As submitted to the Securities and Exchange Commission on December 8, 1999
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Charles River Laboratories Holdings, Inc.
(Exact name of Registrant as specified in its charter)
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Delaware 2836 06-139-7316
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
Thomas Ackerman
Chief Financial Officer
251 Ballardvale Street Charles River Laboratories, Inc.
Wilmington, MA 01887 251 Ballardvale Street
(978) 658-6000 Wilmington, MA 01887
(978) 658-6000
(Address,including zip code, and telephone number, (Name, address, including zip code, and telephone number,
including area code, of Registrant's including area code, of agent for service)
principal executive offices)
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Copies to:
Richard D. Truesdell, Jr., Esq. Greg Ezring
Davis Polk & Wardwell Latham & Watkins
450 Lexington Avenue 885 Third Avenue
New York, New York 10017 New York, New York 10022
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, please check the following box. |X|
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 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 number of the earliest effective registration statement for the
same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earliest effective registration statement for the
same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
===========================================================================================================================
Proposed Maximum Proposed
Offering Aggregate Maximum Amount of
Title of Each Class Amount to be Price Aggregate Registration
of Securities to be Registered Registered Per Security(1) Offering Price(1) Fee(5)
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Warrants to purchase common stock..... 150,000 warrants $ 10.00(2) $ 1,500,000 $ 396
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Common Stock, par value $.01 per share 591,366 shares(3) $ 2.53(4) $ 1,496,156 $ 395
===========================================================================================================================
(1) Estimated solely for the purpose of computing the amount of registration fee.
(2) Based on the exercise price of the warrants.
(3) 591,366 shares of common stock of the registrant are issuable upon
exercise of the warrants being registered hereunder, plus a presently
indeterminable number of shares of common stock, if any, as shall be
issuable from time to time as required pursuant to adjustments under the
warrants.
(4) Based on each warrant entitling the holder to purchase 3.94 shares of common
stock.
(5) Previously paid in connection with Registration No. 333-91845.
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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 SEC, acting pursuant to said Section 8(a), may
determine.
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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 DECEMBER 8, 1999
PROSPECTUS
Charles River Laboratories Holdings, Inc.
COMMON STOCK
WARRANTS TO PURCHASE COMMON STOCK
This prospectus relates to the resale of 150,000 warrants to purchase
shares of common stock of Holdings, par value $.01 per share, by certain
holders named in this prospectus or in an accompanying supplement to this
prospectus. This prospectus also relates to the issuance and sale of shares of
common stock of Holdings issued upon the exercise of the warrants. All of the
common stock and warrants being registered may be offered and sold from time to
time by certain of the holders.
Holdings will not receive any proceeds from the sale of the common stock
or warrants by the selling holders, other than payment of the exercise price of
the warrants. The warrants were initially issued in a private placement
pursuant to an exemption from the registration requirements of the Securities
Act of 1933, as amended. The warrants are being registered by Holdings pursuant
to registration rights granted in connection with the initial placement of the
warrants.
The common stock and warrants are not listed on any national securities
exchange. Holdings has agreed to bear certain expenses in connection with the
registration and sale of the warrants and the common stock being offered by the
selling holders.
See "Risk Factors" beginning on page 13 for a discussion of the risk
factors that should be considered by you.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
The date of this prospectus is , 1999.
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TABLE OF CONTENTS
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Page
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Summary....................................................................1
Risk Factors..............................................................13
The Transactions..........................................................20
Use of Proceeds...........................................................23
Dividend Policy...........................................................23
Capitalization............................................................24
Selected Historical Consolidated Financial Data...........................25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations...........................................................27
Business..................................................................39
Management................................................................49
Executive Compensation....................................................52
Security Ownership of Certain Beneficial Owners and Management............55
Certain Relationships and Related Party
Transactions.........................................................56
Description of New Credit Facility........................................58
Warrantholders............................................................60
Description of Warrants...................................................62
Description of Capital Stock..............................................65
Certain United States Tax Consequences....................................66
Plan of Distribution......................................................69
Legal Matters.............................................................71
Independent Accountants...................................................71
Index to Unaudited Pro Forma Condensed
Consolidated Financial Data.........................................P-1
Index to Consolidated Financial Statements...............................F-1
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FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" including, in
particular, the statements about our plans, strategies and prospects under the
headings "Summary," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," and in the Unaudited Pro
Forma Financial Information and the related notes. Although we believe that our
plans, intentions and expectations reflected in or suggested by such
forward-looking statements are reasonable, we can give no assurance that such
plans, intentions or expectations will be achieved. Important factors that
could cause actual results to differ materially from the forward-looking
statements we make in this prospectus are set forth in this prospectus,
including under the headings "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business." All
forward looking statements attributable to us or persons acting on our behalf
are expressly qualified in their entirety by the cautionary statements and risk
factors contained throughout this prospectus.
INDUSTRY AND MARKET DATA
In this prospectus, we rely on and refer to information and statistics
regarding the research model and biomedical products and services industries,
and our market share in the sectors in which we compete. We obtained this
information and statistics from various third party sources, discussions with
our customers and/or our own internal estimates. We believe that these sources
and estimates are reliable, but we have not independently verified them and
cannot guarantee their accuracy or completeness.
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SUMMARY
References to "Holdings" refers to Charles River Laboratories Holdings,
Inc. References to the words "Charles River," "CRL," "Company," "we," "our,"
and "us" refer only to Charles River Laboratories, Inc., its predecessors, its
subsidiaries, its affiliates and its joint ventures. This summary highlights
information contained elsewhere in this prospectus and may not contain all of
the information that is important to you. For a more complete understanding of
this offering, we encourage you to read this entire prospectus carefully.
Our fiscal year ends on the Saturday closest to December 31. Unless the
context indicates otherwise, whenever we refer in this prospectus to a
particular fiscal year, we mean the fiscal year ending in that particular
calendar year. When we refer to "pro forma" financial results, we mean the
financial results of Charles River and its subsidiaries on a consolidated basis
as if the Transactions (which we define on page 4) had occurred at the
beginning of the relevant time period.
CHARLES RIVER LABORATORIES HOLDINGS, INC.
Holdings is a holding company and does not have any material operations or
assets other than its ownership of all of the capital stock of Charles River.
Our principal executive offices are located at 251 Ballardvale Street,
Wilmington, MA 01887 and our telephone number is (978) 658-6000.
CHARLES RIVER LABORATORIES, INC.
Overview
We are a global market leader in the commercial production and supply of
animal research models for use in the discovery, development and testing of new
pharmaceuticals. We have expanded our core capabilities in research models to
become a leading supplier of related biomedical products and services in
several specialized niche markets. Our research model capabilities and
biomedical products and services, together with our global distribution
network, allow us to meet the extensive needs of our broad customer base. Our
customers consist primarily of:
o large pharmaceutical companies, including the ten largest global
pharmaceutical companies based on 1998 revenues
o biotechnology, animal health, medical device and diagnostics companies
o hospitals
o academic institutions
o government agencies
Our facilities are located in 18 countries, including the United States,
Canada, Japan and many European countries. On a pro forma basis, research
models accounted for 62%, and biomedical products and services accounted for
38%, of net sales for the twelve-month period ended September 25, 1999. Over
the same time period, we reported pro forma net sales of $230.5 million and pro
forma Adjusted EBITDA of $57.0 million. Adjusted EBITDA represents EBITDA, as
defined, adjusted for non-recurring, non-cash and cash items, as appropriate,
which is more fully described on page 12. EBITDA, as defined, represents
operating income plus depreciation and amortization. Adjusted EBITDA is
presented because we believe it is a meaningful indicator of Charles River's
operating performance, and it is the measure by which certain of the covenants
under the new credit facility are
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computed. EBITDA, as defined, and Adjusted EBITDA are not intended to represent
cash flows for the period, nor are they presented as an alternative to
operating income or as an indicator of operating performance. They should not
be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles ("GAAP")
in the United States and are not indicative of operating income or cash flow
from operations as determined under GAAP. Our method of computation may not be
comparable to other similarly titled measures of other companies.
Research Models. We have a leading position in the global market for
research models, which primarily consists of purpose-bred rats and mice. The
use of research models is often a critical part of scientific discovery in the
life sciences and is required by FDA guidelines as well as foreign regulatory
agencies for new drug approval processes. Our business is primarily involved in
the early stages of drug discovery and development, commonly referred to as the
pre-clinical stage of drug development. During this stage, promising new drug
candidates are evaluated for their efficacy and safety through testing in
research models. Data from the pre-clinical stage is submitted to the
applicable regulatory agency for review in order for the drug to obtain
approval to advance to the human testing stage, commonly known as clinical
studies. We principally produce and sell rats, mice, other rodents and primates
with highly defined health and genetic backgrounds, primarily for use in
pre-clinical research. Our research models include special disease rodent
models, such as mice with impaired immune systems, which are increasingly
demanded by biomedical researchers for specialized research and discovery. We
focus on maintaining reliable biosecurity, which includes stringent guidelines
to ensure contamination-free research models. As a result, we provide
consistent product availability and offer a wide variety of healthy,
genetically defined and specifically targeted research models. We further
differentiate our research models by providing extensive technical service and
support, including scientific oversight from a team of more than 70 full-time,
dedicated professionals specializing in laboratory animal medicine, pathology
and virology as well as molecular biology, primatology and genetics.
Biomedical Products and Services. Our biomedical products and services are
principally focused on meeting the research needs of large pharmaceutical
companies as well as biotechnology, animal health, medical device and
diagnostics companies. We are a leading supplier of endotoxin testing kits that
detect fever producing toxins in injectable drugs and devices and are one of
only two FDA validated in vitro alternatives to an animal test. In addition, we
are one of the world's largest producers of specific pathogen free fertile
chicken eggs which we refer to as "SPF eggs", which are principally used to
produce poultry vaccines. Our other biomedical products and services, many of
which are related to technologies developed in our research model business,
include:
o transgenic animal production
o medical device testing
o contract research services
o comprehensive health monitoring programs, including DNA testing, of
animal colonies
o testing services for human protein drug candidates
o facility management services
Competitive Strengths
Long-Standing Relationships with an Extensive Customer Base. Our customers
consist primarily of large pharmaceutical companies, including the ten largest
global pharmaceutical companies based on 1998 revenues, as well as
biotechnology, animal health, medical device and diagnostics companies and
hospitals, academic institutions and government agencies. We have many
long-term, stable relationships with our customers as evidenced by the fact
that all of our top 20 customers in 1989 remain our customers today. We have
further strengthened our customer relationships by offering related biomedical
products and services to our research model customers. Our
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customer base is also diversified with no individual customer accounting for
more than 3% of net sales in 1998 and the top 30 customers representing
approximately 30% of total net sales.
Critical Component of Pharmaceutical Research. The research models we
supply are essential to the new drug discovery and development process. FDA
guidelines and certain foreign regulatory agencies for many years have required
that new drug candidates be tested on two separate animal species in the
pre-clinical stage. According to the Pharmaceutical Research and Manufacturers
of America, total research and development spending in the United States by
research-based pharmaceutical companies was $17 billion in 1998. While
pharmaceutical companies generally invest large sums of money in developing new
drugs, the purchase of research models typically represents an immaterial
portion of the cost to commercialize a new drug. As a result, most customers
are principally focused on the quality of the research model which is critical
for achieving accurate and reproducible study results and facilitating timely
FDA approval of new drug candidates. For these reasons, our reputation for high
quality models and consistent product availability enables us to maintain and
expand our customer relationships.
Leading Market Position. We believe that our worldwide infrastructure,
global staff of nearly 100 scientific professionals, 50 years of operating
history and reputation for high quality products have established us as a
global market leader in the commercial production and supply of research
models. We maintain our leadership position through our well-established
customer relationships, extensive high quality product offerings and ability to
provide complementary services. Our market leadership in research models has
allowed us to capitalize on the significant research and development spending
by large pharmaceutical companies, and more recently on outsourcing trends by
our customers.
Global Presence. We are a global provider of research models, with 49
facilities in the United States, Canada, Japan and many European countries. On
a pro forma basis, our international business contributed approximately 36% of
our net sales for the twelve-month period ended September 25, 1999. We believe
that as our customers continue to expand globally, they are likely to prefer to
deal with a select number of suppliers who have the ability to offer them a
wide range of products and services worldwide and in a timely manner. In
addition, our customers benefit from our global presence because it reduces
potential exposure to biosecurity risks and minimizes regulatory restrictions
and costs relating to transporting research models over long distances. We
provide our customers with uniform and consistent research models, regardless
of the location of their research study.
Experienced and Motivated Management Team. Our senior management team has
extensive experience in supplying the biomedical research industry, and an
average of 17 years of experience with Charles River. Our senior management
team, led by our chief executive officer, James C. Foster, has successfully
grown our business, secured our current strong market positions, integrated
eight strategic acquisitions since 1992 and positioned us for growth. Our
senior management team has broadened our pure research model focus to also
include being a leading supplier of biomedical products and services in several
specialized niche markets. As a result of the recapitalization of our business,
our management team indirectly holds 6.1% of the equity of Charles River, and
expects to have the option to acquire additional equity of Charles River
through a customary equity incentive plan.
Business Strategy
Increase Sales in Research Models. We believe we can continue to increase
our market share in this segment by introducing new research models, providing
exceptional technical service and support, optimizing our existing price
structure and product mix and maintaining reliable biosecurity. In general, we
have been able to increase our prices at rates that are above the rate of
inflation in the United States by maintaining high quality and specialized
products, enhancing service and improving availability. We also have been
focused on periodically adding higher value research models to our portfolio.
These higher value research models tend to be premium priced, targeted towards
specific disease conditions and provide us with an enhanced product mix that
contributes to moderate but sustained growth in the research model business. We
expect to continue to expand this segment, both through sustained growth in
demand for already introduced models and the introduction of new models.
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Expand Value-Added Biomedical Products and Services. Our biomedical
products and services segment has been our fastest growing segment over the
past several years. We believe we can continue to grow this business by
capitalizing on outsourcing trends, building upon our existing capabilities and
increasing our global sales.
Capitalize on Outsourcing Trends. Most of our biomedical products and
services have been developed in response to the increasing outsourcing
trends within the pharmaceutical industry. We believe this shift toward
increased outsourcing began in response to the pharmaceutical companies'
growing capabilities in identifying potential new drug compounds and the
resulting resource constraints placed on pharmaceutical research
infrastructures by non-core activities. By outsourcing their non-core
activities to us, our customers can focus on proprietary drug development
and streamline their drug development process. In response, we have
expanded our offerings to include many pre-clinical research activities
undertaken by our customers.
Build Upon Our Existing Capabilities. As a result of our strong position
in research models, our global presence and our professional expertise, we
have the unique capability to offer related biomedical products and
services to many of our customers. We intend to build upon this expertise
to capture more outsourcing business opportunities by using our existing
infrastructure, reputation for quality and extensive customer contacts. We
believe there are numerous other opportunities for increasing our share of
high value pre-clinical research services and products.
Increase Our Global Sales. Our current biomedical products and services
customer base is primarily composed of our domestic research model
customers. We intend to continue to cross-sell our biomedical products and
services to our existing international research model customers as well as
seek new international customers for this segment. We believe that we can
rapidly increase our global presence in this area by leveraging our
existing international customer relationships and infrastructure.
Undertake Strategic Acquisitions and Alliances. We have a history of
acquiring and successfully integrating small companies in both our research
model and our biomedical products and services businesses. We expect that
strategic acquisitions will continue to provide an additional source of
long-term growth. In addition, we believe that our association with Global
Health Care Partners, LLC, one of our equity investors, will assist us in
identifying attractive acquisition candidates while expanding our existing
business. Global Health Care Partners, which is comprised of several
experienced healthcare executives, has a strategic partnership with DLJ
Merchant Banking Partners II, L.P. to invest in healthcare related businesses.
The founding partners of Global Health Care Partners who are represented on the
Charles River board include Henry Wendt, former Chairman of SmithKline Beecham
Corporation, Robert Cawthorn, former Chairman and CEO of Rhone-Poulenc Rorer
Inc. and Douglas Rogers, founder of Kidder, Peabody's Health Care Group.
THE TRANSACTIONS
We collectively refer to the recapitalization and the Sierra acquisition,
which we describe below, as the "Transactions."
The Recapitalization
On September 29, 1999, we were acquired by certain affiliates of DLJ
Merchant Banking Partners II, L.P., management and other investors while
certain subsidiaries of Bausch & Lomb Incorporated retained a portion of their
equity investment in us, for total consideration of $456.2 million. As a
result, DLJ Merchant Banking Partners II, L.P. and some of its affiliates, who
we refer to collectively as the "DLJMB Funds", indirectly own 71.9% and
subsidiaries of Bausch & Lomb Incorporated, who we refer to collectively as the
"Rollover Shareholders", own 12.5% of Holdings. We are a wholly owned
subsidiary of Holdings. The recapitalization was financed with:
o a portion of the proceeds from an offering of units, which consisted
of notes and the warrants to purchase shares of common stock of
Holdings
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o $105.6 million in equity investment, consisting of $92.4 million in
cash by the DLJMB Funds, management, and other investors and equity
retained by the Rollover Shareholders with a fair value of $13.2
million
o a portion of the borrowings of approximately $162.0 million under our
new senior secured credit facility
o senior discount debentures with other warrants issued by Holdings to
the DLJMB Funds and other investors for $37.6 million
o a subordinated discount note issued by Holdings to the Rollover
Shareholders for $43.0 million
We collectively refer to the Recapitalization and all related financing as
the "Recapitalization."
The Sierra Acquisition
Concurrently with the Recapitalization, we acquired SBI Holdings, Inc.
("Sierra") for an initial purchase price of $24.0 million, of which
approximately $6.0 million was used to repay Sierra's existing debt. We funded
the acquisition of Sierra with:
o available cash
o a portion of the net proceeds from the units
o a portion of the borrowings under our new credit facility
Sierra is a pre-clinical biomedical services company with expertise in
drug safety and efficacy assessment studies using research models. We believe
that the acquisition of Sierra will contribute to our growing presence in the
pre-clinical testing services business.
We collectively refer to the acquisition of Sierra and all related
financings as the "Sierra Acquisition."
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SUMMARY DESCRIPTION OF THE WARRANTS
The warrants were issued as part of units in a private placement
pursuant to an offering memorandum and exemption from the registration
requirements of the Securities Act of 1933. Each unit consisted of $1,000
principal amount of 13 1/2% senior subordinated notes due 2009 ("notes") and
one warrant to purchase 3.942 shares of common stock, par value $.01 per share.
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Warrants............................................. 150,000 warrants which will entitle the holders to
purchase an aggregate of 591,366 shares of the common
stock of Holdings, representing approximately 5.0% of
Holdings common stock on a fully diluted basis,
assuming exercise of all outstanding warrants.
Exercise............................................. Each warrant will entitle the holder, subject to certain
conditions, to purchase 3.942 shares of the common stock
of Holdings at an exercise price of $10.00 per share,
subject to adjustment under certain circumstances. The
warrants will be exercisable at any time on or after
October 1, 2001, and prior to the expiration of the
warrants. The exercise price and number of shares of
common stock of Holdings issuable upon exercise of the
warrants will be subject to adjustment from time to time
upon the occurrence of certain changes with respect to the
common stock of Holdings, including:
o certain distributions of shares of common stock of
Holdings
o issuances of options or convertible securities
o dividends and distributions
o certain changes in options and convertible securities
of Holdings
A warrant does not entitle its holder to receive any dividends
paid on shares of the common stock of Holdings.
Expiration........................................... October 1, 2009.
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You should refer to the section entitled "Risk Factors" for an explanation
of certain risks of investing in this offering.
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CHARLES RIVER LABORATORIES HOLDINGS, INC. AND CHARLES RIVER LABORATORIES, INC.
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA
COMBINED FINANCIAL DATA
The table below presents summary historical and unaudited pro forma
combined financial data and other data for Holdings and Charles River. For the
historical periods presented below, Holdings had no asset, liabilities or
operations. The summary combined financial data for the fiscal years ended
December 28, 1996, December 27, 1997 and December 26, 1998 are derived from the
combined financial statements of Holdings and Charles River and the notes
thereto included elsewhere in this prospectus. The summary historical combined
unaudited financial data as of September 25, 1999 and for the nine months ended
September 26, 1998 and September 25, 1999 are derived from the unaudited
combined financial statements of Holdings and Charles River and the notes
thereto included elsewhere in this prospectus. In the opinion of management,
Holdings' and Charles River's unaudited combined financial statements include
all adjustments, consisting only of normal recurring adjustments, necessary
for a fair presentation of the financial condition and results of operations
for these periods. The summary unaudited pro forma combined financial data are
derived from the Holdings and Charles River Unaudited Pro Forma Condensed
Combined Financial Data appearing elsewhere in this prospectus. The summary
unaudited pro forma combined financial data do not purport to be indicative of
the results that actually would have been obtained had the Transactions been
completed as of such dates and are not intended to be a projection of
Holdings' and Charles River's combined future results of operations or
financial position. You should read the information contained in this table in
conjunction with "Use of Proceeds," "Selected Historical Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," Holdings and Charles River "Unaudited Pro Forma
Condensed Combined Financial Data" and Holdings' and Charles River's combined
financial statements and the notes thereto contained elsewhere in this
prospectus.
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Pro Forma
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Fiscal Year(1) Nine Months Ended Nine Months
--------------------------------- ----------------------- Fiscal Ended
September September Year September
26, 25, Ended 25,
1996 1997 1998 1998 1999 1998 1999
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(dollars in thousands)
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Income Statement Data:
Net sales................................... $ 155,604 $ 170,713 $ 193,301 $ 145,519 $ 161,096 $ 216,638 $ 177,130
Cost of products sold and services
provided.................................. 97,777 111,460 122,547 91,041 97,230 135,897 106,819
Selling, general and administrative
expenses.................................. 28,327 30,451 34,142 25,202 29,414 41,565 35,023
Amortization of goodwill and other
intangibles.............................. 610 834 1,287 1,036 1,114 2,585 2,006
Restructuring charges....................... 4,748 5,892 -- -- -- -- --
----------- --------- --------- ---------- --------- -------- ---------
Operating income............................ 24,142 22,076 35,325 28,240 33,338 36,591 33,282
Other Data:
EBITDA, as defined(2)....................... $ 33,670 $ 31,779 $ 46,220 $ 36,172 $ 42,039 $ 49,607 $ 43,415
Adjusted EBITDA(2).......................... 39,167 38,528 47,234 37,012 43,378 51,103 45,205
Adjusted EBITDA margin...................... 25.2% 22.6% 24.4% 25.4% 26.9% 23.6% 25.5%
Depreciation and amortization............... $ 9,528 $ 9,703 $ 10,895 $ 7,932 $ 8,701 $ 13,016 $ 10,133
Capital expenditures........................ 11,572 11,872 11,909 5,834 7,426 13,307 8,398
Cash interest expense(3)................................................................................. 35,060 28,340
Cash flows from operating activities(4)..... $ 20,545 $ 23,684 $ 36,699 $ 23,486 $ 19,552
Cash flows from investing activities(4)..... $ (11,678) $(12,306) $ (22,349) $ (14,267) $ (4,751)
Cash flows from financing activities(4)..... $ (4,068) $(12,939) $ (8,018) $ (2,412) $ (34,554)
Selected Ratios:
Ratio of earnings to fixed charges(5)....... 18.8x 16.5x 25.8x 26.1x 33.7x 0.8x 0.9x
Ratio of Adjusted EBITDA to cash interest expense........................................................ 1.5x 1.6x
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As of September 25, 1999
---------------------------
Historical Pro Forma
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(dollars in thousands)
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Balance Sheet Data:
Cash and cash equivalents............................................................... $ 3,457 $ 3,678
Working capital......................................................................... 20,596 31,870
Total assets............................................................................ 210,371 327,824
Total debt(6)........................................................................... 1,033 382,770
Total stockholder's equity.............................................................. 148,965 (115,197)
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(1) Our fiscal year consists of twelve months ending on the Saturday closest to
December 31.
(2) EBITDA, as defined, represents operating income plus depreciation and
amortization. EBITDA, as defined, is presented because it is a widely
accepted financial indicator used by certain investors and analysts to
analyze and compare companies on the basis of operating performance.
Adjusted EBITDA, which represents EBITDA, as defined, adjusted for
non-recurring, non-cash and cash items, as appropriate, is presented below
because we believe it is a meaningful indicator of Holdings' and Charles
River's operating performance and it is the measure by which certain of
the covenants under the new credit facility are computed.
EBITDA, as defined, and Adjusted EBITDA are not intended to represent cash
flows for the period, nor are they presented as an alternative to
operating income or as an indicator of operating performance. They should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP in the United States and are
not indicative of operating income or cash flow from operations as
determined under GAAP. Our method of computation may or may not be
comparable to other similarly titled measures of other companies.
The following table sets forth a reconciliation of EBITDA, as defined, to
Adjusted EBITDA:
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Pro Forma
---------------------
Fiscal Year(1) Nine Months Ended Nine Months
--------------------------------- ----------------------- Fiscal Ended
September September Year September
26, 25, Ended 25,
1996 1997 1998 1998 1999 1998 1999
----------- --------- --------- ----------- --------- --------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA, as defined.......................... $ 33,670 $ 31,779 $ 46,220 $ 36,172 $ 42,039 $ 49,607 $ 43,415
Restructuring and other charges............. 4,748 5,892 -- -- 400 -- 400
Dividends received from equity investments.. 725 773 681 681 815 681 815
Charles River non-cash compensation(a)...... 24 84 333 159 124 333 124
Seirra non-cash compensation(a)............. -- -- -- -- -- 262 --
Non-recurring transaction expenses(b)....... -- -- -- -- -- 220 451
----------- -------- --------- --------- --------- --------- ---------
Adjusted EBITDA............................. 39,167 38,528 47,234 37,012 43,378 51,103 45,205
=========== ======== ========= ========== ========= ========= =========
</TABLE>
- -------------------
(a) Amount represents non-cash compensation expense recorded by Charles
River and Sierra as a result of options under their respective option
plans being issued at below fair market value.
(b) Represents expenses incurred by Sierra related to its acquisition of
HTI Bio-Services, Inc., and to its acquisition by Charles River;
these amounts are considered non-recurring.
(3) Cash interest expense represents total interest expense less amortization
of deferred financing costs and other non-cash interest charges.
(4) Cash flow information is not presented with respect to the unaudited pro
forma data because a statement of cash flows is not required by Article 11
of SEC Regulation S-X.
(5) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" consist of income before income taxes, minority interests and
earnings from equity investments less minority interests plus earnings
from equity investments plus fixed charges. "Fixed charges" consist of
interest expense on all indebtedness, amortization of deferred financing
costs and one-third of rental expense from operating leases that we
believe is a reasonable approximation of the interest
8
<PAGE>
component of rental expense. On a pro forma basis for the fiscal year
ended December 25, 1998 and the nine months ended September 25, 1999,
fixed charges exceeded earnings by $5,382 and $3,870, respectively.
(6) Total debt includes all debt and capital lease obligations, including
current portions.
9
<PAGE>
CHARLES RIVER LABORATORIES, INC.
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL DATA
The table below presents summary historical and unaudited pro forma
consolidated financial data and other data for Charles River. The summary
historical consolidated financial data for the fiscal years ended December 28,
1996, December 27, 1997 and December 26, 1998 are derived from our consolidated
financial statements and the notes thereto included elsewhere in this
prospectus. The summary unaudited financial data as of September 25, 1999 and
for the nine months ended September 26, 1998 and September 25, 1999 are
derived from our unaudited consolidated financial statements and the notes to
those statements.In the opinion of management, our unaudited consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
condition and results of operations for these periods. The summary unaudited
pro forma consolidated financial data are derived from the Unaudited Pro Forma
Condensed Consolidated Financial Data appearing elsewhere in this prospectus.
The summary unaudited pro forma consolidated financial data do not purport to
be indicative of the results that actually would have been obtained had the
Transactions been completed as of such dates and are not intended to be a
projection of our future results of operations or financial position. You
should read the information contained in this table in conjunction with "Use
of Proceeds," "Selected Historical Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Unaudited Pro Forma Condensed Consolidated Financial Data" and our
consolidated financial statements and the notes thereto contained elsewhere in
this prospectus.
<TABLE>
<CAPTION>
Pro Forma
---------------------------------
Nine Twelve
Fiscal Year(1) Nine Months Ended Months Months
-------------------------------- ------------------- Fiscal Ended Ended
September September Year September September
26, 25, Ended 25, 25,
1996 1997 1998 1998 1999 1998 1999 1999
---------- --------- --------- --------- --------- --------- --------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales............................... $ 155,604 $ 170,713 $ 193,301 $ 145,519 $ 161,096 $ 216,638 $ 177,130 $ 230,496
Cost of products sold and services
provided............................. 97,777 111,460 122,547 91,041 97,230 135,897 106,819 141,370
Selling, general and administrative
expenses............................. 28,327 30,451 34,142 25,202 29,414 41,215 34,760 45,738
Amortization of goodwill and other
intangibles.......................... 610 834 1,287 1,036 1,114 2,585 2,006 2,547
Restructuring charges................... 4,748 5,892 -- -- -- -- -- --
---------- --------- -------- --------- -------- --------- --------- ----------
Operating income........................ 24,142 22,076 35,325 28,240 33,338 36,941 33,545 40,841
Other Data:
EBITDA, as defined(2)................... $ 33,670 $ 31,779 $ 46,220 $ 36,172 $ 42,039 $ 49,957 $ 43,678 $ 54,585
Adjusted EBITDA(2)...................... 39,167 38,528 47,234 37,012 43,378 51,453 45,468 57,031
Adjusted EBITDA margin.................. 25.2% 22.6% 24.4% 25.4% 26.9% 23.8% 25.7% 24.7%
Depreciation and amortization........... $ 9,528 $ 9,703 $ 10,895 $ 7,932 $ 8,701 $ 13,016 $ 10,133 $ 13,744
Capital expenditures.................... 11,572 11,872 11,909 5,834 7,426 13,307 8,398 14,967
Cash interest expense(3)........................................................................ 35,013 28,330 37,134
Cash flows from operating activities (4) $ 20,545 $ 23,684 $ 36,699 $ 23,486 $ 19,552
Cash flows from investing activities (4) $ (11,678) $ (12,306) $ (22,349) $ (14,267)$ (4,751)
Cash flows from financing activities (4) $ (4,068) $ (12,939) $ (8,018) $ (2,412)$ (34,554)
Selected Ratios:
Ratio of earnings to fixed charges(5)... 18.8x 16.5x 25.8x 26.1x 33.7x 1.0x 1.2x 1.1x
Ratio of Adjusted EBITDA to cash interest expense............................................... 1.5x 1.6x 1.5x
Ratio of total pro forma debt to Adjusted EBITDA...................................................................... 5.5x
</TABLE>
10
<PAGE>
<TABLE>
As of September 25, 1999
---------------------------
Historical Pro Forma
------------- ------------
(dollars in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............................................................... $ 3,457 $ 3,678
Working capital......................................................................... 20,596 31,870
Total assets............................................................................ 210,371 327,824
Total debt(6)........................................................................... 1,033 311,128
Total stockholder's equity.............................................................. 148,965 (30,357)
</TABLE>
- -------------------
(1) Charles River's fiscal year consists of twelve months ending on the
Saturday closest to December 31.
(2) EBITDA, as defined, represents operating income plus depreciation and
amortization. EBITDA, as defined, is presented because it is a widely
accepted financial indicator used by certain investors and analysts to
analyze and compare companies on the basis of operating performance.
Adjusted EBITDA, which represents EBITDA, as defined, adjusted for
non-recurring, non-cash and cash items, as appropriate, is presented below
because we believe it is a meaningful indicator of Charles River's
operating performance and it is the measure by which certain of the
covenants under the new credit facility are computed.
EBITDA, as defined, and Adjusted EBITDA are not intended to represent cash
flows for the period, nor are they presented as an alternative to
operating income or as an indicator of operating performance. They should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP in the United States and are
not indicative of operating income or cash flow from operations as
determined under GAAP. Our method of computation may or may not be
comparable to other similarly titled measures of other companies. The
following table sets forth a reconciliation of EBITDA, as defined, to
Adjusted EBITDA:
The following table sets forth a reconciliation of EBITDA, as defined, to
Adjusted EBITDA:
<TABLE>
Pro Forma
---------------------------------
Nine Twelve
Fiscal Year(1) Nine Months Ended Months Months
-------------------------------- ------------------- Fiscal Ended Ended
September September Year September September
26, 25, Ended 25, 25,
1996 1997 1998 1998 1999 1998 1999 1999
---------- --------- --------- --------- --------- --------- --------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA, as defined(2)................... $ 33,670 $ 31,779 $ 46,220 $ 36,172 $ 42,039 $ 49,957 $ 43,678 $ 54,585
Adjusted EBITDA(2)...................... 4,748 5,892 -- -- 400 -- 400 400
Dividends received from equity
investments........................... 725 773 681 681 815 681 815 815
Charles River non-cash compensation(a).. 24 84 333 159 124 333 124 298
Sierra non-cash compensation(a)......... -- -- -- -- -- 262 -- 262
Non-recurring transaction expenses(b)... -- -- -- -- -- 220 451 671
---------- --------- --------- --------- -------- --------- --------- ----------
Adjusted EBITDA......................... $ 39,167 $ 38,528 $ 47,234 $ 37,012 $ 43,378 $ 51,453 $ 45,468 $ 57,031
========== ========= ========= ========= ======== ========= ========= ==========
</TABLE>
- -------------------
(a) Amount represents non-cash compensation expense recorded by Charles
River and Sierra as a result of options under their respective option
plans being issued at below fair market value.
(b) Represents expenses incurred by Sierra related to its acquisition of
HTI Bio-Services, Inc., and to its acquisition by Charles River;
these amounts are considered non-recurring.
(3) Cash interest expense represents total interest expense less amortization
of deferred financing costs and other non-cash interest charges.
(4) Cash flows information is not presented with respect to the unaudited pro
forma data because a statement of cash flows is not required by Article 11
of SEC Regulation S-X.
(5) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" consist of income before income taxes, minority interests and
earnings from equity investments less minority interests plus earnings
from equity investments plus
11
<PAGE>
fixed charges. "Fixed charges" consist of interest expense on all
indebtedness, amortization of deferred financing costs and one-third of
rental expense from operating leases that we believe is a reasonable
approximation of the interest component of rental expense.
(6) Total debt includes all debt and capital lease obligations, including
current portions.
12
<PAGE>
RISK FACTORS
In addition to the other matters described in this prospectus, you should
carefully consider the risk factors set forth below.
Risks relating to our debt
We have a significant amount of debt
On a pro forma basis, after giving effect to the Transactions, as of
September 25, 1999, Charles River and Holdings had (a) total combined
indebtedness of approximately $382.8 million; and (b) approximately $28 million
of borrowings available under our new credit facility, subject to customary
conditions. In addition, subject to the restrictions in our new credit facility
and the indenture governing the notes, we may incur significant additional
indebtedness, which may be secured, from time to time.
The level of our indebtedness could have important consequences,
including:
o limiting cash flow available for general corporate purposes,
including acquisitions, because a substantial portion of our cash
flow from operations must be dedicated to servicing our debt
o limiting our ability to obtain additional debt financing in the future
for working capital, capital expenditures or acquisitions
o limiting our flexibility in reacting to competitive and other changes
in our industry and economic conditions generally
We may not be able to service our debt
Our ability to pay or to refinance our indebtedness will depend upon our
future operating performance, which will be affected by general economic,
financial, competitive, legislative, regulatory, business and other factors
beyond our control.
We anticipate that our operating cash flow, together with money we can
borrow under our new credit facility, will be sufficient to meet anticipated
future operating expenses, to fund capital expenditures and to service our debt
as it becomes due. If we were still unable to meet our debt service
obligations, we could attempt to restructure or refinance our indebtedness or
seek additional equity capital. We cannot assure you that we will be able to
accomplish those actions on satisfactory terms, if at all.
In addition, subject to the restrictions and limitations contained in our
debt agreements, we may incur significant additional indebtedness, which could
adversely affect our operating cash flows and our ability to service
indebtedness.
Restrictive covenants in our indenture and new credit facility may adversely
affect us
The indenture governing the notes contains various covenants that limit
our ability to engage in certain transactions. These covenants limit, among
other things, our ability, and the ability of some of our subsidiaries, to:
o borrow money
o create liens
o engage in sale-leaseback transactions
13
<PAGE>
o pay dividends on stock or repurchase stock
o make certain investments
o engage in transactions with affiliates or
o sell certain assets or merge with or into other companies
In addition, our new credit facility contains other and more restrictive
covenants and prohibits us from prepaying our subordinated indebtedness,
including the notes. Our new credit facility also requires us to maintain
specified financial ratios and satisfy certain other financial condition tests.
Our ability to meet those financial ratios and tests can be affected by events
beyond our control, and we cannot assure you that we will meet those tests. A
breach of any of these covenants could result in a default under our new credit
facility and/or the notes. Upon the occurrence of an event of default under our
new credit facility, which includes a cross default to indebtedness of
Holdings, the lenders could elect to declare all amounts outstanding under our
new credit facility to be immediately due and payable and terminate all
commitments to extend further credit. If we were unable to repay those amounts,
the lenders could proceed against the collateral granted to them to secure that
indebtedness. We pledged substantially all of our assets, other than assets of
our foreign subsidiaries, as security under our new credit facility.
Risks relating to our business
Biosecurity breaches or "contaminations" can damage our inventory and result
n decrease in sales
On a pro forma basis, research models accounted for 62% of our net sales
for the twelve-month period ended September 25, 1999. We breed research models
that are free of certain agents, such as viruses and bacteria, which when
present can distort or otherwise compromise the quality of research results. We
also produce fertile chicken eggs that must be free of certain avian
contaminants in order to be used in poultry and human vaccine production. A
breach in biosecurity within any one of over 150 barrier breeding rooms or 50
poultry houses could result in the introduction of an otherwise excluded agent
into that room's animal or bird population. These breaches can arise from
several factors or conditions, including:
o a supervisor's or animal care technician's failure to oversee or
follow operating protocols,
o compromised breed stock, or
o from an erosion in a "clean room's" equipment or structure
A biosecurity breach typically results in the "recycling" or cleaning up
of the contaminated room, which in turn results in inventory loss, clean-up and
start-up costs, and can reduce sales as a result of lost customer orders and
credits for prior shipments. Biosecurity breaches are unanticipated and
difficult to predict. We experienced several material contaminations in 1996
and a few significant contaminations in 1997 that adversely impacted our 1996
and 1997 financial results. We experienced no significant contaminations in
1998. Future contaminations may harm our reputation for providing high quality
products. In the event of a known contamination, we immediately notify our
customers. While avoidance of biosecurity breaches in our research model and
SPF egg facilities around the world is our highest operational priority, with
several worldwide programs in place, we cannot assure you that we will not
experience future barrier room or poultry house contaminations that will
adversely impact our operations and financial results.
We are dependent on certain industries; consolidations in the pharmaceutical
industry may result in less demand for our business
14
<PAGE>
Our sales are highly dependent on research and development expenditures by
the pharmaceutical and, to a lesser extent, biotechnology industries. Our
operations could be materially and adversely affected by general economic
downturns in our clients' industries, or any decrease in research and
development expenditures.
Over the past several years, the pharmaceutical industry has undergone a
period of significant consolidations, particularly in Europe, a trend that many
industry experts expect to continue. After recent consolidations, certain
customers combined or otherwise reduced their research and development
operations, resulting in fewer animal research activities. Due to these
consolidations, we have experienced both temporary disruptions and permanent
reductions in purchases of our research models by some of our customers.
Consolidations may also lead to reduced demand as our customers eliminate
redundant research activities. Future consolidations in the pharmaceutical
industry could result in additional disruptions and reductions in purchasing
and consequently adversely affect our results of operations.
The outsourcing trend in the pharmaceutical industry may decrease, which
could affect our growth
Some of our biomedical products and services businesses have grown
significantly as a result of the increase over the past several years in
outsourcing of non-clinical research support activities by pharmaceutical
companies. While industry analysts expect the outsourcing trend to continue for
the next several years, a substantial decrease in outsourcing activity in the
pre-clinical sector could result in a diminished growth rate in the sales of
one or more of our expected higher growth businesses.
Displacement technologies may be developed, validated and increasingly used
in biomedical research, and as a result could reduce demand for some of our
products
For many years, groups within the scientific and research community have
attempted to develop models, methods and systems that would replace or
supplement the use of living animals as test subjects in biomedical research.
While several techniques have been developed that have scientific merit,
especially in the area of cosmetics and household product testing (markets in
which we are not active), few alternative test methods have been validated and
successfully deployed in the discovery and development of effective and safe
treatments for human and animal disease conditions. The principal validated in
vitro or non-animal test system is the LAL, or endotoxin testing system, a
technology which we acquired and have aggressively marketed as an alternative
to an animal test. We are also part of a strategic alliance involving software
that is predictive of systemic responses to certain biologically active
molecular configurations. While we would expect to participate in some fashion
with any in vitro method as it becomes validated as a research model
alternative or adjunct in our markets, we cannot assure you that these methods
will be available to us or that we will be successful in commercializing these
methods. Even if we are successful, net sales from these methods may not offset
reduced research model net sales, which would adversely affect our results of
operations.
In our SPF egg business, researchers have developed recombinant
technologies that could displace certain avian vaccine applications for SPF
eggs. At this time, we do not believe that these technologies can compete with
SPF eggs from a cost or performance standpoint, but we cannot assure you that
recombinant technologies will not improve in the future until they become a
commercially viable alternative to SPF eggs.
In our endotoxin testing business, researchers are in the early stages of
developing a potential recombinant alternative to the naturally occurring LAL
product. We intend to collaborate with an academic research group with early
stage proprietary technology. While we do not expect the recombinant technology
to be a viable commercial alternative to LAL, due to cost and performance
deficiencies, we cannot assure you that a technology displacement derived in
vitro will not be developed.
Such alternative research methods would decrease the need for research
models, and we may not be able to develop new products effectively or in a
timely manner to replace any lost sales.
15
<PAGE>
Animal rights issues could have a material adverse effect on our primate and
overall business
Increased social focus on animal testing could adversely affect our
business. Although our primate business constitutes a small part of our overall
business, it has from time to time been subjected to animal rights media
attention and on-site protests, especially at our small import facility located
in England. In addition, animal rights activists have also focused on Sierra's
business, which involves large animals. The protests and demonstrations by
animal rights activists may lead our customers, many of whom are concerned with
public perception, to decide to decrease their business with us. In addition,
threats to our facility located in England have been made by animal rights
activists, which may result in property damages, or may cause us to incur
expenses in protecting our employees and our facility and subject us to
liabilities. Our core research models of rats, mice and other rodents have not
historically been the subject of such protests. However, developments and
movements in the area of animal rights, including protests related to rats,
mice and other rodents, could adversely affect our business.
Some of our businesses are dependent on a few sources of animal suppliers and
supply
Our primate import business is dependent on animals both captured and bred
on the island of Mauritius. These animals are unique in that they are naturally
free of herpes B virus, which is important to our customers. While we have a
long-term supply agreement with the leading provider of these animals, and
supply has not been disrupted since we commenced importing these animals a
decade ago, we cannot assure you that temporary or permanent obstacles to their
continued supply might not arise, including export or import restrictions or
embargos, government or economic instability or severe weather conditions in
Mauritius. Sierra also depends on a supply agreement with a provider in China,
and any disruption of this supply may have a material adverse effect on its
business.
Our endotoxin testing business is dependent on the plentiful availability
of horseshoe crabs, the blood of which is used to produce the test material. We
cannot assure you that there will not be regulatory or other restrictions
imposed on the use of horseshoe crabs in the future.
If we are not able to obtain these animals from our existing sources, we
may not be able to find an alternative source on commercially reasonable terms,
or delivery to our customers may be delayed.
Our supply of animal feed may be interrupted by the bankruptcy of our
commercial supplier
Our commercial supplier of animal feed for our United States research
model business has filed for reorganization under the U.S. Bankruptcy Code;
however, we do not expect this to interrupt our supply of animal feed. In
addition, we believe an alternative or secondary source of animal feed could be
secured if necessary on terms comparable with our current supplier, although we
cannot assure you that we will be able to secure an alternative or secondary
source on comparable commercial terms.
Our operations in foreign countries are subject to risks
Approximately 46%, 41%, 40% and 35% of our net sales for 1996, 1997, 1998
and the nine months ended September 25, 1999 were derived from our operations
outside the United States. In addition, approximately 36% of our pro forma net
sales for the twelve-month period ended September 25, 1999 were derived from
operations outside the United States. Our operations and financial results
could be significantly affected by factors such as changes in foreign currency
rates, uncertainties related to regional economic circumstances and the costs
of complying with a wide variety of international and United States regulatory
requirements.
Because the sales and expenses of our foreign operations are generally
denominated in local currencies, exchange rate fluctuations between local
currencies and the United States dollar will subject us to currency translation
risk with respect to the reported results of our foreign operations. We cannot
assure you that these fluctuations would not have an adverse effect on our
results of operations. We currently do not hedge against the risk of exchange
rate fluctuations.
16
<PAGE>
We face significant competition in our business
We have different competitors in each of our business areas. We primarily
compete against smaller, limited- service providers in our research models
business and numerous other companies of varying sizes in our biomedical
products and services business. A few of our competitors in our biomedical
products and services business may have greater capital, technical and other
resources than we do. Expansion by our competitors into other areas in which we
operate could affect our competitive position. We generally compete on the
basis of quality, reputation, and availability, which is supported by our
international presence with strategically located facilities. We cannot assure
you that we will be able to compete favorably in these areas in the future.
We are dependent on key personnel
Our success depends to a significant extent on the continued services of
our senior management and other members of management. We could be adversely
affected if any of these persons were unwilling or unable to continue in our
employ.
Certain of our biomedical products and services businesses, most notably
the Special Animal Services and biosafety testing businesses, are particularly
dependent on the retention and recruitment of key personnel with highly
specialized technical backgrounds. We cannot assure you that we will be able to
continue to successfully recruit and retain key scientific staff necessary to
support superior levels of service in our higher growth businesses, especially
during a period of tight labor markets.
If we are not successful in selecting and integrating the businesses we
acquire, we may be adversely affected
Since December 31, 1996, we have completed four acquisitions and will
continue to review future acquisition opportunities in the ordinary course of
our business. We cannot assure you that acquisition candidates will continue to
be available on terms and conditions acceptable to us. Acquisitions involve
numerous risks, including, among other things, difficulties and expenses
incurred in connection with the acquisitions and subsequent assimilation of the
operations and services or products of the acquired companies, the difficulty
of operating new businesses, the diversion of management's attention from other
business concerns and the potential loss of key employees of the acquired
company. Acquisitions of foreign companies also may involve the additional
risks of assimilating differences in foreign business practices and overcoming
language barriers. In the event that the operations of an acquired business do
not live up to expectations, we may be required to restructure the acquired
business. We cannot assure you that our past and any future acquisitions,
including the Sierra Acquisition, will be successfully integrated into our
operations.
We are controlled by our principal shareholders whose interests may differ
from your interests
Circumstances may occur in which the interests of our principal
shareholders could be in conflict with your interests. In addition, these
shareholders may have an interest in pursuing transactions that, in their
judgment, enhance the value of their equity investment in our company, even
though such transactions may involve risks that you may not want to assume as a
holder of the warrants or common stock of Holdings.
Most of our outstanding shares of common stock are directly or indirectly
held by the DLJMB Funds. As a result of their stock ownership, the DLJMB Funds
control us and indirectly have the power to elect most of our directors,
appoint new management and approve any action requiring the approval of the
holders of common stock, including adopting amendments to our certificate of
incorporation and approving recapitalizations or sales of all or substantially
all of our assets. The directors elected by the DLJMB Funds will have the
ability to control decisions affecting our capital structure, including the
issuance of additional capital stock, the implementation of stock repurchase
programs and the declaration of dividends.
The general partners of each of the DLJMB Funds are affiliates or
employees of Donaldson, Lufkin & Jenrette, Inc. Donaldson, Lufkin & Jenrette
Securities Corporation, which was the initial purchaser of the units, is an
affiliate
17
<PAGE>
of Donaldson, Lufkin & Jenrette, Inc., as is DLJ Capital Funding, Inc., which
is the lead arranger, syndication agent and a lender under our new credit
facility.
Our historical financial information may not be representative of our results
as a separate company
The historical financial information we have included in this prospectus
may not reflect what our results of operations, financial position and cash
flows would have been had we been a separate, stand-alone company during the
periods presented or what our results of operations, financial position and
cash flows will be in the future. Various adjustments and allocations were made
to the historical financial statements in this prospectus because Bausch &Lomb
Incorporated did not account for us as a single stand-alone business for all
periods presented. We cannot assure you that the adjustments and allocations we
have made in preparing our historical and pro forma consolidated financial
statements appropriately reflect our operations during the periods presented as
if we had operated as a stand-alone company.
We must comply with many federal, state and local rules and regulations
Our business is affected by FDA regulations and similar foreign regulations
Much of our business depends on the comprehensive government regulation of
the drug development process of our customers. In the United States, from time
to time legislation is introduced in Congress to substantially modify
regulations administered by the FDA governing the drug approval process. In
Europe, the general trend has been toward establishing common standards for
clinical testing of new drugs, leading to changes in the various requirements
currently imposed by each country. Changes in regulation in the United States
or elsewhere, including a relaxation in the scope of regulatory requirements or
the introduction of simplified drug approval procedures, as well as anticipated
regulation, could materially and adversely affect the demand for our services
and products.
Our endotoxin testing business is regulated as a medical device
manufacturer under FDA regulations. We received a "warning letter" from the FDA
earlier this year, citing quality control and certain other operational
deficiencies at our Charleston, South Carolina facility which the agency
considered to be in violation of the laws or regulations enforced by the FDA.
While the FDA has allowed our operation to continue to manufacture and sell the
LAL product line produced at the Charleston facility, we must make certain
prescribed changes to our production and quality control systems in order to
maintain our license to manufacture at that facility. We expect that we will be
able to meet all of the FDA's requirements in the near future, and have already
made considerable progress in addressing the non-compliance issues, but we
cannot assure you that the FDA will not conclude that our corrective actions
are inadequate. If the FDA finds that we have not corrected the deficiencies
noted in the warning letter, the agency could, among other things, issue
another warning letter, request that we enter into a consent decree, prohibit
new product introductions, institute a product recall, prohibit us from
shipping products until all deficiencies are corrected to its satisfaction or
temporarily revoke our manufacturing license, any of which could have a
material adverse effect on our results of operations.
Our business may be affected by changes in the Animal Welfare Act and
related regulations
Certain of our business activities are currently regulated by the Animal
Welfare Act, which governs the treatment of certain animals intended for use in
research. Much of our United States small animal research model business, which
is predominantly rats and mice, is not subject to regulation under the Animal
Welfare Act although we comply with licensing and registration requirement
standards set by the USDA for handling animals, including breeding, maintenance
and transportation of our animals. Birds, including the chickens used in our
United States SPF egg business, are also not subject to Animal Welfare Act
regulations. However, the USDA, which enforces the Animal Welfare Act, is
presently considering changing the regulations issued pursuant to the Animal
Welfare Act, in light of judicial action, to include rats, mice and birds
within its coverage. The Animal Welfare Act imposes a wide variety of specific
regulations on producers and users of animal subjects, most notably cage size,
shipping conditions and environmental enrichment methods. Should the USDA
decide to include rats, mice and birds, especially chickens, in its
regulations, we could be required to alter our production operation for these
models,
18
<PAGE>
including adding production capacity, new equipment and additional employees.
While we believe that application of the Animal Welfare Act to our rats, mice
and SPF egg businesses in the United States will not result in loss of net
sales, margin or market share, since all producers and users will be subject to
the same regulations, we cannot assure you that the USDA's actions will not
adversely affect our operations. In addition, although we do not anticipate the
addition of rats, mice and birds to the Animal Welfare Act to require
significant expenditures, we cannot assure you that the Animal Welfare Act,
when amended, will not be more stringent than we expect or that any future
amendments to the Animal Welfare Act or any other laws or regulations will not
require significant expenditures.
In addition, some states have their own regulations, including general
anti-cruelty legislation, which establish certain standards in handling
animals. To the extent that we provide products and services overseas, we also
have to comply with foreign laws, such as the European Convention for the
Protection of Animals During International Transport and other anti-cruelty
laws. The Council of Europe is presently considering proposals to more
stringently regulate animal research.
Noncompliance with such laws and regulations described above can result in
significant civil and criminal penalties.
We have been engaged in legal disputes over environmental compliance at our
Florida Keys primate business for many years
We have for two decades raised primates on two islands we purchased for
this purpose in the Florida Keys. Federal, state and local environmental and
wildlife authorities, as well as private environmental advocacy groups, have
challenged the continuing legality of this operation, citing damage to a
subsequently protected plant species, mangroves, resulting from the free range
conditions in which the primates have been maintained. To settle our disputes,
we have agreed to move the primates off the islands and thereafter transfer the
real property to the government. We have also agreed to refoliate the islands
at our cost, restoring them to their conditions prior to our arrival. While we
believe the refoliation process can be efficiently completed within a
reasonable period, we cannot assure you that the refoliation process will be
successful, or that there will not be any further disputes with environmental
authorities relating to this obligation in which restitution costs, damages and
penalties might be assessed.
Our business may be affected by healthcare reform
The healthcare industry is subject to changing political, economic and
regulatory influences that may affect the pharmaceutical and biotechnology
industries. Adoption and implementation of government healthcare reform, most
notably price controls on new drugs, may adversely affect research and
development expenditures by pharmaceutical and biotechnology companies,
resulting in a decrease of the business opportunities available to us. Many
foreign governments have also reviewed or undertaken healthcare reform, and we
cannot predict the impact that any pending or future healthcare reform
proposals may have on our business in foreign countries.
Our business may be disrupted by year 2000 problems
Historically, many computerized systems have used two digits rather than
four to define the applicable year. Computer equipment and software and devices
with imbedded technology that are time-sensitive may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in system
failure or miscalculations causing disruptions of operations. This problem is
generally referred to as the "Year 2000 issue."
We are currently engaged in a comprehensive project to upgrade our
computer software to make it Year 2000 compliant and we expect to be able to
modify or replace all affected systems in a manner which will minimize any
detrimental effects on operations. However, if such modifications and
replacements are not made, or are not completed in a timely manner, the year
2000 issue may have a material adverse effect on our business, results of
operations and financial condition. To date, we have spent approximately $1.5
million on year 2000 projects and future expenditures are not expected to be
significant. There can be no assurances that the actual costs required to
19
<PAGE>
become year 2000 compliant will not exceed our estimates. In addition, we are
uncertain as to the extent our customers and vendors may be affected by the
Year 2000 issues and failure by any of our customers/vendors, suppliers or
other third parties with whom we do business to be year 2000 compliant could
have a material adverse effect on our operations.
If we cannot obtain consents and approvals from third parties required as a
result of the change in control of our company, we may be adversely affected
A substantial number of our material agreements, including supply
agreements, license agreements, joint venture agreements and service agreements
contain provisions that require consents and/or approvals from third parties,
including government entities, in case of a change in control of our company.
In addition, a substantial number of our leases contain provisions prohibiting
such change in control or permitting the landlord to terminate the lease upon a
change in control. The Recapitalization constituted a change of control as
defined in those agreements. We have received the necessary consents and/or
approvals from third parties to our material agreements, except those from
government entities. Consents from government entities generally require post-
transaction disclosure which is in process, and we expect to receive such
consents. We cannot assure you that all consents and/or approvals that are
triggered by the change in control of our company will be obtained from
government entities. We also cannot assure you that our inability to obtain
such consents will not have a material adverse effect on our business.
There are no public trading markets for the warrants and the common stock of
Holdings issuable upon conversion of the warrants
There is currently no active trading markets for the warrants and the
common stock of Holdings issuable upon conversion of the warrants. As a result,
quotes for such warrants and shares will likely not be readily available.
Further, there can be no assurances as to the liquidity of or the ability of
the holders to sell their securities, or the price at which holders would be
able to sell their securities.
The trading price of the securities depends on the market for similar
securities and other factors, including economic conditions and our financial
condition, performance and prospects.
You may not receive dividends
Holdings has not paid dividends to date on the Holdings common stock or
any other securities and does not anticipate paying any dividends on the
Holdings common stock or any other securities in the foreseeable future.
Holdings is a holding company that is dependent on distributions from its
subsidiaries to meet its cash requirements. The terms of the indenture
governing notes issued by Charles River and the new credit facility will
restrict the ability of Charles River to make distributions to Holdings and,
consequently, will restrict the ability of Holdings to pay dividends on the
Holdings common stock or service its indebtedness. In addition, holders of the
warrants will not have the right to receive any dividends so long as their
warrants are unexercised.
20
<PAGE>
THE TRANSACTIONS
The Recapitalization
We entered into a recapitalization agreement dated as of July 25, 1999
with Bausch & Lomb Incorporated ("B&L"), the Rollover Shareholders, Holdings,
DLJMB and CRL Acquisition LLC, a wholly owned subsidiary of DLJMB. The
recapitalization agreement provided for, among other things:
o the contribution of all assets and liabilities (except as described
below) relating to our business by the Rollover Shareholders to us in
exchange for all of our capital stock
o the exchange by the Rollover Shareholders of their shares of our
capital stock for an equivalent ownership of shares of Holdings, so
that Holdings will own 100% of our capital stock
o the Rollover Shareholders retained certain assets including:
o substantially all of our cash and cash equivalents as of the day
preceding the closing date
o all receivables owed by the Rollover Shareholders or their
affiliates
o the Rollover Shareholders retained certain liabilities including:
o all indebtedness for borrowed money outstanding immediately prior
to the closing date
o all payables and other obligations owed to the Rollover
Shareholders or any of their affiliates
o all tax liabilities relating to pre-closing periods
o the formation by CRL Acquisition LLC of a wholly owned subsidiary
("Acquisition Subco"). CRL Acquisition LLC and Acquisition Subco were
organized by DLJMB for the purpose of consummating the
Recapitalization. The DLJMB Funds, management and other investors who
previously purchased units contributed equity of $92.4 million in
cash to CRL Acquisition LLC in exchange for all of the membership
interests in CRL Acquisition LLC, and CRL Acquisition LLC then
contributed equity of $92.4 million in cash to Acquisition Subco in
exchange for all of the capital stock of Acquisition Subco
o the merger of Acquisition Subco with and into Holdings, with Holdings
being the surviving entity
o the redemption by Holdings of 87.5% of its capital stock from the
Rollover Shareholders for $400.0 million in cash and a subordinated
discount note for $43.0 million issued by Holdings to the Rollover
Shareholders; the Rollover Shareholders retained 12.5% of their
equity investment with a fair market value of $13.2 million
As a result of the Recapitalization, the DLJMB Funds, management and
certain other investors indirectly own (through CRL Acquisition LLC) 87.5% of
the capital stock of Holdings and the Rollover Shareholders own 12.5% of the
capital stock of Holdings.
The Sierra Acquisition
We acquired Sierra for an initial purchase price of $24.0 million, of
which approximately $6 million was used to repay Sierra's existing debt. In
addition, we have agreed to pay:
o up to $2.0 million in contingent purchase price if certain financial
objectives are reached by December 31, 2000
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<PAGE>
o up to $10.0 million in performance-based bonus payments if certain
financial objectives are reached over the next five years, with no
payment in any individual year to exceed $2.7 million
o $3.0 million in retention and non-competition payments contingent
upon the continuing employment of certain key scientific and
management personnel through June 30, 2001
The Financing
We consummated the Recapitalization and the Sierra Acquisition
concurrently (the "effective time"). In order to fund the consideration for the
Transactions and pay related fees and expenses:
o we issued and sold units pursuant to an offering memorandum in the
aggregate principal amount of $150.0 million
o we obtained $105.6 million in equity investment, consisting of $92.4
million in cash by the DLJMB Funds, management, and other investors
and equity retained by the Rollover Shareholders with a fair value of
$13.2 million
o we entered into a new $190.0 million senior secured credit facility,
consisting of $160.0 million of term loan availability and $30.0
million of revolving loan availability with a group of financial
institutions led by DLJ Capital Funding. At the effective time, we
borrowed all of the term loans and $2.0 million of the revolving
credit facility. We may use the remaining borrowing availability
under the new credit facility for general corporate purposes, subject
to certain conditions, including the absence of any material adverse
change
o Holdings issued senior discount debentures with other warrants to the
DLJMB Funds and other investors for $37.6 million
o Holdings issued a subordinated discount note to the Rollover
Shareholders for $43.0 million
Concurrently with the effective time:
o we dividended $270.0 million less fees and expenses, which included a
portion of the amount received pursuant to the units previously
offered and under our new credit facility, to Holdings
o the Rollover Shareholders received cash in the amount of $400.0
million and a subordinated discount note for $43.0 million in
exchange for 87.5% of their shares of capital stock of Holdings; the
Rollover Shareholders retained 12.5% of their equity investment with
a fair market value of $13.2 million
We funded the Sierra Acquisition with:
o available cash
o a portion of the net proceeds from the units
o a portion of the borrowings under our new credit facility
22
<PAGE>
The following table sets forth the sources and uses of funds for the
Transactions on a pro forma basis.
As of September
25, 1999
---------------
(dollars in
thousands)
Sources:
Available cash.................................................... $ 2,508
Borrowings under our new credit facility:
Revolving credit facility(1)...................................... 2,000
Term loans(2)..................................................... 160,000
Units(3).......................................................... 150,000
Senior discount debentures with warrants of Holdings(4)........... 37,613
Subordinated discount note of Holdings(5)......................... 43,000
Equity investment by DLJMB Funds, management and other investors.. 92,387
Rollover Shareholders' equity..................................... 13,198
----------
Total sources.................................................. $ 500,706
==========
Uses:
Recapitalization consideration.................................... $ 443,000
Sierra acquisition consideration(6)............................... 24,000
Rollover Shareholders' equity..................................... 13,198
Debt issuance costs............................................... 13,237
Loans to management............................................... 920
Transaction fees and expenses(7).................................. 6,351
----------
Total uses..................................................... $ 500,706
==========
- -------------------
(1) We have availability of $28.0 million under our new revolving credit
facility, subject to customary borrowing conditions. See "Description of
New Credit Facility."
(2) Includes a senior secured Term Loan A facility of $40.0 million and a
senior secured Term Loan B facility of $120.0 million.
(3) Represents $150.0 million of units previously offered.
(4) Investment by the DLJMB Funds.
(5) Investment by the Rollover Shareholders.
(6) Approximately $6 million was used to repay Sierra's existing debt.
(7) Includes financial advisory and other fees, and legal, accounting and
other professional fees. See "Certain Relationships and Related
Transactions."
23
<PAGE>
USE OF PROCEEDS
Our net proceeds from the offering of the units, after deducting the
expenses of the Transactions, including discounts and commissions to the
initial purchaser, were approximately $143.2 million. We dividended $270.0
million less certain fees and expenses, consisting of a portion of the net
proceeds from the offering together with a portion of the $162.0 million of
initial borrowings under our new credit facility to Holdings. Holdings used the
proceeds from this dividend, together with its new equity investment by the
DLJMB Funds, management and other investors, proceeds from the issuance of its
senior discount debentures with other warrants and its subordinated discount
note, to fund the Recapitalization and to pay certain fees and expenses related
to the Recapitalization. We used the remaining proceeds to fund the Sierra
Acquisition and pay certain related fees and expenses. See "The Transactions."
All of the warrants offered hereby are being sold by the warrantholders.
Holdings will not receive any proceeds from the sale of the warrants or common
stock of Holdings issued upon the exercise of the warrants, other than the
payment of the exercise price of the warrants.
DIVIDEND POLICY
Holdings has not paid dividends to date on the Holdings common stock or
any other securities and does not anticipate paying any dividends on the
Holdings common stock or any other securities in the foreseeable future.
Holdings is a holding company that is dependent on distributions from its
subsidiaries to meet its cash requirements. The terms of the indenture
governing notes issued by Charles River and the new credit facility will
restrict the ability of Charles River to make distributions to Holdings and,
consequently, will restrict the ability of Holdings to pay dividends on the
Holdings common stock or service its indebtedness. In addition, holders of the
warrants will not have the right to receive any dividends so long as their
warrants are unexercised.
24
<PAGE>
CAPITALIZATION
The following table presents Holdings and Charles River's combined cash
and cash equivalents and capitalization as of September 25, 1999 (i) on a
historical basis and (ii) as adjusted to give pro forma effect to the
Transactions. This table should be read in conjunction with "The Transactions,"
"Use of Proceeds," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," our consolidated financial statements and notes
thereto included elsewhere in this prospectus. See "Unaudited Pro Forma
Condensed Consolidated Financial Data."
<TABLE>
As of September 25, 1999
------------------------
Historical Pro Forma
---------- ---------
(dollars in thousands)
<S>
<C> <C>
Cash and cash equivalents......................................................... $ 3,457 $ 3,678
======== ========
Debt:
New credit facility(1):
Revolving credit facility...................................................... $ -- $2,000
Term loans(2).................................................................. -- 160,000
Senior subordinated notes(3)...................................................... -- 147,872
Senior discount debentures with warramts.......................................... -- 28,642
Subordinated discount notes....................................................... -- 43,000
Capital lease obligations and other long-term debt................................ 1,033 1,256
-------- --------
Total debt.................................................................. 1,033 311,128
-------- --------
Redeemable Common Stock........................................................... -- 13,198
Shareholder's equity:
Common stock................................................................... 1 1
Additional paid-in capital..................................................... 17,836 196,184
Retained earnings.............................................................. 142,422 (299,168)
Loans to officers.............................................................. -- (920)
Accumulated other comprehensive income......................................... (11,294) (11,294)
-------- --------
Total shareholder's equity.................................................. 148,965 (15,197)
-------- --------
Total capitalization........................................................ $149,998 $280,771
======== ========
</TABLE>
- -------------------
(1) We have availability of $28.0 million under our new revolving credit
facility, subject to customary borrowing conditions. See "Description of
New Credit Facility."
(2) Includes a senior secured Term Loan A facility of $40.0 million and a
senior secured Term Loan B facility of $120.0 million.
(3) Represents $147.9 million of senior subordinated notes previously offered.
25
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
For the historical periods presented below, Holdings had no assets,
liabilities or operations. Therefore, the following table presents Charles
River's selected historical consolidated financial data and other data as of
and for the fiscal years ended December 31, 1994, December 30, 1995, December
28, 1996, December 27, 1997 and December 26, 1998 and as of and for the nine
months ended September 26, 1998 and September 25, 1999. The selected historical
consolidated financial data as of and for the three fiscal years ended December
26, 1998 were derived from our consolidated financial statements and the notes
to those statements. The selected historical consolidated financial data as of
and for the fiscal years ended December 31, 1994 and December 30, 1995 and as
of and for the periods ended September 26, 1998 and September 25, 1999 were
derived from our unaudited consolidated financial statements and the notes to
those statements. In the opinion of management, our unaudited consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
condition and results of operations for these periods. The information
contained in this table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and the notes thereto contained elsewhere
in this prospectus.
<TABLE>
Fiscal Year(1) Nine Months Ended
------------------------------------------------------ ---------------------
September September
1994 1995 1996 1997 1998 26, 1998 25, 1999
------ ------ ------- ------ ------ --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales....................... $135,747 $141,041 $155,604 $170,713 $193,301 $145,519 $161,096
Cost of products sold and
services provided............ 85,092 86,404 97,777 111,460 122,547 91,041 97,230
Selling, general and
administrative expenses...... 25,824 27,976 28,327 30,451 34,142 25,202 29,414
Amortization of goodwill and
other intangibles............ 437 558 610 834 1,287 1,036 1,114
Restructuring charges........... 4,788 -- 4,748 5,892 -- -- --
------- ------- ------- ------- ------- ------- -------
Operating income................ 19,606 26,103 24,142 22,076 35,325 28,240 33,338
Other income.................... -- -- -- -- -- -- 1,441
Interest income................. 149 634 654 865 986 659 496
Interest expense................ (464) (768) (491) (501) (421) (311) (207)
Gain/(loss) from foreign
currency, net................ 39 (68) 84 (221) (58) (127) (143)
------- ------- ------- ------- ------- ------- -------
Income before income taxes,
minority interests and
earnings from equity
investments.................. 19,330 25,901 24,389 22,219 35,832 28,461 34,925
Provision for income taxes...... 7,995 10,759 10,889 8,499 14,123 11,280 16,903
------- ------- ------- ------- ------- ------- -------
Income before minority
interests and earnings from
equity investments........... 11,335 15,142 13,500 13,720 21,709 17,181 18,022
Minority interests.............. -- (13) (5) (10) (10) (8) (10)
Earnings from equity
investments.................. 1,492 1,885 1,750 1,630 1,679 1,286 1,940
------- ------- ------- ------- ------- ------- -------
Net income...................... $12,827 $17,014 $15,245 $15,340 $23,378 $18,459 $19,952
======= ======= ======= ======= ======= ======= =======
</TABLE>
26
<PAGE>
<TABLE>
Fiscal Year(1) Nine Months Ended
------------------------------------------------------ ---------------------
September September
1994 1995 1996 1997 1998 26, 1998 25, 1999
------ ------ ------- ------ ------ --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Other Data:
Depreciation and
amortization................. $9,635 $9,717 $9,528 $9,703 $10,895 $7,932 $8,701
Capital expenditures............ 5,727 10,239 11,572 11,872 11,909 5,834 7,426
Ratio of earnings to fixed
charges(2)................... 21.9x 18.9x 18.8x 16.5x 25.8x 26.1x 33.7x
Balance Sheet Data (at end
of period):
Cash and cash equivalents....... $9,584 $15,336 $19,657 $17,915 $24,811 $25,184 $3,457
Working capital................. 23,366 35,901 45,204 41,746 37,422 48,457 20,596
Total assets.................... 164,680 184,271 196,981 196,211 233,410 222,092 210,371
Total debt(3)................... 4,142 4,626 1,645 1,363 1,582 1,462 1,033
Total shareholder's equity...... 126,000 142,212 153,818 149,364 168,259 165,324 148,965
</TABLE>
- -------------------
(1) Our fiscal year consists of twelve months ending on the Saturday closest to
December 31.
(2) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of income before income taxes, minority interests and
earnings from equity investments less minority interests plus earnings
from equity investments plus fixed charges. "Fixed charges" consist of
interest expense on all indebtedness, amortization of deferred financing
costs and one-third of rental expense from operating leases that we
believe is a reasonable approximation of the interest component of rental
expense.
(3) Total debt includes all debt and capital lease obligations, including
current portions.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our
consolidated financial statements and our unaudited pro forma condensed
consolidated financial statements, including the notes thereto, included
elsewhere in this prospectus.
This discussion contains forward-looking statements which involve risks
and uncertainties. Our actual results may differ significantly from the results
discussed in the forward-looking statements. Factors that might cause such
differences include, but are not limited to, those discussed in "Risk Factors."
HOLDINGS
Holdings is a holding company and does not have any material operations or
assets other than its ownership of all of the capital stock of Charles River.
CHARLES RIVER
Overview
We are a global market leader in the commercial production and supply of
animal research models for use in the discovery, development and testing of new
pharmaceuticals. We have expanded our core capabilities in research models to
become a leading supplier of related biomedical products and services in
several specialized niche markets. Our research model capabilities and
biomedical products and services, together with our global distribution
network, allow us to meet the extensive needs of our broad customer base. Our
customers consist primarily of large pharmaceutical companies, including the
ten largest global pharmaceutical companies based on 1998 revenues, as well as
biotechnology, animal health, medical device and diagnostic companies and
hospitals, academic institutions and government agencies. Our facilities are
located in 18 countries, including the United States, Canada, Japan and many
European countries.
We operate in two segments for financial reporting purposes--research
models and biomedical products and services. On a pro forma basis, research
models accounted for 62%, and biomedical products and services accounted for
38%, of net sales for the twelve-month period ended September 25, 1999. Over
the same period, Charles River and Holdings reported pro forma net sales of
$230.5 million and pro forma combined Adjusted EBITDA of $57.0 million.
Adjusted EBITDA represents EBITDA, as defined, adjusted for non-recurring,
non-cash and cash items, as appropriate, which are more fully described on page
12. EBITDA, as defined, represents operating income plus depreciation and
amortization. Adjusted EBITDA is presented because we believe it is a
meaningful indicator of Charles River's operating performance, and it is the
measure by which certain of the covenants under the new credit facility are
computed. EBITDA, as defined, and Adjusted EBITDA are not intended to represent
cash flows for the period, nor are they presented as an alternative to
operating income or as an indicator of operating performance. They should not
be considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP in the United States and are not indicative of
operating income or cash flow from operations as determined under GAAP. Our
method of computation may not be comparable to other similarly titled measures
of other companies.
Sierra, which we recently acquired, is a pre-clinical biomedical services
company with expertise in drug safety and efficacy assessment studies using
research models. Sierra offers its services to biotechnology, pharmaceutical
and medical device companies that are principally focused on conducting studies
needed in the early stages of drug development, especially those that require
highly specialized scientific capabilities. Sierra has expertise in conducting
critical developmental studies on potential new drugs and devices using
research models, including short-term evaluations of potential new treatment
for human or animal disease conditions.
28
<PAGE>
Net Sales. We recognize net sales when a product is shipped or as services
are rendered. Over the past three years, unit volume of small animal research
models has increased modestly in North America and has decreased modestly in
Europe. During the same period, sales in both North America and Europe have
increased, principally as a result of price increases and a shift in mix
towards higher priced research models. In recent years, we have increased our
focus on the sale of specialty research models, such as special disease models,
which have contributed to additional sales growth.
Our customers typically place orders for research models with less than a
week's lead time. Meeting such demand requires efficient inventory management
and strong customer service support. We improved inventory availability in the
last two years through better forecasting and production mix, and most
importantly, improved biosecurity, thereby reducing the possibility of
contaminations.
Biomedical products and services have grown at a compounded rate of 31%
from 1996 to 1998 and accounted for 30% of our sales in 1998, compared to 22%
in 1996. Our growth in this business demonstrates our ability to capitalize on
our core research model technology and enter into related product development
activities undertaken by our customers.
Pricing. We maintain published list prices for all of our research models,
biomedical products and certain of our services. We also have pricing
agreements with our customers which provide certain discounts, usually based on
volume. Many of our services are based on customized orders and are priced
accordingly. While pricing has been competitive, certain of our products are
priced at a premium due to the higher quality, better availability, and
superior customer support that our customers associate with our products.
Biosecurity. Biosecurity is our highest operational priority. Prior
breaches of biosecurity have adversely affected our results of operations, and
we cannot assure you that future breaches would not materially affect our
results of operations. A biosecurity breach typically results in additional
expenses from the need to "recycle" or clean up the contaminated room, which in
turn results in inventory loss, clean-up and start-up costs, and can reduce net
sales as a result of lost customer orders and credits for prior shipments. We
experienced several significant contaminations in 1996 and a few significant
contaminations in 1997, both in our barrier rooms for research models and in
our poultry houses for SPF eggs. As a result, our net sales in 1996 and 1997
were adversely affected by our inability to fulfill customer orders and our
expenses were increased during those periods by the costs associated with
cleaning up the contaminations. Since December 31, 1996, we have made over $6.0
million of capital expenditures designed to strengthen our biosecurity,
primarily by upgrading our production facilities. In addition, we have made
significant changes to our operating procedures for barrier rooms and poultry
houses designed to further minimize the risks of contamination, including, for
example, increasing the frequency of replacing masks and gowns, and most
importantly, increasing awareness and training among our employees. These
improvements to our operating procedures increased annual ongoing biosecurity
related expenses by approximately $0.5 million in 1998. While we cannot assure
you that we will not experience future significant barrier room or poultry
house contaminations in the future, these changes have contributed to our
absence of significant contaminations during 1998 and the first nine months of
1999.
Acquisitions. Since December 31, 1996, we have successfully acquired and
integrated four companies, which contributed $6.3 million in sales in 1998, or
3.3% of total sales. We acquired Sierra for an initial purchase price of $24.0
million, of which approximately $6 million was used to repay Sierra's existing
debt. In addition, we have agreed to pay (a) up to $2.0 million in contingent
purchase price if certain financial objectives are reached by December 31,
2000, (b) up to $10.0 million in performance-based bonus payments if certain
financial objectives are reached over the next five years, with no payment in
any individual year to exceed $2.7 million, and (c) $3.0 million in retention
and non-competition payments contingent upon the continuing employment of
certain key scientific and managerial personnel through June 30, 2001.
The $2.0 million in contingent purchase price will, if paid, increase
goodwill and/or other identifiable intangibles by the same amount and not
affect our results of operations except through the subsequent related
amortization expense and any interest expense related to any borrowings
necessary to finance such payment. The $10.0 million in performance-based bonus
payments, will, if paid, be expensed during the period in which it becomes
reasonably certain that such financial objectives will be achieved. The $3.0
million in retention and non-competition payments will be
29
<PAGE>
expensed over the next two years. The contingent purchase price and
performance-based bonus payments are not reflected in the pro forma financial
data included elsewhere herein because they are not considered reasonably
estimable; the retention and non-competition payments are not included in the
pro forma financial data as they are considered non-recurring.
Joint Ventures. We have two unconsolidated joint ventures which are
accounted for under the equity method. Our largest is Charles River Japan,
which we own 50%/50% with Ajinimoto Co., Inc., and is an extension of our
research model business. Our royalty agreement provides us with 3% of the sales
of locally produced research models. We also receive dividends based on our
pro-rata share of 50% of net income. Dividends received from Charles River
Japan were $0.7 million, $0.8 million and $0.7 million in 1996, 1997 and 1998,
respectively. In addition, dividends for 1999 in the amount of $0.8 million
have been received. Our other unconsolidated joint venture is Charles River
Mexico, an extension of our SPF eggs business, which is not significant to our
operations.
Restructuring Program. During 1996 and 1997, we implemented two
restructuring programs in conjunction with B&L which were designed to: reduce
capacity and consolidate facilities in the SPF eggs and small research models
product lines; reduce staff costs in the United States and Europe; relocate our
primate breeding operation in the Florida Keys to new locations and refoliate
the related islands in response to a June 1997 court order; and close and
consolidate several small product lines. In connection with the 1997
restructuring program, we entered into certain severance arrangements that call
for payments over an extended period of time. Further, due to complications
associated with our plan to relocate our primates from the Florida Keys to
Miami, Florida, the relocation has taken longer than anticipated to complete.
Specifically, we were particularly sensitive to moving the Florida Keys
primates in a controlled and unrushed manner, in order to minimize mortality
and breeding disruption. We believe that the restructuring programs have
allowed us to significantly improve operations in 1998 and the first nine
months of 1999.
Allocation of Costs from Bausch & Lomb. Historically, B&L charged us for
certain direct expenses, including insurance, information technology and other
miscellaneous expenses, based upon actual charges incurred on our behalf.
However, these charges and estimates are not necessarily indicative of the
costs and expenses which would have resulted had we incurred these costs as a
stand-alone entity. The actual amounts of expenses we incur in future periods
may vary significantly from these allocations and estimates. We expect to incur
other incremental expenses as a stand-alone company. See "Unaudited Pro Forma
Condensed Consolidated Financial Data."
The Transactions. The Recapitalization, which was consummated on September
29, 1999, was accounted for as a leveraged recapitalization, which will have no
impact on the historical basis of our assets and liabilities. The Sierra
Acquisition was accounted for under the purchase method of accounting with the
purchase price allocated to the assets and liabilities of Sierra based on an
estimate of their fair value, with the remainder, if any, being allocated to
goodwill. On a pro forma basis, we incurred various costs of approximately
$19.6 million (pre-tax) in connection with consummating the Transactions. The
portion of these costs that represents deferred financing costs will be
capitalized and amortized over the life of the related financing. A portion of
the expenses related to the Recapitalization will be charged to retained
earnings while the portion related to the Sierra Acquisition will be included
in the purchase price.
Deferred Tax Assets. In conjunction with the Recapitalization, we will
make an election under section 338(h)(10) of the Internal Revenue Code of 1986,
as amended. Such election results in a step-up in the tax basis of the
underlying assets. The resulting net deferred tax asset of $88.1 million is
expected to be realized over 15 years through future tax deductions which are
expected to reduce future tax payments. See Note (e) to the Unaudited Pro Forma
Condensed Consolidated Balance Sheet included in the Unaudited Pro Forma
Condensed Consolidated Financial Data.
Results of Operations
The following table summarizes historical results of operations as a
percentage of net sales for the periods shown:
<TABLE>
Fiscal Year Ended Nine Months Ended
---------------------------------------------------------------------
December 28, December 27, December 26, September 26, September 25,
1996 1997 1998 1998 1999
------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales........................................ 100.0% 100.0% 100.0% 100.0% 100.0%
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Costs of products sold and service provided...... 62.8 65.3 63.4 62.6 60.4
Selling, general and administrative expenses..... 18.2 17.8 17.7 17.3 18.3
Amortization of goodwill and other intangibles... 0.4 0.5 0.7 0.7 0.7
Restructuring charges............................ 3.1 3.5 -- -- --
----- ----- ----- ----- -----
Operating income................................. 15.5 12.9 18.2 19.4 20.6
----- ----- ----- ----- -----
Net income....................................... 9.8% 9.0% 12.1% 12.7% 12.4%
===== ===== ===== ===== =====
</TABLE>
Nine Months ended September 25, 1999 Compared to Nine Months ended September
26, 1998
Net Sales. Net sales for the first nine months of 1999 were $161.1
million, an increase of $15.6 million, or 10.7%, from $145.5 million in the
first nine months of 1998.
Research Models. Net sales of research models for the first nine months of
1999 were $109.2 million, an increase of $6.0 million, or 5.8%, from $103.2
million for the first nine months of 1998. Sales increased due to the increase
in small animal research model sales in North America and Europe, resulting
from improved pricing, a more favorable product mix and an increase in unit
volume. We also experienced growth in our primate import and conditioning
business, mainly due to pricing.
Biomedical Products and Services. Net sales of biomedical products and
services for the first nine months of 1999 were $51.9 million, an increase of
$9.6 million, or 22.7%, from $42.3 million for the first nine months of 1998.
At the beginning of the second quarter of 1998, we acquired two new businesses
that contributed $2.8 million of this sales growth. The remaining increase was
due to significant sales increases of Special Animal Services and Endotoxin
testing kits, and sales from our facility management contracts, primarily due
to better customer awareness of our outsourcing solutions.
Cost of Products Sold and Services Provided. Cost of products sold and
services provided for the first nine months of 1999 was $97.2 million, an
increase of $6.2 million, or 6.8%, from $91.0 million for the first nine months
of 1998.
Research Models. Cost of products sold and services provided for research
models for the first nine months of 1999 was $65.4 million, an increase of $1.7
million, or 2.7%, compared to $63.7 million for the first nine months of 1998.
Cost of products sold and services provided for the first nine months of 1999
was 59.9% of net sales compared to 61.7% of net sales for the first nine months
of 1998. Cost of products sold and services provided increased at a lower rate
than net sales due to the more favorable product mix and better pricing, as
well as improved capacity utilization.
Biomedical Products and Services. Cost of products sold and services
provided for biomedical products and services for the first nine months of 1999
was $31.8 million, an increase of $4.5 million, or 16.5%, compared to $27.3
million for the first nine months of 1998. Cost of products sold and services
provided for the first nine months of 1999 was 61.3% of net sales compared to
64.5% of net sales for the first nine months of 1998. Cost of products sold and
services provided increased at a lower rate than net sales, due to improved
utilization in our SPF egg business, and a favorable sales mix in our Special
Animal Services and biosafety testing businesses.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the first nine months of 1999 were $29.4 million,
an increase of $4.2 million, or 16.7% from $25.2 million for the first nine
months of 1998. Selling, general and administrative expenses for the first nine
months of 1999 were 18.2% of net sales, compared to 17.3% of net sales for the
first nine months of 1998. Selling, general and administrative expenses also
included research and development expense of $0.4 million for the first nine
months of 1999 compared to $0.8 million for the same period in 1998.
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Research Models. Selling, general and administrative expenses for research
models for the first nine months of 1999 were $15.7 million, an increase of
$2.5 million, or 18.9%, compared to $13.2 million, for the first nine months of
1998. Selling, general and administrative expenses for the first nine months of
1999 were 14.4% of net sales, compared to 12.8% for the first nine months of
1998. The increase was attributable to additional worldwide marketing efforts,
additional salespeople in the United States and the impact of selling efforts
in Europe for ESD, a business acquired at the end of 1998.
Biomedical Products and Services. Selling, general and administrative
expenses for biomedical products and services for the first nine months of 1999
were $7.5 million, an increase of $0.9 million, or 13.6%, compared to $6.6
million for the first nine months of 1998. Selling, general and administrative
expenses for the first nine months of 1999 decreased to 14.5% of net sales,
compared to 15.6% of net sales for the first nine months of 1998, due to the
significant increase in sales.
Unallocated Corporate Overhead. Unallocated corporate overhead, which
consists of various corporate expenses, was $6.2 million for the first nine
months of 1999, an increase of $0.8 million, or 14.8%, compared to $5.4 million
for the first nine months of 1998. The increase resulted from a number of
items, the most significant of which related to the write down of a small
investment in one of our joint ventures, which is undergoing significant
financial difficulties.
Amortization of Goodwill and Other Intangibles. Amortization of goodwill
and other intangibles for the first nine months of 1999 was $1.1 million, an
increase of $0.1 million, or 10.0%, from $1.0 million for the first nine months
of 1998. The increase was due to the effect of three recent acquisitions, two
in April 1998 and one in December 1998.
Restructuring Charges. There were no restructuring charges during the nine
months ended September 25, 1999 and September 26, 1998. During the nine months
ended September 25, 1999, we charged $0.8 million of previously reserved for
costs against the recorded restructuring reserves. The remaining reserves,
which primarily relate to continuing severance payments and relocation and
refoliation costs, are expected to be fully utilized by the end of 1999.
Operating Income. Operating income for the first nine months of 1999 was
$33.3 million, an increase of $5.1 million, or 18.1%, from $28.2 million in the
first nine months of 1998. Operating income for the first nine months of 1999
was 20.7% of net sales, compared to 19.4% of net sales for the first nine
months of 1998. Operating income increased in total and as a percentage of net
sales for the reasons described below.
Research Models. Operating income from sales of research models for the
first nine months of 1999 was $28.0 million, an increase of $1.7 million, or
6.5%, from $26.3 million in the first nine months of 1998. Operating income
from sales of research models for the first nine months of 1999 was 25.5% of
net sales, unchanged from the first nine months of 1998.
Biomedical Products and Services. Operating income from sales of
biomedical products and services for the first nine months of 1999 was $11.5
million, an increase of $4.2 million, or 57.5%, from $7.3 million in the first
nine months of 1998. Operating income from sales of biomedical products and
services for the first nine months of 1999 increased to 22.2% of net sales,
compared to 17.3% of net sales for the first nine months of 1998, due to
improvements in pricing, sales mix and cost savings achieved.
Other Income. During the third quarter of 1999, we recorded a $1.4 million
gain on the sale of two small facilities, one located in Florida, and the other
located in the Netherlands.
Income Taxes. The effective tax rate of 48.4% for the first nine months of
1999 as compared to 39.6% for the first nine months of 1998, reflects the
remittance of cash dividends of $20.7 million from our foreign subsidiaries
which, in turn, were remitted to B&L. The related amounts were previously
considered permanently reinvested in the foreign jurisdictions for U.S. income
tax reporting purposes, therefore, we were required to provide additional taxes
upon their repatriation to the U.S. In addition, during the nine months ended
September 25, 1999, an election was made by B&L to treat certain foreign
entities as branches for United States income tax purposes. As a result, all
previously untaxed accumulated earnings of such entities became immediately
subject to tax in the United States. The receipt of the cash
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<PAGE>
dividends from the foreign subsidiaries and the foreign tax elections made
resulted in incremental United States taxes of $2.0 million, net of foreign tax
credits, during the nine months ended September 25, 1999.
Net Income. Net income for the first nine months of 1999 was $20.0
million, an increase of $1.5 million, or 8.1%, from $18.5 million in the first
nine months of 1998. The increase was attributable to the factors described
above.
Fiscal 1998 Compared to Fiscal 1997
Net Sales. Net sales in 1998 were $193.3 million, an increase of $22.6
million, or 13.2%, from $170.7 million in 1997.
Research Models. Net sales of research models in 1998 were $134.6 million,
an increase of $9.4 million, or 7.5%, from $125.2 million in 1997. Sales
increased due to the increase in small animal research model sales in North
America, resulting from improved pricing and a more favorable product mix. In
addition, in 1998 we were not affected by the significant contaminations which
negatively impacted sales in 1997. Overall, unit volumes remained relatively
flat, with modest increases in North America offset by modest declines in
Europe. Our net sales in our primate import and conditioning business also
increased as a result of expansion in our boarding and service business.
Biomedical Products and Services. Net sales of biomedical products and
services in 1998 were $58.7 million, an increase of $13.2 million, or 29.0%,
from $45.5 million in 1997. During 1998 we acquired three businesses that
contributed $6.1 million of our sales growth. The remaining increase was due to
increased sales across all of our product lines, and in particular our Special
Animal Services and Endotoxin testing businesses.
Cost of Products Sold and Services Provided. Cost of products sold and
services provided in 1998 was $122.5 million, an increase of $11.0 million, or
9.9%, from $111.5 million in 1997.
Research Models. Cost of products sold and services provided for research
models for 1998 was $85.8 million, an increase of $3.3 million, or 4.0%,
compared to $82.5 million in 1997. Cost of products sold and services provided
for 1998 was 63.7% of net sales compared to 65.9% for 1997. Cost of products
sold and services provided increased for 1998 compared to 1997, but at a slower
rate than net sales due principally to better product mix and pricing as well
as greater economies of scale and improved production efficiencies.
Biomedical Products and Services. Cost of products sold and services
provided for biomedical products and services for 1998 was $36.7 million, an
increase of $7.7 million, or 26.6%, compared to $29.0 million in 1997. Cost of
products sold and services provided was 62.5% of net sales in 1998 compared to
63.7% in 1997. Cost of products sold and services provided increased for 1998
compared to 1997, but at a slower rate than net sales due principally to cost
savings.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses in 1998 were $34.1 million, an increase of $3.6
million, or 11.8%, from $30.5 million in 1997. Selling, general and
administrative expenses in 1998 were 17.6% of net sales compared to 17.9% of
net sales in 1997. These expenses increased mainly in line with sales. Selling,
general and administrative expenses also included research and development
expense of $1.4 million in 1998, which was the same amount as in 1997.
Research Models. Selling, general and administrative expenses for research
models for 1998 were $18.1 million, a decrease of $1.5 million, or 7.7%,
compared to $19.6 million, for 1997. Selling, general and administrative
expenses for 1998 decreased to 13.4% of net sales, compared to 15.7% for 1997
due primarily to the significant increase in sales.
Biomedical Products and Services. Selling, general and administrative
expenses for biomedical products and services for 1998 were $9.7 million, an
increase of $2.8 million, or 40.6%, compared to $6.9 million for 1997. Selling,
general and administrative expenses for 1998 were 16.5% of net sales, compared
to 15.2% of net sales for 1997. The increase was principally attributable to
the acquisition of two small businesses in April 1998.
33
<PAGE>
Unallocated Corporate Overhead. Unallocated corporate overhead was $6.3
million for 1998, an increase of $2.3 million, or 57.5%, compared to $4.0
million in 1998. The increase was due to an increase in our supplemental
retirement program costs, along with an increase in management bonuses for
1998.
Amortization of Goodwill and Other Intangibles. Amortization of goodwill
and other intangibles in 1998 was $1.3 million, an increase of $0.5 million, or
62.5%, from $0.8 million in 1998. The increase was due to the acquisition of
two small service businesses in April 1998.
Restructuring Charges. There were no restructuring charges in 1998
compared to $5.9 million in 1997 associated with the restructuring program
discussed above. During 1998, we charged $1.6 million of previously reserved
for costs against the previously recorded restructuring reserves.
Operating Income. Operating income in 1998 was $35.3 million, an increase
of $13.2 million, or 59.7%, from $22.1 million in 1997. Operating income in
1998 was 18.3% of net sales compared to 12.9% of net sales in 1997.
Research Models. Operating income from research models in 1998 was $30.5
million, an increase of $10.9 million, or 55.6%, from $19.6 million in 1997.
Operating income from sales of research models in 1998 increased to 22.7% of
net sales, compared to 15.7% of net sales in 1997 for the reasons described
above.
Biomedical Products and Services. Operating income from biomedical
products and services in 1998 was $11.1 million, an increase of $4.6 million,
or 70.8%, from $6.5 million in 1997. Operating income increased to 18.9% of net
sales, compared to 14.3% of net sales in 1997 for the reasons described above.
Income Taxes. The effective tax rate in 1998 was 39.4% compared to 38.3%
in 1997.
Net Income. Net income in 1998 was $23.4 million, an increase of $8.1
million, or 52.9%, from $15.3 million in 1997. The increase was attributable to
the factors referred to above.
Fiscal 1997 Compared to Fiscal 1996
Net Sales. Net sales in 1997 were $170.7 million, an increase of $15.1
million, or 9.7%, from $155.6 million in 1996.
Research Models. Net sales of research models in 1997 were $125.2 million,
an increase of $3.9 million, or 3.2%, from $121.3 million in 1996. Sales
increased due to the increase in small animal research model sales in North
America, primarily due to improved pricing and a favorable product mix which
more than offset slight unit volume declines in Europe and flat unit volume
sales in North America. The unit volume declines were partially due to a number
of contaminations which occurred in 1996 and several contaminations in 1997,
which mostly impacted net sales in 1997. In addition, net sales in 1997 were
negatively impacted by foreign currency translations. Sales in our primate
business increased after our imported primates business was reacquired at the
beginning of the third quarter of 1996.
Biomedical Products and Services. Net sales of biomedical products and
services in 1997 were $45.5 million, an increase of $11.2 million, or 32.7%,
from $34.3 million in 1996. The increase was due to increased sales of SPF
eggs, an increase in facility management contracts and the acquisition of our
French distributor for Endotoxin testing kits in the beginning of the second
quarter of 1996.
Cost of Products Sold and Services Provided. Cost of products sold and
services provided in 1997 was $111.5 million, an increase of $13.7 million, or
14.0%, from $97.8 million in 1996.
Research Models. Cost of products sold and services provided for research
models for 1997 was $82.5 million, an increase of $6.5 million, or 8.6%,
compared to $76.0 million in 1996. Cost of products sold and services provided
for 1997 was 65.9% of net sales compared to 62.7% for 1996. Cost of products
sold and services provided increased for
34
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1997 compared to 1996 at a greater rate than sales due principally to
additional costs associated with biosecurity and the prevention of
contaminations.
Biomedical Products and Services. Cost of products sold and services
provided for biomedical products and services for 1997 was $29.0 million, an
increase of $7.2 million, or 33.0%, compared to $21.8 million in 1996. Cost of
products sold and services provided for 1997 was 63.7% of net sales in 1997
compared to 63.6% in 1996.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses in 1997 were $30.5 million, an increase of $2.2
million, or 7.8%, from $28.3 million in 1996. Selling, general and
administrative expenses in 1997 were 17.9% of net sales compared to 18.2% of
net sales in 1996. Selling, general and administrative expenses also included
research and development expense of $1.4 million in 1997, compared to $1.5
million in 1996.
Research Models. Selling, general and administrative expenses for research
models for 1997 were $19.6 million, a decrease of $0.1 million, or 0.5%,
compared to $19.7 million, for 1996. Selling, general and administrative
expenses for 1997 were 15.7% of net sales, compared to 16.2% for 1996.
Biomedical Products and Services. Selling, general and administrative
expenses for biomedical products and services for 1997 were $6.9 million, an
increase of $1.5 million, or 27.8%, compared to $5.4 million for 1996. Selling,
general and administrative expenses for 1997 were 15.2% of net sales, compared
to 15.7% of net sales for 1996.
Unallocated Corporate Overhead. Corporate overhead was $4.0 million for
1997, an increase of $0.8 million, or 25.0%, compared to $3.2 million in 1996.
Amortization of Goodwill and Other Intangibles. Amortization of goodwill
and other intangibles in 1997 was $0.8 million, an increase of $0.2 million, or
33.3%, from $0.6 million in 1996. The increase was due to the acquisition of
our French distributor for Endotoxin testing kits in the beginning of the
second quarter of 1996.
Restructuring Charges. Restructuring charges in 1997 were $5.9 million, an
increase of $1.2 million, or 25.5%, from $4.7 million in 1996. The 1997
restructuring charges consisted of the following: plant closings and personnel
reductions in our SPF egg business, severance costs and relocation costs for
our purpose bred primates in the Florida Keys and related refoliation costs and
staff reductions and associated severance costs in Europe and the United
States. The 1996 restructuring charges consisted of the following: plant
closings in the United States and Europe of the small animal business,
personnel reductions at our European headquarters, administrative staff
reductions at the SPF egg business, and shut-down or consolidations of several
other small businesses. During 1997, we charged $3.2 million of costs against
the reserves recorded in 1997. The restructuring activities provided for in
1996 were completed by the end of the year with actual charges approximating
those originally provided for.
Operating Income. Operating income in 1997 was $22.1 million, a decrease
of $2.0 million, or 8.3%, from $24.1 million in 1996. Operating income in 1997
was 12.9% of net sales compared to 15.5% of net sales in 1996. Operating income
decreased in total and as a percentage of net sales due to the factors
described above.
Research Models. Operating income from research models in 1997 was $19.6
million, a decrease of $4.5 million, or 18.7%, from $24.1 million in 1996.
Operating income from sales of research models in 1997 decreased to 15.7% of
net sales, compared to 19.9% of net sales in 1996 due primarily to biosecurity
costs and higher restructuring charges.
Biomedical Products and Services. Operating income from biomedical
products and services in 1997 was $6.5 million, an increase of $3.2 million, or
97.0%, from $3.3 million in 1996. Operating income from sales of biomedical
products and services in 1997 increased to 14.3% of net sales, compared to 9.6%
of net sales in 1996 due to the significant increase in sales.
Income Taxes. The effective tax rate in 1997 was 38.3%, compared to 44.6%
in 1996, due to higher foreign statutory tax rates in 1996.
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Net Income. Net income in 1997 was $15.3 million, an increase of $0.1
million, or 0.7%, from $15.2 million in 1996. The increase was attributable to
the factors referred to above.
Liquidity and Capital Resources
Post-Transactions
Our principal sources of liquidity are cash flow from operations and
borrowings under our new credit facility. Our principal uses of cash are debt
service requirements as described below, capital expenditures, working capital
requirements and acquisitions.
On a pro forma basis, after giving effect to the Transactions, as of
September 25, 1999, Charles River and Holdings had:
o total combined indebtedness of approximately $382.8 million
o approximately $28.0 million of borrowings available under our new
credit facility, subject to customary conditions
Our significant debt service obligations following the Transactions could,
under certain circumstances, have material consequences to our security
holders. See "Risk Factors--Risks relating to our debt."
The term loan facility under the new credit facility consists of a $40.0
million term loan A facility and a $120.0 million term loan B facility. The
term loan A facility matures six years after the closing date of the facility
and the term loan B facility matures eight years after the closing date of the
facility.
The new credit facility also includes a $30.0 million revolving credit
facility which matures six years after the closing date of the facility. The
revolving credit facility may be increased by up to $25.0 million at our
request, which will only be available to us under certain circumstances,
subject to a successful syndication under the same terms and conditions of the
$30.0 million revolving credit facility.
Loans under the term loan A facility and the revolving facility will bear
interest, at our option, at the alternate base rate or the reserve adjusted
LIBOR rate plus, in each case, applicable margins of 3.00% for LIBOR loans and
1.75% for base rate loans. Loans under the term loan B facility will bear
interest, at our option, at the alternate base rate or the reserve adjusted
LIBOR rate plus, in each case, applicable margins of 3.75% for LIBOR loans and
2.50% for base rate loans. We pay commitment fees in an amount equal to 0.50%
per annum on the daily average unused portion of the revolving credit facility.
Such fees are payable quarterly in arrears and upon the maturity or termination
of the revolving credit facility. Beginning approximately six months after the
closing date of the new credit facility, the applicable margins applicable to
loans under the term loan A facility and the revolving facility and commitment
fees will be determined based on the ratio (the "Leverage Ratio") of
consolidated total debt to consolidated EBITDA (as defined in the new credit
facility) of our company and our restricted subsidiaries (as defined in the new
credit facility).
All of our future domestic restricted subsidiaries will be guarantors of
the new credit facility. Our obligations under the new credit facility are or
will be secured by:
o all of our stock,
o all of our existing and after-acquired personal property and all the
existing and after-acquired personal property of our future domestic
restricted subsidiaries, including a pledge of all of the equity
interests of all our future restricted subsidiaries held by us or any
of our restricted subsidiaries and no more than 65% of the equity
interests of any foreign restricted subsidiary, and all intercompany
debt in our favor,
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<PAGE>
o first-priority perfected liens on all of our material existing and
after-acquired real property fee and leasehold interests, subject to
customary permitted liens (as defined in the new credit facility),
and
o a negative pledge on all of our and our subsidiaries' assets.
The new credit facility contains customary covenants and restrictions on
our ability to engage in certain activities, including, but not limited to:
o limitations on other indebtedness, liens, investments and guarantees,
o restrictions on dividends and redemptions and payments on subordinated
debt and
o restrictions on mergers and acquisitions, sales of assets and leases.
The new credit facility also contains customary events of default and
a cross-default to indebtedness of Holdings.
The notes mature in 2009. Interest on the notes is payable semi-annually
in cash. The notes contain customary covenants and events of default, including
covenants that limit our ability to incur debt, pay dividends and make certain
investments.
We anticipate that we will spend approximately $15.0 million on a pro
forma basis for capital expenditures in 1999. The new credit facility contains
restrictions on our ability to make capital expenditures. Based on current
estimates, management believes that the amount of capital expenditures
permitted to be made under the new credit facility will be adequate to grow our
business according to our business strategy and to maintain the properties and
businesses of our continuing operations.
Working capital totaled $31.9 million at September 25, 1999 on a pro forma
basis. Management believes that we will continue to require working capital
consistent with past experience and that current levels of working capital,
together with borrowings available under the new credit facility, will be
sufficient to meet expected liquidity needs in the near term.
We anticipate that our operating cash flow, together with borrowings under
the new credit facility, will be sufficient to meet our anticipated future
operating expenses, capital expenditures and debt service obligations as they
become due. However, our ability to make scheduled payments of principal of, to
pay interest on or to refinance our indebtedness and to satisfy our other debt
obligations will depend upon our future operating performance, which will be
affected by general economic, financial, competitive, legislative, regulatory,
business and other factors beyond our control. See "Risk Factors."
From time to time we will continue to explore additional financing methods
and other means to lower our cost of capital, which could include stock
issuance or debt financing and the application of the proceeds therefrom to the
repayment of bank debt or other indebtedness. In addition, in connection with
any future acquisitions, we may require additional funding which may be
provided in the form of additional debt or equity financing or a combination
thereof. There can be no assurance that any such additional financing will be
available to us on acceptable terms.
In connection with the Transactions, Holdings issued $37.6 million
aggregate principal amount of 16.27% senior discount debentures with other
warrants to the DLJMB Funds and other investors. The senior discount debentures
accrete from their original issue price of $37.6 million to $82.3 million by
October 1, 2004. Thereafter, interest is payable in cash. The senior discount
debentures mature on April 1, 2010. The senior discount debentures contain
covenants and events of default substantially similar to those contained in the
notes. In addition, Holdings issued to the Rollover Shareholders a subordinated
discount note with an original issue price of $43.0 million. The subordinated
discount note accretes at the rate of 12% prior to October 1, 2004 and
thereafter at 15% to an aggregate principal amount of $175.3 million at
maturity on October 1, 2010. The subordinated discount notes are subject to
mandatory redemption upon a change of control at the option of the holder
thereof and are subject to redemption at Holdings' option at any time.
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Holdings has no source of liquidity other than dividends from Charles
River. Charles River's ability to pay dividends will be subject to limitations
contained in the indenture governing the notes and the new credit facility.
Historical
Nine Months Ended September 25, 1999 Compared to Nine Months Ended
September 26, 1998
Cash flow from operating activities for the nine months ended September
25, 1999 was $19.6 million compared to $23.5 million for the nine months ended
September 26, 1998 due to an increase in working capital.
Net cash used in investing activities, consisting primarily of capital
expenditures and acquisitions, was $4.8 million for the nine months ended
September 25, 1999 compared to $14.3 million for the nine months ended
September 26, 1998. The investing levels primarily change from year to year as
the result of spending on acquisitions. The large amount in 1998 primarily
relates to the acquisition of Tektagen, Inc. Capital expenditures were $7.4
million for the nine months ended September 25, 1999, compared to $5.8 million
for the nine months ended September 26, 1998. There were not any significant
capital commitments at September 25, 1999. We continually monitor our capital
spending in relation to current and anticipated business needs. Our operations
typically do not require large capital expenditures and we anticipate that
capital spending will remain relatively consistent except for requirements
related to acquisitions.
Net cash used in financing activities, consisting principally of net
activity with B&L, was $34.6 million for the nine months ended September 25,
1999 compared to $2.4 million for the nine months ended September 26, 1998.
This large increase relates principally to B&L dividending all excess cash in
Charles River Laboratories in connection with the Transactions.
Fiscal 1998 Compared to Fiscal 1997
Cash flow from operating activities in 1998 was $36.7 million compared to
$23.7 million in 1997, due to an increase in net income and a decrease in
working capital.
Net cash used in investing activities in 1998 was $22.3 million compared
to $12.3 million in 1997. The increase in 1998 was primarily due to the
acquisition of Tektagen, Inc. Capital expenditures were $11.9 million in 1998,
the same as 1997. Cash paid for acquisitions was $11.1 million in 1998,
compared to $1.2 million in 1997.
Net cash used in financing activities was $8.0 million in 1998 compared to
$12.9 million in 1997. The decrease is due to less remittances to B&L.
Fiscal 1997 Compared to Fiscal 1996
Cash flow from operating activities in 1997 was $23.7 million compared to
$20.5 million in 1996, due to a decrease in working capital.
Net cash used in investing activities in 1997 was $12.3 million compared
to $11.7 million in 1996. Capital expenditures were $11.9 million in 1997,
compared to $11.6 million in 1996.
Net cash used in financing activities was $12.9 million in 1997 compared to
$4.1 million in 1996. The increase is due to increased remittances to B&L.
We anticipate that our operating cash flow, together with borrowings under
the new credit facility, will be sufficient to meet our anticipated future
operating expenses, capital expenditures and debt service obligations as they
become due. However, our ability to make scheduled payments of principal of, to
pay interest on or to refinance our indebtedness and to satisfy our other debt
obligations will depend upon our future operating performance, which will be
affected by general economic, financial, competitive, legislative, regulatory,
business and other factors beyond our control. See "Risk Factors."
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Year 2000 Compliance
We have been addressing the potential risks associated with the year 2000
date issue. We are following a formal program developed by B&L to assess and
renovate internal information technology ("IT") and non-information technology
("non-IT") operations that are at risk, and further, to evaluate the year 2000
readiness of key third-party suppliers and recipients of products, services,
materials or data. Year 2000 issues are being addressed through a combination
of software replacement, system upgrades and, in limited instances, source code
modifications (collectively, "renovation"). Ongoing reengineering projects have
had the incidental benefit of remediating several major year 2000 issues.
The assessment phase of IT systems is substantially complete. The
renovation phase is on schedule and all key IT systems are compliant as of
November 1999. We expect other IT systems to be tested and compliant by mid-
December 1999. For non-IT systems, we have utilized a leading production
systems integration firm specializing in year 2000 assessment and remediation
of manufacturing, laboratory and research and development facilities. The
assessment phase was fully completed during the second quarter of 1999. At this
time, all key non-IT systems have been tested and are compliant. We assessed
the readiness of key suppliers and customers in early 1999. We have interacted
with each major supplier or recipient of data, including face-to-face
interviews with many of those considered to be critical to our company. This
assessment is complete.
Our anticipated costs, comprised of both period expenses and capital
expenditures, of identifying and remediating year 2000 issues on the
above-described areas, are not expected to exceed $1.5 million. The majority of
this work has been done by in-house personnel, which commenced in 1995.
Management believes that our year 2000 program will substantially reduce the
risk of a material adverse impact on future financial results caused by the
year 2000 issue. Potential risks of a failure to address a year 2000 issue
(whether IT, non-IT, or external) that could have a materially detrimental
impact to us include the inability to manufacture or ship products, the
inability to receive and fill orders, and problems with customers or suppliers,
including the loss of electrical power or the failure of a key customer or
supplier to purchase products or provide anticipated goods and services. At
this stage, we have contingency plans for all our major facilities globally.
On September 29, 1999, we acquired Sierra. We are currently working with
local management to implement the year 2000 compliance program of Charles
River. We expect to complete all phases by the end of the fourth quarter of
1999.
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BUSINESS
HOLDINGS
Holdings is a holding company and does not have any material operations or
assets other than its ownership of all of the capital stock of Charles River.
CHARLES RIVER
Overview
We are a global market leader in the commercial production and supply of
animal research models for use in the discovery, development and testing of new
pharmaceuticals. We have expanded our core capabilities in research models to
become a leading supplier of related biomedical products and services in
several specialized niche markets. Our research model capabilities and
biomedical products and services, together with our global distribution
network, allow us to meet the extensive needs of our broad customer base. Our
customers consist primarily of:
o large pharmaceutical companies, including the ten largest global
pharmaceutical companies based on 1998 revenues
o biotechnology, animal health, medical device and diagnostics companies
o hospitals
o academic institutions
o government agencies
Our facilities are located in 18 countries, including the United States,
Canada, Japan and many European countries. On a pro forma basis, research
models accounted for 62%, and biomedical products and services accounted for
38%, of net sales for the twelve-month period ended September 25, 1999. Over
the same time period, Charles River and Holdings reported pro forma net sales
of $230.5 million and pro forma Adjusted EBITDA of $57.0 million. Adjusted
EBITDA represents EBITDA, as defined, adjusted for non-recurring, non-cash and
cash items, as appropriate, which are more fully described on page 12. EBITDA,
as defined, represents operating income plus depreciation and amortization.
Adjusted EBITDA is presented because we believe it is a meaningful indicator of
Charles River's operating performance, and it is the measure by which certain
of the covenants under the new credit facility are computed. EBITDA, as
defined, and Adjusted EBITDA are not intended to represent cash flows for the
period, nor are they presented as an alternative to operating income or as an
indicator of operating performance. They should not be considered in isolation
or as a substitute for measures of performance prepared in accordance with GAAP
in the United States and are not indicative of operating income or cash flow
from operations as determined under GAAP. Our method of computation may not be
comparable to other similarly titled measures of other companies.
Research Models. We have a leading position in the global market for
research models, which primarily consists of purpose-bred rats and mice. The
use of research models is often a critical part of scientific discovery in the
life sciences and is required by FDA guidelines as well as foreign regulatory
agencies for new drug approval processes. Our business is primarily involved in
the early stages of drug discovery and development, commonly referred to as the
pre-clinical stage of drug development. During this stage, promising new drug
candidates are evaluated for their efficacy and safety through testing in
research models. Data from the pre-clinical stage is submitted to the
applicable regulatory agency for review in order for the drug to obtain
approval to advance to the human testing stage, commonly known as clinical
studies. We principally produce and sell rats, mice, other rodents and primates
with highly defined health and genetic backgrounds, primarily for use in
pre-clinical research. Our research models include special disease rodent
models, such as mice with impaired immune systems, which are increasingly
demanded by biomedical researchers for specialized
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research and discovery. We focus on maintaining reliable biosecurity, which
includes stringent guidelines to ensure contamination-free research models. As
a result, we provide consistent product availability and offer a wide variety
of healthy, genetically defined and specifically targeted research models. We
further differentiate our research models by providing extensive technical
service and support, including scientific oversight from a team of more than 70
full-time, dedicated professionals (DVMs, MDs and PhDs) specializing in
laboratory animal medicine, pathology and virology as well as molecular
biology, primatology and genetics.
Biomedical Products and Services. Our biomedical products and services are
principally focused on meeting the research needs of large pharmaceutical
companies as well as biotechnology, animal health, medical device and
diagnostics companies. We are a leading supplier of endotoxin testing kits that
detect fever producing toxins in injectable drugs and devices and are one of
only two FDA validated in vitro alternatives to an animal test. In addition, we
are one of the world's largest producers of SPF fertile chicken eggs, which are
principally used to produce poultry vaccines. Our other biomedical products and
services, many of which are related to technologies developed in our research
model business, include:
o transgenic animal production
o medical device testing
o contract research services
o comprehensive health monitoring programs, including DNA testing, of
animal colonies
o testing services for human protein drug candidates
o facility management services
Competitive Strengths
Long-Standing Relationships with an Extensive Customer Base. Our customers
consist primarily of large pharmaceutical companies, including the ten largest
global pharmaceutical companies based on 1998 revenues, as well as
biotechnology, animal health, medical device and diagnostics companies and
hospitals, academic institutions and government agencies. We have many
long-term, stable relationships with our customers as evidenced by the fact
that all of our top 20 customers in 1989 remain our customers today. We have
further strengthened our customer relationships by offering related biomedical
products and services to our research model customers. Our customer base is
also diversified with no individual customer accounting for more than 3% of net
sales in 1998 and the top 30 customers representing approximately 30% of total
net sales.
Critical Component of Pharmaceutical Research. The research models we
supply are essential to the new drug discovery and development process. FDA
guidelines and certain foreign regulatory agencies for many years have required
that new drug candidates be tested on two separate animal species in the
pre-clinical stage. According to the Pharmaceutical Research and Manufacturers
of America, total research and development spending in the United States by
research-based pharmaceutical companies was $17 billion in 1998. While
pharmaceutical companies generally invest large sums of money in developing new
drugs, the purchase of research models typically represents an immaterial
portion of the cost to commercialize a new drug. As a result, most customers
are principally focused on the quality of the research model which is critical
for achieving accurate and reproducible study results and facilitating timely
FDA approval of new drug candidates. For these reasons, our reputation for high
quality models and consistent product availability enable us to maintain and
expand our customer relationships.
Leading Market Position. We believe that our worldwide infrastructure,
global staff of nearly 100 scientific professionals, 50 years of operating
history and reputation for high quality products have established us as a
global market leader in the commercial production and supply of research
models. We maintain our leadership position through our well-established
customer relationships, extensive high quality product offerings and our
ability to provide
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complementary services. Our market leadership in research models has allowed us
to capitalize on the significant research and development spending by large
pharmaceutical companies, and more recently on outsourcing trends by our
customers.
Global Presence. We are a global provider of research models, with 49
facilities in the United States, Canada, Japan and many European countries. On
a pro forma basis, our international business contributed approximately 36% of
our net sales for the twelve-month period ended September 25, 1999. We believe
that as our customers continue to expand globally, they are likely to prefer to
deal with a select number of suppliers who have the ability to offer them a
wide range of products and services worldwide and in a timely manner. In
addition, our customers benefit from our global presence because it reduces
potential exposure to biosecurity risks and, minimizes regulatory restrictions
and costs relating to transporting research models over long distances. We
provide our customers with uniform and consistent research models regardless of
the location of their research study.
Experienced and Motivated Management Team. Our senior management team has
extensive experience in supplying the biomedical research industry, and an
average of 17 years of experience with Charles River. Our senior management
team, led by our chief executive officer, James C. Foster, has successfully
grown our business, secured our current strong market positions, integrated
eight strategic acquisitions since 1992 and positioned us for growth. Our
senior management team has broadened our pure research model focus to also
include being a leading supplier of biomedical products and services in several
specialized niche markets. As a result of the recapitalization of our business,
our management team indirectly holds 6.1% of the equity of Charles River, and
expects to have the option to acquire additional equity of Charles River
through a customary equity incentive plan.
Business Strategy
Increase Sales in Research Models. We believe we can continue to increase
our market share in this segment by introducing new research models, providing
exceptional technical service and support, optimizing our existing price
structure and product mix and maintaining reliable biosecurity. In general, we
have been able to increase our prices at rates that are above the rate of
inflation in the United States by maintaining high quality and specialized
products, enhancing service and improving availability. We also have been
focused on periodically adding higher value research models to our portfolio.
These higher value research models tend to be premium priced, targeted towards
specific disease conditions and provide us with an enhanced product mix that
contributes to moderate but sustained growth in the research model business. We
expect to continue to expand this segment, both through sustained growth in
demand for already introduced models and the introduction of new models.
Expand Value-Added Biomedical Products and Services. Our biomedical
products and services segment has been our fastest growing segment over the
past several years. We believe we can continue to grow this business by
capitalizing on outsourcing trends, building upon our existing capabilities and
increasing our global sales.
Capitalize on Outsourcing Trends. Most of our biomedical products and
services have been developed in response to the increasing outsourcing
trends within the pharmaceutical industry. We believe this shift toward
increased outsourcing began in response to the pharmaceutical companies'
growing capabilities in identifying potential new drug compounds and the
resulting resource constraints placed on pharmaceutical research
infrastructures by non-core activities. By outsourcing their non-core
activities to us, our customers can focus on proprietary drug development
and streamline their drug development process. In response, we have
expanded our offerings to include many pre-clinical research activities
undertaken by our customers.
Build Upon Our Existing Capabilities. As a result of our strong
position in research models, our global presence and our professional
expertise, we have the unique capability to offer related biomedical
products and services to many of our customers. We intend to build upon
this expertise to capture more outsourcing business opportunities by using
our existing infrastructure, reputation for quality and extensive customer
contacts. We believe there are numerous other opportunities for increasing
our share of high value pre-clinical research services and products.
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Increase Our Global Sales. Our current biomedical products and
services customer base is primarily composed of our domestic research
model customers. We intend to continue to cross-sell our biomedical
products and services to our existing international research model
customers as well as seek new international customers for this segment. We
believe that we can rapidly increase our global presence in this area by
leveraging our existing international customer relationships and
infrastructure.
Undertake Strategic Acquisitions and Alliances. We have a history of
acquiring and successfully integrating small companies in both our research
model and our biomedical products and services businesses. We expect that
strategic acquisitions will continue to provide an additional source of
long-term growth. In addition, we believe that our association with GHCP, one
of our equity investors, will assist us in identifying attractive acquisition
candidates while expanding our existing business. GHCP, which is comprised of
several experienced healthcare executives, has a strategic partnership with
DLJMB to invest in healthcare related businesses. The founding partners of GHCP
who are represented on the Charles River board include Henry Wendt, former
Chairman of SmithKline Beecham Corporation, Robert Cawthorn, former Chairman
and CEO of Rhone-Poulenc Rorer Inc. and Douglas Rogers, founder of Kidder,
Peabody's Health Care Group.
Business Segments
Our business is divided into two segments, research models and related
biomedical products and services.
Research Models
The research model business is our core business and accounted for 70% of
our 1998 sales. The business is principally comprised of small animals (rats,
mice and other rodents), and primates.
Small Animal Models
Our largest product line is the small animal models group, which consists
primarily of the production and sale of large numbers of purpose-bred rats and
mice to researchers. We believe we are a commercial leader in this business,
supplying rodents for research since 1947. We began as a supplier of outbred
rats, with genetic characteristics representative of a random population, and
over the years added other small animal species and strains to our product mix.
We have also added inbred animals, which have essentially identical genes,
hybrid animals, which are the offspring of two different inbred parents,
spontaneous mutant animals, which contain a naturally occurring genetic
mutation (such as immune deficiency) and transgenic animals, which contain
genetic material transferred from another source. We believe we offer one of
the largest selections of small animal models and provide our customers with
high volume and high quality production. Our rats, mice and other rodent
species (e.g., guinea pigs, hamsters) have been and continue to be some of the
most extensively used research models in the world, largely as a result of our
continuous commitment to innovation and quality in the breeding process. We
provide our small animal models to numerous customers around the world,
including pharmaceutical and biotechnology companies and hospitals and
universities.
The most common use of our small animal models is for the screening,
discovery and testing of new drug candidates. For example, in order for a
pharmaceutical company to file a complete submission for FDA approval of a new
drug, it must provide evidence of safe and effective testing on two species of
animal models, one small and one large, before moving into the clinic for
testing on humans. Animal testing is used in order to identify, define,
characterize and assess the safety of new drug candidates. Outbred, and
increasingly, inbred mice are often the model of choice in early discovery and
development work, while outbred rats are frequently used in safety assessment
studies. Our models are also used in basic life science research within
universities, hospitals and other research institutions. Unlike drug discovery,
these uses are generally not specifically mandated by regulatory agencies such
as the FDA, but instead are governed by the terms of government grants,
institutional protocols as well as the scientific inquiry and peer review
publication processes.
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Primates
We provide primates to the research community, principally for use in drug
development and testing studies. Primates are often used as the required large
animal species in FDA or similar regulated testing protocols. We believe that
the use of primates has been moderately increasing recently, as they are often
the preferred model for testing the growing number of new drug candidates
derived from human proteins, such as drugs developed in AIDS research.
Our largest primate business is located in Houston, where we import,
quarantine, condition, hold and sell primates exported to us by our supplier in
Mauritius. We believe that these primates are unique, in that they are
naturally free of herpes B virus, a common virus present in the species which
is transmissible to humans in a highly toxic form. We have a long-term supply
contract under which our supplier provides us with a reliable stream of
purpose-bred and feral animals. The contract expires in December 31, 2005 but
is automatically renewed for an additional five-year period unless it is
breached. We also have a primate import and quarantine facility in the United
Kingdom.
Biomedical Products and Services
Biomedical products and services include our newer, higher growth
businesses, such as: SPF eggs; endotoxin testing; special animal services;
diagnostics; biosafety testing; facility management; and medical device
testing.
SPF Eggs
Fertile SPF chicken embryos within eggs are often used by animal health
companies as a living "bioreactor," or self-contained manufacturing vehicle, to
grow large quantities of live or killed avian viruses. These viruses are then
used as the raw material in poultry vaccines. We are a leading supplier to the
major global manufacturers of poultry vaccines, researchers and other users. We
also provide specially raised SPF eggs for some human vaccines. We have entered
into an agreement with a company that is in the FDA approval process for a
nasal spray flu vaccine for human use that, if commercially successful, may
significantly increase our existing SPF eggs business.
We have a worldwide presence that includes several SPF eggs production
facilities in the United States, as well as facilities in Germany and in
Australia. We have a joint venture in Mexico and a franchise in India. We also
operate a specialized avian laboratory in Storrs, Connecticut which provides
support services to our customers.
Endotoxin Testing
We are a market leader in the endotoxin testing business, which is used to
test quality control samples of injectable drugs and devices, their components
and the processes under which they are manufactured, for the presence of
endotoxin. Endotoxins are fever producing pathogens or toxic compounds that are
highly toxic to humans when sufficient quantities are introduced into the body.
Quality control testing for endotoxin contamination by our customers is a
mandatory FDA requirement for injectable drugs and devices, and the manufacture
of the test kits and reagents is regulated by the FDA as a medical device.
Endotoxin testing uses a processed extract from the blood of the horseshoe
crab, known as limulus amebocyte lysate, or "LAL." The LAL test is the first
and one of the only FDA validated in vitro alternatives to an animal model
test, specifically the rabbit pyrogen test. The process of extracting blood is
not harmful to the crabs, which are subsequently returned to their natural
ocean environment. We produce and distribute test kits and reagents to
pharmaceutical and biotechnology medical device and product companies on a
global basis.
Special Animal Services
Special Animal Services, or SAS, provides services for our customers to
help them maintain, improve, breed and test animals purchased or created by
them for biomedical research activities. Our special animal services business
includes: transgenic breeding, model characterization and scale-up, genetic
testing and characterization, quarantine, embryo cryopreservation, embryo
transfer, rederivation, and health and genetic monitoring. We provide these
services to more than 100 customers around the world, from pharmaceutical and
biotechnology companies to hospitals and universities, and maintain more than
150 different lines of research models. Our Contract Research Services business
is
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a discrete unit within the SAS business that provides more advanced or
specialized research model studies. These projects not only capitalize on our
strong historical research model capabilities, but also exploit more recently
developed capabilities in protocol development, animal micro-surgery, dosing
techniques, drug efficacy testing and data management and analysis. We
initiated SAS five years ago in response to our customers' outsourcing needs.
The business is managed and staffed by a senior team that was trained and
developed internally. This business leverages the technologies and
relationships associated with our research model business.
Diagnostics
Diagnostics is an internally developed business that was built upon the
scientific foundation created by the diagnostic laboratory needs of our
research model business. We now provide commercial laboratory services to
monitor and analyze the health and genetics of our customers' research models
used in their research protocols. We may serve as the customer's sole source
testing laboratory, or as a back-up source supporting some internal capability.
Our diagnostics business is principally located in Wilmington, Massachusetts
and Troy, New York.
Biosafety Testing
We recently entered the evolving business generally known as "biosafety
testing." This is a specialized area of nonclinical quality control testing
that is frequently outsourced by both pharmaceutical and biotechnology
companies. The testing services we provide allow the customer to determine if
the human protein drug candidates, or the process for manufacturing those
products, are essentially "pure," or free of residual biological materials. The
bulk of this testing work is required by the FDA, either for obtaining new drug
approval or maintaining a licensed manufacturing capability. Our scientific
staff consults with customers in the areas of process development, validation,
manufacturing scale-up, and biological tests. Our biosafety business is located
in Malvern, Pennsylvania.
Facility Management
Facility management involves managing the animal care function and
facilities on behalf of government, academic, pharmaceutical and biotechnology
companies. This business builds upon our core capabilities as a leading
provider of high quality research models. We now manage all or a part of the
animal care facilities of several commercial, government and academic
institutions in both the United States and Europe.
Medical Device Testing
We have capabilities in medical device testing that are complementary to
our research model business, especially in the large and growing cardiovascular
field, using large research models. This business also provides services in
support of animal and human health research, most notably in the area of new
drug and vaccine development and experimental xenotransplantation of whole
organs and tissues from swine to humans. Our medical device testing business is
located in Southbridge, Massachusetts.
Sierra
Sierra, which we recently acquired, is a pre-clinical biomedical services
company with expertise in drug safety and efficacy assessment studies using
research models. Sierra offers its services to biotechnology, pharmaceutical
and medical device companies that are principally focused on conducting studies
needed in the early stages of drug development, especially those that require
highly specialized scientific capabilities. Sierra has expertise in conducting
critical developmental studies on potential new drugs and devices using
research models, including short-term evaluations of potential new treatment
for human or animal disease conditions.
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Customers
Our customers consist primarily of large pharmaceutical companies,
including the ten largest pharmaceutical companies based on 1998 revenues, as
well as biotechnology, animal health, medical device and diagnostic companies
and hospitals, academic institutions and government agencies. We have many
long-term, stable relationships with our customers as evidenced by the fact
that all of our top 20 customers in 1989 remain our customers today.
During 1998, in both the research models and biomedical products and
services businesses, approximately two-thirds of our sales were to
pharmaceutical and biotechnology companies, and the balance to hospitals,
universities and the government.
Sales, Marketing and Customer Support
We sell our products and services principally through a direct sales
force. As of September 25, 1999, we have approximately 51 employees engaged in
field sales, of which 30 are in the United States, 12 are in Europe and 9 are
with our joint venture company in Japan. The direct sales force is supplemented
by a network of international distributors for certain of our biomedical
product and services businesses.
Our internal marketing groups support the field sales staff, while
developing and implementing programs to create close working relationships with
customers in the biomedical research industry. Our web site, www.criver.com, is
an effective marketing tool, and has become recognized as a valuable resource
in the laboratory animal field by a broad spectrum of industry leaders. Our
website is not incorporated by reference in this prospectus.
We maintain both a customer service and technical assistance department,
which services our customers' routine and more specialized needs. We frequently
assist our customers in solving problems related to animal husbandry, health
and genetics, biosecurity, protocol development and other areas in which our
internal expertise is recognized as a valuable customer resource.
Research and Development
We do not maintain a fully dedicated research and development staff.
Rather, this work is done on an individual project basis or through a
university or other forms of collaborations. Our annual dedicated research and
development spending was $1.5 million in 1996, $1.4 million in 1997, $1.4
million in 1998 and $0.4 million for the nine months ended September 25, 1999.
Our approach to developing new products or services is to extend our base
technologies into new applications and fields, and to license or acquire
technologies to serve as a platform for the development of new businesses that
service our existing customer base. Our research and development focus is
principally on developing projects that improve our productivity or processes.
Industry Support and Animal Welfare
Among the shared values of our employees is a concern for and commitment
to animal welfare. We have been in the forefront of animal welfare improvements
in our industry, and continue to demonstrate our commitment with special
recognition programs for employees who demonstrate an extraordinary commitment
in this critical area of our business.
We support a wide variety of organizations and individuals working to
further animal welfare as well as the interests of the biomedical research
community. We fund internships in laboratory animal medicine, provide financial
support to non-profit institutions that educate the public about the benefits
of animal research, and provide awards and prizes to outstanding leaders in the
laboratory animal medicine field. Our primate import business dedicates a
portion of its net sales, through a royalty, to support similar programs and
initiatives.
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Employees
As of September 25, 1999, we have approximately 2,430 employees, including
nearly 100 professionals with advanced degrees (DVMs, PhDs and MDs). Our
employees are not unionized in the United States, though we are unionized in
certain European locales, consistent with local custom for our industry. We
believe that we have a good relationship with our employees.
Competition
Our strategy is to be the leader in each of the markets in which we
participate. Our competitors are generally different in each of our business
areas.
In our research models business segment, we have three smaller competitors
in the United States, several smaller ones in Europe, and two in Japan. Of our
main United States competitors, two are privately held businesses and the third
is a government financed non-profit institution. We believe that none of our
competitors for research models has our comparable global reach, financial
strength, breadth of product offering or pharmaceutical industry relationships.
We have several competitors in our biomedical products and services
business segment. A few of our competitors in our biomedical products and
services business are larger than we are; however, many are smaller and more
regionalized. Expansion by our competitors in other areas in which we operate
could affect our competitive position. Of all of our businesses, we have the
smallest relative share in the biosafety testing market, where the market
leader is a well established company.
We generally compete on the basis of quality, reputation, and
availability, which is supported by our international presence with
strategically located facilities.
Environmental Matters; Legal Proceedings
Our operations and properties are subject to extensive foreign and
federal, state and local environmental protection and health and safety laws
and regulations. These laws and regulations govern, among other things, the
generation, storage, handling, use and transportation of hazardous materials
and the handling and disposal of hazardous and biohazardous waste generated at
our facilities. Under such laws and regulations, we are required to obtain
permits from governmental authorities for certain operations. If we violate or
fail to comply with these laws, regulations or permits, we could be fined or
otherwise sanctioned by regulators. Under certain environmental laws and
regulations, we could also be held responsible for all of the costs relating to
any contamination at our past or present facilities and at third party waste
disposal sites.
Although we believe that our costs of complying with current and future
environmental laws, and our liabilities arising from past or future releases
of, or exposure to, hazardous substances will not materially adversely affect
our business, results of operations or financial condition, we cannot assure
you that they will not do so.
We have for many years been engaged in disputes with federal, state and
local authorities and private environmental groups regarding damage to mangrove
plants resulting from our maintaining a free range primate breeding operation
on two islands we purchased in the Florida Keys. To settle our disputes, we
have agreed to move the primates off the islands, and thereafter transfer the
real property to the government. We have also agreed to refoliate the islands
at our cost, restoring them to their conditions prior to our arrival. Despite
our best efforts, we have not been able to successfully replant the lost
mangroves, principally due to the presence of a free range animal population
and storms. We believe that we will finally resolve these disputes by
successfully refoliating the islands over the next three years.
We are not a party to any other material legal proceedings, other than
ordinary routine litigation incidental to our business which is not otherwise
material to our business or financial condition.
47
<PAGE>
Regulatory Matters
Certain of our business activities are currently regulated by the AWA,
which governs the treatment of certain animals intended for use in research.
Much of our United States small animal research model business, which is
predominantly rats and mice, is not subject to regulation under the AWA
although we comply with licensing and registration requirement standards set by
the USDA for handling animals, including breeding, maintenance and
transportation of our animals. Birds, including the chickens used in our United
States SPF egg business, are also not subject to AWA regulations. However, the
USDA, which enforces the AWA, is presently considering changing the regulations
issued pursuant to the AWA, in light of judicial action, to include rats, mice
and birds within its coverage. The AWA imposes a wide variety of specific
regulations on producers and users of animal subjects, most notably cage size,
shipping conditions and environmental enrichment methods. Our animal production
facilities in the United States are accredited by a highly regarded member
association known as AAALAC, which maintains standards that often exceed those
of the USDA.
Our biomedical products and services businesses are also generally
regulated by the USDA, and in the case of our endotoxin testing business, the
FDA. Our manufacture of test kits and reagents for endotoxin testing is subject
to regulation by the FDA, under the authority of the Federal Food, Drug, and
Cosmetic Act. We are required to register with the FDA as a device manufacturer
and are subject to inspection on a routine basis for compliance with the FDA's
Quality System Regulations. These regulations require that we manufacture our
products and maintain our documents in a prescribed manner with respect to
manufacturing, testing and control activities. We are in receipt of a "warning
letter" from the FDA for quality control deficiencies with regard to our
Charleston, South Carolina facility, and are attempting to address the agency's
concerns. See "Risk Factors--We must comply with many federal, state and local
rules and regulations."
Properties
The following charts provide summary information on our properties. The
first chart lists the sites we own, and the second chart the sites we lease.
Most of our material leases expire from 2000 to 2005.
Sites--Owned
<TABLE>
No. of
Country Sites Total Square Feet Principal Functions
- ------------------------------------- ------- ------------------- -------------------------------
<S> <C> <C> <C>
Canada............................... 1 48,789 Office, Production, Laboratory
France............................... 3 373,214 Office, Production, Laboratory
Germany.............................. 3 122,314 Office, Production, Laboratory
Italy................................ 1 36,677 Office, Production, Laboratory
Japan................................ 3 114,831 Office, Production, Laboratory
Netherlands.......................... 1 6,502 Office, Production
United Kingdom....................... 2 67,331 Office, Production, Laboratory
USA.................................. 19 732,980 Office, Production, Laboratory
----- ---------
Total................................ 33 1,502,638
===== =========
</TABLE>
Sites--Leased
<TABLE>
No. of
Country Sites Total Square Feet Principal Functions
- ------------------------------------- ------- ------------------- -------------------------------
<S> <C> <C> <C>
Australia............................ 1 16,787 Office, Production
Belgium.............................. 1 16,140 Office, Production
Czech Republic....................... 1 23,704 Office, Production, Laboratory
Hungary.............................. 1 4,681 Office, Production, Laboratory
Spain................................ 1 3,228 Production, Laboratory
48
<PAGE>
No. of
Country Sites Total Square Feet Principal Functions
- ------------------------------------- ------- ------------------- -------------------------------
<S> <C> <C> <C>
Sweden............................... 1 8,070 Production
USA(1)............................... 10 255,895 Office, Production, Laboratory
----- -------
Total................................ 16 328,505
===== =======
- -------------------
(1) Includes two properties leased by Sierra with a total square footage of 116,751 square feet.
</TABLE>
49
<PAGE>
MANAGEMENT
The following table sets forth the name, age and position of each person
who is an executive officer, significant member of management, or director of
Holdings as of the Recapitalization.
<TABLE>
Name Age Position
- ---- --- --------
<S> <C> <C>
James C. Foster.................................... 48 President, Chief Executive Officer and Director
Thomas F. Ackerman................................. 45 Vice President and Chief Financial Officer
Dennis R. Shaughnessy ............................. 41 Vice President, Corporate Development, General
Counsel and Secretary
Robert Cawthorn.................................... 63 Director
Stephen D. Chubb................................... 55 Director
Thompson Dean...................................... 41 Director
Stephen C. McCluski................................ 47 Director
Reid S. Perper..................................... 40 Director
Douglas E. Rogers.................................. 44 Director
William Waltrip.................................... 62 Director
Henry C. Wendt..................................... 66 Director
</TABLE>
James C. Foster joined Charles River in 1976 as General Counsel. Over the
past 23 years, Mr. Foster has held various staff and managerial positions with
Charles River, culminating in Mr. Foster being named Charles River's President
and Chief Operating Officer in 1991. He has served as our President and Chief
Executive Officer since 1992. Mr. Foster also serves on the Board of Directors
of BioTransplant, Inc.
Thomas F. Ackerman joined Charles River in 1988 with over eleven years of
combined public accounting and international finance experience. He was named
Controller, North America in 1992 and became our Vice President and Chief
Financial Officer in 1996. He is currently responsible for overseeing Charles
River's Accounting and Finance Department, as well as our Information
Management & Technology Group. Prior to joining Charles River, Mr.
Ackerman was an accountant at Arthur Anderson & Co.
Dennis R. Shaughnessy joined Charles River in 1988 as Corporate Counsel
and was named Vice President, Business Affairs in 1991. Prior to joining
Charles River, Mr. Shaughnessy was a corporate associate at Boston's Testa,
Hurwitz & Thibeault and previously served in government policy positions. He
assumed his current position in 1994 and is responsible for overseeing our
business development initiatives on a worldwide basis, as well as handling our
overall legal affairs. Mr. Shaughnessy also serves as our Corporate Secretary.
Robert Cawthorn has been a Managing Director of Global Health Care
Partners, a group of DLJ Merchant Banking, Inc. since 1997. Previously, Mr.
Cawthorn was Chief Executive Officer and Chairman of Rhone-Poulenc Rorer Inc.
and an Executive Officer of Pfizer International and the first President of
Biogen Inc. Mr. Cawthorn serves as a director of CBS Corporation and Sunoco,
Inc.
Stephen D. Chubb has been Chairman, Director and Chief Executive Officer of
Matritech, Inc. since its inception in 1987. Previously, Mr. Chubb served as
President and Chief Executive Officer of T Cell Sciences, Inc. and as
President and Chief Executive Officer of Cytogen Company.
Thompson Dean has been a Managing Partner of DLJ Merchant Banking, Inc.
since November 1996. Previously, Mr. Dean was a Managing Director of DLJ
Merchant Banking, Inc. and its predecessor since January 1992. Mr. Dean serves
as a director of Commvault Inc., Von Hoffmann Press, Inc., Manufacturer's
Services Limited, Phase Metrics, Inc., AKI Holdings Corp., Amatek Ltd.,
DeCrane Aircraft Holdings Inc., Insilco Holding Corporation, Formica
Corporation and Mueller Group, Inc.
50
<PAGE>
Stephen C. McCluski has been Senior Vice President and Chief Financial
Officer of Bausch & Lomb Incorporated since 1995. Previously, Mr. McCluski
served as Vice President and Controller of Bausch & Lomb Incorporated and
President of Outlook Eyewear Company.
Reid S. Perper has been a Principal of DLJ Merchant Banking, Inc. since
January 1996. Prior to that time, Mr. Perper had been a Vice President of DLJ
Merchant Banking, Inc. since January 1993. Mr. Perper was formerly a director
of IVAC Holdings, Inc. and Fiberite Holdings, Inc.
Douglas E. Rogers has been Managing Director of Global Health Care
Partners, a group of DLJ Merchant Banking, Inc. since 1996. Previously, Mr.
Rogers was Vice President at Kidder Peabody & Co., Senior Vice President at
Lehman Brothers, and head of U.S. Investment Banking at Baring Brothers. Mr.
Rogers serves as a director of Computerized Medical Systems, Inc. and Wilson
Greatbatch Ltd.
William Waltrip has been director of Bausch & Lomb Incorporated since
1985, and Chairman of the Board of Directors of Technology Solutions Company
since 1993. He is also a director of Teachers Insurance and Annuity
Association, Thomas & Betts Corporation and Technology Solutions Company.
Previously, Mr. Waltrip served as Chairman and Chief Executive Officer of
Bausch & Lomb Incorporated, as Chief Executive Officer of Technology Solutions
Company, as Chairman and Chief Executive Officer of Biggers Brothers, Inc., and
as Chief Operating Officer of IU International Corporation. He was also
previously President and Chief Executive Officer and a director of Purolator
Courier Corporation.
Henry C. Wendt has been the Chairman of Global Health Care Partners, a
group of DLJ Merchant Banking, Inc. since 1996. Previously, Mr. Wendt was
Chairman of SmithKline Beecham Corporation and President and Chief Executive
Officer of SmithKline Beckman Corp. prior to its merger with Beecham and
served as founder and First Chairman of Pharmaceutical Partners for Better
Health Care. Mr. Wendt serves as a director of Allergen, Inc., Atlantic
Richfield Company, Computerized Medical Systems, The Egypt Investment Company,
West Marine Products and Wilson Greatbatch Ltd.
51
<PAGE>
EXECUTIVE COMPENSATION
The aggregate remuneration of our chief executive officer during 1998 and
the four other most highly compensated executive officers whose salary and
bonus exceeded $100,000 for the fiscal year ended December 26, 1998, is set
forth in the following table:
Summary Compensation Table
<TABLE>
Long Term
Compensation
------------------------
Restricted Securities
Stock Underlying All Other
Name and Principal Position Annual Awards(s) Options Compensation
- -------------------------------------- ------------------- ---------- ---------- ------------
Salary Bonus
----- -----
<S> <C> <C> <C> <C> <C>
James C. Foster........................ $308,700 230,705(1) 4,500 19,000 $204,985(2)
Director, President and Chief
Executive Officer
Real H. Renaud......................... 212,000 99,814 -- 4,200 64,834(3)
Senior Vice President and
General Manager, European
and North American Animal
Operations
David P. Johst......................... 146,800 69,911 -- 4,200 69,871(4)
Vice President, Human
Resources and Administration
Julia D. Palm.......................... 165,200 50,829 -- 1,720 66,953(5)
Vice President and General
Manager, Biotech Products
and Services
Dennis R. Shaughnessey................. 167,800 79,898 -- 4,200 82,056(6)
Vice President, Corporate
Development, General
Counsel and Secretary
</TABLE>
- -------------------
(1) Includes $12,000 in cash paid to Mr. Foster under Bausch & Lomb's Long Term
Incentive Plan during 1998.
(2) Includes employer contribution under our Executive Supplemental Life
Insurance Retirement Plan and EVA Long- Term Incentive Plan ($168,068) and
Employee Savings Plan ($3,200), costs associated with a corporate
automobile ($23,861) and corporate club dues and services ($9,856).
(3) Includes employer contribution under our Executive Supplemental Life
Insurance Retirement Plan ($40,075) and Employee Savings Plan ($3,200) and
costs associated with a corporate automobile ($21,559).
(4) Includes employer contribution under our Executive Supplemental Life
Insurance Retirement Plan ($54,982) and Employee Savings Plan ($3,200) and
costs associated with a corporate automobile ($11,689).
(5) Includes employer contribution under our Executive Supplemental Life
Insurance Retirement Plan ($50,691) and Employee Savings Plan ($3,200) and
costs associated with a corporate automobile ($13,062).
(6) Includes employer contribution under our Executive Supplemental Life
Insurance Retirement Plan ($57,956) and Employee Savings Plan ($2,132) and
costs associated with a corporate automobile ($21,968).
Stock Options
The following table presents material information regarding options to
acquire shares of Bausch & Lomb's common stock granted to our named executive
officers in 1998.
52
<PAGE>
Option Grants in 1998 Fiscal Year
<TABLE>
Individual Grants Potential Realizable Value
------------------------------------------------ at Assumed
Number of Percent of Total Annual Rates of Stock Price
Securities Options Appreciation
Underlying Granted to Exercise or for Option Term(1)
Options Employees in Base Price Expiration ---------------------------------
Name Granted(#) Fiscal Year(%) ($/Sh) Date 0%($) 5%($) 10%($)
- ----- ---------- -------------- ---------- ---------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
James C. Foster............. 19,000 1.36% 50.94 7/27/08 -- 608,682 1,542,520
Real H. Renaud.............. 4,200 0.30% 50.94 7/27/08 -- 134,551 340,978
David P. Johst.............. 4,200 0.30% 50.94 7/27/08 -- 134,551 340,978
Julia D. Palm............... 1,720 0.12% 50.94 7/27/08 -- 55,102 139,639
Dennis R. Shaughnessy....... 4,200 0.30% 50.94 7/27/08 -- 134,551 340,978
- -------------------
(1) We cannot assure you that the value realized by an optionee will be at or near the amount estimated using this
model. These amounts rely on assumed future stock price movements which management believes cannot be
predicted with a reliable degree of accuracy. These amounts are based on the assumption that the option holders
hold the options granted for their full term. The column headed "0% ($)" is included to illustrate that the options
were granted at fair market value and option holders will not recognize any gain without an increase in the stock
price, which increase benefits all shareholders commensurately.
</TABLE>
The following table provides material information related to the number
and value of options exercised during 1998 and the value of options held by
the named executive officers at the end of 1998. On December 26, 1998, the
closing sale price of Bausch & Lomb common stock on NYSE was $58 11/16 .
Aggregated Option Exercises in 1998 Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
Number of Securities
Underlying Unexercised Value of Unexercised
Options In-the-Money Options at
Shares at Fiscal Year-End(#) Year End($)(2)
Acquired on Value Realized ----------------------- --------------------------
Name Exercise(#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ----- ------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James C. Foster......................... 362 10,238 73,740 37,760 1,244,664 497,373
Real H. Renaud.......................... 5,036 82,873 17,696 9,418 257,909 125,719
David P. Johst.......................... 3,144 64,194 7,370 8,407 105,561 111,026
Julia D. Palm........................... 1,880 39,600 3,214 4,267 60,463 64,727
Dennis R. Shaughnessy................... 6,890 54,303 1,650 8,350 15,469 109,697
</TABLE>
(1) Value realized represents the difference between the exercise price of the
option shares and the market price of the option shares on the date the
option was exercised. The value realized was determined without
consideration for any issues or brokerage expenses which may have been
owed.
(2) Represents the total gain which would be realized if all in-the-money
options held at year end were exercised, determined by multiplying the
number of shares underlying the options by the difference between the per
share option exercise price and the per share fair market value on
December 26, 1998.
Employee Agreements and Compensation Arrangements
We do not currently have employment agreements with any of our named
executive officers.
53
<PAGE>
Director Compensation
We intend to pay our independent directors $10,000 per year and $1,000 per
board meeting, plus travel expenses.
54
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of our common stock is held by Holdings. The following table sets
forth certain information with respect to the beneficial ownership of Holdings
common stock by (a) any person or group who beneficially owns more than five
percent of Holdings common stock, (b) each of our directors and executive
officers and (c) all directors and officers as a group.
Percentage of
Outstanding
Name of Beneficial Owner: Common Stock(1)
- ------------------------- --------------
DLJ Merchant Banking Partners II, L.P. and related investors(2)(3).. 71.9%
Bausch & Lomb Incorporated.......................................... 12.5%
James C. Foster(4).................................................. 2.0%
Thomas F. Ackerman(4)............................................... *
Dennis R. Shaughnessy(4)............................................ *
Robert Cawthorn(5).................................................. --
Stephen D. Chubb.................................................... --
Thompson Dean(5).................................................... --
Stephen C. McCluski................................................. --
Reid S. Perper(5)................................................... --
Douglas E. Rogers(5)................................................ --
William Waltrip..................................................... --
Henry C. Wendt(5)................................................... --
Officers and directors as a group(4)................................ 6.1%
- -------------------
* less than 1%.
(1) Under the SEC's rules, each person or entity is deemed to be a beneficial
owner with the power to vote and direct the disposition of these shares.
(2) Consists of shares held indirectly through CRL Acquisition LLC by the DLJMB
Funds and the following related investors: DLJ Merchant Banking Partners
II-A, L.P.; DLJ Investment Partners, L.P.; DLJ Offshore Partners II,
C.V.; DLJ Capital Corp.; DLJ Diversified Partners, L.P.; DLJ Diversified
Partners-A, L.P.; DLJ Millennium Partners, L.P.; DLJ Millennium
Partners-A, L.P.; DLJMB Funding II, Inc.; DLJ First ESC L.P.; DLJ EAB
Partners, L.P.; DLJ ESC II, L.P.; Sprout Capital VIII, L.P. and Sprout
Venture Capital, L.P. See "Certain Relationships and Related Party
Transactions" and "Plan of Distribution." The address of each of these
investors is 277 Park Avenue, New York, New York 10172, except the
address of Offshore Partners is John B. Gorsiraweg 14, Willemstad,
Curacao, Netherlands Antilles.
(3) Does not include the effect of the warrants or the issuance by Holdings of
senior discount debentures with other warrants to the DLJMB Funds and
other investors. If such warrants were exercised, the percentage of
outstanding common stock beneficially owned by DLJ Merchant Banking
Partners II, L.P. and related investors would decrease by 1.0%.
(4) Consists of shares held indirectly through CRL Acquisition LLC.
(5) Messrs. Cawthorn, Dean, Perper, Rogers and Wendt are officers of DLJ
Merchant Banking, Inc., an affiliate of the DLJMB Funds and the initial
purchaser. Shares shown for Messrs. Cawthorn, Dean, Perper, Rogers and
Wendt exclude shares shown as held by the DLJMB Funds, as to which they
disclaim beneficial ownership. The address of each of these investors is
277 Park Avenue, New York, New York 10172.
55
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Recapitalization
Financial Advisory Fees and Agreements
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ Securities
Corporation"), an affiliate of the DLJMB Funds, acted as financial advisor to
us and was also the initial purchaser of the notes. We paid customary fees to
DLJ Securities Corporation as compensation for its services as financial
advisor and initial purchaser. DLJ Capital Funding, an affiliate of the DLJMB
Funds, received customary fees and reimbursement of expenses in connection with
the arrangement and syndication of the new credit facility and as a lender
thereunder. The aggregate amount of all fees paid to the DLJ entities in
connection with the Recapitalization and the related financing was
approximately $13.2 million plus out-of-pocket-expenses.
Pursuant to the investors' agreement described below, for a period of five
years from the date of the investors' agreement, DLJ Securities Corporation or
any of its affiliates will be engaged as the exclusive financial and investment
banking advisor of Holdings. We expect that DLJ Securities Corporation or such
affiliate will receive customary fees for such services rendered and will be
entitled to reimbursement for all reasonable disbursements and out-of-pocket
expenses incurred in connection with such engagement. We expect that any such
arrangement will include provisions for the indemnification of DLJ Securities
Corporation against certain liabilities, including liabilities under the
federal securities laws.
CRL Acquisition LLC Operating Agreement
CRL Acquisition LLC, DLJMB Funds, management and certain other investors
entered into an operating agreement at the effective time of the
Recapitalization. The operating agreement provides, among other things, that
any person acquiring limited liability company units of CRL Acquisition LLC who
is required by the operating agreement or by any other agreement or plan of CRL
Acquisition LLC to become a party to the operating agreement will execute an
agreement to be bound by the operating agreement.
The terms of the operating agreement restrict transfers of the limited
liability company units of CRL Acquisition LLC by certain investors or
management and certain future limited liability company unit holders parties
thereto. The agreement provides for, among other things:
o the ability of the other limited liability company unit holders to
participate in certain sales of units of CRL Acquisition LLC by the
DLJMB Funds
o the ability of the DLJMB Funds to require the other limited liability
company unit holders to sell limited liability company units of CRL
Acquisition LLC in certain circumstances should the DLJMB Funds
choose to sell any such units owned by them
The operating agreement also provides that DLJMB Funds has the right to
appoint the three members of the board of directors of CRL Acquisition LLC,
including the chairman.
Investors' Agreement
Holdings, CRL Acquisition LLC, CRL Holdings, Inc. (a subsidiary of B&L),
management and certain other investors entered into an investors' agreement at
the effective time of the Recapitalization. The investors' agreement provides,
among other things, that any person acquiring shares of common stock of
Holdings who is required by the investors' agreement or by any other agreement
or plan of Holdings to become a party to the investors' agreement will execute
an agreement to be bound by the investors' agreement.
56
<PAGE>
The terms of the investors' agreement restrict transfers of the shares of
Holdings' common stock by CRL Holdings Inc., management and certain other
investors and certain future shareholders parties thereto. The agreement
provides for, among other things:
o the ability of certain other shareholders to participate in certain
sales of shares of Holdings by CRL Acquisition LLC or its permitted
transferees
o the ability of DLJMB Funds or CRL Acquisition LLC to require the
other shareholders to sell shares of Holdings in certain
circumstances should the DLJMB Funds or CRL Acquisition LLC choose to
sell any such shares owned by them
o certain registration rights with respect to shares of common stock of
Holdings, including rights to indemnification against certain
liabilities, including liabilities under the Securities Act
o the right of CRL Holdings Inc. to sell to Holdings all of the common
stock of Holdings acquired by it as of the closing date of the
Recapitalization and still held by it, beginning on the date that
substantially all of the debt of Holdings and its subsidiaries is
either repaid or refinanced and such refinanced debt permits it (such
right terminates upon the occurrence of certain events, including an
initial public offering, or 12 years from the closing date of the
Recapitalization)
o pre-emptive rights of all the parties, other than CRL Acquisition LLC
and its permitted transferees, to acquire its pre-emptive portion of
Holdings common stock in certain instances when Holdings proposes to
issue common stock
The investors' agreement also provides that DLJ Merchant Banking Partners
II, L.P. has the right to appoint seven of the nine members of the board of
directors of Holdings, including the chairman.
Transactions with Officers and Directors
In connection with the Recapitalization, certain of our officers purchased
units of CRL Acquisition LLC, some of whom also borrowed funds up to a maximum
aggregate amount of $1.3 million from DLJ Inc. secured by their units. James C.
Foster borrowed $.3 million and each of Real H. Renaud, Thomas F. Ackerman and
Dennis R. Shaughnessy borrowed approximately $0.2 million. Two weeks after the
consummation of the Recapitalization, the loans matured and were repaid by the
officers, partially with funds borrowed from Charles River up to a maximum
aggregate amount of $.9 million. The loans from Charles River matures in ten
years and interest accrues at the initial rate of the Term Loan B of the new
credit facility. Each loan is secured by units in CRL Acquisition LLC held by
the borrower, 25% of each loan is recourse to the borrower and all proceeds
from the sale of such equity and options will be used to pay down the loan
until it is repaid in full. All payments due under each loan accelerates
immediately upon the termination of the borrower's employment with Charles
River for any reason.
57
<PAGE>
DESCRIPTION OF NEW CREDIT FACILITY
The new credit facility was provided by a syndicate of financial
institutions led by DLJ Capital Funding, as sole book runner, lead arranger and
syndication agent. The new credit facility includes a $40.0 million term loan A
facility, a $120.0 million term loan B facility and a $30.0 million revolving
credit facility, which provides for loans and under which up to $15.0 million
in letters of credit may be issued. The term loan A facility matures six years
after the closing date of the facility, the term loan B facility matures eight
years after the closing date of the facility and the revolving facility matures
six years after the closing date of the facility. The revolving credit facility
is subject to a potential, but uncommitted, increase of up to $25 million at
our request at any time prior to such revolving credit facility maturity date.
Such increase will be available only if one or more financial institutions
agrees, at the time of our request, to provide it.
Loans under the term loan A facility and the revolving facility will bear
interest, at our option, at the alternate base rate or the reserve adjusted
LIBOR rate plus, in each case, applicable margins of 3.00% for LIBOR loans and
1.75% for base rate loans. Loans under the term loan B facility will bear
interest, at our option, at the alternate base rate or the reserve adjusted
LIBOR rate plus, in each case, applicable margins of 3.75% for LIBOR loans and
2.50% for base rate loans. We pay commitment fees in an amount equal to 0.50%
per annum on the daily average unused portion of the revolving credit facility.
Such fees are payable quarterly in arrears and upon the maturity or termination
of the revolving credit facility. Beginning approximately six months after the
closing date of the new credit facility, the applicable margins applicable to
loans under the term loan A facility and the revolving facility and commitment
fees will be determined based on the ratio (the "Leverage Ratio") of
consolidated total debt to consolidated EBITDA (as defined in the new credit
facility) of us and our restricted subsidiaries (as defined in the new credit
facility).
We will pay a letter of credit fee on the outstanding undrawn amounts of
letters of credit issued under the new credit facility at a rate per year equal
to the margin applicable to LIBOR loans under the revolving facility (in the
case of standby letters of credit) or 1.25% (in the case of commercial letters
of credit), which shall be shared by all lenders participating in the relevant
letters of credit. In addition, we will pay an additional fee to the issuer of
each letter of credit in an amount agreed between us and the issuer.
The term loan A is subject to the following amortization schedule:
Term Loan
Year Amortization(%)
- ----- ---------------
1..................................................................... 0%
2..................................................................... 5
3..................................................................... 10
4..................................................................... 20
5..................................................................... 25
6..................................................................... 40
The term loan B is subject to the following amortization schedule:
Year Term Loan
Year Amortization(%)
- ---- ---------------
1-7................................................................... 1%
8..................................................................... 93
The new credit facility is subject to mandatory prepayment:
o with the net cash proceeds of the sale or other disposition of any
property or assets of, or receipt of casualty proceeds by, us or any
of our restricted subsidiaries, subject to certain exceptions,
including an exception for reinvestment in our and our restricted
subsidiaries' business,
58
<PAGE>
o with 50% of the net cash proceeds received from the issuance of
equity securities of Holdings, us or any of our restricted
subsidiaries (subject to certain exceptions) so long as the Leverage
Ratio following such payment would exceed 3.5:1,
o with the net cash proceeds received from issuances of debt securities
by Holdings, us or any of our restricted subsidiaries (subject to
certain exceptions) and
o with 50% of excess cash flow (as defined in the new credit facility)
for each fiscal year so long as the Leverage Ratio following such
payment would exceed 3.5:1.
All mandatory prepayment amounts will be applied first to the prepayment
of the term loans.
All of our future domestic restricted subsidiaries will be guarantors of
the new credit facility. Our obligations under the new credit facility will be
secured by:
o all of our stock,
o all of our existing and after-acquired personal property and all the
existing and after-acquired personal property of our future domestic
restricted subsidiaries, including a pledge of all of the equity
interests of all our future restricted subsidiaries held by us or any
of our restricted subsidiaries and no more than 65% of the equity
interests of any foreign restricted subsidiary, and all intercompany
debt in our favor,
o first-priority perfected liens on all of our material existing and
after-acquired real property fee and leasehold interests, subject to
customary permitted liens (as defined in the new credit facility),
and
o a negative pledge on all of our and our subsidiaries' assets.
The new credit facility contains customary covenants and restrictions on
our ability to engage in certain activities, including, but not limited to:
o limitations on other indebtedness, liens, investments and guarantees,
o restrictions on dividends and redemptions and payments on subordinated
debt and
o restrictions on mergers and acquisitions, sales of assets and leases.
The new credit facility also contains financial covenants requiring us to
maintain a minimum EBITDA, minimum coverage of interest expense, minimum
coverage of fixed charges and a maximum leverage ratio. The new credit facility
contains customary events of default and a cross-default to indebtedness of
Holdings.
Borrowings and reimbursement obligations under the new credit facility are
subject to significant conditions, including compliance with certain financial
ratios and the absence of any material adverse change. See "Risk Factors--Risks
relating to our debt."
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WARRANTHOLDERS
Below is information with respect to the number of the warrants, and
shares of common stock of Holdings owned by each of the warrantholders. The
warrants are being registered to permit public secondary trading of the
warrants and the common stock issued upon the exercise of the warrants, and the
warrantholders may offer the warrants and common stock issued upon the exercise
of the warrants for resale from time to time. See "Plan of Distribution."
We have filed with the SEC a registration statement, of which this
prospectus forms a part, with respect to the resale of the warrants and the
issuance and resale of common stock of Holdings issued upon the exercise of the
warrants from time to time, pursuant to Rule 415 under the Securities Act, in
the over-the-counter market, in privately-negotiated transactions, in
underwritten offerings or by a combination of such methods of sale, and have
agreed to use our best efforts to keep such registration statement effective
until the earlier of (i) two years following the first date on which no
warrants remain outstanding and (ii) if all warrants expire unexercised, the
expiration of the warrants (October 1, 2009).
The warrants and our common stock issued upon the exercise of the warrants
offered by this prospectus may be offered from time to time by the persons or
entities named below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Type and Number of Warrants Ownership
Owned Prior to Offering After Offering
------------------------------- -------------------------
Number of Shares
of Common Stock Type and Number of Shares Number of
Name and Address of Owned Prior to Number of Issuable Upon Shares of
Holders Offering Warrants Exercise Common Stock Percent
--------------------- ---------------- --------- ------------- ------------ -------
</TABLE>
None of such holders have, or within the past three years had, any
position, office or other material relationship with us or any of our
predecessors or affiliates.
Because the selling holders may, pursuant to this prospectus, offer all or
some portion of the warrants or the common stock issuable upon conversion of
the warrants, no estimate can be given as to the amount of the warrants or the
common stock issuable upon conversion of the warrants that will be held by the
selling holders upon termination of any such sales. In addition, the selling
holders identified above may have sold, transferred or otherwise disposed of
all or a portion of their warrants, since the date on which they provided the
information regarding their warrants, in transactions exempt from the
registration requirements of the Securities Act. See "Plan of Distribution."
Only selling holders identified above who beneficially own the securities
set forth opposite each such selling holder's name in the foregoing table on
the effective date of the registration statement of which this prospectus forms
a part may sell such securities pursuant to the registration statement. Prior
to any use of this prospectus in connection with an offering of the warrants
and/or the common stock issuable upon conversion of warrants by any holder not
identified above, this prospectus will be supplemented to set forth the name
and number of shares beneficially owned by the selling securityholder intending
to sell such warrants and/or common stock, and the number of warrants and/or
shares of common stock to be offered. The prospectus supplement will also
disclose whether any selling securityholder selling in connection with such
prospectus supplement has held any position or office with, been employed by or
otherwise has
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had a material relationship with, us or any of our affiliates during the three
years prior to the date of the prospectus supplement if such information has
not been disclosed herein.
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DESCRIPTION OF WARRANTS
The warrants (the "Warrants") were issued pursuant to a Warrant Agreement
(the "Warrant Agreement") between Holdings and State Street Bank and Trust
Company, as Warrant Agent (the "Warrant Agent"), a copy of which is available
as set forth under the caption entitled "Where You Can Find More Information."
The following summary of certain provisions of the Warrant Agreement does not
purport to be complete and is qualified in its entirety by reference to the
Warrant Agreement, including the definitions therein of certain terms used
below.
General
Each Warrant, when exercised, will entitle the holder thereof to receive
3.942 fully paid and non-assessable shares of Holdings common stock (the
"Warrant Shares"), at an exercise price of $10.00 per share, subject to
adjustment (the "Exercise Price"). The Exercise Price and the number of Warrant
Shares are both subject to adjustment in certain cases referred to below. The
holders of the Warrants would be entitled, in the aggregate, to purchase shares
of Holdings common stock representing approximately 5.0% of Holdings common
stock on a fully diluted basis on the closing date (assuming exercise of all
outstanding warrants). The Warrants will be exercisable at any time on or after
October 1, 2001. Unless exercised, the Warrants will automatically expire at
5:00 p.m. New York City time on October 1, 2009 (the "Expiration Date").
The Warrants may be exercised by surrendering to Holdings the warrant
certificates evidencing the Warrants to be exercised with the accompanying form
of election to purchase properly completed and executed, together with payment
of the Exercise Price. Payment of the Exercise Price may be made at the
holder's election (i) by tendering notes having an aggregate principal amount
at maturity, plus accrued and unpaid interest, if any, thereon, to the date of
exercise equal to the Exercise Price and (ii) in cash in United States dollars
by wire transfer or by certified or official bank check to the order of
Holdings. Upon surrender of the warrant certificate and payment of the Exercise
Price, Holdings will deliver or cause to be delivered, to or upon the written
order of such holder, stock certificates representing the number of whole
Warrant Shares to which the holder is entitled. If less than all of the
Warrants evidenced by a warrant certificate are to be exercised, a new warrant
certificate will be issued for the remaining number of Warrants. Holders of
Warrants will be able to exercise their Warrants only if a registration
statement relating to the Warrant Shares underlying the Warrants is then in
effect, or the exercise of such Warrants is exempt from the registration
requirements of the Securities Act, and such securities are qualified for sale
or exempt from qualification under the applicable securities laws of the states
in which the various holders of Warrants or other persons to whom it is
proposed that Warrant Shares be issued on exercise of the Warrants reside.
No fractional Warrant Shares will be issued upon exercise of the Warrants.
Holdings will pay to the holder of the Warrant at the time of exercise an
amount in cash equal to the current market value of any such fractional Warrant
Shares less a corresponding fraction of the Exercise Price.
The holders of the Warrants will have no right to vote on matters
submitted to the stockholders of Holdings and will have no right to receive
dividends. The holders of the Warrants will not be entitled to share in the
assets of Holdings in the event of liquidation, dissolution or the winding up
of Holdings. In the event a bankruptcy or reorganization is commenced by or
against Holdings, a bankruptcy court may hold that unexercised Warrants are
executory contracts which may be subject to rejection by Holdings with approval
of the bankruptcy court, and the holders of the Warrants may, even if
sufficient funds are available, receive nothing or a lesser amount as a result
of any such bankruptcy case than they would be entitled to if they had
exercised their Warrants prior to the commencement of any such case.
In the event of a taxable distribution to holders of Holdings common stock
that results in an adjustment to the number of Warrant Shares or other
consideration for which a Warrant may be exercised, the holders of the Warrants
may, in certain circumstances, be deemed to have received a distribution
subject to United States federal income tax as a dividend. See "Certain Federal
Income Tax Consequences."
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Adjustments
The number of Warrant Shares purchasable upon exercise of Warrants and the
Exercise Price will be subject to adjustment in certain events including:
(1) the payment by Holdings of dividends and other distributions on the
Holdings common stock,
(2) subdivisions, combinations and reclassifications of the Holdings
common stock,
(3) the issuance to all holders of Holdings common stock of rights,
options or warrants entitling them to subscribe for Holdings common
stock or securities convertible into, or exchangeable or exercisable
for, Holdings common stock at a price which is less than the fair
market value per share (as defined) of Holdings common stock,
(4) certain distributions to all holders of Holdings common stock of any
of Holdings' assets or debt securities or any rights or warrants to
purchase any such securities (excluding those rights and warrants
referred to in clause (3) above),
(5) the issuance of shares of Holdings common stock for consideration per
share less than the then fair market value per share of Holdings
common stock (excluding securities issued in transactions referred to
in clauses (1) through (4) above or (6) below and subject to certain
exceptions),
(6) the issuance of securities convertible into or exchangeable for
Holdings common stock for a conversion or exchange price plus
consideration received upon issuance less than the then fair market
value per share of Holdings common stock at the time of issuance of
such convertible or exchangeable security (excluding securities
issued in transactions referred to in clauses (1) through (4) above),
and
(7) certain other events that could have the effect of depriving holders
of the Warrants of the benefit of all or a portion of the purchase
rights evidenced by the Warrants.
Adjustments to the Exercise Price will be calculated to the nearest cent.
No adjustment need be made for any of the foregoing transactions if holders of
Warrants issued hereunder are to participate in the transaction on a basis and
with notice that the board of directors determines to be fair and appropriate
in light of the basis and notice and on which other holders of Holdings common
stock participate in the transaction.
"Disinterested Director" means, in connection with any issuance of
securities that gives rise to a determination of the fair market value thereof,
each member of the board of directors of Holdings who is not an officer,
employee, director or other affiliate of the party to whom Holdings is
proposing to issue the securities giving rise to such determination.
"Fair Market Value" per security at any date of determination shall be (1)
in connection with a sale to a party that is not an affiliate of Holdings in an
arm's-length transaction (a "Non-Affiliate Sale"), the price per security at
which such security is sold and (2) in connection with any sale to an affiliate
of Holdings, (a) the last price per security at which such security was sold in
a Non-Affiliate Sale within the three-month period preceding such date of
determination or (b) if clause (a) is not applicable, the fair market value of
such security determined in good faith by (i) a majority of the Board of
Directors of Holdings, including a majority of the disinterested directors, and
approved in a board resolution delivered to the Warrant Agent or (ii) a
nationally recognized investment banking, appraisal or valuation firm, which is
not an affiliate of Holdings, in each case taking into account, among all other
factors deemed relevant by the Board of Directors or such investment banking,
appraisal or valuation firm, the trading price and volume of such security on
any national securities exchange or automated quotation system on which such
security is traded.
No adjustment in the Exercise Price will be required unless such
adjustment would require an increase or decrease of at least one percent (1.0%)
in the Exercise Price; provided however, that any adjustment that is not made
will be
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carried forward and taken into account in any subsequent adjustment. In the
case of certain consolidations or mergers of Holdings, or the sale of all or
substantially all of the assets of Holdings to another corporation, (i) each
Warrant will thereafter be exercisable for the right to receive the kind and
amount of shares of stock or other securities or property to which such holder
would have been entitled as a result of such consolidation, merger or sale had
the Warrants been exercised immediately prior thereto and (ii) the Person
formed by or surviving any such consolidation or merger (if other than the
company) or to which such sale shall have been made will assume the obligations
of Holdings under the Warrant Agreement.
Reservation of Shares
Holdings has authorized and reserved for issuance and will at all times
reserve and keep available such number of shares of Holdings common stock as
will be issuable upon the exercise of all outstanding Warrants. Such shares of
Holdings common stock, when paid for and issued, will be duly and validly
issued, fully paid and non-assessable, free of preemptive rights and free from
all taxes, liens, charges and security interests with respect to the issuance
thereof.
Amendment
From time to time, Holdings and the Warrant Agent, without the consent of
the holders of the Warrants, may amend or supplement the Warrant Agreement for
certain purposes, including curing defects or inconsistencies or making any
change that does not adversely affect the legal rights of any holder. Any
amendment or supplement to the Warrant Agreement that adversely affects the
legal rights of the holders of the Warrants will require the written consent of
the holders of a majority of the then outstanding Warrants (excluding Warrants
held by Holdings or any of its affiliates). The consent of each holder of the
Warrants affected will be required for any amendment pursuant to which the
Exercise Price would be increased or the number of Warrant Shares purchasable
upon exercise of Warrants would be decreased (other than pursuant to
adjustments provided in the Warrant Agreement).
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DESCRIPTION OF CAPITAL STOCK OF HOLDINGS
General
Holdings is authorized to issue an aggregate of 40,000,000 shares of
common stock, par value $.01 per share, of which 10,285,715 are outstanding
(excluding 1,600,000 reserved for issuance for outstanding warrants, including
the Warrants). The following is a summary of certain of the rights and
privileges pertaining to Holdings common stock. For a full description of the
Holdings' capital stock, reference is made to the Holdings' Certificate of
Incorporation currently in effect, a copy of which is available from Holdings.
See "Where You Can Find More Information."
Common Stock
Holders of Holdings common stock have no conversion, redemption or
preemptive rights.
Voting Rights
The holders of Holdings common stock are entitled to one vote per share on
all matters submitted for action by the shareholders. There is no provision for
cumulative voting with respect to the election of directors. Accordingly, the
holders of more than 50% of the shares of Holdings common stock can, if they
choose to do so, elect the board of directors of Holdings and determine most
matters on which stockholders are entitled to vote. Pursuant to the Investors'
Agreement, the shareholders who are party to such agreement have agreed to vote
their shares to cause CRL Acquisition LLC to select five of the seven Holdings'
directors, including the chairman. See "Certain Relationships and Related Party
Transactions--Investors' Agreement."
Dividend Rights
Holders of Holdings common stock are entitled to share equally, share for
share, if dividends are declared on Holdings common stock, whether payable in
cash, property or securities of Holdings.
Liquidation Rights
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of Holdings, after payment has been made from the funds available
therefore to the holders of preferred stock, if any, for the full amount to
which they are entitled, the holders of the shares of Holdings common stock are
entitled to share equally, share for share, in the assets available for
distribution.
Preferred Stock
Holdings has authorized 10,000,000 shares of preferred stock to be issued
from time to time in one or more series, with such designations, powers,
preferences, rights, qualifications, limitations and restrictions as the board
of directors may determine. The shares of preferred stock of any one series
shall be identical with each other in all respects except as to the dates from
which dividends shall accrue or be cumulative. On all matters with respect to
which holders of the preferred stock are entitled to vote as a single class,
each holder of preferred stock with such voting right shall be entitled to one
vote for each share held.
Section 203 of Delaware General Corporation Law
Holdings is a Delaware corporation and subject to Section 203 of the DGCL.
Section 203 prevents an "interested stockholder" (defined generally as a person
owning 15% or more of a corporation's outstanding voting stock) from engaging
in a "business combination" with a Delaware corporation for three years
following the date such person became an interested stockholder, subject to
certain exceptions such as transactions done with the approval of the board of
directors and of the holders of at least two-thirds of the outstanding shares
of voting stock not owned by the interested stockholder. The existence of this
provision would be expected to have an anti-takeover effect, including possibly
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discouraging takeover attempts that might result in a premium over the market
price for the shares of Holdings common stock.
DLJMB Warrants
Holdings issued senior discount debentures with other Warrants (the "DLJMB
Warrants") to the DLJMB Funds and other investors for $37.6 million. Each DLJMB
Warrant will entitle the holder thereof to purchase one share of Holdings
common stock at an exercise price of not less than $0.01 per share subject to
customary antidilution provisions (which differ in certain respects from those
contained in the Warrants) and other customary terms. The DLJMB Warrants will
be exercisable at any time prior to 5:00 p.m., New York City time, on April 1,
2010. The exercise of the DLJMB Warrants also will be subject to applicable
federal and state securities laws.
The DLJMB Funds are entitled to certain registrations rights related to
the warrants.
Transfer Agent and Registrar
The transfer agent and registrar for the Holdings common stock will be the
Secretary of Holdings.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following describes the material United States federal income tax
consequences of the ownership, disposition and exercise of Warrants applicable
to holders of warrants. This discussion is based on the Internal Revenue Code
of 1986, as amended to the date hereof (the "Code"), administrative
pronouncements, judicial decisions and existing and proposed Treasury
Regulations, and interpretations of the foregoing, changes to any of which
subsequent to the date of this registration statement may affect the tax
consequences described herein, possibly with retroactive effect.
The following discusses only Warrants and the Warrant Shares held as
capital assets within the meaning of Section 1221 of the Code. It does not
discuss all of the tax consequences that may be relevant to a holder in light
of his particular circumstances or to holders subject to special rules, such as
certain financial institutions, tax-exempt entities, insurance companies,
dealers and traders in securities or currencies and holders who hold the
Warrants or Warrant Shares as part of a hedging transaction, "straddle,"
conversion transaction or other integrated transaction, or persons who have
ceased to be United States citizens or to be taxed as resident aliens. Persons
considering the purchase of Warrants should consult their tax advisors with
regard to the application of the United States federal income tax laws to their
particular situations as well as any tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Warrant or Warrant Share that for United States federal income tax purposes is:
o a citizen or resident of the United States;
o a corporation created or organized in or under the laws of the United
States or of any political subdivision thereof;
o an estate the income of which is subject to United States federal
income taxation regardless of its source; or
o a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or
more United States persons have the authority to control all
substantial decisions of the trust.
As used herein, the term "Non-U.S. Holder" means an owner of a Warrant or
Warrant Share that is, for United States federal income tax purposes,
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o a nonresident alien individual;
o a foreign corporation;
o a nonresident alien fiduciary of a foreign estate or trust; or
o a foreign partnership, one or more of the members of which is a
nonresident alien individual, a foreign corporation or a nonresident
alien fiduciary of a foreign estate or trust.
Tax Consequences to U.S. Holders
The Warrants
A U.S. Holder will generally not recognize any gain or loss upon exercise
of any Warrants (except with respect to any cash received in lieu of a
fractional Warrant Share). A U.S. Holder will have an initial tax basis in the
Warrant Shares received on exercise of the Warrants equal to the sum of its tax
basis in the Warrants and the aggregate cash exercise price, if any, paid in
respect of such exercise. A U.S. Holder's holding period in such Warrant Shares
will commence on the day the Warrants are exercised.
If a Warrant expires without being exercised, a U.S. Holder will recognize
a capital loss in an amount equal to its tax basis in the Warrant. Upon the
sale or exchange of a Warrant, a U.S. Holder will generally recognize a capital
gain or loss equal to the difference, if any, between the amount realized on
such sale or exchange and the U.S. Holder's tax basis in such Warrant. Such
capital gain or loss will be long-term capital gain or loss if, at the time of
such sale or exchange, the Warrant has been held for more than one year.
Under Section 305 of the Code, a U.S. Holder of a Warrant may be deemed to
have received a constructive distribution from Charles River, which may result
in the inclusion of ordinary dividend income, in the event of certain
adjustments to the number of Warrant Shares to be issued on exercise of a
Warrant.
Backup Withholding and Information Reporting
Backup withholding of U.S. federal income tax at a rate of 31% may apply to
dividends received with respect to Warrant Shares and the proceeds of a
disposition of a Warrant or Warrant Shares to a U.S. Holder who is not an
exempt recipient. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities are exempt recipients. Backup
withholding will apply only if the U.S. Holder
o fails to furnish its Taxpayer Identification Number ("TIN") which, in
the case of an individual, is his or her Social Security Number;
o furnishes an incorrect TIN;
o is notified by the Internal Revenue Service ("IRS") that it has failed
to properly report payments of dividends; or
o under certain circumstances, fails to certify, under penalty of
perjury, that it has furnished a correct TIN and has not been
notified by the IRS that it is subject to backup withholding.
U.S. Holders should consult their tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption if applicable.
The amount of any backup withholding from a payment to a U.S. Holder is
not an additional tax and is allowable as a credit against such U.S. Holder's
United States federal income tax liability and may entitle such U.S. Holder to
a refund, provided that the required information is furnished to the IRS.
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Tax Consequences to Non-U.S. Holders
Dividends on Warrant Shares
Dividends paid to a Non-U.S. Holder of Warrant Shares (and, after December
31, 2000, any deemed dividends resulting from certain adjustments to the number
of Warrant Shares to be issued on exercise of a Warrant) generally will be
subject to withholding tax at a 30% rate or such lower rate as may be specified
by an applicable income tax treaty, unless such dividends are effectively
connected with the conduct by the Non-U.S. Holder of a trade or business in the
U.S. Currently, for purposes of determining whether tax is to be withheld at a
30% rate or at a reduced treaty rate, Charles River ordinarily will presume
that dividends paid on or before December 31, 2000 to an address in a foreign
country are paid to a resident of such country absent knowledge that such
presumption is not warranted. Under Treasury Regulations effective for payments
after December 31, 2000, Non-U.S. Holders will be required to satisfy certain
applicable certification requirements to claim treaty benefits.
Sale, Exchange or Disposition of the Warrants or Warrant Shares
A Non-U.S. Holder of a Warrant or Warrant Shares will not be subject to
United States federal income tax on gain realized on the sale, exchange or
other disposition of such Warrant or Warrant Shares, unless:
o that holder is an individual who is present in the United States for
183 days or more in the taxable year of the disposition, and some
other conditions are met;
o that gain is effectively connected with the Non-U.S. Holder's conduct
of a trade or business in the United States; or
o the Warrant or Warrant Share was a United States real property
interest ("USRPI") as defined in Section 897(c)(1) of the Code at any
time during the five year period prior to the sale or exchange or at
any time during the time that the Non-U.S. Holder held such Warrant
or Warrant Share, whichever time was shorter.
A Warrant or Warrant Share would be a USRPI only if, at any time during
the five years prior to the sale or exchange of such Warrant or Warrant Share
or at any time during the period that the Non-U.S. Holder held such Warrant or
Warrant Share, whichever time was shorter, Charles River had been a "United
States real property holding corporation" (USRPHC") as defined in Section
897(c)(2) of the Code. Charles River believes that it is not, has not been and
will not become a USRPHC for federal income tax purposes.
Estate Tax
An individual Non-U.S. Holder who is treated as the owner of, or has made
certain lifetime transfers of, an interest in a Warrant or Warrant Shares will
be required to include the value thereof in his gross estate for U.S. federal
estate tax purposes, and may be subject to U.S. federal estate tax unless an
applicable estate tax treaty provides otherwise.
Effectively Connected Dividend Income or Gain
Dividends with respect to Warrant Shares or gain realized on the sale,
exchange or other disposition of Warrants or Warrant Shares that are
effectively connected with the conduct of a trade or business in the U.S. by a
Non-U.S. Holder, although exempt from withholding tax, may be subject to U.S.
income tax at graduated rates as if such dividends or gain were earned by a
U.S. Holder. The Non-U.S. Holder will be exempt from withholding tax if it
properly certifies on IRS Form 4224, Form W-8ECI or other appropriate successor
form that the income is effectively connected with the conduct of a United
States trade or business. In addition, if such Non-U.S. Holder is a foreign
corporation, it may be subject to a 30% branch profits tax (unless reduced or
eliminated by an applicable treaty) on its earnings and profits for the taxable
year attributable to such effectively connected income, subject to certain
adjustments.
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Backup Withholding and Information Reporting
Where required, Charles River will report annually to the IRS and to each
Non-U.S. Holder the amount of any dividends paid to the Non-U.S. Holder. Copies
of these information returns may also be made available under the provisions of
a specific treaty or other agreement to the tax authorities of the country in
which the Non-U.S. Holder resides.
Backup withholding (described above under "-- Tax Consequences to U.S.
Holders--Backup Withholding and Information Reporting") generally will not
apply to dividends paid on or before December 31, 2000 to a Non-U.S. Holder at
an address outside the United States, provided Charles River or its paying
agent does not have actual knowledge that the payee is a United States Person.
Under Treasury Regulations effective for payments made after December 31, 2000,
however, a Non-U.S. Holder will be subject to backup withholding unless
applicable certification requirements are met.
Under current Treasury Regulations, payments on the sale, exchange or
other disposition of a Warrant or Warrant Share made to or through a foreign
office of a broker generally will not be subject to backup withholding.
However, if such broker is a United States person, a controlled foreign
corporation for United States federal income tax purposes, a foreign person 50
percent or more of whose gross income is effectively connected with a United
States trade or business for a specified three-year period or (generally in the
case of payments made after December 31, 2000) a foreign partnership with
certain connections to the United States, then information reporting (but not
backup withholding) will be required unless the broker has in its records
documentary evidence that the beneficial owner is not a United States person
and certain other conditions are met or the beneficial owner otherwise
establishes an exemption. Backup withholding may apply to any payment that such
broker is required to report if the broker has actual knowledge that the payee
is a United States person. Payments to or through the United States office of a
broker will be subject to backup withholding and information reporting unless
the holder certifies, under penalties of perjury, that it is not a United
States person or otherwise establishes an exemption.
Recently promulgated Treasury Regulations, generally effective for
payments after December 31, 2000, provide certain presumptions under which a
Non-U.S. Holder will be subject to backup withholding and information reporting
unless the holder certifies as to its non-U.S. status or otherwise establishes
an exemption. In addition, the new Treasury Regulations change certain
procedural requirements relating to establishing a holder's non-U.S. status.
Non-U.S. Holders of Warrants or Warrant Shares should consult their tax
advisers regarding the application of information reporting and backup
withholding in their particular situations, the availability of an exemption
therefrom, and the procedure for obtaining such an exemption, if available. Any
amount withheld from a payment to a Non-U.S. Holder under the backup
withholding rules is not an additional tax and is allowable as a credit against
such holder's United States federal income tax liability, if any, or may
entitle such holder to a refund, provided that the required information is
furnished to the IRS.
PLAN OF DISTRIBUTION
Holdings will not receive any proceeds from this offering, other than in
connection with the exercise of the warrants. The warrants and the common stock
of Holdings issued upon the exercise of the warrants offered hereby may be sold
by the warrantholders from time to time in transactions in the over-the-counter
market, in negotiated transactions, in underwritten offerings, or a combination
of such methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices
or at negotiated prices. The warrantholders may effect such transactions by
selling the warrants and common stock of Holding issued upon the exercise of
the warrants to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
warrantholders and/or the purchasers of the warrants for whom such
broker-dealers may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
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In order to comply with the securities laws of certain states, if
applicable, the warrants and common stock will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
states the warrants and the common stock of Holdings may not be sold unless
they have been registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirement is available and
is complied with.
The warrantholders and any broker-dealers or agents that participate with
the warrantholders in the distribution of the warrants or the common stock of
Holdings issued upon the exercise of the warrants may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the warrants or the common
stock issued upon the exercise of the warrants purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act.
Each warrantholder will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of shares of the common stock of
Holdings by the warrantholders.
The costs of the registration of the warrants will be paid by Holdings,
including, without limitation, SEC filing fees and expenses of compliance with
state securities or "blue sky" laws; provided, however, that the selling
holders will pay all underwriting discounts and selling commissions, if any.
The selling holders will be indemnified by Holdings against certain civil
liabilities, including certain liabilities under the Securities Act, or will be
entitled to contribution in connection therewith.
70
<PAGE>
LEGAL MATTERS
The validity of the warrants and shares of common stock of Holdings
issuable upon the exercise of the warrants offered hereby will be passed upon
for Charles River Laboratories, Inc. and Charles River Laboratories Holdings,
Inc. by Davis Polk & Wardwell, New York, New York.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of Charles River Laboratories, Inc.
and the combined financial statements of Charles River Laboratories Holdings,
Inc. and Charles River Laboratories, Inc. as of December 27, 1997 and December
26, 1998 and for each of the three years in the period ended December 26, 1998
included in this prospectus have been audited by PricewaterhouseCoopers LLP as
stated in their report appearing herein.
WHERE YOU CAN FIND MORE INFORMATION
Holdings has filed with the SEC a registration statement on Form S-1 under
the Securities Act with respect to warrants and shares of common stock of
Holdings issuable upon the exercise of the warrants. This prospectus does not
contain all the information included in the registration statement and the
related exhibits and schedules. You will find additional information about us,
Holdings and the warrants and shares of common stock of Holdings issuable upon
the exercise of the warrants in the registration statement. The registration
statement and the related exhibits and schedules may be inspected and copied at
the public reference facilities maintained by the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the public
reference facilities of the SEC's Regional Offices: New York Regional Office,
Seven World Trade Center, Suite 1300, New York, New York 10048; and Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of this material may also be obtained from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. You can obtain information on the operation of the public
reference facilities by calling 1-800-SEC-0330. The SEC also maintains a site
on the World Wide Web (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants, including
Charles River and Holdings, that file electronically with the SEC. Statements
made in this prospectus about legal documents may not necessarily be complete
and you should read the documents which are filed as exhibits or schedules to
the registration statement or otherwise filed with the SEC.
We are required under the warrant agreement to furnish the warrantholders
with all quarterly and annual financial information that would be required to
be contained in a filing with the SEC on forms 10-Q and 10-K if Holdings were
required to file such Forms, including, without limitation, (a) "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by Holdings's
certified independent accountants, and (b) all current reports that would be
required to be filed with the SEC on Form 8-K if Holdings were required to
file such reports, in each case, within the time periods specified in the
SEC's rules and regulations.]
71
<PAGE>
<TABLE>
INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
<S> <C>
Page
----
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Data..................................... P-2
Charles River Laboratories, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 25, 1999............................. P-4
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 25, 1999.................... P-5
Unaudited Pro Forma Condensed Consolidated Statement of Income for the Year Ended December 26,
1998..................................................................................................... P-6
Unaudited Pro Forma Condensed Consolidated Statement of Income for the Nine Months Ended
September 26, 1998....................................................................................... P-7
Unaudited Pro Forma Condensed Consolidated Statement of Income for the Nine Months Ended
September 25, 1999....................................................................................... P-8
Unaudited Pro Forma Condensed Consolidated Statement of Income for the Twelve Months Ended
September 25, 1999....................................................................................... P-9
Notes to Unaudited Pro Forma Condensed Consolidated Statements of Income...................................... P-10
Charles River Laboratories Holdings, Inc. and Charles River Laboratories, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet as of September 25, 1999................................. P-14
Notes to Unaudited Pro Forma Condensed Combined Balance Sheet as of September 25, 1999........................ P-15
Unaudited Pro Forma Condensed Combined Statement of Income for the Year Ended December 26, 1998............... P-17
Unaudited Pro Forma Condensed Combined Statement of Income for the Nine Months Ended
September 25, 1999....................................................................................... P-18
Notes to Unaudited Pro Forma Condensed Combined Statements of Income.......................................... P-19
</TABLE>
P-1
<PAGE>
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL DATA
On September 29, 1999, Charles River Laboratories, Inc. (the "Company" or
"Charles River") consummated a recapitalization transaction pursuant to a
recapitalization agreement dated July 25, 1999 (the "Recapitalization
Agreement") with Bausch & Lomb Incorporated ("B&L"), certain subsidiaries of
B&L (such subsidiaries and B&L are referred to, collectively, as the "Rollover
Shareholders"), Endosafe, Inc. (renamed Charles River Laboratories Holdings,
Inc., referred to as "Holdings") and CRL Acquisition LLC, a subsidiary of DLJ
Merchant Banking Partners II, L.P. ("DLJMB"). Prior to the consummation of the
Recapitalization, the Company became a wholly owned subsidiary of Holdings.
Holdings has no operations other than those related to Charles River. Holdings
was recapitalized in a transaction providing aggregate consideration of $456.2
million, consisting of $400.0 million in cash, a subordinated discount note for
$43.0 million to be issued by Holdings to the Rollover Shareholders and equity
to be retained by the Rollover Shareholders with a fair market value of $13.2
million (the "Recapitalization"). The $400.0 million cash consideration was
raised through the following:
o $92.4 million cash equity investment in Holdings by DLJMB and certain
of its affiliated funds (collectively, "the DLJMB Funds"), management
and certain other investors
o $37.6 million senior discount debentures with warrants issued by
Holdings to DLJMB and some of its affiliates and other investors
o $162.0 million senior secured credit facilities at the Company
o a portion of the net proceeds of the Company's units offered hereby
Upon the consummation of the Recapitalization, the DLJMB Funds, management
and certain other investors owned 87.5% of the outstanding capital stock of
Holdings and B&L owned 12.5% of the outstanding capital stock of Holdings. The
Recapitalization has been accounted for as a leveraged recapitalization, which
will have no impact on the historical basis of Holdings' and, accordingly
Charles River's, assets and liabilities.
Simultaneously with the Recapitalization, the Company acquired SBI
Holdings, Inc. ("Sierra") pursuant to a stock purchase agreement (the "Sierra
Acquisition") for an initial purchase price of $24.0 million, of which
approximately $6.0 million was used to repay Sierra's existing debt, which the
Company funded with available cash, a portion of the net proceeds from the
notes offered hereby and a portion of the borrowings under our new credit
facility. In addition, the Company has agreed to pay (a) up to $2.0 million in
contingent consideration if certain financial objectives are reached by
December 31, 2000, (b) up to $10.0 million in performance-based bonus payments
if certain financial objectives are reached over the next five years, and (c)
$3.0 million in retention and non-competition payments contingent upon the
continuing employment of certain key scientific and managerial personnel
through June 30, 2001. The Recapitalization and the Sierra Acquisition are
collectively referred to as the "Transactions." The Recapitalization and the
Sierra Acquisition were consummated concurrently.
The following unaudited pro forma condensed consolidated financial data of
(1) Charles River and (2) Charles River and Holdings, combined, is based upon
historical consolidated financial statements of the Company and of Holdings as
adjusted to give effect to the impact of the Transactions and the application
of the related net proceeds therefrom as discussed under the captions
"Transactions" and "Use of Proceeds." As Holdings has no operations other than
those related to Charles River, the primary distinction between the Charles
River and Holdings combined, unaudited pro forma condensed financial data is
the different capital structure resulting from the additional financial
instruments issued by Holdings. The unaudited pro forma condensed consolidated
balance sheets as of September 25, 1999 give effect to the Transactions
assuming that the Transactions had occurred on September 25, 1999. The
unaudited pro forma condensed consolidated statements of income for the year
ended December 26, 1998, the nine months ended September 26, 1998, the nine
months ended September 25, 1999, and for the twelve month period ended
September 25, 1999 give effect to the Transactions as if they had occurred at
the beginning of the period presented. The unaudited pro forma condensed
consolidated statements of income for the twelve months ended December 26,
1998 also give effect to the
P-2
<PAGE>
Tektagen, Therion and ESD Acquisitions (the "1998 Acquisitions") as if they all
had occurred at the beginning of the period presented.
The pro forma adjustments are based on estimates, available information
and certain assumptions and may be revised as additional information becomes
available. The unaudited pro forma condensed consolidated financial data do not
purport to represent what Charles River's, or Holdings' and Charles River's
combined results of operations or financial position would actually have been
if the Transactions and other adjustments had occurred on the dates indicated
and are not necessarily representative of Charles River or Holdings' and
Charles River's combined results of operations for any future period. The
unaudited pro forma condensed consolidated balance sheet and consolidated
statements of income should be read in conjunction with our consolidated
financial statements and the notes thereto, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the other
financial information appearing elsewhere in this prospectus.
P-3
<PAGE>
CHARLES RIVER LABORATORIES, INC.
CHARLES RIVER LABORATORIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 25, 1999
(dollars in thousands)
<TABLE>
Sierra
Settlement Pro Forma -------------------------
Company with Recapitalization for the Acquisition
Historical B&L(a) Adjustments Recapitalization Historical(b) Adjustments Pro Forma
---------- ---------- ---------------- ---------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,457 $ 2,437 $ 21,827(c) $ 27,721 $ 292 $(24,335)(d) $ 3,678
Trade receivables........ 33,820 -- -- 33,820 2,493 -- 36,313
Inventories.............. 28,577 -- -- 28,577 853 -- 29,430
Deferred income taxes.... 5,432 (5,432) -- -- -- -- --
Due from affiliates...... 966 -- -- 966 -- -- 966
Other current assets..... 5,051 -- -- 5,051 791 -- 5,842
--------- -------- -------- -------- -------- -------- ---------
Total current assets..... 77,303 (2,995) 21,827 96,135 4 ,429 (24,335) 76,229
Property, plant and
equipment, net........... 79,349 -- -- 79,349 4,918 -- 84,267
Goodwill and other
intangibles, net......... 16,212 -- -- 16,212 4,919 12,926(d) 34,057
Investments in affiliates... 19,385 -- -- 19,385 -- -- 19,385
Deferred tax assets......... 5,787 (5,787) 88,060(e) 88,060 -- -- 88,060
Other assets................ 12,335 -- 13,237(c) 25,572 254 --(d) 25,826
--------- -------- -------- -------- -------- -------- ---------
Total assets............. $ 210,371 $ (8,782) $123,124 $324,713 $ 14,520 (11,409) $ 327,824
========= ======== ======== ======== ======== ======== =========
Liabilities and
Shareholder's Equity
Current Liabilities:
Current portion of long-
term debt............. $ 166 $ -- $ 1,200(c) $ 1,366 $ 1,729 $ (1,729)(d) $ 1,366
Current portion of
capital lease
obligations........... 167 -- -- 167 105 -- 272
Accounts payable......... 5,992 -- -- 5,992 1,134 -- 7,126
Accrued compensation..... 11,015 -- -- 11,015 569 -- 11,584
Accrued ESLIRP........... 5,845 -- -- 5,845 -- -- 5,845
Accrued restructuring.... 354 -- -- 354 -- -- 354
Deferred income.......... 4,550 -- -- 4,550 -- -- 4,550
Accrued liabilities...... 12,410 -- -- 12,410 852 -- 13,262
Accrued income taxes..... 16,208 (16,208) -- -- -- -- --
--------- -------- -------- -------- -------- -------- ---------
Total current
liabilities............ 56,707 (16,208) 1,200 41,699 4,389 (1,729) 44,359
Long-term debt.............. -- -- 308,672(c) 308,672 4,240 (4,240)(d) 308,672
Long-term capital lease
obligations.............. 700 -- -- 700 118 -- 818
Other long-term liabilities. 3,706 -- -- 3,706 333 -- 4,039
--------- -------- -------- -------- -------- -------- ---------
Total liabilities........ 61,113 (16,208) 309,872 354,777 9,080 (5,969) 357,888
--------- -------- -------- -------- -------- -------- ---------
Minority interests.......... 293 -- -- 293 -- -- 293
Shareholder's equity
Common stock............. 1 -- -- 1 -- -- 1
Capital in excess of par
value................. 17,836 -- 88,060(e) 105,896 4,667 (4,667)(d) 105,896
Retained earnings
(accumulated deficit). 142,422 7,426 (273,888)(c) (124,040) 4,057 (4,057)(d) (124,040)
Treasury stock, at cost.. -- -- -- -- (3,284) 3,284 (d) --
</TABLE>
P-4
<PAGE>
<TABLE>
Sierra
Settlement Pro Forma -------------------------
Company with Recapitalization for the Acquisition
Historical B&L(a) Adjustments Recapitalization Historical(b) Adjustments Pro Forma
---------- ---------- ---------------- ---------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Treasury stock, at cost.. -- -- -- -- (3,284) 3,284 (d) --
Loans to officers........ (920) (920) (920)
Accumulated other
comprehensive
income (accumulated
deficit).............. (11,294) -- -- (11,294) -- -- (11,294)
--------- -------- -------- -------- -------- -------- ---------
Total shareholder's equity 148,965 7,426 (186,748) (30,357) 5,440 (5,440) (30,357)
--------- -------- -------- -------- -------- -------- ---------
Total liabilities and
shareholder's equity $ 210,371 $ (8,782) $123,124 $324,713 $ 14,520 $(11,409 $ 327,824
========= ======== ======== ======== ======== ======== =========
</TABLE>
- -------------------
(a) Represents assets and liabilities of Charles River as of September 25,
1999 that, according to the terms of the Recapitalization Agreement, were
distributed to or assumed by B&L in conjunction with the closing of the
Recapitalization and, accordingly, are not part of the ongoing operations
of Charles River. In addition, the adjustment includes a cash settlement
paid by B&L to Charles River in accordance with the terms of the
Recapitalization Agreement.
(b) Reflects Sierra's historical unaudited consolidated balance sheet at
September 25, 1999.
(c) Holdings was recapitalized as described under the caption "Transactions."
The Company's portion of the sources and uses of cash required to
consummate the Transactions as of September 25, 1999 follow:
Sources:
Available cash........................................................ $ 2,173
New credit facility
Revolving credit facility........................................ 2,000
Term loans....................................................... 160,000
Units(1).............................................................. 150,000
---------
Total cash sources............................................... $ 314,173
=========
Uses:
Distribution to Holdings.............................................. $ 270,000
Cash consideration for Sierra acquisition(1).......................... 24,000
Debt issuance costs................................................... 13,237
Estimated transaction fees and expenses(2)............................ 6,016
Loans to officer...................................................... 920
---------
Total cash uses.................................................. $ 314,173
=========
- -------------------
(1) The fair value of the related warrants was estimated at $2,128.
(2) Consists of bridge facility commitment, legal and other professional
fees. Does not include fees associated with the Sierra Acquisition
(see note (d) below).
(d) Reflects the Sierra Acquisition adjustments. Goodwill represents the
excess purchase price paid over the estimated fair value of net
identifiable assets acquired and is amortized over fifteen years
using the straight-line method. The sources and uses of cash which
were required to consummate the Sierra Acquisition on September 29,
1999 follow:
Sources:
Available cash........................................................ $ 24,335
---------
P-5
<PAGE>
Total cash sources............................................... $ 24,335
=========
Uses:
Sierra acquisition consideration(1)................................... $ 24,000
Estimated transaction fees and expenses(2)............................ 335
Total cash uses.................................................. $ 24,335
=========
- -------------------
(1) Approximately $6,000 will be used to repay Sierra's existing debt.
(2) Consists of legal and other professional fees.
In conjunction with the Sierra Acquisition, the Company has agreed
to pay additional consideration of up to $2,000 if Sierra achieves certain
financial targets by December 31, 2000. This additional consideration, if any,
will be recorded as additional goodwill at the time the contingency is
resolved.
(e) The adjustment reflects the increase in the deferred tax assets of the
Company due to the Section 338(h)(10) election made in conjunction with
the Recapitalization. Such election results in a step-up in the tax basis
of the underlying assets. The resulting net deferred tax asset of
approximately $88,060 is expected to be realized over 15 years through
future tax deductions which are expected to reduce future tax payments.
In connection with the establishment of this net deferred tax asset,
management has recorded a valuation allowance of $7,770, primarily
related to its realizability with respect to state income taxes.
Management has recorded this net deferred tax asset based on its belief
that it is more likely than not that it will be realized. This belief is
based upon a review of all available evidence, including historical
operating results, projections of future taxable income, and tax planning
strategies.
P-6
<PAGE>
CHARLES RIVER LABORATORIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollars in thousands)
<TABLE>
For the Year Ended December 26, 1998(a)
------------------------------------------------------------------------------------------------------
Pro Forma
for the
Recapitalization Sierra
Company 1998 Recapitalization and the 1998 --------------------------
Historical Acquisitions(b) Adjustments Acquisitions Historical(c) Adjustments Pro Forma
---------- -------------- ---------------- ---------------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $193,301 $3,457 $ -- $196,758 $19,880 $ -- $216,638
Cost of products sold and
services provided.......... 122,547 2,716 -- 125,263 10,634 -- 135,897
Selling, general and
administrative expenses.... 34,142 805 41(d) 34,988 6,227 -- 41,215
Amortization of goodwill
and other intangibles....... 1,287 116(e) -- 1,403 256 926(e) 2,585
-------- ------ ---------- -------- ------- ------ --------
Operating income............ 35,325 (180) (41) 35,104 2,763 (926) 36,941
Interest income............. 986 -- (986)(f) -- -- -- --
Interest expense............ (421) (23) (36,279)(g) (36,723) (762) 762(h) (36,723)
Loss from foreign currency,
net........................ (58) -- -- (58) -- -- (58)
-------- ------ ---------- -------- ------- ------ --------
Income (loss) before income
taxes, minority interests
and earnings from equity
investments................ 35,832 (203) (37,306) (1,677) 2,001 (164) 160
Provision (benefit) for
income taxes................ 14,123 150 (14,670)(i) (397) 820 305(j) 728
-------- ------ ---------- -------- ------- ------ --------
Income (loss) before
minority interests and
earnings from equity
investments................ 21,709 (353) (22,636) (1,280) 1,181 (469) (568)
Minority interests.......... (10) -- -- (10) -- -- (10)
Earnings from equity
investments................ 1,679 2 -- 1,681 -- -- 1,681
-------- ------ ---------- -------- ------- ------ --------
Net income (loss)........... $ 23,378 $ (351) $ (22,636) $ 391 $ 1,181 $ (469) $ 1,103
======== ====== ========= ======== ======= ====== ========
</TABLE>
P-7
<PAGE>
CHARLES RIVER LABORATORIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollars in thousands)
<TABLE>
For the Nine Months Ended September 26, 1998(a)
------------------------------------------------------------------------------------------------------
Pro Forma
for the
Recapitalization Sierra
Company 1998 Recapitalization and the 1998 --------------------------
Historical Acquisitions(b) Adjustments Acquisitions Historical(c) Adjustments Pro Forma
---------- -------------- ---------------- ---------------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $145,519 $2,984 $ -- $148,503 $14,769 $ -- $163,272
Cost of products sold and
services provided........ 91,041 2,436 -- 93,477 7,869 -- 101,346
Selling, general and
administrative expenses.. 25,202 723 47(d) 25,972 4,265 -- 30,237
Amortization of goodwill and
other intangibles........ 1,036 116(e) -- 1,152 192 700 (e) 2,044
Restructuring charges....... -- -- -- -- -- -- --
-------- ------ -------- -------- ------- ------ --------
Operating income............ 28,240 (291) (47) 27,902 2,443 (700) 29,645
Interest income ............ 659 -- (659)(f) -- -- -- --
Interest expense............ (311) (23) (27,210)(g) (27,544) (513) 513 (h) (27,544)
Loss from foreign currency,
net....................... (127) -- -- (127) -- -- (127)
-------- ------ -------- -------- ------- ------ --------
Income (loss) before income
taxes, minority interests
and earnings from equity
investments.............. 28,461 (314) (27,916) 231 1,930 (187) --
Provision (benefit) for
income taxes............. 11,280 105 (10,985)(i) 400 791 205 (j) 1,396
-------- ------ -------- -------- ------- ------ --------
Income (loss) before minority
interests and earnings from
equity investments....... 17,181 (419) (16,931) (169) 1,139 (392) 578
Minority interests....... (8) -- (8) -- -- (8)
Earnings from equity
investments.............. 1,286 2 -- 1,288 -- -- 1,288
-------- ------ -------- -------- ------- ------ --------
Net income (loss)............. $ 18,459 $ (417) $(16,931) $ 1,111 $ 1,139 $ (392) $ 1,858
======== ====== ======== ======== ======= ====== ========
</TABLE>
P-8
<PAGE>
<TABLE>
CHARLES RIVER LABORATORIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollars in thousands)
For the Nine Months Ended September 25, 1999(a)
-------------------------------------------------------------------------------------------------
Pro Forma for
Sierra Recapitalization
Company Recapitalization Pro Forma ---------------------------- & Sierra
Historical Adjustments Recapitalization Historical(c) Adjustments Acquisition
---------- ---------------- ---------------- ------------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Net sales..................... $161,096 $ -- $161,096 $ 16,034 $ -- $ 177,130
Cost of products sold and
services provided............ 97,230 -- 97,230 9,589 -- 106,819
Selling, general and
administrative expenses...... 29,414 (18)(d) 29,396 5,364 -- 34,760
Amortization of goodwill and
other intangibles............ 1,114 -- 1,114 192 700 (e) 2,006
Restructuring charges -- -- -- -- -- --
------- -------- -------- --------- ---------- --------
Operating income.............. 33,338 18 33,356 889 (700) 33,545
Other income.................. 1,441 -- 1,441 -- -- 1,441
Interest income............... 496 (496)(f) -- -- -- --
Interest expense.............. (207) (29,373)(g) (29,580) (321) 321 (h) (29,580)
Loss from foreign currency,
net.......................... (143) -- (143) -- -- (143)
------- -------- -------- --------- ---------- --------
Income (loss) before income
taxes, minority interests
and earnings from equity
investments.................. 34,925 (29,851) 5,074 568 (379) 5,263
Provision (benefit) for
income taxes................. 16,903 (11,940)(i) 4,963 233 128 (j) 5,324
------- -------- -------- --------- ---------- --------
Income (loss) before minority
interests and earnings
from equity investments...... 18,022 (17,910) 112 335 (507) (61)
Minority interests............ (10) -- (10) -- -- (10)
Earnings from equity
investments.................. 1,940 -- 1,940 -- -- 1,940
------- -------- -------- --------- ---------- --------
Net income (loss)............. $19,952 $(17,910) $ 2,042 $ 335 $ (507) $ 1,869
======= ======== ======== ========= ========== ========
</TABLE>
P-9
<PAGE>
<TABLE>
CHARLES RIVER LABORATORIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(dollars in thousands)
For the Twelve Months Ended September 25, 1999(m)
---------------------------------------------------------------------------------------------------
Pro Forma
for
1998 Recapital-
Acquisi- Sierra ization
tions (b) Recappitali- --------------------------- & Sierra
Company --------- zation Pro Forma Adjust- Acquisi-
Historical ESD Adjustments Recapitalization Historical(c) ments tion(k)
---------- --------- ----------- ---------------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales...................... $208,878 $ 473 $ -- $209,351 $ 21,145 $ -- $ 230,496
Cost of products sold and
services provided............. 128,736 280 -- 129,016 12,354 -- 141,370
Selling, general and
administrative expenses....... 38,354 82 (24)(d) 38,412 7,326 -- 45,738
Amortization of goodwill and
other intangibles............. 1,365 -- -- 1,365 256 926 (e) 2,547
------- ----- -------- ------ -------- ------- --------
Operating income............... 40,423 111 24 40,558 1,209 (926) 40,841
Other income................... 1,441 -- -- 1,441 -- -- 1,441
Interest income................ 823 -- (823)(f) -- -- -- --
Interest expense............... (317) -- (38,442)(g) (38,759) (570) 570 (b) (38,759)
Loss from foreign currency, net (74) -- -- (74) -- -- (74)
------- ----- -------- ------ -------- ------- --------
Income (loss) before income
taxes, minority interests and
earnings from equity
investments................... 42,296 111 (39,241) 3,166 639 (356) 3,449
Provision (benefit) for income
taxes......................... 19,746 45 (15,625)(i) 4,166 262 228 (j) 4,656
------- ----- -------- ------ -------- ------- --------
Income (loss) before minority
interests and earnings from
equity investments............ 22,550 66 (23,616) (1,000) 377 (584) (1,207)
Minority interests............. (12) -- -- (12) -- -- (12)
Earnings from equity
investments................... 2,333 -- -- 2,333 -- -- 2,333
------- ----- -------- ------ -------- ------- --------
Net income (loss).............. $24,871 $ 66 $(23,616) $1,321 $ 377 $ (584) $ 1,114
======= ===== ======== ====== ======== ======= ========
</TABLE>
P-10
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands)
(a) Charles River's fiscal year consists of a twelve month period ending on
the Saturday closest to December 31; the Company's nine month periods
consist of the nine months ending on the Saturday closest to September 30.
(b) Represents the financial results for the companies acquired during 1998
for the periods not included in the Company Historical column as follows:
Tektagen (from January 1, 1998 until March 31, 1998), Therion (from
January 1, 1998 until March 31, 1998) and ESD (from January 1, 1998 until
November 30, 1998). The tables below detail these results for the year
ended December 26, 1998 and the nine months ended September 26, 1998:
<TABLE>
For the Year Ended December 26, 1998
-----------------------------------------------------------------
Tektagen Therion ESD Adjustments Total
-------- ------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net sales.................................... $ 917 $310 $2,230 $ -- $ 3,457
Cost of products sold and services
provided.................................. 977 89 1,650 -- 2,716
Selling, general and administrative
expenses.................................. 407 85 313 -- 805
Amortization of goodwill and other
intangibles............................... -- -- -- 116(e) 116(e)
----- ----- ------ ------- --------
Operating income............................. (467) 136 267 (116) (180)
Interest income.............................. -- -- -- -- --
Interest expense............................. (23) -- -- -- (23)
(Loss) gain from foreign currency, net....... -- -- -- -- --
----- ----- ------ ------- --------
(Loss) income before income taxes,
minority interests and earnings from
equity investments..................... (490) 136 267 (116) (230)
Provision (benefit) for income taxes... -- 43 107 -- 150
----- ----- ------ ------- --------
(Loss) income before minority interests
and earnings from equity investments... (490) 93 160 (116) (353)
Minority interests........................ -- -- -- -- --
----- ----- ------ ------- --------
Earnings from equity investments............. -- 2 -- -- 2
----- ----- ------ ------- --------
Net (loss) income............................ $(490) $ 95 $ 160 $ (116) $ (351)
===== ===== ====== ======= ========
</TABLE>
<TABLE>
For the Nine Months Ended September 26, 1998
-----------------------------------------------------------------
Tektagen Therion ESD Adjustments Total
-------- ------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net sales.................................... $ 917 $310 $1,757 $ -- $ 2,984
Cost of products sold and services
provided.................................. 977 89 1,370 -- 2,436
Selling, general and administrative
expenses.................................. 407 85 231 -- 723
Amortization of goodwill and other
intangibles............................... -- -- -- 116(e) 116(e)
----- ---- ------ -------- -------
Operating income............................. (467) 136 156 (116) (291)
Interest income.............................. -- -- -- -- --
Interest expense............................. (23) -- -- -- (23)
Loss from foreign currency, net.............. -- -- -- -- --
---- ----- ----- -------- -------
P-11
<PAGE>
For the Nine Months Ended September 26, 1998
-----------------------------------------------------------------
Tektagen Therion ESD Adjustments Total
-------- ------- ----------- ----------- ----------
(Loss) income before income taxes,
minority interests and earnings from
equity investments....................... (490) 136 156 (116) (314)
Provision (benefit) for income taxes........ -- 43 62 -- 105
---- ----- ----- ------- -------
(Loss) income before minority interests
and earnings from equity investments..... (490) 93 94 (116) (419)
Earnings from equity investments......... -- 2 -- -- 2
Minority interests.......................... -- -- -- -- --
----- ----- ----- ------- -------
Net (loss) income........................... $(490) $ 95 $ 94 $ (116) $ (417)
===== ===== ===== ======= =======
</TABLE>
(c) Represents the historical unaudited consolidated financial results of
Sierra. These results have been adjusted to reflect the results of
operations for HTI Bio-Services, Inc., a company Sierra acquired in
January 1999 for the periods not included in the Sierra historical
results. The results also reflect related pro forma adjustments to
goodwill amortization, interest and tax expense.
As part of the Sierra Acquisition, the Company has agreed to pay up to
$10,000 in performance-based bonus payments if certain financial
objectives are reached over the next five years. At the time these
contingencies are resolved, the bonuses, if any, will be recorded as
compensation expense. As these amounts are not reasonably estimable, the
expense related to those bonus payments has not been included in the pro
forma financial statements.
Also in conjunction with the Sierra Acquisition, the Company will enter
into employment agreements with certain Sierra employees that contain
retention and non-competition payments totaling $3,000 to be paid upon
their continuing employment with the Company at December 31, 1999 and
June 30, 2001. The expense related to these payments has not been
included in the pro forma financial statements as they are considered
non-recurring. At the time these contingencies are resolved, the
payments, if any, will be recorded as compensation expense.
(d) To record the elimination of certain B&L allocated or specifically
identified corporate costs to be replaced by management's estimate of the
stand alone costs. The Company historically operated autonomously from
B&L; therefore, the level of corporate charges was minimal. Management's
estimates of stand alone costs include additional professional fees and
other general and administrative expenses as shown below:
<TABLE>
Nine Months Nine Months Twelve
Year Ended Ended Ended Months Ended
December 26, September 26, September 25, September 25,
1998 1998 1999 1999
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Allocated or identified corporate costs:
Professional services........................... $ 12 $ 13 $ 17 $ 16
Insurance....................................... 2,552 1,894 1,820 2,478
Other general and administrative................ 60 46 181 195
------ ------ ------ ------
Total........................................ 2,624 1,953 2,018 2,689
------ ------ ------ ------
Management's estimated stand alone costs:
Professional services(1)........................ 500 375 375 500
Insurance....................................... 1,940 1,455 1,455 1,940
Other general and administrative................ 225 170 170 225
------ ------ ------ ------
Total........................................ 2,665 2,000 2,000 2,665
------ ------ ------ ------
Net increase (decrease) in expenses.......... $ 41 $ 47 $ (18) $ (24)
====== ====== ====== ======
</TABLE>
- -------------------
(1) Include legal, financial and tax accounting and other professional
expenses.
P-12
<PAGE>
(e) Reflects the incremental expense required to reflect amortization of
goodwill generated in the 1998 Acquisitions and the Sierra Acquisition
based on an estimated useful life of 15 years.
(f) Reflects the elimination of interest income generated from cash and cash
equivalents that, according to the terms of the Recapitalization
Agreement, will not be a part of the ongoing operations of Charles River.
(g) To adjust historical interest expense for that portion related to
liabilities that, according to the Recapitalization Agreement, will be
assumed by B&L and will therefore not be part of the ongoing operations of
Charles River as well as adjustment to the unaudited pro forma
consolidated interest expense as a result of the Transactions:
<TABLE>
Nine Months Nine Months Twelve Months
Year Ended Ended Ended Ended
December 26, September 6, September 25, September 25,
1998 19998 1999 1999
------------ ------------ ------------- --------------
<S> <C> <C> <C> <C>
Increase in interest expense
Notes offered hereby(1)........................... $ 20,203 $ 15,152 $ 17,222 $ 22,273
Term loans(2)..................................... 14,500 10,875 10,875 14,500
Revolver(3)....................................... 310 233 233 310
Amortization of deferred financing costs(4)....... 1,523 1,142 1,142 1,523
------------ ----------- ---------- ----------
Total(5)....................................... 36,536 27,402 29,472 38,606
Elimination of historical interest expense........ (257) (192) (99) (164)
------------ ----------- ---------- ----------
Net increase in interest expense............... $ 36,279 $ 27,210 $ 29,373 $ 38,442
============ =========== ========== ==========
</TABLE>
- ------------------
(1) Interest expense was calculated at an effective interest rate of
13.66%.
(2) Interest expense was calculated at an effective blended interest rate
of 9.06%, which is based upon a base rate or LIBOR plus a margin and
is reset every six months.
(3) Represents interest expense calculated at 8.50% plus fees on the
unused portion of 0.50%.
(4) Represents annual amortization expense utilizing a weighted average
maturity on all borrowings of 8.70 years.
(5) A 0.125% increase or decrease in the effective weighted average
interest rate for the senior credit facilities would change pro forma
interest expense by $203, $152 and $152 for the fiscal year ended
December 26, 1998 and the nine months ended September 26, 1998 and
September 25, 1999, respectively.
(h) To eliminate Sierra's historical interest expense related to debt that,
according to the terms of the Sierra stock purchase agreement, will be
repaid.
(i) Represents the income tax adjustment required to result in a pro forma
income tax provision based on: the direct tax effects of the pro forma
adjustments described above.
(j) Represents the income tax adjustment required to result in a pro forma
income tax provision based on: the direct tax effects of the pro forma
adjustments described above.
(k) Information for the twelve months ended September 25, 1999 represents the
sum of the unaudited pro forma fiscal year ended December 26, 1998 and the
unaudited pro forma nine months ended September 25, 1999, less the
unaudited pro forma nine months ended September 26, 1998.
P-13
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of September 25, 1999
(dollars in thousands)
<TABLE>
Pro Forma Sierra
Settlement Recappitali- for the ----------------------------
Company with zation Recapitali- Acquisition
Historical B&L(a) Adjustments zation Historical(b) Adjustments Pro Forma
---------- ---------- ------------ ----------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents..............$ 3,457 $ 2,437 $ 21,827 (c) $ 27,721 $ 292 $(24,335)(d) $ 3,678
Trade receivables. 33,820 -- -- 33,820 2,493 -- 36,313
Inventories....... 28,577 -- -- 28,577 853 -- 29,430
Deferred income taxes 5,432 (5,432) -- -- -- -- --
Due from affiliates 966 -- -- 966 -- -- 966
Other current assets 5,051 -- -- 5,051 791 -- 5,842
-------- -------- -------- -------- ------- ------- --------
Total current assets 77,303 (2,995) 21,827 96,135 4,429 (24,335) 76,229
Property, plant and
equipment, net........... 79,349 -- -- 79,349 4,918 -- 84,267
Goodwill and other
intangibles, net......... 16,212 -- -- 16,212 4,919 12,926 (d) 34,057
Investments in affiliates... 19,385 -- -- 19,385 -- -- 19,385
Deferred tax assets......... 5,787 (5,787) 88,060 (e) 88,060 -- -- 88,060
Other assets................ 12,335 -- 13,237 (c) 25,572 254 -- (d) 25,826
-------- -------- -------- -------- ------- ------- --------
Total assets......$210,371 $(8,782) $123,124 $324,713 $14,520 (11,409) $327,824
======== ======= ======== ======== ======= ======= ========
Liabilities and
Shareholder's Equity
Current Liabilities:
Current portion of long-
term debt...................$ 166 $ -- $ 1,200 (c) $ 1,366 $ 1,729 $ (1,729)(d) $ 1,366
Current portion of capital
lease obligations...... 167 -- -- 167 105 -- 272
Accounts payable.......... 5,992 -- -- 5,992 1,134 -- 7,126
Accrued compensation...... 11,015 -- -- 11,015 569 -- 11,584
Accrued ESLIRP.... 5,845 -- -- 5,845 -- -- 5,845
Accrued restructuring..... 354 -- -- 354 -- -- 354
Deferred income........... 4,550 -- -- 4,550 -- -- 4,550
Accrued liabilities....... 12,410 -- -- 12,410 852 -- 13,262
Accrued income taxes...... 16,208 (16,208) -- -- -- -- --
-------- -------- -------- -------- ------- ------- --------
Total current liabilities 56,707 (16,208) 1,200 41,699 4,389 (1,729) 44,359
Long-term debt.............. -- -- 380,314 (c) 380,314 4,240 (4,240)(d) 380,314
Long-term capital lease
obligations.............. 700 -- -- 700 118 -- 818
Other long-term liabilities. 3,706 -- -- 3,706 333 -- 4,039
-------- -------- -------- -------- ------- ------- --------
Total liabilities. 61,113 (16,208) 381,514 426,419 9,080 (5,969) 429,530
-------- -------- -------- -------- ------- ------- --------
Minority interests.......... 293 -- -- 293 -- -- 293
Redeemable common stock..... -- -- 13,198 (f) 13,198 -- -- 13,198
Shareholder's equity
Common stock........... 1 -- -- 1 -- -- 1
Capital in excess of par
value.................. 17,836 -- 178,348 (e)(f) 196,184 4,667 (4,667)(d) 196,184
P-14
<PAGE>
Pro Forma Sierra
Settlement Recappitali- for the ----------------------------
Company with zation Recapitali- Acquisition
Historical B&L(a) Adjustments zation Historical(b) Adjustments Pro Forma
---------- ---------- ------------ ----------- ------------- ------------ ---------
Retained earnings
(accumulated deficit).. 142,422 7,426 (449,016)(c) (299,168) 4,057 (4,057)(d) (299,168)
Treasury stock, at cost -- -- -- -- (3,284) 3,284 (d) --
Loans to officers........... (920) (920) (920)
Accumulated other
comprehensive income
(accumulated deposit).. (11,294) -- -- (11,294) -- -- (11,294)
-------- ------- -------- -------- ------- --------- --------
Total shareholder's
equity.................. 148,965 7,426 (271,588) (115,197) 5,440 (5,440) (115,197)
-------- ------- -------- -------- ------- --------- --------
Total liabilities and
shareholder's equity....$210,371 $(8,782) $123,124 $324,713 $14,520 $(11,409) $327,824
======== ======= ======== ======== ======= ======== ========
</TABLE>
(a) Represents assets and liabilities of Holdings as of September 25, 1999
that, according to the terms of the Recapitalization Agreement, were
distributed to or assumed by B&L in conjunction with the closing of the
Recapitalization and, accordingly, are not part of the ongoing operations
of Holdings. In addition, the adjustment includes a cash settlement paid
by B&L to Holdings in accordance with the terms of the Recapitalization
Agreement.
(b) Reflects Sierra's historical unaudited consolidated balance sheet at
September 25, 1999.
(c) Holdings was recapitalized as described under the caption "Transactions."
The sources and uses of cash required to consummate the Transactions as
of September 25, 1999 follow:
Sources:
Available cash............................................ $ 2,173
New credit facility
Revolving credit facility.............................. 2,000
Term loans............................................. 160,000
Units(1).................................................. 150,000
Senior discount debentures with warrants(2)............... 37,613
Subordinated discount note................................ 43,000
Rollover Shareholders' equity............................. 13,198
DLJMB Funds, management and other investor equity......... 92,387
Total cash sources..................................... $500,371
Uses:
Recapitalization consideration............................ $443,000
Rollover Shareholders' equity............................. 13,198
Cash consideration for Sierra acquisition(1).............. 24,000
Debt issuance costs....................................... 13,237
Estimated transaction fees and expenses(2)................ 6,016
Loans to officer.......................................... 920
Total cash uses........................................ $500,371
- ---------------
(1) The fair value of the related warrants was estimated at $2,128.
(2) The fair value of the related warrants was estimated at $8,971.
(3) Consists of bridge facility commitment, legal and other professional
fees. Does not include fees associated with the Sierra Acquisition (see
note (d) below).
P-15
(d) Reflects the Sierra Acquisition adjustments. Goodwill represents the
excess purchase price paid over the estimated fair value of net
identifiable assets acquired and is amortized over fifteen years using
the straight-line method. The sources and uses of cash which were
required to consummate the Sierra Acquisition on September 29, 1999
follow:
<TABLE>
<S> <C>
Sources:
Available cash......................................... $24,335
Total cash sources.................................. $24,335
Uses:
Sierra acquisition consideration(1).................... $24,000
Estimated transaction fees and expenses(2)............. 335
Total cash uses..................................... $24,335
</TABLE>
(1) Approximately $6,000 was used to repay Sierra's existing debt.
(2) Consists of legal and other professional fees.
In conjunction with the Sierra Acquisition, Holdings has agreed to pay
additional consideration of up to $2,000 if Sierra achieves certain
financial targets by December 31, 2000. This additional consideration, if
any, will be recorded as additional goodwill at the time the contingency
is resolved.
(e) The adjustment reflects the increase in the deferred tax assets of
Holdings due to the Section 338(h)(10) election made in conjunction with
the Recapitalization. Such election results in a step-up in the tax basis
of the underlying assets. The resulting net deferred tax asset of
approximately $88,060 is expected to be realized over 15 years through
future tax deductions which are expected to reduce future tax payments.
In connection with the establishment of this net deferred tax asset,
management has recorded a valuation allowance of $7,770, primarily
related to its realizability with respect to state income taxes.
Management has recorded this net deferred tax asset based on its belief
that it is more likely than not that it will be realized. This belief is
based upon a review of all available evidence, including historical
operating results, projections of future taxable income, and tax planning
strategies.
(f) Amount represents the fair value attributable to the Rollover
Shareholders' equity that has been reclassified from additional paid in
capital to the mezzanine section of the balance sheet due to the
existence of a put option held by the Rollover Shareholder. Such put
option is only exercisable during the period, if any, beginning on the
earlier of:
(i) the date on which all of the consolidated indebtedness of
Holdings incurred on or prior to the effective date of the
Transactions has been repaid in full, including any
refinancings or replacements; or
(ii) the date on which all of the consolidated indebtedness of
Holdings has been repaid in full, refinanced or replaced and
such refinanced or replacement debt permits the put option to
be exercised
and ending on the earlier of:
(i) the date of an initial public offering;
(ii) the date on which the DLJ-affiliated entities own less than
50% of the outstanding common stock of Holdings; or
(iii) twelve years from the effective date of the Transactions.
P-16
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(dollars in thousands)
<TABLE>
<CAPTION>
For the Year Ended December 26, 1998(a)
-------------------------------------------------------------------------------------------------------
Pro Forma
for the
Recappitali-
zation Sierra
Company 1998 Recapitalization and the 1998 ---------------------------
Historical Acquisition(b) Adjustments Acquisitions Historical(c) Adjustments Pro Forma
---------- -------------- ---------------- ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $193,301 $3,457 $ -- $196,758 $19,880 $ -- $216,638
Cost of products sold and
services provided.......... 122,547 2,716 -- 125,263 10,634 -- 135,897
Selling, general and
administrative expenses.... 34,142 805 391 (d) 35,338 6,227 -- 41,565
Amortization of goodwill
and other intangibles....... 1,287 116 (e) -- 1,403 256 926 (e) 2,585
-------- ------- -------- -------- ------- ------ -------
Operating income............ 35,325 (180) (391) 34,754 2,763 (926) 36,591
Interest income............. 986 -- (986)(f) -- -- -- --
Interest expense............ (421) (23) (47,100)(g) (47,544) (762) 762 (h) (47,544)
Loss from foreign currency,
net......................... (58) -- -- (58) -- -- (58)
-------- ------- -------- -------- ------- ------ -------
Income (loss) before income
taxes, minority interests
and earnings from equity
investments................ 35,832 (203) (48,477) (12,848) 2,001 (164) (11,011)
Provision (benefit) for
income taxes................ 14,123 150 (18,605)(i) (4,332) 820 305 (j) (3,207)
-------- ------- -------- -------- ------- ------ -------
Income (loss) before
minority interests and
earnings from equity
investments................ 21,709 (353) (29,872) (8,516) 1,181 (469) (7,804)
Minority interests.......... (10) -- -- (10) -- -- (10)
Earnings from equity
investments................ 1,679 2 -- 1,681 -- -- 1,681
-------- ------- -------- -------- ------- ------ -------
Net income (loss)........... $ 23,378 $ (351) $(29,872) $ (6,845) $ 1,181 $ (469) $(6,133)
======== ====== ======== ======== ======= ====== =======
Pro forma loss per common
share (k)..................
Basic......................
$ (0.60)
Diluted....................
(0.60)
Pro forma weighted average
number of common
shares outstanding.........
Basic......................
10,285,715
Diluted....................
10,285,715
</TABLE>
P-17
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS INC. AND
CHARLES RIVER LABORATORIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(dollars in thousands)
<TABLE>
For the Nine Months Ended September 25, 1999(a)
----------------------------------------------------------------------------------------
Pro Forma for
Recapiptal1-
Sierra zation
Company Recapitali- Pro Forma ----------------------------- & Sierra
Historical zation Recapitalization Historical(c) Adjustments Acquisition
---------- ----------- ---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales..................... 161,096 $ -- $161,096 $16,034 $ -- $177,130
Cost of products sold and
services provided............ 97,230 -- 97,230 9,589 -- 106,819
Selling, general and
administrative expenses...... 29,414 245 (d) 29,659 5,364 -- 35,023
-------- ---- -------- ------ ------- --------
Amortization of goodwill and
other intangibles............ 1,114 -- 1,114 192 700 (e) 2,006
Restructuring charges -- -- -- -- -- --
Operating income.............. 33,338 (245) 33,093 889 (700) 33,282
Other income.................. 1,441 -- 1,441 -- -- 1,441
Interest income............... 496 (496) (f) -- -- -- --
Interest expense.............. (207) (38,676) (g) (38,883) (321) 321 (h) (38,883)
Loss from foreign currency,
net.......................... (143) -- (143) -- -- (143)
-------- ---- -------- ------ ------- --------
Income (loss) before income
taxes, minority interests
and earnings from equity
investments.................. 34,925 (39,417) (4,492) 568 (379) (4,303)
Provision (benefit) for
income taxes................. 16,903 (15,118)(i) 1,785 233 128 (j) 2,146
-------- ---- -------- ------ ------- --------
Income (loss) before minority
interests and earnings
from equity investments...... 18,022 (24,299) (6,277) 335 (507) (6,449)
Minority interests............ (10) -- (10) -- -- (10)
Earnings from equity
investments.................. 1,940 -- 1,940 -- -- 1,940
-------- ---- -------- ------ ------- --------
Net income (loss)............. $19,952 $(24,299) $ (4,347) $335 $ (507) $ (4,519)
======= ======== ======== ==== ======== ========
Pro forma loss per common
share(k).....................
Basic........................ $ (0.44)
Diluted...................... (0.44)
Pro forma weighted average
number of common shares
outstanding..................
Basic........................ 10,285,715
Diluted...................... 10,285,715
</TABLE>
P-18
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands)
(a) Holdings' fiscal year consists of a twelve month period ending on the
Saturday closest to December 31; the Company's nine month periods consist
of the nine months ending on the Saturday closest to September 30.
(b) Represents the financial results for the companies acquired during 1998
for the periods not included in the Holdings' Historical column as
follows: Tektagen (from January 1, 1998 until March 31, 1998), Therion
(from January 1, 1998 until March 31, 1998) and ESD (from January 1, 1998
until November 30, 1998). The tables below detail these results for the
year ended December 26, 1998:
<TABLE>
For the Year Ended December 26, 1998
-------------------------------------------------------
Tektagen Therion ESD Adjustments Total
-------- ------- --- ----------- ------
<S> <C> <C> <C> <C> <C>
Net sales.................................... $ 917 $ 310 $2,230 $ -- $3,457
Cost of products sold and services
provided.................................... 977 89 1,650 -- 2,716
Selling, general and administrative
expenses................................... 407 85 313 -- 805
Amortization of goodwill and other
intangibles................................ -- -- -- 116 (e) 116 (e)
----- ---- ------ ----- ------
Operating income............................. (467) 136 267 (116) (180)
Interest income.............................. -- -- -- -- --
Interest expense............................. (23) -- -- -- (23)
(Loss) gain from foreign currency, net....... -- -- -- -- --
----- ---- ------ ----- ------
(Loss) income before income taxes,
minority interests and earnings from
equity investments........................ (490) 136 267 (116) (203)
Provision (benefit) for income taxes......... -- 43 107 -- 150
----- ---- ------ ----- ------
(Loss) income before minority interests
and earnings from equity investments....... (490) 93 160 (116) (353)
Minority interests........................... -- -- -- -- --
----- ---- ------ ----- ------
Earnings from equity investments............. -- 2 -- -- 2
Net (loss) income............................ $(490) $ 95 $ 160 $(116) $ (351)
===== ==== ====== ===== ======
</TABLE>
(c) Represents the historical unaudited consolidated financial results of
Sierra. These results have been adjusted to reflect the results of
operations for HTI Bio-Services, Inc., a company Sierra acquired in
January 1999 for the periods not included in the Sierra historical
results. The results also reflect related pro forma adjustments to
goodwill amortization, interest and tax expense.
As part of the Sierra Acquisition, Holdings has agreed to pay up to $10,000
in performance-based bonus payments if certain financial objectives are
reached over the next five years. At the time these contingencies are
resolved, the bonuses, if any, will be recorded as compensation expense.
As these amounts are not reasonably estimable, the expense related to
those bonus payments has not been included in the pro forma financial
statements.
Also in conjunction with the Sierra Acquisition, Holdings will enter into
employment agreements with certain Sierra employees that contain
retention and non-competition payments totaling $3,000 to be paid upon
their continuing employment with Holdings at December 31, 1999 and June
30, 2001. The expense related to these payments has not been included in
the pro forma financial statements as they are considered non-recurring.
At the time these contingencies are resolved, the payments, if any, will
be recorded as compensation expense.
P-19
<PAGE>
(d) To record the elimination of certain B&L allocated or specifically
identified corporate costs to be replaced by management's estimate of the
stand alone costs. Holdings historically operated autonomously from B&L;
therefore, the level of corporate charges was minimal. Management's
estimates of stand alone costs include additional professional fees and
other general and administrative expenses as shown below:
<TABLE>
Year Ended December 26, Nine Months Ended
1998 September 25, 1999
----------------------- ------------------
<S> <C> <C>
Allocated or identified corporate costs:
Professional services.............................. $ 12 $ 17
Insurance.......................................... 2,552 1,820
Other general and administrative................... 60 181
------ ------
Total............................................ 2,624 2,018
------ ------
Management's estimated stand alone costs:
Professional services(1)........................... 500 375
Insurance.......................................... 1,940 1,455
Financial advisor fees (2)......................... 350 263
Other general and administrative................... 225 170
------ ------
Total.............................................. 3,015 2,263
------ ------
Net increase in expenses........................... $ 391 $ 245
====== ======
</TABLE>
(1) Include legal, financial and tax accounting and other professional
expenses.
(2) Represents financial advisor fees agreed to on a prospective basis.
(e) Reflects the incremental expense required to reflect amortization of
goodwill generated in the 1998 Acquisitions and the Sierra Acquisition
based on an estimated useful life of 15 years.
(f) Reflects the elimination of interest income generated from cash and cash
equivalents that, according to the terms of the Recapitalization
Agreement, will not be a part of the ongoing operations of Holdings.
(g) To adjust historical interest expense for that portion related to
liabilities that, according to the Recapitalization Agreement, will be
assumed by B&L and will therefore not be part of the ongoing operations
of Holdings as well as adjustment to the unaudited pro forma consolidated
interest expense as a result of the Transactions:
<TABLE>
Year Ended December 26, Nine Months Ended
1998 September 25, 1999
----------------------- ------------------
<S> <C> <C>
Increase in interest expense
Units(1).............................................. $20,203 $17,222
Term loans(2)......................................... 14,500 10,875
Senior discount debentures with warrants(3)........... 4,962 4,309
Subordinated discount note(4)......................... 5,859 4,994
Revolver(5)........................................... 310 233
Amortization of deferred financing costs(6)........... 1,523 1,142
------- -------
Total(7)............................................ 47,357 38,775
Elimination of historical interest expense............ (257) (99)
------- -------
Net increase in interest expense...................... $47,100 $38,676
======= =======
</TABLE>
(1) Interest expense was calculated at an effective interest rate of
13.66%.
(2) Interest expense was calculated at an effective blended interest
rate of 9.06%, which is based upon a base rate or LIBOR plus a
margin and is reset every six months.
P-20
<PAGE>
(3) Interest expense was calculated at an effective interest rate of
16.53%.
(4) Interest expense was calculated at an effective interest rate of
13.63%.
(5) Represents interest expense calculated at 8.50% plus fees on the
unused portion of 0.50%.
(6) Represents annual amortization expense utilizing a weighted
average maturity on all borrowings of 8.69 years.
(7) A 0.125% increase or decrease in the effective weighted average
interest rate for the senior credit facilities would change pro
forma interest expense by $292 and $219 for the fiscal year ended
December 26, 1998 and the nine months September 25, 1999,
respectively.
(h) To eliminate Sierra's historical interest expense related to debt that,
according to the terms of the Sierra stock purchase agreement, will be
repaid.
(i) Represents the income tax adjustment required to result in a pro forma
income tax provision based on the direct tax effects of the pro forma
adjustments described above.
(j) Represents the income tax adjustment required to result in a pro
forma income tax provision based on the direct tax effects of the pro
forma adjustments described above.
(k) Dilutive securities assuming exercise of the warrants were excluded from
the computation of earnings per share due to the net loss.
P-21
<PAGE>
<TABLE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
<S> <C>
Charles River Laboratories, Inc.
Report of Independent Accountants........................................................................... F-2
Consolidated Statements of Income for the years ended December 28, 1996, December 27, 1997 and
December 26, 1998........................................................................................ F-3
Consolidated Balance Sheets as of December 27, 1997 and December 26, 1998................................... F-4
Consolidated Statement of Cash Flows for the years ended December 28, 1996, December 27, 1997 and
December 26, 1998 ....................................................................................... F-5
Consolidated Statement of Changes in Shareholder's Equity for the years ended December 30, 1995,
December 28, 1996, December 27, 1997 and December 26, 1998............................................... F-7
Notes to Consolidated Financial Statements.................................................................. F-8
Consolidated Statements of Income for the nine months ended September 26, 1998 and September 25,
1999 (unaudited)......................................................................................... F-24
Consolidated Balance Sheet as of September 25, 1999 (unaudited)............................................. F-25
Consolidated Statements of Cash Flows for the nine months ended September 26, 1998 and September 25,
1999 (unaudited)......................................................................................... F-26
Notes to Interim Consolidated Financial Statements (unaudited).............................................. F-28
Charles River Laboratories Holdings, Inc.
Report of Independent Accountants........................................................................... F-32
Combined Statements of Income for the years ended December 28, 1996, December 27, 1997 and
December 26, 1998........................................................................................ F-33
Combined Balance Sheets as of December 27, 1997 and December 26, 1998....................................... F-34
Combined Statement of Cash Flows for the years ended December 28, 1996, December 27, 1997 and
December 26, 1998........................................................................................ F-35
Combined Statement of Changes in Shareholder's Equity for the years ended December 30, 1995,
December 28, 1996, December 27, 1997 and December 26, 1998............................................... F-37
Notes to Combined Financial Statements...................................................................... F-38
Combined Statements of Income for the nine months ended September 26, 1998 and September 25, 1999
(unaudited).............................................................................................. F-54
Combined Balance Sheet as of September 25, 1999 (unaudited) ................................................ F-55
Combined Statements of Cash Flows for the nine months ended September 26, 1998 and September 25,
1999 (unaudited) ........................................................................................ F-56
Notes to Interim Combined Financial Statements (unaudited).................................................. F-58
</TABLE>
F-1
<PAGE>
Report of Independent Accountants
To the Board of Directors of
Charles River Laboratories, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, changes in shareholder's equity and
cash flows present fairly, in all material respects, the financial position of
Charles River Laboratories, Inc. and its subsidiaries (the "Company") at
December 26, 1998 and December 27, 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
26, 1998, in conformity with generally accepted accounting principles. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 16(b) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and the financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 30, 1999,
except as to Note 2, which is as of September 29, 1999
F-2
<PAGE>
CHARLES RIVER LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands)
<TABLE>
Fiscal Year Ended
--------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................................................... $155,604 $170,713 $193,301
Costs and expenses
Cost of products sold and services provided.......................... 97,777 111,460 122,547
Selling, general and administrative.................................. 28,327 30,451 34,142
Amortization of goodwill and intangibles............................. 610 834 1,287
Restructuring charges................................................ 4,748 5,892 --
-------- -------- --------
Operating income........................................................ 24,142 22,076 35,325
Other income (expense)
Interest income...................................................... 654 865 986
Interest expense..................................................... (491) (501) (421)
Gain/(loss) from foreign currency, net............................... 84 (221) (58)
-------- -------- --------
Income before income taxes, minority interests and earnings
from equity investments.............................................. 24,389 22,219 35,832
Provision for income taxes.............................................. 10,889 8,499 14,123
-------- -------- --------
Income before minority interests and earnings from equity investments... 13,500 13,720 21,709
Minority interests...................................................... (5) (10) (10)
Earnings from equity investment......................................... 1,750 1,630 1,679
-------- -------- --------
Net income.............................................................. $ 15,245 $ 15,340 $ 23,378
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
CHARLES RIVER LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
December 27, December 26,
1997 1998
------------ ------------
Assets
Current assets
<S> <C> <C>
Cash and cash equivalents................................................ $ 17,915 $ 24,811
Trade receivables, less allowances of $688 and $898, respectively........ 28,280 32,466
Inventories.............................................................. 28,904 30,731
Deferred income taxes.................................................... 4,751 5,432
Due from affiliates...................................................... 1,153 982
Other current assets..................................................... 2,320 2,792
-------- --------
Total current assets................................................... 83,323 97,214
Property, plant and equipment, net.......................................... 76,889 82,690
Goodwill and other intangibles, less accumulated amortization of $4,356
and $5,591 respectively.................................................. 8,621 17,705
Investments in affiliates................................................... 16,140 18,470
Other assets................................................................ 11,238 17,331
-------- --------
Total assets........................................................... $196,211 $233,410
======== ========
Liabilities and Shareholder's Equity
Current liabilities
Current portion of long-term debt........................................ $ 83 $ 202
Current portion of capital lease obligations............................. 144 188
Accounts payable......................................................... 7,566 11,615
Accrued compensation..................................................... 8,601 9,972
Accrued ESLIRP........................................................... 4,407 5,160
Deferred income.......................................................... 1,339 3,419
Accrued restructuring.................................................... 2,732 1,113
Accrued liabilities...................................................... 8,282 13,794
Accrued income taxes..................................................... 8,423 14,329
-------- --------
Total current liabilities.............................................. 41,577 59,792
Long-term debt.............................................................. 170 248
Capital lease obligations................................................... 966 944
Other long-term liabilities................................................. 3,844 3,861
-------- --------
Total liabilities...................................................... 46,557 64,845
-------- --------
Commitments and contingencies (Note 12)
Minority interests.......................................................... 290 306
Shareholder's equity
Common stock, par value $1 per share, 1,000 shares issued................ 1 1
Capital in excess of par value........................................... 17,836 17,836
Retained earnings........................................................ 140,320 156,776
Accumulated other comprehensive income................................... (8,793) (6,354)
-------- --------
Total shareholder's equity............................................. 149,364 168,259
-------- --------
Total liabilities and shareholder's equity............................. $196,211 $233,410
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
CHARLES RIVER LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
Fiscal Year Ended
--------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows relating to operating activities
Net income.............................................................. $15,245 $15,340 $23,378
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................ 9,528 9,703 10,895
Provision for doubtful accounts...................................... 81 166 181
Earnings from equity investments..................................... (1,750) (1,630) (1,679)
Minority interests................................................... 5 10 10
Deferred income taxes................................................ (5,693) (1,363) (3,133)
Stock compensation expense........................................... 24 84 333
Property, plant and equipment write downs............................ -- 822 --
Changes in assets and liabilities
Trade receivables.................................................... (1,840) (2,232) (1,712)
Inventories.......................................................... (1,552) (1,917) (1,250)
Due from affiliates.................................................. (845) (462) 538
Other current assets................................................. 133 165 (241)
Other assets......................................................... (1,787) 611 (4,990)
Accounts payable..................................................... (180) 594 2,853
Accrued compensation................................................. (347) 674 2,090
Accrued ESLIRP....................................................... 674 499 821
Deferred income...................................................... (62) 105 1,278
Accrued restructuring................................................ -- 2,732 (1,619)
Accrued liabilities.................................................. 1,705 431 3,970
Accrued income taxes................................................. 6,852 (500) 5,605
Other long-term liabilities.......................................... 354 (148) (629)
------ ------ ------
Net cash provided by operating activities.......................... 20,545 23,684 36,699
------ ------ ------
Cash flows relating to investing activities
Dividends received from equity investments.............................. 725 773 681
Capital expenditures.................................................... (11,572) (11,872) (11,909)
Cash paid for acquisition of businesses................................. (831) (1,207) (11,121)
------ ------ ------
Net cash used in investing activities.............................. (11,678) (12,306) (22,349)
------ ------ ------
Cash flows relating to financing activities
Long-term debt.......................................................... (3,677) 162 (1,048)
Capital lease obligations............................................... (194) (346) (48)
Net activity with Bausch & Lomb......................................... (197) (12,755) (6,922)
------ ------ ------
Net cash used in financing activities.............................. (4,068) ( 12,939) (8,018)
------ ------ ------
Effect of exchange rate changes on cash and cash equivalents............... (478) (181) 564
------ ------ ------
Net change in cash and cash equivalents.................................... 4,321 (1,742) 6,896
Cash and cash equivalents, beginning of year............................... 15,336 19,657 17,915
------ ------ ------
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Cash and cash equivalents, end of year..................................... $19,657 $17,915 $24,811
======= ======= =======
Supplemental cash flow information
Cash paid for taxes..................................................... $4,821 $4,254 $4,681
Cash paid for interest.................................................. 414 287 177
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
CHARLES RIVER LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(dollars in thousands)
<TABLE>
Accumulated
Other Capital
Retained Comprehensive Common In Excess
Total Earnings Income Stock of Par
----- -------- ------------- ------ ---------
<S> <C> <C> <C> <C> <C>
Balance at December 30, 1995........................ $142,537 $122,687 $ 2,013 $ 1 $17,836
Components of comprehensive income:
Net income.................................... 15,245 15,245 -- -- --
Foreign currency translation.................. (3,467) -- (3,467) -- --
Minimum pension liability adjustment.......... 15 -- 15 -- --
--------
Total comprehensive income.................. 11,793
-------- -- -- -- --
Net activity with Bausch & Lomb.................. (197) (197) -- -- --
-------- -------- ------- ----- -------
Balance at December 28, 1996........................ $154,133 $137,735 $(1,439) $ 1 $17,836
Components of comprehensive income:
Net income.................................... 15,340 15,340 -- -- --
Foreign currency translation.................. (6,844) -- (6,844) -- --
Minimum pension liability adjustment.......... (510) -- (510) --
--------
Total comprehensive income.................. 7,986
-------- -- -- -- --
Net activity with Bausch & Lomb.................. (12,755) (12,755) -- -- --
-------- -------- ------- ----- -------
Balance at December 27, 1997........................ $149,364 $140,320 $(8,793) $ 1 $17,836
Components of comprehensive income:
Net income.................................... 23,378 23,378 -- -- --
Foreign currency translation.................. 2,839 -- 2,839 -- --
Minimum pension liability adjustment.......... (400) -- (400) --
--------
Total comprehensive income.................. 25,817
-------- -- -- -- --
Net activity with Bausch & Lomb.................. (6,922) (6,922) -- -- --
-------- -------- ------- ----- -------
Balance at December 26, 1998........................ $168,259 $156,776 $(6,354) $ 1 $17,836
======== ======== ======= ===== =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
Charles River Laboratories, Inc. (the "Company") is a commercial producer
and supplier of animal research models for use in the discovery, development
and testing of pharmaceuticals. In addition, the Company is a supplier of
biomedical products and services in several specialized niche markets. The
Company is a 100% owned subsidiary of Bausch & Lomb Incorporated (Bausch &
Lomb). The Company's fiscal year is the twelve month period ending the last
Saturday in December.
Basis of Presentation
As of the dates and for the periods presented in these financial
statements, the assets, liabilities, operations and cash flows relating to the
Company are held by Bausch & Lomb and certain affiliated entities. As more
fully described in Note 2, effective September 29, 1999, the Company
consummated a recapitalization agreement that provides for the contribution of
all such assets, liabilities and operations to an existing dormant subsidiary
which was subsequently renamed CRL Holdings, Inc. These consolidated financial
statements include all such assets, liabilities, operations and cash flows as
of and for each of the periods presented.
Principles of Consolidation
The financial statements include all majority-owned U.S. and non-U.S.
subsidiaries. Intercompany accounts, transactions and profits are eliminated.
Affiliated companies over which the Company does not have the ability to
exercise control are accounted for using the equity method (Note 11).
Use of Estimates
The financial statements have been prepared in conformity with generally
accepted accounting principles and, as such, include amounts based on informed
estimates and judgments of management with consideration given to materiality.
Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash equivalents include time deposits and highly liquid investments with
remaining maturities at the purchase date of three months or less.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
principally on the average cost method. All inventories have been reduced to
their net realizable value. Costs for primates are accumulated in inventory
until certain primates are sold or declared breeders.
Property, Plant and Equipment
Property, plant and equipment, including improvements that significantly
add to productive capacity or extend useful life, are recorded at cost, while
maintenance and repairs are expensed as incurred. Depreciation is calculated
for financial reporting purposes using the straight-line method based on the
estimated useful lives of the assets as follows: building, 20 to 40 years;
machinery and equipment, 2 to 20 years; and leasehold improvements, shorter of
estimated useful life or the lease periods.
F-8
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
Intangible Assets
Intangible assets are amortized on a straight-line basis over periods
ranging from eight to 20 years. Intangible assets consist primarily of
goodwill, patents and non-compete agreements.
Other Assets
Other assets consist primarily of the cash surrender value of life
insurance net long-term deferred tax assets and the net value of primate
breeders. The value of primate breeders is amortized over 20 years. Total
amortization expense for primate breeders was $378, $348 and $323 in 1996, 1997
and 1998 and is included in costs of products sold and services provided.
Impairment of Long-Lived Assets
The Company evaluates long-lived assets and intangibles whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated
undiscounted future cash flows expected to result from the use of the asset and
its eventual disposal are less than its carrying amount. In such instances, the
carrying value of long-lived assets is reduced to the estimated fair value, as
determined using an appraisal or discounted cash flow, as appropriate.
Stock-Based Compensation Plans
As permitted under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (FAS 123), the Company accounts for
its stock-based compensation plans using the intrinsic value method prescribed
by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25).
Revenue Recognition
Revenues are recognized when products are shipped, services performed or
upon submission of a lab report for laboratory services. Deferred income
represents cash received in advance of delivery of primates from customers
under contract and is recognized at time of delivery.
Fair Value of Financial Instruments
The carrying amount of the Company's significant financial instruments,
which includes accounts receivable and debt, approximate their fair values at
December 26, 1998 and December 27, 1997.
Income Taxes
As of December 26, 1998, the Company was not a separate taxable entity for
federal, state or local income tax purposes and its results of operations were
included in the consolidated Bausch & Lomb tax returns. The Company accounts
for income taxes under the separate return method in accordance with Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS
109).
F-9
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
Foreign Operations
The financial statements of all non-U.S. subsidiaries are translated into
U.S. dollars as follows: assets and liabilities at year-end exchange rates;
income, expenses and cash flows at average exchange rates; and shareholder's
equity at historical exchange rates. The resulting translation adjustment is
recorded as a component of accumulated other comprehensive income on the
accompanying balance sheet.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables from
customers within the pharmaceutical and biomedical industries. As these
industries have experienced significant growth and its customers are
predominantly well-established and viable, the Company believes its exposure to
credit risk to be minimal.
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," (FAS 130) at the beginning of 1998. As it
relates to the Company, comprehensive income is defined as net income plus the
sum of currency translation adjustments and the change in minimum pension
liability (collectively, other comprehensive income), and is presented in the
Consolidated Statement of Changes in Shareholder's Equity.
Segment Reporting
During 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information" (FAS 131), which requires financial and descriptive information
about an enterprise's reportable operating segments. Operating segments are
components of an enterprise about which separate financial information is
available and regularly evaluated by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. The Company
operates in two business segments, research models and biomedical products and
services.
Reclassifications
Certain amounts in prior year financial statements and related notes have
been changed to conform with current year presentation.
2. Subsequent Events
On September 29, 1999 CRL Acquisition LLC, an affiliate of DLJ Merchant
Banking Partners II, L.P., consummated a transaction in which it acquired 87.5%
of the common stock of Charles River Laboratories, Inc. from Bausch & Lomb for
approximately $443 million. This transaction was effected through Charles River
Laboratories Holdings, Inc. ("Holdings"), a holding company with no operations
or assets other than its ownership of 100% of the Company's outstanding stock.
This transaction will be accounted for as a leveraged recapitalization, which
will have no impact on the historical basis of the Company's assets and
liabilities. In addition, concurrent with the transaction, the Company
purchased all of the outstanding shares of common stock of SBI Holdings, Inc.
("Sierra"), a pre-clinical biomedical services company, for $24.0 million. This
acquisition will be accounted for as a purchase business combination with the
operating results of Sierra being included in the Company's consolidated
operating results beginning on the effective date of the acquisition. These
transactions are hereafter referred to as the "Acquisitions".
F-10
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
The Acquisitions and related transaction fees and expenses were funded as
follows:
o issuance of 150,000 units, each consisting of a $1,000 principal
amount of 13.5% senior subordinated note (the Series A Note Offering)
and one warrant to purchase 3.942 shares of common stock of Holdings;
o borrowings by the Company of $162.0 million under a new senior
secured credit facility;
o an equity investment of $92.4 million in Holdings;
o senior discount debentures with warrants issued by Holdings for $37.6
million; and
o subordinated discount note issued by Holdings to Bausch & Lomb for
$43.0 million.
The Series A Note Offering (the "Notes") will mature on October 1, 2009.
The Notes will not be redeemable at the issuers' option prior to October 1,
2004. Thereafter, the Notes will be subject to redemption at any time at the
option of the issuer at redemption prices set forth in the Notes. Interest on
the Notes will accrue at the rate of 13.5% per annum and will be payable
semi-annually in arrears on October 1 and April 1 of each year, commencing on
April 1, 2000. The payment of principal and interest on the Notes will be
subordinated in right to the prior payment of all Senior Debt, as defined. The
senior secured credit facility includes a $40 million term loan A facility, a
$120 million term loan B facility and a $30 million revolving credit facility.
The term loan A facility will mature on October 1, 2005, the term loan B
facility will mature on October 1, 2007 and the revolving credit facility will
mature on October 1, 2005. Interest on the term loan A, term loan B and
revolving credit facility will accrue at either a base rate plus 1.75% or LIBOR
plus 3.0%, at the Company's option (8.5%, 9.25% and 8.5%, respectively, at
September 29, 1999) per annum and will be paid quarterly in arrears commencing
on December 30, 1999. A commitment fee in an amount equal to 0.50% per annum on
the daily average unused portion of the revolving credit facility will be paid
quarterly in arrears. Upon the occurrence of a change in control, as defined,
the issuer will be obligated to make an offer to each holder of the Notes to
repurchase all or any part of such holders' Notes at an offer price in cash
equal to 101% of the principal amount thereof, plus accrued and unpaid
interest. Restrictions under the Notes include certain sales of assets, certain
payments of dividends and incurrence of debt, and limitations on certain
mergers and transactions with affiliates. With respect to the Notes and the
senior secured credit facility, the Company will be required to maintain
certain financial ratios and covenants.
3. Restructuring Charges and Asset Impairments
In June 1996 and April 1997, the Bausch & Lomb board of directors approved
plans to restructure portions of the Company. As a result, pre-tax
restructuring charges of $4,748 and $5,892 were recorded in 1996 and 1997,
respectively. The major components of the plans are summarized in the table
below:
1996 1997
------- -------
Employee separations............................................$ 2,283 $ 3,200
Asset writedowns................................................ 1,631 2,157
Other........................................................... 834 535
------- -------
$ 4,748 $ 5,892
======= =======
These restructuring efforts have reduced the Company's fixed cost
structure and realigned the business to meet its strategic objectives through
the closure, relocation and consolidation of breeding, distribution, sales and
administrative
F-11
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
operations, and workforce reductions. Certain severance costs are being paid
over periods greater than one year. Further, the Company is under a court order
issued in June 1997 to relocate its primate operations from two islands located
in the Florida Keys to Miami, Florida. Also, the Company is required to
refoliate the islands due to damage caused by the primates. Due to
complications arising within the plan to relocate the primates, the relocation
has taken longer than anticipated to complete, as the primates needed to be
moved in a controlled manner in order to minimize mortality and breeding
disruption. Asset writedowns relate primarily to the closing of facilities and
losses resulting from equipment dispositions. Other charges included
miscellaneous costs and other commitments.
The following table sets forth the activity in the restructuring reserves
through December 26, 1998:
Restructuring Programs
----------------------------
1996 1997 Total
---- ---- -----
Restructuring provision........................ $4,748 -- $4,748
Cash payments.................................. (3,117) -- (3,117)
Asset write-downs.............................. (1,631) -- (1,631)
----- ----- -----
Balance, December 28, 1996.................. -- -- --
Restructuring provision........................ -- 5,892 5,892
Cash payments ................................. -- (1,725) (1,725)
Asset write-downs.............................. -- (1,435) (1,435)
----- ----- -----
Balance, December 27, 1997.................. -- 2,732 2,732
Cash payments.................................. -- (897) (897)
Asset write-downs.............................. -- (722) (722)
----- ----- -----
Balance, December 26, 1998.................. $ -- $1,113 $1,113
===== ===== =====
Reserves remaining at December 26, 1998 primarily represent liabilities
for continuing severance payments and relocation and refoliation costs. The
remaining balance of $1,113 is expected to be fully utilized by the end of
1999.
4. Supplemental Balance Sheet Information
The composition of inventories is as follows:
December 27, December 26,
1997 1998
------------ ------------
Raw materials and supplies........................... $ 5,222 $ 4,932
Work in process...................................... 379 1,088
Finished products.................................... 23,303 24,711
------ ------
Inventories....................................... $28,904 $30,731
====== ======
F-12
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
The composition of property, plant and equipment is as follows:
December 27, December 26,
1997 1998
------------ ------------
Land................................................. $ 7,473 $ 7,783
Buildings............................................ 82,963 90,919
Machinery and equipment.............................. 63,192 74,876
Leasehold improvements............................... 1,033 3,063
Furniture and fixtures............................... 1,383 1,532
Vehicles............................................. 2,864 3,006
Construction in progress............................. 8,483 6,176
-------- --------
167,391 187,355
Less accumulated depreciation........................ (90,502) (104,665)
-------- --------
Net property, plant and equipment................. $ 76,889 $ 82,690
======== ========
5. Long-Term Debt
The Company has various debt instruments outstanding at its international
subsidiaries aggregating $253 and $450 at December 27, 1997 and December 26,
1998, respectively, with interest rates ranging from 3% to 15.2% and maturities
ranging from September 1999 through June 2003.
6. Leases
Capital Leases
The Company has one capital lease for a building and three capital leases
for equipment. These leases are capitalized using interest rates considered
appropriate at the inception of each lease. Following is an analysis of assets
under capital lease:
December 27, December 26,
1997 1998
------------ ------------
Building............................................. $2,001 $2,001
Equipment............................................ 179 179
Accumulated depreciation............................. (1,213) (1,457)
------ ------
$ 967 $ 723
====== ======
F-13
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
Capital lease obligations amounted to $1,110 and $1,132 at December 27,
1997 and December 26, 1998, respectively, with maturities through 2003 at
interest rates ranging from 8.6% to 9.3%. Future minimum lease payments under
capital lease obligations at December 26, 1998 are as follows:
1999...................................................................$ 282
2000................................................................... 282
2001................................................................... 282
2002................................................................... 282
2003................................................................... 534
Total minimum lease payments........................................... 1,662
Less amount representing interest...................................... (530)
-------
Present value of net minimum lease payments............................$ 1,132
=======
Operating Leases
The Company has various operating leases for machinery and equipment,
automobiles, office equipment, land and office space. Rent expense for all
operating leases was $2,944 in 1996, $3,111 in 1997 and $3,273 in 1998. Future
minimum payments by year and in the aggregate, under noncancellable operating
leases with initial or remaining terms of one year or more consist of the
following at December 26, 1998:
1999...................................................................$ 3,182
2000................................................................... 2,932
2001................................................................... 1,994
2002................................................................... 1,088
2003................................................................... 488
Thereafter............................................................. 1,690
-------
$11,374
=======
7. Income Taxes
An analysis of the components of income before income taxes and minority
interests and the related provision for income taxes is presented below:
<TABLE>
Fiscal Year Ended
--------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Income before equity in earnings of foreign subsidiaries,
income taxes and minority interests
U.S........................................................ $15,422 $13,497 $22,364
Non-U.S.................................................... 8,967 8,722 13,468
------- ------- -------
$24,389 $22,219 $35,832
======= ======= =======
F-14
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
Fiscal Year Ended
--------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Income tax provision
Current:
Federal................................................. $ 5,506 $ 6,202 $ 7,730
Foreign................................................. 4,217 2,528 6,171
State and local......................................... 1,406 1,397 1,833
------- ------- -------
Total current......................................... 11,129 10,127 15,734
------- ------- -------
Deferred:
Federal................................................. (496) (1,867) (597)
Foreign................................................. 376 498 (887)
State................................................... (120) (259) (127)
------- ------- -------
Total deferred........................................ (240) (1,628) (1,611)
------- ------- -------
$10,889 $ 8,499 $14,123
======= ======= =======
</TABLE>
Deferred taxes, detailed below, recognize the impact of temporary
differences between the amounts of assets and liabilities recorded for
financial statement purposes and such amounts measured in accordance with tax
laws. Realization of benefit for net operating losses and foreign tax credit
carryforwards, which expire between 2002 and 2011, is contingent on future
taxable earnings. A valuation allowance has been recorded for foreign tax
credits, which may not be realized.
<TABLE>
December 27, 1997 December 26, 1998
-------------------- --------------------
Assets Liabilities Assets Liabilities
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Current:
Inventories........................................... $ 588 -- $ 827 --
Restructuring accruals................................ 1,584 -- 1,006 --
Employee benefits and compensation.................... 2,023 -- 3,077 --
Other accruals........................................ 556 -- 522 --
------ ------ ------- -----
4,751 -- 5,432 --
------ ------ ------- -----
Non-current:
Net operating loss and credit carryforwards........... 1,776 2,960
Depreciation and amortization......................... 3,326 1,723 3,672 836
Valuation allowance on foreign tax credits............ (1,776) (1,766)
Other.............................................. 654 -- 921 --
------ ------ ------- -----
3,980 1,723 5,787 836
------ ------ ------- -----
$8,731 $1,723 $11,219 $ 836
====== ====== ======= =====
</TABLE>
F-15
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
Reconciliations of the statutory U.S. federal income tax rate to effective
tax rates are as follows:
<TABLE>
Fiscal Year Ended
---------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Tax at statutory U.S. tax rate............................. 35.0% 35.0% 35.0%
Foreign tax rate differences............................... 6.0 (0.1) 1.6
Non-deductible goodwill amortization....................... 0.3 0.4 0.6
State income taxes, net of federal tax benefit............. 3.4 3.3 3.1
Other...................................................... (0.6) (0.4) (0.8)
---- ---- ----
44.1% 38.2% 39.5%
==== ==== ====
</TABLE>
The Company's foreign subsidiaries have undistributed earnings at December
26, 1998. Those earnings are considered to be indefinitely reinvested and,
accordingly, no provision for U.S. federal and state income taxes has been
provided thereon. Upon distribution of those earnings in the form of dividends
or otherwise, the Company would be subject to both U.S. income taxes (subject
to an adjustment for foreign tax credits) and withholding taxes payable to the
various foreign countries. Determination of the amount of unrecognized deferred
U.S. income tax liability is not practicable because of the complexities
associated with its hypothetical calculation.
8. Employee Benefits
The Company sponsors one defined contribution plan and two defined benefit
plans. The Company's defined contribution plan ("Charles River Laboratories
Employee Savings Plan") qualifies under section 401(k) of the Internal Revenue
Code. It covers substantially all U.S. employees and contains a provision
whereby the Company matches two percent of employee contributions up to four
percent. The costs associated with the defined contribution plan totaled $395,
$416 and $498 in 1996, 1997, and 1998, respectively.
One of the Company-sponsored defined benefit plans (Charles River
Laboratories, Inc. Pension Plan) is a qualified, non-contributory plan that
also covers substantially all U.S. employees. Benefits are based on
participants' final average monthly compensation and years of service.
Participants' rights vest upon completion of five years of service.
Under another defined benefit plan, the Company provides certain
executives with supplemental retirement benefits. This plan (Executive
Supplemental Life Insurance Retirement Plan or ESLIRP) is generally unfunded
and non-qualified under the provisions of the Employee Retirement Income
Securities Act of 1974.
The following table provides reconciliations of the changes in benefit
obligations, fair value of plan assets and funded status of the two defined
benefit plans.
<TABLE>
Pension Benefit Plans
---------------------
1997 1998
------ ------
<S> <C> <C>
Reconciliation of benefit obligation
Benefit/obligation at beginning of year........................ $17,570 $20,531
Service cost................................................... 804 795
Interest cost.................................................. 1,413 1,588
Benefit payments............................................... (710) (742)
Actuarial loss................................................. 1,454 2,940
------- -------
Benefit/obligation at end of year.............................. $20,531 $25,112
======= =======
F-16
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
Pension Benefit Plans
---------------------
1997 1998
------ ------
<S> <C> <C>
Reconciliation of fair value of plan assets
Fair value of plan assets at beginning of year................. $17,394 $19,237
Actual return on plan assets................................... 2,328 7,773
Employer contributions......................................... 225 225
Benefit payments............................................... (710) (742)
------- -------
Fair value of plan assets at end of year....................... $19,237 $26,493
======= =======
Funded status
Funded status at beginning of year............................. $(1,294) $ 1,380
Unrecognized transition obligation............................. 705 564
Unrecognized prior-service cost................................ (31) (27)
Unrecognized gain.............................................. (4,331) (7,178)
------- -------
Accrued benefit (cost)......................................... $(4,951) $(5,261)
======= =======
Amounts recognized in the consolidated balance sheet
Accrued benefit cost........................................... $(6,945) $(7,849)
Intangible asset............................................... 358 286
Accumulated other comprehensive income......................... 982 1,381
------- -------
Net amount recognized.......................................... $(5,605) $(6,182)
======= =======
</TABLE>
Key weighted-average assumptions used in the measurement of the Company's
benefit obligations are shown in the following table:
Fiscal Year Ended
---------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ ------------
Discount rate........................... 7.75% 7.5% 7%
Expected return on plan assets.......... 10% 10% 10%
Rate of compensation increase........... 5.0% 4.75% 4.75%
The following table provides the components of net periodic benefit cost
for the two defined benefit plans for 1996, 1997 and 1998:
Defined Benefit Plans
---------------------------
1996 1997 1998
------ ------ ------
Components of net periodic benefit cost
Service cost...................................... $ 690 $ 804 $ 795
Interest cost..................................... 1,236 1,413 1,588
Expected return on plan assets.................... (1,463) (1,717) (1,901)
Amortization of transition obligation............. 141 141 141
Amortization of prior-service cost................ (3) (3) (3)
Amortization of net gain.......................... (189) (172) (85)
------ ------ ------
Net periodic benefit cost......................... $ 412 $ 466 $ 535
====== ====== ======
F-17
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plan with accumulated benefit obligations
in excess of plan assets were $6,752, $6,409 and $0, respectively, as of
December 27, 1997, and $8,205, $7,745 and $0, respectively, as of December 26,
1998.
The Company had an adjusted minimum pension liability of $1,636 ($982, net
of tax) and $2,302 ($1,381, net of tax) as of December 27, 1997 and December
26, 1998, which represented the excess of the minimum accumulated net benefit
obligation over previously recorded pension liabilities.
9. Stock Compensation Plans
Stock Options
Bausch & Lomb sponsors several stock-based compensation plans in which the
Company's employees participate. Stock options vest ratably over three years
and expire ten years from the grant date. The exercise price on all options
issued has been equal to the fair market value of the underlying security on
the date of the grant. Vesting is contingent upon continued employment with
Bausch & Lomb. The total number of shares available for grant in each calendar
year for all plans combined excluding incentive stock options shall be no
greater than three percent of the total number of outstanding shares of common
stock as of the first day of each such year. No more than six million shares
are available for granting purposes as incentive stock options under Bausch &
Lomb's current plan. As of December 26, 1998, 2.5 million shares remain
available for such grants.
All of Bausch & Lomb's stock-based compensation plans are accounted for
under the provisions of APB 25. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income is required by FAS 123, which
also requires that the information be determined as if the Company has
accounted for its employee stock options granted subsequent to December 31,
1994 under the fair value method of that Statement.
For purposes of this disclosure, the fair value of each fixed option grant
was estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions used for grants outstanding in
1996, 1997 and 1998:
1996 1997 1998
------ ------ ------
Risk-free interest rate.......................... 6.11% 5.66% 4.69%
Dividend yield................................... 2.42% 2.54% 2.48%
Volatility factor................................ 24.87% 25.17% 25.67%
Weighted average expected life (years)........... 5 5 4
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because Bausch & Lomb's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
Had compensation expense for the Company's portion of fixed options been
determined consistent with FAS 123, the Company's net income would have been
reduced to the pro forma amounts indicated below:
F-18
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
Net Income
--------------------------
As Reported Pro Forma
----------- ---------
1998...................... $23,378 $22,859
1997...................... 15,340 15,021
1996...................... 15,245 15,042
A summary of the status of the Company's portion of fixed stock option
plans at year end 1996, 1997 and 1998 is presented below:
<TABLE>
1996 1997 1998
-------------------------- -------------------------- ---------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Price Exercise Price Exercise Price
Shares (Per Share) Shares (Per Share) Shares (Per Share)
-------- -------------- -------- -------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year.. 225,584 $40.84 294,162 $39.90 326,722 $41.00
Granted........................... 71,643 35.86 77,154 42.32 73,280 50.64
Exercised......................... (80) 27.40 (13,350) 30.34 (73,481) 39.45
Forfeited......................... (2,985) 43.60 (31,244) 41.99 (1,370) 41.48
------- ----- ------- ----- ------- -----
Outstanding at end of year........ 294,162 39.90 326,722 41.00 325,151 43.98
======= ===== ======= ===== ======= =====
Options exercisable at year end... 177,155 193,097 176,096
======= ======= =======
Weighted-average fair value of
options granted during the year... $ 9.34 $ 10.59 $ 10.93
======= ======= =======
</TABLE>
The following presents additional information about the Company's fixed
stock options outstanding at December 26, 1998:
<TABLE>
Options Outstanding Options Exercisable
---------------------------------------------- ------------------------------
Weighted
Average Weighted
Remaining Average Weighted
Number Contractual Exercise Price Number Average
Range of Exercise Prices Per Share Outstanding Life (Years) (Per Share) Exercisable Exercise Price
- ---------------------------------- ----------- ------------ -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$26 to $35........................ 52,990 6.3 $34.78 39,726 $34.60
$36 to $45........................ 131,413 7.3 41.35 81,577 40.88
$46 to $55........................ 140,748 7.5 49.90 54,793 48.26
------- -------
$26 to $55........................ 325,151 7.2 43.98 176,096 41.76
======= =======
</TABLE>
Stock Awards
Bausch & Lomb issued restricted stock awards to directors, officers and
other key personnel. These awards have vesting periods up to three years with
vesting criteria based upon the attainment of certain Economic-Value-Added
(EVA) metrics and continued employment until applicable vesting dates. EVA is a
measure of capital utilization. It is not, nor is it intended to be, a measure
of operating performance in accordance with generally accepted accounting
principles. Compensation expense is recorded based on the applicable vesting
criteria and, for those awards with performance goals, as such goals are met.
In 1996, 1997 and 1998, 2,484, 1,400 and 1,200 such awards were granted to
F-19
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
Company employees at weighted average market values of $35.92, $42.25 and
$51.63 per share, respectively. The compensation expense relating to stock
awards in 1996, 1997 and 1998 was $24, $84 and $333, respectively.
10. Business Acquisitions
The Company acquired several businesses during the three-year period ended
December 26, 1998. All acquisitions have been accounted for under the purchase
method of accounting. The results of operations of the acquired business are
included in the consolidated financial statements from the date of acquisition.
Significant acquisitions include the following:
On March 30, 1998, the Company acquired 100% of the outstanding stock of
Tektagen, Inc. ("Tektagen") for $8,000 and assumed debt equal to approximately
$850. Tektagen provides quality control testing and consulting services to the
biotechnology and pharmaceutical industries. The purchase price exceeded the
fair value of the net assets acquired by approximately $6,600, which is being
amortized on a straight line basis over 15 years. In addition, during 1998 the
Company acquired an additional biomedical service business and one research
model business; the impact of each is considered immaterial to the Company's
financial statements taken as a whole.
On July 31, 1996, the Company reacquired the assets of two businesses it
previously owned for approximately $1,100 in cash plus the forgiveness of
approximately $5,800 in debt. These businesses represent substantially all of
the Company's primate operations. The purchase price was allocated to the fair
value of net assets acquired.
The following selected unaudited pro forma consolidated results of
operations are presented as if each of the acquisitions had occurred as of the
beginning of the period immediately preceding the period of acquisition after
giving effect to certain adjustments for the amortization of goodwill and
related income tax effects. The pro forma data is for informational purposes
only and does not necessarily reflect the results of operations had the
companies operated as one during the period. No effect has been given for
synergies, if any, that may have been realized through the acquisitions.
Fiscal Year Ended
------------------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ ------------
(Amounts unaudited)
Net sales................... $161,708 $179,513 $196,973
Operating income............ 25,497 21,830 35,154
Net income.................. 15,966 15,018 22,913
In addition, during 1997 and 1998 the Company made contingent payments of
$640 and $681, respectively, to the former owner of an acquired business in
connection with an additional purchase price commitment.
11. Joint Ventures
The Company holds investments in several joint ventures. These joint
ventures are separate legal entities whose purpose is consistent with the
overall operations of the Company and represent geographical expansions of
existing Company markets. The financial results of two of the joint ventures
are consolidated into the Company's results as the Company has the ability to
exercise control over these entities. The interests of the outside joint
venture partners in these two joint ventures has been recorded as minority
interests totaling $290 at December 27, 1997 and $306 at December 26, 1998.
The Company also has investments in two other joint ventures that are
accounted for on the equity method as the Company does not have the ability to
exercise control over the operations. Charles River Japan is a 50 /50 joint
venture
F-20
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
with Ajinomoto Co., Inc. and is an extension of the Company's research model
business in Japan. Dividends received from Charles River Japan amounted to $725
in 1996, $773 in 1997, and $681 in 1998. Charles River Mexico, a joint venture
which is an extension of the Company's avian business in Mexico, is not
significant to the Company's operations.
Summarized financial statement information for the unconsolidated joint
ventures is as follows:
<TABLE>
Fiscal Year Ended
------------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ ------------
Condensed Combined Statements of Income
<S> <C> <C> <C>
Net sales................................ $43,978 $44,744 $39,798
Operating income......................... 7,712 7,484 6,756
Net income............................... 3,500 3,337 3,445
</TABLE>
December 27, December 26,
1997 1998
------------ ------------
Condensed Combined Balance Sheets
Current assets............................. $18,466 $19,388
Non-current assets......................... 34,774 36,376
------- -------
$53,240 $55,764
======= =======
Current liabilities........................ $17,105 $13,501
Non-current liabilities.................... 5,237 6,617
Shareholders' equity....................... 30,898 35,646
------- -------
$53,240 $55,764
======= =======
12. Commitments and Contingencies
Insurance
The Company maintains insurance for workers' compensation, auto liability
and general liability. The per claim loss limits are $250, with annual
aggregate loss limits of $1,500. Related accruals were $849 and $2,363 on
December 27, 1997 and December 26, 1998, respectively. Separately, the Company
has provided three letters of credit in favor of the insurance carriers in the
amount of $825.
Litigation
Various lawsuits, claims and proceedings of a nature considered normal to
its business are pending against Holdings. In the opinion of management, the
outcome of such proceedings and litigation currently pending will not
materially affect the Company's consolidated financial statements. The most
potentially significant claim is described below.
As discussed in Note 3, the Company is currently under a court order
issued in June 1997 to remove its primate operations from two islands located
in the Florida Keys. The mandate asserts that the Company's operations have
contributed to the defoliation of certain protected plant life. Reserves of
$500 are included in the restructuring reserve
F-21
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
recorded in the accompanying consolidated financial statements to provide for
relocation costs and any exposures in connection with the refoliation.
13. Related Party Transactions
The Company historically has operated autonomously from Bausch & Lomb.
However, certain costs and expenses including insurance, information technology
and other miscellaneous expenses were charged to the Company on a direct basis.
Management believes these charges are based upon assumptions that are
reasonable under the circumstances. However, these charges and estimates are
not necessarily indicative of the costs and expenses which would have resulted
had the Company incurred these costs as a separate entity. Charges of
approximately $460, $470 and $250 for these items are included in costs of
products sold and services rendered and selling, general and administrative
expense in the accompanying consolidated statements of income for the years
ended 1996, 1997 and 1998, respectively.
14. Geographic and Business Segment Information
The Company is organized into geographic regions for management reporting
with operating income being the primary measure of regional profitability.
Certain general and administrative expenses, including some centralized
services provided by regional offices, are allocated based on business segment
sales. The accounting policies used to generate geographic results are the same
as the Company's overall accounting policies.
The following table presents sales and other financial information by
geography for the years 1996, 1997 and 1998. Sales to unaffiliated customers
represent net sales originating in entities physically located in the
identified geographic area. Long-lived assets include property, plant and
equipment, goodwill and intangibles, other investments and other assets.
<TABLE>
Other
U.S. France Non U.S. Consolidated
------- ------ -------- ------------
<S> <C> <C> <C> <C>
1996
Sales to unaffiliated customers..... $ 83,520 $28,892 $43,192 $155,604
Long-lived assets................... 65,594 12,790 18,952 96,336
1997
Sales to unaffiliated customers..... $100,314 $25,680 $44,719 $170,713
Long-lived assets................... 62,236 10,146 22,108 94,490
1998
Sales to unaffiliated customers..... $115,639 $26,177 $51,485 $193,301
Long-lived assets................... 76,289 12,751 23,745 112,785
</TABLE>
The Company's product line segments are research models and biomedical
products and services. The following table presents sales and other financial
information by product line segment for the fiscal years 1996, 1997 and 1998.
Sales to unaffiliated customers represent net sales originating in entities
primarily engaged in either provision of research models or biomedical products
and services. Long-lived assets include property, plant and equipment, goodwill
and intangibles; other investments; and other assets.
1996 1997 1998
Research models ------ ------ ------
Net sales..................... $ 121,262 $ 125,214 $ 134,590
Operating income.............. 24,080 19,583 30,517
Total assets ................. 162,201 157,915 180,139
Depreciation and amortization 5,351 5,297 5,534
F-22
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands)
Capital expenditures ......... 6,119 6,178 8,127
Biomedical products and services
Net sales .................... $ 34,342 $ 45,499 $ 58,711
Operating income ............. 3,264 6,496 11,117
Total assets ................. 34,780 38,296 53,271
Depreciation and amortization. 4,177 4,406 5,361
Capital expenditures ......... 5,453 5,694 3,782
A reconciliation of segment operating income to consolidated operating
income is as follows:
Fiscal Year Ended
--------------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ ------------
Total segment operating income... $27,344 $26,079 $41,634
Unallocated corporate overhead... (3,202) (4,003) (6,309)
------- ------- -------
Consolidated operating income.... $24,142 $22,076 $35,325
======= ======= =======
A summary of identifiable long-lived assets of each business segment at
year end is as follows:
December 27, December 26,
1997 1998
------------ ------------
Research Models...................... $65,144 $ 73,190
Biomedical Products and Services..... 29,346 39,595
------- --------
$94,490 $112,785
======= ========
F-23
<PAGE>
CHARLES RIVER LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands)
<TABLE>
Nine Months Ended
-----------------------------
September 26, September 25,
1998 1999
------------- -------------
<S> <C> <C>
Net sales.......................................................... $145,519 $161,096
Costs and expenses
Cost of products sold and services provided..................... 91,041 97,230
Selling, general and administrative............................. 25,202 29,414
Amortization of goodwill and intangibles........................ 1,036 1,114
-------- --------
Operating income................................................... 28,240 33,338
Other income (expense)
Other income.................................................... -- 1,441
Interest income................................................. 659 496
Interest expense................................................ (311) (207)
Loss from foreign currency, net................................. (127) (143)
-------- --------
Income before income taxes, minority interests and earnings
from equity investments......................................... 28,461 34,925
Provision for income taxes......................................... 11,280 16,903
Income before minority interests and earnings from equity
investments..................................................... 17,181 18,022
Minority interests................................................. (8) (10)
Earnings from equity investments................................... 1,286 1,940
-------- --------
Net income......................................................... $ 18,459 $ 19,952
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-24
<PAGE>
CHARLES RIVER LABORATORIES, INC.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(dollars in thousands)
<TABLE>
September 25,
1999
-------------
Assets
<S> <C>
Current assets
Cash and cash equivalents................................................... $ 3,457
Trade receivables, less allowances of $854.................................. 33,820
Inventories................................................................. 28,577
Deferred income taxes....................................................... 5,432
Due from affiliates......................................................... 966
Other current assets........................................................ 5,051
--------
Total current assets........................................................ 77,303
Property, plant and equipment, net.......................................... 79,349
Goodwill and other intangibles, less accumulated amortization of $6,960..... 16,212
Investments in affiliates................................................... 19,385
Other assets................................................................ 18,122
--------
Total assets.............................................................. $210,371
========
Liabilities and shareholder's equity
Current liabilities
Current portion of long-term debt........................................... $ 166
Current portion of capital lease obligations................................ 167
Accounts payable............................................................ 5,992
Accrued compensation........................................................ 11,015
Accrued ESLIRP.............................................................. 5,845
Deferred income............................................................. 4,550
Accrued restructuring....................................................... 354
Accrued liabilities......................................................... 12,410
Accrued income taxes........................................................ 16,208
Total current liabilities................................................... 56,707
Long-term debt................................................................ --
Capital lease obligations..................................................... 700
Other long-term liabilities................................................... 3,706
--------
Total liabilities......................................................... 61,113
--------
Commitments and contingencies (Note 3)
Minority interests............................................................ 293
Shareholder's equity
Common stock, par value $1 per share, 1,000 shares issued..................... 1
Capital in excess of par value................................................ 17,836
Retained earnings............................................................. 142,422
Accumulated other comprehensive income........................................ (11,294)
--------
Total shareholder's equity.................................................. 148,965
--------
Total liabilities and shareholder's equity................................ $210,371
========
</TABLE>
See Notes to Consolidated Financial Statements.
F-25
<PAGE>
CHARLES RIVER LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
<TABLE>
Nine Months Ended
------------------------------
September 26, September 25,
1998 1999
------------- -------------
<S> <C> <C>
Cash flows relating to operating activities
Net income....................................................... $ 18,459 $ 19,952
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.................................. 7,932 8,701
Provision for doubtful accounts................................ 248 13
Gain from sale of facilities................................... (1,441)
Earnings from equity investments............................... (1,286) (1,940)
Minority interests............................................. 8 10
Deferred income taxes.......................................... (634) --
Stock compensation expense..................................... 159 124
Property, plant, and equipment write downs..................... -- 324
Change in assets and liabilities
Trade receivables.............................................. (3,298) (3,022)
Inventories.................................................... (683) 1,232
Due from affiliates............................................ 153 (264)
Other current assets........................................... (1,255) (2,115)
CVS of life insurance.......................................... (3,585) (439)
Other assets................................................... (464) (510)
Accounts payable............................................... 910 (4,767)
Accrued compensation........................................... 1,640 (605)
Accrued ESLIRP................................................. 519 688
Deferred income................................................ 671 1,130
Accrued restructuring.......................................... (1,425) (759)
Accrued liabilities............................................ 1,687 1,079
Accrued income taxes........................................... 4,259 2,211
Other long-term liabilities.................................... (529) (50)
------- -------
Net cash provided by operating activities.................... 23,486 19,552
------- -------
Cash flows relating to investing activities
Dividends received from equity investments....................... 681 815
Proceeds from sale of facilities -- 1,860
Capital expenditures............................................. (5,834) (7,426)
Cash paid for acquisition of businesses.......................... (9,114) 0
------- -------
Net cash used in investing activities............................ (14,267) (4,751)
------- -------
Cash flows relating to financing activities
Long-term debt................................................... (949) (312)
Capital lease obligations........................................ (94) (90)
Net activity with Bausch & Lomb.................................. (1,369) (34,152)
------- -------
Net cash used in financing activities.......................... (2,412) (34,554)
------- -------
Effect of exchange rate changes on cash and cash equivalents........ 462 (1,601)
------- -------
Net change in cash and cash equivalents............................. 7,269 (21,354)
------- -------
See Notes to Consolidated Financial Statements.
F-26
<PAGE>
Nine Months Ended
------------------------------
September 26, September 25,
1998 1999
------------- -------------
<S> <C> <C>
Cash and cash equivalents, beginning of year........................ 17,915 24,811
------- -------
Cash and cash equivalents, end of year.............................. $25,184 $ 3,457
======= =======
Supplemental cash flow information
Cash paid for taxes.............................................. $ 2,202 $ 3,316
Cash paid for interest........................................... 161 207
</TABLE>
See Notes to Consolidated Financial Statements.
F-27
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (UNAUDITED)
(dollars in thousands)
1. Basis of Presentation
The consolidated balance sheet at September 25, 1999 and the consolidated
statements of income and of cash flows for the nine months ended September 26,
1998 and September 25, 1999 are unaudited, and certain information and footnote
disclosure related thereto normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been omitted.
In the opinion of management, the accompanying unaudited consolidated financial
statements were prepared following the same policies and procedures used in the
preparation of the audited financial statements and reflect all adjustments
(consisting of normal recurring adjustments) considered necessary to present
fairly the financial position of the Company. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
2. Supplemental Balance Sheet Information
The composition of inventories is as follows:
September 25,
1999
-------------
Raw materials and supplies........................... $ 4,228
Work in process...................................... 988
Finished products.................................... 23,361
-------
Net inventories...................................... $28,577
=======
The composition of property, plant and equipment is as follows:
September 25,
1999
-------------
Land...................................................... $ 7,329
Buildings................................................. 89,014
Machinery and equipment................................... 76,648
Leasehold improvements.................................... 3,746
Furniture and fixtures.................................... 1,595
Vehicles.................................................. 2,843
Construction in progress.................................. 6,434
--------
187,609
Less accumulated depreciation............................. (108,260)
--------
Net property, plant and equipment......................... $ 79,349
========
3. Commitments and Contingencies
Litigation
Various lawsuits, claims and proceedings of a nature considered normal to
its business are pending against the Company. In the opinion of management, the
outcome of such proceedings and litigation currently pending will not
materially affect the Company's consolidated financial statements. The most
potentially significant claim is described below.
F-28
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (UNAUDITED)
(dollars in thousands)
(continued)
3. Commitments and Contingencies (continued)
The Company is currently under a court order issued June 1997 to remove
its primate operations from two islands located in the Florida Keys. The
mandate asserts that the Company's operations have contributed to the
defoliation of certain protected plant life. Reserves of $218 are included in
the restructuring reserve recorded in the accompanying consolidated financial
statements to provide for any exposures in connection with the relocation and
refoliation.
4. Business Segment Information
The following table presents sales and other financial information by
product line segment for the nine months ended September 26, 1998 and September
25, 1999. Sales to unaffiliated customers represent net sales originating in
entities primarily engaged in either provision of research models or biomedical
products and services.
1998 1999
------ ------
Research models
Net sales......................... $103,205 $109,177
Operating income.................. 26,281 27,977
Total assets...................... 182,761 157,284
Depreciation and amortization..... 5,738 6,044
Capital expenditures.............. 4,112 4,282
Biomedical products and services
Net sales......................... $ 42,314 $ 51,919
Operating income.................. 7,347 11,553
Total assets...................... 39,331 53,087
Depreciation and amortization..... 2,194 2,657
Capital expenditures.............. 1,722 3,144
A reconciliation of segment operating income to consolidated operating
income is as follows:
1998 1999
------ ------
Total segment operating income.... $33,628 $39,530
Unallocated corporate overhead.... (5,388) (6,192)
------- -------
Consolidated operating income..... $28,240 $33,338
======= =======
5. Comprehensive Income
The components of comprehensive income for the nine-month periods ended
September 26, 1998 and September 25, 1999 are set forth below:
1998 1999
------ ------
Net income $18,459 $19,952
Foreign currency translation 20 (4,940)
------ ------
Comprehensive income $18,479 $15,012
====== ======
F-29
<PAGE>
CHARLES RIVER LABORATORIES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- (UNAUDITED)
(dollars in thousands)
(continued)
6. Other Income
During the nine months ended September 25, 1999, the Company recorded a
gain of $1.4 million on the sale of certain facilities located in Florida and
The Netherlands.
7. Restructuring Reserve
During the nine months ended September 25, 1999, the Company charged
approximately $759 against the restructuring reserve for costs previously
reserved for. As of September 25, 1999, the remaining restructuring reserve
amounted to $354, comprised primarily of scheduled severance payments and
relocation and refoliation costs. Such payments will be substantially complete
by the end of the year.
8. Subsequent Events
On September 29, 1999 CRL Acquisition LLC, an affiliate of DLJ Merchant
Banking Partners II, L.P., consummated a transaction in which it acquired 87.5%
of the common stock of Charles River Laboratories, Inc. from Bausch & Lomb for
approximately $443 million. This transaction was effected through Charles River
Laboratories Holdings, Inc. ("Holdings"), a holding company with no operations
or assets other than its ownership of 100% of the Company's outstanding stock.
This transaction will be accounted for as a leveraged recapitalization, which
will have no impact on the historical basis of the Company's assets and
liabilities. In addition, concurrent with the transaction, the Company
purchased all of the outstanding shares of common stock of SBI Holdings, Inc.
("Sierra"), a pre-clinical biomedical services company, for $24.0 million. This
acquisition will be accounted for as a purchase business combination with the
operating results of Sierra being included in the Company's consolidated
operating results beginning on the effective date of the acquisition. These
transactions are hereafter referred to as the "Acquisitions".
The Acquisitions and related transaction fees and expenses were funded as
follows:
o issuance of 150,000 units, each consisting of a $1,000 principal
amount of 13.5% senior subordinated note (the Series A Note Offering)
and one warrant to purchase 3.942 shares of common stock of Holdings;
o borrowings by the Company of $162.0 million under a new senior
secured credit facility;
o an equity investment of $92.4 million in Holdings;
o senior discount debentures with warrants issued by Holdings for $37.6
million; and
o subordinated discount note issued by Holdings to Bausch & Lomb for
$43.0 million.
The Series A Note Offering (the "Notes") will mature on October 1, 2009.
The Notes will not be redeemable at the issuers' option prior to October 1,
2004. Thereafter, the Notes will be subject to redemption at any time at the
option of the issuer at redemption prices set forth in the Notes. Interest on
the Notes will accrue at the rate of 13.5% per annum and will be payable
semi-annually in arrears on October 1 and April 1 of each year, commencing on
April 1, 2000. The payment of principal and interest on the Notes will be
subordinated in right to the prior payment of all Senior Debt, as defined. The
senior secured credit facility includes a $40 million term loan A facility, a
$120 million term loan B facility and a $30 million revolving credit facility.
The term loan A facility will mature on October 1, 2005, the term loan B
facility will mature on October 1, 2007 and the revolving credit facility will
mature on October 1, 2005. Interest on the term loan A, term loan B and
revolving credit facility will accrue at either a base rate plus 1.75% or LIBOR
plus 3.0%, at the Company's option (8.5%, 9.25% and 8.5%, respectively, at
September 29, 1999) per annum and will be paid quarterly in arrears commencing
on December 30, 1999. A commitment fee in an amount equal to 0.50% per annum on
the daily
F-30
<PAGE>
average unused portion of the revolving credit facility will be paid quarterly
in arrears. Upon the occurrence of a change in control, as defined, the issuer
will be obligated to make an offer to each holder of the Notes to repurchase
all or any part of such holders' Notes at an offer price in cash equal to 101%
of the principal amount thereof, plus accrued and unpaid interest. Restrictions
under the Notes include certain sales of assets, certain payments of dividends
and incurrence of debt, and limitations on certain mergers and transactions
with affiliates. With respect to the Notes and the senior secured credit
facility, the Company will be required to maintain certain financial ratios and
covenants.
9. Dividends from Foreign Subsidiaries
During the nine months ended September 25, 1999, cash dividends totaling
$20,662 were remitted to the Company from several of its foreign subsidiaries.
Pursuant to the terms of the transaction more fully described in Note 8, such
dividends were, in turn, remitted by the Company to B&L. As the related amounts
had previously been considered permanently reinvested in the foreign
jurisdictions, the Company was required to provide additional taxes upon their
repatriation to the United States. In addition, during the nine months ended
September 25, 1999, an election was made by B&L to treat certain foreign
entities as branches for United States income tax purposes. As a result, all
previously untaxed accumulated earnings of such entities became immediately
subject to tax in the United States. The receipt of the cash dividends from the
foreign subsidiaries and the foreign tax elections made resulted in incremental
United States taxes of $1,974, net of foreign tax credits, during the nine
months ended September 25, 1999.
F-31
<PAGE>
Report of Independent Accountants
To the Board of Directors of
Charles River Laboratories Holdings, Inc. and
Charles River Laboratories, Inc.
In our opinion, the accompanying combined balance sheets and the related
combined statements of income, changes in shareholder's equity and cash flows
present fairly, in all material respects, the financial position of Charles
River Laboratories Holdings, Inc. ("Holdings") and Charles River Laboratories,
Inc. and its subsidiaries ("collectively, "Holdings") at December 26, 1998 and
December 27, 1997, and the results of their operations and their cash flows for
each of the three years in the period ended December 26, 1998, in conformity
with generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule listed in the index appearing under Item 16(b)
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related combined financial statements. These
financial statements and the financial statement schedule are the
responsibility of Holdings' management; our responsibility is to express an
opinion on these financial statements and the financial statement schedule
based on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 30, 1999,
except as to Note 2, which is as of September 29, 1999
F-32
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
COMBINED STATEMENTS OF INCOME
(dollars in thousands)
<TABLE>
Fiscal Year Ended
----------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................................................... $ 155,604 $ 170,713 $ 193,301
Costs and expenses
Cost of products sold and services provided.......................... 97,777 111,460 122,547
Selling, general and administrative.................................. 28,327 30,451 34,142
Amortization of goodwill and intangibles............................. 610 834 1,287
Restructuring charges................................................ 4,748 5,892 --
--------- --------- ---------
Operating income........................................................ 24,142 22,076 35,325
Other income (expense)
Interest income...................................................... 654 865 986
Interest expense..................................................... (491) (501) (421)
Gain/(loss) from foreign currency, net............................... 84 (221) (58)
--------- --------- ---------
Income before income taxes, minority interests and earnings from equity
investments.......................................................... 24,389 22,219 35,832
Provision for income taxes.............................................. 10,889 8,499 14,123
--------- --------- ---------
Income before minority interests and earnings from equity investments... 13,500 13,720 21,709
Minority interests...................................................... (5) (10) (10)
Earnings from equity investment......................................... 1,750 1,630 1,679
--------- --------- ---------
Net income.............................................................. $ 15,245 $ 15,340 $ 23,378
========= ======== =========
</TABLE>
See Notes to Combined Financial Statements.
F-33
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
COMBINED BALANCE SHEETS
(dollars in thousands)
<TABLE>
December 27, December 26,
1997 1998
------------ ------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents....................................................... $ 17,915 $ 24,811
Trade receivables, less allowances of $688 and $898, respectively............... 28,280 32,466
Inventories..................................................................... 28,904 30,731
Deferred income taxes........................................................... 4,751 5,432
Due from affiliates............................................................. 1,153 982
Other current assets............................................................ 2,320 2,792
--------- ---------
Total current assets.......................................................... 83,323 97,214
Property, plant and equipment, net................................................. 76,889 82,690
Goodwill and other intangibles, less accumulated amortization of $4,356 and
$5,591 respectively............................................................. 8,621 17,705
Investments in affiliates.......................................................... 16,140 18,470
Other assets....................................................................... 11,238 17,331
--------- ---------
Total assets.................................................................. $ 196,211 $ 233,410
========= =========
Liabilities and Shareholder's Equity
Current liabilities
Current portion of long-term debt............................................... $ 83 $ 202
Current portion of capital lease obligations.................................... 144 188
Accounts payable................................................................ 7,566 11,615
Accrued compensation............................................................ 8,601 9,972
Accrued ESLIRP.................................................................. 4,407 5,160
Deferred income................................................................. 1,339 3,419
Accrued restructuring........................................................... 2,732 1,113
Accrued liabilities............................................................. 8,282 13,794
Accrued income taxes............................................................ 8,423 14,329
--------- ---------
Total current liabilities..................................................... 41,577 59,792
Long-term debt..................................................................... 170 248
Capital lease obligations.......................................................... 966 944
Other long-term liabilities........................................................ 3,844 3,861
--------- ---------
Total liabilities............................................................. 46,557 64,845
--------- ---------
Commitments and contingencies (Note 12)
Minority interests................................................................. 290 306
Shareholder's equity
Common stock, par value $1 per share, 1,000 shares issued....................... 1 1
Capital in excess of par value.................................................. 17,836 17,836
Retained earnings............................................................... 140,320 156,776
Accumulated other comprehensive income.......................................... (8,793) (6,354)
--------- ---------
Total shareholder's equity.................................................... 149,364 168,259
--------- ---------
Total liabilities and shareholder's equity.................................... $ 196,211 $ 233,410
========= =========
</TABLE>
See Notes to Combined Financial Statements.
F-34
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
COMBINED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
Fiscal Year Ended
------------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows relating to operating activities
Net income.............................................................. $ 15,245 $ 15,340 $ 23,378
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................ 9,528 9,703 10,895
Provision for doubtful accounts...................................... 81 166 181
Earnings from equity investments..................................... (1,750) (1,630) (1,679)
Minority interests................................................... 5 10 10
Deferred income taxes................................................ (5,693) (1,363) (3,133)
Stock compensation expense........................................... 24 84 333
Property, plant and equipment write downs............................ -- 822 --
Changes in assets and liabilities
Trade receivables.................................................... (1,840) (2,232) (1,712)
Inventories.......................................................... (1,552) (1,917) (1,250)
Due from affiliates.................................................. (845) (462) 538
Other current assets................................................. 133 165 (241)
Other assets......................................................... (1,787) 611 (4,990)
Accounts payable..................................................... (180) 594 2,853
Accrued compensation................................................. (347) 674 2,090
Accrued ESLIRP....................................................... 674 499 821
Deferred income...................................................... (62) 105 1,278
Accrued restructuring................................................ -- 2,732 (1,619)
Accrued liabilities.................................................. 1,705 431 3,970
Accrued income taxes................................................. 6,852 (500) 5,605
Other long-term liabilities.......................................... 354 (148) (629)
--------- --------- ---------
Net cash provided by operating activities.......................... 20,545 23,684 36,699
--------- --------- ---------
Cash flows relating to investing activities
Dividends received from equity investments.............................. 725 773 681
Capital expenditures.................................................... (11,572) (11,872) (11,909)
Cash paid for acquisition of businesses................................. (831) (1,207) (11,121)
--------- --------- ---------
Net cash used in investing activities.............................. (11,678) (12,306) (22,349)
--------- --------- ---------
Cash flows relating to financing activities
Long-term debt.......................................................... (3,677) 162 (1,048)
Capital lease obligations............................................... (194) (346) (48)
Net activity with Bausch & Lomb......................................... (197) (12,755) (6,922)
--------- --------- ---------
Net cash used in financing activities.............................. (4,068) (12,939) (8,018)
--------- --------- ---------
Effect of exchange rate changes on cash and cash equivalents............... (478) (181) 564
--------- --------- ---------
Net change in cash and cash equivalents.................................... 4,321 (1,742) 6,896
Cash and cash equivalents, beginning of year............................... 15,336 19,657 17,915
--------- --------- ---------
See Notes to Combined Financial Statements.
F-35
<PAGE>
Fiscal Year Ended
------------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Cash and cash equivalents, end of year..................................... $ 19,657 $ 17,915 $ 24,811
--------- --------- ---------
Supplemental cash flow information
Cash paid for taxes..................................................... $ 4,821 $ 4,254 $ 4,681
Cash paid for interest.................................................. 414 287 177
</TABLE>
See Notes to Combined Financial Statements.
F-36
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(dollars in thousands)
<TABLE>
Accumulated
Other Capital
Retained Comprehensive Common In Excess
Total Earnings Income Stock of Par
--------- --------- ------------- ------ ---------
<S> <C> <C> <C> <C> <C>
Balance at December 30, 1995........................ $ 142,537 $ 122,687 $ 2,013 $ 1 $ 17,836
Components of comprehensive income:
Net income.................................... 15,245 15,245 -- -- --
Foreign currency translation.................. (3,467) -- (3,467) -- --
Minimum pension liability adjustment.......... 15 -- 15 -- --
---------
Total comprehensive income.................. 11,793
---------
Net activity with Bausch & Lomb.................. (197) (197) -- -- --
--------- --------- --------- ------ --------
Balance at December 28, 1996........................ $ 154,133 $ 137,735 $ (1,439) $ 1 $ 17,836
Components of comprehensive income:
Net income.................................... 15,340 15,340 -- -- --
Foreign currency translation.................. (6,844) -- (6,844) -- --
Minimum pension liability adjustment.......... (510) -- (510) -- --
--------- --------- --------- ------ --------
Total comprehensive income.................. 7,986
---------
Net activity with Bausch & Lomb.................. (12,755) (12,755) -- -- --
--------- --------- --------- ------ --------
Balance at December 27, 1997........................ $ 149,364 $ 140,320 $ (8,793) $ 1 $ 17,836
Components of comprehensive income:
Net income.................................... 23,378 23,378 -- -- --
Foreign currency translation.................. 2,839 -- 2,839 -- --
Minimum pension liability adjustment.......... (400) -- (400) -- --
---------
Total comprehensive income.................. 25,817
---------
Net activity with Bausch & Lomb.................. (6,922) (6,922) -- -- --
--------- --------- --------- ------ --------
Balance at December 26, 1998........................ $ 168,259 $ 156,776 $ (6,354) $ 1 $ 17,836
========= ========= ========= ====== ========
</TABLE>
See Notes to Combined Financial Statements.
F-37
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(dollars in thousands)
1. Basis of Presentation, Description of Business and Summary of Significant
Accounting Policies
Basis of Presentation and Description of Business
These combined financial statements include the accounts of Charles River
Laboratories Holdings, Inc. ("Holdings"), B&L CRL, Inc. and its subsidiaries,
the assets, liabilities, operations and cash flows of which are held by Bausch
& Lomb, Inc. and certain affiliated entities as of and for the periods
presented in these financial statements. Holdings is an indirect wholly owned
subsidiary of Bausch & Lomb, Inc. As more fully described in Note 2, on
September 29, 1999, B&L CRL, Inc. consummated a recapitalization transaction
that provided for the contribution of all of its assets, liabilities, results
of operations and cash flows to a subsidiary named Charles River Laboratories,
Inc. (the "Company"). Pursuant to the recapitalization, the Company became a
wholly-owned subsidiary of Holdings.
Based on the ongoing structure described above and the common ownership
and management of Holdings and the Company as of and during the periods
presented in these financial statements, these financial statements are
presented on a combined basis and include all such assets, liabilities, results
of operations and cash flows of the combined entities. As of the dates and for
the periods presented in these combined financial statements, Holdings has no
assets, liabilities, results of operations or cash flows. Hereafter, Holdings
and the Company are referred to collectively as "Holdings".
Prior to August 31, 1999, Holdings was named Endosafe, Inc.
Holdings is a commercial producer and supplier of animal research models
for use in the discovery, development and testing of pharmaceuticals. In
addition, Holdings is a supplier of biomedical products and services in several
specialized niche markets. Holdings fiscal year is the twelve month period
ending the last Saturday in December.
Principles of Consolidation
The financial statements include all majority-owned U.S. and non-U.S.
subsidiaries. Intercompany accounts, transactions and profits are eliminated.
Affiliated companies over which the Company does not have the ability to
exercise control are accounted for using the equity method (Note 11).
Use of Estimates
The financial statements have been prepared in conformity with generally
accepted accounting principles and, as such, include amounts based on informed
estimates and judgments of management with consideration given to materiality.
Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash equivalents include time deposits and highly liquid investments with
remaining maturities at the purchase date of three months or less.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
principally on the average cost method. All inventories have been reduced to
their net realizable value. Costs for primates are accumulated in inventory
until certain primates are sold or declared breeders.
F-38
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
Property, Plant and Equipment
Property, plant and equipment, including improvements that significantly
add to productive capacity or extend useful life, are recorded at cost, while
maintenance and repairs are expensed as incurred. Depreciation is calculated
for financial reporting purposes using the straight-line method based on the
estimated useful lives of the assets as follows: building, 20 to 40 years;
machinery and equipment, 2 to 20 years; and leasehold improvements, shorter of
estimated useful life or the lease periods.
Intangible Assets
Intangible assets are amortized on a straight-line basis over periods
ranging from eight to 20 years. Intangible assets consist primarily of
goodwill, patents and non-compete agreements.
Other Assets
Other assets consist primarily of the cash surrender value of life
insurance net long-term deferred tax assets and the net value of primate
breeders. The value of primate breeders is amortized over 20 years. Total
amortization expense for primate breeders was $378, $348 and $323 in 1996, 1997
and 1998 and is included in costs of products sold and services provided.
Impairment of Long-Lived Assets
Holdings evaluates long-lived assets and intangibles whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated
undiscounted future cash flows expected to result from the use of the asset and
its eventual disposal are less than its carrying amount. In such instances, the
carrying value of long-lived assets is reduced to the estimated fair value, as
determined using an appraisal or discounted cash flow, as appropriate.
Stock-Based Compensation Plans
As permitted under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (FAS 123), Holdings accounts for its
stock-based compensation plans using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25).
Revenue Recognition
Revenues are recognized when products are shipped, services performed or
upon submission of a lab report for laboratory services. Deferred income
represents cash received in advance of delivery of primates from customers
under contract and is recognized at time of delivery.
Fair Value of Financial Instruments
The carrying amount of Holdings' significant financial instruments, which
includes accounts receivable and debt, approximate their fair values at
December 26, 1998 and December 27, 1997.
F-39
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
Income Taxes
As of December 26, 1998, Holdings was not a separate taxable entity for
federal, state or local income tax purposes and its results of operations were
included in the consolidated Bausch & Lomb tax returns. Holdings accounts for
income taxes under the separate return method in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS
109).
Foreign Operations
The financial statements of all non-U.S. subsidiaries are translated into
U.S. dollars as follows: assets and liabilities at year-end exchange rates;
income, expenses and cash flows at average exchange rates; and shareholder's
equity at historical exchange rates. The resulting translation adjustment is
recorded as a component of accumulated other comprehensive income on the
accompanying balance sheet.
Concentrations of Credit Risk
Financial instruments that potentially subject Holdings to concentrations
of credit risk consist primarily of trade receivables from customers within the
pharmaceutical and biomedical industries. As these industries have experienced
significant growth and its customers are predominantly well-established and
viable, Holdings believes its exposure to credit risk to be minimal.
Comprehensive Income
Holdings adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," (FAS 130) at the beginning of 1998. As it
relates to Holdings, comprehensive income is defined as net income plus the sum
of currency translation adjustments and the change in minimum pension liability
(collectively, other comprehensive income), and is presented in the
Consolidated Statement of Changes in Shareholder's Equity.
Segment Reporting
During 1998, Holdings adopted Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
(FAS 131), which requires financial and descriptive information about an
enterprise's reportable operating segments. Operating segments are components
of an enterprise about which separate financial information is available and
regularly evaluated by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Holdings operates in two
business segments, research models and biomedical products and services.
Reclassifications
Certain amounts in prior year financial statements and related notes have
been changed to conform with current year presentation.
2. Subsequent Events
On September 29, 1999 CRL Acquisition LLC, an affiliate of DLJ Merchant
Banking Partners II, L.P., consummated a transaction in which it acquired 87.5%
of the common stock of Charles River Laboratories, Inc. (the "Company") from
Bausch & Lomb for approximately $443 million. This transaction was effected
through Charles River
F-40
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
Laboratories Holdings, Inc. ("Holdings"), a holding company with no operations
or assets other than its ownership of 100% of the Company's outstanding stock.
This transaction will be accounted for as a leveraged recapitalization, which
will have no impact on the historical basis of Holdings' assets and
liabilities. In addition, concurrent with the transaction, Holdings purchased
all of the outstanding shares of common stock of SBI Holdings, Inc. ("Sierra"),
a pre-clinical biomedical services company, for $24.0 million. This acquisition
will be accounted for as a purchase business combination with the operating
results of Sierra being included in Holdings' consolidated operating results
beginning on the effective date of the acquisition. These transactions are
hereafter referred to as the "Acquisitions".
The Acquisitions and related transaction fees and expenses were funded as
follows:
o issuance of 150,000 units, each consisting of a $1,000 principal
amount of 13.5% senior subordinated note (the Series A Note Offering)
and one warrant to purchase 3.942 shares of common stock of Holdings;
o borrowings by the Company of $162.0 million under a new senior
secured credit facility;
o an equity investment of $92.4 million in Holdings;
o senior discount debentures with warrants issued by Holdings for $37.6
million; and
o subordinated discount note issued by Holdings to Bausch & Lomb for
$43.0 million.
The Series A Note Offering (the "Notes") will mature on October 1, 2009.
The Notes will not be redeemable at the issuers' option prior to October 1,
2004. Thereafter, the Notes will be subject to redemption at any time at the
option of the issuer at redemption prices set forth in the Notes. Interest on
the Notes will accrue at the rate of 13.5% per annum and will be payable
semi-annually in arrears on October 1 and April 1 of each year, commencing on
April 1, 2000. The payment of principal and interest on the Notes will be
subordinated in right to the prior payment of all Senior Debt, as defined. The
senior secured credit facility includes a $40 million term loan A facility, a
$120 million term loan B facility and a $30 million revolving credit facility.
The term loan A facility will mature on October 1, 2005, the term loan B
facility will mature on October 1, 2007 and the revolving credit facility will
mature on October 1, 2005. Interest on the term loan A, term loan B and
revolving credit facility will accrue at either a base rate plus 1.75% or LIBOR
plus 3.0%, at the Company's option (8.5%, 9.25% and 8.5%, respectively, at
September 29, 1999) per annum and will be paid quarterly in arrears commencing
on December 30, 1999. A commitment fee in an amount equal to 0.50% per annum on
the daily average unused portion of the revolving credit facility will be paid
quarterly in arrears. Upon the occurrence of a change in control, as defined,
the issuer will be obligated to make an offer to each holder of the Notes to
repurchase all or any part of such holders' Notes at an offer price in cash
equal to 101% of the principal amount thereof, plus accrued and unpaid
interest. Restrictions under the Notes include certain sales of assets, certain
payments of dividends and incurrence of debt, and limitations on certain
mergers and transactions with affiliates. With respect to the Notes and the
senior secured credit facility, the Company will be required to maintain
certain financial ratios and covenants. The senior discount debentures with
warrants bear interest at 15.5% and mature on October 1, 2010. The subordinated
discount note bears interest at 12.0% in years one through five and at 15% in
years six through eleven, and mature on September 29, 2010.
Each warrant will entitle the holder, subject to certain conditions, to
purchase 3.942 shares of common stock of Holdings at an exercise price of
$10.00 per share of common stock of Holdings, subject to adjustment under
certain circumstances. Upon exercise, the holders of warrants would be
entitled, in the aggregate, to purchase common stock of Holdings representing
approximately 5.0% of the common stock of Holdings on a fully diluted basis on
the closing date
F-41
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
(assuming exercise of all outstanding warrants). The warrants will be
exercisable on or after October 1, 2001 and will expire on October 1, 2009.
3. Restructuring Charges and Asset Impairments
In June 1996 and April 1997, the Bausch & Lomb board of directors approved
plans to restructure portions of Holdings. As a result, pre-tax restructuring
charges of $4,748 and $5,892 were recorded in 1996 and 1997, respectively.
The major components of the plans are summarized in the table below:
1996 1997
------- -------
Employee separations..........................................$ 2,283 $ 3,200
Asset writedowns.............................................. 1,631 2,157
Other......................................................... 834 535
------- -------
$ 4,748 $ 5,892
======= =======
These restructuring efforts have reduced Holdings' fixed cost structure
and realigned the business to meet its strategic objectives through the
closure, relocation and consolidation of breeding, distribution, sales and
administrative operations, and workforce reductions. Certain severance costs
are being paid over periods greater than one year. Further, Holdings is under a
court order issued in June 1997 to relocate its primate operations from two
islands located in the Florida Keys to Miami, Florida. Also, Holdings is
required to refoliate the islands due to damage caused by the primates. Due to
complications arising within the plan to relocate the primates, the relocation
has taken longer than anticipated to complete, as the primates needed to be
moved in a controlled manner in order to minimize mortality and breeding
disruption. Asset writedowns relate primarily to the closing of facilities and
losses resulting from equipment dispositions. Other charges included
miscellaneous costs and other commitments.
The following table sets forth the activity in the restructuring reserves
through December 26, 1998:
<TABLE>
Restructuring Programs
---------------------------------
1996 1997 Total
------- ------- --------
<S> <C> <C> <C>
Restructuring provision...................................$ 4,748 -- $ 4,748
Cash payments............................................. (3,117) -- (3,117)
Asset write-downs......................................... (1,631) -- (1,631)
------- -------
Balance, December 28, 1996............................. -- -- --
Restructuring provision................................... -- 5,892 5,892
Cash payments ............................................ -- (1,725) (1,725)
Asset write-downs......................................... -- (1,435) (1,435)
------- -------
Balance, December 27, 1997............................. -- 2,732 2,732
Cash payments............................................. -- (897) (897)
Asset write-downs......................................... -- (722) (722)
------- -------
Balance, December 26, 1998.............................$ -- $ 1,113 $ 1,113
======= ======== =======
</TABLE>
Reserves remaining at December 26, 1998 primarily represent liabilities
for continuing severance payments and relocation and refoliation costs. The
remaining balance of $1,113 is expected to be fully utilized by the end of
1999.
F-42
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
4. Supplemental Balance Sheet Information
The composition of inventories is as follows:
December 27, December 26,
1997 1998
------------ ------------
Raw materials and supplies........................... $ 5,222 $ 4,932
Work in process...................................... 379 1,088
Finished products.................................... 23,303 24,711
-------- --------
Inventories....................................... $ 28,904 $ 30,731
======== ========
The composition of property, plant and equipment is as follows:
December 27, December 26,
1997 1998
------------ ------------
Land................................................. $ 7,473 $ 7,783
Buildings............................................ 82,963 90,919
Machinery and equipment.............................. 63,192 74,876
Leasehold improvements............................... 1,033 3,063
Furniture and fixtures............................... 1,383 1,532
Vehicles............................................. 2,864 3,006
Construction in progress............................. 8,483 6,176
-------- --------
167,391 187,355
Less accumulated depreciation........................ (90,502) (104,665)
-------- --------
Net property, plant and equipment................. $ 76,889 $ 82,690
======== ========
5. Long-Term Debt
The Company has various debt instruments outstanding at its international
subsidiaries aggregating $253 and $450 at December 27, 1997 and December 26,
1998, respectively, with interest rates ranging from 3% to 15.2% and maturities
ranging from September 1999 through June 2003.
6. Leases
Capital Leases
The Company has one capital lease for a building and three capital leases
for equipment. These leases are capitalized using interest rates considered
appropriate at the inception of each lease. Following is an analysis of assets
under capital lease:
December 27, December 26,
1997 1998
------------ ------------
Building............................................. $ 2,001 $ 2,001
Equipment............................................ 179 179
Accumulated depreciation............................. (1,213) (1,457)
-------- --------
F-43
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
December 27, December 26,
1997 1998
------------ ------------
$ 967 $ 723
======== ========
Capital lease obligations amounted to $1,110 and $1,132 at December 27,
1997 and December 26, 1998, respectively, with maturities through 2003 at
interest rates ranging from 8.6% to 9.3%. Future minimum lease payments under
capital lease obligations at December 26, 1998 are as follows:
1999........................................................ $ 282
2000........................................................ 282
2001........................................................ 282
2002........................................................ 282
2003........................................................ 534
-------
Total minimum lease payments................................ $ 1,662
Less amount representing interest........................... (530)
-------
Present value of net minimum lease payments................. $ 1,132
=======
Operating Leases
The Company has various operating leases for machinery and equipment,
automobiles, office equipment, land and office space. Rent expense for all
operating leases was $2,944 in 1996, $3,111 in 1997 and $3,273 in 1998. Future
minimum payments by year and in the aggregate, under noncancellable operating
leases with initial or remaining terms of one year or more consist of the
following at December 26, 1998:
1999........................................................ $ 3,182
2000........................................................ 2,932
2001........................................................ 1,994
2002........................................................ 1,088
2003........................................................ 488
Thereafter.................................................. 1,690
-------
$11,374
=======
7. Income Taxes
An analysis of the components of income before income taxes and minority
interests and the related provision for income taxes is presented below:
<TABLE>
Fiscal Year Ended
-----------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Income before equity in earnings of foreign subsidiaries,
income taxes and minority interests
U.S.................................................................. $ 15,422 $ 13,497 $ 22,364
Non-U.S.............................................................. 8,967 8,722 13,468
-------- -------- --------
F-44
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
Fiscal Year Ended
-----------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
$ 24,389 $ 22,219 $ 35,832
======== ======== ========
Income tax provision
Current:
Federal........................................................... $ 5,506 $ 6,202 $ 7,730
Foreign........................................................... 4,217 2,528 6,171
State and local................................................... 1,406 1,397 1,833
-------- -------- --------
Total current................................................... 11,129 10,127 15,734
-------- -------- --------
Deferred:
Federal........................................................... (496) (1,867) (597)
Foreign........................................................... 376 498 (887)
State............................................................. (120) (259) (127)
-------- -------- --------
Total deferred.................................................. (240) (1,628) (1,611)
-------- -------- --------
$ 10,889 $ 8,499 $ 14,123
======== ======== ========
</TABLE>
Deferred taxes, detailed below, recognize the impact of temporary
differences between the amounts of assets and liabilities recorded for
financial statement purposes and such amounts measured in accordance with tax
laws. Realization of benefit for net operating losses and foreign tax credit
carryforwards, which expire between 2002 and 2011, is contingent on future
taxable earnings. A valuation allowance has been recorded for foreign tax
credits, which may not be realized.
<TABLE>
December 27, 1997 December 26, 1998
----------------------- ----------------------
Assets Liabilities Assets Liabilities
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Current:
Inventories................................................... $ 588 -- $ 827 --
Restructuring accruals........................................ 1,584 -- 1,006 --
Employee benefits and compensation............................ 2,023 -- 3,077 --
Other accruals................................................ 556 -- 522 --
------- ------- ------- -----
4,751 -- 5,432 --
------- ------- ------- -----
Non-current:
Net operating loss and credit carryforwards................... 1,776 -- 2,960 --
Depreciation and amortization................................. 3,326 1,723 3,672 836
Valuation allowance on foreign tax credits.................... (1,776) -- (1,766) --
Other......................................................... 654 -- 921 --
------- ------- ------- -----
3,980 1,723 5,787 836
------- ------- ------- -----
$ 8,731 $ 1,723 $11,219 $ 836
======= ======= ======= =====
</TABLE>
Reconciliations of the statutory U.S. federal income tax rate to effective
tax rates are as follows:
F-45
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
<TABLE>
Fiscal Year Ended
-----------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Tax at statutory U.S. tax rate................................ 35.0% 35.0% 35.0%
Foreign tax rate differences.................................. 6.0 (0.1) 1.6
Non-deductible goodwill amortization.......................... 0.3 0.4 0.6
State income taxes, net of federal tax benefit................ 3.4 3.3 3.1
Other......................................................... (0.6) (0.4) (0.8)
---- ---- ----
44.1% 38.2% 39.5%
==== ==== ====
</TABLE>
Holdings' foreign subsidiaries have undistributed earnings at December 26,
1998. Those earnings are considered to be indefinitely reinvested and,
accordingly, no provision for U.S. federal and state income taxes has been
provided thereon. Upon distribution of those earnings in the form of dividends
or otherwise, Holdings would be subject to both U.S. income taxes (subject to
an adjustment for foreign tax credits) and withholding taxes payable to the
various foreign countries. Determination of the amount of unrecognized deferred
U.S. income tax liability is not practicable because of the complexities
associated with its hypothetical calculation.
8. Employee Benefits
Holdings sponsors one defined contribution plan and two defined benefit
plans. Holdings' defined contribution plan ("Charles River Laboratories
Employee Savings Plan") qualifies under section 401(k) of the Internal Revenue
Code. It covers substantially all U.S. employees and contains a provision
whereby Holdings matches two percent of employee contributions up to four
percent. The costs associated with the defined contribution plan totaled $395,
$416 and $498 in 1996, 1997, and 1998, respectively.
One of the Company-sponsored defined benefit plans (Charles River
Laboratories, Inc. Pension Plan) is a qualified, non-contributory plan that
also covers substantially all U.S. employees. Benefits are based on
participants' final average monthly compensation and years of service.
Participants' rights vest upon completion of five years of service.
Under another defined benefit plan, Holdings provides certain executives
with supplemental retirement benefits. This plan (Executive Supplemental Life
Insurance Retirement Plan or ESLIRP) is generally unfunded and non-qualified
under the provisions of the Employee Retirement Income Securities Act of 1974.
The following table provides reconciliations of the changes in benefit
obligations, fair value of plan assets and funded status of the two defined
benefit plans.
Pension Benefits Plans
----------------------
1997 1998
-------- --------
Reconciliation of benefit obligation
Benefit/obligation at beginning of year......... $ 17,570 $ 20,531
Service cost.................................... 804 795
Interest cost................................... 1,413 1,588
Benefit payments................................ (710) (742)
Actuarial loss.................................. 1,454 2,940
-------- --------
Benefit/obligation at end of year............... 20,531 $ 25,112
====== ========
Reconciliation of fair value of plan assets
F-46
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
Pension Benefits Plans
----------------------
1997 1998
-------- --------
Fair value of plan assets at beginning of year.. $ 17,394 $ 19,237
Actual return on plan assets.................... 2,328 7,773
Employer contributions.......................... 225 225
Benefit payments................................ (710) (742)
-------- --------
Fair value of plan assets at end of year........ $ 19,237 $ 26,493
======== =========
Funded status
Funded status at beginning of year.............. (1,294) $ 1,380
Unrecognized transition obligation.............. 705 564
Unrecognized prior-service cost................. (31) (27)
Unrecognized gain............................... (4,331) (7,178)
-------- --------
Accrued benefit (cost).......................... $ (4,951) $ (5,261)
======== =========
Amounts recognized in the consolidated balance sheet
Accrued benefit cost............................ $ (6,945) $ (7,849)
Intangible asset................................ 358 286
Accumulated other comprehensive income.......... 982 1,381
-------- --------
Net amount recognized........................... $ (5,605) $ (6,182)
======== =========
Key weighted-average assumptions used in the measurement of Holdings'
benefit obligations are shown in the following table:
<TABLE>
Fiscal Year Ended
-----------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Discount rate........................................................ 7.75% 7.5% 7%
Expected return on plan assets....................................... 10% 10% 10%
Rate of compensation increase........................................ 5.0% 4.75% 4.75%
</TABLE>
The following table provides the components of net periodic benefit cost
for the two defined benefit plans for 1996, 1997 and 1998:
<TABLE>
Defined Benefit Plans
-----------------------------------------
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Components of net periodic benefit cost
Service cost......................................................... $ 690 $ 804 $ 795
Interest cost........................................................ 1,236 1,413 1,588
Expected return on plan assets....................................... (1,463) (1,717) (1,901)
Amortization of transition obligation................................ 141 141 141
Amortization of prior-service cost................................... (3) (3) (3)
Amortization of net gain............................................. (189) (172) (85)
-------- ------- -------
Net periodic benefit cost............................................ $ 412 $ 466 $ 535
======== ======= =======
</TABLE>
F-47
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plan with accumulated benefit obligations
in excess of plan assets were $6,752, $6,409 and $0, respectively, as of
December 27, 1997, and $8,205, $7,745 and $0, respectively, as of December 26,
1998.
Holdings had an adjusted minimum pension liability of $1,636 ($982, net of
tax) and $2,302 ($1,381, net of tax) as of December 27, 1997 and December 26,
1998, which represented the excess of the minimum accumulated net benefit
obligation over previously recorded pension liabilities.
9. Stock Compensation Plans
Stock Options
Bausch & Lomb sponsors several stock-based compensation plans in which
Holdings employees participate. Stock options vest ratably over three years and
expire ten years from the grant date. The exercise price on all options issued
has been equal to the fair market value of the underlying security on the date
of the grant. Vesting is contingent upon continued employment with Bausch &
Lomb. The total number of shares available for grant in each calendar year for
all plans combined excluding incentive stock options shall be no greater than
three percent of the total number of outstanding shares of common stock as of
the first day of each such year. No more than six million shares are available
for granting purposes as incentive stock options under Bausch & Lomb's current
plan. As of December 26, 1998, 2.5 million shares remain available for such
grants.
All of Bausch & Lomb's stock-based compensation plans are accounted for
under the provisions of APB 25. Under APB 25, because the exercise price of
Holdings' employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income is required by FAS 123, which
also requires that the information be determined as if Holdings has accounted
for its employee stock options granted subsequent to December 31, 1994 under
the fair value method of that Statement.
For purposes of this disclosure, the fair value of each fixed option grant
was estimated on the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions used for grants outstanding in
1996, 1997 and 1998:
<TABLE>
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Risk-free interest rate....................................... 6.11% 5.66% 4.69%
Dividend yield................................................ 2.42% 2.54% 2.48%
Volatility factor............................................. 24.87% 25.17% 25.67%
Weighted average expected life (years)........................ 5 5 4
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because Bausch & Lomb's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
F-48
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
Had compensation expense for Holdings' portion of fixed options been
determined consistent with FAS 123, the Company's net income would have been
reduced to the pro forma amounts indicated below:
Net Income
-------------------------
As Reported Pro Forma
----------- ---------
1998................................... $ 23,378 $ 22,859
1997................................... 15,340 15,021
1996................................... 15,245 15,042
A summary of the status of Holdings' portion of fixed stock option plans
at year end 1996, 1997 and 1998 is presented below:
<TABLE>
1996 1997 1998
-------------------------- -------------------------- --------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Price Exercise Price Exercise Price
Shares (Per Share) Shares (Per Share) Shares (Per Share)
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year..... 225,584 $ 40.84 294,162 $ 39.90 326,722 $ 41.00
Granted.............................. 71,643 35.86 77,154 42.32 73,280 50.64
Exercised............................ (80) 27.40 (13,350) 30.34 (73,481) 39.45
Forfeited............................ (2,985) 43.60 (31,244) 41.99 (1,370) 41.48
------- ------- -------
Outstanding at end of year........... 294,162 39.90 326,722 41.00 325,151 43.98
======= ======= =======
Options exercisable at year end...... 177,155 193,097 176,096
======= ======= =======
Weighted-average fair value of
options granted during the year... $ 9.34 $ 10.59 $ 10.93
======= ======= =======
</TABLE>
The following presents additional information about Holdings' fixed stock
options outstanding at December 26, 1998:
<TABLE>
Options Outstanding Options Exercisable
------------------------------------------- ----------------------------
Weighted
Average Weighted
Remaining Average Weighted
Number Contractual Exercise Price Number Average
Range of Exercise Prices Per Share Outstanding Life (Years) (Per Share) Exercisable Exercise Price
- -------------------------------------- ----------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$26 to $35.......................... 52,990 6.3 $ 34.78 39,726 $ 34.60
$36 to $45.......................... 131,413 7.3 41.35 81,577 40.88
$46 to $55.......................... 140,748 7.5 49.90 54,793 48.26
------- -------
$26 to $55.......................... 325,151 7.2 43.98 176,096 41.76
======= =======
</TABLE>
Stock Awards
Bausch & Lomb issued restricted stock awards to directors, officers and
other key personnel. These awards have vesting periods up to three years with
vesting criteria based upon the attainment of certain Economic-Value-Added
F-49
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
(EVA) metrics and continued employment until applicable vesting dates. EVA is a
measure of capital utilization. It is not, nor is it intended to be, a measure
of operating performance in accordance with generally accepted accounting
principles. Compensation expense is recorded based on the applicable vesting
criteria and, for those awards with performance goals, as such goals are met.
In 1996, 1997 and 1998, 2,484, 1,400 and 1,200 such awards were granted to
Holdings employees at weighted average market values of $35.92, $42.25 and
$51.63 per share, respectively. The compensation expense relating to stock
awards in 1996, 1997 and 1998 was $24, $84 and $333, respectively.
10. Business Acquisitions
Holdings acquired several businesses during the three-year period ended
December 26, 1998. All acquisitions have been accounted for under the purchase
method of accounting. The results of operations of the acquired business are
included in the consolidated financial statements from the date of acquisition.
Significant acquisitions include the following:
On March 30, 1998, Holdings acquired 100% of the outstanding stock of
Tektagen, Inc. ("Tektagen") for $8,000 and assumed debt equal to approximately
$850. Tektagen provides quality control testing and consulting services to the
biotechnology and pharmaceutical industries. The purchase price exceeded the
fair value of the net assets acquired by approximately $6,600, which is being
amortized on a straight line basis over 15 years. In addition, during 1998
Holdings acquired an additional biomedical service business and one research
model business; the impact of each is considered immaterial to Holdings'
financial statements taken as a whole.
On July 31, 1996, Holdings reacquired the assets of two businesses it
previously owned for approximately $1,100 in cash plus the forgiveness of
approximately $5,800 in debt. These businesses represent substantially all of
the Company's primate operations. The purchase price was allocated to the fair
value of net assets acquired.
The following selected unaudited pro forma consolidated results of
operations are presented as if each of the acquisitions had occurred as of the
beginning of the period immediately preceding the period of acquisition after
giving effect to certain adjustments for the amortization of goodwill and
related income tax effects. The pro forma data is for informational purposes
only and does not necessarily reflect the results of operations had the
companies operated as one during the period. No effect has been given for
synergies, if any, that may have been realized through the acquisitions.
<TABLE>
Fiscal Year Ended
-----------------------------------------
December 28, December 27, December 26,
(Amounts unaudited) 1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Net sales.................................................... $ 161,708 $ 179,513 $ 196,973
Operating income............................................. 25,497 21,830 35,154
Net income................................................... 15,966 15,018 22,913
</TABLE>
In addition, during 1997 and 1998 Holdings made contingent payments of
$640 and $681, respectively, to the former owner of an acquired business in
connection with an additional purchase price commitment.
11. Joint Ventures
Holdings holds investments in several joint ventures. These joint ventures
are separate legal entities whose purpose is consistent with the overall
operations of Holdings and represent geographical expansions of existing
Holdings markets. The financial results of two of the joint ventures are
consolidated into Holdings' results as Holdings has the ability to
F-50
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
exercise control over these entities. The interests of the outside joint
venture partners in these two joint ventures has been recorded as minority
interests totaling $290 at December 27, 1997 and $306 at December 26, 1998.
Holdings also has investments in two other joint ventures that are
accounted for on the equity method as Holdings does not have the ability to
exercise control over the operations. Charles River Japan is a 50 /50 joint
venture with Ajinomoto Co., Inc. and is an extension of Holdings' research
model business in Japan. Dividends received from Charles River Japan amounted
to $725 in 1996, $773 in 1997, and $681 in 1998. Charles River Mexico, a joint
venture which is an extension of Holdings' avian business in Mexico, is not
significant to the Company's operations.
Summarized financial statement information for the unconsolidated joint
ventures is as follows:
<TABLE>
Fiscal Year Ended
-----------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Condensed Combined Statements of Income
Net sales...................................... $ 43,978 $ 44,744 $ 39,798
Operating income............................... 7,712 7,484 6,756
Net income..................................... 3,500 3,337 3,445
December 27, December 26,
1997 1998
------------ -------------
<S> <C> <C>
Condensed Combined Balance Sheets
Current assets........................................ $ 18,466 $ 19,388
Non-current assets.................................... 34,774 36,376
--------- ---------
$ 53,240 $ 55,764
========= =========
Current liabilities................................... $ 17,105 $ 13,501
Non-current liabilities............................... 5,237 6,617
Shareholders' equity.................................. 30,898 35,646
--------- ---------
$ 53,240 $ 55,764
========= =========
</TABLE>
12. Commitments and Contingencies
Insurance
Holdings maintains insurance for workers' compensation, auto liability and
general liability. The per claim loss limits are $250, with annual aggregate
loss limits of $1,500. Related accruals were $849 and $2,363 on December 27,
1997 and December 26, 1998, respectively. Separately, Holdings has provided
three letters of credit in favor of the insurance carriers in the amount of
$825.
Litigation
Various lawsuits, claims and proceedings of a nature considered normal to
its business are pending against Holdings. In the opinion of management, the
outcome of such proceedings and litigation currently pending will not
materially affect Holdings' consolidated financial statements. The most
potentially significant claim is described below.
F-51
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(dollars in thousands)
As discussed in Note 3, Holdings is currently under a court order issued
in June 1997 to remove its primate operations from two islands located in the
Florida Keys. The mandate asserts that Holdings' operations have contributed to
the defoliation of certain protected plant life. Reserves of $500 are included
in the restructuring reserve recorded in the accompanying consolidated
financial statements to provide for relocation costs and any exposures in
connection with the refoliation.
13. Related Party Transactions
Holdings historically has operated autonomously from Bausch & Lomb.
However, certain costs and expenses including insurance, information technology
and other miscellaneous expenses were charged to the Company on a direct basis.
Management believes these charges are based upon assumptions that are
reasonable under the circumstances. However, these charges and estimates are
not necessarily indicative of the costs and expenses which would have resulted
had Holdings incurred these costs as a separate entity. Charges of
approximately $460, $470 and $250 for these items are included in costs of
products sold and services rendered and selling, general and administrative
expense in the accompanying consolidated statements of income for the years
ended 1996, 1997 and 1998, respectively.
14. Geographic and Business Segment Information
Holdings is organized into geographic regions for management reporting
with operating income being the primary measure of regional profitability.
Certain general and administrative expenses, including some centralized
services provided by regional offices, are allocated based on business segment
sales. The accounting policies used to generate geographic results are the same
as Holdings' overall accounting policies.
The following table presents sales and other financial information by
geography for the years 1996, 1997 and 1998. Sales to unaffiliated customers
represent net sales originating in entities physically located in the
identified geographic area. Long-lived assets include property, plant and
equipment, goodwill and intangibles, other investments and other assets.
<TABLE>
Other
U.S. France Non U.S. Consolidated
--------- --------- -------- ------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers................... $ 83,520 $ 28,892 $ 43,192 $ 155,604
Long-lived assets................................. 65,594 12,790 18,952 96,336
1997
Sales to unaffiliated customers................... $ 100,314 $ 25,680 $ 44,719 $ 170,713
Long-lived assets................................. 62,236 10,146 22,108 94,490
1998
Sales to unaffiliated customers................... $ 115,639 $ 26,177 $ 51,485 $ 193,301
Long-lived assets................................. 76,289 12,751 23,745 112,785
</TABLE>
Holdings' product line segments are research models and biomedical
products and services. The following table presents sales and other financial
information by product line segment for the fiscal years 1996, 1997 and 1998.
Sales to unaffiliated customers represent net sales originating in entities
primarily engaged in either provision of research models or biomedical products
and services. Long-lived assets include property, plant and equipment, goodwill
and intangibles; other investments; and other assets.
F-52
<PAGE>
<TABLE>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Research models
Net sales............................................ $ 121,262 $ 125,214 $ 134,590
Operating income..................................... 24,080 19,583 30,517
Total assets ........................................ 162,201 157,915 180,139
Depreciation and amortization ....................... 5,351 5,297 5,534
Capital expenditures ................................ 6,119 6,178 8,127
Biomedical products and services
Net sales ........................................... 34,342 $ 45,499 $ 58,711
Operating income .................................... 3,264 6,496 11,117
Total assets ........................................ 34,780 38,296 53,271
Depreciation and amortization ....................... 4,177 4,406 5,361
Capital expenditures ................................ 5,453 5,694 3,782
</TABLE>
A reconciliation of segment operating income to consolidated operating
income is as follows:
<TABLE>
Fiscal Year Ended
-----------------------------------------
December 28, December 27, December 26,
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
Total segment operating income.......................... $ 27,344 $ 26,079 $ 41,634
Unallocated corporate overhead.......................... (3,202) (4,003) (6,309)
-------- -------- --------
Consolidated operating income........................... $ 24,142 $ 22,076 $ 35,325
======== ======== ========
</TABLE>
A summary of identifiable long-lived assets of each business segment at
year end is as follows:
<TABLE>
December 27, December 26,
1997 1998
------------ -------------
<S> <C> <C>
Research Models....................................................... $ 65,144 $ 73,190
Biomedical Products and Services...................................... 29,346 39,595
-------- ---------
$ 94,490 $ 112,785
======== =========
</TABLE>
F-53
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
COMBINED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands)
<TABLE>
Nine Months Ended
------------------------------
September 26, September 25,
1998 1999
------------- -------------
<S> <C> <C>
Net sales.......................................................................... $ 145,519 $ 161,096
Costs and expenses
Cost of products sold and services provided..................................... 91,041 97,230
Selling, general and administrative............................................. 25,202 29,414
Amortization of goodwill and intangibles........................................ 1,036 1,114
--------- ---------
Operating income................................................................... 28,240 33,338
Other income (expense)
Other income.................................................................... -- 1,441
Interest income................................................................. 659 496
Interest expense................................................................ (311) (207)
Loss from foreign currency, net................................................. (127) (143)
--------- ---------
Income before income taxes, minority interests and earnings from equity
investments..................................................................... 28,461 34,925
Provision for income taxes......................................................... 11,280 16,903
--------- ---------
Income before minority interests and earnings from equity investments.............. 17,181 18,022
Minority interests................................................................. (8) (10)
Earnings from equity investments................................................... 1,286 1,940
--------- ---------
Net income......................................................................... $ 18,459 $ 19,952
========= =========
</TABLE>
See Notes to Combined Financial Statements.
F-54
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
COMBINED BALANCE SHEET (UNAUDITED)
(dollars in thousands)
<TABLE>
September 25,
1999
-------------
<S> <C>
Assets
Current assets
Cash and cash equivalents.................................................................... $ 3,457
Trade receivables, less allowances of $854................................................... 33,820
Inventories.................................................................................. 28,577
Deferred income taxes........................................................................ 5,432
Due from affiliates.......................................................................... 966
Other current assets......................................................................... 5,051
---------
Total current assets....................................................................... 77,303
Property, plant and equipment, net.............................................................. 79,349
Goodwill and other intangibles, less accumulated amortization of $6,960......................... 16,212
Investments in affiliates....................................................................... 19,385
Other assets.................................................................................... 18,122
---------
Total assets............................................................................... $ 210,371
=========
Liabilities and shareholder's equity
Current liabilities
Current portion of long-term debt............................................................ $ 166
Current portion of capital lease obligations................................................. 167
Accounts payable............................................................................. 5,992
Accrued compensation......................................................................... 11,015
Accrued ESLIRP............................................................................... 5,845
Deferred income.............................................................................. 4,550
Accrued restructuring........................................................................ 354
Accrued liabilities.......................................................................... 12,410
Accrued income taxes......................................................................... 16,208
---------
Total current liabilities.................................................................. 56,707
Long-term debt.................................................................................. --
Capital lease obligations....................................................................... 700
Other long-term liabilities..................................................................... 3,706
---------
Total liabilities.......................................................................... 61,113
---------
Commitments and contingencies (Note 3)
Minority interests.............................................................................. 293
Shareholder's equity
Common stock, par value $1 per share, 1,000 shares issued....................................... 1
Capital in excess of par value.................................................................. 17,836
Retained earnings............................................................................... 142,422
Accumulated other comprehensive income.......................................................... (11,294)
---------
Total shareholder's equity................................................................. 148,965
---------
Total liabilities and shareholder's equity.............................................. $ 210,371
=========
</TABLE>
See Notes to Combined Financial Statements.
F-55
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
(dollars in thousands)
<TABLE>
Nine Months Ended
------------------------------
September 26, September 25,
1998 1999
------------- -------------
<S> <C> <C>
Cash flows relating to operating activities
Net income..................................................................... $ 18,459 $ 19,952
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................... 7,932 8,701
Provision for doubtful accounts............................................. 248 13
Gain from sale of facilities................................................ (1,441)
Earnings from equity investments............................................ (1,286) (1,940)
Minority interests.......................................................... 8 10
Deferred income taxes....................................................... (634) --
Stock compensation expense.................................................. 159 124
Property, plant, and equipment write downs.................................. -- 324
Change in assets and liabilities
Trade receivables........................................................... (3,298) (3,022)
Inventories................................................................. (683) 1,232
Due from affiliates......................................................... 153 (264)
Other current assets........................................................ (1,255) (2,115)
CVS of life insurance....................................................... (3,585) (439)
Other assets................................................................ (464) (510)
Accounts payable............................................................ 910 (4,767)
Accrued compensation........................................................ 1,640 (605)
Accrued ESLIRP.............................................................. 519 688
Deferred income............................................................. 671 1,130
Accrued restructuring....................................................... (1,425) (759)
Accrued liabilities......................................................... 1,687 1,079
Accrued income taxes........................................................ 4,259 2,211
Other long-term liabilities................................................. (529) (50)
-------- --------
Net cash provided by operating activities................................. 23,486 19,552
-------- --------
Cash flows relating to investing activities
Dividends received from equity investments..................................... 681 815
Proceeds from sale of facilities -- 1,860
Capital expenditures........................................................... (5,834) (7,426)
Cash paid for acquisition of businesses........................................ (9,114) 0
-------- --------
Net cash used in investing activities..................................... (14,267) (4,751)
-------- --------
Cash flows relating to financing activities
Long-term debt................................................................. (949) (312)
Capital lease obligations...................................................... (94) (90)
Net activity with Bausch & Lomb................................................ (1,369) (34,152)
-------- --------
Net cash used in financing activities..................................... (2,412) (34,554)
-------- --------
Effect of exchange rate changes on cash and cash equivalents...................... 462 (1,601)
-------- --------
Net change in cash and cash equivalents........................................... 7,269 (21,354)
-------- --------
See Notes to Combined Financial Statements.
F-56
<PAGE>
Nine Months Ended
------------------------------
September 26, September 25,
1998 1999
------------- -------------
<S> <C> <C>
Cash and cash equivalents, beginning of year...................................... 17,915 24,811
-------- --------
Cash and cash equivalents, end of year............................................ $ 25,184 $ 3,457
======== ========
Supplemental cash flow information
Cash paid for taxes............................................................ $ 2,202 $ 3,316
Cash paid for interest......................................................... 161 207
</TABLE>
See Notes to Combined Financial Statements.
F-57
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS - (UNAUDITED)
(dollars in thousands)
1. Basis of Presentation
The combined balance sheet at September 25, 1999 and the combined
statements of income and of cash flows for the nine months ended September 26,
1998 and September 25, 1999 are unaudited, and certain information and footnote
disclosure related thereto normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been omitted.
In the opinion of management, the accompanying unaudited consolidated financial
statements were prepared following the same policies and procedures used in the
preparation of the audited financial statements and reflect all adjustments
(consisting of normal recurring adjustments) considered necessary to present
fairly the financial position of Holdings. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
2. Supplemental Balance Sheet Information
The composition of inventories is as follows:
September 25,
1999
----------------
Raw materials and supplies................................. $ 4,228
Work in process............................................ 988
Finished products.......................................... 23,361
--------
Net inventories............................................ $ 28,577
========
The composition of property, plant and equipment is as follows:
September 25,
1999
----------------
Land....................................................... $ 7,329
Buildings.................................................. 89,014
Machinery and equipment.................................... 76,648
Leasehold improvements..................................... 3,746
Furniture and fixtures..................................... 1,595
Vehicles................................................... 2,843
Construction in progress................................... 6,434
--------
187,609
Less accumulated depreciation.............................. (108,260)
--------
Net property, plant and equipment.......................... $ 79,349
========
3. Commitments and Contingencies
Litigation
Various lawsuits, claims and proceedings of a nature considered normal to
its business are pending against the Company. In the opinion of management, the
outcome of such proceedings and litigation currently pending will not
materially affect the Company's consolidated financial statements. The most
potentially significant claim is described below.
F-58
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS - (UNAUDITED)
(dollars in thousands)
(continued)
Holdings is currently under a court order issued June 1997 to remove its
primate operations from two islands located in the Florida Keys. The mandate
asserts that Holdings' operations have contributed to the defoliation of
certain protected plant life. Reserves of $218 are included in the
restructuring reserve recorded in the accompanying consolidated financial
statements to provide for any exposures in connection with the relocation and
refoliation.
4. Business Segment Information
The following table presents sales and other financial information by
product line segment for the nine months ended September 26, 1998 and September
25, 1999. Sales to unaffiliated customers represent net sales originating in
entities primarily engaged in either provision of research models or biomedical
products and services.
1998 1999
---------- ---------
Research models
Net sales................................. $ 103,205 $ 109,177
Operating income.......................... 26,281 27,977
Total assets.............................. 182,761 157,284
Depreciation and amortization............. 5,738 6,044
Capital expenditures...................... 4,112 4,282
Biomedical products and services
Net sales................................. $ 42,314 $ 51,919
Operating income.......................... 7,347 11,553
Total assets.............................. 39,331 53,087
Depreciation and amortization............. 2,194 2,657
Capital expenditures...................... 1,722 3,144
A reconciliation of segment operating income to consolidated operating
income is as follows:
1998 1999
---------- ---------
Total segment operating income................. $ 33,628 $ 39,530
Unallocated corporate overhead................. (5,388) (6,192)
---------- ---------
Consolidated operating income.................. $ 28,240 $ 33,338
========== =========
5. Comprehensive Income
The components of comprehensive income for the nine-month periods ended
September 26, 1998 and September 25, 1999 are set forth below:
1998 1999
---------- ---------
Net income $ 18,459 $ 19,952
Foreign currency translation 20 (4,940)
--------- ---------
Comprehensive income $ 18,479 $ 15,012
========= =========
F-59
<PAGE>
CHARLES RIVER LABORATORIES HOLDINGS, INC. AND
CHARLES RIVER LABORATORIES, INC.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS - (UNAUDITED)
(dollars in thousands)
(continued)
6. Other Income
During the nine months ended September 25, 1999, Holdings recorded a gain
of $1.4 million on the sale of certain facilities located in Florida and The
Netherlands.
7. Restructuring Reserve
During the nine months ended September 25, 1999, Holdings charged
approximately $759 against the restructuring reserve for costs previously
reserved for. As of September 25, 1999, the remaining restructuring reserve
amounted to $354, comprised primarily of scheduled severance payments and
relocation and refoliation costs. Such payments will be substantially complete
by the end of the year.
8. Subsequent Events
On September 29, 1999 CRL Acquisition LLC, an affiliate of DLJ Merchant
Banking Partners II, L.P., consummated a transaction in which it acquired 87.5%
of the common stock of Charles River Laboratories, Inc. from Bausch & Lomb for
approximately $443 million. This transaction was effected through Charles River
Laboratories Holdings, Inc. ("Holdings"), a holding company with no operations
or assets other than its ownership of 100% of the Company's outstanding stock.
This transaction will be accounted for as a leveraged recapitalization, which
will have no impact on the historical basis of the Company's assets and
liabilities. In addition, concurrent with the transaction, the Company
purchased all of the outstanding shares of common stock of SBI Holdings, Inc.
("Sierra"), a pre-clinical biomedical services company, for $24.0 million. This
acquisition will be accounted for as a purchase business combination with the
operating results of Sierra being included in the Company's consolidated
operating results beginning on the effective date of the acquisition. These
transactions are hereafter referred to as the "Acquisitions".
The Acquisitions and related transaction fees and expenses were funded as
follows:
o issuance of 150,000 units, each consisting of a $1,000 principal
amount of 13.5% senior subordinated note (the Series A Note Offering)
and one warrant to purchase 3.942 shares of common stock of Holdings;
o borrowings by the Company of $162.0 million under a new senior
secured credit facility;
o an equity investment of $92.4 million in Holdings;
o senior discount debentures with warrants issued by Holdings for $37.6
million; and
o subordinated discount note issued by Holdings to Bausch & Lomb for
$43.0 million.
The Series A Note Offering (the "Notes") will mature on October 1, 2009.
The Notes will not be redeemable at the issuers' option prior to October 1,
2004. Thereafter, the Notes will be subject to redemption at any time at the
option of the issuer at redemption prices set forth in the Notes. Interest on
the Notes will accrue at the rate of 13.5% per annum and will be payable
semi-annually in arrears on October 1 and April 1 of each year, commencing on
April 1, 2000. The payment of principal and interest on the Notes will be
subordinated in right to the prior payment of all Senior Debt, as defined. The
senior secured credit facility includes a $40 million term loan A facility, a
$120 million term loan B facility and a $30 million revolving credit facility.
The term loan A facility will mature on October 1, 2005, the term loan B
facility will mature on October 1, 2007 and the revolving credit facility will
mature on October 1, 2005. Interest on the
F-60
<PAGE>
term loan A, term loan B and revolving credit facility will accrue at either a
base rate plus 1.75% or LIBOR plus 3.0%, at the Company's option (8.5%, 9.25%
and 8.5%, respectively, at September 29, 1999) per annum and will be paid
quarterly in arrears commencing on December 30, 1999. A commitment fee in an
amount equal to 0.50% per annum on the daily average unused portion of the
revolving credit facility will be paid quarterly in arrears. Upon the
occurrence of a change in control, as defined, the issuer will be obligated to
make an offer to each holder of the Notes to repurchase all or any part of such
holders' Notes at an offer price in cash equal to 101% of the principal amount
thereof, plus accrued and unpaid interest. Restrictions under the Notes include
certain sales of assets, certain payments of dividends and incurrence of debt,
and limitations on certain mergers and transactions with affiliates. With
respect to the Notes and the senior secured credit facility, the Company will
be required to maintain certain financial ratios and covenants. The senior
discount debentures with warrants bear interest at 15.5% and mature on October
1, 2010. The subordinated discount note bears interest at 12.0% in years one
through five and at 15% in years six through eleven, and mature on September
29, 2010.
Each warrant will entitle the holder, subject to certain conditions, to
purchase 3.942 shares of common stock of Holdings at an exercise price of
$10.00 per share of common stock of Holdings, subject to adjustment under
certain circumstances. Upon exercise, the holders of warrants would be
entitled, in the aggregate, to purchase common stock of Holdings representing
approximately 5.0% of the common stock of Holdings on a fully diluted basis on
the closing date (assuming exercise of all outstanding warrants). The warrants
will be exercisable on or after October 1, 2001 and will expire on October 1,
2009.
9. Dividends from Foreign Subsidiaries
During the nine months ended September 25, 1999, cash dividends totaling
$20,662 were remitted to Holdings from several of its foreign subsidiaries.
Pursuant to the terms of the transaction more fully described in Note 8, such
dividends were, in turn, remitted by Holdings to B&L. As the related amounts
had previously been considered permanently reinvested in the foreign
jurisdictions, Holdings was required to provide additional taxes upon their
repatriation to the United States. In addition, during the nine months ended
September 25, 1999, an election was made by B&L to treat certain foreign
entities as branches for United States income tax purposes. As a result, all
previously untaxed accumulated earnings of such entities became immediately
subject to tax in the United States. The receipt of the cash dividends from the
foreign subsidiaries and the foreign tax elections made resulted in incremental
United States taxes of $1,974, net of foreign tax credits, during the nine
months ended September 25, 1999.
F-61
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all estimated expenses incurred or
expected to be incurred by the Registrant in connection with the issuance and
distribution of the securities being registered hereby, other than underwriting
discounts and commissions.
Item Amount
- ---- -----------
SEC Registration Fee............................................... $ 791.00
Printing and Engraving Costs....................................... 100,000.00
Legal Fees and Expenses............................................ 100,000.00
Accounting Fees and Expenses....................................... 50,000.00
Miscellaneous...................................................... 50,000.00
-----------
Total........................................................... $300,791.00
===========
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The certificate of incorporation of Holdings contains a provision
eliminating or limiting director liability to the company and its stockholders
for monetary damages arising from acts or omissions in the director's capacity
as a director. This provision may not, however, eliminate or limit the personal
liability of a director:
o for any breach of such director's duty of loyalty to the company or
its stockholders;
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
o under the Delaware statutory provision making directors personally
liable, under a negligence standard, for unlawful dividends or
unlawful stock purchases or redemptions; or
o for any transaction from which the director derived an improper
personal benefit.
As a result of this provision, the ability of the company, or a stockholder
thereof, to successfully prosecute an action against a director for breach of
his duty of care is limited. However, the provision does not affect the
availability of equitable remedies such as an injunction or rescission based
upon a director's breach of his duty of care. The SEC has taken the position
that the provision will have no effect on claims arising under the federal
securities laws.
In addition, the certificate of incorporation of Holdings provides for
mandatory indemnification rights, subject to limited exceptions, to any
director or executive officer of the company who (by reason of the fact that he
or she is a director or officer) is involved in a legal proceeding of any
nature. Such indemnification rights include reimbursement for expenses incurred
by such director or officer in advance of the final disposition of such
proceeding in accordance with the applicable corporate law.
Charles River provides insurance from commercial carriers against some
liabilities incurred by the directors and officers of Holdings.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On September 29, 1999, Charles River Laboratories, Inc. sold 150,000 units
consisting of 13 1/2% notes due 2009 and warrants to purchase 591,366 shares of
common stock of Charles River Laboratories Holdings, Inc. for an aggregate
principal amount of $150,000,000 to Donaldson, Lufkin & Jenrette Securities
Corporation in a private placement in reliance on Section 4(2) under the
Securities Act, at an offering price of $1,000 per unit. On the same day, the
Registrant sold senior discount debentures with other warrants to DLJ Merchant
Banking Partners II, L.P. and certain other investors for $37.6 million and a
subordinated discount note to certain subsidiaries of Bausch & Lomb
Incorporated for $43 million, each in a private placement in reliance on
Section 4(2) under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
Exhibit
Number
- -------
2.1* Recapitalization Agreement, dated as of July 25, 1999, among Charles
River Laboratories, Inc., Charles River Laboratories Holding, Inc.
(formerly known as Endosafe, Inc.), Bausch & Lomb Incorporated, and
other parties listed therein.
2.2* Amendment No. 1 to Recapitalization Agreement, dated as of September 29,
1999 by Bausch & Lomb Incorporated and CRL Acquisition LLC.
3.1.1* Certificate of Incorporation of Charles River Laboratories Holdings,
Inc.
3.1.2* By-laws of Charles River Laboratories Holdings, Inc.
4.1* Warrant Agreement dated as of September 29, 1999 between Charles River
Laboratories Holdings, Inc. and State Street Bank and Trust Company, as
warrant agent.
4.2* Investors' Agreement, dated as of September 29, 1999, among Charles
River Laboratories Holdings, Inc. and the shareholders named therein.
5.1* Opinion of Davis Polk & Wardwell with respect to the validity of the
securities.
10.3* Credit Agreement, dated as of September 29, 1999, among Charles River
Laboratories, Inc., the various financial institutions that are or may
become parties as lenders thereto, DLJ Capital Funding, Inc., as lead
arranger, sole book runner and syndication agent for the lenders, Union
Bank of California, N.A., as administrative agent for the lenders, and
National City Bank, as documentation agent for the lenders.
10.4* Indenture, dated as of September 29, 1999 between Charles River
Laboratories, Inc. and the Trustee.
10.5* Purchase Agreement between Charles River Laboratories, Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation as Initial
Purchaser.
10.6** Joint Venture Agreement between Ajinomoto Co., Inc. and Charles River
Breeding Laboratories, Inc. dated June 24, 1981, and ancillary
agreements, amendments and addendums. June 15, 1987 Amendment Agreement,
Amending the Joint Venture Agreement. January 17, 1994 Letter Amendment
of Joint Venture Agreement. August 30, 1996 Addendum to the Joint
Venture Agreement. License and Technical Assistance Agreement CRL
Breeding Labs and Ajinomoto Co., Inc. Amendment Agreement, dated March
24, 1978.
10.7* Merck Primate Supply Agreement between Merck & Co., Inc. and Charles
River Laboratories, Inc. dated September 30, 1994.
10.8* Amended and Restated Stock Purchase Agreement among Charles River
Laboratories, Inc. and SBI Holdings, Inc. and its stockholders dated
September 4, 1999.
10.9** Ground Lease between HIC Associates (Lessor) and Charles River
Laboratories, Inc. (Lessee) dated June 5, 1992; Real Estate Lease
between Charles River Laboratories, Inc. (Landlord) and Charles River
Partners L.P. (Tenant) dated December 22, 1993; and Assignment and
Assumption Agreement between Charles River Partners, L.P. (Assignor) and
Wilmington Partners L.P. (Assignees) dated December 22, 1993.
II-2
<PAGE>
10.10* Amended and Restated Distribution Agreement between Charles River BRF,
Inc., Charles River Laboratories, Inc., Bioculture Mauritius Ltd. and
Mary Ann and Owen Griffiths, dated December 23, 1997.
10.11* Supply Agreement for non-human primates among Sierra Biomedical, Inc.
and Scientific Resources International, Ltd., dated March 18, 1997.
12.1* Computation of Ratio of Earnings to Fixed Charges
12.2* Computation of Ratio of Total Pro Forma Debt to Adjusted EBITDA
12.3* Computation of Ratio of Adjusted EBITDA to Cash Interest Expense
21.1* Subsidiaries of Charles River Laboratories Holdings, Inc.
23.1* Consent of Davis Polk & Wardwell (contained in their opinion filed as
Exhibit 5.1).
23.2.1* Consent of PricewaterhouseCoopers LLP for Charles River Laboratories,
Inc.
23.2.2* Consent of PricewaterhouseCoopers LLP for Charles River Labororatories
Holdings, Inc.
24.1* Power of Attorney (Included in Part II of this Registration
Statement under the caption "Signatures").
27.1* Financial Data Schedule for Charles River Laboratories Holdings, Inc.
- -------------------
* Filed herewith.
** To be filed by amendment.
(b) Financial Statement Schedules.
Schedule II Valuation and Qualifying Accounts
Other schedules are omitted because they are not applicable.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(x) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(y) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement.
(z) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
the time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
described in Item 510 of Regulation S-K, 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 Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wilmington, State of
Massachusetts, on December 8, 1999.
CHARLES RIVER LABORATORIES HOLDINGS, INC.
By: /s/ Thomas F. Ackerman
----------------------------------
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Thomas F. Ackerman and James C. Foster,
and each of them, his true and lawful attorneys-in-fact and agents with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to sign any registration
statement for the same offering covered by this Registration Statement that is
to be effective on filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, and all post-effective amendments thereto, and to file
the same, with all exhibits thereto and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or their substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James C. Foster President, Chief Executive Officer (Principal December 8, 1999
- -------------------------- Executive Officer) and Director
James C. Foster
/s/ Thomas F. Ackerman Chief Financial Officer (Principal Financial December 8, 1999
- -------------------------- Officer) and Vice President, Finance and
Thomas F. Ackerman Administration (Principal Accounting Officer)
/s/ Reid S. Perper Director December 8, 1999
- --------------------------
Reid S. Perper
/s/ Thompson Dean Director December 8, 1999
- --------------------------
Thompson Dean
/s/ Robert Cawthorn Director December 8, 1999
- --------------------------
Robert Cawthorn
/s/ Douglas E. Rogers Director December 8, 1999
- --------------------------
Douglas E. Rogers
</TABLE>
II-5
<PAGE>
Schedule II - Valuation and Qualifying Accounts
Charles River Laboratories, Inc.
Allowance for Doubtful Accounts
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at Charged to Charged to Balance at
beginning costs and other end of
of period expenses accounts Description Deductions Description period
- ----------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- ----------------------------------------------------------------------------------------------------------------------
For the year ended
December 26, 1998
Allowance for
Doubtful Recoveries/
Accounts......... $ 688 $ 265 Provision $ (55) Write-offs $ 898
- ----------------------------------------------------------------------------------------------------------------------
For the year ended
December 27, 1997
Allowance for
Doubtful Recoveries/
Accounts......... $ 568 $ 192 Provision $ (72) Write-offs $ 688
- ----------------------------------------------------------------------------------------------------------------------
For the year ended
December 28, 1996
Allowance for
Doubtful Recoveries/
Accounts......... $ 490 $ 101 Provision $ (23) Write-offs $ 568
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
II-6
<PAGE>
Schedule II - Valuation and Qualifying Accounts
Charles River Laboratories Holdings, Inc. and
Charles River Laboratories, Inc.
Allowance for Doubtful Accounts
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at Charged to Charged to Balance at
beginning costs and other end of
of period expenses accounts Description Deductions Description period
- ----------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
- ----------------------------------------------------------------------------------------------------------------------
For the year ended
December 26, 1998
Allowance for
Doubtful Recoveries/
Accounts......... $ 688 $ 265 Provision $ (55) Write-offs $ 898
- ----------------------------------------------------------------------------------------------------------------------
For the year ended
December 27, 1997
Allowance for
Doubtful Recoveries/
Accounts......... $ 568 $ 192 Provision $ (72) Write-offs $ 688
- ----------------------------------------------------------------------------------------------------------------------
For the year ended
December 28, 1996
Allowance for
Doubtful Recoveries/
Accounts......... $ 490 $ 101 Provision $ (23) Write-offs $ 568
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
II-7
<PAGE>
Index to Exhibits
Exhibit
Number
- -------
2.1* Recapitalization Agreement, dated as of July 25, 1999, among Charles
River Laboratories, Inc., Charles River Laboratories Holding, Inc.
(formerly known as Endosafe, Inc.), Bausch & Lomb Incorporated, and
other parties listed therein.
2.2* Amendment No. 1 to Recapitalization Agreement, dated as of September 29,
1999 by Bausch & Lomb Incorporated and CRL Acquisition LLC.
3.1.1* Certificate of Incorporation of Charles River Laboratories Holdings,
Inc.
3.1.2* By-laws of Charles River Laboratories Holdings, Inc.
4.1* Warrant Agreement dated as of September 29, 1999 between Charles River
Laboratories Holdings, Inc. and State Street Bank and Trust Company, as
warrant agent.
4.2* Investors' Agreement, dated as of September 29, 1999, among Charles
River Laboratories Holdings, Inc. and the shareholders named therein.
5.1* Opinion of Davis Polk & Wardwell with respect to the validity of the
securities.
10.3* Credit Agreement, dated as of September 29, 1999, among Charles River
Laboratories, Inc., the various financial institutions that are or may
become parties as lenders thereto, DLJ Capital Funding, Inc., as lead
arranger, sole book runner and syndication agent for the lenders, Union
Bank of California, N.A., as administrative agent for the lenders, and
National City Bank, as documentation agent for the lenders.
10.4* Indenture, dated as of September 29, 1999 between Charles River
Laboratories, Inc. and the Trustee.
10.5* Purchase Agreement between Charles River Laboratories, Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation as Initial
Purchaser.
10.6** Joint Venture Agreement between Ajinomoto Co., Inc. and Charles River
Breeding Laboratories, Inc. dated June 24, 1981, and ancillary
agreements, amendments and addendums. June 15, 1987 Amendment Agreement,
Amending the Joint Venture Agreement. January 17, 1994 Letter Amendment
of Joint Venture Agreement. August 30, 1996 Addendum to the Joint
Venture Agreement. License and Technical Assistance Agreement CRL
Breeding Labs and Ajinomoto Co., Inc. Amendment Agreement, dated March
24, 1978.
10.7* Merck Primate Supply Agreement between Merck & Co., Inc. and Charles
River Laboratories, Inc. dated September 30, 1994.
10.8* Amended and Restated Stock Purchase Agreement among Charles River
Laboratories, Inc. and SBI Holdings, Inc. and its stockholders dated
September 4, 1999.
10.9** Ground Lease between HIC Associates (Lessor) and Charles River
Laboratories, Inc. (Lessee) dated June 5, 1992; Real Estate Lease
between Charles River Laboratories, Inc. (Landlord) and Charles River
Partners L.P. (Tenant) dated December 22, 1993; and Assignment and
Assumption Agreement between Charles River Partners, L.P. (Assignor) and
Wilmington Partners L.P. (Assignees) dated December 22, 1993.
10.10* Amended and Restated Distribution Agreement between Charles River BRF,
Inc., Charles River Laboratories, Inc., Bioculture Mauritius Ltd. and
Mary Ann and Owen Griffiths, dated December 23, 1997.
10.11* Supply Agreement for non-human primates among Sierra Biomedical, Inc.
and Scientific Resources International, Ltd., dated March 18, 1997.
12.1* Computation of Ratio of Earnings to Fixed Charges
12.2* Computation of Ratio of Total Pro Forma Debt to Adjusted EBITDA
12.3* Computation of Ratio of Adjusted EBITDA to Cash Interest Expense
21.1* Subsidiaries of Charles River Laboratories Holdings, Inc.
23.1* Consent of Davis Polk & Wardwell (contained in their opinion filed as
Exhibit 5.1).
23.2.1* Consent of PricewaterhouseCoopers LLP for Charles River Laboratories,
Inc.
23.2.2* Consent of Pricewaterhouse Coopers LLP for Charles River Labororatories
Holdings, Inc.
24.1* Power of Attorney (Included in Part II of this Registration
Statement under the caption "Signatures").
II-8
<PAGE>
27.1* Financial Data Schedule for Charles River Laboratories Holdings, Inc.
- -----------------
* Filed herewith.
** To be filed by amendment.
II-9
EXHIBIT 2.1
RECAPITALIZATION AGREEMENT
Among
BAUSCH & LOMB INCORPORATED,
ENDOSAFE, INC.,
CRL HOLDINGS, INC.,
CHARLES RIVER LABORATORIES, INC., CHARLES RIVER SPAFAS, INC.,
BAUSCH & LOMB INTERNATIONAL, INC.,
WILMINGTON PARTNERS, L.P.,
BAUSCH & LOMB CANADA, INC.,
CRL ACQUISITION LLC
and
DLJ MERCHANT BANKING PARTNERS II, L.P.
Dated as of July 25, 1999
<PAGE>
TABLE OF CONTENTS
Page
Article 1 DEFINITIONS, ETC.........................................2
1.1 Definitions......................................................2
1.2 Construction....................................................14
1.3 Accounting Conventions..........................................15
1.4 Disclosure Schedule.............................................15
Article 2 REORGANIZATION, MERGER RECAPITALIZATION,
REDEMPTIONS AND CLOSING.................................15
2.1 Reorganization; Merger..........................................15
2.2 Recapitalization of Recap Co....................................16
2.3 Redemptions.....................................................16
2.4 Closing.........................................................17
Article 3 REPRESENTATIONS AND WARRANTIES OF SELLER PARENT.........17
3.1 Organization, Good Standing and Power...........................17
3.2 Authorization and Validity......................................18
3.3 Capitalization of Recap Subco and Recap Subsidiaries............18
3.4 Consent and Approvals; No Conflict..............................19
3.5 Purchased Shares in Merger......................................19
3.6 Financial Statements............................................19
3.7 Absence of Undisclosed Liabilities..............................20
3.8 Absence of Certain Changes......................................20
3.9 Entire CRL Business.............................................21
3.10 Legal Proceedings...............................................21
3.11 Employees and Labor Relations Matters...........................22
3.12 CRL Business Tangible Assets; Real Property.....................22
3.13 Intellectual Property...........................................23
3.14 Compliance with Applicable Laws.................................23
3.15 Employee Benefit Plans..........................................24
3.16 Environmental Matters...........................................26
3.17 Tax Matters.....................................................27
3.18 Contracts.......................................................27
3.19 Certain Fees....................................................28
3.20 Year 2000.......................................................28
3.21 Insider Interests; Intercompany Transactions....................28
3.22 No Other Representations or Warranties..........................28
Article 4 REPRESENTATIONS AND WARRANTIES OF BUYER
AND BUYER PARENT........................................29
4.1 Organization, Good Standing and Power...........................29
i
<PAGE>
4.2 Authorization and Validity of Agreements........................29
4.3 Consents and Approvals; No Conflict.............................29
4.4 Legal Proceedings...............................................30
4.5 Certain Fees....................................................30
4.6 Financing.......................................................30
4.7 Access and Investigation........................................30
4.8 No Other Representations or Warranties..........................31
Article 5 COVENANTS OF THE PARTIES................................31
5.1 Access to Information; Confidentiality..........................31
5.2 Approvals under Competition Laws................................32
5.3 Conduct of the CRL Business Pending the Closing Date............32
5.4 Consents........................................................33
5.5 Tax Matters.....................................................34
5.6 Employee Matters................................................35
5.7 Additional Assurances...........................................36
5.8 Updated Disclosure Schedule.....................................37
5.9 Buyer's Insurance...............................................38
5.10 Cash Management.................................................38
5.11 Company Acquisition Proposal....................................38
5.12 Books and Records...............................................39
5.13 Use of Names....................................................39
5.14 Commitment Letters..............................................39
5.15 Broekman Sale...................................................39
5.16 Stage I Reorganization Matters..................................40
5.17 Confidential Information........................................40
5.18 Closing Efforts.................................................40
5.19 Interim Financial Statements....................................40
5.20 Financial Assurances............................................41
5.21 Financial Statements............................................41
5.22 Net Underfunding Amount.........................................42
Article 6 CONDITIONS TO CLOSING...................................42
6.1 Conditions to Obligations of Buyer and Seller Parent and
Recap Co........................................................42
6.2 Conditions to Obligations of Buyer..............................43
6.3 Conditions to Obligations of Seller Parent, the Sellers,
Recap Co and Recap Subco........................................45
Article 7 TERMINATION AND ABANDONMENT.............................45
7.1 Termination.....................................................45
7.2 Effect of Termination and Abandonment...........................46
Article 8 SURVIVAL AND INDEMNIFICATION............................47
8.1 Survival of Representations, Warranties and Covenants...........47
ii
<PAGE>
8.2 Indemnification by Seller Parent................................47
8.3 Indemnification by Recap Co.....................................47
8.4 Certain Limitations on Indemnities..............................48
8.5 Procedure.......................................................49
8.6 No Consequential Damages........................................50
8.7 Exclusive Remedy................................................50
8.8 Validity........................................................50
8.9 Waiver..........................................................51
Article 9 MISCELLANEOUS...........................................51
9.1 Public Announcement.............................................51
9.2 Expenses........................................................51
9.3 Transfer Taxes and Recording Expenses...........................52
9.4 Knowledge.......................................................52
9.5 Notices.........................................................52
9.6 Severability....................................................54
9.7 Specific Performance............................................54
9.8 No Conflict of Interest.........................................54
9.9 Binding Effect; Benefit.........................................54
9.10 Assignability...................................................54
9.11 Amendment, Waiver...............................................55
9.12 Section Headings................................................55
9.13 Counterparts....................................................55
9.14 Applicable Law..................................................55
9.15 Submission to Jurisdiction......................................55
9.16 Entire Agreement................................................56
<PAGE>
RECAPITALIZATION AGREEMENT
This Recapitalization Agreement is made as of the 25th day of July,
1999, by and among Bausch & Lomb Incorporated, a New York corporation ("Seller
Parent"), Endosafe, Inc., a Delaware corporation ("Recap Co"), CRL Holdings,
Inc., a Delaware corporation ("Recap Subco"), Charles River Laboratories, Inc.,
a Delaware corporation ("CRL"), Charles River SPAFAS, Inc., a Delaware
corporation ("SPAFAS"), Bausch & Lomb International, Inc., a New York
corporation ("International"), Wilmington Partners, L.P., a Delaware limited
partnership ("WPLP"), Bausch & Lomb Canada, Inc., a Canadian corporation
("Parent Canada"), CRL Acquisition LLC, a Delaware limited liability company
("Buyer"), and DLJ Merchant Banking Partners II, L.P., a Delaware limited
partnership ("Buyer Parent"). Certain terms which are capitalized in this
Agreement are used with the meanings ascribed thereto in Section 1.1.
RECITALS
Recap Subco, directly and through its direct and indirect
subsidiaries, together with WPLP and Parent Canada, are engaged in the CRL
Business.
Seller Parent, through CRL, SPAFAS and International, owns all of the
issued and outstanding shares of capital stock of Recap Subco.
Immediately prior to the Closing, Seller Parent, WPLP and Parent
Canada shall cause the reorganization to occur so that at the Closing, (i) Recap
Subco, or a subsidiary thereof, shall own all of the assets used in the CRL
Business (other than the Excluded Assets), (ii) Recap Subco shall be a wholly
owned subsidiary of Recap Co and (iii) CRL, SPAFAS, International and WPLP shall
own all of the issued and outstanding shares of capital stock of Recap Co.
Immediately prior to the Closing, Buyer Parent shall cause Buyer to
be capitalized with at least $90,000,000, Acquisition Co to be formed and
capitalized by Buyer with at least $90,000,000 and Acquisition Co to be merged
with and into Recap Co.
Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, Seller Parent shall cause Recap Co and Recap Subco to
incur indebtedness to facilitate the recapitalization of Recap Co, and Buyer
shall assist Recap Co and Recap Subco in incurring such indebtedness.
At the Closing, immediately following the incurrence of the foregoing
indebtedness, Seller Parent and Buyer shall cause Recap Subco to use all of the
net proceeds of such indebtedness incurred by it to declare and pay a dividend
to Recap Co.
Immediately following the payment of such dividend, Seller Parent
shall cause Recap Co to use the proceeds of such dividend and the indebtedness
incurred by it to redeem for cash all of the shares of Recap Co Common Stock
held by SPAFAS and International and all of the shares of Recap Co Preferred
Stock held by WPLP and to redeem for cash and the Recap Co Sub Note certain
shares of Recap Co Common Stock held by CRL such that immediately thereafter CRL
shall own 12.5% of the number of issued and outstanding shares of Recap Co
Common Stock and Buyer shall own 87.5% of the number of issued and outstanding
shares of Recap Co Common Stock.
<PAGE>
Article 1
DEFINITIONS, ETC.
1.1 Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
"Accounting Firm" means Arthur Andersen LLP or if such firm does not
accept an engagement, then an independent nationally recognized accounting firm
mutually agreed upon by Seller Parent and Buyer.
"Acquisition Co" has the meaning set forth in Section 2.1.6.
"Affiliate" means, with respect to any Person, any subsidiary,
officer or director of such Person and any other Person which directly or
indirectly controls, is controlled by or is under common control with such
Person, whether through the ownership of securities, by contract or otherwise.
"Agreement" means this Recapitalization Agreement and the Exhibits
and the Disclosure Schedule to this Agreement, as the same may from time to time
be amended as provided herein.
"Assumed Liabilities" means all liabilities and obligations of Seller
Parent, any Seller or any of the CRL Companies arising from or with respect to
the CRL Business or the CRL Business Assets, except for the Excluded
Liabilities.
"Audited Financial Statements" has the meaning set forth in Section
5.21.
"Balance Sheet" means the December 26, 1998 balance sheet of the CRL
Business included in the Audited Financial Statements.
"Balance Sheet Date" means December 26, 1998.
"Benefit Plan" has the meaning set forth in Section 3.15.1.
"Broekman Sale" has the meaning set forth in Section 5.15.
"Business Day" means any day other than a day when the commercial
banks doing business in New York or Massachusetts are required or permitted by
Law to be closed for business.
"Buyer" has the meaning set forth at the beginning of this Agreement.
"Buyer's Group" means, collectively, Buyer and Buyer Parent.
"Buyer Indemnified Parties" has the meaning set forth in Section 8.2.
"Buyer Material Adverse Effect" means one or more adverse changes
which, individually or in the aggregate, is or would reasonably be expected to
materially adversely effect the ability
2
<PAGE>
of Buyer or Buyer Parent to consummate the transactions contemplated by this
Agreement on the terms and conditions and within the time frame set forth
herein.
"Buyer Parent" has the meaning set forth at the beginning of this
Agreement.
"CERCLA" has the meaning set forth in Section 3.16.
"Claim" has the meaning set forth in Section 8.5.
"Closing" has the meaning set forth in Section 2.6.
"Closing Date" has the meaning set forth in Section 2.6.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury regulations issued thereunder.
"Commercial Efforts" means diligent, good faith efforts which shall
not require the performing party to (i) take any action which is unreasonable
under the circumstances, (ii) make any investment or capital contribution not
expressly contemplated by this Agreement or the Commitment Letters, (iii) amend
or waive any rights under this Agreement or the Commitment Letters, or (iv)
incur or expend any amount of funds with respect to any matter in excess of
$5,000 but, notwithstanding the foregoing, Commercial Efforts shall require the
expenditure of all reasonable out-of-pocket expenses necessary to satisfy a
party's obligations under this Agreement, including the fees, expenses and
disbursements of accountants, counsel, investment bankers and other
professionals.
"Commitment Letters" means those commitment letters attached hereto
as Exhibit 4.6.
"Company Acquisition Proposal" has the meaning set forth in Section
5.11.
"Computer Systems" has the meaning set forth in Section 3.20.
"Confidentiality Agreement" has the meaning set forth in Section 5.1.
"Contracts" has the meaning set forth in Section 3.18.
"Contribution Agreements" has the meaning set forth in the definition
of Stage 1 Reorganization.
"Cost" means, collectively, Losses and Litigation Expenses which are
not unconditionally covered by insurance (provided that if the CRL Business is
unconditionally entitled to insurance with respect to such Loss or Litigation
Expense, such insurance proceeds shall be applied to the Loss or Litigation
Expense).
"CRL" has the meaning set forth at the beginning of this Agreement.
"CRL Business" means the businesses conducted by Seller Parent
through its direct and indirect subsidiaries, including, as of the date hereof,
Recap Subco, the Recap Subsidiaries, WPLP and Parent Canada and, prior to the
Stage 1 Reorganization, also through CRL, SPAFAS
3
<PAGE>
and International, in each case relating to (i) the production, supply and
resale of laboratory animals for use in pharmaceutical and other medical testing
(the "Research Models"), (ii) the production and supply of specific pathogen
free eggs for vaccine production and research, (iii) testing and monitoring of
laboratory animal colonies, (iv) special laboratory animal contract services for
the performance of studies for pharmaceutical and biotechnology companies, (v)
research services for large laboratory animals, (vi) laboratory animal facility
management, (vii) biological and analytical testing of large non-animal molecule
products, (viii) the production and supply of in vitro test kits for bacterial
endotoxin detection in parental drugs and devices, (ix) the production and
supply of monoclonal and polyclonal antibodies, and (x) the sale of equipment
related to laboratory animal production and maintenance.
"CRL Business Assets" means the CRL Business and all of Seller
Parent's, each of the Sellers' and each CRL Companies' right, title and interest
in and to all of the assets, rights and properties of every kind and nature,
whether real, personal or mixed, tangible or intangible, whether identifiable or
contingent, wherever located, which are related to or used in the CRL Business,
other than the Excluded Assets, which CRL Business assets, rights and properties
include, without limitation, all of the following except for the Excluded
Assets:
(i) all assets shown or reflected on the Balance
Sheet, except for changes made therein in the
ordinary course of business since the Balance
Sheet Date and through the Closing Date;
(ii) all land and other real property, all buildings
and other improvements located thereon, and all
rights, interests or appurtenances thereto which
are related to or used in the conduct of the CRL
Business;
(iii) all of the fixed assets and other tangible
personal property, including, without limitation,
machinery, vehicles, tools, equipment, furniture,
fixtures, leasehold improvements and supplies
related to or used in the conduct of the CRL
Business wherever located (collectively, the
"Property"), including Property acquired through
the Closing Date;
(iv) all research models, raw materials, components
and other parts, work-in-process, finished goods
and all other inventory whether on hand, on
order, in transit or held by others on a
consignment basis (collectively, the "Inventory")
related to or used in the conduct of the CRL
Business wherever located, including the
inventory shown or reflected on the Balance Sheet
and Inventory acquired after the Balance Sheet
Date and through the Closing Date, excluding only
such Inventory as shall have been sold in the
ordinary course of business after the Balance
Sheet Date and through the Closing Date;
(v) all tradenames, tradename rights, trademarks,
trademark rights, licenses, patents, patent
rights, copyrights, copyright rights, service
marks, service mark rights, trade secrets, trade
secret rights, confidential information, mailing
lists, customer lists, supplier lists, market
studies, training and equipment manuals, trade
dress, designs, patterns, technology, trade
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secrets, and manufacturing, engineering,
technical and any other know-how processes,
business opportunities, and businesses, projects
and products planned or under development, other
intellectual property rights (including without
limitation, all goodwill associated with any of
the foregoing, licenses in respect of any of the
foregoing, applications relating to any of the
foregoing and claims for infringement of or
interference with any of the foregoing) and other
proprietary information related to or used in the
conduct of the CRL Business, in any case whether
domestic or foreign or registered or common law
including, without limitation, the names "Charles
River Laboratories," "Charles River" and "SPAFAS"
and all variations thereof (collectively,
"Intellectual Property");
(vi) all receivables related to the CRL Business,
including, without limitation, trade accounts and
other accounts receivable, loans receivable and
advances as at the Balance Sheet Date and all
receivables related to the CRL Business acquired
or created after the Balance Sheet Date and
through the Closing Date (collectively, the
"Receivables"), excluding only such Receivables
as shall have been collected on or prior to the
Closing Date;
(vii) all contracts of or related to the CRL Business,
including without limitation, the Material
Contracts and all contracts relating to the
Benefit Plans and Non-US Benefit Plans;
(viii) all goodwill, other intangible property, and
causes of action, actions, claims, rights and
remedies of any kind as against others (whether
by contract or otherwise) relating to the CRL
Business or any of the other CRL Business Assets
or Seller Parent, any of the Sellers or any of
the CRL Companies in the conduct or operation of
the CRL Business (including without limitation,
the Intellectual Property) or the Assumed
Liabilities;
(ix) all books and records (financial, accounting and
other), correspondence, and all sales, marketing,
advertising, packaging and promotional materials,
files, data (whether written, on disk, film, tape
or other media, and including all computerized
data), drawings, engineering and manufacturing
data and other technical information and data,
and all other business and other records, in each
case relating to Recap Subco, any Recap
Subsidiary, WPLP, Parent Canada, the CRL Business
Assets, the Assumed Liabilities or the CRL
Business wherever located, except for any located
at Seller Parent in Rochester, New York;
(x) all Permits to the extent legally transferable;
(xi) all prepaid expenses, refunds, security and like
deposits and all other investments relating to
the CRL Business; and
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(xii) all proceeds of any of the foregoing (other than
Excluded Assets).
"CRL Business Material Adverse Effect" means one or more adverse
changes which, individually or in the aggregate, has resulted in or would
reasonably be expected to result in either (a) the loss of $15,000,000 or more
of annual revenue by the CRL Business or (b) Costs in excess of $15,000,000;
provided, however that none of the events set forth on Schedule 1.1.3 shall
constitute a CRL Business Material Adverse Effect.
"CRL Companies" shall mean Recap Subco, each of the Recap
Subsidiaries, WPLP and Parent Canada.
"Default" means the occurrence of any event which of itself or with
the giving of notice or the passage of time or both would constitute a breach, a
default or an event of default under the applicable agreement, contract,
instrument or lease or would permit any party thereto to cancel or terminate
performance or seek damages or specific performance for breach or default.
"Disclosure Schedule" means the Disclosure Schedule delivered by
Seller Parent to Buyer simultaneously with the execution of this Agreement and
shall include an Update in accordance with Section 5.8.
"DOJ" has the meaning set forth in Section 5.2.
"Draft Audited Financial Statements" has the meaning set forth in
Section 3.6.
"Draft Unaudited Financial Statements" has the meaning set forth in
Section 3.6.
"Draft Financial Statements" has the meaning set forth in Section
3.6.
"Employees" means all of those persons employed as of the Closing
Date by any of the CRL Companies in the CRL Business, including employees who
are on disability (whether short-term or long-term) or other leave from any of
the CRL Companies.
"Environmental Claim" means any notice or claim by any person or
entity alleging potential liability (including potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resource damages, property damages, personal injuries or penalties) arising out
of, based on or resulting from (i) the generation, treatment, storage,
transportation or recycling of any Hazardous Substance or the presence, or
release, discharge, disposal or emission into the environment, of any Hazardous
Substances at the Real Property or at any other real property, whether or not
presently or formerly owned or leased by any of the CRL Companies, or (ii) any
violation, or alleged violation, of any Environmental Laws by any of the CRL
Companies, Sellers or Seller Parent prior to the Closing Date, in each case with
respect to the CRL Business.
"Environmental Laws" means any and all Laws of any Governmental
Entity in effect as of the Closing Date, relating to health, pollution control
or protection of the environment, including all Laws relating to the
manufacture, processing, distribution, generation, use, ownership, collection,
treatment, storage, transportation, recovery, recycling, removal, handling,
discharge, disposal, release or threatened release of any Hazardous Substances,
or regarding
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exposure to, monitoring or assessment of, or remediation (including
operation and maintenance of remedial systems) of, any Hazardous Substances, or
record keeping, notification or reporting requirements respecting any Hazardous
Substances, or the on-site or off-site contamination or pollution of the
environment, or air, soil, or water quality, or air or water emissions, or
public health and safety or community right-to-know, including Laws of the
United States, Belgium, Canada, China, France, Germany, Italy, Japan, Mexico,
Netherlands, United Kingdom, Australia, Czech Republic, Hungary, Japan, Spain
and Sweden.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
all regulations promulgated thereunder, as the same have from time to time been
amended.
"Excluded Assets" means:
(i) all cash (except to the extent necessary to
satisfy the requirements of Section 5.10 hereof,
except for any cash received with respect to
divested assets pursuant to Section 5.2.2 hereof,
except an amount equal to 50% of all indebtedness
of Charles River Japan, Inc. for borrowed money
evidenced by a note, bond, debenture or similar
instrument, except an amount equal to the Net
Underfunding Amount and except any net proceeds
arising from the sale of assets referred to in
item 6 of Schedule 3.8, all of which shall
constitute CRL Business Assets and all of which
shall be held by Recap Co, Recap Subco or one of
the U.S. wholly owned Recap Subsidiaries) and
cash equivalents of the CRL Business, Recap
Subco, Recap Co and the Recap Subsidiaries on the
date immediately preceding the Closing Date;
(ii) (A) all books and records relating to the CRL
Business that are located at Seller Parent in
Rochester, New York and (B) all books and records
relating to the CRL Business that are located in
Wilmington, Massachusetts or at any of the Recap
Subsidiaries which are required to be retained by
Seller Parent, CRL, WPLP, SPAFAS, International
or Parent Canada pursuant to any applicable Law
(in the case of (A) and (B) of this clause,
copies of such books and records, to the extent
related to the CRL Business, shall be provided to
Buyer, Recap Co and the Recap Subsidiaries upon
request);
(iii) all Tax assets of Recap Co and the Recap
Subsidiaries which relate to pre-closing periods;
(iv) all assets set forth on Schedule 1.1.1(iv);
provided, however, in the event the Broekman Sale
is not consummated on or after the Closing Date,
item 2 on Schedule 1.1.1(iv) shall not be an
Excluded Asset; and
(v) all Receivables from Seller Parent or any
Affiliate of Seller Parent which is not one of
the CRL Companies.
"Excluded Debt" shall mean, with respect to Seller Parent, any
Seller, Recap Subco or any Recap Subsidiary, without duplication, (i) all
indebtedness of Seller Parent, any Seller,
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Recap Subco or any Recap Subsidiary for borrowed money, and all indebtedness
evidenced by notes, bonds, debentures or similar instruments, (ii) the deferred
purchase price of assets or services which in accordance with GAAP would be
shown on the liability side of the balance sheet of Seller Parent, any Seller,
Recap Subco or any Recap Subsidiary, (iii) all indebtedness of a second Person
secured by any Lien on any property owned by Seller Parent, any Seller, Recap
Subco or any Recap Subsidiary, whether or not such indebtedness has been
assumed, (iv) all obligations under any lease of any property (whether real,
personal or mixed) by Seller Parent, any Seller, Recap Subco or any Recap
Subsidiary as lessee which, in conformity with GAAP, would be accounted for as a
capital lease on the balance sheet of such Person (each a "Capital Lease"),
other than Capital Lease obligations as of June 30, 1999 set forth on Schedule
1.1(x), (v) all net obligations of Seller Parent, any Seller, Recap Subco or any
Recap Subsidiary under interest rate agreements, swap, cap, collar or similar
agreements or instruments and (vi) all contingent obligations of Seller Parent,
any Seller, Recap Subco or any Recap Subsidiary arising from the guaranty by
Seller Parent, any Seller, Recap Subco or any Recap Subsidiary of Excluded Debt
of other Persons; provided, however, that Excluded Debt which is owed by any
Joint Venture shall mean the product of the amount of Excluded Debt of such
Joint Venture and the percentage of the total equity interests of such Joint
Venture held by all CRL Companies (other than such Joint Venture) in such Joint
Venture.
"Excluded Liabilities" means:
(i) all debts, claims, liabilities or obligations for
any Tax (except for any Tax arising as a result
of the breach of any representation or warranty
contained in Article 3 other than Section 3.17)
(A) arising from or with respect to the CRL
Business Assets or the operation or conduct of
the CRL Business on or prior to the Closing Date,
including but not limited to all income taxes
directly arising from the deemed sale of assets
under the Section 338(h)(10) Election, whether or
not due and payable on or before the Closing Date
and whether or not attributable to a Tax period
that ends on or before the Closing Date (in which
event the Tax attributable to the period on or
prior to the Closing Date shall be determined on
a closing-of-the-books method, ending the close
of business on the Closing Date, with respect to
income Taxes and on a per diem basis, including
in such period the Closing Date, with respect to
all other Taxes); (B) of or attributable to any
Tax Sharing Agreement to which Recap Subco or any
Recap Subsidiary is or was a party for any period
on or prior to the Closing Date; and (C) for
which Recap Subco or any Recap Subsidiary is held
liable under Treasury Regulationss. 1.1502-6 or
any similar provisions of state, local or foreign
Law, which Tax is attributable to income of any
Person other than Recap Subco or any Recap
Subsidiary arising on or prior to the Closing
Date.
(ii) all debts, claims, liabilities or obligations of
Seller Parent, any of the CRL Companies or
Sellers, in respect of accounts payable, notes
payable (including intercompany promissory notes
and similar financing arrangements) or other
obligations (whether or not billed or accrued) to
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Seller Parent or any Affiliate of Seller Parent
which is not Recap Subco or one of the Recap
Subsidiaries;
(iii) all debts, claims, liabilities or obligations,
whether presently in existence or arising after
the date of the Agreement, relating to fees,
commissions or expenses owed to any broker,
finder, investment banker, accountant, attorney
or other intermediary or advisor employed by
Seller Parent or any Affiliate of Seller Parent
in connection with the transactions contemplated
hereby;
(iv) the Excluded Debt;
(v) all debts, claims, liabilities or obligations
specifically arising out of or relating to any of
the Excluded Assets which fall within
subparagraphs (i), (ii), (iii), (iv) (but only
with respect to such debts, claims, liabilities
or obligations specifically arising out of or
related to (A) the contract for the sale of the
property and assets set forth in item 1 of
Schedule 1.1.1(iv) and (B) businesses and assets
of or operation or ownership thereof by the
entities set forth in item 3 through 7 of
Schedule 1.1.1(iv) other than the CRL Business or
the CRL Business Assets), or (v) of the
definition of Excluded Assets;
(vi) the accrued and unpaid deferred compensation and
bonuses payable or accrued as of June 30, 1999 to
the management and other employees of the CRL
Business;
(vii) all debts, claims, liabilities or obligations
arising out of or relating to the net
underfunding if any, of Non-U.S. Benefit Plans
that are defined benefit plans; provided,
however, that as to any Non-U.S. Benefit Plan
covering employees of an entity as to which a
third party holds an equity interest exceeding
15% of the total equity interests of such entity
(such entity being referred to herein as a "Joint
Venture" and such Non-U.S. Benefit Plan, a "Joint
Venture Non-U.S. Benefit Plan"), Excluded
Liabilities shall be the product of the aggregate
Excluded Liability of such Joint Venture as to
the applicable Joint Venture Non-U.S. Benefit
Plan and the percentage of the equity interests
held by all CRL Companies (other than such Joint
Venture) in such Joint Venture (the "Net
Underfunding Amount"); and
(viii) the obligations under the Retention Agreements
with respect to Section I(A) regarding the EVA
Banks and with respect to Section I(B) regarding
the compensation for accelerated vesting of
Seller Parent stock options for Employees and the
obligations of Seller Parent or, prior to the
Closing Date Recap SubCo, under the Releases.
"Expiration Date" has the meaning set forth in Section 8.1.
"Financial Statements" has the meaning set forth in Section 5.21.
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"FTC" has the meaning set forth in Section 5.2.
"GAAP" means generally accepted U.S. accounting principles, as in
effect at the time to which the financial statements or records relate, applied
on a consistent basis in accordance with the policies applied in the preparation
of the Financial Statements.
"Governmental Consents" has the meaning set forth in Section
6.1.1(b).
"Governmental Entity" means, collectively, the United States
government, the government of any of the states constituting the United States,
any municipality and any other domestic or foreign national or provincial or
regional government, and all of their respective branches, departments,
agencies, instrumentalities, courts, subsidiary corporations or other
subdivisions, to the extent such Governmental Entity has jurisdiction.
"Hazardous Substances" means any (i) material, substance, waste
(including any solid, liquid, semisolid or gas or gaseous mixture), product,
chemical, pesticide, fungicide, rodenticide, pollutant, contaminant, hazardous
material, hazardous substance, hazardous waste or solid waste, as the foregoing
terms are considered or defined as harmful or toxic under, regulated by or form
the basis of liability under any applicable Environmental Law; (ii) petroleum
(including crude oil or any fraction thereof) products of any kind; (iii)
asbestos, asbestos containing material; (iv) radioactive substance; and (v) any
polychlorinated biphenyl (PCB).
"Highly Compensated Employee" has the meaning set forth in Section
3.11.1.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and all regulations promulgated thereunder, as the same has been amended
from time to time.
"Immaterial Injunction" has the meaning set forth in Section 6.1.1.
"Indemnitee" has the meaning set forth in Section 8.5.
"Indemnitor" has the meaning set forth in Section 8.5.
"Intellectual Property" has the meaning set forth in the definition
of CRL Business Assets.
"Interest Rate" means the sum of the annual rate of interest from
time to time announced publicly by The Chase Manhattan Bank as its prime rate,
plus two percent or if The Chase Manhattan Bank no longer announces its prime
rate, LIBOR plus five percent.
"Internal Reorganization" means, collectively, the Stage 1
Reorganization and the Stage 2 Reorganization.
"International" has the meaning set forth at the beginning of this
Agreement.
"Investors' Agreement" means the agreement entered into as of the
Closing Date among Recap Co, Buyer, CRL and each other stockholder of Recap Co
in substantially the form of Exhibit 2.3.8.
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"IRS" means the U.S. Internal Revenue Service.
"Joint Venture" shall have the meaning set forth in subparagraph
(vii) of the definition of Excluded Liabilities.
"Joint Venture Non-U.S. Benefit Plan" shall have the meaning set
forth in subparagraph (vii) of the definition of Excluded Liabilities.
"Knowledge" has the meaning set forth in Section 9.4.
"Law" means any constitution, law, statute, code, ordinance, rule,
regulation, order, judgment or decree that is of a binding nature and
enforceable by or through any Governmental Entity through the Closing Date.
"Litigation Expense" means any costs and expenses incurred in
connection with investigating, defending or asserting any claim, action, suit or
proceeding incident to any matter indemnified against under this Agreement,
including, without limitation, court filing fees, court costs, arbitration fees
or costs, witness fees and reasonable fees and disbursements of legal counsel
(whether incurred in any action or proceeding between the parties to this
Agreement or between any party to this Agreement and any third party),
investigators, expert witnesses, accountants and other professionals and all
costs and expenses incurred as a result of Section 8.4.5.
"Loss" means any loss, obligation, claim, liability, settlement
payment, award, judgment, tax, fine, penalty, interest charge, cost, expense,
damage or deficiency or other charge, other than Litigation Expense and all
costs and expenses incurred as a result of Section 8.4.5.
"Material Contracts" has the meaning set forth in Section 3.18.
"Merger" shall mean the merger of Acquisition Subco with and into
Recap Co.
"Multiemployer Plans" has the meaning set forth in Section 3.15.1.
"NewCanCo" has the meaning set forth in Section 2.1.1.
"Net Underfunding Amount" has the meaning set forth in subparagraph
(vii) of the definition of Excluded Liabilities.
"Non-U.S. Benefit Plans" has the meaning set forth in Section
3.15.13.
"Other Consents" has the meaning set forth in Section 6.2.5.
"Parent Canada" has the meaning set forth at the beginning of this
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" has the meaning set forth in Section 3.14.
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"Permitted Encumbrances" means: (i) those encumbrances disclosed in
Schedule 1.1.4 of the Disclosure Schedule; (ii) those encumbrances disclosed in
the notes to the Audited Financial Statements, excluding encumbrances in respect
of Excluded Liabilities; (iii) liens for Taxes, assessments and other
governmental charges not yet due and payable or due but not delinquent or being
timely contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP; (iv) mechanics',
workmen's, repairmen's, warehousemen's, carriers' or other like liens arising or
incurred in the ordinary course of business and securing obligations which are
not past due or being timely contested in good faith by appropriate proceedings;
(v) Capital Leases and equipment leases with third parties entered into in the
ordinary course of business excluding Capital Leases constituting Excluded Debt;
(vi) with respect to Real Property: (A) easements, quasi-easements, leases,
licenses, restrictive covenants, rights-of-way and other similar encumbrances,
provided that none of the same (individually or in the aggregate) could
reasonably be expected to result in Costs in excess of $350,000, (B) any
conditions that would be shown on or disclosed by a current survey, provided
that none of the same (individually or in the aggregate) could reasonably be
expected to result in Costs in excess of $350,000, and (C) restrictions imposed
by any applicable Law, including zoning and building Laws; and (vii) all rights
in Intellectual Property requiring subsequent recording or registration to
perfect title.
"Person" means any individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Entity and any other entity.
"Plans" has the meaning set forth in Section 3.15.1.
"Premises" means the real property presently owned, leased or
licensed by or for the CRL Business.
"Purchase Price" means $443,000,000.
"Purchased Shares" means the shares of Recap Co Common Stock issued
to Acquisition Co in the Merger.
"Real Property" has the meaning set forth in Section 3.12.
"Recapitalization" has the meaning set forth in Section 2.2.
"Recapitalization Documents" means all credit facilities, notes,
indentures, securities purchase agreements, security documents and other
agreements, instruments or documents entered into in connection with the
Recapitalization.
"Recap Co" has the meaning set forth at the beginning of this
Agreement.
"Recap Co Common Stock" means the common stock, par value $.01, per
share, of Recap Co.
"Recap Co Sub Note" means the subordinated, pay-in-kind promissory
note to be issued by Recap Co to CRL on the Closing Date in substantially the
form of Exhibit 2.3.1.
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"Recap Subco" has the meaning set forth at the beginning of this
Agreement.
"Recap Subco Common Stock" means the common stock, par value $.01,
per share, of Recap Subco.
"Recap Co Preferred Stock" means the Series A Redeemable Preferred
Stock, par value $.01 per share, of Recap Co.
"Recap Subco Preferred Stock" means the Series A Redeemable Preferred
Stock, par value $.01 per share, of Recap Subco.
"Recap Subsidiaries" means the corporations and other entities whose
capital stock or equity interests are owned by Recap Subco as and in the
percentages listed on Schedule 3.3 of the Disclosure Schedule, and shall mean
and include Recap Co.
"Receivables" has the meaning set forth in the definition of CRL
Business Assets.
"Redemptions" means the series of transactions whereby Recap Co
redeems Common Stock held by CRL, SPAFAS, and International and Preferred Stock
held by WPLP, in each case as described in Section 2.3.
"Releases" means each Agreement and Release, dated the date hereof,
among each Person who is a party to the Retention Agreements, Recap Subco and
Seller Parent.
"Representative" has the meaning set forth in Section 5.1.
"Required Consents" means, collectively, the Governmental Consents
and the Third Party Consents.
"Retention Agreements" means the agreements set forth on Schedule
5.6.5.
"Section 338(h)(10) Election" has the meaning set forth in Section
5.5.5.
"Seller Indemnified Parties" has the meaning set forth in Section
8.3.
"Seller Parent" has the meaning set forth at the beginning of this
Agreement.
"Sellers" means CRL, SPAFAS, WPLP and International.
"Seller's Equity Percentage" shall mean the number of shares of Recap
Co Common Stock that CRL or any Affiliate of CRL owns at such time divided by
the total number of issued and shares of Recap Co Common Stock.
"SERP" means the Charles River Laboratories Executive Life
Insurance/Supplemental Retirement Income Plan, as amended and restated.
"SPAFAS" has the meaning set forth at the beginning of this
Agreement.
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"Stage 1 Reorganization" means the transactions which occurred on
July 9, 1999 pursuant to the Contribution Agreement between Recap Subco and CRL,
the Contribution Agreement between Recap Subco and International, the
Contribution Agreement between Recap Subco and SPAFAS, and the Contribution
Agreement between Recap Subco and CRL (with respect to the transfer of all of
the issued and outstanding shares of CRL U.K. Limited) (collectively, the
"Contribution Agreements").
"Stage 2 Reorganization" has the meaning set forth in Section 2.1.
"Tax" means any federal, state, local, foreign or provincial income,
gross receipts, property, sales, service, use, license, lease, excise,
franchise, employment, payroll, withholding, employment, unemployment insurance,
workers' compensation, social security, alternative or added minimum, ad
valorem, value added, stamp, business license, occupation, premium,
environmental windfall profit, customs, duties, estimated, transfer or excise
tax, or any other tax, custom, duty, premium, governmental fee or other
assessment or charge of any kind whatsoever, together with any interest or
penalty imposed by any Governmental Entity.
"Tax Returns" means all returns, reports, estimates, information
returns and statements any nature with respect to Taxes.
"Tax Sharing Agreements" has the meaning set forth in Section 3.17.1.
"Transfer Taxes" has the meaning set forth in Section 9.3.
"Transfer Tax Returns" has the meaning set forth in Section 9.3.
"Unaudited Financial Statements" has the meaning set forth in Section
5.21.
"Update" has the meaning set forth in Section 5.8.
"WPLP" has the meaning set forth at the beginning of this Agreement.
"Year 2000 Compliant" has the meaning set forth in Section 3.20.
1.2 Construction.
1.2.1 References in this Agreement to any gender shall include
references to all genders. Unless the context otherwise requires, references in
the singular include references in the plural and vice versa. References to a
party to this Agreement or to other agreements described herein means those
Persons executing such agreements. The words "include," "including" or
"includes" shall be deemed to be followed by the phrase "without limitation" or
the phrase "but not limited to" in all places where such words appear in this
Agreement. Except with respect to Sections 3.2 and 4.2, the representation or
statement that an agreement is "enforceable" shall be deemed to include an
exception to the extent that enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
Laws relating to or affecting the enforcement of creditor's rights generally,
and general equitable principles, whether considered in a proceeding in equity
or at law. The words "the transactions contemplated by this Agreement" shall
include the Redemptions, the Merger, the
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Recapitalization and the execution and delivery of the Recap Co Sub Note and the
Investors' Agreement. This Agreement is the joint drafting product of Seller
Parent and Buyer and each provision has been subject to negotiation and
agreement and, in the event of an ambiguity or question of intent or
interpretation, shall not be construed for or against either party as drafter
thereof.
1.2.2 The phrases "have heretofore been provided" or "has provided"
or similar words mean that Seller Parent has delivered copies of such
information to Buyer. The phrase "has provided access" or similar words means
that Seller Parent has allowed Buyer to review such information if requested by
Buyer.
1.3 Accounting Conventions. All references in the Agreement to
financial terms shall be deemed to refer to such terms as they are defined under
GAAP, unless specifically identified otherwise.
1.4 Disclosure Schedule. The Disclosure Schedule shall be prepared by
Seller Parent and delivered to Buyer simultaneously with the execution of this
Agreement and shall be arranged in Schedules corresponding to the numbered
Sections contained in this Agreement. The disclosures in any Schedule shall
qualify any other Schedule or Section to the extent that such information is
pertinent unless the Section specifies a specific Schedule and all contracts,
agreements or other documents referred to on any Schedule are hereby
incorporated by reference. The inclusion of any contract, agreement or matter on
any Schedule shall not be deemed an admission by Seller Parent or Recap Co that
such contract, agreement or matter is material or required to be disclosed or
that all similar contracts, agreements or matters have been disclosed except as
otherwise expressly required by the terms of this Agreement.
ARTICLE 2
REORGANIZATION, MERGER RECAPITALIZATION,
REDEMPTIONS AND CLOSING
2.1 Reorganization; Merger. Upon the terms and subject to the
conditions of this Agreement, the parties agree that the following transactions
will take place immediately prior to the Closing in the order set forth below
(with the steps set forth in Section 2.1.1 through 2.1.5 being hereinafter
referred to as the "Stage 2 Reorganizations"):
2.1.1 Recap Subco shall form a wholly owned Canadian Corporation
("NewCanCo").
2.1.2 WPLP shall contribute all of its CRL Business Assets used in
the CRL Business to Recap Subco and, in exchange therefor, Recap Subco shall
issue to WPLP the Recap Subco Preferred Stock pursuant to a contribution
agreement in substantially the form of the Contribution Agreements.
2.1.3 Each of CRL, SPAFAS, and International shall exchange all of
Recap Subco Common Stock owned by it for the same number of shares of Recap Co
Common Stock and WPLP shall exchange all of the Recap Subco Preferred Stock for
the same number of shares of Recap Co Preferred Stock.
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2.1.4 CRL shall purchase shares of Recap Co Common Stock in exchange
for cash, Recap Co shall purchase shares of Recap Subco Common Stock in exchange
for cash and Recap Subco shall purchase shares of NewCanCo common stock in
exchange for cash.
2.1.5 Parent Canada shall sell all of its CRL Business Assets used in
the CRL Business to NewCanCo in exchange for cash pursuant to an Asset Purchase
Agreement in substantially the form of the Contribution Agreements.
2.1.6 Buyer shall form a wholly owned Delaware corporation
("Acquisition Co") and contribute at least $90,000,000 thereto in exchange for
shares of common stock of Acquisition Co.
2.1.7 Buyer and Seller Parent shall cause Acquisition Co to merge
with and into Recap Co with Recap Co being the surviving entity and with Buyer
receiving such number of shares of Recap Co Common Stock constituting 87.5% of
the total number of shares of Recap Co Common Stock which shall be issued and
outstanding following the Redemptions.
2.2 Recapitalization of Recap Co. Upon the terms and subject to the
conditions of this Agreement, prior to the Closing Date, Buyer will use its
Commercial Efforts to assist Recap Co and Recap Subco to obtain debt financing
all upon the terms and conditions set forth in the Commitment Letters (the
"Recapitalization"). On the Closing Date, Seller Parent shall cause Recap Co and
Recap Subco to enter into the Recapitalization Documents. The proceeds of the
Recapitalization together with the Recap Co Sub Note will be used to consummate
the Redemptions.
2.3 Redemptions. Upon the terms and subject to the conditions of this
Agreement,
at the Closing:
2.3.1 Recap Co shall redeem all of the shares of Recap Co Preferred
Stock owned by WPLP for $242,000,000 in cash payable by wire transfer of
immediately available funds to such account as is designated by WPLP, and WPLP
shall deliver to Recap Co certificates, duly endorsed for transfer, representing
such shares of Recap Co Preferred Stock.
2.3.2 Recap Co shall redeem all of the shares of Recap Co Common
Stock owned by SPAFAS for $10,000,000 in cash payable by wire transfer of
immediately available funds to such account as is designated by SPAFAS, and
SPAFAS shall deliver to Recap Co certificates, duly endorsed for transfer,
representing such shares of Recap Co Common Stock.
2.3.3 Recap Co shall redeem all of the shares of Recap Co Common
Stock owned by International for $8,000,000 in cash payable by wire transfer of
immediately available funds to such account as is designated by International,
and International shall deliver to Recap Co certificates representing such
shares of Recap Co Common Stock.
2.3.4 Recap Co shall redeem such number of shares of Recap Co Common
Stock owned by CRL constituting 87.5% of the total number of shares of Recap Co
Common Stock then issued and outstanding following the redemptions set forth in
Sections 2.3.1 through 2.3.3 so that immediately after all of the Redemptions
CRL shall own 12.5% of the issued and outstanding shares of Recap Co Common
Stock for $140,000,000 in cash, payable by wire
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transfer of immediately available funds to such account as is designated by CRL,
and $43,000,000 in principal amount of the Recap Co Sub Note, and CRL shall
deliver to Recap Co certificates, duly endorsed for transfer, representing such
shares of Recap Co Common Stock.
2.3.5 By execution and delivery of this Agreement, Buyer and the
other parties to this Agreement hereby and as of the Closing Date consents to
the Redemptions.
2.4 Closing. Unless this Agreement shall have been terminated and the
transactions contemplated herein have been abandoned pursuant to Article 7, the
Closing of the Stage 2 Reorganization, Recapitalization, Redemptions and Merger
(the "Closing") shall take place at 10:00 a.m. at the offices of Nixon, Peabody
LLP, 437 Madison Avenue, New York, New York 10022 on the later of September 24,
1999 (with an effective date upon the close of business on September 25, 1999)
or the tenth calendar day following the satisfaction of all conditions in
Article 6 or such other time and place as may be agreed to by Seller Parent and
Buyer (the "Closing Date").
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER PARENT
Seller Parent represents and warrants to Buyer as of the date hereof
as follows:
3.1 Organization, Good Standing and Power. Except as set forth in the
Disclosure Schedule, each of Seller Parent, Recap Co, Recap Subco, CRL, SPAFAS,
International and Parent Canada is a corporation duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
incorporation. Seller Parent, Recap Co, Recap Subco and each Seller (other than
WPLP) has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. WPLP is a limited
partnership duly organized under the laws of the State of Delaware. WPLP has all
requisite partnership power and authority to enter into this Agreement and to
perform its obligations hereunder. Each of the Celtics Companies has all
requisite corporate power and authority to own, lease and operate the CRL
Business Assets owned by it. As of the Closing Date, Recap Co, Recap Subco and
each of the Recap Subsidiaries will be duly authorized, qualified or licensed to
do business as a foreign corporation and, where such concept is applicable, in
good standing, in each of the jurisdictions in which its ownership of the CRL
Business Assets owned by it as of the Closing Date, or the conduct of the CRL
Business by it as of the Closing Date, requires such authorization,
qualification or licensing, except where the failure to so qualify or to be in
good standing would not, individually or in the aggregate, reasonably be
expected to have a CRL Business Material Adverse Effect.
3.2 Authorization and Validity. The execution, delivery and
performance by Seller Parent, Recap Co, Recap Subco and each Seller (except
WPLP) of this Agreement and the consummation by such corporations of the
transactions contemplated by this Agreement and the Internal Reorganization has
been duly authorized by the Boards of Directors of Seller Parent, Recap Co,
Recap Subco and each Seller (except WPLP), respectively. As of the Closing Date,
no other corporate or stockholder action on the part of Seller Parent, Recap Co,
Recap Subco, CRL, SPAFAS, International or Parent Canada will be necessary for
the authorization,
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execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby or the Internal
Reorganization. The execution, delivery and performance by WPLP of this
Agreement has been duly authorized by all partnership action required on its
part. This Agreement has been duly executed and delivered by each of Seller
Parent, Recap Co, Recap Subco and each Seller and constitutes a valid and
legally binding obligation of each of them, enforceable against each of them in
accordance with its terms.
3.3 Capitalization of Recap Subco and Recap Subsidiaries. The
Disclosure Schedule sets forth all classes or series, and the number of shares
of capital stock or other equity interests of Recap Co and Recap Subco
authorized, issued and outstanding and the beneficial and record holders
thereof. Except as described in this Agreement (including the Stage 2
Reorganization) or the Recapitalization Documents and except for arrangements,
understandings, agreements or commitments to which Buyer is a party or plans of
Buyer, there are no outstanding options, calls, warrants, subscriptions or other
rights or agreements to acquire, or any plans, agreements, or commitments
providing for the issuance or redemption of or the right to acquire: (i) any
capital stock or other equity interest of Recap Subco or any Recap Subsidiary,
or (ii) any securities or other obligations or rights convertible into,
exercisable for or exchangeable for the capital stock or other equity interests
of Recap Subco or any Recap Subsidiary. Other than the Recap Subsidiaries,
neither Recap Co nor Recap Subco has any equity ownership interest in any other
Person. Except as set forth in the Disclosure Schedule, as of the Closing Date,
all of the issued and outstanding shares of capital stock or other equity
interests of each of the Recap Subsidiaries will be owned, directly or
indirectly, by Recap Co, free and clear of all liens, encumbrances and transfer
restrictions of any kind. All of the issued and outstanding shares of common
stock and other capital stock of each Recap Subsidiary have been duly and
validly authorized and issued and are fully paid and non-assessable.
3.4 Consent and Approvals; No Conflict. Except as described in the
Disclosure Schedule and except for the pre-merger notification requirements of
the HSR Act, the expiration or early termination of the waiting periods
thereunder and such filings, notifications and approvals as are required under
foreign antitrust or competition Laws, the execution, delivery and performance
of this Agreement by Seller Parent, Recap Co, Recap Subco and by each Seller,
and the consummation by each of them of the transactions contemplated hereby and
the Internal Reorganization: (i) did not (with respect to the Stage 1
Reorganization) and will not (with respect to the Stage 2 Reorganization and the
transactions contemplated hereby), with or without the giving of notice or the
lapse of time or both, violate, or require any of them to obtain any consent,
approval, or authorization to make any filing or to give any notice to any
Governmental Entity under any provision of any Law except where the failure to
obtain, make or give any such consents, approvals, filings or notices would not,
individually or in the aggregate, reasonably be expected to result in Costs in
excess of $350,000; and (ii) did not (with respect to the Stage 1
Reorganization) and will not (with respect to the Stage 2 Reorganization and the
transactions contemplated hereby), with or without the giving of notice or the
lapse of time or both, conflict with, result in the breach or termination of any
provision of, constitute a Default under, result in the acceleration of the
performance of an obligation of the CRL Business, or result in the creation of a
lien, charge or encumbrance upon any of the CRL Business Assets pursuant to any
of the organizational documents of Recap Subco, or any Recap Subsidiary, or any
Contract to which Seller Parent (with respect to the CRL Business), any Seller
(with respect to the CRL Business), Recap Subco or any Recap Subsidiary is a
party or by which Seller Parent (with
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respect to the CRL Business), any Seller (with respect to the CRL Business),
Recap Subco or any Recap Subsidiary or any of the CRL Business Assets is bound,
except for such conflicts, breaches, terminations, Defaults, accelerations,
liens, charges or encumbrances which would not, individually or in the
aggregate, reasonably be expected to result in Costs in excess of $350,000.
Seller Parent has delivered to Buyer a true, complete and correct copy of each
agreement or other document relating to the Stage 1 Reorganization prior to the
date hereof.
3.5 Purchased Shares in Merger. The Purchased Shares are duly
authorized, validly issued, fully paid and non-assessable. The issuance of the
Purchased Shares in the Merger are not subject to any preemptive, right of first
refusal, first offer, or other rights on behalf of any Person. At the Closing,
upon the issuance of the Purchased Shares to the Buyer in the Merger, Buyer will
have good and valid title to the Purchased Shares free and clear of all liens,
restrictions or other encumbrances of any kind.
3.6 Financial Statements.
3.6.1 Seller Parent has delivered to Buyer the most recent draft of
the consolidated balance sheets of the CRL Business as of December 26, 1998 and
December 27, 1997, and the related consolidated statements of income, changes in
shareholder's equity, and cash flows, including the notes thereto, for each of
the three years in the period ended December 26, 1998 (the "Draft Audited
Financial Statements"). Seller Parent has also delivered to Buyer the most
recent draft of the unaudited consolidated balance sheet of the CRL Business as
of June 26, 1999, and the related unaudited consolidated statements of income
and cash flows, including the notes thereto, for the six-month periods ended
June 26, 1999 and June 27, 1998 (collectively, the "Draft Unaudited Financial
Statements" and together with the Draft Audited Financial Statements, the "Draft
Financial Statements"). Upon delivery of the Financial Statements to Buyer
pursuant to Sections 5.21.1 and 5.21.2, they will have been prepared from the
books and records of the CRL Business and in accordance with GAAP consistently
applied and maintained throughout the periods indicated (except that the
Unaudited Financial Statements will not include comprehensive footnotes) and
will fairly present in all material respects the financial condition of the CRL
Business as at their respective dates and the results of its operations and cash
flows for the periods covered thereby. Upon delivery of the Unaudited Financial
Statements to Buyer pursuant to Section 5.21.2, they will include all
adjustments, which consist only of normal recurring adjustments, necessary for
such fair presentation.
3.6.2 Notwithstanding anything contained herein to the contrary,
neither Seller Parent nor Recap Co make any representation or warranty as to any
tax or accounting treatment which may or may not be available to Recap Co or
Buyer upon consummation of the transactions contemplated by this Agreement,
including the availability of any step-up in basis for tax purposes or the
availability of leveraged recapitalization accounting treatment and the
existence of goodwill (or the amount thereof) that is or may be required to be
in any financial statements of Recap Co for periods after the Closing Date.
3.7 Absence of Undisclosed Liabilities. Except as set forth in or
reserved against in the Balance Sheet and except as set forth in the Disclosure
Schedule, the CRL Business does not have any liabilities of any nature (whether
accrued, absolute, contingent or otherwise, whether due or to become due, and
whether or not the amount thereof is readily ascertainable or required
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by GAAP to be disclosed on a balance sheet (or a footnote thereto)), except for
current liabilities (determined in accordance with GAAP consistently applied)
incurred after the Balance Sheet Date in the ordinary course of business
consistent with past practice; provided, however in no event shall the
representation and warranty contained in this Section 3.7 cover or be deemed to
cover any matter, subject, category or event which is covered by or addressed in
any other representation or warranty of Seller Parent contained in this
Agreement.
3.8 Absence of Certain Changes. Except as set forth in the Disclosure
Schedule, since the Balance Sheet Date, the CRL Business has been conducted in
the ordinary course of business consistent with past practice, and other than in
the ordinary course of business, there has not been with respect to the CRL
Business any: (i) sale, assignment, pledge, hypothecation or other transfer of
any of the CRL Business Assets which, individually or in the aggregate, could
reasonably be expected to have a value in excess of $350,000, except for the
sale of inventory, collection of accounts receivable and the disposal of
obsolete or worn out equipment, in any case in the ordinary course of business
consistent with past practice, (ii) termination or material amendment of any
Material Contract, (iii) suffered any damage, destruction or other casualty loss
(whether or not covered by insurance) which, individually or in the aggregate,
have resulted or are reasonably likely to result, in Costs in excess of
$350,000, (iv) except for salary, bonuses and incentive compensation paid or
adjusted in the ordinary course of business consistent with past practices,
increase or amend the compensation payable or to become payable to any Highly
Compensated Employee or increase or amend any employee benefit plan, payment or
arrangement for any such Highly Compensated Employee; (v) labor dispute or, to
the Knowledge of Seller Parent, threatened labor dispute involving any Highly
Compensated Employee or any group of employees, (vi) actual or threatened
dispute with, or loss of business from, any material customer or supplier, or to
the Knowledge of Seller Parent, any event or circumstances which could
reasonably be expected to result in any such dispute or loss of business, (vii)
change in the method or procedures for billing or collection of customer
accounts or recording of customer accounts receivable or reserves for doubtful
accounts, or any method of accounting or accounting principles, (viii)
cancellation of debts or waiver of any claim or right which could reasonably be
expected to have a value, individually or in the aggregate, in excess of
$350,000, (ix) agreements or commitments for capital expenditures in excess of
$350,000 (individually or in the aggregate) other than as set forth in the 1999
capital expenditure budget of the CRL Business heretofore delivered to Buyer or
other than as approved by Buyer in writing, (x) security interest, lien or other
encumbrances with respect to any of the CRL Business Assets other than Permitted
Encumbrances, (xi) adverse change which is reasonably likely to have a CRL
Business Material Adverse Effect, (xii) amendment of any charter, by-laws or
other governing documents of Recap Subco or any Recap Subsidiary, (xiii)
employment or consulting agreement entered into with any Employee or any
increase in the compensation of any Employee, except for increases in the
ordinary course of business consistent with past practice or as a result of any
collective bargaining, employment or other agreement, or pursuant to any policy
or any bonus, pension, profit-sharing or other plan or commitment set forth in
the Disclosure Schedule, (xiv) loans or any other transaction with any Affiliate
other than transactions entered into in the ordinary course of business
consistent with past practice, (xv) establishment, amendment or contribution to
any pension, retirement, profit sharing, or stock bonus plan or multiemployer
plan covering any of the employees of the CRL Business, except as required by
Law or in accordance with past practice, or (xvi) an agreement to do any of the
foregoing.
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3.9 Entire CRL Business. Except for the Excluded Assets or as set
forth on Schedule 3.9 of the Disclosure Schedule and except for such assets or
rights the failure of which to have would be reasonably likely to result in
Costs in excess of $350,000, the CRL Business Assets constitute all of the
assets, properties and rights used to conduct the CRL Business as conducted on
the date of this Agreement and will constitute all of the assets, properties and
rights used to conduct the CRL Business on the Closing Date.
3.10 Legal Proceedings. Except as described in the Disclosure
Schedule, there is no litigation, proceeding, action, suit, order, judgment or
decree before, of or by, or to the Knowledge of Seller Parent, investigation by,
any Governmental Entity or any claim in writing outside of the ordinary course
of business which is pending against Seller Parent, any Seller or any CRL
Company with respect to the CRL Business or, to the Knowledge of Seller Parent,
threatened in writing against Seller Parent, any Seller or any CRL Company or
the CRL Business: (i) relating to the CRL Business Assets or the CRL Business as
to which there is a reasonable likelihood of an outcome or outcomes that would,
individually or in the aggregate, reasonably be expected to result in Costs in
excess of $350,000, or (ii) which seeks to question, delay or prevent the
consummation of the transactions contemplated by this Agreement or the Internal
Reorganization.
3.11 Employees and Labor Relations Matters.
3.11.1 The Disclosure Schedule contains a list of all employees of
the CRL Business whose projected 1999 annual base compensation equals or exceeds
$100,000 (each, a "Highly Compensated Employee").
3.11.2 Except as described in the Disclosure Schedule, to the
Knowledge of Seller Parent, there are no strikes, walk-outs, lock-outs or other
concerted work actions or union organization activity involving a material
number of employees of the CRL Business pending or threatened with respect to
the CRL Business which, individually or in the aggregate, could reasonably be
expected to result in Costs in excess of $350,000. Neither Recap Subco nor any
Recap Subsidiary nor any Seller is a party to any collective bargaining
agreements with respect to the CRL Business with any labor union or other
representative of employees with respect to employees of the CRL Business
located in the United States.
3.11.3 Except as set forth in the Disclosure Schedule, no CRL Company
nor any Seller is a party to any collective bargaining agreements with any labor
union or other representative of employees or any works' council or similar
entity under applicable Laws with respect to employees of the CRL Business
located outside of the United States, including local agreements, amendments,
supplements, letters and memoranda of understanding of any kind, nor, to the
Knowledge of Seller Parent, is there any pending or threatened union
organization activity by or among any such employees.
3.11.4 Except as set forth in the Disclosure Schedule, there are no
material violations of any Federal, state, local or foreign statutes,
ordinances, rules, regulations, orders, directives or other Laws with respect to
the employment of individuals by, or the employment practices or work conditions
of, Recap Subco or any Recap Subsidiary or any Seller with respect the conduct
of the CRL Business, or the terms and conditions of employment, wages and hours
of employees
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of the CRL Business. Neither Recap Subco nor any Recap Subsidiary
nor any Seller with respect to the CRL Business is engaged in any unfair labor
practice or other unlawful employment practice and, except as set forth in the
Disclosure Schedule, there are no charges of unfair labor practices or other
employee-related complaints pending or, to the Knowledge of Seller Parent,
threatened against any such Person before the National Labor Relations Board,
the Equal Employment Opportunity Commission, the Occupational Safety and Health
Review Commission, the Department of Labor or any other Governmental Entity.
3.12 CRL Business Tangible Assets; Real Property.
(a) Except as set forth in the Disclosure Schedule, as of the Closing
Date, (i) Recap Subco or one of the Recap Subsidiaries will have good, valid and
marketable title to all of the CRL Business Assets which constitute owned real
property, (ii) Recap Subco or one of the Recap Subsidiaries will have good and
valid title to all of the CRL Business Assets which constitute personal, mixed
or other (except Intellectual Property, as to which Section 3.13 relates)
property, (iii) Recap Subco or one of the Recap Subsidiaries will have a valid
and binding leasehold interest in all of the CRL Business Assets which
constitute leased property, and (iv) Recap Subco or one of the Recap
Subsidiaries will have good and valid title to the percentage of outstanding
capital stock or other equity interests of all of the Recap Subsidiaries as set
forth in Schedule 3.3 of the Disclosure Schedule, in each case, except to the
extent that such CRL Business Assets have been sold or otherwise disposed of
prior to the Closing Date in the ordinary course of business or otherwise in
accordance with this Agreement, and in each case free and clear of all liens,
charges and other encumbrances of any kind, except Permitted Encumbrances.
(b) The Disclosure Schedule sets forth a complete and accurate list
of all real property leased to or owned by any of the CRL Companies and all
other real property in which any of the CRL Companies has any interest
(collectively, the "Real Property").
3.13 Intellectual Property. Except as described in the Disclosure
Schedule, as of the Closing Date, Recap Subco or one of the Recap Subsidiaries
will own good and valid title to, or be licensed to use, all material
Intellectual Property used to conduct the CRL Business as presently conducted.
Except as set forth in the Disclosure Schedule, to the Knowledge of Seller
Parent (i) there are no actions or proceedings pending or threatened in writing
which challenge the CRL Business' right to use any of the Intellectual Property
necessary to conduct the CRL Business, and (ii) neither Seller Parent nor any of
its Affiliates has received any written notice of, nor has knowledge of any
facts which indicate the likelihood of, any infringement by the CRL Business as
presently conducted of the trademark rights of others in any manner which would,
individually or in the aggregate, reasonably be expected to result in Costs in
excess of $350,000 and (iii) neither Seller Parent nor any of its Affiliates has
received any written notice of, nor has knowledge of any facts which indicate
the likelihood of, any infringement by, or any conflict with any third party
with respect to, the patents included in the Intellectual Property (including,
without limitation, any demand or request that Seller Parent or its Affiliates
license any rights from a third party). Notwithstanding anything to the contrary
contained in this Agreement, except for the representations and warranties
contained in this Section 3.13, neither Seller Parent nor any other Person makes
any express or implied representation or warranty on behalf of Seller Parent,
Recap Subco or any Recap Subsidiary with respect to Intellectual Property.
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3.14 Compliance with Applicable Laws. Except as set forth in the
Disclosure Schedule, and without admitting any liability with respect thereto
(except to a Buyer Indemnified Party in the event of a breach of the
representation and warranty contained in this Section 3.14 which entitles such
Buyer Indemnified Party to indemnification pursuant to Section 8.2(a)), the CRL
Business and each of Seller Parent (with respect to the CRL Business), Sellers
(with respect to the CRL Business), Recap Subco and the Recap Subsidiaries, has
been and is operated and conducted so as to comply with all applicable Laws,
except where the failure to comply with such Laws would not, individually or in
the aggregate, reasonably be expected to result in Costs in excess of $350,000.
Except as described in the Disclosure Schedule, as of the Closing Date, to the
Knowledge of Seller Parent, Recap Subco and Recap Subsidiaries shall have all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of each Governmental Entity required for the ownership of the CRL
Business Assets and conduct of the CRL Business as presently conducted
(collectively, "Permits"), except where the failure to have such licenses,
permits, consents, approvals, authorizations, qualifications and orders would
not, individually or in the aggregate, reasonably be expected to result in costs
in excess of $350,000.
3.15 Employee Benefit Plans.
3.15.1 The Disclosure Schedule sets forth with respect to all United
States locations of the CRL Business each pension, profit-sharing, savings,
bonus, incentive or deferred compensation, severance pay, vacation pay, medical,
life insurance, welfare or other employee benefit plan in which employees of
Recap Subco or any of the Recap Subsidiaries participate or that Recap Subco or
any of the Recap Subsidiaries maintains or sponsors, or to which Recap Subco or
any of the Recap Subsidiaries is required to make contributions. All pension,
profit-sharing, savings, bonus, incentive or deferred compensation, severance
pay, medical, life insurance, welfare or other employee benefit plans within the
meaning of Section 3(3) of ERISA in which the U.S. employees of Recap Subco or
any of the Recap Subsidiaries participate (such plans and related trusts,
insurance and annuity contracts, funding media and related agreements and
arrangements, other than any "multiemployer plan" (within the meaning of Section
3(37) of ERISA), being hereinafter referred to as the "Benefit Plans" and any
such multiemployer plans being hereinafter referred to as the "Multiemployer
Plans") comply with all requirements of the Department of Labor (the "DOL") and
the IRS, and with all other applicable Laws, except where the failure to comply
with such Laws (individually or in the aggregate) would not reasonably be
expected to result in Costs in excess of $350,000. The CRL Companies have
furnished to Buyer copies of all Benefit Plans and all financial statements,
actuarial reports and annual reports and returns filed with the IRS with respect
to such Benefit Plans for a period of two years prior to the date hereof. To the
Knowledge of Seller Parent, such financial statements, actuarial reports and
annual reports and returns are true and accurate in all material respects.
3.15.2 Except as set forth in the Disclosure Schedule, each Benefit
Plan intended to qualify under Section 401(a) of the Code has received a
favorable determination letter from the IRS as to its qualification under
Section 401(a) of the Code, and nothing has occurred in the operation of any
such Benefit Plan which, either individually or in the aggregate, would
reasonably be expected to cause the loss of such qualification or the imposition
of any liability, penalty or tax under ERISA or the Code which would reasonably
be expected to result in Costs in excess of $350,000.
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3.15.3 No Benefit Plan which is a "defined benefit plan" (within the
meaning of Section 3(35) of ERISA) (hereinafter referred to as the "Defined
Benefit Plans") has incurred an "accumulated funding deficiency" (within the
meaning of Section 412(a) of the Code), whether or not waived.
3.15.4 Except as set forth in the Disclosure Schedule, in the last
six (6) years there has been no "reportable event" (within the meaning of
Section 4043 of ERISA) for which there has been a nonwaiveable notice
requirement imposed under Section 4043 of ERISA with respect to any Defined
Benefit Plan.
3.15.5 To the Knowledge of Seller Parent, no "prohibited transaction"
(within the meaning of Section 406 of ERISA or Section 4975(c) of the Code) has
occurred with respect to any Benefit Plan.
3.15.6 None of the CRL Companies has incurred any liability to the
PBGC, except for required premium payments. No notice of termination has been
filed by the plan administrator (pursuant to Section 4041 of ERISA) or issued by
the PBGC (pursuant to Section 4042 of ERISA) with respect to any Benefit Plan
subject to ERISA. There has been no termination of any Defined Benefit Plan or
any related trust by any of the CRL Companies.
3.15.7 As of the date of the most recent actuarial report, the excess
of the aggregate present value of accrued benefits over the aggregate value of
the assets of any Defined Benefit Plan (computed both on a termination basis and
on an ongoing basis) is not more than $-0-, and there are no unfunded vested
benefits (within the meaning of PBGC Reg. ss. 4006.4) with respect to any
Defined Benefit Plan.
3.15.8 There are no overdue contributions which are required to be
made by any of the CRL Companies to trusts in connection with any Benefit Plan
that is a "defined contribution plan" (within the meaning of Section 3(34) of
ERISA).
3.15.9 Other than claims in the ordinary course for benefits with
respect to the Benefit Plans, there are no actions, suits or claims (including
claims for income taxes, interest, penalties, fines or excise taxes with respect
thereto) pending with respect to any Benefit Plan, or, to the Seller Parent's
Knowledge, any circumstances which would reasonably be expected to give rise to
any such action, suit or claim (including claims for income taxes, interest,
penalties, fines or excise taxes with respect thereto).
3.15.10 All material reports, returns, notices and similar documents
with respect to the Benefit Plans required to be filed with the IRS, the DOL,
the PBGC or any other Governmental Entity have been so filed.
3.15.11 Except as set forth in the Disclosure Schedule, none of the
CRL Companies has any obligation to provide health or other welfare benefits to
former, retired or terminated employees in the CRL Business, except as
specifically required under Section 4980B of the Code or Section 601 of ERISA.
Each of the CRL Companies has complied with the notice and continuation
requirements of Section 4980B of the Code and Section 601 of ERISA and the
regulations thereunder.
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3.15.12 None of the CRL Companies maintains, sponsors or contributes
to and has never maintained, sponsored or contributed to any Multiemployer Plan.
3.15.13 The Disclosure Schedule sets forth all benefit plans,
contracts and arrangements covering non-U.S. CRL Business employees ("Non-U.S.
Benefit Plans"). Each of the CRL Companies and Sellers is and following the
Stage 2 Reorganization each of Recap Subco and each Recap Subsidiary will be in
compliance with applicable Laws and collective bargaining agreements with
respect to all Non-U.S. Benefit Plans except where the failure to comply with
such Laws and agreements (individually or in the aggregate) would not reasonably
be expected to result in Costs in excess of $350,000. Except as set forth in the
Disclosure Schedule, there are no unfunded liabilities (determined in accordance
with GAAP) with respect to any Non-U.S. Benefit Plans that are defined benefit
plans.
3.16 Environmental Matters. Except as set forth in the Disclosure
Schedule:
(a) each of the CRL Companies has duly complied with, and the CRL
Business is conducted and has been conducted in substantial compliance with, all
Environmental Laws, except where the failure to comply with such Laws
(individually or in the aggregate) would not reasonably be expected to result in
Costs in excess of $350,000, and each of the CRL Companies has provided Buyer
with copies of all Phase I and Phase II environmental site assessments and other
material reports, notices and similar materials in their possession and related
to Environmental Laws or Environmental Claims;
(b) none of the CRL Companies has received written notice of, nor are
there any facts to Seller Parent's Knowledge which can reasonably be expected to
give rise to, any Environmental Claim against or affecting any of the CRL
Companies in the conduct or operation of the CRL Business as currently
conducted;
(c) none of the CRL Companies, nor, to the Knowledge of Seller
Parent, any other Person, has generated, treated, transported, stored, recycled,
discharged, emitted, disposed of or released any Hazardous Substances or
arranged for the generation, treatment, transport, storage, recycling,
discharge, emission, disposal or release of any Hazardous Substances, which
could reasonably be expected to give rise to any Environmental Claim or any
liability or corrective or remedial obligation of any of the CRL Companies in
the conduct or operation of the CRL Business under any Environmental Laws,
except for such Environmental Claims, liabilities or obligations which
(individually or in the aggregate) would not reasonably be expected to result in
Costs in excess of $350,000;
(d) none of the Real Property, or property to which any of the CRL
Companies has transported or arranged for the transportation of any Hazardous
Substances, is listed on the National Priorities List promulgated pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), on CERCLIS (as referred to in CERCLA) or on any
similar federal or state list of sites requiring investigation or clean-up; and
(e) The New Jersey Industrial Site Recovery Act, N.J.S.A. 13:1 K-6 et
seq., and the regulations promulgated thereunder, will not be applicable to any
of the Real Property
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upon consummation of the transactions contemplated by this Agreement or the
Internal Reorganization. The Connecticut Transfer Act, C.G.S.A., Chapter 445,
22a-134 et seq., and the regulations promulgated thereunder, will not be
applicable to any of the Real Property upon consummation of the transactions
contemplated by this Agreement or the Internal Reorganization.
3.17 Tax Matters.
3.17.1 Except as disclosed in the Disclosure Schedule: (i) Recap
Subco and each Recap Subsidiary has filed all material Tax Returns required to
be filed by it, or requests for extensions to file such Tax Returns have been
timely filed, granted and have not expired; (ii) Recap Subco and each Recap
Subsidiary has paid all Taxes which have become due as shown on such Tax
Returns; (iii) no material claim for unpaid Taxes is being asserted in writing
by a Tax authority with respect to Recap Subco or any Recap Subsidiary; and (iv)
all Tax sharing agreements to which Recap Subco and any Recap Subsidiary is a
party ("Tax Sharing Agreements") will be terminated as of the Closing Date and
after the Closing Date none of Recap Subco nor any Recap Subsidiary shall have
any liability with respect to any Tax under any such Tax Sharing Agreement.
3.17.2 CRL is a member of Seller Parent's consolidated federal income
tax group, eligible to file the Section 338(h)(10) Election.
3.17.3 No election under Section 341(f) of the Code has been or will
be made to treat Recap Subco or any Recap Subsidiary as a "consenting
corporation" as defined therein.
3.17.4 The accrual for Taxes reflected in the Financial Statements
accurately reflects the total amount of unpaid Taxes arising from or with
respect to the CRL Business Assets or the operation or conduct of the CRL
Business on or prior to the Closing Date, whether or not disputed and whether or
not presently due and payable, of Recap Subco and each Recap Subsidiary as of
the close of the periods covered by the Financial Statements. Adequate accruals
and reserves have been made in the Financial Statements and the books and
records of each of Recap Subco and each Recap Subsidiary for the payment of all
unpaid federal, state, local, foreign and other Taxes arising from or with
respect to the CRL Business Assets or the operation or conduct of the CRL
Business on or prior to the Closing Date for all periods through the respective
dates thereof, whether or not yet due and payable and whether or not disputed.
3.18 Contracts. Except as set forth in the Disclosure Schedule, all
written and, to the Knowledge of Seller Parent, all oral contracts, employment
agreements, consulting agreements, service agreements, guarantees (or other
agreements or commitments relating to contingent obligations), purchase
commitments for materials and other services, advertising and promotional
agreements, leases, license agreements and other agreements pertaining to the
CRL Business that are included in the CRL Business Assets ("Contracts") which
(a) (i) may be performed in whole or in part after the Closing Date; (ii)
individually involve payments or other financial commitments as of the date of
this Agreement which, by its terms, must be in excess of $100,000 during any
twelve month period; (iii) extend more than twelve (12) months after the date of
this Agreement; and (iv) are not terminable without penalty within ninety (90)
days or (b) are set forth in Schedule 3.18 of the Disclosure Schedule
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(collectively the "Material Contracts") are in full force and effect and are
valid and enforceable in accordance with their respective terms except where the
failure to be in full force and effect and valid and enforceable would not,
individually or in the aggregate, reasonably be expected to result in Costs in
excess of $350,000. The Disclosure Schedule sets forth a complete and correct
list of each Material Contract and all powers of attorney, if any, relating to
the conduct or operation of the CRL Business. Except as set forth in the
Disclosure Schedule, the CRL Business is not in Default in the performance of
any obligation under any Contract except for such Defaults which, individually
or in the aggregate, would not reasonably be expected to result in Costs in
excess of $350,000, and the Celtics Business has not received written notice or,
to Seller Parent's Knowledge, oral notice that any party to any Material
Contract intends to terminate, amend or modify any such Material Contract. To
the Knowledge of Seller Parent, no other party or parties to any Material
Contract is in Default in the performance of any obligation thereunder except
for such Defaults which, individually or in the aggregate, would not reasonably
be expected to result in Costs in excess of $350,000.
3.19 Certain Fees. With the exception of fees and expenses payable to
Morgan Stanley & Co. Inc., which shall be paid by Seller Parent, none of Seller
Parent, any Seller, any CRL Company nor any of their Affiliates has employed any
broker or finder or incurred any other liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated by
this Agreement.
3.20 Year 2000. Except as set forth in the Disclosure Schedule, to
the Knowledge of Seller Parent all computer software, hardware and related
systems (including without limitation embedded microcontrollers in non computer
equipment) (collectively, "Computer Systems") included in the CRL Business
Assets are either (i) Year 2000 Compliant or (ii) designated (in the 1999
capital expenditure budget of the CRL Business heretofore delivered to Buyer) to
receive upgrades or modifications to become Year 2000 compliant, except where a
failure of such Computer Systems to be Year 2000 Compliant would not
(individually or in the aggregate) reasonably be expected to result in Costs in
excess of $350,000. For purposes of this Section 3.20, "Year 2000 Compliant"
shall mean that the Computer Systems are designed, have been modified or will be
modified to be able to process accurately all date/time data to be used prior
to, during, and after the calendar year 2000 A.D., without error, aborts, delays
or other interruptions relating to the processing, calculation, comparing,
sequencing or other use of date/time data from, into and between the twentieth
and twenty-first centuries.
3.21 Insider Interests; Intercompany Transactions. Except as set
forth in the Disclosure Schedule, no stockholder, officer, director or Affiliate
of Seller Parent or any CRL Company (a) is presently a party to any transaction,
agreement or arrangement pertaining to the CRL Business or (b) owns any interest
in any of the CRL Business Assets.
3.22 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article 3 or in any certificate
executed by Seller Parent, any CRL Company or any Seller pursuant to Section
6.2.3, neither Seller Parent nor any other Person makes any express or implied
representation or warranty on behalf of Seller Parent, any CRL Company or any
Seller.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER AND BUYER PARENT
Buyer and Buyer Parent, jointly and severally, represent and warrant
to Seller Parent and each of the Sellers as follows:
4.1 Organization, Good Standing and Power. Buyer is a limited
liability company and Buyer Parent is a limited partnership, in each case, duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation or formation, as the case may be, and has all
requisite limited partnership or limited liability company power and authority
to own, lease and operate the assets owned by it and to conduct the business as
now conducted by it. Each of Buyer and Buyer Parent has all requisite limited
partnership or limited liability power and authority to enter into this
Agreement and the Recapitalization Documents to which it is a party and to
perform its obligations hereunder and thereunder. Each of Buyer and Buyer Parent
is duly authorized, qualified or licensed to do business as a foreign
corporation or entity and, where such concept is applicable, is in good
standing, in each of the jurisdictions in which its ownership of assets owned by
it, or the conduct of the business as now conducted by it, requires such
authorization, qualification or licensing, except where the failure to so
qualify or to be in good standing would not, individually or in the aggregate,
reasonably be expected to have a Buyer Material Adverse Effect. 4.2
Authorization and Validity of Agreements. The execution, delivery, and
performance by Buyer and Buyer Parent of this Agreement and the consummation by
Buyer and Buyer Parent of the transactions contemplated hereby have been duly
authorized by all necessary limited liability company or partnership action. No
other limited liability company or partnership action on the part of Buyer or
Buyer Parent is necessary for the authorization, execution, delivery and
performance by Buyer or Buyer Parent of this Agreement and the consummation by
Buyer or Buyer Parent of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by each of Buyer and Buyer Parent and
constitutes a valid and legally binding obligation of each of Buyer and Buyer
Parent, enforceable against each of Buyer and Buyer Parent in accordance with
its terms.
4.3 Consents and Approvals; No Conflict. Except for the pre-merger
notification requirements of the HSR Act, the expiration or early termination of
the waiting periods thereunder and such filings, notifications and approvals as
are required under foreign antitrust or competition Laws, the execution,
delivery and performance of this Agreement by Buyer or Buyer Parent, and the
consummation by each of them of the transactions contemplated hereby and
thereby:
(a) will not violate, or require any consent, approval, filing or
notice to be made by the Buyer or Buyer Parent under, any provision of any Law
applicable to the Buyer or Buyer Parent; and
(b) will not conflict with, result in the breach or termination of
any provision of, constitute a Default under, result in the acceleration of the
performance of an obligation of Buyer or Buyer Parent under, or result in the
creation of a lien, charge or encumbrance upon the assets of the Buyer or Buyer
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Parent pursuant to: (i) the operating agreement, partnership agreement or
by-laws (or analogous organizational documents) of Buyer or Buyer Parent, or
(ii) any indenture, mortgage, deed of trust, lease, licensing agreement,
contract, instrument or other agreement to which Buyer or Buyer Parent is a
party or by which Buyer or Buyer Parent or any of their respective assets is
bound.
4.4 Legal Proceedings. There is no litigation, proceeding or
governmental investigation pending or, to the Knowledge of Buyer, threatened
against Buyer or Buyer Parent, which seeks to question, delay or prevent the
consummation of, or would impair the ability of Buyer or Buyer Parent to
consummate, the transactions contemplated by this Agreement.
4.5 Certain Fees. With the exception of fees and expenses payable to
DLJ Securities Corp. and payable as contemplated by the Commitment Letters,
which shall be paid by Recap Co or Recap Subco on the Closing Date, none of
Buyer, Buyer Parent nor any of their Affiliates has employed any broker or
finder or incurred any other liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby or
thereby.
4.6 Financing. Buyer has heretofore delivered to Seller Parent true
and complete copies of the Commitment Letters. As of the date of this Agreement,
the Commitment Letters are in full force and effect and have not been rescinded,
amended or modified in any respect.
4.7 Access and Investigation. In connection with the negotiation and
execution of this Agreement, Buyer's Group has performed a comprehensive
investigation of the CRL Business and, with its advisors, has made its own
analysis and evaluation of the CRL Business, the Purchased Shares and Assumed
Liabilities and has received from Seller Parent or its Affiliates or had access
to all information that Buyer or Buyer Parent deems necessary or desirable in
deciding whether to acquire the Purchased Shares. Buyer's Group has had the
opportunity to ask questions of and receive answers from officers and other
representatives of Seller Parent, Recap Co and other management of the CRL
Business regarding the terms and conditions of its acquisition of the Purchased
Shares. In entering into this Agreement, Buyer's Group has relied solely upon
its own investigation and analysis and the representations, warranties and other
provisions of this Agreement and acknowledges that none of the Seller Parent,
Recap Co or any other of their Affiliates, employees, agents or representatives
makes or has made any representation, express or implied, with respect to the
CRL Business or the Purchased Shares except as expressly set forth in this
Agreement or any certificate delivered pursuant hereto. Buyer, by reason of its
business or financial experience, or the business and financial experience of
its professional advisors has the capacity to evaluate and protect its own
interests in the acquisition of the Purchased Shares. Buyer, and each of its
equity owners, has the financial capacity to bear the risk of, including the
entire loss of, its investment in the Purchased Shares. Nothing contained in
this Section 4.7 shall prohibit or in any way limit Buyer and Buyer Parent from
relying upon the representations and warranties of Seller Parent contained in
Article 3 nor from being indemnified pursuant to Article 8.
4.8 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article 4 or in any
certificates or other documents executed by Buyer or Buyer Parent in connection
with the transactions contemplated by this Agreement, neither Buyer, Buyer
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Parent nor any other Person makes any express or implied representation or
warranty on behalf of Buyer or Buyer Parent.
ARTICLE 5
COVENANTS OF THE PARTIES
5.1 Access to Information; Confidentiality. Each of Seller Parent and
Recap Co agrees that, during the period commencing on the date hereof and ending
on the Closing Date, it will (a) give or cause to be given to Buyer and its
counsel, financial advisors, auditors, lenders, investors and their respective
authorized representatives in connection with the Recapitalization
(collectively, "Representatives") access to the properties, books and records of
the CRL Business and each of the CRL Companies to the extent that Buyer may from
time to time reasonably request such access, (b) furnish or cause to be
furnished to Buyer or its Representatives such financial and operating data and
other information relating to the CRL Business, the CRL Business Assets and each
of the CRL Companies as Buyer may from time to time reasonably request, (c)
provide Buyer and its Representatives such access as Buyer may reasonably
request to the representatives, officers and employees of its Affiliates
actively involved in the CRL Business, and (d) assist Buyer and its
Representatives as reasonably requested by Buyer in connection with the
Recapitalization and related transactions, provided that such assistance will
not unreasonably interfere with the conduct of the CRL Business; provided,
however, that (i) access to the properties, books, records, representatives,
officers and employees shall only be provided during normal business hours, upon
reasonable advance notice and in such manner as will not unreasonably interfere
with the operation of the CRL Business, (ii) all requests for access shall be
directed to Alan H. Farnsworth, Vice President Business Development of Seller
Parent, or such other person as Seller Parent shall designate from time to time,
and (iii) Seller Parent shall have the right to have a representative present at
all times access to properties, books, records representatives, officers and
employees is provided. Buyer agrees that, prior to the Closing, it will, and
will cause its Affiliates and Representatives to, continue to treat all
information so obtained from Seller Parent or any of its Affiliates as
"Confidential Information" under the Confidentiality Agreement entered into
between Seller Parent and Buyer dated January 4, 1999 (the "Confidentiality
Agreement"), and will continue to honor its obligations thereunder and that if
requested by Seller Parent, Buyer will cause any of its Representatives so
requested to enter into a written agreement acknowledging the terms of the
Confidentiality Agreement and agreeing to be bound thereby.
5.2 Approvals under Competition Laws.
5.2.1 Seller Parent and Buyer will, (i) as promptly as practicable
but in no event later than ten (10) Business Days after the date of this
Agreement, file with the United States Federal Trade Commission (the "FTC") and
the United States Department of Justice (the "DOJ") in materially accurate and
complete form, the notification and report form, if any, required for the
transactions contemplated hereby pursuant to the HSR Act and (ii) as promptly as
practicable, make such filings or notifications and seek such approvals as are
required for the transactions contemplated hereby under foreign antitrust or
competition Laws. Each of Seller Parent and Buyer shall furnish to the other
such necessary information and reasonable assistance as the other may request in
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connection with its preparation of any filing or submission that is necessary
under the HSR Act or under foreign antitrust or competition Laws. Seller Parent
and Buyer shall promptly notify the other of the status of any communications
with, and inquiries or requests for additional information from, the FTC, the
DOJ and the Governmental Entities which administer the foreign antitrust or
competition Laws and shall comply promptly with any such inquiry or request.
Each of Seller Parent and Buyer will use its Commercial Efforts to obtain as
promptly as possible any clearance required under the HSR Act and the foreign
antitrust or competition Laws for the consummation of the transactions
contemplated hereby.
5.2.2 Buyer and Buyer Parent shall take or cause to be taken, and
Seller Parent shall reasonably cooperate in connection therewith, any and all
reasonable actions, including any divestitures of assets of (i) Buyer and/or
Buyer Parent and/or their Affiliates and/or (ii) the CRL Business Assets, that
may be required by any Governmental Entity pursuant to the antitrust laws of the
United States or foreign antitrust or competition Laws in order to obtain
required consents or non-opposition to the transactions contemplated hereby from
the United States and other relevant jurisdictions or to permit the consummation
of the transactions contemplated hereby on terms and conditions consistent with
the terms of any judgment, decree or order issued by any court of competent
jurisdiction that may be in effect on the Closing Date; provided, however, that
Buyer shall not be required to violate any such judgment, decree or order, or to
effect or agree to effect any divestitures of assets of Buyer and/or Buyer
Parent and/or their Affiliates and/or the CRL Business Assets if the aggregate
annual revenues associated with all such divested assets of Buyer and/or Buyer
Parent and/or their Affiliates and/or the CRL Business Assets exceed $15,000,000
(individually or in the aggregate), using for the purposes of such calculation
the most recently completed fiscal year of Buyer and with respect to the CRL
Business, the fiscal year ended December 26, 1998; provided, however, that any
and all proceeds of any such divestiture of assets shall be the exclusive
property of Buyer (or Recap Subco or one of the Recap Subsidiaries as may be
designated by Buyer).
5.3 Conduct of the CRL Business Pending the Closing Date. Seller
Parent agrees that, except as permitted, required or contemplated by this
Agreement or any Recapitalization Document, or the Exhibits or Disclosure
Schedules attached hereto (including, without limitation, Schedule 5.3 of the
Disclosure Schedule) or thereto and except that none of the restrictions set
forth in this Section 5.3 shall apply to any of the Excluded Assets, during the
period between the date of this Agreement and the Closing Date, without the
prior written consent of Buyer which shall not be unreasonably withheld, delayed
or conditioned:
5.3.1 Seller Parent will, and will cause its Affiliates to, operate
the CRL Business only in the ordinary course of business consistent with past
practice;
5.3.2 Seller Parent will not, and will cause its Affiliates not to,
amend or modify in any material respect any Material Contract;
5.3.3 Seller Parent will not permit Recap Subco or any Recap
Subsidiary to amend its charter or by-laws (or analogous organizational
documents), except as may be required in connection with the consummation of the
transactions contemplated by this Agreement;
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5.3.4 Seller Parent will not permit Recap Subco or any Recap
Subsidiary to issue or agree to issue any additional shares of capital stock of
any class or series, or any securities convertible into or exchangeable for
shares of capital stock, or issue any options, warrants or other rights to
acquire any shares of capital stock;
5.3.5 Seller Parent will not, and will not permit any of its
Affiliates to: (i) sell, transfer, dispose of or encumber any of the CRL
Business Assets having a value, individually or in the aggregate, in excess of
$100,000, other than in the ordinary course of business consistent with past
practice; (ii) enter into any employment or consulting agreement with any
employee of the CRL Business or grant any increase in the compensation of any
such employee, except for increases in the ordinary course of business
consistent with past practice or as a result of any collective bargaining, any
industrial award or as required by any employment or other agreement, or
pursuant to any policy or any bonus, pension, profit-sharing or other plan or
commitment; (iii) make any loans or enter into any transaction with any
Affiliate other than transactions entered into in the ordinary course of
business consistent with past practice; (iv) establish, amend or contribute to
any pension, retirement, profit sharing, or stock bonus plan or multiemployer
plan covering any of the employees of the CRL Business except as required by Law
or in the ordinary course of business consistent with past practice; (v) waive,
cancel, sell or otherwise dispose of for less than the face value thereof any
material claim or right that the CRL Business has against others, except in the
ordinary course of business consistent with past practices; (vi) incur
indebtedness at any Joint Venture which would constitute Excluded Debt; or (vii)
commit, or enter into any agreement to do, any of the foregoing.
5.4 Consents. Seller Parent shall, at its sole cost and expense, use
its Commercial Efforts to promptly obtain the consents, approvals and
authorizations and to take the other actions set forth on Schedule 3.4. Buyer
shall, on Seller Parent's request, use its Commercial Efforts to assist Seller
Parent in obtaining such consents, approvals and authorizations and shall have
the right, if additional assurances with respect to the assumption of
obligations by Recap Subco or any of the Recap Subsidiaries after the Closing
Date are requested by the Person from whom consent, approval or authorization is
sought, participate, directly or through its Representatives, in the process of
obtaining such consents, approvals and authorizations. The forms, terms and
conditions of such consents, approvals and authorizations shall be subject to
the prior approval of Buyer, which shall not be unreasonably withheld or
delayed.
5.5 Tax Matters.
5.5.1 Seller Parent shall cause the CRL Business, Recap Subco and the
Recap Subsidiaries to be included in the consolidated federal income Tax Returns
of Seller Parent for any periods for which it is required to be so included, and
in any other required state, local and foreign consolidated, affiliated,
combined, unitary or other similar group income Tax Returns that include the CRL
Business, for all periods ending on or prior to the Closing Date. Seller Parent
shall prepare information (including schedules, worksheets and other data)
necessary, in Seller Parent's judgment, to include the CRL Business, Recap Subco
and the Recap Subsidiaries in such income Tax Returns for such periods. Seller
Parent shall timely prepare and file, or cause to be prepared and filed, all
income Tax Returns of or including the CRL Business, Recap Subco and the Recap
Subsidiaries for all taxable periods ending on or before the Closing Date and
shall pay, or cause to be paid, when due all income Taxes relating to such Tax
Returns.
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5.5.2 (a) Seller Parent shall have the right and obligation to
represent the interests of the CRL Business, Recap Subco or the Recap
Subsidiaries in any Tax audit or administrative or court proceeding relating to
Tax Returns for any periods or portions thereof ending on or prior to the
Closing Date.
(b) Following the Closing, in the event of an audit of Recap Subco or
any Recap Subsidiary as referred to in Section 5.5.3, Buyer shall execute, or
cause the appropriate Affiliate of Buyer to execute, a federal tax Form 2848 or
comparable Power of Attorney authorizing Seller Parent or Seller Parent's
designated representative to represent Recap Co or such Recap Subsidiary with
respect to income Taxes for which Seller Parent may be liable pursuant to this
Section 5.5 or Article 8.
5.5.3 Buyer shall promptly notify Seller Parent in writing upon
receipt by Buyer or any Affiliate of Buyer of notice of any pending or
threatened Tax audits or assessments of the CRL Business, Recap Subco or the
Recap Subsidiaries so long as any period or portion thereof prior to the Closing
Date remains open to the Knowledge of Buyer.
5.5.4 After the Closing Date, Buyer and Seller Parent shall provide
each other with such cooperation and information relating to the CRL Business,
Recap Subco or the Recap Subsidiaries as either party reasonably may request in
filing any Tax Return (or amended Tax Return) or refund claim, determining any
Tax liability or a right to a refund, conducting or defending any audit or other
proceeding in respect of Taxes or effectuating the terms of this Agreement. The
parties shall retain all Tax Returns, schedules, work papers and other material
documents relating thereto, until the seventh anniversary of the Closing Date
or, if later, the expiration of any relevant statute of limitations (and, to the
extent notified by any party, any extensions thereof) and, unless such Tax
Returns and other documents are offered and delivered to Seller Parent or Buyer,
as applicable, until the final determination of any Tax in respect of such
years. Any information obtained under this Section 5.5.4 shall be kept
confidential, except as may be otherwise necessary in connection with filing any
Tax Return (or amended Tax Return) or refund claim, determining any Tax
liability or a right to a refund, conducting or defending any audit or other
proceeding in respect of Taxes or otherwise effectuating the terms of this
Agreement. Notwithstanding the foregoing, neither Seller Parent nor Buyer, nor
any of their Affiliates, shall be required unreasonably to prepare any document,
or determine any information not then in its possession, in response to a
request under this Subsection 5.5.4; provided, however, no request shall be
deemed unreasonable if made in response to the request of a taxing authority for
information or documents not in the possession of the party receiving the
request nor otherwise reasonably available to it.
5.5.5 CRL will join with Buyer in making a timely election under
Section 338(h)(10) of the Code (the "Section 338(h)(10) Election") to treat the
Merger as the deemed sale of the assets of all or some (as elected by Buyer) of
Recap Co and the Recap Subsidiaries while such Persons are members of Seller
Parent's consolidated group for federal income tax purposes. If requested by
Buyer, CRL (unless there is a material detriment to CRL) will also join with
Buyer in making any similar election under state or local law, which if made
shall be treated as part of the Section 338(h)(10) Election. In order to effect
a timely Section 338(h)(10) Election, at the Closing, each of CRL and Buyer
shall jointly prepare and execute copies of IRS Form 8023 and all attachments
required to be filed therewith in accordance with the Code and the applicable
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regulations thereunder, which Form 8023 shall be completed by them to the extent
practicable at the time of the Closing in a manner consistent with the parties'
agreement as to the allocation of the "MADSP" among the assets of Recap Co and
the Recap Subsidiaries as set forth in Schedule 5.5.5 of the Disclosure Schedule
and shall be delivered to Buyer at the Closing. Following the Closing, Buyer
will complete the Form 8023 and will adjust any allocation to comply with the
requirements of Section 33 8(h)(10) of the Code and in a manner consistent with
provisions of Schedule 5.5.5 of the Disclosure Schedule, and will file the Form
8023 with the IRS (and any applicable state or local tax authority) with a copy
to CRL in order to effect a timely Section 338(h)(10) Election. CRL and Buyer
agree otherwise to take all necessary action to make a timely Section 338(h)(10)
Election with respect to the Merger, and shall otherwise cooperate fully with
each other in the making of such election and to comply with all substantive and
procedural requirements of Section 338(h)(10) of the Code, any applicable
regulations thereunder and any applicable provision of state or local law.
Except as required by applicable Law, neither CRL nor Buyer will take, nor
permit any Affiliate to take, for federal, state or local income Tax purposes,
any position inconsistent with the Section 338(h)(10) Election or the allocation
set forth in the Form 8023 filed by Buyer. Buyer will make a timely election
under Section 338(g) of the Code with respect to any Recap Subsidiary which is
incorporated in a jurisdiction other than the United States and shall comply
with all substantive and procedural requirements of Section 338(g) of the Code
and any applicable regulations thereunder, unless Buyer would suffer a material
detriment as a result of making such election.
5.6 Employee Matters.
5.6.1 During the period commencing on the Closing Date and ending on
the eighteen (18) month anniversary of the Closing Date, Buyer shall, or shall
cause Recap Subco and the Recap Subsidiaries to provide employee benefit plans,
programs and arrangements having benefits not less favorable in the aggregate to
the Employees of Recap Subco and the Recap Subsidiaries than the Benefit Plans
and Non-U.S. Benefit Plans, as applicable, provided that nothing in this
Agreement shall require Buyer, Recap Subco or any Recap Subsidiary to establish,
provide, sponsor or maintain any specific plan, program or arrangement or shall
require any such Person to continue the employment, or to refrain from modifying
or terminating the terms of employment of any Employee. In the case of any new
plan, program or arrangement, Buyer shall, or shall cause Recap Subco and the
Recap Subsidiaries to the extent permitted under applicable Law, provide that
periods of service with any of Recap Subco any Recap Subsidiary, any Seller or
any Affiliate of any of the foregoing Persons prior to the Closing Date shall be
credited for eligibility, vesting and benefits purposes (if applicable and
without duplication) with respect to such plan, program or arrangement, provided
that no service will be credited for purposes of calculating an employee's
benefit accrual under any Defined Benefit Plan or any Non-U.S. Benefit Plan that
is a defined benefit plan for any period of time that the employee did not
participate in such plan on or before the Closing Date.
5.6.2 For any mass layoff or plant closing which occurs on or after
the Closing Date, Buyer shall cause Recap Subco or the relevant Recap Subsidiary
to give any notice to the Employees which is required under the Worker
Adjustment and Retraining Notification Act or any similar federal, state, local
or foreign Law.
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5.6.3 On the Closing Date, Buyer shall have in effect and thereafter
maintain or cause Recap Subco and the Recap Subsidiaries to have in effect and
maintain all policies of worker's compensation, employer's liability or similar
insurance which are required by any Governmental Entity to be in effect as of
the Closing Date.
5.6.4 Buyer shall provide or shall cause Recap Subco or the Recap
Subsidiaries to provide continuation health care coverage pursuant to Part 6 of
Title I of ERISA to all current or former employees of Recap Subco, Recap
Subsidiaries and/or their predecessors and such individuals' qualifying
beneficiaries who are eligible for such coverage.
5.6.5 On the Closing Date, Seller Parent shall pay and discharge in
full all Excluded Debt other than Excluded Debt with respect to Joint Ventures
and terminate all related liens, security interests or other encumbrances in
respect of CRL Business Assets and comply and cause Recap Subco to comply with
their respective obligations under the Releases.
5.7 Additional Assurances.
5.7.1 After the Closing Date, Seller Parent shall promptly and shall
cause its Affiliates promptly to, and Buyer shall promptly and shall cause Recap
Co and the Recap Subsidiaries promptly to, take such additional actions and
execute any such additional documents and instruments as may be reasonably
necessary (i) to effectuate the transactions contemplated by this Agreement,
including to fully vest good and valid title to all of the CRL Business Assets
in Recap Subco and the Recap Subsidiaries, as applicable, and to fully vest good
and valid title in the Excluded Assets in Seller Parent or its Affiliates free
and clear of all liens, claims or other encumbrances except Permitted
Encumbrances, and (ii) to cause Seller Parent or its Affiliates to retain or
assume any Excluded Liabilities not retained or assumed by Seller Parent or an
Affiliate prior to or on the Closing Date, or to cause Recap Subco or any Recap
Subsidiary to assume any Assumed Liability not assumed by it prior to or on the
Closing Date. Prior to and after the Closing Date, Seller Parent agrees to
assist Buyer in any reasonable manner requested, and without unreasonable delay,
in the preparation of financial statements of the CRL Business, including the
interim unaudited financial statements at and for the three months ended March
27, 1999 and at and for nine months ended September 25, 1999, including so that
such financial statements can be presented in conformity with the accounting
rules of Regulation S-X under the Securities Act of 1933, as amended; provided
however, that Buyer shall bear any out-of-pocket costs and expenses incurred by
Seller Parent or any of its Affiliates in connection with providing such
assistance.
5.7.2 Notwithstanding anything to the contrary contained in this
Agreement, to the extent that the sale, assignment, transfer, conveyance or
delivery or attempted sale, assignment, transfer, conveyance or delivery of any
CRL Business Asset in the Internal Reorganization or any transaction
contemplated by this Agreement is prohibited by any applicable Law or would
require any Governmental Entity or other third party authorizations, approvals,
consents or waivers and such authorizations, approvals, consents or waivers
shall not have been obtained prior to the Closing and either such item(s) are
not a condition to Closing or Buyer shall have waived in writing the applicable
condition to Closing with respect to such item(s), this Agreement shall not
constitute a sale, assignment, transfer, conveyance or delivery, or any
attempted sale, assignment, transfer, conveyance or delivery thereof. Following
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the Closing, the parties shall use Commercial Efforts and shall cooperate with
each other to obtain promptly such authorizations, approvals, consents or
waivers. Pending such authorization, approval, consent or waiver, the parties
shall cooperate with each other in any reasonable and lawful arrangements
designed to provide to Buyer, Recap Co and the Recap Subsidiaries the benefits
and liabilities of use of such CRL Business Asset. Once such authorization,
approval, consent or waiver for the sale, assignment, transfer, conveyance or
delivery of a CRL Business Asset not sold, assigned, transferred, conveyed or
delivered at the Closing is obtained, Seller Parent shall and shall cause its
Affiliates to promptly assign, transfer, convey and deliver, or cause to be
assigned, transferred, conveyed and delivered, such CRL Business Asset to Recap
Subco or a Recap Subsidiary for no additional consideration free and clear of
all liens, claims or other encumbrances except Permitted Encumbrances. To the
extent that any such CRL Business Asset cannot be transferred or the full
benefits and liabilities of use of any such CRL Business Asset cannot be
provided to Buyer, Recap Subco and the Recap Subsidiaries following the Closing
pursuant to this Section 5.7, then Buyer and Seller Parent or one or more of its
Affiliates shall enter into such arrangements (including subleasing or
subcontracting if permitted) designed to provide to Recap Subco and the Recap
Subsidiaries the economic and operational equivalent of obtaining such
authorization, approval, consent or waiver and the performance by Recap Subco
and the Recap Subsidiaries of the obligations thereunder to the extent permitted
by Law.
5.7.3 Subject to Section 5.4, Buyer and Seller Parent shall cooperate
with each other and use their Commercial Efforts, as soon as practicable after
the Closing, to take all actions, if any are required, to transfer all permits,
authorizations and registrations issued to the CRL Business.
5.8 Updated Disclosure Schedule. Seller Parent shall prepare and
deliver to Buyer at least five (5) Business Days prior to the Closing an update
of the Disclosure Schedule for the sole purpose of disclosing events or other
matters which have occurred after the date of this Agreement other than as a
result of the breach of this Agreement by Seller Parent, any of the Sellers,
Recap Subco or Recap Co or occurred prior to the date of this Agreement but did
not require disclosure as of the date of this Agreement (an "Update"). In the
event of the delivery to Buyer of an Update which sets forth the occurrence or
existence of an event or other matter which would cause the condition set forth
in Section 6.2.1 hereof not to be satisfied (determined without regard to the
Update), Buyer shall have no obligation to complete the Closing of the
transactions contemplated by this Agreement and may terminate this Agreement
pursuant to and in accordance with the procedure set forth in Section 7.1.1(d)
(without regard to the twenty (20) day cure period); provided that in the event
that Buyer does not so terminate this Agreement and the Closing occurs, the
Disclosure Schedule shall be deemed to be amended as of the date of this
Agreement to include the events or other matters set forth in the Update for all
purposes of this Agreement, including Article 8.
5.9 Buyer's Insurance. From and after the Closing and at all times
until the Recap Co Sub Notes have been paid in full and Seller Parent and/or its
Affiliates cease to beneficially own any shares of Recap Co Common Stock, Buyer
shall cause Recap Co and the Recap Subsidiaries to procure and maintain in full
force and effect insurance coverage in such amounts, covering such risks and
liabilities and with such deductibles or self-insured retentions as is the
normal industry practice for businesses of similar size operating in similar
industries and markets and with similar financial conditions, including without
limitation, Directors and Officers Liability Insurance with annual limits in an
amount not less than $10,000,000 per occurrence and in aggregate.
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5.10 Cash Management. On the Closing Date, Seller Parent shall cause
the checking and all other applicable bank accounts of Recap Co and the Recap
Subsidiaries to have on deposit all amounts in good funds to pay in full on or
following the Closing Date all checks and drafts of the CRL Business issued but
not drawn on or prior to the Closing Date.
5.11 Company Acquisition Proposal. Seller Parent covenants and agrees
that, from and after the date of this Agreement and until the first to occur of
its termination pursuant to Article 7 or the Closing, neither it nor any of its
Affiliates nor any of its representatives shall directly or indirectly (a) take
any action to solicit or initiate any Company Acquisition Proposal (as
hereinafter defined), or (b) engage in discussions or negotiations with any
Person with respect to any Company Acquisition Proposal, or (c) disclose any
non-public information relating to the CRL Business or afford access to the
employees, properties, books or records of the CRL Business to any Person that
has made or, to Seller Parent's Knowledge is considering making, a Company
Acquisition Proposal. Within five (5) Business Days after receipt of a Company
Acquisition Proposal or any request for nonpublic information relating to the
CRL Business or for access to the employees, properties, books or records of the
CRL Business by any Person who indicates that they may be considering making, or
has made, a Company Acquisition Proposal, Seller Parent shall notify Buyer of
the fact that such event has occurred and shall notify Buyer of the Person if
the Company Acquisition Proposal is received, directly or indirectly, by any
Person identified on Schedule 5.11 hereto. For the purposes hereof, "Company
Acquisition Proposal" shall mean any offer or proposal for (whether oral or in
writing), or any indication of interest in, a merger or other business
combination involving any of the CRL Business, Recap Subco or any Recap
Subsidiary or any Seller or the acquisition of any equity interest in, or all or
a substantial portion of the assets of, any of Recap Subco, any Recap Subsidiary
or any Seller or the CRL Business, other than the transactions contemplated by
this Agreement and other than transactions with respect to the Excluded Assets.
5.12 Books and Records. Seller Parent shall retain in accordance with
its current records retention polices all books and records relating to the CRL
Business and, unless otherwise consented to in writing by Seller Parent or Buyer
(as the case may be), Buyer and Seller Parent will not, for a period of six
years following the Closing Date, destroy, alter, or otherwise dispose of any of
such books and records without first offering to surrender to Seller Parent or
Buyer, as the case may be, such books and records or any portion thereof which
Buyer or Seller Parent, as the case may be, may intend to destroy, alter, or
dispose. Buyer and Seller Parent will allow the other party's representatives
access to such books and records, upon reasonable request during such party's
normal business hours, for the purpose of examining and copying the same (but
only to the extent they relate to the CRL Business) in connection with any
matter related to or arising out of this Agreement or the transactions
contemplated hereby or the conduct by Buyer of the CRL Business.
5.13 Use of Names. Buyer, Recap Co and the Recap Subsidiaries are
purchasing, acquiring or otherwise obtaining right, title or interest in the
names "Charles River Laboratories" and "SPAFAS" and any tradenames, trademarks,
identifying logos or service marks related thereto or employing the words
"Charles River" or "SPAFAS" (collectively, the "Names"). Seller Parent agrees
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that, neither it nor any of its Affiliates shall make any commercial use of the
Names from and after the Closing Date; provided, however, Seller Parent shall
retain the right to make use of the Names for purposes of reflecting its
ownership of the CRL Business prior to the Closing Date. On the Closing Date,
Seller Parent shall cause the name of each of its Affiliates that contains the
words "Charles River" or "SPAFAS" to be changed to a name that does not contain
such words.
5.14 Commitment Letters. Buyer shall use its Commercial Efforts to
obtain the financing contemplated by the Commitment Letters and shall use
Commercial Efforts to notify Seller Parent in writing within one (1) Business
Day if any of the Commitment Letters are terminated or within five (5) Business
Days of any of the terms or conditions of the Commitment Letters are amended or
modified in any material respect.
5.15 Broekman Sale. In the event that the sale of the Broekman
Institute B.V., a Netherlands corporation located at Schoolstraat 21,5711 CP
Someran, The Netherlands, to Panning B.V. or an Affiliate thereof (the "Broekman
Sale") is consummated after the Closing Date, Buyer shall cause Charles River
Laboratories Europe GmbH to pay to Seller Parent all net proceeds of the
Broekman Sale within two (2) Business Days after receipt of such proceeds by
Charles River Laboratories Europe GmbH; provided, however, Charles River
Laboratories Europe GmbH shall be entitled to retain any and all sale proceeds
which are placed in escrow on the closing date of the Broekman Sale (the "Escrow
Amount") and thereafter released, regardless of whether the Broekman Sale occurs
prior to, on or after the Closing Date. In the event that Pharming B.V. or an
Affiliate thereof (the "Broekman Purchaser ") makes a claim for indemnification
under the Broekman Sale agreement, after the Closing Date Buyer shall cause
Recap Subco or a Recap Subsidiary, at Seller Parent's sole cost and expense, to
defend the claim, to the same extent as it would defend any claim for which it
was responsible for payment. In the event the Broekman Purchaser is entitled to
indemnification, such amount first shall be paid out of the sale proceeds placed
in escrow to the extent of the Escrow Amount and the balance, if any, shall
promptly be paid by Seller Parent. Buyer shall cause Recap Co or a Recap
Subsidiary to keep Seller Parent informed on a timely basis of any and all
indemnification claims and the status thereof. In the event that the Broekman
Sale is consummated after the Closing Date, Seller Parent shall indemnify Recap
Co and the Recap Subsidiaries for any income tax or similar tax liability
arising from any income or gain realized by Recap Co or any Recap Subsidiaries
on the Broekman Sale.
5.16 Stage I Reorganization Matters. Seller Parent shall use its
Commercial Efforts cause to CRL, SPAFAS or International, as the case may be, to
obtain the consents, approvals and authorizations and make the filings set forth
in Schedule 5.16 of the Disclosure Schedule on or prior to the Closing Date.
5.17 Confidential Information. Seller Parent and the Sellers covenant
and agree that none of them will, following the Closing, without the prior
written consent of Buyer, disclose (or permit to be disclosed) or use in any way
any confidential information of the CRL Business unless (i) compelled to
disclose such confidential information by judicial or administrative process or,
in the opinion of its counsel, by other requirements of Law, (ii) such
confidential information is available to the public through no fault of Seller
Parent or any of the Sellers, (iii) such confidential information becomes
available to Seller Parent or any of the Sellers from a third party who to their
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knowledge, is under no confidential fiduciary obligation to the CRL Business,
Recap Co, the Recap Subsidiaries or Buyer with respect to such confidential
information, or (iv) such confidential information is used in connection with
reflecting, asserting or defending Seller Parent's or any of the Seller's
ownership of the CRL Business prior to the Closing Date.
5.18 Closing Efforts. Each of Buyer, Buyer Parent and Seller Parent
shall use their respective Commercial Efforts to consummate the transactions
contemplated hereby.
5.19 Interim Financial Statements. Seller Parent will, or will cause
its Affiliates to, maintain the books and records of the CRL Business, on a
basis consistent with past practice, and Seller Parent will furnish, or will
cause its Affiliates to furnish, Buyer for each complete fiscal quarter
occurring after June 26, 1999, financial statements (the "Quarterly Financial
Statements") of the CRL Business, including consolidated statements of income,
changes in shareholders' equity and cash flows and a consolidated balance sheet,
all prepared in accordance with GAAP (but without footnotes) on a basis
consistent with the preparation of the Unaudited Financial Statements, within
fifteen (15) days of the end of such fiscal quarter ending on or prior to the
Closing.
5.20 Financial Assurances. As promptly as practicable after the
Closing Date, Buyer shall provide to Seller Parent evidence of the release of
Seller Parent or any Seller from, the cancellation of Seller Parent's or any
Seller's obligation under, or the substitution of Buyer, Recap Co, Recap Subco
or any Recap Subsidiary for Seller Parent or any Seller in, the financial
assurances or Letters of Credit related to the CRL Business set forth on
Schedule 5.20 of the Disclosure Schedule (the "Financial Assurances"), which
evidence shall be in form and substance reasonably satisfactory to Seller
Parent.
5.21 Financial Statements.
5.21.1 On or before August 4, 1999, Seller Parent shall deliver to
Buyer the audited consolidated balance sheets of the CRL Business as of December
26, 1998 and December 27, 1997 and the related audited consolidated statements
of income, changes in shareholder's equity and cash flows, including the notes
thereto, for each of the three years in the period ended December 26, 1998, with
an unqualified report thereon by PricewaterhouseCoopers LLP (the "Audited
Financial Statements").
5.21.2 On or before August 4, 1999, Seller Parent shall deliver to
Buyer the final unaudited consolidated balance sheet of the CRL Business as of
June 26, 1999, and the related unaudited consolidated statements of income and
cash flows, including the notes thereto, for the six-month periods ended June
26, 1999 and June 27, 1998 (the "Unaudited Financial Statements"). The Audited
Financial Statements and the Unaudited Financial Statements are collectively
referred to as the "Financial Statements."
5.21.3 On or before midnight on the second Business Day after the
date of delivery of the Financial Statements, Buyer shall provide a written
notice (the "Notice") to Seller Parent which states whether or not the Financial
Statements comply with the following (the "Standards"): (i) as to the Audited
Financial Statements: (A) the Audited Financial Statements are substantially
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identical to the Draft Audited Financial Statements with respect to the
consolidated balance sheets as at December 27, 1997 and December 26, 1998 and
the related consolidated statements of income and changes in shareholder's
equity for each of the three years in the period ended December 26, 1998, (B)
the Audited Financial Statements are substantially identical to the Draft
Audited Financial Statements with respect to the line items in the consolidated
cash flow statements for each of the three years in the period ended December
26, 1998 for cash and cash equivalents at the beginning of the applicable
period, cash and cash equivalents at the end of the applicable period,
depreciation, amortization and capital expenditures, in each case for the
applicable periods, and (C) the notes to the Audited Financial Statements are
substantially identical as to form with the notes to the Draft Audited Financial
Statements, and the notes to the Audited Financial Statements contain the
financial information required by GAAP to be contained therein; and (ii) as to
the Unaudited Financial Statements: (A) the Unaudited Financial Statements are
substantially similar to the Draft Unaudited Financial Statements with respect
to the consolidated balance sheet as of June 26, 1999 and the related
consolidated statements of income for the six month periods ended June 26, 1999
and June 27, 1998, (B) the Unaudited Financial Statements are substantially
similar to the Draft Unaudited Financial Statements with respect to the line
items in the consolidated cash flow statements for the six month periods ended
June 26, 1999 and June 27, 1998 for cash and cash equivalents at the beginning
of the applicable period, cash and cash equivalents at the end of the applicable
period, depreciation, amortization and capital expenditures, in each case for
the applicable periods, and (C) the notes to the Unaudited Financial Statements
are substantially similar as to form with the notes to the Draft Unaudited
Financial Statements, and the notes to the Unaudited Financial Statements
contain the financial information required by GAAP to be contained therein. If
the Notice states that the Financial Statements are not in conformity with the
Standards, or if Buyer provides a written notice to Seller Parent after August
4, 1999 that the Financial Statements have not been delivered to Buyer, this
Agreement automatically shall terminate and be of no further force and effect.
If the Notice states that the Financial Statements are in conformity with the
Standards, or if the Notice is not timely given, this Agreement shall continue
in full force and effect in accordance with its terms.
5.22 Net Underfunding Amount. Ten (10) Business Days prior to the
Closing Date, Seller Parent shall deliver to Buyer its calculation of the Net
Underfunding Amount, together with supporting documentation. Seller Parent and
Buyer shall use their Commercial Efforts to reach agreement on the Net
Underfunding Amount. In the event they are unable to reach agreement within
three Business Days after Buyer's receipt of Seller Parent's calculation, Arthur
Andersen LLP shall be engaged to determine the Net Underfunding Amount and Buyer
and Seller Parent shall be bound by its determination. The fees and expenses of
Arthur Andersen LLP shall be paid 50% by Buyer and 50% by Seller Parent.
ARTICLE 6
CONDITIONS TO CLOSING
6.1 Conditions to Obligations of Buyer and Seller Parent and Recap
Co. The respective obligations of Buyer, Buyer Parent, Seller Parent, the
Sellers, Recap Co and Recap
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Subco to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction at or prior to the Closing of the following
conditions:
6.1.1 (a) There shall be no injunction, restraining order or decree
of any nature of any Governmental Entity that is in effect that restrains or
prohibits the consummation of the transactions contemplated hereby, provided
that with respect to injunctions, restraining orders or decrees that do not
individually, or in the aggregate, restrain the transfer of a material portion
of the CRL Business Assets (an "Immaterial Injunction"), Buyer shall be required
to use Commercial Efforts to remove such Immaterial Injunction by entering into
an agreement with the applicable Governmental Entity to divest such enjoined CRL
Business Assets after the Closing Date, or Buyer shall have the right to require
Seller Parent to divest the enjoined CRL Business Assets on or prior to the
Closing Date, and in either case Buyer shall be entitled to the proceeds of such
divestiture.
(b) Subject to Section 5.2.2, all consents, approvals, authorizations
and orders of Governmental Entities that are necessary to permit the
consummation of the transactions contemplated by this Agreement and which are
set forth on Schedule 6.1.1 (the "Governmental Consents") shall have been
obtained in form and substance reasonably satisfactory to Buyer and Seller
Parent, and, without limiting the foregoing, all applicable waiting periods
specified under the HSR Act and applicable foreign antitrust and competition
Laws with respect to the transactions contemplated by this Agreement, shall have
lapsed or been terminated.
(c) For purposes of Section 6.1.1(a), a material portion of the CRL
Business Assets shall mean CRL Business Assets generating aggregate annual
revenues exceeding $15,000,000 based on the fiscal year ended December 26, 1998.
6.2 Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction (or waiver in writing by Buyer) at or prior to the Closing of each
of the following conditions:
6.2.1 Each representation and warranty of Seller Parent contained in
this Agreement shall be true and correct on and as of the Closing Date, with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date, except (i) to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct as of such date, and
(ii) to the extent that any inaccuracies in such representations and warranties,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a CRL Business Material Adverse Effect.
6.2.2 Seller Parent, Recap Subco and each Seller shall have performed
all obligations and agreements, and complied with all covenants and conditions,
contained in this Agreement to be performed or complied with by each of them
prior to or on the Closing Date except to the extent that any breaches of such
obligations, agreements, covenants and conditions, individually or in the
aggregate, have not had, and would not reasonably be expected to have, a CRL
Business Material Adverse Effect.
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6.2.3 Buyer shall have received a certificate of Seller Parent, dated
the Closing Date and executed by an officer of Seller Parent, to the effect that
each of the representations and warranties of Seller Parent contained in this
Agreement is true and correct on the Closing Date as if made on such Date,
except as set forth in the Update, and that the Update is true and correct.
6.2.4 The Affiliates of Parent, other than the CRL Business
employees, who are directors and officers of Recap Subco and the Recap
Subsidiaries and who have been requested to resign by Buyer shall have tendered
their resignations effective as of the Closing Date.
6.2.5 Buyer shall have received evidence satisfactory to Buyer of
receipt of the consents or approvals to the consummation of the transactions
contemplated by this Agreement and the Internal Reorganization under (or, as
applicable, the taking of the indicated action in connection with the
transactions contemplated by this Agreement and the Internal Reorganization with
respect to) the contracts, agreements, leases, other instruments, licenses and
other items which have been designated with an asterisk in Schedule 3.4 of the
Disclosure Schedule, which consents, approvals and actions shall be in form and
substance reasonably satisfactory to Buyer.
6.2.6 On the Closing Date, Seller Parent shall have delivered to
Buyer all of the following:
(i) stock certificates representing the Purchased
Shares. Each such certificate evidencing the
Purchased Shares shall be duly endorsed in blank,
or be accompanied by stock transfer powers duly
executed in blank, and shall be accompanied by
all requisite documentary or stock transfer taxes
affixed thereto and canceled;
(ii) all stock certificates, minute books, stock
books, ledgers and registers, corporate seals and
other corporate records relating to the
organization, ownership and maintenance of Recap
Subco and each Recap Subsidiary which are not
located at Recap Subco or any Recap Subsidiary in
Wilmington, Massachusetts or at the principal
place of business of Recap Subco or any Recap
Subsidiary;
(iii) original or copies of consents, filings,
authorizations, approvals and other actions
described in Sections 5.5.5, 6.1.1(b) or 6.2.5;
(iv) certificates as to the valid existence and good
standing of Recap Subco and each Recap Subsidiary
which is organized under the Laws of the United
States of America (or other appropriate
certificates in those jurisdictions that do not
issue such good standing certificates) from the
Secretary of State or other appropriate
Governmental Entity of each of such Person's
respective jurisdiction of incorporation,
organization or formation, as the case may be,
dated as of a date within thirty (30) days of the
Closing Date; and
(v) a true and correct copy of the certificate of
incorporation or articles of organization, as the
case may be, by-laws or other organizational
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documents of each of Recap Co, Recap Subco and
each Recap Subsidiary which is organized under
the Laws of the United States of America,
certified as true and correct by the Secretary or
Assistant Secretary of Seller Parent.
6.2.7 Seller Parent, Recap Co and each other stockholder of Recap Co
(other than Buyer) shall have executed and delivered to Buyer the Investors'
Agreement.
6.2.8 Buyer, Recap Co and Recap Subco shall have received debt and
equity proceeds in the amounts and on the terms and conditions set forth in the
Commitment Letters or such other terms and conditions satisfactory to Buyer.
6.2.9 Buyer shall have received an opinion of counsel for Seller
Parent, Recap Co, Recap Subco and the Sellers, dated the date of the Closing, in
form and substance reasonably satisfactory to Buyer.
6.3 Conditions to Obligations of Seller Parent, the Sellers, Recap Co
and Recap Subco. The obligations of Seller Parent, each Seller, Recap Co and
Recap Subco to consummate the transactions contemplated by this Agreement are
subject to the satisfaction (or waiver in writing by Seller Parent) at or prior
to the Closing of each of the following conditions:
6.3.1 Each of the representations and warranties of Buyer contained
in this Agreement shall be true and correct on and as of the Closing Date, with
the same force and effect as though such representations and warranties had been
made on and as of the Closing Date, except (i) to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct as of such date, and
(ii) to the extent that any inaccuracies in such representations and warranties,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Buyer Material Adverse Effect.
6.3.2 Buyer shall have performed all obligations and agreements, and
complied with all covenants and conditions, contained in this Agreement to be
performed or complied with by it prior to or on the Closing Date except to the
extent that any breaches of such obligations, agreements, covenants and
conditions, individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Buyer Material Adverse Effect.
6.3.3 Seller Parent shall have received a certificate of Buyer, dated
the Closing Date and executed by an officer of Buyer, to the effect that the
conditions specified in Sections 6.3.1 and 6.3.2 above have been fulfilled.
6.3.4 Buyer, Recap Co and each other stockholder of Recap Co (other
than CRL) shall have executed and delivered to Seller Parent the Investors'
Agreement.
6.3.5 Seller Parent shall have received an opinion of counsel for
Buyer and Buyer Parent, dated the date of the Closing, in form and substance
reasonably satisfactory to Seller Parent.
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ARTICLE 7
TERMINATION AND ABANDONMENT
7.1 Termination.
7.1.1 This Agreement maybe terminated at anytime prior to the Closing
Date:
(a) by mutual written consent of Seller Parent and Buyer;
(b) by either Seller Parent or Buyer, if: (i) the Redemptions, Merger
and Recapitalization shall not have been consummated on or prior to the date
which is three (3) months after the date hereof; provided, however, that the
right to terminate this Agreement pursuant to this Section 7.1.1(b) shall not be
available to any party whose breach of any of its representations, warranties,
covenants or other agreements under this Agreement or failure to perform any of
its obligations under this Agreement results in the failure of the transactions
contemplated by this Agreement to be consummated by such time; or (ii) subject
to Section 5.2.2 any Governmental Entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the consummation of the transactions contemplated by this Agreement
and such order, decree or ruling or other action shall have become final and
non-appealable (but only if the terminating party (if it has standing to do so)
shall have used its Commercial Efforts to cause such order, decree or ruling or
other action to be lifted or vacated);
(c) by Seller Parent, if (i) Buyer or Buyer Parent shall have
breached any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach or failure to perform is incapable of
being cured or has not been cured within 20 days after the giving of written
notice thereof to Buyer and such breach, individually or in the aggregate, has
had or would reasonably be expected to have, a Buyer Material Adverse Effect;
provided, however, that Seller Parent may not terminate this Agreement pursuant
to this Section 7.1.1(c) if Seller Parent, Recap Subco, Recap Co or any Seller
is then in breach in any material respect of any of such Person's
representation, warranty, covenant or agreement contained in this Agreement, or
(ii) one or more of the Commitment Letters have been terminated or have expired
and substitute commitment letters, on substantially the same terms and
conditions, have not been entered into by Buyer at the time of such termination
or expiration.
(d) by Buyer, if Seller Parent, Recap Co, Recap Subco or any Seller
shall have breached any of such Person's representations, warranties, covenants
or other agreements contained in this Agreement, which breach or failure to
perform is incapable of being cured or has not been cured within 20 days after
the giving of written notice thereof to Seller Parent and such breaches,
individually or in the aggregate, have had or would reasonably be expected to
have, a CRL Business Material Adverse Effect; provided, however, that Buyer may
not terminate this Agreement pursuant to this Section 7.1.1(d) if Buyer is then
in breach in any material respect of any representation, warranty, covenant or
agreement contained in this Agreement.
7.1.2 The party desiring to terminate this Agreement pursuant to
Section 7.1.1 shall give written notice of such termination to the other party
in accordance with Section 9.5 below.
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7.1.3 This Agreement shall automatically terminate under the
circumstances set forth in Section 5.21.3.
7.2 Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of the transactions
contemplated by this Agreement pursuant to this Article 7, this Agreement (other
than as set forth in this Section 7.2 and Sections 9.1 (Public Announcement),
9.2 (Expenses), 9.5 (Notices) and 9.14 (Applicable Law)) shall become void and
of no effect with no liability on the part of any party hereto (or of any of its
directors, officers, employees, agents, legal or financial advisors or other
representatives); except nothing contained in this Agreement shall relieve any
party from any liability for any inaccuracy, misrepresentation or breach of any
representation, warranty, covenant or agreement contained in this Agreement
prior to such termination.
ARTICLE 8
SURVIVAL AND INDEMNIFICATION
8.1 Survival of Representations, Warranties and Covenants. The
representations and warranties of the parties contained in this Agreement shall
survive the Closing for the periods set forth in this Section 8.1. The
representations and warranties of Seller Parent and Recap Co shall survive the
Closing and the representations and warranties of Buyer and Buyer Parent shall
survive the Closing until the close of business on March 31, 2001 (the
"Expiration Date"), provided, however, that the representations and warranties
contained in Sections 3.1, 3.2, 3.3, 3.5, 3.12(a)(i), (ii) and (iv), 4.1, 4.2,
4.3., and 4.7 shall survive the Closing until the sixth year anniversary of the
Closing Date with respect to claims which may be asserted in connection with a
breach thereof, the representations and warranties contained in Section 3.16
shall survive the Closing for four years with respect to claims which may be
asserted in connection with a breach thereof, and the representations and
warranties that are the subject of any indemnification claim shall survive
indefinitely, but only with respect to such indemnification claim until such
claim is finally resolved. The covenants and agreements made by any party which
are to be performed after the Closing Date shall survive until fully performed
and the covenants and agreements made by any party which are to be performed at
or prior to the Closing Date shall expire at the Closing other than Article 2
and Sections 5.6.5, 5.10 and 5.11.
8.2 Indemnification by Seller Parent. Subject to the applicable
limitations set forth in Section 8.4 and in the manner herein provided, from and
after the Closing Date, Seller Parent shall indemnify and hold harmless Recap
Co, Recap Subco, each Recap Subsidiary, Buyer and its Affiliates, and their
respective employees, directors, agents and representatives (collectively, the
"Buyer Indemnified Parties"), from and against any and all Loss and Litigation
Expense, which they or any of them may suffer or incur as a result of or arising
from any of the following: (a) any misrepresentation or breach of any
representation or warranty of Seller Parent contained in this Agreement or in
any certificate delivered pursuant hereto including, without limitation,
pursuant to Section 6.2.3 or as a result of an Update; or (b) the failure by
Seller Parent, any Seller, Recap Co or Recap Subco to perform any of such
Person's covenants and agreements under this Agreement (in the case of Recap Co
and Recap Subco, covenants and agreements to be performed on or prior to the
Closing Date); or (c) any Excluded Liability.
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8.3 Indemnification by Recap Co. Subject to the applicable
limitations set forth in Section 8.4 and in the manner herein provided, from and
after the Closing Date, Recap Co shall indemnify and hold harmless Seller
Parent, its Affiliates and their respective employees, directors, agents and
representatives (collectively, the "Seller Indemnified Parties"), from and
against any and all Loss and Litigation Expense which they, or any of them, may
suffer or incur as a result of or arising from any of the following: (a) any
misrepresentation or breach of warranty of Buyer or Buyer Parent contained in
this Agreement; (b) the failure by Buyer, Buyer Parent or, after the Closing
Date, Recap Co or Recap Subco to perform any of such Person's covenants and
agreements under this Agreement (in the case of Recap Co and Recap Subco,
covenants and agreements to be performed after the Closing Date); (c) any
Assumed Liability; or (d) the conduct of the CRL Business after the Closing Date
except to the extent the Losses or Litigation Expense resulted from the conduct
of the CRL Business prior to the Closing Date. Any indemnity payable pursuant to
Section 8.3(a) or Section 8.3(b) (but only with respect to the covenants and
agreements, contained in Section 5.15), shall be increased by an amount equal to
the sum of (i) such Loss and Litigation Expense and (ii) the product of such
amount and Seller's Equity Percentage at the time.
8.4 Certain Limitations on Indemnities
8.4.1 Subject to the terms hereof, the aggregate liability of Seller
Parent or Recap Co, as the case may be, for Losses and Litigation Expenses under
Sections 8.2(a) or 8.3(a), respectively, other than Losses and Litigation
Expenses arising from any inaccuracy or breach of any of the representations and
warranties contained in Sections 3.1, 3.2, 3.3, 3.5, 3.12(a)(iv), 4.1, 4.2, 4.3,
and 4.7 (in which case the limits set forth in this Section 8.4.1 shall be
inapplicable), is, and shall be, limited to an amount equal to $100,000,000.
8.4.2 No Buyer Indemnified Party nor any Seller Indemnified Party
shall be entitled to indemnification pursuant to Sections 8.2(a) or 8.3(a)
hereof unless and until the aggregate amount of all Losses and Litigation
Expenses sustained or incurred by all Buyer Indemnified Parties or all Seller
Indemnified Parties, as the case may be, under Sections 8.2(a) or 8.3(a),
respectively, exceeds an aggregate amount (the "Basket Amount") equal to
$4,000,000, and then only for the amount of such excess, provided however, that
the limit set forth in this Section 8.4.2 shall not be applicable for Losses or
Litigation Expenses for any indemnification obligation arising under (a) Section
8.2(a) (to the extent relating to misrepresentations, inaccuracies or breaches
of the representations and warranties contained in Sections 3.1, 3.2, 3.3, 3.5,
3.9, 3.12(a)(iv)) or (b) Section 8.3(a) (to the extent relating to
misrepresentations, inaccuracies or breaches of the representations and
warranties contained in Sections 4.1, 4.2, 4.3, or 4.7).
8.4.3 Any indemnity payable pursuant to this Agreement shall be
decreased to the extent of any insurance proceeds (net of all Costs payable in
connection therewith) actually received by a Buyer Indemnified Party or Seller
Indemnified Party or which a Buyer Indemnified Party or a Seller Indemnified
Party is unconditionally entitled to receive in respect of the Loss giving rise
to such indemnity payment.
8.4.4 The indemnifying party under Sections 8.2(a) and 8.3(a) shall
not be liable to any Indemnified Party with respect to any occurrence, event,
circumstance, act, omission or conduct unless such matter or a series of related
matters arising from the same or similar occurrences, events, circumstances,
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acts, omissions or conduct which causes a representation or warranty under
Sections 8.2(a) or 8.3(a) to be breached results in Costs of $25,000 or more,
and then only for the amount of such excess.
8.4.5 Each indemnified party shall be obligated, in connection with
any claim for indemnification under Section 8.2 or 8.3, to use Commercial
Efforts to mitigate Losses upon and after becoming aware of any event which
could reasonably be expected to give rise to such Losses.
8.5 Procedure. Promptly after acquiring knowledge of any Loss, or any
action, suit, investigation, proceeding, demand, assessment, audit, judgment, or
claim ("Claim") which may result in a Loss or Litigation Expense, the Person
seeking indemnity under this Article 8 (the "Indemnitee") shall give written
notice thereof to the party from whom indemnity is sought (the "Indemnitor");
provided, however, that the failure to promptly notify the Indemnitor shall not
affect the indemnification obligation hereunder if the Indemnitor was not
prejudiced thereby and the failure to promptly notify was inadvertent. The
Indemnitor shall have the right, at its expense, to defend or contest (subject
to the third to last sentence of this Section 8.5) such Claim, through counsel
of its choice (unless such Indemnitor is relieved of its liability hereunder
with respect to such Claim and Loss and Litigation Expense by the Indemnitee)
and shall not then be liable for fees or expenses of the Indemnitee's attorneys
(unless the Indemnitor and Indemnitee are parties to the action and there exists
a conflict of interest between the Indemnitor and the Indemnitee, in which event
the Indemnitor will be responsible for the reasonable fees and expenses of one
firm of counsel for all Indemnitees), and the Indemnitee and the Indemnitor
shall provide to each other all necessary and reasonable cooperation in the
defense of all Claims, including, but not limited to, reasonable access to
employees who are familiar with the transactions out of which such Claim or Loss
may have arisen. In the event that the Indemnitor shall undertake to defend any
Claim, it shall promptly notify the Indemnitee of its intention to do so within
thirty (30) days of being notified of any such Claim. In the event that the
Indemnitor, after written notice from Indemnitee, fails to take timely action to
defend the same, the Indemnitee shall have the right to defend the same by
counsel of its own choosing, but at the cost and expense of the Indemnitor,
provided no settlement of a Claim by Indemnitee (other than a Claim relating to
an Excluded Liability) shall be effected without the consent of the Indemnitor
which shall not be unreasonably withheld or delayed unless Indemnitee waives any
right to indemnification therefor. The Indemnitor may settle or compromise any
Claim without the prior written consent of Indemnitee except for settlement or
compromise of a Claim (i) which includes the unconditional release by the Person
asserting the Claim and any related claimants of Indemnitee from all liability
with respect to such Claim in form and substance reasonably satisfactory to
Indemnitee, (ii) which would not adversely affect the Indemnitee and its
Affiliates to own, hold, use and operate their respective assets and businesses,
and (iii) for money damages only. Seller Parent and Buyer shall treat any
payment under this Article 8 for all Tax purposes as an adjustment of the
Purchase Price and as allocable to the assets deemed purchased under the Section
338(h)(10) Election as shall reasonably be determined by the Indemnitee, except
to the extent such treatment is not permitted under applicable Law.
8.5.1 (a) The amount of any indemnification payment otherwise
determined to be due under this Article 8 shall be reduced (but not increased)
by the amount of the "Actual Tax Savings" (as hereinafter defined), if any,
realized by the Indemnitee with respect to the
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indemnified Loss. For purposes hereof, the amount of an Indemnitee's Actual
Tax Savings shall be equal to the excess, if any, of the Actual Tax Benefit
Amount over the Actual Tax Detriment Amount, each as defined below and each of
which shall be calculated taking into account only those items of tax savings
or tax liabilities actually incurred by the Indemnitee in the taxable year in
which the indemnification payment is made (taking into account all of the
indemnitee's tax attributes for the period or periods in question).
(b) The Actual Tax Benefit Amount shall equal the actual
amount of any reduction of the Indemnitee's federal, state
or local (but not foreign) income tax liability for the taxable year in which
the indemnification payment is made, which reduction would not have been
realized but for the occurrence of the event in respect of which the
indemnification payment is made or the receipt of the indemnification payment.
The Actual Tax Detriment Amount shall equal the actual amount of any increase in
the Indemnitee's federal, state or local (but not foreign) income tax liability
for the taxable year in which the indemnification payment is made, which
increase would not have been realized but for the occurrence of the event in
respect of which the indemnification payment is made or the receipt of the
indemnification payment.
(c) The parties agree that any determination made under this
Section 8.5.1 shall be made by the Indemnitee, who shall provide the
Indemnitor with its calculation of the Actual Tax Savings in writing. The
parties shall attempt to resolve any dispute over such determination in good
faith, provided that if such dispute is not resolved by the parties such
determination shall be made by the national accounting firm regularly employed
by the Indemnitee.
8.6 No Consequential Damages. NEITHER ANY PARTY TO THIS AGREEMENT NOR
THEIR AFFILIATES SHALL BE LIABLE FOR CONSEQUENTIAL DAMAGES SUFFERED BY A PARTY
OR ITS AFFILIATES WITH RESPECT TO ANY TERM OR THE SUBJECT MATTER OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT THIS WAIVER SHALL NOT LIMIT ANY LIABILITY
OF ANY PARTY TO INDEMNIFY THE APPLICABLE INDEMNIFIED PARTIES FOR LOSS OR
LITIGATION EXPENSES ARISING FROM COSTS OF SUCH TYPE WHICH THE INDEMNIFIED
PARTY IS REQUIRED TO PAY TO ANY OTHER PERSON.
8.7 Exclusive Remedy. If the Closing occurs, the exclusive remedies
for any breach of any representation, warranty, covenant or agreement
hereunder shall be the indemnification provided by this Article 8, and each
party expressly waives any other rights or remedies it may have, whether under
this Agreement or otherwise, or (other than in the case of fraudulent conduct)
at law or in equity, provided, however, that equitable relief, including the
remedies of specific performance and injunction shall be available with
respect to any actual or attempted breach of this Agreement occurring before
the Closing Date or with respect to the breach of any covenant to be performed
after the Closing Date.
8.8 Validity. The indemnification agreements provided for in this
Article 8 shall apply notwithstanding any knowledge of, or any investigation
made at any time by or on behalf of, any party hereto.
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8.9 Waiver. It is understood and agreed that neither Seller Parent
nor any Seller shall be entitled to any indemnification, right of contribution
or other right of recovery from Recap Co, Recap Subco or any Recap Subsidiary
in connection with any claim made by any Buyer Indemnification Party(s)
against Seller Parent hereunder, all of which are hereby irrevocably and
unconditionally waived and released by Seller Parent and each Seller;
provided, however, such waiver shall not preclude Seller Parent or any Seller
from contesting any such claims made by any Buyer Indemnified Party,
including, without limitation, on the basis that the alleged Loss or
Litigation Expense arose, in whole or in part, as a result of the operation of
the CRL Business after the Closing Date or arose out of an Assumed Liability.
Article 9
MISCELLANEOUS
9.1 Public Announcement. Except in furtherance by Buyer and Buyer
Parent of its covenants in Sections 5.14 and 5.18 and notwithstanding anything
contained in this Agreement, no news release or other public announcement
pertaining in any way to the transactions contemplated by this Agreement will
be made by any party without the prior consent of the other parties (which
consent shall not be unreasonably withheld, conditioned or delayed) unless
such release or announcement is required by applicable Laws or pursuant to any
applicable listing agreement with, or rules or regulations of, the NYSE, in
which case the disclosing party, prior to making such announcement, shall
consult with the other parties. In the event the transactions contemplated by
this Agreement are not consummated, each party shall return to the other all
documents, work papers and other materials, including any extracts, summaries,
analyses, compilations or other documents prepared by the receiving party or
its representatives from such information (including any copies thereof
whether in written, electronic or other format) or destroy such materials and
provide to the other a written certification of such destruction and will hold
in absolute confidence any information obtained from the other party except to
the extent (i) such party is required to disclose such information by Law or
such disclosure is necessary or desirable in connection with the pursuit or
defense of a claim relating to the transactions contemplated hereby, (ii) such
information was known by such party prior to such disclosure or was thereafter
developed or obtained by such party independent of such disclosure, or (iii)
such information becomes generally available to the public or is otherwise no
longer confidential. Prior to any disclosure of information pursuant to the
exception in clause (i) of the preceding sentence, the party intending to
disclose the same shall so notify the party that provided the same in order
that such party may seek a protective order or other appropriate remedy should
it choose to do so.
9.2 Expenses. Subject to the provisions of Sections 7.2 and 9.3,
whether or not the transactions contemplated by this Agreement are completed,
each of the parties hereto shall pay the fees and expenses incurred by it in
connection with the negotiation, preparation, execution and performance of
this Agreement, including, without limitation, attorneys', accountants',
brokers' and other advisors' fees.
9.3 Transfer Taxes and Recording Expenses. All excise, sales, use,
transfer, stamp, documentary, filing, recording and other similar taxes or
fees which may be imposed or assessed
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as the result of the transactions contemplated hereby, including, without
limitation, the Merger and Redemptions ("Transfer Taxes"), together with any
interest or penalties with respect thereto, shall be shared by the Seller
Parent and Recap Co as follows: the first $100,000 shall be paid by Seller
Parent, the second $100,000 shall be paid by, and all amounts in excess of
$200,000 shall be paid 50% by Recap Co and 50% by Seller Parent. All excise,
sales, use, transfer, stamp, documentary, filing, recording and other similar
taxes or fees which may be imposed or assessed as the result of the Internal
Reorganization, together with any interest or penalties with respect thereto
("Reorganization Transfer Taxes"), shall be paid 56.25% by Recap Co and 43.75%
by Seller Parent. All Tax Returns required to be filed in connection with any
Transfer Taxes or Reorganization Transfer Taxes ("Transfer Tax Returns") shall
be prepared and filed when due by the party responsible under applicable Law
or custom to file such Transfer Tax Returns. The filing party shall promptly
provide the other applicable parties with copies of such Transfer Tax Returns.
All Transfer Tax Returns shall be prepared on a basis consistent with Schedule
5.5.5 of the Disclosure Schedule. From time to time but not later than ninety
(90) days after the Closing Date, Seller Parent shall provide notice to Buyer
of any Transfer Taxes and Reorganization Transfer Taxes paid by Seller Parent
or its Affiliates and Buyer shall promptly reimburse Seller Parent or its
Affiliates as applicable in accordance with the provisions of this Section
9.3. From time to time but not later than ninety (90) days after the Closing
Date, Buyer shall provide notice to Seller Parent of any Transfer Taxes and
Reorganization Transfer Taxes paid by Buyer or its Affiliates and Seller
Parent shall promptly reimburse Buyer or its Affiliates as applicable in
accordance with the provisions of this Section 9.3. Seller Parent shall pay
all interest or penalty charges associated with Seller Parent's failure to pay
when due any Transfer Taxes or any Reorganization Transfer Taxes, provided
that such failure is not the result of Buyer's failure to remit amounts agreed
to be paid under this Section 9.3 to Seller Parent promptly upon request.
9.4 Knowledge. Whenever used in this Agreement, the words "knowledge"
of Seller Parent or similar words or phrases shall mean the actual knowledge
of those officers of Seller Parent or the CRL Business who are listed on
Schedule 9.4(a) and the words "knowledge" of Buyer or similar words or phrases
shall mean the actual knowledge of those officers of Buyer, Buyer Parent or
its Affiliates who are listed on Schedule 9.4(b).
9.5 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing
and shall be deemed to have been duly given if delivered personally, if sent
by telecopier or facsimile or sent by a recognized overnight courier service
or mailed, first class mail, postage prepaid, return receipt requested, as
follows:
(a) If to Seller Parent or, prior to the Closing
Date, to Recap Co or Recap Subco:
Bausch & Lomb Incorporated
One Bausch & Lomb Place
Rochester, New York 14604-2701
Attention: Alan H. Farnsworth
Vice President - Business Development
Fax: (716)338-8706
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with copies to:
Bausch & Lomb Incorporated
One Bausch & Lomb Place
Rochester, New York 14604-2701
Attention: Robert B. Stiles, Esq.
Senior Vice President and General Counsel
Fax: (716)338-5043
Nixon Peabody LLP
P.O. Box 1051
Clinton Square
Rochester, New York 14604
Attention: Lori B. Green, Esq.
Fax: (716) 263-1600
(b) If to Buyer or Buyer Parent or, after the Closing Date,
to Recap Co or Recap Subco:
DLJ Merchant Banking Partners
277 Park Avenue
New York, New York 10172
Attention: Ivy Dodes
Fax: (212) 892-2609
with a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Attention: Bradley P. Cost, Esq.
Fax: (212) 682-0200
or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been given on the date of personal
delivery or upon confirmed receipt to the person to whom addressed if sent by
telecopier, overnight courier service or mail.
9.6 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may
be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances
shall not be affected by such invalidity or unenforceability.
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9.7 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Accordingly, the parties further agree that each party shall be
entitled to an injunction or restraining order to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof, all
without the necessity of posting any bond or other security and without the
need to show any actual damages or that money damages would not afford an
adequate remedy, this being in addition to any other right or remedy to which
such party may be entitled under this Agreement, at law or in equity.
9.8 No Conflict of Interest. Each of the parties to this Agreement
hereby agrees that Nixon Peabody LLP (or its successor) may serve as counsel
to Seller Parent and its Affiliates and Haythe & Curley (or its successor) may
serve as counsel to Buyer and its Affiliates in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereunder and that either Nixon
Peabody LLP (or its successor) or Haythe & Curley (or any successor) may serve
as counsel to Seller Parent, Seller Parent's Affiliates, Buyer, Buyer's
Affiliates or any director, officer, employee or affiliate of any one or more
of them in connection with any litigation arising out of or relating to this
Agreement or the transactions contemplated by this Agreement, each of the
parties hereto hereby consenting thereto and waiving any conflict of interest
arising therefrom. This Agreement shall not limit, impair or modify any
existing agreement, arrangement or understanding relating to the
representation by Nixon Peabody LLP (or its successor) or Haythe & Curley (or
its successors) of any of the parties hereto or any beneficial owner of any
such party.
9.9 Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as provided in Article 8 with respect
to indemnification, nothing in this Agreement, expressed or implied, is
intended to confer on any Person other than the parties hereto or their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
9.10 Assignability. This Agreement shall not be assigned by Seller
Parent, Parent Canada, any Seller, Recap Subsidiary or Recap Co without the
prior written consent of Buyer or by Buyer without the prior written consent
of Seller Parent; provided, however, that at and after the Closing, Buyer's,
Recap Co's and Recap Subco's rights or interest under this Agreement may be
assigned, upon at least 30 days (or two (2) days in the case of clause (a)
below) prior written notice to Seller Parent, (a) to any Affiliate of Buyer,
and (b) in connection with a sale of all or substantially all of the assets of
Buyer or any of its corporate parents, or direct or indirect consolidated
subsidiaries; and provided further that at and after the Closing, Buyer's,
Recap Co's and Recap Subco's rights or interests under this Agreement may be
assigned to any bank, financial institution or other Person which has extended
credit to Recap Co, Recap SubCo, Buyer or any Affiliate of Buyer. Any
attempted assignment in violation of this Section 9.10 shall be null and void.
9.11 Amendment, Waiver. This Agreement may be amended, supplemented
or otherwise modified only by a written instrument executed by Seller Parent
and Buyer. No waiver by any party of any of the provisions hereof shall be
effective unless explicitly set forth in writing and executed by the party so
waiving. Except as provided in the preceding sentence, no
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action taken pursuant to this Agreement, including without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained herein or in any other document
delivered in connection herewith. The waiver by any party hereto of a breach
of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach. No failure on the part of any party hereto to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof.
9.12 Section Headings. The Section headings contained in this
Agreement and the table of contents to this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
9.13 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
9.14 Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to the conflicts of laws principles thereof.
9.15 Submission to Jurisdiction. The parties hereby irrevocably and
unconditionally consent to submit to the exclusive jurisdiction of the federal
courts of the United States of America located in Monroe County, New York for
any actions, suits or proceedings arising out of or relating to this Agreement,
the Recapitalization Documents or the transactions contemplated hereby or
thereby, and the parties agree not to commence any action, suit or proceeding
relating thereto except in such courts, and further agree that service of any
process, summons, notice or document by U.S. registered mail shall be effective
service of process for any action, suit or proceeding brought against the
parties in any such court. The parties hereby irrevocably and unconditionally
waive any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement, any Recapitalization Document or the transactions
contemplated hereby or thereby, in the federal courts of the United States of
America located in Monroe County, New York, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
9.16 Entire Agreement. This Agreement, including the Exhibits and the
Disclosure Schedule hereto, constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral and written (other than the
Confidentiality Agreement which shall not survive the Closing). There are no
restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein.
53
<PAGE>
IN WITNESSETH WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
Bausch & Lomb, Incorporated
By:
--------------------------------------
Name: Alan H. Farnsworth
Title: Vice President
CRL Holdings, Inc.
By:
--------------------------------------
Name: Alan H. Farnsworth
Title: Vice President
Endosafe, Inc.
By:
--------------------------------------
Name: Alan H. Farnsworth
Title: Vice President
Bausch & Lomb International, Inc.
By:
--------------------------------------
Name: Alan H. Farnsworth
Title: Vice President
Charles River SPAFAS, Inc.
By:
--------------------------------------
Name: Alan H. Farnsworth
Title: Vice President
Charles River Laboratories, Inc.
By:
--------------------------------------
Name: Alan H. Farnsworth
Title: Vice President
54
<PAGE>
Wilmington Partners, L.P.
By: Wilmington Management Corp.,
a General Partner
By:
--------------------------------------
Name: Alan H. Farnsworth
Title: Vice President
Bausch & Lomb Canada, Inc.
By:
--------------------------------------
Name: Alan H. Farnsworth
Title: Vice President
CRL Acquisition LLC
By:
--------------------------------------
Name: Reid Perper
Title: President
DLJ Merchant Banking Partners II, L.P.
By:
--------------------------------------
Name: Ari Benacerraf
Title: Principal
55
EXHIBIT 2.2
AMENDMENT NO. 1
TO
RECAPITALIZATION AGREEMENT
AMENDMENT dated as of September 29, 1999 (this "Amendment") to
Recapitalization Agreement dated as of the July 25, 1999 (the
"Recapitalization Agreement") by and among Bausch & Lomb Incorporated, a New
York corporation ("Seller Parent') and CRL Acquisition LLC, a Delaware limited
liability company ("Buyer"). Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the
Recapitalization Agreement.
W I T N E S S E T H
WHEREAS, Seller Parent, Buyer, Sellers, Parent Canada, Recap Co, Recap
Subco and Buyer Parent have entered into the Recapitalization Agreement; and
WHEREAS, the parties hereto desire to amend certain of the provisions
of the Recapitalization Agreement pursuant to Section 9.11 thereof as more
particularly described below.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE I.
AMENDMENTS TO RECAPITALIZATION AGREEMENT
1.1 The parties hereto acknowledge and agree that Section 2.1 of the
Recapitalization Agreement is hereby amended by deleting it in its entirety
and replacing it with the following:
"2.1 Reorganization and Stock Split. Upon the terms and subject to the
conditions of this Agreement, the parties agree that the following
transactions will take place immediately prior to the Closing in the order set
forth below (with the steps set forth in Section 2.1.2 through 2.1.5 being
hereinafter referred to as the "Stage 2 Reorganization"):
2.1.1 Recap Co shall redeem 29,000 shares of Recap Co Common Stock
owned by Recap Subco in exchange for $1.00.
2.1.2 Recap Subco shall form a wholly owned Canadian Corporation
("NewCanCo").
2.1.3 WPLP shall contribute all of its CRL Business Assets used in
the CRL Business to Recapo Subco and, in exchange therefor, Recap Subco shall
issue to WPLP the Recap Subco Preferred Stock pursuant to a contribution
agreement in substantially the form of the Contribution Agreements.
<PAGE>
2.1.4 CRL shall purchase shares of Recap Subco Common Stock in
exchange for cash and Recap Subco shall purchase shares of NewCanCo common
stock in exchange for cash.
2.1.5 Parent Canada shall sell all of its CRL Business Assets used in
the CRL Business to NewCanCo in exchange for cash pursuant to an Asset
Purchase Agreement in substantially the form of the Contribution Agreements.
2.1.6 Each of CRL, SPAFAS, and International shall exchange all of
the Recap Subco Common Stock owned by it for the same number of shares of
Recap Co Common Stock and WPLP shall exchange all of the Recap Subco Preferred
Stock for the same number of shares of Recap Co Preferred Stock."
2.1.7 Recap Co shall redeem 1,000 shares of Recap Co Common Stock
owned by Recap Subco in exchange for $1.00.
2.1.8 Recap Co shall, by way of a stock dividend, effect a stock
split of the issued and outstanding shares of Recap Co Common Stock by
declaring and paying a stock dividend of 46.6190509259 shares of Recap Co
Common Stock in respect of each issued and outstanding share of Recap Co
Common Stock (the "Stock Split").
2.1.9 Buyer shall form a wholly owned Delaware corporation
("Acquisition Co") and contribute at least $90,000,000 thereto in exchange for
shares of common stock of Acquisition Co."
1.2 (a) The parties hereto acknowledge and agree that Section 2.3 of
the Recapitalization Agreement is hereby amended by deleting the caption
thereto in its entirety and replacing such caption with the following:
"Redemptions; Merger."
(b) The parties hereto acknowledge and agree that Section 2.3 of the
Recapitalization Agreement is hereby amended by deleting Section 2.3.4 thereof
in its entirety and replacing such Section 2.3.4 with the following:
"2.3.4 Recap Co shall redeem 5,227,167 shares of Recap Co Common
Stock owned by CRL for $50,000,000 in cash, payable by wire transfer of
immediately available funds to such account as is designated by CRL, and
$43,000,000 in principal amount of the Recap Co Sub Note, and CRL shall
deliver to Recap Co certificates, duly endorsed for transfer, representing
such shares of Recap Co Common Stock."
(c) The parties hereto acknowledge and agree that Section 2.3 of the
Recapitalization Agreement is hereby amended by adding a new Section 2.3.5
thereof to read in its entirety as follows:
"2.3.5 Buyer and Seller Parent shall cause Acquisition Co to merge
with and into Recap Co with Recap Co being the surviving entity (the
"Merger"). At the effective time of the Merger, (i) CRL shall receive, as the
sole shareholder of Recap Co, in exchange for each one share of the 5,058,548
shares of Recap Co Common Stock issued and outstanding immediately prior to
the effective time of the Merger, $17.7916666996 and .254166808341 shares of
Recap Co Common Stock as the surviving corporation in the Merger, and (ii)
Buyer shall receive 9,000,000 shares of Recap Co Common Stock in exchange for
all of the issued and outstanding shares of Acquisition Co common stock,
constituting 87.5% of the total number of shares of Recap Co Common Stock
issued and
<PAGE>
outstanding following all of the Redemptions and the Merger,
including the number of shares so issued. The parties acknowledge that the
Merger will be treated for tax purposes as a qualified stock purchase within
the meaning of section 338(d)(3) of the Internal Revenue Code, section
1.338-1(c)(8) of the regulations thereunder and Rev. Rul. 90-95, 1990-2 C.B.
67."
(d) The parties hereto acknowledge and agree that Section 2.3 of the
Recapitalization Agreement is hereby amended by renumbering Section 2.3.5 as
Section 2.3.6.
1.3 The parties hereto acknowledge and agree that Section 5.5.5 of
the Recapitalization Agreement is hereby amended by deleting the phrase ", at
the Closing," in the third sentence of Section 5.5.5 and replacing such phrase
with the following:
",within sixty (60) calendar days after the Closing,"
1.4 The parties hereto acknowledge and agree that Section 8.3 of the
Recapitalization Agreement is hereby amended by deleting clause 8.3(d) thereof
in its entirety and replacing such clause with the following:
"(d) the conduct of the CRL Business after the Closing Date except to
the extent the Losses or Litigation Expense resulted from the conduct of the
CRL Business prior to the Closing Date. Any indemnity payable pursuant to
Section 8.3(a) or Section 8.3(b) (but only with respect to the covenants and
agreements, contained in Section 5.15), shall be increased by an amount equal
to the product of (i) such Loss and Litigation Expense and (ii) the Seller's
Equity Percentage at the time."
1.5 The parties hereto acknowledge and agree that Section 8.5 of the
Recapitalization Agreement is hereby amended by deleting the fifth sentence
thereof in its entirety and replacing such sentence with the following:
"The Indemnitor may not settle or compromise any Claim without the
prior written consent of Indemnitee except for settlement or compromise of a
Claim (i) which includes the unconditional release by the Person asserting the
Claim and any related claimants of Indemnitee from all liability with respect
to such Claim in form and substance reasonably satisfactory to Indemnitee,
(ii) which would not adversely affect the Indemnitee and its Affiliates to
own, hold use and operate their respective assets and businesses, and (iii)
for money damages only."
1.6 The parties hereto acknowledge and agree that Section 9.3 of the
Recapitalization Agreement is hereby amended by deleting the first sentence
thereof in its entirety and replacing such sentence with the following:
"All excise, sales, use, transfer, stamp, documentary, filing,
recording and other similar taxes or fees which may be imposed or assessed as
the result of the transactions contemplated hereby, including, without
limitation, the Merger and Redemptions ("Transfer Taxes"), together with any
interest or penalties with respect thereto, shall be shared by the Seller
Parent and Recap Co as follows: the first $100,000 shall be paid by Seller
Parent, the second $100,000 shall be paid by Recap Co, and all amounts in
excess of $200,000 shall be paid 50% by Recap Co and 50% by Seller Parent."
<PAGE>
ARTICLE II.
MISCELLANEOUS
2.1 Invalidity, Etc. The provisions of this Amendment shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Amendment, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may
be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Amendment and the
application of such provision to other persons, entities or circumstances
shall not be affected by such invalidity or unenforceability.
2.2 Governing Law. This Amendment shall be governed by, and construed
in accordance with, the laws of the State of New York without regard to the
conflicts of laws principles thereof.
2.3 Recitals. The section headings contained in this Amendment are
for reference purposes only and shall not affect the meaning or interpretation
of this Amendment.
2.4 Counterparts. This Amendment may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
2.5 Ratification. The parties hereto hereby ratify and approve the
Recapitalization Agreement, as amended hereby, and the parties hereto
acknowledge that all of the terms and provisions of the Recapitalization
Agreement as amended hereby, are and remain in full force and
effect.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first above written.
BAUSCH & LOMB, INCORPORATED
By:
-----------------------------------
Name: Alan H. Farnsworth
Title: Vice President-Business
Development
CRL ACQUISITION LLC
By:
-----------------------------------
Name: Reid Perper
Title: President
EXHIBIT 3.1.1
State of Delaware
PAGE 1
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "ENDOSAFE, INC.", CHANGING ITS NAME FROM "ENDOSAFE, INC." TO "CHARLES RIVER
LABORATORIES HOLDINGS, INC.", FILED IN THIS OFFICE ON THE THIRTY-FIRST DAY OF
AUGUST, A.D. 1999, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
[SEAL OF THE SECRETARY OF STATE] -----------------------------------
Edward J. Freel, Secretary of State
2375407 8100 AUTHENTICATION: 9974575
DATE: 09-17-99
991388750
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 08/31/1999
991364074-2375407
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
ENDOSAFE, INC.
Endosafe, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, by the unanimous
written consent to its members, filed with the minutes of the Board, adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of the Corporation:
RESOLVED: That the Certificate of Incorporation of Endosafe,
Inc. be amended by changing the FIRST Article thereof so that, as
amended, said Article shall be and read as follows:
FIRST: The name of the Corporation is Charles River Laboratories
Holdings, Inc.
SECOND: That in lieu of a meeting and vote of the stockholders, the
stockholders have given written consent to said amendment in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, Endosafe, Inc. has caused this certificate to be
signed by Alan H. Resnick, its Treasurer, this 31st day of August, 1999.
Endosafe, Inc.
By /s/ Alan H. Resnick
------------------------------------
Alan H. Resnick
Treasurer
<PAGE>
State of Delaware
PAGE 1
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "ENDOSAFE, INC.", FILED IN THIS OFFICE ON THE TWELFTH DAY OF
AUGUST, A.D. 1999, AT 9 O'CLOCK A.M.
/s/ Edward J. Freel
[SEAL OF THE SECRETARY OF STATE] -----------------------------------
Edward J. Freel, Secretary of State
2375407 8100 AUTHENTICATION: 9974576
DATE: 09-17-99
991388750
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ENDOSAFE, INC.
(Pursuant to Section 242 of the General
Corporation Law of the State of Delaware)
Endosafe, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), does hereby
certify that:
1. The name of the Corporation is Endosafe, Inc.
2. Article FOURTH of the Certificate of Incorporation is hereby amended to
read in its entirety as follows:
"FOURTH: The Corporation is authorized to issue two (2) classes of
shares to be designated, respectively, Common Stock ("Common Stock") and
Preferred Stock ("Preferred Stock"). The total number of shares of stock
that the Corporation shall be authorized to issue is Five Hundred Thousand
(500,000). The total number of shares of Common Stock that the Corporation
shall be authorized to issue is Two Hundred Fifty Thousand (250,000) shares
of Common Stock with a par value of $.01 per share. The total number of
shares of Preferred Stock that the Corporation shall be authorized to issue
is Two Hundred Fifty Thousand (250,000) shares of Series A Redeemable
Preferred Stock with a par value of $.01 per share.
The rights, preferences and limitations granted to and imposed on the
authorized stock are as set forth below in this Article FOURTH:
A. Common Stock. The Common Stock shall have the rights, preferences and
limitations granted to and imposed upon the Common Stock as are set forth in the
following sections.
Section 1. Dividend Rights. After payment in full of any dividends then
accrued with respect to the Preferred Stock, dividends payable in cash, stock or
otherwise, as may be declared by the Board of Directors, may be declared and
paid on the Common Stock from time to time out of any funds lawfully available
therefor.
Section 2. Voting Rights. The holders of the Common Stock shall be
entitled to one (1) vote per share.
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED ON 09:00 AM 08/12/1999
991335443 - 2375407
<PAGE>
Section 3. Liquidation, Dissolution or Winding Up. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary and after payment in full of the amount payable in respect of the
Preferred Stock, as provided in Paragraph B, Section 1(b) below, the holders of
the shares of Common Stock shall share ratably in the distribution of the
Residual Assets as defined in Paragraph B, Section 1(b) below.
B. Preferred Stock. The Preferred Stock shall consist of Two Hundred
Fifty Thousand (250,000) shares having a par value of $.01 per share and shall
be designated as "Series A Redeemable Preferred Stock" (the "Series A Preferred
Stock"). The rights, preferences and limitations granted to and imposed on the
Preferred Stock are as set forth in the following sections:
Section 1. Rights, Preferences and Limitations of Series A Preferred
Stock.
(a) Dividends. The holders of the Series A Preferred Stock, in
preference to the holders of all Common Stock, shall be entitled to receive
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, cumulative dividends as provided in this Paragraph.
Dividends on each share of Series A Preferred Stock shall be payable in cash,
and shall accrue at the Dividend Rate on the sum of (i) the Purchase Price and
(ii) all accumulated and unpaid dividends accrued thereon pursuant to this
Paragraph from the date of issuance thereof (the "Series A Dividends"); the sum
of the Purchase Price and the Series A Dividends is referred to herein as the
"Series A Preference Amount." Such dividends will be calculated and compounded
annually in arrears on December 31 of each year (each a "Dividend Date") in
respect of the prior twelve month period, prorated on a daily basis for partial
periods. Such dividends shall commence to accrue on each share of Series A
Preferred Stock from the date of issuance thereof whether or not declared by the
Board of Directors, and whether or not there are profits, surplus or other funds
of the Corporation legally available for the payment of dividends, and shall
continue to accrue thereon until the Series A Preference Amount is paid in full
in cash.
(b) Liquidation, Dissolution or Winding Up. In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, subject to the rights of holders of other series of preferred stock
of the Corporation, each holder of outstanding shares of Series A Preferred
Stock and Common Stock shall be entitled to be paid out of the assets of the
Corporation available for distribution to stockholders, whether such assets are
capital, surplus, or earnings as follows: (i) first, the holders of the
outstanding shares of Series A Preferred Stock shall receive an amount in cash
equal to the Purchase Price together with any accrued but unpaid dividends to
which the holders of outstanding shares of such series are entitled pursuant to
Section 1(a) hereof (the "Series A Liquidation Preference") before any payment
shall be made to the holders of any Common Stock or of any other series of
preferred stock of the Corporation; and (ii) second, the holders of the
outstanding shares of Common Stock shall share ratably in the distribution of
the assets of the Corporation remaining for distribution to stockholders,
whether such assets are capital, surplus, or earnings (the "Residual Assets").
2
<PAGE>
(c) Voting Rights. The holders of Series A Preferred Stock shall not be
entitled to vote except as required by law.
(d) Conversion. The Series A Preferred Stock shall not be convertible
into Common Stock or any other security of the Corporation.
(e) Redemption Rights.
(i) Redemption Rights of the Holder. At any time or from time
to time after the issuance of any shares of Series A Preferred Stock and prior
to the completion of a Public Offering, any holder of such shares shall have the
right to cause the Corporation to redeem its shares by notifying the Corporation
in writing of its intent to exercise the rights afforded by this Paragraph and
specifying a date not less than two (2) days (or such shorter period as may be
determined by mutual agreement of the holder and the Corporation) nor more than
thirty (30) days from the date of such notice on which the shares designated
therein shall be redeemed (the "Optional Redemption Date"). The Corporation
shall redeem on the Optional Redemption Date all shares of Series A Preferred
Stock which have been tendered for redemption in accordance with the foregoing,
together with stock powers duly endorsed for transfer to the Corporation.
(ii) Redemption Rights of the Corporation. Subject to
compliance with applicable law, at any time or from time to time the Corporation
shall have the right to redeem any or all of the then outstanding shares of
Series A Preferred Stock. The Corporation shall notify the holders of Series A
Preferred Stock of its intent to exercise the rights afforded by this Paragraph
and specify a date not less than two (2) days (or such shorter period as may be
determined by mutual agreement of the holder and the Corporation) nor more than
thirty (30) days from the date of such notice on which the shares designated
therein shall be redeemed (the "Mandatory Redemption Date"). The recipient of
such notice shall tender to the Corporation the shares of Series A Preferred
Stock specified therein on or before such date, together with stock powers duly
endorsed for transfer to the Corporation.
(iii) Payment of Redemption Price. The total amount payable to
a holder of Series A Preferred Stock upon redemption of the shares hereunder
shall be the Series A Preference Amount of such shares (the "Redemption Price").
The Redemption Price shall be paid in cash by wire transfer of immediately
available funds on the Optional Redemption Date or the Mandatory Redemption
Date, as applicable.
(iv) Statutory Limitations. If the Corporation does not have
sufficient funds legally available to redeem all shares for which redemption is
requested hereunder, then it shall redeem such shares on a pro rata basis among
the holders of the Series A Preferred Stock which requested redemption in
proportion to the shares of Series A Preferred Stock then held by them to the
extent possible and shall redeem the remaining shares to be redeemed as soon as
sufficient funds are legally available therefor.
(f) No Reissuance of Preferred Stock. No share or shares of Preferred
Stock acquired by the Corporation by reason of redemption, purchase, conversion
or otherwise shall be reissued, and all such shares shall be cancelled. The
Corporation may from time to time take such appropriate corporate action as may
be necessary to reduce the authorized number of shares of Preferred Stock
accordingly.
(g) Definitions.
3
<PAGE>
"Certificate of Incorporation" shall mean the Certificate of
Incorporation of the Corporation, as amended from time to time.
"Common Stock" shall mean the Corporation's Common Stock, $.01 par
value per share.
"Dividend Date" shall have the meaning set forth in Paragraph B(1)(a)
hereof.
"Dividend Rate" shall mean 7.5% per annum.
"Person" shall mean an individual, partnership, corporation,
association, trust, joint venture, unincorporated organization and any
government, governmental department or agency or political subdivision thereof.
"Public Offering" shall mean any underwritten offering by the
Corporation of its equity securities to the public pursuant to an effective
registration statement under the Securities Act of 1933 or any comparable
statement under any similar federal statute then in force, other than an
offering of shares being issued as consideration in a business acquisition or
combination or an offering in connection with an employee benefit plan.
"Purchase Price" of any share of Series A Preferred Stock shall be
$1,000.
"Series A Preference Amount" shall have the meaning set forth in
Paragraph B(1)(a).
"Series A Preferred Stock" shall mean the Corporation's Series A
Redeemable Preferred Stock, $.01 par value.
3. The Board of Directors of the Corporation, by unanimous written
consent in lieu of a meeting pursuant to Section 141(f) of the General
Corporation Law of the State of Delaware, duly adopted resolutions declaring
advisable this Certificate of Amendment.
4. In lieu of a meeting and vote of stockholders, the stockholders have
approved this Certificate of Amendment by written consent in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware and the By-laws of the Corporation, and notice of the taking of such
action was duly given to stockholders not consenting in writing to such action.
5. This Certificate of Amendment was duly adopted in accordance with
Sections 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, ENDOSAFE, INC. has caused this Certificate of Amendment
to be signed by its President, this 10th day of July,
1999.
ENDOSAFE, INC.
By: /s/ David R. Shaughnessy
-------------------------------
David R. Shaughnessy, President
<PAGE>
State of Delaware
PAGE 1
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "ENDOSAFE, INC.", FILED IN THIS OFFICE ON THE THIRD DAY OF
FEBRUARY, A.D. 1994, AT 12:30 O'CLOCK P.M.
/s/ Edward J. Freel
[SEAL OF THE SECRETARY OF STATE] -----------------------------------
Edward J. Freel, Secretary of State
2375407 8100 AUTHENTICATION: 9969334
DATE: 09-14-99
991382279
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED ON 12:30 PM 02/03/1994
944013232 - 2375407
CERTIFICATE OF INCORPORATION
of
ENDOSAFE, INC.
FIRST: The name of this Corporation is: Endosafe, Inc.
SECOND: The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted
by this Corporation is as follows:
To engage in any, lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 200,000 shares of Common Stock, $.01 par value per
share.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
FIFTH: The name and mailing address of the sole incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
David P. Johst c/o Charles River Laboratories, Inc.
211 Ballardvale Street
Wilmington, MA 01887
SIXTH: In furtherance of and not in limitation of powers conferred by
statute, it is further provided:
1. Election of directors need not be by written ballot.
2. The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation.
<PAGE>
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Tide 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall if sanctioned by the court to which the said application has been made, be
binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH: Except to the extent that the General Corporation Law of
Delaware prohibits the elimination or limitation of liability of directors for
breaches of fiduciary duty, no director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary damages for any
breach of fiduciary duty as a director, notwithstanding any provision of law
imposing such liability. No amendment to or repeal of this provision shall apply
to or have any effect on the liability or alleged liability of any director of
the Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
NINTH: The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of Delaware, as amended from time to time,
indemnify each person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was, or has agreed to become, a director or officer of the Corporation, or
is or was serving, or has agreed to serve, at the request of the Corporation, as
a director, officer or trustee of, or in a similar capacity with, another
corporation, partnership, joint venture, trust or other enterprise (including
any employee benefit plan), or by reason of any action alleged to have been
taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom.
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Indemnification may include payment by the Corporation of expenses in
defending an action or proceeding in advance of the final disposition of such
action or proceeding upon receipt of an undertaking by the person indemnified to
repay such payment if it is ultimately determined that such person is not
entitled to indemnification under this Article, which undertaking may be
accepted without reference to the financial ability of such person to make such
repayment.
The Corporation shall not indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person unless the initiation thereof was approved by the Board of Directors
of the Corporation.
The indemnification rights provided in this Article (i) shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any law, agreement or vote of stockholders or disinterested directors or
otherwise, and (ii) shall inure to the benefit of the heirs, executors and
administrators of such persons. The Corporation may, to the extent authorized
from time to time by its Board of Directors, grant indemnification rights to
other employees or agents of the Corporation or other persons serving the
Corporation and such rights may be equivalent to, or greater or less than, those
set forth in this Article.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute and this Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
EXECUTED at Wilmington, Massachusetts, on February 3, 1994.
/s/ David P. Johst
---------------------------------------------
Incorporator
EXHIBIT 3.1.2
BY-LAWS
OF
ENDOSAFE, INC.
<PAGE>
BY-LAWS
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TABLE OF CONTENTS
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Page
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ARTICLE 1 - Stockholders ................................................... 1
Section 1.1 Place of Meetings ...................................... 1
Section 1.2 Annual Meeting ......................................... 1
Section 1.3 Special Meetings ....................................... 1
Section 1.4 Notice of Meetings ..................................... 1
Section 1.5 Voting List ............................................ 2
Section 1.6 Quorum ................................................. 2
Section 1.7 Adjournments ........................................... 2
Section 1.8 Voting and Proxies ..................................... 2
Section 1.9 Action at Meeting ...................................... 3
Section 1.10 Action without Meeting ................................. 3
ARTICLE 2 - Directors ...................................................... 3
Section 2.1 General Powers ......................................... 3
Section 2.2 Number; Election and Qualification ..................... 4
Section 2.3 Enlargement of the Board ............................... 4
Section 2.4 Tenure ................................................. 4
Section 2.5 Vacancies .............................................. 4
Section 2.6 Resignation ............................................ 4
Section 2.7 Regular Meetings ....................................... 4
Section 2.8 Special Meetings ....................................... 5
Section 2.9 Notice of Special Meetings ............................. 5
Section 2.10 Meetings by Telephone Conference Calls ................. 5
Section 2.11 Quorum ................................................. 5
Section 2.12 Action at Meeting ...................................... 5
Section 2.13 Action by Consent ...................................... 5
Section 2.14 Removal ................................................ 6
Section 2.15 Committees ............................................. 6
Section 2.16 Compensation of Directors .............................. 6
ARTICLE 3 - Officers ....................................................... 7
Section 3.1 Enumeration ............................................ 7
Section 3.2 Election ............................................... 7
Section 3.3 Qualification .......................................... 7
Section 3.4 Tenure ................................................. 7
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Page
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Section 3.5 Resignation and Removal ................................ 7
Section 3.6 Vacancies .............................................. 8
Section 3.7 Chairman of the Board and Vice-Chairman of the Board ... 8
Section 3.8 President .............................................. 8
Section 3.9 Vice Presidents ........................................ 8
Section 3.10 Secretary and Assistant Secretaries .................... 8
Section 3.11 Treasurer and Assistant Treasurers ..................... 9
Section 3.12 Salaries ............................................... 9
ARTICLE 4 - Capital Stock .................................................. 10
Section 4.1 Issuance of Stock ...................................... 10
Section 4.2 Certificates of Stock .................................. 10
Section 4.3 Transfers .............................................. 10
Section 4.4 Lost, Stolen or Destroyed Certificates ................. 11
Section 4.5 Record Date ............................................ 11
ARTICLE 5 - General Provisions ............................................. 12
Section 5.1 Fiscal Year ............................................ 12
Section 5.2 Corporate Seal ......................................... 12
Section 5.3 Waiver of Notice ....................................... 12
Section 5.4 Voting of Securities ................................... 12
Section 5.5 Evidence of Authority .................................. 12
Section 5.6 Certificate of Incorporation ........................... 12
Section 5.7 Transactions with Interested Parties ................... 12
Section 5.8 Severability ........................................... 13
Section 5.9 Pronouns ............................................... 13
ARTICLE 6 - Amendments ..................................................... 13
Section 6.1 By the Board of Directors .............................. 13
Section 6.2 By the Stockholders .................................... 14
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<PAGE>
BY-LAWS
OF
ENDOSAFE, INC.
ARTICLE I - Stockholders
1.1 Place of Meetings. All meetings of stockholders shall be held at such
place within or without the State of Delaware as may be designated from time to
time by the Board of Directors or the President or, if not so designated, at the
registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the election
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date to be fixed by the Board of
Directors or the President (which date shall not be a legal holiday in the place
where the meeting is to be held) at the time and place to be fixed by the Board
of Directors or the President and stated in the notice of the meeting. If no
annual meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient.
If no annual meeting is held in accordance with the foregoing provisions, a
special meeting may be held in lieu of the annual meeting, and any action taken
at that special meeting shall have the same effect as if it had been taken at
the annual meeting, and in such case all references in these By-Laws to the
annual meeting of the stockholders shall be deemed to refer to such special
meeting.
1.3 Special Meetings. Special meetings of stockholders may be called at
any time by the President or by the Board of Directors. Business transacted at
any special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
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shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
1.5 Voting List. The officer who has charge of the stock ledger of the
corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, at a place within the city where the meeting is to
be held. The list shall also be produced and kept at the time and place of the
meeting during the whole time of the meeting, and may be inspected by any
stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these By-Laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to vote
at a meeting of stockholders, or to express consent or dissent to
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corporate action in writing without a meeting, may vote or express such consent
or dissent in person or may authorize another person or persons to vote or act
for him by written proxy executed by the stockholder or his authorized agent
and delivered to the Secretary of the corporation. No such proxy shall be voted
or acted upon after three years from the date of its execution, unless the proxy
expressly provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these By-Laws. Any election by stockholders shall be determined
by a plurality of the votes cast by the stockholders entitled to vote at the
election.
1.10 Action without Meeting. Any action required or permitted to be taken
at any annual or special meeting of stockholders of the corporation may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote on such action were present and voted. Prompt notice of the
taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE 2 - Directors
2.1 General Powers. The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law or the
Certificate of Incorporation. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board until the vacancy is filled.
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2.2 Number; Election and Qualification. The number of directors which
shall constitute the whole Board of Directors shall be determined by resolution
of the stockholders or the Board of Directors, but in no event shall be less
than one. The number of directors may be decreased at any time and from time to
time either by the stockholders or by a majority of the directors then in
office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote on such election. Directors need not be
stockholders of the corporation.
2.3 Enlargement of the Board. The number of directors may be increased at
any time and from time to time by the stockholders or by a majority of the
directors then in office.
2.4 Tenure. Each director shall hold office until the next annual
meeting and until his successor is elected and qualified, or until his earlier
death, resignation or removal.
2.5 Vacancies. Unless and until filled by the stockholders, any vacancy
in the Board of Directors, however occurring, including a vacancy resulting from
an enlargement of the Board may be filled by vote of a majority of the
directors then In office, although less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, and a director chosen to fill a
position resulting from an increase in the number of directors shall hold office
until the next annual meeting of stockholders and until his successor is elected
and qualified, or until his earlier death, resignation or removal.
2.6 Resignation. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.7 Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
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2.8 Special Meetings. Special meetings of the Board of Directors may be
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, President, two or more directors, or by
one director in the event that there is only a single director in office.
2.9 Notice of Special Meetings. Notice of any special meeting of
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 48 hours in advance of the meeting, (ii) by sending a telegram or telex,
or delivering written notice by hand, to his last known business or home address
at least 48 hours in advance of the meeting, or (iii) by mailing written notice
to his last known business or home address at least 72 hours in advance of the
meeting. A notice or waiver of notice of a meeting of the Board of Directors
need not specify the purposes of the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or any members of
any committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.11 Quorum. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
2.12 Action at Meeting. At any meeting of the Board of Directors at which
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, the Certificate
of Incorporation or these By-Laws.
2.13 Action by Consent. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting,
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if all members of the Board or committee as the case may be, consent to the
action in writing, and the written consents are filed with the minutes of
proceedings of the Board or committee.
2.14 Removal. Except as otherwise provided by the General Corporation Law
of Delaware, any one or more or all of the directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors, except that the directors elected by the holders of
a particular class or series of stock may be removed without cause only by vote
of the holders of a majority of the outstanding shares of such class or series.
2.15 Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members of the committee present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors and subject to the
provisions of the General Corporation Law of the State of Delaware, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation and may authorize the
seal of the corporation to be affixed to all papers which may require it. Each
such committee shall keep minutes and make such reports as the Board of
Directors may from time to time request. Except as the Board of Directors may
otherwise determine, any committee may make rules for the conduct of its
business, but unless otherwise provided by the directors or in such rules, its
business shall be conducted as nearly as possible in the same manner as is
provided in these By-Laws for the Board of Directors.
2.16 Compensation of Directors. Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
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ARTICLE 3 - Officers
3.1 Enumeration. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. No officer need be a stockholder. Any two or more
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal. Any officer may resign by delivering his
written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without cause, by vote of
a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
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3.6 Vacancies. The Board of Directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board and Vice-Chairman of the Board. The Board of
Directors may appoint a Chairman of the Board and may designate the Chairman of
the Board as Chief Executive Officer. If the Board of Directors appoints a
Chairman of the Board, he shall perform such duties and possess such powers as
are assigned to him by the Board of Directors. If the Board of Directors
appoints a Vice-Chairman of the Board, he shall, in the absence or disability of
the Chairman of the Board, perform the duties and exercise the powers of the
Chairman of the Board and shall perform such other duties and possess such other
powers as may from time to time be vested in him by the Board of Directors.
3.8 President. The President shall, subject to the direction of the Board
of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders, if he is a director, at all
meetings of the Board of Directors. Unless the Board of Directors has designated
the Chairman of the Board or another officer as Chief Executive Officer, the
President shall be the Chief Executive Officer of the corporation. The President
shall perform such other duties and shall have such other powers as the Board of
Directors may from time to time prescribe.
3.9 Vice Presidents. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such
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powers as are incident to the office of the secretary, including without
limitation the duty and power to give notices of all meetings of stockholders
and special meetings of the Board of Directors to attend all meetings of
stockholders and the Board of Directors and keep a record of the proceedings, to
maintain a stock ledger and prepare lists of stockholders and their addresses as
required, to be custodian of corporate records and the corporate seal and to
affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the President or the Secretary may from time to time
prescribe. In the event of the absence, inability or refusal to act of the
Secretary, the Assistant Secretary, (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such
duties and shall have such powers as may from time to time be assigned to him by
the Board of Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of
Directors statements of all such transactions and of the financial condition of
the corporation.
The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurer, (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 Salaries. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
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ARTICLE 4 - Capital Stock
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the corporation shall
be entitled to have a certificate, in such form as may be prescribed by law and
by the Board of Directors, certifying the number and class of shares owned by
him in the corporation. Each such certificate shall be signed by, or in the name
of the corporation by, the Chairman or Vice-Chairman, if any, of the Board of
Directors, or the President or a Vice President, and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-Laws,
applicable securities laws or any agreement among any number of shareholders or
among such holders and the corporation shall have conspicuously noted on the
face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction.
4.3 Transfers. Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these By-Laws, the corporation shall be entitled to treat the record
holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote
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with respect to such stock, regardless of any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the corporation in accordance with the requirements of these By-Laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action. Such record date shall not be more than 60 nor less than 10 days
before the date of such meeting, nor more than 60 days prior to any other action
to which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed. The record date for determining Stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
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ARTICLE 5 - General Provisions
5.1 Fiscal Year. Except as from time to time otherwise designated by the
Board of Directors, the fiscal year of the corporation shall begin on the first
day of January in each year and end on the last day of December in each year.
5.2 Corporate Seal. The corporate seal shall be in such form as shall be
approved by the Board of Directors.
5.3 Waiver of Notice. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these By-Laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
5.4 Voting of Securities. Except as the directors may otherwise
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
5.5 Evidence of Authority. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith
be conclusive evidence of such action.
5.6 Certificate of Incorporation. All references in these By-Laws to the
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time,
5.7 Transactions with Interested Parties. No contract or
transaction between the corporation and one or more of the directors or
officers, or between the corporation and any other corporation partnership,
association, or other organization in which one or more of the directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of
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<PAGE>
Directors or a committee of the Board of Directors which authorizes the contract
or transaction or solely because his or their votes are counted for such
purpose, if:
(1) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors or the committee and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
(2) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation as
of the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contractor transaction.
5.8 Severability, Any determination that any provision of these By-Laws
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
5.9 Pronouns. All pronouns used in these By-Laws shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
ARTICLE 6 - Amendments
6 1 By the Board of Directors. These By-Laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
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<PAGE>
6.2 By the Stockholders. These By-Laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of the holders of
a majority of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alteration,
amendment repeal or adoption of new by-laws shall have been stated in the
notice of such special meeting.
EXHIBIT 4.1
================================================================================
CHARLES RIVER LABORATORIES HOLDINGS, INC.
Warrants to Purchase
591,366 Shares of Common Stock
WARRANT AGREEMENT
Dated as of September 29, 1999
STATE STREET BANK AND TRUST COMPANY
Warrant Agent
================================================================================
<PAGE>
WARRANT AGREEMENT, dated as of September 29, 1999, between
Charles River Laboratories Holdings, Inc., a Delaware corporation (the
"Company"), and State Street Bank and Trust Company, as warrant agent (the
"Warrant Agent").
WHEREAS, the Company proposes to issue warrants (the
"Warrants") to initially purchase up to an aggregate of 591,366 shares of Common
Stock, par value $.01 per share (the "Common Stock"), of the Company (the Common
Stock issuable on exercise of the Warrants being referred to herein as the
"Warrant Shares"), in connection with the offering (the "Offering") by Charles
River Laboratories, Inc. ("Charles River") of 150,000 Units (the "Units"), each
consisting of $1,000 principal amount at maturity of Charles River's 13 1/2%
Senior Subordinated Notes due 2009 (the "Notes") and one Warrant, each Warrant
initially representing the right to purchase 3.94244 Warrant Shares.
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing so to act in connection
with the issuance of Warrant Certificates (as defined) and other matters as
provided herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following respective meanings:
"144A Global Warrant" means a global Warrant substantially in
the form of Exhibit A hereto bearing the Global Warrant Legend and the Private
Placement Legend and deposited with or on behalf of, and registered in the name
of, the Depositary or its nominee.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as used with respect to any Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such specified Person, whether
through the ownership of voting securities, by agreement or otherwise; provided
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Warrant, the rules and
procedures of the Depositary, Euroclear and Cedelbank that apply to such
transfer or exchange.
"Business Day" means any day other than a Legal Holiday.
"Cedelbank" means Cedelbank, a limited liability company (a
societe anonyme) organized under Luxembourg law.
"Closing Date" means the date hereof.
"Commission" means the Securities and Exchange Commission.
"Depositary" means, with respect to the Warrants issuable or
issued in whole or in part in global form, the Person specified in Section 3.3
hereof as the Depositary with respect to the Warrants, and any and all
successors thereto appointed as Depositary hereunder and having become such
pursuant to the applicable provision of the Indenture.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Global Warrants" means, individually and collectively, each
of the Restricted Global Warrants and the Unrestricted Global Warrants,
substantially, in the form of Exhibit A hereto issued in accordance with Section
3.1(b) and 3.5 hereof.
"Global Warrant Legend" means the legend set forth in Section
3.5(g)(ii), which is required to be placed on all Global Warrants issued under
this Warrant Agreement.
"Holder" means a person who is listed as the record owner of
Registrable Securities.
"IAI Global Warrant" means the global Warrant substantially in
the form of Exhibit A hereto bearing the Global Warrant Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee.
"Indenture" means the indenture, dated the date hereof,
between Charles River, the Guarantors that are party thereto and State Street
Bank and Trust Company, as trustee relating to the Notes.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Warrant through a Participant.
"Initial Purchaser" means Donaldson, Lufkin & Jenrette
Securities Corporation.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act, which is not also a QIB.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or the city in which the principal
corporate trust office or the Warrant Agent is located or at a place of payment
are authorized by law, regulation or executive order to remain closed. If a
payment date is a Legal Holiday at a place of payment, payment may be made at
that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue on such payment for the intervening period.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Warrant Agent in form and substance reasonably
acceptable to the Warrant Agent. The counsel may be an employee of or counsel to
the Company, any subsidiary of the Company or the Warrant Agent.
"Participant" means, with respect to the Depositary, Euroclear
or Cedelbank, a Person who has an account with the Depositary, Euroclear or
Cedelbank, respectively (and, with respect to The Depository Trust Company,
shall include Euroclear and Cedelbank).
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof, including any
subdivision or ongoing business of any such entity or substantially all of the
assets of any such entity, subdivision or business.
"Private Placement Legend" means the legend set forth in
Section 3.5(g)(i) to be placed on all Warrants issued under this Warrant
Agreement except where otherwise permitted by the provisions of this Warrant
Agreement.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registrable Securities" shall mean the Warrants, the Warrant
Shares and any other securities issued or issuable with respect to the Warrants
or the Warrant Shares by way of a stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization; provided that a security ceases to be a Registrable Security
when it is no longer a Transfer Restricted Security. The Registrable Securities
are entitled to the benefits of the Warrant Registration Rights Agreement.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Regulation S Global Warrant" means a global Warrant in the
form of Exhibit A hereto bearing the Global Warrant Legend, the Private
Placement Legend and the Regulation S Legend and deposited with or on behalf of
and registered in the name of the Depositary or its nominee.
"Regulation S Legend" means the legend set forth in Section
3.5(g)(iv) to be placed on all Registrable Securities issued pursuant to
Regulation S.
"Restricted Definitive Warrant" means a Definitive Warrant
bearing the Private Placement Legend.
"Restricted Global Warrant" means a Global Warrant bearing the
Private Placement Legend.
"Rule 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Rule 903" means Rule 903 promulgated under the Securities
Act.
"Rule 904" means Rule 904 promulgated under the Securities
Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Separation Date" means the earliest of (i) 180 days after the
closing of the Offering, (ii) the date on which a registration statement with
respect to a registered exchange offer for the Notes is declared effective under
the Securities Act, (iii) the date a shelf registration statement with respect
to the Notes is declared effective under the Securities Act, (iv) such date as
Donaldson, Lufkin & Jenrette Securities Corporation in its sole discretion shall
determine and (v) the occurrence of a Change of Control (as defined in the
Indenture).
"Transfer Restricted Securities" shall mean (a) each Warrant
and Warrant Share held by an Affiliate of the Company and (b) each other Warrant
and Warrant Share until the earlier to occur of (i) the date on which such
Warrant or Warrant Share (other than any Warrant Share issued upon exercise of a
Warrant in accordance with a Registration Statement (as defined in the Warrant
Registration Rights Agreement)) has been disposed of in accordance with a
Registration Statement and (ii) the date on which such Warrant or Warrant Share
(or the related Warrant) is distributed to the public pursuant to Rule 144 under
the Act.
"Trustee" means the trustee under the Indenture.
"Unrestricted Global Warrant" means a global Warrant
substantially in the form of Exhibit A attached hereto that bears the Global
Warrant Legend and that has the "Schedule of Exchanges of Interests in the
Global Warrant" attached thereto, and that is deposited with or on behalf of and
registered in the name of the Depositary, representing a series of Warrants that
do not bear the Private Placement Legend.
"Unrestricted Definitive Warrant" means one or more Definitive
Warrants that do not bear and are not required to bear the Private Placement
Legend.
"U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"Warrant Registration Rights Agreement" means the registration
rights agreement, dated as of September 29, 1999, between the Company and the
Initial Purchaser relating to the Warrants and the Warrant Shares.
SECTION 2. APPOINTMENT OF WARRANT AGENT.
The Company hereby appoints the Warrant Agent to act as agent
for the Company in accordance with the instructions set forth hereinafter in
this Agreement and the Warrant Agent hereby accepts such appointment.
SECTION 3. ISSUANCE OF WARRANTS; WARRANT CERTIFICATES.
3.1. FORM AND DATING.
(a) General.
The Warrants shall be substantially in the form of Exhibit A
hereto (the "Warrant Certificates"). The Warrants may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Warrant shall
be dated the date of the countersignature.
The terms and provisions contained in the Warrants shall
constitute, and are hereby expressly made, a part of this Warrant Agreement. The
Company and the Warrant Agent, by their execution and delivery of this Warrant
Agreement, expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any Warrant conflicts with the express
provisions of this Warrant Agreement, the provisions of this Warrant Agreement
shall govern and be controlling.
(b) Global Warrants.
Warrants issued in global form shall be substantially in the
form of Exhibit A attached hereto (including the Global Warrant Legend thereon
and the "Schedule of Exchanges of Interests in the Global Warrant" attached
thereto). Warrants issued in definitive form shall be substantially in the form
of Exhibit A attached hereto (but without the Global Warrant Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Warrant" attached
thereto). Each Global Warrant shall represent such of the outstanding Warrants
as shall be specified therein and each shall provide that it shall represent the
number of outstanding Warrants from time to time endorsed thereon and that the
number of outstanding Warrants represented thereby may from time to time be
reduced or increased, as appropriate, to reflect exchanges and redemptions. Any
endorsement of a Global Warrant to reflect the amount of any increase or
decrease in the number of outstanding Warrants represented thereby shall be made
by the Warrant Agent in accordance with instructions given by the Holder thereof
as required by Section 3.5 hereof.
(c) Euroclear and Cedelbank Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of Cedelbank" and "Customer Handbook" of Cedelbank shall be
applicable to transfers of beneficial interests in the Regulation S Global
Warrant that are held by Participants through Euroclear or Cedelbank.
3.2. EXECUTION.
An Officer shall sign the Warrants for the Company by manual
or facsimile signature.
If the Officer whose signature is on a Warrant no longer holds
that office at the time a Warrant is countersigned, the Warrant shall
nevertheless be valid.
A Warrant shall not be valid until countersigned by the manual
signature of the Warrant Agent. The signature shall be conclusive evidence that
the Warrant has been properly issued under this Warrant Agreement.
The Warrant Agent shall, upon a written order of the Company
signed by an Officer (a "Warrant Countersignature Order"), countersign Warrants
for original issue up to the number stated in the preamble hereto.
The Warrant Agent may appoint an agent acceptable to the
Company to countersign Warrants. Such an agent may countersign Warrants whenever
the Warrant Agent may do so. Each reference in this Warrant Agreement to a
countersignature by the Warrant Agent includes a countersignature by such agent.
Such an agent has the same rights as the Warrant Agent to deal with the Company
or an Affiliate of the Company.
3.3. WARRANT REGISTRAR.
The Company shall maintain an office or agency where Warrants
may be presented for registration of transfer or for exchange ("Warrant
Registrar"). The Warrant Registrar shall keep a register of the Warrants and of
their transfer and exchange. The Company may appoint one or more co-Warrant
Registrars. The term "Warrant Registrar" includes any co-Warrant Registrar. The
Company may change any Warrant Registrar without notice to any holder. The
Company shall notify the Warrant Agent in writing of the name and address of any
agent not a party to this Warrant Agreement. If the Company fails to appoint or
maintain another entity as Warrant Registrar, the Warrant Agent shall act as
such. The Company or any of its subsidiaries may act as Warrant Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Warrants.
The Company initially appoints the Warrant Agent to act as the
Warrant Registrar with respect to the Global Warrants.
3.4. HOLDER LISTS.
The Warrant Agent shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders. If the Warrant Agent is not the Warrant Registrar, the
Company shall promptly furnish to the Warrant Agent at such times as the Warrant
Agent may request in writing, a list in such form and as of such date as the
Warrant Agent may reasonably require of the names and addresses of the Holders.
3.5. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Warrants.
A Global Warrant may not be transferred as a whole except by
the Depositary to a nominee of the Depositary, by a nominee of the Depositary to
the Depositary or to another nominee of the Depositary, or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Warrants will be exchanged by the Company for Definitive
Warrants if (i) the Company delivers to the Warrant Agent notice from the
Depositary that it is unwilling or unable to continue to act as Depositary or
that it is no longer a clearing agency registered under the Exchange Act and, in
either case, a successor Depositary is not appointed by the Company within 120
days after the date of such notice from the Depositary or (ii) the Company in
its sole discretion determines that the Global Warrants (in whole but not in
part) should be exchanged for Definitive Warrants and delivers a written notice
to such effect to the Warrant Agent. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Warrants shall be issued in
such names as the Depositary shall instruct the Warrant Agent. Global Warrants
also may be exchanged or replaced, in whole or in part, as provided in Sections
3.6 and 3.7 hereof. A Global Warrant may not be exchanged for another Warrant
other than as provided in this Section 3.5(a), however, beneficial interests in
a Global Warrant may be transferred and exchanged as provided in Section 3.5(b),
(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the
Global Warrants.
The transfer and exchange of beneficial interests in the
Global Warrants shall be effected through the Depositary, in accordance with the
provisions of this Warrant Agreement and the Applicable Procedures. Beneficial
interests in the Restricted Global Warrants shall be subject to restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Warrants also
shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs, as
applicable:
(i) Transfer of Beneficial Interests in the Same Global
Warrant. Beneficial interests in any Restricted Global Warrant may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Warrant in accordance
with the transfer restrictions set forth in the Private Placement
Legend. Beneficial interests in any Unrestricted Global Warrant may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Warrant. No written
orders or instructions shall be required to be delivered to the Warrant
Registrar to effect the transfers described in this Section 3.5(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Warrants. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 3.5(b)(i) above,
the transferor of such beneficial interest must deliver to the Warrant
Registrar either (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Warrant in an amount
equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be credited
with such increase or (B) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Warrant in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary
to the Warrant Registrar containing information regarding the Person in
whose name such Definitive Warrant shall be registered. Upon
effectiveness of the Registration Statement (as defined in the Warrant
Registration Rights Agreement) by the Company in accordance with
Section 3.5(f) hereof, the requirements of this Section 3.5(b)(ii)
shall be deemed to have been satisfied upon receipt by the Warrant
Registrar of a certification required by the Company in connection with
such Registration Statement delivered by the Holder of such beneficial
interests in the Restricted Global Warrants. Upon satisfaction of all
of the requirements for transfer or exchange of beneficial interests in
Global Warrants contained in this Agreement and the Warrants or
otherwise applicable under the Securities Act, the Warrant Agent shall
adjust the principal amount of the relevant Global Warrant(s) pursuant
to Section 3.5(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Warrant. A beneficial interest in any Restricted Global Warrant
may be transferred to a Person who takes delivery thereof in the form
of a beneficial interest in another Restricted Global Warrant if the
transfer complies with the requirements of Section 3.5(b)(ii) above and
the Warrant Registrar receives the following:
(A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Warrant, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form
of a beneficial interest in the Regulation S Global Warrant,
then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2)
thereof; and
(C) if the transferee will take delivery in the form
of a beneficial interest in the IAI Global Warrant, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications and certificates and
Opinion of Counsel required by item (3) thereof, if
applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Warrant for Beneficial Interests in the Unrestricted
Global Warrant. A beneficial interest in any Restricted Global Warrant
may be exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Warrant or transferred to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Warrant if the exchange or transfer complies with
the requirements of Section 3.5(b)(ii) above and:
(A) such transfer is effected pursuant to the
Registration Statement in accordance with the Warrant
Registration Rights Agreement; or
(B) the Warrant Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Warrant proposes to
exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Warrant, a
certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Warrant proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global
Warrant, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (B), if the
Warrant Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable to the
Warrant Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
If any such transfer is effected pursuant to subparagraph (B)
above at a time when an Unrestricted Global Warrant has not yet been issued, the
Company shall issue and, upon receipt of an Warrant Countersignature Order in
accordance with Section 3.2 hereof, the Warrant Agent shall countersign one or
more Unrestricted Global Warrants in the number equal to the number of
beneficial interests transferred pursuant to subparagraph (B) above.
(c) Transfer and Exchange of Beneficial Interests for
Definitive Warrants.
(i) Beneficial Interests in Restricted Global Warrants to
Restricted Definitive Warrants. If any holder of a beneficial interest
in a Restricted Global Warrant proposes to exchange such beneficial
interest for a Restricted Definitive Warrant or to transfer such
beneficial interest to a Person who takes delivery thereof in the form
of a Restricted Definitive Warrant, then, upon receipt by the Warrant
Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Warrant proposes to exchange such beneficial
interest for a Restricted Definitive Warrant, a certificate
from such holder in the form of Exhibit C hereto, including
the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in accordance
with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of
the Securities Act in accordance with Rule 144 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such beneficial interest is being transferred
to an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the Securities
Act other than those listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth in Exhibit B
hereto, including the certifications, certificates and Opinion
of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c)
thereof,
the Warrant Agent shall cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the number of
Warrants represented by the Global Warrant to be reduced by the number of
Warrants to be represented by the Definitive Warrant pursuant to Section 3.5(h)
hereof, and the Company shall execute and the Warrant Agent shall countersign
and deliver to the Person designated in the instructions a Definitive Warrant in
the appropriate amount. Any Definitive Warrant issued in exchange for a
beneficial interest in a Restricted Global Warrant pursuant to this Section
3.5(c) shall be registered in such name or names as the holder of such
beneficial interest shall instruct the Warrant Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The Warrant
Agent shall deliver such Definitive Warrants to the Persons in whose names such
Warrants are so registered. Any Definitive Warrant issued in exchange for a
beneficial interest in a Restricted Global Warrant pursuant to this Section
3.5(c)(i) shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Warrants to
Unrestricted Definitive Warrants. A holder of a beneficial interest in
a Restricted Global Warrant may exchange such beneficial interest for
an Unrestricted Definitive Warrant or may transfer such beneficial
interest to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Warrant only if:
(A) such transfer is effected pursuant to the
Registration Statement in accordance with the Warrant
Registration Rights Agreement; or
(B) the Warrant Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Warrant proposes to
exchange such beneficial interest for a Definitive
Warrant that does not bear the Private Placement
Legend, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in
item (1)(b) thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Warrant proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
Definitive Warrant that does not bear the Private
Placement Legend, a certificate from such holder in
the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (B), if
the Warrant Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Warrant Registrar to the effect
that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities
Act.
(iii) Beneficial Interests in Unrestricted Global Warrants to
Unrestricted Definitive Warrants. If any holder of a beneficial
interest in an Unrestricted Global Warrant proposes to exchange such
beneficial interest for a Definitive Warrant or to transfer such
beneficial interest to a Person who takes delivery thereof in the form
of a Definitive Warrant, then, upon satisfaction of the conditions set
forth in Section 3.5(b)(ii) hereof, the Warrant Agent shall cause the
amount of the applicable Global Warrant to be reduced accordingly
pursuant to Section 3.5(h) hereof, and the Company shall execute and
the Warrant Agent shall countersign and deliver to the Person
designated in the instructions a Definitive Warrant in the appropriate
principal amount. Any Definitive Warrant issued in exchange for a
beneficial interest pursuant to this Section 3.5(c)(iii) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct
the Warrant Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Warrant Agent shall deliver
such Definitive Warrants to the Persons in whose names such Warrants
are so registered. Any Definitive Warrant issued in exchange for a
beneficial interest pursuant to this Section 3.5(c)(iii) shall not bear
the Private Placement Legend.
(d) Transfer and Exchange of Definitive Warrants for
Beneficial Interests.
(i) Restricted Definitive Warrants to Beneficial Interests in
Restricted Global Warrants. If any Holder of a Restricted Definitive
Warrant proposes to exchange such Warrant for a beneficial interest in
a Restricted Global Warrant or to transfer such Restricted Definitive
Warrants to a Person who takes delivery thereof in the form of a
beneficial interest in a Restricted Global Warrant, then, upon receipt
by the Warrant Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive
Warrant proposes to exchange such Warrant for a beneficial
interest in a Restricted Global Warrant, a certificate from
such Holder in the form of Exhibit C hereto, including the
certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Warrant is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Warrant is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such Restricted Definitive Warrant is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Restricted Definitive Warrant is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such Restricted Definitive Warrant is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Warrant is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Warrant Agent shall cancel the Restricted Definitive Warrant,
increase or cause to be increased the amount of, in the case of clause
(A) above, the appropriate Restricted Global Warrant, in the case of
clause (B) above, the 144A Global Warrant, in the case of clause (C)
above, the Regulation S Global Warrant, and in all other cases, the IAI
Global Warrant.
(ii) Restricted Definitive Warrants to Beneficial Interests in
Unrestricted Global Warrants. A Holder of a Restricted Definitive
Warrant may exchange such Warrant for a beneficial interest in an
Unrestricted Global Warrant or transfer such Restricted Definitive
Warrant to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Warrant only if:
(A) such transfer is effected pursuant to the
Registration Statement in accordance with the Registration
Rights Agreement; or
(B) the Warrant Registrar receives the following:
(1) if the Holder of such Definitive
Warrants proposes to exchange such Warrants for a
beneficial interest in the Unrestricted Global
Warrant, a certificate from such Holder in the form
of Exhibit C hereto, including the certifications in
item (1)(c) thereof; or
(2) if the Holder of such Definitive
Warrants proposes to transfer such Warrants to a
Person who shall take delivery thereof in the form of
a beneficial interest in the Unrestricted Global
Warrant, a certificate from such Holder in the form
of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Warrant Registrar so requests or if the Applicable
Procedures so require, an Opinion of Counsel in form
reasonably acceptable to the Warrant Registrar to the effect
that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities
Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 3.5(d)(ii), the Warrant Agent shall cancel the Definitive
Warrants and increase or cause to be increased the aggregate principal
amount of the Unrestricted Global Warrant.
(iii) Unrestricted Definitive Warrants to Beneficial Interests
in Unrestricted Global Warrants. A Holder of an Unrestricted Definitive
Warrant may exchange such Warrant for a beneficial interest in an
Unrestricted Global Warrant or transfer such Definitive Warrants to a
Person who takes delivery thereof in the form of a beneficial interest
in an Unrestricted Global Warrant at any time. Upon receipt of a
request for such an exchange or transfer, the Warrant Agent shall
cancel the applicable Unrestricted Definitive Warrant and increase or
cause to be increased the amount of one of the Unrestricted Global
Warrants.
If any such exchange or transfer from a Definitive Warrant to a
beneficial interest is effected pursuant to subparagraphs (ii)(B) or
(iii) above at a time when an Unrestricted Global Warrant has not yet
been issued, the Company shall issue and, upon receipt of an Warrant
Countersignature Order in accordance with Section 3.2 hereof, the
Warrant Agent shall countersign one or more Unrestricted Global
Warrants in the number equal to the number of beneficial interests of
Definitive Warrants so transferred.
(e) Transfer and Exchange of Definitive Warrants for
Definitive Warrants.
Upon request by a Holder of Definitive Warrants and such
Holder's compliance with the provisions of this Section 3.5(e), the Warrant
Registrar shall register the transfer or exchange of Definitive Warrants. Prior
to such registration of transfer or exchange, the requesting Holder shall
present or surrender to the Warrant Registrar the Definitive Warrants duly
endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Warrant Registrar duly executed by such Holder or by its
attorney, duly authorized in writing. In addition, the requesting Holder shall
provide any additional certifications, documents and information, as applicable,
required pursuant to the following provisions of this Section 3.5(e).
(i) Restricted Definitive Warrants to Restricted Definitive
Warrants. Any Restricted Definitive Warrant may be transferred to and
registered in the name of Persons who take delivery thereof in the form
of a Restricted Definitive Warrant if the Warrant Registrar receives
the following:
(A) if the transfer will be made pursuant to Rule
144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903
or Rule 904, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
item (2) thereof; or
(C) if the transfer will be made pursuant to any
other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Warrants to Unrestricted Definitive
Warrants. Any Restricted Definitive Warrant may be exchanged by the
Holder thereof for an Unrestricted Definitive Warrant or transferred to
a Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Warrant if:
(A) any such transfer is effected pursuant to the
Registration Statement in accordance with the Warrant
Registration Rights Agreement; or
(B) the Warrant Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Warrants proposes to exchange such
Warrants for an Unrestricted Definitive Warrant, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(d)
thereof; or
(2) if the Holder of such Restricted
Definitive Warrants proposes to transfer such
Warrants to a Person who shall take delivery thereof
in the form of an Unrestricted Definitive Warrant, a
certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (B), if
the Warrant Registrar so requests, an Opinion of Counsel in
form reasonably acceptable to the Company to the effect that
such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and
in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Warrants to Unrestricted
Definitive Warrants. A Holder of Unrestricted Definitive Warrants may
transfer such Warrants to a Person who takes delivery thereof in the
form of an Unrestricted Definitive Warrant. Upon receipt of a request
to register such a transfer, the Warrant Registrar shall register the
Unrestricted Definitive Warrants pursuant to the instructions from the
Holder thereof.
(f) Registration Statement.
Upon the effectiveness of the Registration Statement and sales
of Warrants in connection therewith in accordance with the Warrant Registration
Rights Agreement, the Company shall issue and, upon receipt of a Warrant
Countersignature Order in accordance with Section 3.2, the Warrant Agent shall
countersign (i) one or more Unrestricted Global Warrants in an amount equal to
the amount of the beneficial interests in the Restricted Global Warrants sold
under such Registration Statement and (ii) Definitive Warrants in an amount
equal to the amount of the beneficial interests of the Restricted Definitive
Warrants sold under such Registration Statement. Concurrently with the issuance
of such Warrants, the Warrant Agent shall cause the amount of the applicable
Restricted Global Warrants to be reduced accordingly, and the Company shall
execute and the Warrant Agent shall countersign and deliver to the Persons
designated by the Holders of Definitive Warrants so accepted Definitive Warrants
in the appropriate amount.
(g) Legends.
The following legends shall appear on the face of all Global
Warrants and Definitive Warrants issued under this Warrant Agreement unless
specifically stated otherwise in the applicable provisions of this Warrant
Agreement.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below,
each Global Warrant and each Definitive Warrant (and all
Warrants issued in exchange therefor or substitution thereof)
shall bear the legend in substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) AND THE WARRANT
SHARES TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT, AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
UNITED STATES PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS
ACQUIRED THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION
S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(A)(1),(2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904
OF REGULATION S OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO
SUCH TRANSFER, FURNISHES THE WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS SECURITY (THE
FORM OF WHICH CAN BE OBTAINED FROM THE WARRANT AGENT) AND, IF SUCH TRANSFER IS
IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITY LESS THAN $250,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION,
(3) AGREES NOT TO ENGAGE IN HEDGING TRANSACTIONS UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT AND
(4) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED
STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE WARRANT AGREEMENT CONTAINS A PROVISION REQUIRING THE WARRANT
AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE
FOREGOING."
(B) Notwithstanding the foregoing, any Global Warrant
or Definitive Warrant issued pursuant to subparagraphs
(b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii),
(e)(iii) or (f) to this Section 3.5 (and all Warrants issued
in exchange therefor or substitution thereof) shall not bear
the Private Placement Legend.
(ii) Global Warrant Legend. Each Global Warrant shall bear a
legend in substantially the following form:
"THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS
DEFINED IN THE WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE
IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE
WARRANT AGENT MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 3.5 OF THE WARRANT AGREEMENT, (II) THIS GLOBAL
WARRANT MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
3.5(a) OF THE WARRANT AGREEMENT, (III) THIS GLOBAL WARRANT MAY BE
DELIVERED TO THE WARRANT AGENT FOR CANCELLATION PURSUANT TO SECTION 3.8
OF THE WARRANT AGREEMENT AND (IV) THIS GLOBAL WARRANT MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
CHARLES RIVER LABORATORIES HOLDINGS, INC. (THE "COMPANY")."
(iii) Unit Legend. Each Warrant issued prior to the Separation
Date shall bear a legend in substantially the following form:
"THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE
INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF
WHICH CONSIST OF $1,000 PRINCIPAL AMOUNT AT MATURITY OF THE 13 1/2%
SENIOR SUBORDINATED NOTES DUE 2009 (THE "NOTES") OF CHARLES RIVER
LABORATORIES, INC. AND ONE WARRANT (THE "WARRANTS") INITIALLY ENTITLING
THE HOLDER THEREOF TO PURCHASE 3.94244 SHARES, PAR VALUE $0.01 PER
SHARE, OF CHARLES RIVER LABORATORIES HOLDINGS, INC.
PRIOR TO THE EARLIEST TO OCCUR OF (I) 180 DAYS AFTER
THE CLOSING OF THE OFFERING OF THE UNITS, (ii) THE DATE ON WHICH A
REGISTRATION STATEMENT WITH RESPECT TO A REGISTERED EXCHANGE OFFER FOR
THE NOTES IS DECLARED EFFECTIVE UNDER THE UNITED STATES SECURITIES ACT
OF 1933 (THE "SECURITIES ACT"), (Iii) THE DATE A SHELF REGISTRATION
STATEMENT WITH RESPECT TO THE NOTES IS DECLARED EFFECTIVE UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), (iV) SUCH DATE AS DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION IN ITS SOLE DISCRETION SHALL DETERMINE AND (V) THE
OCCURRENCE OF A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE
GOVERNING THE NOTES), THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY
NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED
OR EXCHANGED ONLY TOGETHER WITH, THE NOTES."
(iv) Regulation S. Legend. Each Warrant that is a Registrable
Security and issued pursuant to Regulation S shall bear the following
legend on the fact thereof:
"THIS WARRANT AND THE SECURITIES TO BE ISSUED UPON
ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND THE
WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S. PERSON UNLESS
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
IN ORDER TO EXERCISE THIS WARRANT, THE HOLDER MUST FURNISH TO THE
COMPANY AND THE WARRANT AGENT EITHER (A) A WRITTEN CERTIFICATION THAT
IT IS NOT A U.S. PERSON AND THE WARRANT IS NOT BEING EXERCISED ON
BEHALF OF A U.S. PERSON OR (B) A WRITTEN OPINION OF COUNSEL TO THE
EFFECT THAT THE SECURITIES DELIVERED UPON EXERCISE OF THE WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OR THAT THE DELIVERY OF SUCH
SECURITIES IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. TERMS IN THIS LEGEND HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT."
(h) Cancellation and/or Adjustment of Global Warrants.
At such time as all beneficial interests in a particular
Global Warrant have been exercised or exchanged for Definitive Warrants or a
particular Global Warrant has been exercised, redeemed, repurchased or canceled
in whole and not in part, each such Global Warrant shall be returned to or
retained and canceled by the Warrant Agent in accordance with Section 3.8
hereof. At any time prior to such cancellation, if any beneficial interest in a
Global Warrant is exercised or exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another Global
Warrant or for Definitive Warrants, the amount of Warrants represented by such
Global Warrant shall be reduced accordingly and an endorsement shall be made on
such Global Warrant by the Warrant Agent or by the Depositary at the direction
of the Warrant Agent to reflect such reduction; and if the beneficial interest
is being exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Warrant, such other
Global Warrant shall be increased accordingly and an endorsement shall be made
on such Global Warrant by the Warrant Agent or by the Depositary at the
direction of the Warrant Agent to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Warrant Agent shall countersign Global
Warrants and Definitive Warrants upon the Company's order or at the
Warrant Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Warrant or to a holder of a Definitive
Warrant for any registration of transfer or exchange, but the Company
may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith.
(iii) All Global Warrants and Definitive Warrants issued upon
any registration of transfer or exchange of Global Warrants or
Definitive Warrants shall be the duly authorized, executed and issued
warrants for Common Stock of the Company, not subject to any preemptive
rights, and entitled to the same benefits under this Warrant Agreement,
as the Global Warrants or Definitive Warrants surrendered upon such
registration of transfer or exchange.
(iv) Prior to due presentment for the registration of a
transfer of any Warrant, the Warrant Agent, and the Company may deem
and treat the Person in whose name any Warrant is registered as the
absolute owner of such Warrant for all purposes and none of the Warrant
Agent, or the Company shall be affected by notice to the contrary.
(v) The Warrant Agent shall countersign Global Warrants and
Definitive Warrants in accordance with the provisions of Section 3.2
hereof.
(j) Facsimile Submissions to Warrant Agent.
All certifications, certificates and Opinions of Counsel
required to be submitted to the Warrant Registrar pursuant to this Section 3.5
to effect a registration of transfer or exchange may be submitted by facsimile.
Notwithstanding anything herein to the contrary, as to any
certificates and/or certifications delivered to the Warrant Registrar pursuant
to this Section 3.5, the Warrant Registrar's duties shall be limited to
confirming that any such certifications and certificates delivered to it are in
the form of Exhibits B and C attached hereto. The Warrant Registrar shall not be
responsible for confirming the truth or accuracy of representations made in any
such certifications or certificates. As to any Opinions of Counsel delivered
pursuant to this Section 3.5, the Warrant Registrar may rely upon, and be fully
protected in relying upon, such opinions.
3.6. REPLACEMENT WARRANTS.
If any mutilated Warrant is surrendered to the Warrant Agent
or the Company and the Warrant Agent receives evidence to its satisfaction of
the destruction, loss or theft of any Warrant, the Company shall issue and the
Warrant Agent, upon receipt of a Warrant Countersignature Order, shall
countersign a replacement Warrant if the Warrant Agent's requirements are met.
If required by the Warrant Agent or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Warrant Agent
and the Company to protect the Company, the Warrant Agent, any Agent and any
agent for purposes of the countersignature from any loss that any of them may
suffer if a Warrant is replaced. The Company may charge for its expenses in
replacing a Warrant.
Every replacement Warrant is an additional warrant of the
Company and shall be entitled to all of the benefits of this Warrant Agreement
equally and proportionately with all other Warrants duly issued hereunder.
3.7. TEMPORARY WARRANTS.
Until certificates representing Warrants are ready for
delivery, the Company may prepare and the Warrant Agent, upon receipt of a
Warrant Countersignature Order, shall issue temporary Warrants. Temporary
Warrants shall be substantially in the form of certificated Warrants but may
have variations that the Company considers appropriate for temporary Warrants
and as shall be reasonably acceptable to the Warrant Agent. Without unreasonable
delay, the Company shall prepare and the Warrant Agent, as soon as practicable
upon receipt of the written order of the Company signed by an officer of the
Company, shall countersign definitive Warrants in exchange for temporary
Warrants.
Holders of temporary Warrants shall be entitled to all of the
benefits of this Warrant Agreement.
3.8. CANCELLATION.
Subject to Section 3.5(h) hereof, the Company at any time may
deliver Warrants to the Warrant Agent for cancellation. The Warrant Registrar
and Warrant Paying Agent shall forward to the Warrant Agent any Warrants
surrendered to them for registration of transfer, exchange or exercise. The
Warrant Agent and no one else shall cancel all Warrants surrendered for
registration of transfer, exchange, exercise, replacement or cancellation and
shall destroy canceled Warrants (subject to the record retention requirement of
the Exchange Act). Certification of the destruction of all canceled Warrants
shall be delivered to the Company. The Company may not issue new Warrants to
replace Warrants that have been exercised or that have been delivered to the
Warrant Agent for cancellation.
SECTION 4. SEPARATION OF WARRANTS; TERMS OF WARRANTS; EXERCISE OF WARRANTS.
(a) The Notes and Warrants will not be separately transferable
until the Separation Date. Subject to the terms of this Agreement, each Warrant
holder shall have the right, which may be exercised during the period commencing
at the opening of business on the Separation Date and until 5:00 p.m., New York
City time on October 1, 2009 (the "Exercise Period"), to receive from the
Company the number of fully paid and nonassessable Warrant Shares which the
holder may at the time be entitled to receive on exercise of such Warrants and
payment of the exercise price (the "Exercise Price") (i) by tendering Notes
having an aggregate principal amount at maturity, plus accrued and unpaid
interest, if any thereon to the date of exercise or (ii) in cash, by wire
transfer or by certified or official check payable to the order of the Company,
in each case, equal to the Exercise Price then in effect for such Warrant
Shares; provided that holders shall be able to exercise their Warrants only if a
registration statement relating to the Warrant Shares is then in effect, or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and such securities
are qualified for sale or exempt from qualification under the applicable
securities laws of the states in which the various holders of the Warrants or
other persons to whom it is proposed that the Warrant Shares be issued on
exercise of the Warrants reside. Each Warrant not exercised prior to 5:00 p.m.,
New York City time, on October 1, 2009 (the "Expiration Date") shall become void
and all rights thereunder and all rights in respect thereof under this agreement
shall cease as of such time. No adjustments as to dividends will be made upon
exercise of the Warrants.
(b) In order to exercise all or any of the Warrants
represented by a Warrant Certificate, the holder thereof must deliver to the
Warrant Agent at its corporate trust office set forth in Section 15 hereof the
Warrant Certificate and the form of election to purchase on the reverse thereof
duly filled in and signed, which signature shall be medallion guaranteed by an
institution which is a member of a Securities Transfer Association recognized
signature guarantee program, and upon payment to the Warrant Agent for the
account of the Company of the Exercise Price, which is set forth in the form of
Warrant Certificate attached hereto as Exhibit A, as adjusted as herein
provided, for the number of Warrant Shares in respect of which such Warrants are
then exercised. Payment of the aggregate Exercise Price shall be made (i) in
cash, by wire transfer or by certified or official bank check payable to the
order of the Company or (ii) by tendering Notes in the manner provided in
Section 4(a) hereof.
(c) Subject to the provisions of Section 5 hereof, upon
compliance with clause (b) above, the Warrant Agent shall deliver or cause to be
delivered with all reasonable dispatch, to or upon the written order of the
holder and in such name or names as the Warrant holder may designate, a
certificate or certificates for the number of whole Warrant Shares issuable upon
the exercise of such Warrants or other securities or property to which such
holder is entitled hereunder, together with cash as provided in Section 9
hereof; provided that if any consolidation, merger or lease or sale of assets is
proposed to be effected by the Company as described in Section 8(m) hereof, or a
tender offer or an exchange offer for shares of Common Stock shall be made, upon
such surrender of Warrants and payment of the Exercise Price as aforesaid, the
Warrant Agent shall, as soon as possible, but in any event not later than two
business days thereafter, deliver or cause to be delivered the full number of
Warrant Shares issuable upon the exercise of such Warrants in the manner
described in this sentence or other securities or property to which such holder
is entitled hereunder, together with cash as provided in Section 9 hereof. Such
certificate or certificates shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become a holder of
record of such Warrant Shares as of the date of the surrender of such Warrants
and payment of the Exercise Price.
(d) The Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part. If less than all
the Warrants represented by a Warrant Certificate are exercised, such Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same tenor
and for the number of Warrants which were not exercised shall be executed by the
Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Warrant Certificate, registered in such name or names as may
be directed in writing by the holder, and shall deliver the new Warrant
Certificate to the Person or Persons entitled to receive the same.
(e) All Warrant Certificates surrendered upon exercise of
Warrants shall be cancelled by the Warrant Agent. Such cancelled Warrant
Certificates shall then be disposed of by the Warrant Agent in a manner
satisfactory to the Company. The Warrant Agent shall account promptly to the
Company with respect to Warrants exercised and concurrently pay to the Company
all monies received by the Warrant Agent for the purchase of the Warrant Shares
through the exercise of such Warrants.
(f) The Warrant Agent shall keep copies of this Agreement and
any notices given or received hereunder available for inspection by the holders
during normal business hours at its office. The Company shall supply the Warrant
Agent from time to time with such numbers of copies of this Agreement as the
Warrant Agent may request.
SECTION 5. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes attributable
to the initial issuance of Warrant Shares upon the exercise of Warrants;
provided that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue of any Warrant
Certificates or any certificates for Warrant Shares in a name other than that of
the registered holder of a Warrant Certificate surrendered upon the exercise of
a Warrant, and the Company shall not be required to issue or deliver such
Warrant Certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
SECTION 6. RESERVATION OF WARRANT SHARES.
(a) The Company will at all times reserve and keep available,
free from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock or its authorized and issued Common Stock held in its treasury, for
the purpose of enabling it to satisfy any obligation to issue Warrant Shares
upon exercise of Warrants, the maximum number of shares of Common Stock which
may then be deliverable upon the exercise of all outstanding Warrants.
(b) The Company or, if appointed, the transfer agent for the
Common Stock (the "Transfer Agent") and every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of any of the
rights of purchase aforesaid will be irrevocably authorized and directed at all
times to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Warrant Agent is hereby irrevocably authorized
to requisition from time to time from such Transfer Agent the stock certificates
required to honor outstanding Warrants upon exercise thereof in accordance with
the terms of this Agreement. The Company will supply such Transfer Agent with
duly executed certificates for such purposes and will provide or otherwise make
available any cash which may be payable as provided in Section 9 hereof. The
Company will furnish such Transfer Agent a copy of all notices of adjustments,
and certificates related thereto, transmitted to each holder pursuant to Section
11 hereof.
(c) Before taking any action which would cause an adjustment
pursuant to Section 8 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take any corporate action
which may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
(d) The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants will, upon issue, be fully paid, nonassessable,
free of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issuance thereof.
SECTION 7. OBTAINING STOCK EXCHANGE LISTINGS.
The Company will from time to time take all action which may
be necessary so that the Warrant Shares, immediately upon their issuance upon
the exercise of Warrants, will be listed on the principal securities exchanges,
automated quotation systems or other markets within the United States of
America, if any, on which other shares of Common Stock are then listed, if any.
SECTION 8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES
ISSUABLE.
The Exercise Price and the number of Warrant Shares issuable
upon the exercise of each Warrant are subject to adjustment from time to time
upon the occurrence of the events enumerated in this Section 8. For purposes of
this Section 8, "Common Stock" means shares now or hereafter authorized of any
class of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
(a) Adjustment for Change in Capital Stock.
If the Company (i) pays a dividend or makes a distribution on
its Common Stock in shares of its Common Stock, (ii) subdivides its outstanding
shares of Common Stock into a greater number of shares, (iii) combines its
outstanding shares of Common Stock into a smaller number of shares, (iv) makes a
distribution on its Common Stock in shares of its capital stock other than
Common Stock or (v) issues by reclassification of its Common Stock any shares of
its capital stock, then the Exercise Price in effect immediately prior to such
action shall be proportionately adjusted so that the holder of any Warrant
thereafter exercised may receive the aggregate number and kind of shares of
capital stock of the Company which he would have owned immediately following
such action if such Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a holder of a Warrant upon exercise of it may receive
shares of two or more classes of capital stock of the Company, the Company shall
determine, in good faith, the allocation of the adjusted Exercise Price between
the classes of capital stock. After such allocation, the exercise privilege and
the Exercise Price of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section 8. Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to
all holders of its Common Stock entitling them for a period expiring within 45
days after the record date mentioned below to purchase shares of Common Stock at
a price per share less than the Fair Value (as defined herein) per share on that
record date, the Exercise Price shall be adjusted in accordance with the
formula:
0 + NxP
-------
E' = E x M
-------
0+N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding
on the record date.
N = the number of additional shares of Common Stock
issued pursuant to such rights, options or
warrants.
P = the aggregate price per share of the additional
shares.
M = the Fair Value per share of Common Stock on the
record date.
If adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to
receive the rights, options or warrants. If at the end of the period during
which such rights, options or warrants are exercisable, not all rights, options
or warrants shall have been exercised, the Exercise price shall be immediately
readjusted to what it would have been if "N" in the above formula had been the
number of shares actually issued.
(c) Adjustment for Other distributions.
If the Company distributes to all holders of its Common Stock
any of its assets or debt securities or any rights or warrants to purchase debt
securities of the Company, the Exercise Price shall be adjusted in accordance
with the formula:
M - F
E' = E x ------
M
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the Fair Value per share of Common Stock on the
record date mentioned below.
F = the fair market value on the record date of the
assets, securities, rights or warrants to be
distributed in respect o fone share of Common
Stock as determined in good faith by the Board of
Directors of the Company (the "Board of
Directors").
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This Section 8(c) does not apply to cash dividends or cash
distributions paid out of consolidated current or retained earnings as shown
on the books of the Company prepared in accordance with generally accepted
accounting principles. Also, this Section 8(c) does not apply to rights,
options or warrants referred to in Section 8(b) hereof.
(d) Adjustment for Common Stock Issue.
If the Company issues shares of Common Stock for a
consideration per share less than the Fair Value per share on the date the
Company fixes the offering price of such additional shares, the Exercise Price
shall be adjusted in accordance with the formula:
P
---
E' = E x O + M
------------
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior
to the issuance of such additional shares.
P = the aggregate consideration received for the
issuance of such additional shares.
M = the Fair Value per share on the date of issuance
of such additional shares.
A = the number of shares outstanding immediately after
the issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections
(a), (b) and (c) of this Section 8,
(2) the exercise of Warrants, or the conversion or
exchange of other securities convertible or exchangeable for
Common Stock the issuance of which caused an adjustment to
be made under Section 8(e),
(3) Common Stock issued to the Company's employees
(or employees of its subsidiaries) under bona fide employee
benefit plans adopted by the Board of Directors and approved
by the holders of Common Stock when required by law, if such
Common Stock would otherwise be covered by this subsection
(d) (but only to the extent that the aggregate number of
shares excluded hereby and issued after the date of this
Warrant Agreement shall not exceed 5% of the Common Stock
outstanding at the time of the adoption of each such plan,
exclusive of anti-dilution adjustments thereunder),
(4) Common Stock issued to shareholders of any person
which merges into the Company, or with a subsidiary of the
Company, in proportion to their stock holdings of such
person immediately prior to such merger, upon such merger,
provided that if such person is an Affiliate of the Company,
the Board of Directors shall have obtained a fairness
opinion from a nationally recognized investment banking,
appraisal or valuation firm, which is not an Affiliate of
the Company, stating that the consideration received in such
merger is fair to the Company from a financial point of
view, or
(5) the issuance of shares of Common Stock pursuant
to rights, options or warrants which were originally issued
in a Non-Affiliate Sale (as defined below) together with one
or more other securities as part of a unit at a price per
unit.
(e) Adjustment for Convertible Securities Issue.
If the Company issues any securities convertible into or
exchangeable for Common Stock (other than securities issued in transactions
described in subsections (b) and (c) of this Section 8) for a consideration per
share of Common Stock initially deliverable upon conversion or exchange of such
securities less than the Fair Value per share on the date of issuance of such
securities, the Exercise Price shall be adjusted in accordance with this
formula:
P
---
O + M
E' = E x ----------------
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding
immediately prior to the issuance of such
securities.
P = the aggregate consideration received for the
issuance of such securities.
M = the Fair Value per share on the date of issuance
of such securities.
D = the maximum number of shares deliverable
upon conversion or in exchange for such
securities at the initial conversion or
exchange rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after
such issuance.
If all of the Common Stock deliverable upon conversion or
exchange of such securities have not been issued when such securities are no
longer outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion or exchange of such securities.
This subsection (e) does not apply to convertible securities
issued to shareholders of any person which merges into the Company, or with a
subsidiary of the Company, in proportion to their stock holdings of such person
immediately prior to such merger, upon such merger, provided that if such person
is an Affiliate of the Company, the Board of Directors shall have obtained a
fairness opinion from a nationally recognized investment banking, appraisal or
valuation firm, which is not an Affiliate of the Company, stating that the
consideration received in such merger is fair to the Company from a financial
point of view.
(f) Consideration Received.
For purposes of any computation respecting consideration
received pursuant to subsections (d), and (e) of this Section 8, the following
shall apply:
(1) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of
such cash, provided that in no case shall any deduction be
made for any commissions, discounts or other expenses
incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(2) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than
cash, the consideration other than cash shall be deemed to
be the fair market value thereof as determined in good faith
by the Board of Directors (irrespective of the accounting
treatment thereof), whose determination shall be conclusive,
and described in a Board resolution which shall be filed
with the Warrant Agent;
(3) in the case of the issuance of securities
convertible into or exchangeable for shares, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of
such securities plus the additional minimum consideration,
if any, to be received by the Company upon the conversion or
exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (1) and
(2) of this subsection); and
(4) in the case of the issuance of shares of Common
Stock pursuant to rights, options or warrants which rights,
options or warrants were originally issued together with one
or more other securities as part of a unit at a price per
unit, the consideration shall be deemed to be the fair value
of such rights, options or warrants at the time of issuance
thereof as determined in good faith by the Board of
Directors whose determination shall be conclusive and
described in a Board resolution which shall be filed with
the Warrant Agent plus the additional minimum consideration,
if any, to be received by the Company upon the exercise,
conversion or exchange thereof (as determined in the same
manner as provided in clauses (1) and (2) of this
subsection).
(g) Fair Value.
In Sections 8(d) and (e) hereof, the "Fair Value" per security
at any date of determination shall be (1) in connection with a sale by the
Company to a party that is not an Affiliate of the Company in an arm's-length
transaction (a "Non-Affiliate Sale"), the price per security at which such
security is sold and (2) in connection with any sale by the Company to an
Affiliate of the Company, (a) the last price per security at which such security
was sold in a Non-Affiliate Sale within the three-month period preceding such
date of determination (it being understood that the sale of Common Stock of the
Company to DLJ Merchant Banking Partners II, L.P. and its Affiliates on
September 29, 1999 was a sale to a party not then an Affiliate of the Company
and therefore a Non-Affiliate Sale) or (b) if clause (a) is not applicable, the
fair market value of such security determined in good faith by (i) a majority of
the Board of Directors, including a majority of the Disinterested Directors, and
approved in a Board resolution delivered to the Warrant Agent or (ii) a
nationally recognized investment banking, appraisal or valuation firm, which is
not an Affiliate of the Company, in each case, taking into account, among all
other factors deemed relevant by the Board of Directors or such investment
banking, appraisal or valuation firm, the trading price and volume of such
security on any national securities exchange or automated quotation system on
which such security is traded. Notwithstanding the foregoing, any sale to
Donaldson, Lufkin & Jenrette Securities Corporation (or any successor thereto)
pursuant to an underwritten public offering registered under the Securities Act
shall be deemed to be and treated as a Non-Affiliate Sale.
In Sections 8(b) and (c) hereof, the "Fair Value" per security
at any date of determination shall be (a) the last price per security at which
such security was sold by the Company in a Non-Affiliate Sale within the
three-month period preceding such date of determination or (b) if clause (a) is
not applicable, the fair market value of such security determined in good faith
by (i) a majority of the Board of Directors, including a majority of the
Disinterested Directors, and approved in a Board resolution delivered to the
Warrant Agent or (ii) a nationally recognized investment banking, appraisal or
valuation firm, which is not an Affiliate of the Company, in each case, taking
into account, among all other factors deemed relevant by the Board of Directors
or such investment banking, appraisal or valuation firm, the trading price and
volume of such security on any national securities exchange or automated
quotation system on which such security is traded.
For purposes of this Section 8(g), "Disinterested Director"
means, in connection with any issuance of securities that gives rise to a
determination of the Fair Value thereof, each member of the Board of Directors
who is not an officer, employee, director or other Affiliate of the party to
whom the Company is proposing to issue the securities giving rise to such
determination.
For purposes of this Section 8(g), "Affiliate" of any
specified Person means (A) any other Person directly or indirectly controlling
or controlled by or under direct or indirect common control with such specified
Person and (B) any director, officer or employee of such specified person. For
purposes of this definition "control" (including, with correlative meanings, the
terms "controlling," "controlled by" and "under common control with") as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise.
(h) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the Exercise
Price. Any adjustments that are not made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 8
shall be made to the nearest cent or to the nearest 1/10,000th of a share, as
the case may be, it being understood that no such rounding shall be made under
subsection (p).
(i) When No Adjustment Required.
No adjustment need be made for a transaction referred to
Section 8(a), (b), (c), (d), (e) or (f) hereof, if Warrant holders are to
participate (without being required to exercise their Warrants) in the
transaction on a basis and with notice that the Board of Directors determines to
be fair and appropriate in light of the basis and notice on which holders of
Common Stock participate in the transaction. No adjustment need be made for (i)
rights to purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest, (ii) a change in the par value or no par value of the
Common Stock or (iii) the issuance by the Company of warrants to DLJ Merchant
Banking Partners II, L.P. and certain of its Affiliates on or about September
29, 1999. To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
(j) Notice of Adjustment.
Whenever the Exercise Price is adjusted, the Company shall
provide the notices required by Section 10 hereof.
(k) Notice of Certain Transactions.
If (i) the Company takes any action that would require an
adjustment in the Exercise Price pursuant to Section 8(a), (b), (c), (d), (e) or
(f) hereof and if the Company does not arrange for Warrant holders to
participate pursuant to Section 8(i) hereof, (ii) the Company takes any action
that would require a supplemental Warrant Agreement pursuant to Section 8(l)
hereof or (iii) there is a liquidation or dissolution of the Company, then the
Company shall mail to Warrant holders a notice stating the proposed record date
for a dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. The Company shall mail the notice at least 15 days
before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
(l) Reorganization of Company.
Immediately after the date hereof, if the Company consolidates
or merges with or into, or transfers or leases all or substantially all its
assets to, any person, upon consummation of such transaction the Warrants shall
automatically become exercisable for the kind and amount of securities, cash or
other assets which the holder of a Warrant would have owned immediately after
the consolidation, merger, transfer or lease if the holder had exercised the
Warrant immediately before the effective date of the transaction. Concurrently
with the consummation of such transaction, the corporation formed by or
surviving any such consolidation or merger if other than the Company, or the
person to which such sale or conveyance shall have been made, shall enter into
(i) a supplemental Warrant Agreement so providing and further providing for
adjustments which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section 8(l) and (ii) a supplement to the
Warrant Registration Rights Agreement providing for the assumption of the
Company's obligations thereunder. The successor Company shall mail to Warrant
holders a notice describing the supplemental Warrant Agreement and Warrant
Registration Rights Agreement. If the issuer of securities deliverable upon
exercise of Warrants under the supplemental Warrant Agreement is an affiliate of
the formed, surviving, transferee or lessee corporation, that issuer shall join
in the supplemental Warrant Agreement and Warrant Registration Rights Agreement.
If this Section 8(l) applies, Sections 8(a), (b), (c), (d), (e) and (f) hereof
do not apply.
(m) Company Determination Final.
Any determination that the Company or the Board of Directors
must make pursuant to Section 8(a), (c), (d), (e), (f), (g), (h) or (i) hereof
is conclusive.
(n) Warrant Agent's Disclaimer.
The Warrant Agent has no duty to determine when an adjustment
under this Section 8 should be made, how it should be made or what it should be.
The Warrant Agent has no duty to determine whether any provisions of a
supplemental Warrant Agreement under Section 8(l) hereof are correct. The
Warrant Agent makes no representation as to the validity or value of any
securities or assets issued upon exercise of Warrants. The Warrant Agent shall
not be responsible for the Company's failure to comply with this Section 8.
(0) When Issuance or Payment May Be Deferred.
In any case in which this Section 8 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the holder of any Warrant exercised after such record date
the Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Exercise Price
and (ii) paying to such holder any amount in cash in lieu of a fractional share
pursuant to Section 10 hereof; provided that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional Warrant Shares, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
(p) Adjustment in Number of Shares.
Upon each adjustment of the Exercise Price pursuant to this
Section 8, each Warrant outstanding prior to the making of the adjustment in the
Exercise Price shall thereafter evidence the right to receive upon payment of
the adjusted Exercise Price that number of shares of Common Stock (calculated to
the nearest hundredth) obtained from the following formula:
N' = N x E
---
E'
where:
N' = the adjusted number of Warrant Shares
issuable upon exercise of a Warrant by
payment of the adjusted Exercise Price.
N = the number or Warrant Shares previously
issuable upon exercise of a Warrant by
payment of the Exercise Price prior to
adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(q) Form of Warrants.
Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
SECTION 9. FRACTIONAL INTERESTS.
The Company shall not be required to issue fractional Warrant
Shares on the exercise of Warrants. If more than one Warrant shall be presented
for exercise in full at the same time by the same holder, the number of full
Warrant Shares which shall be issuable upon the exercise thereof shall be
computed on the basis of the aggregate number of Warrant Shares purchasable on
exercise of the Warrants so presented. If any fraction of a Warrant Share would,
except for the provisions of this Section 9, be issuable on the exercise of any
Warrants (or specified portion thereof), the Company shall pay an amount in cash
equal to the Fair Value per Warrant Share, as determined on the day immediately
preceding the date the Warrant is presented for exercise, multiplied by such
fraction, computed to the nearest whole U.S. cent.
SECTION 10. NOTICES TO WARRANT HOLDERS.
(a) Upon any adjustment of the Exercise Price pursuant to
Section 8 hereof, the Company shall promptly thereafter (i) cause to be filed
with the Warrant Agent a certificate of a firm of independent public accountants
of recognized standing selected by the Board of Directors of the Company (who
may be the regular auditors of the Company) setting forth the Exercise Price
after such adjustment and setting forth in reasonable detail the method of
calculation and the facts upon which such calculations are based and setting
forth the number of Warrant Shares (or portion thereof) issuable after such
adjustment in the Exercise Price, upon exercise of a Warrant and payment of the
adjusted Exercise Price, which certificate shall be conclusive evidence of the
correctness of the matters set forth therein, and (ii) cause to be given to each
of the registered holders of Warrants at the address appearing on the Warrant
register for each such registered holder written notice of such adjustments by
first-class mail, postage prepaid. Where appropriate, such notice may be given
in advance and included as a part of the notice required to be mailed under the
other provisions of this Section 10.
(b) In case:
(i) the Company shall authorize the issuance to all holders
of shares of Common Stock of rights, options or warrants to subscribe
for or purchase shares of Common Stock or of any other subscription
rights or warrants;
(ii) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or
assets (other than dividends or cash distributions paid out of
consolidated current or retained earnings as shown on the books of the
Company prepared in accordance with generally accepted accounting
principles or dividends payable in shares of Common Stock or
distributions referred to in Section 10(a) hereof);
(iii) of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the conveyance or transfer of the properties and assets
of the Company substantially as an entirety, or of any reclassification
or change of Common Stock issuable upon exercise of the Warrants (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock;
(iv) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(v) the Company proposes to take any action (other than
actions of the character described in Section 8(a) hereof) which would
require an adjustment of the Exercise Price pursuant to Section 8
hereof;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the registered holders of Warrants at his address
appearing on the Warrant register, at least 20 days (or 10 days in any case
specified in clauses (i) or (ii) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (x)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, (y) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (z) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 11 or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
(c) Nothing contained in this Agreement or in any of the
Warrant Certificates shall be construed as conferring upon the holders of
Warrants the right to vote or to consent or to receive notice as stockholders in
respect of the meetings of stockholders or the election of directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company.
SECTION 11. MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.
(a) Any corporation into which the Warrant Agent may be merged
or with which it may be consolidated, or any corporation resulting from any
merger or consolidation to which the Warrant Agent shall be a party, or any
corporation succeeding to the business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
such corporation would be eligible for appointment as a successor warrant agent
under the provisions of Section 13 hereof. In case at the time such successor to
the Warrant Agent shall succeed to the agency created by this Agreement, and in
case at that time any of the Warrant Certificates shall have been countersigned
but not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent; and in case at that time any of
the Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor to the Warrant
Agent; and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
(b) In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent whose name has been changed
may adopt the countersignature under its prior name, and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name, and in all such cases such Warrant Certificates shall have the
full force and effect provided in the Warrant Certificates and in this
Agreement.
SECTION 12. WARRANT AGENT.
The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions, by all of
which the Company and the holders of Warrants, by their acceptance thereof,
shall be bound:
(a) The statements contained herein and in the Warrant
Certificates shall be taken as statements of the Company and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this Agreement
or in the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant Certificate in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with the opinion or the advice of
such counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant Certificate for
any action taken in reliance on any Warrant Certificate, certificate of shares,
notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties. The Warrant Agent need not
investigate any fact or matter stated in such document.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement. The Company shall indemnify
the Warrant Agent and its agents, employees, officers, directors and
shareholders for, and hold same harmless against, any and all losses,
liabilities or expenses (including without limitation reasonable attorney's fees
and expenses) incurred by it arising out of or in connection with the acceptance
or administration of its duties under this Warrant Agreement, including the
costs and expenses of enforcing this Warrant Agreement against the Company and
defending itself against any claim (whether asserted by the Company or any
Holder or any other person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent any
such loss, liability or expense may be attributable to its negligence or bad
faith. The Warrant Agent shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Warrant Agent to so notify the
Company shall not relieve the Company of its obligations hereunder. At the
Warrant Agent's sole discretion, the Company shall defend the claim and the
Warrant Agent shall cooperate in the defense at the Company's expense. The
Warrant Agent may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel. The Company need not pay for any settlement
made without its consent, which consent shall not be unreasonably withheld.
(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or one or more registered holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as it may
consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrant
Certificates or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent and any recovery of judgment shall
be for the ratable benefit of the registered holders of the Warrants, as their
respective rights or interests may appear.
(g) The Warrant Agent, and any stockholder, director, officer
or employee of it, may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Warrant Agent
under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for
the Company, and its duties shall be determined solely by the provisions hereof.
The Warrant Agent shall not be liable for anything which it may do or refrain
from doing in connection with this Agreement except for its own negligence or
bad faith.
(i) The Warrant Agent shall not at any time be under any duty
or responsibility to any holder of any Warrant Certificate to make or cause to
be made any adjustment of the Exercise Price or number of the Warrant Shares or
other securities or property deliverable as provided in this Agreement, or to
determine whether any facts exist which may require any of such adjustments, or
with respect to the nature or extent of any such adjustments, when made, or with
respect to the method employed in making the same. The Warrant Agent shall not
be accountable with respect to the validity or value or the kind or amount of
any Warrant Shares or of any securities or property which may at any time be
issued or delivered upon the exercise of any Warrant or with respect to whether
any such Warrant Shares or other securities will when issued be validly issued
and fully paid and nonassessable, and makes no representation with respect
thereto.
SECTION 13. CHANGE OF WARRANT AGENT.
If the Warrant Agent shall become incapable of acting as
Warrant Agent, the Company shall appoint a successor to such Warrant Agent. If
the Company shall fail to make such appointment within a period of 30 days after
it has been notified in writing of such incapacity by the Warrant Agent or by
the registered holder of a Warrant Certificate, then the registered holder of
any Warrant may apply to any court of competent jurisdiction for the appointment
of a successor to the Warrant Agent. Pending appointment of a successor to such
Warrant Agent, either by the Company or by such a court, the duties of the
Warrant Agent shall be carried out by the Company. The holders of a majority of
the unexercised Warrants shall be entitled at any time to remove the Warrant
Agent and appoint a successor to such Warrant Agent. Such successor to the
Warrant Agent need not be approved by the Company or the former Warrant Agent.
After appointment the successor to the Warrant Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Warrant Agent without further act or deed; provided that the former
Warrant Agent shall deliver and transfer to the successor to the Warrant Agent
any property at the time held by it hereunder and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure to
give any notice provided for in this Section 13, however, or any defect therein,
shall not affect the legality or validity of the appointment of a successor to
the Warrant Agent.
SECTION 14. REPORTS.
(a) Whether or not required by the rules and regulations of
the Commission, so long as any Warrants or the Warrant Shares are outstanding,
the Company shall furnish to the Warrant Agent and the holders of Warrants or
Warrant Shares (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. In addition, whether or not required by the rules
and regulations of the Commission, the Company shall file a copy of all such
information and reports with the Commission for public availability (unless the
Commission shall not accept such a filing) and make such information available
to securities analysts and prospective investors upon request.
(b) The Company shall provide the Warrant Agent with a
sufficient number of copies of all such reports that the Warrant Agent may be
required to deliver to the holders of the Warrants and the Warrant Shares under
this Section 14.
SECTION 15. NOTICES TO COMPANY AND WARRANT AGENT.
Any notice or demand authorized by this Agreement to be given
or made by the Warrant Agent or by the registered holder of any Warrant to or on
the Company shall be sufficiently given or made when received if deposited in
the mail, first class or registered, postage prepaid, addressed (until another
address is filed in writing by the Company with the Warrant Agent) as follows:
Charles River Laboratories Holdings, Inc.
c/o DLJ Merchant Banking Partners
277 Park Avenue
New York, New York 10172
Telecopier No.: (212) 892-7272
Attention: Reid Perper
With a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopier No.: (212) 450-4800
Attention: Richard Truesdell, Jr, Esq.
In case the Company shall fail to maintain such office or
agency or shall fail to give such notice of the location or of any change in the
location thereof, presentations may be made and notices and demands may be
served at the principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the
Company or by the registered holder(s) of any Warrant to the Warrant Agent shall
be sufficiently given when and if deposited in the mail, first-class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) to the Warrant Agent as follows:
State Street Bank and Trust Company
Goodwin Square, 23rd Floor
225 Asylum Street
Hartford, Connecticut 06103
Telecopier No.: 860-244-1897
Attention: Corporate Trust Administration
SECTION 16. SUPPLEMENTS AND AMENDMENTS.
The Company and the Warrant Agent may from time to time
supplement or amend this Agreement without the approval of any holders of
Warrants in order to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company and the Warrant Agent may deem
necessary or desirable and which shall not in any way adversely affect the
interests of the holders of Warrants. Any amendment or supplement to this
Agreement that has an adverse effect on the interests of the holders of Warrants
shall require the written consent of the holders of a majority of the then
outstanding Warrants (excluding Warrants held by the Company or any of its
affiliates). The consent of each holder of Warrants affected shall be required
for any amendment pursuant to which the Exercise Price would be increased or the
number of Warrant Shares purchasable upon exercise of Warrants would be
decreased (other than pursuant to adjustments provided in this Agreement).
SECTION 17. SUCCESSORS.
All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
SECTION 18. TERMINATION.
This Agreement shall terminate at 5:00 p.m., New York City
time on October 1, 2009. Notwithstanding the foregoing, this Agreement will
terminate on any earlier date if all Warrants have been exercised. The
provisions of Section 12 shall survive such termination.
SECTION 19. GOVERNING LAW.
This Agreement and each Warrant Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of New York
and for all purposes shall be construed in accordance with the internal laws of
said State.
SECTION 20. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any
person or corporation other than the Company, the Warrant Agent and the
registered holders of Warrants any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Warrant Agent and the registered holders of
Warrants.
SECTION 21. COUNTERPARTS.
This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
CHARLES RIVER LABORATORIES HOLDINGS, INC.
By:
----------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Warrant Agent
By:
-----------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
[Face]
Unit Legend. Each Warrant issued prior to the Separation
Date shall bear the following legend (the "Unit Legend") on the face thereof:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN
ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF $1,000 PRINCIPAL
AMOUNT AT MATURITY OF THE 13 1/2% SENIOR SUBORDINATED NOTES DUE 2009 (THE
"NOTES") OF CHARLES RIVER LABORATORIES, INC. AND ONE WARRANT (THE "WARRANTS")
INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 3.94244 SHARES, PAR VALUE
$0.01 PER SHARE, OF CHARLES RIVER LABORATORIES HOLDINGS, INC.
PRIOR TO THE EARLIEST TO OCCUR OF (I) 180 DAYS AFTER THE CLOSING OF THE OFFERING
OF THE UNITS, (II) THE DATE ON WHICH A REGISTRATION STATEMENT WITH RESPECT TO A
REGISTERED EXCHANGE OFFER FOR THE NOTES IS DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (III) THE DATE A SHELF REGISTRATION STATEMENT WITH RESPECT TO
THE NOTES IS DECLARED EFFECTIVE UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), (IV) SUCH DATE AS DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION IN ITS SOLE DISCRETION SHALL DETERMINE AND (V)
THE OCCURRENCE OF A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE GOVERNING THE
NOTES), THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR
EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER
WITH, THE NOTES.
Private Placement Legend: Each Warrant issued pursuant to an
exemption from the registration requirements of the Securities Act shall bear
the following legend (the "Private Placement Legend") on the face thereof:
THIS SECURITY (OR ITS PREDECESSOR) AND THE WARRANT SHARES TO
BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT,
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, UNITED STATES
PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR
OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS
ACQUIRED THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION
S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(A)(1),(2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON
1
<PAGE>
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904
OF REGULATION S OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO
SUCH TRANSFER, FURNISHES THE WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS SECURITY (THE
FORM OF WHICH CAN BE OBTAINED FROM THE WARRANT AGENT) AND, IF SUCH TRANSFER IS
IN RESPECT OF AN AGREEMENT PRINCIPAL AMOUNT OF SECURITY LESS THAN $250,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION,
(3) AGREES NOT TO ENGAGE IN HEDGING TRANSACTIONS UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT AND
(4) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE
WARRANT AGREEMENT CONTAINS A PROVISION REQUIRING THE WARRANT AGENT TO REFUSE TO
REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING.
No. _____________ ____Warrants
CUSIP No. ________
Warrant Certificate
CHARLES RIVER LABORATORIES HOLDINGS, INC.
This Warrant Certificate certifies that Cede & Co., or its
registered assigns, is the registered holder of Warrants expiring October 1,
2009 (the "Warrants") to purchase Common Stock, par value $.01 (the "Common
Stock"), of Charles River Laboratories Holdings, Inc., a Delaware corporation.
Each Warrant entitles the registered holder upon exercise at any time from 9:00
a.m. on the Separation Date referred to below (the "Exercise Date") until 5:00
p.m. New York City Time on October 1, 2009, to receive from the Company 3.94244
fully paid and nonassessable shares of Common Stock (the "Warrant Shares") at
the initial exercise price (the "Exercise Price") of $10.00 per share payable
upon surrender of this Warrant Certificate and payment of the Exercise Price at
the office or agency of the Warrant Agent, but only subject to the conditions
set forth herein and in the Warrant Agreement referred to on the reverse
2
<PAGE>
hereof. The Exercise Price and number of Warrant Shares issuable upon exercise
of the Warrants are subject to adjustment upon the occurrence of certain
events set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City
Time on October 1, 2009, and to the extent not exercised by such time such
Warrants shall become void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent, as such term is used in the Warrant
Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the internal laws of the State of New York.
3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be signed below.
Dated: September 29, 1999
CHARLES RIVER LABORATORIES HOLDINGS, INC.
By:
-----------------------------------------
Name:
Title:
Countersigned:
STATE STREET BANK AND TRUST COMPANY
as Warrant Agent
By:_____________________________________
Authorized Signature
4
<PAGE>
[Reverse of Warrant Certificate]
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring at 5:00 p.m. New York City time on
October 1, 2009 entitling the holder on exercise to receive shares of Common
Stock, and are issued or to be issued pursuant to a Warrant Agreement dated as
of September 29, 1999 (the "Warrant Agreement"), duly executed and delivered by
the Company to State Street Bank and Trust Company, as warrant agent (the
"Warrant Agent"), which Warrant Agreement is hereby incorporated by reference in
and made a part of this instrument and is hereby referred to for a description
of the rights, limitation of rights, obligations, duties and immunities
thereunder of the Warrant Agent, the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company.
Warrants may be exercised at any time on or after the
Separation Date and on or before 5:00 p.m. New York City time on October 1,
2009; provided that holders shall be able to exercise their Warrants only if a
registration statement relating to the Warrants Shares is then in effect, or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and such securities
are qualified for sale or exempt from qualification under the applicable
securities laws of the states in which the various holders of the Warrants or
other persons to whom it is proposed that the Warrant Shares be issued on
exercise of the Warrants reside. In order to exercise all or any of the Warrants
represented by this Warrant Certificate, the holder must deliver to the Warrant
Agent at its New York corporate trust office set forth in Section 19 of the
Warrant Agreement this Warrant Certificate and the form of election to purchase
on the reverse hereof duly filled in and signed, which signature shall be
medallion guaranteed by an institution which is a member of a Securities
Transfer Association recognized signature guarantee program, and upon payment to
the Warrant Agent for the account of the Company of the Exercise Price, as
adjusted as provided in the Warrant Agreement, for the number of Warrant Shares
in respect of which such Warrants are then exercised. No adjustment shall be
made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof may, subject to
certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
The Company has agreed pursuant to a Warrant Registration
Rights Agreement dated as of September 29, 1999 (the "Warrant Registration
Rights Agreement") to file within 120 days after the issuance of the Warrants
and use its reasonable best efforts to make effective on or before 180 days
after such date a shelf registration statement on the appropriate form under the
Securities Act, and to use its reasonable best efforts to keep such registration
statement continuously effective under the Securities Act in order to permit the
resale of the Warrants and Warrant Shares by the holders thereof for the period
of time referred to in the immediately preceding sentence.
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
A-1
<PAGE>
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the
registered holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-2
<PAGE>
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive _____________ shares
of Common Stock and herewith tenders payment for such shares to the order of
CHARLES RIVER LABORATORIES HOLDINGS, INC., in the amount of $__________ in
accordance with the terms hereof. The undersigned requests that a certificate
for such shares be registered in the name of _______________, whose address is
__________________ and that such shares be delivered to ___________, whose
address is ____________________________. If said number of shares is less than
all of the shares of Common Stock purchasable hereunder, the undersigned
requests that a new Warrant Certificate representing the remaining balance of
such shares be registered in the name of ______________________, whose address
is ____________________, and that such Warrant Certificate be delivered to whose
address is ____________________.
----------------------------------------
Signature
Date:
----------------------------------------
Signature Guaranteed
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Warrant Agent, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Warrant Agent in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-3
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS OF GLOBAL WARRANTS
The following exchanges of a part of this Global Warrant have been made:
<TABLE>
Number of Warrants
Amount of decrease in this Global
in Number of Amount of increase in Warrant following Signature of
warrants in this Number of Warrants in such decrease or authorized officer
Date of Exchange Global Warrant this Global Warrant increase of Warrant Agent
- ------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
</TABLE>
A-4
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Charles River Laboratories Holdings, Inc.
c/o DLJ Merchant Banking Partners
277 Park Avenue
New York, New York 10172
State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, Massachusetts 02111
Re: Warrants
Reference is hereby made to the Warrant Agreement, dated as of
September 29, 1999 (the "Warrant Agreement"), between Charles River Laboratories
Holdings, Inc., as issuer (the "Company"), and State Street Bank and Trust
Company, as warrant agent. Capitalized terms used but not defined herein shall
have the meanings given to them in the Warrant Agreement.
___________________, (the "Transferor") owns and proposes to
transfer the Warrant[s] or interest in such Warrant[s] specified in Annex A
hereto, in the principal amount at maturity of $___________ in such Warrant[s]
or interests (the "Transfer"), to ___________________________ (the
"Transferee"), as further specified in Annex A hereto. In connection with the
Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] Check if Transferee will take delivery of a
beneficial interest in the 144A Global Warrant or a Definitive Warrant Pursuant
to Rule 144A. The Transfer is being effected pursuant to and in accordance with
Rule 144A under the United States Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, the Transferor hereby further certifies
that the beneficial interest or Definitive Warrant is being transferred to a
Person that the Transferor reasonably believed and believes is purchasing the
beneficial interest or Definitive Warrant for its own account, or for one or
more accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified institutional
buyer" within the meaning of Rule 144A in a transaction meeting the requirements
of Rule 144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Warrant Agreement, the
transferred beneficial interest or Definitive Warrant will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the 144A Global Warrant and/or the Definitive Warrant and in the Warrant
Agreement and the Securities Act.
2. [ ] Check if Transferee will take delivery of a
beneficial interest in the Regulation S Global Warrant or a Definitive Warrant
pursuant to Regulation S. The Transfer is being effected pursuant to and in
accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly,
the Transferor hereby further certifies that (i) the Transfer is not being made
to a person in the United States and (x) at the time the buy order was
originated, the Transferee was outside the United
B-1
<PAGE>
States or such Transferor and any Person acting on its behalf reasonably
believed and believes that the Transferee was outside the United States or (y)
the transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting
on its behalf knows that the transaction was prearranged with a buyer in the
United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S under the Securities Act, (iii) the transaction is not part of a plan or
scheme to evade the registration requirements of the Securities Act and (iv)
if the proposed transfer is being made prior to the expiration of the
Restricted Period, the transfer is not being made to a U.S. Person or for the
account or benefit of a U.S. Person (other than an Initial Purchaser). Upon
consummation of the proposed transfer in accordance with the terms of the
Warrant Agreement, the transferred beneficial interest or Definitive Warrant
will be subject to the restrictions on Transfer enumerated in the Private
Placement Legend printed on the Regulation S Global Warrant and/or the
Definitive Warrant and in the Warrant Agreement and the Securities Act.
3. [ ] Check and complete if Transferee will take delivery
of a beneficial interest in the IAI Global Warrant or a Definitive Warrant
pursuant to any provision of the Securities Act other than Rule 144A or
Regulation S. The Transfer is being effected in compliance with the transfer
restrictions applicable to beneficial interests in Restricted Global Warrants
and Restricted Definitive Warrants and pursuant to and in accordance with the
Securities Act and any applicable blue sky securities laws of any state of the
United States, and accordingly the Transferor hereby further certifies that
(check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with
the prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements
of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the
Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Warrant or
Restricted Definitive Warrants and the requirements of the exemption
claimed, which certification is supported by (1) a certificate executed
by the Transferee in the form of Exhibit D to the Warrant Agreement and
(2) if the Company requests, an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has attached
to this certification), to the effect that such Transfer is in compliance
with the Securities Act. Upon consummation of the proposed transfer in
accordance with the terms of the Warrant Agreement, the transferred
beneficial interest or Definitive Warrant will be subject to the
restrictions on transfer enumerated in the Private Placement Legend
printed on the IAI Global Warrant and/or the Definitive Warrants and in
the Warrant Agreement and the Securities Act.
B-2
<PAGE>
4. [ ] Check if Transferee will take delivery of a
beneficial interest in an Unrestricted Global Warrant or of an Unrestricted
Definitive Warrant.
(a) [ ] Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained
in the Warrant Agreement and any applicable blue sky securities laws of
any state of the United States and (ii) the restrictions on transfer
contained in the Warrant Agreement and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act.
Upon consummation of the proposed Transfer in accordance with the terms
of the Warrant Agreement, the transferred beneficial interest or
Definitive Warrant will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the
Restricted Global Warrants, on Restricted Definitive Warrants and in the
Warrant Agreement.
(b)[ ] Check if Transfer is Pursuant to Regulation S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904
under the Securities Act and in compliance with the transfer restrictions
contained in the Warrant Agreement and any applicable blue sky securities
laws of any state of the United States and (ii) the restrictions on
transfer contained in the Warrant Agreement and the Private Placement
Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Warrant Agreement, the transferred beneficial
interest or Definitive Warrant will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Warrants, on Restricted Definitive
Warrants and in the Warrant Agreement.
(c) [ ] Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an
exemption from the registration requirements of the Securities Act other
than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer
restrictions contained in the Warrant Agreement and any applicable blue
sky securities laws of any State of the United States and (ii) the
restrictions on transfer contained in the Warrant Agreement and the
Private Placement Legend are not required in order to maintain compliance
with the Securities Act. Upon consummation of the proposed Transfer in
accordance with the terms of the Warrant Agreement, the transferred
beneficial interest or Definitive Warrant will not be subject to the
restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Warrants or Restricted Definitive
Warrants and in the Warrant Agreement.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
--------------------------------------------
[Insert Name of Transferor]
By:
-----------------------------------------
Name:
Title:
Dated:
------------------------
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Warrant, or
(ii) [ ] Regulation S Global Warrant, or
(iii) [ ] IAI Global Warrant; or
(b) [ ] a Restricted Definitive Warrant.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Warrant, or
(ii) [ ] Regulation S Global Warrant, or
(iii) [ ] IAI Global Warrant, or
(iv) [ ] Unrestricted Global Warrant; or
(b) [ ] a Restricted Definitive Warrant; or
(c) [ ] an Unrestricted Definitive Warrant,
in accordance with the terms of the Warrant Agreement.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Charles River Laboratories Holdings, Inc.
c/o DLJ Merchant Banking Partners
277 Park Avenue
New York, New York 10172
State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, Massachusetts 02111
Re: Warrants
(CUSIP ____________)
Reference is hereby made to the Warrant Agreement, dated as of
September 29, 1999 (the "Warrant Agreement"), between Charles River Laboratories
Holdings, Inc., as issuer (the "Company"), and State Street Bank and Trust
Company, as warrant agent. Capitalized terms used but not defined herein shall
have the meanings given to them in the Warrant Agreement.
__________________________, (the "Owner") owns and proposes to
exchange the Warrant[s] or interest in such Warrant[s] specified herein, in the
amount of $____________ in such Warrant[s] or interests (the "Exchange"). In
connection with the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Warrants or Beneficial
Interests in a Restricted Global Warrant for Unrestricted Definitive Warrants
or Beneficial Interests in an Unrestricted Global Warrant
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Warrant to beneficial interest in an Unrestricted Global Warrant.
In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Warrant for a beneficial interest in an Unrestricted
Global Warrant in an equal principal amount, the Owner hereby certifies
(i) the beneficial interest is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance with
the transfer restrictions applicable to the Global Warrants and pursuant
to and in accordance with the United States Securities Act of 1933, as
amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Warrant Agreement and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act and
(iv) the beneficial interest in an Unrestricted Global Warrant is being
acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
(b) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Warrant to Unrestricted Definitive Warrant. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global
Warrant for an Unrestricted Definitive Warrant, the Owner hereby
certifies (i) the Definitive Warrant is being acquired for the Owner's
own account without transfer,
C-1
<PAGE>
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Warrants and
pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Warrant Agreement and the
Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Definitive Warrant is
being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(c)[ ] Check if Exchange is from Restricted Definitive Warrant to
beneficial interest in an Unrestricted Global Warrant. In connection with
the Owner's Exchange of a Restricted Definitive Warrant for a beneficial
interest in an Unrestricted Global Warrant, the Owner hereby certifies
(i) the beneficial interest is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance with
the transfer restrictions applicable to Restricted Definitive Warrants
and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Warrant Agreement and the
Private Placement Legend are not required in order to maintain compliance
with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
(d) [ ] Check if Exchange is from Restricted Definitive Warrant to
Unrestricted Definitive Warrant. In connection with the Owner's Exchange
of a Restricted Definitive Warrant for an Unrestricted Definitive
Warrant, the Owner hereby certifies (i) the Unrestricted Definitive
Warrant is being acquired for the Owner's own account without transfer,
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to Restricted Definitive Warrants and pursuant to
and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Warrant Agreement and the Private Placement
Legend are not required in order to maintain compliance with the
Securities Act and (iv) the Unrestricted Definitive Warrant is being
acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
2. Exchange of Restricted Definitive Warrants or
Beneficial Interests in Restricted Global Warrants for Restricted Definitive
Warrants or Beneficial Interests in Restricted Global Warrants
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Warrant to Restricted Definitive Warrant. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global
Warrant for a Restricted Definitive Warrant in a number equal to the
number of beneficial interests exchanged, the Owner hereby certifies that
the Restricted Definitive Warrant is being acquired for the Owner's own
account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Warrant Agreement, the Restricted
Definitive Warrant issued will continue to be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the
Restricted Definitive Warrant and in the Warrant Agreement and the
Securities Act.
(b) Check if Exchange is from Restricted Definitive Warrant to beneficial
interest in a Restricted Global Warrant. In connection with the Exchange
of the Owner's Restricted Definitive Warrant for a beneficial interest in
the [CHECK ONE] [ ] 144A Global Warrant, [ ] Regulation S Global
Warrant, [ ] IAI Global Warrant in a number equal to the number of
beneficial interests exchanged, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with
C-2
<PAGE>
the transfer restrictions applicable to the Restricted Global Warrants
and pursuant to and in accordance with the Securities Act, and in
compliance with any applicable blue sky securities laws of any state of
the United States. Upon consummation of the proposed Exchange in
accordance with the terms of the Warrant Agreement, the beneficial
interest issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the relevant
Restricted Global Warrant and in the Warrant Agreement and the
Securities Act.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
--------------------------------------------
[Insert Name of Transferor]
By:
\ -----------------------------------------
Name:
Title:
Dated:
------------------------
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Charles River Laboratories Holdings, Inc.
c/o DLJ Merchant Banking Partners
277 Park Avenue
New York, New York 10172
State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, Massachusetts 02111
Re: Warrants
Reference is hereby made to the Warrant Agreement, dated as of
September 29, 1999 (the "Warrant Agreement"), between Charles River Laboratories
Holdings, Inc., as issuer (the "Company"), and State Street Bank and Trust
Company, as warrant agent. Capitalized terms used but not defined herein shall
have the meanings given to them in the Warrant Agreement.
In connection with our proposed purchase of $____________
amount of:
(a) [ ] a beneficial interest in a Global Warrant, or
(b) [ ] a Definitive Warrant,
we confirm that:
1. We understand that any subsequent transfer of the Warrants
or any interest therein is subject to certain restrictions and conditions set
forth in the Warrant Agreement and the undersigned agrees to be bound by, and
not to resell, pledge or otherwise transfer the Warrants or any interest therein
except in compliance with, such restrictions and conditions and the United
States Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Warrants have
not been registered under the Securities Act, and that the Warrants and any
interest therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Warrants or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter and, if
requested by the Company, an Opinion of Counsel in form reasonably acceptable to
the Company to the effect that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of Rule
144(k) under the Securities Act or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing the Definitive Warrant
D-1
<PAGE>
or beneficial interest in a Global Warrant from us in a transaction meeting
the requirements of clauses (A) through (E) of this paragraph a notice
advising such purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Warrants
or beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Warrants purchased by
us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Warrants,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Warrants or beneficial interest
therein purchased by us for our own account or for one or more accounts (each of
which is an institutional "accredited investor") as to each of which we exercise
sole investment discretion.
We agree not to engage in any hedging transactions with regard
to the Warrants unless such hedging transactions are in compliance with the
Securities Act.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
--------------------------------------------
[Insert Name of Transferor]
By:
-----------------------------------------
Name:
Title:
Dated:
------------------------
D-2
<PAGE>
EXHIBIT E
FORM OF WARRANT REGISTRATION RIGHTS AGREEMENT
E-1
EXHIBIT 4.2
INVESTORS' AGREEMENT
dated as of
September 29, 1999
among
CHARLES RIVER LABORATORIES HOLDINGS, INC.
and the
several Stockholders from time to time parties hereto
<PAGE>
TABLE OF CONTENTS
----------------------
PAGE
----
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions....................................................1
ARTICLE 2
CORPORATE GOVERNANCE
SECTION 2.01. Composition of the Board.......................................8
SECTION 2.02. Removal........................................................9
SECTION 2.03. Vacancies......................................................9
SECTION 2.04. Meetings.......................................................9
SECTION 2.05. Action by the Board............................................9
SECTION 2.06. Conflicting Charter or Bylaw Provisions.......................10
ARTICLE 3
RESTRICTIONS ON TRANSFER
SECTION 3.01. General.......................................................10
SECTION 3.02. Legends.......................................................11
SECTION 3.03. Permitted Transferees.........................................11
SECTION 3.04. Restrictions on Transfers by Management Stockholders..........11
SECTION 3.05. Restrictions on Transfers by CRL..............................12
SECTION 3.06. Restrictions on Transfers by New Minority Shareholders;
Right of First Refusal........................................13
ARTICLE 4
TAG-ALONG RIGHTS; DRAG-ALONG RIGHTS
SECTION 4.01. Rights to Participate in Transfer.............................15
SECTION 4.02. Right to Compel Participation in Certain Transfers............17
ARTICLE 5
REGISTRATION RIGHTS
SECTION 5.01. Demand Registration...........................................19
SECTION 5.02. Incidental Registration.......................................22
SECTION 5.03. Holdback Agreements...........................................23
SECTION 5.04. Registration Procedures.......................................24
<PAGE>
PAGE
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SECTION 5.05. Indemnification by the Company................................27
SECTION 5.06. Indemnification by Participating Stockholders.................27
SECTION 5.07. Conduct of Indemnification Proceedings........................28
SECTION 5.08. Contribution..................................................29
SECTION 5.09. Participation in Public Offering..............................30
SECTION 5.10. Other Indemnification.........................................31
SECTION 5.11. Cooperation by the Company....................................31
ARTICLE 6
MISCELLANEOUS
SECTION 6.01. Entire Agreement..............................................31
SECTION 6.02. Binding Effect; Benefit; Treatment of TCW Entities............31
SECTION 6.03. Exclusive Financial and Investment Banking Advisor............32
SECTION 6.04. Put Right.....................................................32
SECTION 6.05. Pre-emptive Rights............................................33
SECTION 6.06. Assignability.................................................33
SECTION 6.07. Amendment; Waiver; Termination................................34
SECTION 6.08. Notices.......................................................34
SECTION 6.09. Headings......................................................37
SECTION 6.10. Counterparts..................................................37
SECTION 6.11. Applicable Law................................................37
SECTION 6.12. Specific Enforcement..........................................37
SECTION 6.13. Consent to Jurisdiction.......................................37
ii
<PAGE>
INVESTORS' AGREEMENT
AGREEMENT dated as of September 29, 1999 among Charles River
Laboratories Holdings, Inc., a Delaware corporation (the "Company"), CRL
Acquisition LLC, a Delaware limited liability company (the "LLC"), DLJ
Investment Partners, L.P., DLJ Investment Funding, Inc., DLJ ESC II L.P.
(collectively with DLJ Investment Partners, L.P., and DLJ Investment Funding,
Inc., "DLJIP"), The 1818 Mezzanine Fund, L.P. ("BB"), Carlyle High Yield
Partners, L.P. ("Carlyle"), B&L CRL, Inc., a Delaware corporation ("CRL"), the
TCW Entities (as defined herein) (if and when the TCW Entities execute a
counterpart of this Agreement), and certain other Persons listed on the
signature pages hereof (each, a "Management Stockholder", and collectively,
the "Management Stockholders").
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"Adverse Person" means any Person whom the Board of Directors of the
Company reasonably determines is a competitor or a potential competitor of the
Company or its subsidiaries in a business that is material to the Company and
its subsidiaries, taken as a whole.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with such Person; provided that no stockholder of the Company shall be deemed
an Affiliate of any other stockholder of the Company solely by reason of any
investment in the Company. For the purpose of this definition, the term
"control" (including with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), when used with respect to
any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
"Affiliated Employee Benefit Trust" means any trust that is a
successor to the assets held by a trust established under an employee benefit
plan subject to
<PAGE>
ERISA or any other trust established directly or indirectly under such plan or
any other such plan having the same sponsor.
"Board" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day
on which commercial banks in New York City are authorized by law to close.
"Bylaws" means the Bylaws of the Company, as amended from time to
time.
"Charter" means the Certificate of Incorporation of the Company, as
amended from time to time.
"Closing Date" means September 29, 1999.
"Common Stock" means the common stock, par value $0.01 per share, of
the Company and any stock into which such Common Stock may thereafter be
converted or changed, and "Common Shares" means shares of Common Stock.
"Company Securities" means the Common Stock and securities
convertible into or exchangeable for Common Stock and options, warrants
(including the Warrants) or other rights to acquire Common Stock or any other
equity security issued by the Company, provided that notwithstanding the
foregoing, the term "Company Securities" shall not include the High Yield
Warrants.
"Drag-Along Portion" means, with respect to any Other Stockholder and
any class of Company Securities, the number of such class of Company
Securities beneficially owned by such Other Stockholder on a Fully Diluted
basis (but without duplication) multiplied by a fraction, the numerator of
which is the number of such class of Company Securities proposed to be sold by
the LLC on behalf of the LLC and the Other Stockholders and the denominator of
which is the total number of such class of Company Securities on a Fully
Diluted basis beneficially owned by the Stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fully Diluted" means, with respect to Common Stock and without
duplication, all outstanding Shares and all Shares issuable in respect of
securities convertible into or exchangeable for Shares, options, warrants
(including the Warrants) and other rights to purchase or subscribe for Shares
or securities convertible into or exchangeable for Common Stock; provided
that, to the extent
2
<PAGE>
any of the foregoing options, warrants or other rights to purchase or
subscribe for Shares are subject to vesting, the Shares subject to vesting
shall be included in the definition of "Fully Diluted" only upon and to the
extent of such vesting; and provided further that any Shares that vest upon
and as a result of a certain transaction shall be included in the definition
of "Fully Diluted" for purposes of such transaction.
"High Yield Warrants" means the warrants that are issued to
purchasers of the Senior Subordinated Notes of Charles River Laboratories,
Inc. on or around the Closing Date for the purchase of shares of Common Stock
constituting not more than 6% of the fully diluted equity of the Company.
"Initial Ownership" means, with respect to any Stockholder and any
class of Company Securities, the number of shares of such class of Company
Securities beneficially owned (and without duplication) which such Persons
have the right to acquire as of the date hereof, or in the case of any Person
that shall become a party to this Agreement on a later date, as of such date,
taking into account any stock split, stock dividend, reverse stock split or
similar event.
"Initial Public Offering" means the first sale after the date hereof
of Common Stock pursuant to an effective registration statement under the
Securities Act (other than (1) a registration statement on Form S-8 or any
successor form and (2) a shelf registration statement filed with respect to
the High Yield Warrants and / or Warrants).
"Other Stockholders" means all Stockholders other than the LLC and
its Permitted Transferees; provided that DLJIP, BB, Carlyle, and the TCW
Entities shall be considered for purposes of this Agreement to be Other
Stockholders.
"Permitted Transferee" means:
(i) in the case of the LLC: (A) any of: DLJ
Merchant Banking Partners II, L.P., a Delaware limited
partnership, DLJ Offshore Partners II, C.V. a Netherlands
Antilles limited partnership, DLJ Merchant Banking Partners
II-A, L.P., a Delaware limited partnership, DLJ Diversified
Partners, L.P., a Delaware limited partnership, DLJ
Diversified Partners-A, L.P., a Delaware limited
partnership, DLJ EAB Partners, L.P., a Delaware limited
partnership, DLJ Millennium Partners, L.P., a Delaware
limited partnership, DLJ Millennium Partners-A, L.P., a
Delaware limited partnership, DLJMB Funding II, Inc., a
Delaware corporation, UK Investment Plan 1997 Partners, a
Delaware partnership, DLJ First ESC, L.P., a Delaware
limited partnership
3
<PAGE>
and DLJ ESC II, L.P., a Delaware limited partnership, (each
of the foregoing, a "DLJ Entity", and collectively, the "DLJ
Entities"), (B) any general or limited partner of any DLJ
Entity (a "DLJ Partner"), and any corporation, partnership,
Affiliated Employee Benefit Trust or other entity that is an
Affiliate of any DLJ Partner (collectively, the "DLJ
Affiliates"), (C) any managing director, general partner,
director, limited partner, officer or employee of any DLJ
Entity or of any DLJ Affiliate, or the heirs, executors,
administrators, testamentary trustees, legatees or
beneficiaries of any of the foregoing persons referred to in
this clause (C) (collectively, "DLJ Associates"), (D) a
trust, the beneficiaries of which, or a corporation, limited
liability company or partnership, the stockholders, members
or general or limited partners of which, include only DLJ
Entities, DLJ Affiliates, DLJ Associates, their spouses or
their lineal descendants, or (E) a voting trustee for one or
more DLJ Entities, DLJ Affiliates or DLJ Associates;
provided that notwithstanding the foregoing, no Other
Stockholder shall be a Permitted Transferee of the LLC;
(ii) in the case of CRL, Bausch & Lomb Incorporated
("B&L"), or any wholly-owned subsidiary of B&L; and
(iii) in the case of any Management Stockholder:
(A) a Person to whom Shares are transferred from such Other
Stockholder (1) by will or the laws of descent and
distribution or (2) by gift without consideration of any
kind; provided that, in the case of clause (2), such
transferee is the issue or spouse of such Management
Stockholder, (B) a trust that is for the exclusive benefit
of such Management Stockholder or its Permitted Transferees
under (A) above, or a custodian or guardian for the
exclusive benefit of the same, or (C) the Company, in a
transfer approved by the Board; and
(iv) in the case of DLJIP, BB, Carlyle, and the TCW
Entities: any Affiliate of such Person.
"Person" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Pro Rata Portion" means the number of Shares a Stockholder holds
multiplied by a fraction, the numerator of which is the number of Shares to be
sold by the LLC and its Permitted Transferees in a Public Offering and the
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denominator of which is the total number of Shares, on a Fully Diluted basis,
held in the aggregate by the LLC and its Permitted Transferees prior to such
Public Offering (excluding any Shares acquired or acquirable upon the exercise
of High Yield Warrants).
"Public Offering" means an underwritten public offering of
Registrable Securities of the Company pursuant to an effective registration
statement under the Securities Act.
"Registrable Securities" means any Shares or Warrants until (i) a
registration statement covering such Shares or Warrants has been declared
effective by the SEC and such Shares or Warrants have been disposed of
pursuant to such effective registration statement, (ii) such Shares or
Warrants are sold under circumstances in which all of the applicable
conditions of Rule 144 are met, or (iii) such Shares or Warrants are otherwise
transferred, the Company has delivered a new certificate or other evidence of
ownership for such Shares or Warrants not bearing the legend required pursuant
to this Agreement and such Shares or Warrants may be resold without subsequent
registration under the Securities Act, provided that the term "Registrable
Securities" shall not apply to any Shares received upon exercise of any High
Yield Warrants.
"Registration Expenses" means (i) all registration and filing fees,
(ii) fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with
blue sky qualifications of the Shares or Warrants), (iii) printing expenses,
(iv) internal expenses of the Company (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), (v) reasonable fees and disbursements of counsel for the
Company and customary fees and expenses for independent certified public
accountants retained by the Company (including the expenses of any comfort
letters or costs associated with the delivery by independent certified public
accountants of a comfort letter or comfort letters requested pursuant to
Section 5.04(h)), (vi) the reasonable fees and expenses of any special experts
retained by the Company in connection with such registration, (vii) reasonable
fees and expenses of one counsel for the Stockholders participating in the
offering selected (A) by the LLC, in the case of any offering in which the LLC
or any Permitted Transferee of the LLC participates, or (B) in any other case,
by the Other Stockholders holding the majority of Shares to be sold for the
account of all Other Stockholders in the offering, (viii) fees and expenses in
connection with any review of underwriting arrangements by the National
Association of Securities Dealers, Inc. (the "NASD") including fees and
expenses of any "qualified independent underwriter" and (ix) fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities; but shall not include any underwriting fees, discounts or
commissions attributable to the sale of
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Registrable Securities, or any out-of-pocket expenses (except as set forth in
clause (vii) above) of the Stockholders (or the agents who manage their
accounts) or any fees and expenses of underwriter's counsel.
"Restriction Termination Date" means the earlier to occur of (a) the
second anniversary of the Initial Public Offering and (b) the fifth
anniversary of the Closing Date.
"Rule 144" means Rule 144 and Rule 144A (or any successor provisions)
under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of Common Stock.
"Stockholder" means each Person (other than the Company) who shall be
a party to or bound by this Agreement, whether in connection with the
execution and delivery hereof as of the date hereof, pursuant to Section 6.06,
or otherwise, so long as such Person shall (i) beneficially own (directly or
indirectly) any Company Securities, or (ii) have any stock appreciation
rights, options, warrants (other than High Yield Warrants) or other rights to
purchase or subscribe for Company Securities.
"Subject Securities" means any Company Securities beneficially owned
by the Other Stockholders.
"Tag-Along Portion" means the number of shares of Common Stock held
(or, without duplication, acquirable under the Warrants) (excluding any shares
of Common Stock acquired or acquirable under the High Yield Warrants) by the
Tagging Person or the Selling Person, as the case may be, multiplied by a
fraction, the numerator of which is the number of shares of Common Stock
proposed to be sold in the Tag-Along Sale pursuant to Section 4.01, and the
denominator of which is the aggregate number of shares of Common Stock on a
Fully Diluted basis owned by all Stockholders (excluding any shares of Common
Stock acquired or acquirable under the High Yield Warrants).
"TCW Entities" means TCW/Crescent Mezzanine Partners II, L.P.,
TCW/Crescent Mezzanine Trust II, Crescent/MACH I Partners, L.P., TCW Leveraged
Income Trust, L.P. and TCW Leveraged Income Trust II, L.P.
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"Third Party" means a prospective purchaser of Shares in an arm's-
length transaction from a Stockholder where such purchaser is not a Permitted
Transferee of such Stockholder.
"Warrants" means the warrants issued by the Company to the DLJ
Entities for the purchase of shares of Common Stock constituting not more than
10% (the "Agreed Percentage") of the fully diluted equity of the Company,
provided that the Agreed Percentage shall be subject to adjustment in the
event of any disruption or adverse change in current financial or capital
markets generally or in the market for new issuances of high yield securities.
"Warrant Shares" means shares of Common Stock issuable by the Company
upon exercise of the Warrants.
(b) The term "LLC", to the extent the LLC shall have transferred any
of its Shares to "Permitted Transferees", shall mean the LLC and the Permitted
Transferees of the LLC, taken together, and any right or action that may be
taken at the election of the LLC may be taken at the election of the holders
of a majority of the Shares then held by the LLC and such Permitted
Transferees. In the event of a distribution of Shares by the LLC to the
holders of limited liability company interests in the LLC, the term "LLC"
shall be deemed to mean the DLJ Entities and their Permitted Transferees,
taken together, and any right or action that may be taken at the election of
the DLJ Entities may be taken at the election of the holders of a majority of
the Shares then held by the DLJ Entities and such Permitted Transferees.
(c) The term "Other Stockholders", to the extent such stockholders
shall have transferred any of their Shares to "Permitted Transferees", shall
mean the Other Stockholders and the Permitted Transferees of the Other
Stockholders, taken together, and any right or action that may be taken at the
election of the Other Stockholders may be taken at the election of the Other
Stockholders and such Permitted Transferees.
(d) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Applicable Holdback Period 5.03
beneficially own 1.01(a)
Demand Registration 5.01(e)
DLJSC 6.03
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Drag-Along Rights 4.02(a)
Exercise Period 6.04
Holders 5.01(a)
Incidental Registration 5.01(e)
Indemnified Party 5.07
Indemnifying Party 5.07
Inspectors 5.04(g)
Maximum Offering Size 5.01(e)
Nominee 2.03(a)
Put 6.04
Records 5.04(g)
Section 4.01 Response Notice 4.01(a)
Section 4.02 Notice 4.02(a)
Section 4.02 Notice Period 4.02(a)
Section 4.02 Sale 4.02(a)
Section 4.02 Sale Price 4.02(a)
Selling Person 4.01(a)
Selling Stockholder 5.01(e)
Tag-Along Notice 4.01(a)
Tag-Along Notice Period 4.01(a)
Tag-Along Offer 4.01(a)
Tag-Along Right 4.01(a)
Tag-Along Sale 4.01(a)
Tagging Person 4.01(a)
transfer 3.01
ARTICLE 2
CORPORATE GOVERNANCE
SECTION 2.01. Composition of the Board. (a) The Board shall consist
initially of nine directors, (i) seven of whom (including the Chairman) will
be designated by DLJ Merchant Banking Partners II, L.P., (ii) one of whom will
be designated by CRL, and (iii) one of whom will be the Chief Executive
Officer appointed by the Board. DLJIP shall be entitled to designate one
observer to the Board, who shall be entitled to receive a copy of any
materials distributed to all members of the Board, until the date on which
DLJIP owns (directly or indirectly) less than 50% of the equity interest in
the Company which it owned (indirectly) as of the Closing Date.
(b) Each Stockholder (other than CRL) entitled to vote for the
election of directors to the Board agrees that it will vote its Shares or
execute written consents, as the case may be, and take all other necessary
action (including
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causing the Company to call a special meeting of stockholders) in order to
ensure that the composition of the Board is as set forth in this Section 2.01;
provided that no Other Stockholder shall be required to vote for the
board-designees of DLJ Merchant Banking Partners II, L.P. if the aggregate
number of Common Shares held by the LLC is less than 10% of its Initial
Ownership of Common Shares, and provided further that no party hereto shall be
required to vote for the board- designee of CRL if the aggregate number of
Common Shares held by CRL is less than 40% of the Initial Ownership of CRL.
SECTION 2.02. Removal. Each Stockholder (other than CRL) agrees that
if, at any time, it is then entitled to vote for the removal of directors of
the Company, it will not vote any of its Shares in favor of the removal of any
director who shall have been designated or nominated pursuant to Section 2.01
unless such removal shall be for cause or the Persons entitled to designate or
nominate such director shall have consented to such removal in writing.
SECTION 2.03. Vacancies. If, as a result of death, disability,
retirement, resignation, removal (with or without cause) or otherwise, there
shall exist or occur any vacancy of the Board:
(a) the Person or Persons entitled under Section 2.01 to designate
or nominate such director whose death, disability, retirement, resignation or
removal resulted in such vacancy may designate another individual (the
"Nominee") to fill such capacity and serve as a director of the Company; and
(b) each Stockholder (other than CRL) then entitled to vote for the
election of the Nominee as a director of the Company agrees that it will vote
its Shares, or execute a written consent, as the case may be, in order to
ensure that the Nominee is elected to the Board.
SECTION 2.04. Meetings. The Board shall hold a regularly scheduled
meeting at least once every calendar quarter, and notice of each meeting shall
be given to all directors at least five Business Days prior to such meeting.
SECTION 2.05. Action by the Board. (a) A quorum of the Board shall
consist of four directors, of whom at least three must be designees of DLJ
Merchant Banking Partners II, L.P.; provided that the LLC shall have the right
at any time to change the number of directors necessary to constitute a quorum
of the Board. All actions of the Board shall require the affirmative vote of
at least a majority of the directors present at a duly convened meeting of the
Board at which a quorum is present or the unanimous written consent of the
Board; provided that, in the event there is a vacancy on the Board and an
individual has been nominated to fill such vacancy, the first order of
business shall be to fill such vacancy.
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(b) CRL shall have the right to send an observer who is an employee
of B&L or an Affiliate of B&L to any meeting of the Board that the director
who is designated by CRL is unable to attend. The observer shall have the
privilege of voice but no vote with respect to any matter and shall be given a
copy of any materials distributed to the Board members for such meeting.
(c) The Board may create executive, compensation and audit
committees, as well as such other committees as it may determine. DLJ Merchant
Banking Partners II, L.P. shall be entitled to designate a majority of the
directors on any committee created by the Board.
SECTION 2.06. Conflicting Charter or Bylaw Provisions. Each
Stockholder shall vote its Shares or execute written consents, as the case may
be, and take all other actions necessary, to ensure that the Company's Charter
and Bylaws facilitate and do not at any time conflict with any provision of
this Agreement.
ARTICLE 3
RESTRICTIONS ON TRANSFER
SECTION 3.01. General. Each Stockholder understands and agrees that
the Company Securities purchased pursuant to the applicable subscription
agreement have not been registered under the Securities Act and are restricted
securities. Each Stockholder agrees that it will not, directly or indirectly,
sell, assign, transfer, grant a participation in, pledge or otherwise dispose
of ("transfer") any Company Securities (or solicit any offers to buy or
otherwise acquire, or take a pledge of any Company Securities) except in
compliance with the Securities Act and the terms and conditions of this
Agreement.
Any attempt to transfer any Company Securities not in compliance with
this Agreement shall be null and void and the Company shall not, and shall
cause any transfer agent not to, give any effect in the Company's stock
records to such attempted transfer.
No transferee other than a Permitted Transferee or a party hereto shall
be required or permitted to become a party to this Agreement or have the benefit
of any rights hereunder or the burden of any obligations hereunder.
Except as set forth in the first sentence of this Section 3.01,
transfers by the LLC are not subject to any restrictions.
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SECTION 3.02. Legends. In addition to any other legend that may be
required, each certificate for shares of Common Stock and each Warrant that is
issued to any Stockholder shall bear a legend in substantially the following
form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD
EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE INVESTORS' AGREEMENT DATED AS OF
SEPTEMBER 29, 1999, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM CHARLES
RIVER LABORATORIES HOLDINGS, INC. OR ANY SUCCESSOR THERETO."
If any Company Securities shall cease to be Registrable
Securities under clause (i) or clause (ii) of the definition thereof, the
Company shall, upon the written request of the holder thereof, issue to such
holder a new certificate evidencing such securities without the first sentence
of the legend required by this Section endorsed thereon. If any Company
Securities cease to be subject to any and all restrictions on transfer set
forth in this Agreement, the Company shall, upon the written request of the
holder thereof, issue to such holder a new certificate evidencing such Company
Securities without the second sentence of the legend required by this Section
endorsed thereon.
SECTION 3.03. Permitted Transferees. Notwithstanding anything in this
Agreement to the contrary, any Stockholder may at any time transfer any or all
of its Company Securities to one or more of its Permitted Transferees without
the consent of the Board or any other Stockholder or group of Stockholders and
without compliance with Sections 3.04, 3.05, 3.06 and 4.01 so long as (a) such
Permitted Transferee shall have agreed in writing to be bound by the terms of
this Agreement and (b) the transfer to such Permitted Transferee is not in
violation of applicable federal or state securities laws.
SECTION 3.04. Restrictions on Transfers by Management Stockholders.
(a) Each Management Stockholder and each Permitted Transferee of
such Management Stockholder may transfer its Company Securities only as
follows:
(i) in a transfer made in compliance with Section 4.01 or 4.02;
(ii) subject to the Public Offering Limitations, in a Public
Offering in connection with the exercise of its rights under Article
5 hereof;
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(iii) after the Initial Public Offering, pursuant to the exemption
from registration provided under Rule 144, provided that until the
later of (A) the third anniversary of the IPO and (B) the Restriction
Termination Date, such sales cannot reduce the Stockholder's
ownership to (or occur at a time when such Stockholder's ownership is
otherwise) below the greater of (X) 50% of his or her Initial
Ownership and (Y) that percentage of his or her Initial Ownership as
equals the percentage of the LLC's Initial Ownership remaining after
previous dispositions by the LLC; or
(iv) following the Restriction Termination Date, to (A) any Third
Party other than an Adverse Person or any person deemed inappropriate
by the Board or (B) any Third Party through a national securities
exchange, in each case for consideration consisting solely of cash,
provided, however, that the amount sold in any 12-month period may
not exceed 20% of the Management Stockholder's Initial Ownership.
For purposes of this Agreement, "Public Offering Limitations" means
(A) no Management Stockholder shall be permitted to sell any Shares in the
Initial Public Offering, (B) in the first public offering following the
Initial Public Offering, no Management Stockholder may sell more than the
lesser of (x) 50% of his or her Pro Rata Portion and (y) 20% of his or her
holdings prior to the offering and (C) in each public offering thereafter,
each Management Stockholder may sell no more than the lesser of (x) his or her
Pro Rata Portion and (y) 50% of his or her holdings prior to the offering.
(b) The provisions of Section 3.04(a) shall terminate upon the
earliest to occur of (i) the tenth anniversary of the Closing Date and (ii)
the date upon which the shareholdings of the LLC fall below 10% of its Initial
Ownership. Notwithstanding the foregoing sentence, the provisions of Section
3.04(a) shall not terminate with respect to any Management Stockholder's
Shares which shall have been pledged to the Company as security in connection
with any indebtedness for borrowed money owed by such Management Stockholder
to the Company unless the proceeds from the sale of such Shares are applied to
repay such indebtedness in full.
SECTION 3.05. Restrictions on Transfers by CRL.
(a) CRL may transfer its Company Securities only as follows:
(i) in a transfer made in compliance with Section 4.01 or 4.02;
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(ii) in a Public Offering in connection with the exercise of its
rights under Article 5 hereof;
(iii) after the Initial Public Offering, pursuant to the exemption
from registration provided under Rule 144, provided, however, that
the amount sold in any 12-month period pursuant to this clause (iii)
may not exceed 25% of CRL's Initial Ownership.
(iv) following the Restriction Termination Date, to (A) any Third
Party other than an Adverse Person or any person deemed inappropriate
by the Board or (B) any Third Party through a national securities
exchange, in each case for consideration consisting solely of cash.
(b) The provisions of Section 3.05(a) shall terminate upon the
earliest to occur of (i) the tenth anniversary of the Closing Date and (ii)
the date upon which the shareholdings of the LLC fall below 10% of its Initial
Ownership.
SECTION 3.06. Restrictions on Transfers by New Minority Shareholders;
Right of First Refusal.
(a) Each of DLJIP, BB, Carlyle, and the TCW Entities (a "New
Minority Shareholder") may transfer its Company Securities only as follows:
(i) in a transfer made in compliance with Section 4.01 or 4.02;
(ii) in a Public Offering in connection with the exercise of its
rights under Article 5 hereof;
(iii) after the Initial Public Offering, pursuant to the exemption
from registration provided under Rule 144;
(iv) after the earlier of (A) 3 years from the Closing Date or (B)
the Initial Public Offering, to any Third Party other than an Adverse
Person or any person deemed inappropriate by the Board, provided in
the case of any transfer prior to the Initial Public Offering that
the transferor shall first have complied with Section 3.06(b) and
that the consideration shall consist solely of cash; or
(v) to the limited partners of such New Minority
Shareholder, as part of a general distribution of all assets held by
such New Minority Shareholder to its limited partners; provided that
any transferees pursuant to this clause (v) shall be deemed not to be
Permitted Transferees.
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(b) Right of First Refusal.
(i) If, prior to an Initial Public Offering, a New Minority
Shareholder proposes to transfer Company Securities owned by such New
Minority Shareholder in a transaction pursuant to and permitted by
Section 3.06(a)(iv), such New Minority Shareholder shall provide DLJ
Merchant Banking II, Inc. and the Company written notice of such
proposed transfer. The notice shall identify the number of Company
Securities proposed to be transferred, the cash price at which a
transfer is proposed to be made and all other material terms and
conditions of the offer.
(ii) The receipt of a such notice by DLJ Merchant Banking II, Inc.
and the Company from a New Minority Shareholder shall constitute an
offer by such New Minority Shareholder to sell first, to the DLJ
Entities and, if not accepted or only accepted in part by the DLJ
Entities, second to the Company, for cash, the Company Securities at
the price and on the other terms and conditions set forth in such
notice. Such offer shall be irrevocable for 10 Business Days after
receipt of such notice by the DLJ Entities and the Company. During
such period, any of the DLJ Entities and the Company shall have the
right to accept such offer as to all or a portion of the Company
Securities (provided that first priority of the right to accept is
given to the DLJ Entities; and provided further that the aggregate
number of Company Securities accepted by the DLJ Entities and the
Company together equals the total number of Company Securities
subject to the offer) by giving a written notice of acceptance to
such Ne Minority Shareholder prior to the expiration of the offer
period.
(iii) Any Person who has accepted the offer shall purchase and pay
for all Company Securities accepted within 30 days after such
acceptance.
(iv) Upon the failure to accept the offer in full prior to the
expiration of the offer period or the failure to consummate the
purchase within 30 days after the acceptance of the offer, there
shall commence a 60-day period during which the New Minority
Shareholder that gave the notice shall have the right to transfer to
a third party any or all of the Company Securities subject to such
offer at a price in cash not less than 90% of the price indicated in
the applicable notice to DLJ Merchant Banking II, Inc. and the
Company, and on the other terms and conditions set forth therein,
provided that the transfer to such third party is not in violation of
applicable federal or state or foreign securities laws. If such New
Minority Shareholder does not consummate the sale in accordance with
the foregoing time limitations, such New Minority Shareholder may
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not thereafter transfer any Company Securities in a transaction
pursuant to Section 3.06(a)(iv) without repeating the foregoing
procedures.
(c) The provisions of Section 3.06(a) shall terminate upon the
earliest to occur of (i) the tenth anniversary of the Closing Date and (ii)
the date upon which the shareholdings of the LLC fall below 10% of its Initial
Ownership.
ARTICLE 4
TAG-ALONG RIGHTS; DRAG-ALONG RIGHTS
SECTION 4.01. Rights to Participate in Transfer. (a) If the LLC (the
"Selling Person") proposes to transfer a number of Shares equal to or
exceeding 25% of the outstanding Shares in a single transaction or in a series
of related transactions on the date of the proposed sale (a "Tag-Along Sale"),
the Other Stockholders may, at their option, elect to exercise their rights
under this Section 4.01 (each such Stockholder, a "Tagging Person"), provided
that no such rights shall apply to transfers of Shares (i) in a Public
Offering or pursuant to Rule 144 (defined for these purposes to exclude Rule
144A under the Securities Act), (ii) to any Permitted Transferee of the LLC
(defined for these purposes to exclude, except in the case of a general
distribution to DLJ Partners, any Permitted Transferee who is a Permitted
Transferee solely by reason of being an Affiliate of a DLJ Partner), or (iii)
to holders of limited liability company units in the LLC ("Units"). In the
event of such a proposed transfer, the Selling Person shall provide each Other
Stockholder written notice of the terms and conditions of such proposed
transfer ("Tag-Along Notice") and offer each Tagging Person the opportunity to
participate in such sale. The Tag-Along Notice shall identify the number and
type of Company Securities subject to the offer ("Tag-Along Offer"), the cash
price at which the transfer is proposed to be made, and all other material
terms and conditions of the Tag-Along Offer, including the form of the
proposed agreement, if any. From the date of the Tag-Along Notice, each
Tagging Person shall have the right (a "Tag-Along Right"), exercisable by
written notice ("Section 4.01 Response Notice") given to the Selling Person
within 15 Business Days (the "Tag-Along Notice Period"), to request that the
Selling Person include in the proposed transfer the number of Company
Securities held by such Tagging Person as is specified in such notice;
provided that if the aggregate number of Company Securities proposed to be
sold by the Selling Person and all Tagging Persons in such transaction exceeds
the number of Company Securities which can be sold on the terms and conditions
set forth in the Tag-Along Notice, then only the Tag-Along Portion of Company
Securities of each Tagging Person shall be sold pursuant to the Tag-Along
Offer and the Selling Person shall sell its Tag-Along Portion of Company
Securities and such
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additional Company Securities as permitted by Section 4.01(d). If the Tagging
Persons exercise their Tag-Along Rights hereunder, each Tagging Person shall
deliver, together with its Section 4.01 Response Notice, to the Selling Person
the certificate or certificates representing the Company Securities of such
Tagging Person to be included in the transfer, together with a limited
power-of-attorney authorizing the Selling Person to transfer such Securities
on the terms set forth in the Tag-Along Notice. Delivery of such certificate
or certificates representing the Company Securities to be transferred and the
limited power-of-attorney authorizing the Selling Person to transfer such
Company Securities shall constitute an irrevocable acceptance of the Tag-Along
Offer by such Tagging Persons. If, at the end of a 120 day period after such
delivery, the Selling Person has not completed the transfer of all such
Company Securities on substantially the same terms and conditions set forth in
the Tag-Along Notice (provided, however, that the cash price payable in any
such sale may exceed the cash price specified in the Tag-Along Notice by up to
10%), the Selling Person shall return to each Tagging Person the limited
power-of-attorney (and all copies thereof) together with all certificates
representing the Company Securities which such Tagging Person delivered for
transfer pursuant to this Section 4.01.
(b) Concurrently with the consummation of the Tag-Along Sale, the
Selling Person shall notify the Tagging Persons thereof, shall remit to the
Tagging Persons the total consideration (by bank or certified check) for the
Company Securities of the Tagging Persons transferred pursuant thereto, and
shall, promptly after the consummation of such Tag-Along Sale, furnish such
other evidence of the completion and time of completion of such transfer and
the terms thereof as may be reasonably requested by the Tagging Persons.
(c) If at the termination of the Tag-Along Notice Period any Tagging
Person shall not have elected to participate in the Tag-Along Sale, such
Tagging Person will be deemed to have waived its rights under Section 4.01(a)
with respect to the transfer of its securities pursuant to such Tag-Along
Sale, but not with respect to any future sales.
(d) If any Stockholder declines to exercise its Tag-Along Rights or
elects to exercise its Tag-Along Rights with respect to less than such Tagging
Person's Tag-Along Portion, the Tagging Persons who do respond and the LLC
shall be entitled to transfer, pursuant to the Tag-Along Offer, an additional
number of Company Securities equal to the number of Company Securities
constituting their pro rata portion of such Tagging Person's Tag-Along Portion
with respect to which Tag-Along Rights were not exercised.
(e) The LLC and any Tagging Person who exercises the Tag-Along
Rights pursuant to this Section 4.01 may sell the Company Securities subject
to
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the Tag-Along Offer on the terms and conditions set forth in the Tag-Along
Notice (provided, however, that the cash price payable in any such sale may
exceed the cash price specified in the Tag-Along Notice by up to 10%) within
120 days of the date on which Tag-Along Rights shall have been waived,
exercised or expire.
(f) In the event that the DLJ Entities propose to transfer a number
of Units equal to or exceeding 40% of the outstanding Units in a single
transaction or in a series of related transactions on the date of the proposed
sale, other than transfers of Units (i) in a Public Offering or pursuant to
Rule 144 (defined for these purposes to exclude Rule 144A under the Securities
Act) or (ii) to any Permitted Transferee of the LLC (defined for these
purposes to exclude, except in the case of a general distribution to DLJ
Partners, any Permitted Transferee who is a Permitted Transferee solely by
reason of being an Affiliate of a DLJ Partner), the Board of Directors shall
in good faith determine an appropriate procedure which shall mutatis mutandis
reflect the procedures of this Section 4.01 to allow Company Securities to be
sold proportionally by Other Stockholders as part of such sale, and shall in
good faith determine an appropriate valuation for such Company Securities
reflecting the price per Unit at which the DLJ Entities propose to sell the
Units.
(g) This Section 4.01 shall terminate upon the Initial Public
Offering.
SECTION 4.02. Right to Compel Participation in Certain Transfers. (a)
If (i) the LLC proposes to transfer not less than 50% of its Initial Ownership
of Common Stock to a Third Party in a bona fide sale or (ii) the LLC proposes
an arms-length transfer in which the shares of Common Stock to be transferred
by the LLC and its Permitted Transferees constitute more than 50% of the
outstanding shares of Common Stock (a "Section 4.02 Sale"), the LLC may at its
option require all Other Stockholders to sell the Drag-Along Portion of the
Subject Securities ("Drag-Along Rights") then held by every Other Stockholder,
and (subject to and at the closing of the Section 4.02 Sale) to exercise all,
but not less than all, of the options held by every Other Stockholder and to
sell all of the shares of Common Stock received upon such exercise to such
Third Party, for the same consideration per share of Common Stock and
otherwise on the same terms and conditions as the LLC; provided that any Other
Stockholder who holds options the exercise price per share of which is greater
than the per share price at which the Shares are to be sold to the Third Party
may, if required by the LLC to exercise such options, in place of such
exercise, submit to irrevocable cancellation thereof without any liability for
payment of any exercise price with respect thereto. In the event the Section
4.02 Sale is not consummated with respect to any shares acquired upon exercise
of such options, or the Section 4.02 Sale is not consummated, such options
shall be deemed not to have been exercised or
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canceled, as applicable. The LLC shall provide written notice of such Section
4.02 Sale to the Other Stockholders (a "Section 4.02 Notice") not later than
the 15th Business Day prior to the proposed Section 4.02 Sale. The Section
4.02 Notice shall identify the transferee, the number of Subject Securities,
the consideration for which a transfer is proposed to be made (the "Section
4.02 Sale Price") and all other material terms and conditions of the Section
4.02 Sale. The number of shares of Common Stock to be sold by each Other
Stockholder will be the Drag-Along Portion of the shares of Common Stock that
such Other Stockholder owns. Each Other Stockholder shall be required to
participate in the Section 4.02 Sale on the terms and conditions set forth in
the Section 4.02 Notice and to tender all its Subject Securities as set forth
below. The price payable in such transfer shall be the Section 4.02 Sale
Price. Not later than the 10th Business Day following the date of the Section
4.02 Notice (the "Section 4.02 Notice Period"), each of the Other Stockholders
shall deliver to a representative of the LLC designated in the Section 4.02
Notice certificates representing all Subject Securities representing the Drag
Along Portion held by such Other Stockholder, duly endorsed, together with all
other documents required to be executed in connection with such Section 4.02
Sale. If an Other Stockholder should fail to deliver such certificates to the
representative of the LLC, the Company shall cause the books and records of
the Company to show that such Subject Securities are bound by the provisions
of this Section 4.02 and that such Subject Securities shall be transferred to
the purchaser of the Subject Securities immediately upon surrender for
transfer by the holder thereof.
(b) The LLC shall have a period of 45 days from the date of receipt
of the Section 4.02 Notice to consummate the Section 4.02 Sale on the terms
and conditions set forth in such Section 4.02 Sale Notice. If the Section 4.02
Sale shall not have been consummated during such period, the LLC shall return
to each of the Other Stockholders all certificates representing Subject
Securities that such Other Stockholder delivered for transfer pursuant hereto,
together with any documents in the possession of the LLC executed by the Other
Stockholder in connection with such proposed transfer, and all the
restrictions on transfer contained in this Agreement or otherwise applicable
at such time with respect to Common Stock owned by the Other Stockholders
shall again be in effect.
(c) Concurrently with the consummation of the transfer of Company
Securities pursuant to this Section 4.02, the LLC shall give notice thereof to
all Stockholders, shall remit to each of the Stockholders who have surrendered
their certificates the total consideration (by bank or certified check) for
the Subject Securities transferred pursuant hereto and shall furnish such
other evidence of the completion and time of completion of such transfer and
the terms thereof as may be reasonably requested by such Stockholders.
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ARTICLE 5
REGISTRATION RIGHTS
SECTION 5.01. Demand Registration. (a) If the Company shall receive a
written request by the LLC or its Permitted Transferees or DLJIP (any such
requesting Person, a "Selling Stockholder") that the Company effect the
registration under the Securities Act of all or a portion of such Selling
Stockholder's Registrable Securities, and specifying the intended method of
disposition thereof, then the Company shall promptly give written notice of
such requested registration (a "Demand Registration") at least 30 days prior
to the anticipated filing date of the registration statement relating to such
Demand Registration to the Other Stockholders and thereupon will use its best
efforts to effect, as expeditiously as possible, the registration under the
Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by the Selling Stockholders, then held by the
Selling Stockholders; and
(ii) subject to the restrictions set forth in Section 5.01(e), all
other Registrable Securities of the same type as that to which the
request by the Selling Stockholders relates which any Other
Stockholder entitled to request the Company to effect an Incidental
Registration (as such term is defined in Section 5.02) pursuant to
Section 5.02 (all such Stockholders, together with the Selling
Stockholders, the "Holders") has requested the Company to register by
written request received by the Company within 15 days after the
receipt by such Holders of such written notice given by the Company,
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered; provided that, subject to Section 5.01(d) hereof, the Company
shall not be obligated to effect (A) more than six Demand Registrations for
the LLC and its Permitted Transferees or (B) one Demand Registration for DLJIP
(which Demand Registration right may not be exercised prior to the earlier of
(1) five years from the Closing Date and (2) the date that is 180 days after
an Initial Public Offering); and provided further that the Company shall not
be obligated to effect a Demand Registration unless the aggregate proceeds
expected to be received from the sale of the Common Stock to be included in
such Demand Registration, in the reasonable opinion of DLJ Merchant Banking
II, Inc. exercised in good faith, equals or exceeds (Y) $30,000,000 if such
Demand Registration would constitute the Initial Public Offering, or (Z)
$10,000,000 in all other cases. In no event will the Company be required to
effect more than one Demand Registration within any four-month period.
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(b) Promptly after the expiration of the 15-day period referred to
in Section 5.01(a)(ii) hereof, the Company will notify all the Holders to be
included in the Demand Registration of the other Holders and the number of
Registrable Securities requested to be included therein. The Selling
Stockholders requesting a registration under this Section may, at any time
prior to the effective date of the registration statement relating to such
registration, revoke such request, without liability to any of the other
Holders, by providing a written notice to the Company revoking such request,
in which case such request, so revoked, shall be considered a Demand
Registration unless the participating Stockholders reimburse the Company for
all costs incurred by the Company in connection with such registration, or
unless such revocation arose out of the fault of the Company, in which case
such request shall not be considered a Demand Registration.
(c) The Company will pay all Registration Expenses in connection
with any Demand Registration.
(d) A registration requested pursuant to this Section shall not be
deemed to have been effected (i) unless the registration statement relating
thereto (A) has become effective under the Securities Act and (B) has remained
effective for a period of at least 180 days (or such shorter period in which
all Registrable Securities of the Holders included in such registration have
actually been sold thereunder); provided that if after any registration
statement requested pursuant to this Section becomes effective (x) such
registration statement is interfered with by any stop order, injunction or
other order or requirement of the SEC or other governmental agency or court
and (y) less than 75% of the Registrable Securities included in such
registration statement has been sold thereunder, such registration statement
shall not be considered a Demand Registration or (ii) if the Maximum Offering
Size (as defined below) is reduced in accordance with Section 5.01(e) or
5.01(f) such that less than 66 2/3% of the Registrable Securities of the
Selling Stockholders sought to be included in such registration are included.
(e) If a Demand Registration involves an Underwritten Public
Offering and the managing underwriter shall advise the Company and the Selling
Stockholders that, in its view, (i) the number of Registrable Securities
requested to be included in such registration (including any securities which
the Company proposes to be included which are not Registrable Securities) or
(ii) the inclusion of some or all of the Registrable Securities owned by the
Holders, in any such case, exceeds the largest number of securities which can
be sold without having an adverse effect on such offering, including the price
at which such securities can be sold (the "Maximum Offering Size"), the
Company will include in such registration, in the priority listed below, up to
the Maximum Offering Size:
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(A) first: (1) in the case of a Demand by the LLC and
its Permitted Transferees, all Securities requested to be
registered by the Selling Stockholder and by all of its
Permitted Transferees and CRL, DLJIP, BB, Carlyle, and the
TCW Entities (allocated, if necessary for the offering not
to exceed the Maximum Offering Size, pro rata among such
Persons on the basis of the relative number of shares of
Registrable Securities requested to be registered), or (2)
in the case of a Demand by DLJIP, all Securities requested
to be registered by the Selling Stockholder and by all of
its Permitted Transferees and BB, Carlyle, and the TCW
Entities (allocated, if necessary for the offering not to
exceed the Maximum Offering Size, pro rata among such
Persons on the basis of the relative number of shares of
Registrable Securities requested to be registered);
(B) second: (1) in the case of a Demand by the LLC and
its Permitted Transferees, all Registrable Securities
requested to be included in such registration by any other
Holder (allocated, if necessary for the offering not to
exceed the Maximum Offering Size, pro rata among such other
Holders on the basis of the relative number of shares of
Registrable Securities requested to be included in such
registration), or (2) in the case of a Demand by DLJIP, all
Registrable Securities requested to be included in such
registration by the LLC and its Permitted Transferees and by
CRL (allocated, if necessary for the offering not to exceed
the Maximum Offering Size, pro rata among such other Holders
on the basis of the relative number of shares of Registrable
Securities requested to be included in such registration);
(C) third: (1) in the case of a Demand by the LLC and
its Permitted Transferees, any securities proposed to be
registered by the Company, or (2) in the case of a Demand by
DLJIP, all Registrable Securities requested to be included
in such registration by any other Holder (allocated, if
necessary for the offering not to exceed the Maximum
Offering Size, pro rata among such other Holders on the
basis of the relative number of shares of Registrable
Securities requested to be included in such registration);
and
(D) fourth: in the case of a Demand by DLJIP, any
securities proposed to be registered by the Company.
(f) If the Company files a shelf registration statement with respect
to the High Yield Warrants, the Company shall notify the holders of the
Warrants at
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least 20 days prior to such filing. The holders of the Warrants shall have the
right (which shall not be deemed to be a use of a Demand Registration right),
by notice to the Company, to include the Warrants in such shelf registration
statement. Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not be construed to confer on any Stockholder (other than
holders of Warrants in their capacity as such, together with any Persons
entitled to indemnification hereunder in connection therewith) any rights in
connection with such shelf registration statement.
SECTION 5.02. Incidental Registration. (a) If the Company proposes to
register any Company Securities under the Securities Act (other than a
registration (A) on Form S-8 or S-4 or any successor or similar forms, (B)
relating to Common Stock issuable upon exercise of employee stock options or
in connection with any employee benefit or similar plan of the Company or (C)
in connection with a direct or indirect acquisition by the Company of another
company), whether or not for sale for its own account, it will each such time,
subject to the provisions of Section 5.02(b), give prompt written notice at
least 30 days prior to the anticipated filing date of the registration
statement relating to such registration to the LLC and each Other Stockholder,
which notice shall set forth such Stockholder's rights under this Section 5.02
and shall offer such Stockholders the opportunity to include in such
registration statement such number of Registrable Securities of the same type
as are proposed to be registered as each such Stockholder may request (an
"Incidental Registration"). Upon the written request of any such Stockholder
made within 15 days after the receipt of notice from the Company (which
request shall specify the number of Registrable Securities intended to be
disposed of by such Stockholder), the Company will use its best efforts to
effect the registration under the Securities Act of all Registrable Securities
which the Company has been so requested to register by such Stockholders, to
the extent requisite to permit the disposition of the Registrable Securities
so to be registered; provided that (I) if such registration involves a Public
Offering, all such Stockholders requesting to be included in the Company's
registration must sell their Registrable Securities to the underwriters
selected as provided in Section 5.04(f) on the same terms and conditions as
apply to the Company and (II) if, at any time after giving written notice of
its intention to register any stock pursuant to this Section 5.02(a) and prior
to the effective date of the registration statement filed in connection with
such registration, the Company shall determine for any reason not to register
such securities, the Company shall give written notice to all such
Stockholders and, thereupon, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (without
prejudice, however, to rights of the LLC under Section 5.01). No registration
effected under this Section 5.02 shall relieve the Company of its obligations
to effect a Demand Registration to the extent required by Section 5.01.
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The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section
5.02.
(b) If a registration pursuant to this Section 5.02 involves a
Public Offering (other than in the case of a Public Offering requested by the
LLC or any of its Permitted Transferees or the Other Stockholders in a Demand
Registration, in which case the provisions with respect to priority of
inclusion in such offering set forth in Section 5.01(e) shall apply) and the
managing underwriter advises the Company that, in its view, the number of
Shares that the Company and such Stockholders intend to include in such
registration exceeds the Maximum Offering Size, the Company will include in
such registration, in the following priority, up to the Maximum Offering Size:
(i) first, so much of the securities proposed to be registered by
the Company as would not cause the offering to exceed the Maximum
Offering Size;
(ii) second, all Registrable Securities requested to be included in
such registration by the LLC and its Permitted Transferees or any
Other Stockholder pursuant to this Section 5.02 (allocated, if
necessary for the offering not to exceed the Maximum Offering Size,
pro rata among such Stockholders on the basis of the relative number
of shares of Registrable Securities so requested to be included in
such registration).
SECTION 5.03. Holdback Agreements. If any registration of Registrable
Securities shall be in connection with a Public Offering, the LLC and its
Permitted Transferees and each Other Stockholder agrees not to effect any
public sale or distribution, including any sale pursuant to Rule 144, or any
successor provision, under the Securities Act, of any Registrable Securities,
and not to effect any such public sale or distribution of any other Common
Stock of the Company or of any stock convertible into or exchangeable or
exercisable for any Common Stock of the Company (in each case, other than as
part of such Public Offering) during the 14 days prior to the effective date
of such registration statement (except as part of such registration) or during
the period after such effective date equal to the lesser of (i) such period of
time as agreed between such managing underwriter and the Company and (ii) 180
days (such lesser period, the "Applicable Holdback Period").
SECTION 5.04. Registration Procedures. Whenever Stockholders request
that any Registrable Securities be registered pursuant to Section 5.01 or
5.02, the Company will, subject to the provisions of such Sections, use its
best efforts to effect the registration and the sale of such Registrable
Securities in accordance
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with the intended method of disposition thereof as quickly as practicable, and
in connection with any such request:
(a) The Company will as expeditiously as possible prepare and file
with the SEC a registration statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate and which
form shall be available for the sale of the Registrable Securities to be
registered thereunder in accordance with the intended method of distribution
thereof, and use its best efforts to cause such filed registration statement
to become and remain effective for a period of not less than 180 days.
(b) The Company will, if requested, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to
participating Stockholder and each underwriter, if any, of the Registrable
Securities covered by such registration statement copies of such registration
statement as proposed to be filed, and thereafter the Company will furnish to
such Stockholder and underwriter, if any, such number of copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference
therein), the prospectus included in such registration statement (including
each preliminary prospectus) and such other documents as such Stockholder or
underwriter may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Stockholder.
(c) After the filing of the registration statement, the Company will
promptly notify each Stockholder holding Registrable Securities covered by
such registration statement of any stop order issued or threatened by the SEC
and take all reasonable actions required to prevent the entry of such stop
order or to remove it if entered.
(d) The Company will use its best efforts to (i) register or qualify
the Registrable Securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions in the United States
as any Stockholder holding such Registrable Securities reasonably (in light of
such Stockholder's intended plan of distribution) requests and (ii) cause such
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company and do any and all other acts and
things that may be reasonably necessary or advisable to enable such
Stockholder to consummate the disposition of the Registrable Securities owned
by such Stockholder; provided that the Company will not be required to (A)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (d), (B) subject
itself to taxation in any
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such jurisdiction or (C) consent to general service of process in any such
jurisdiction.
(e) The Company will immediately notify each Stockholder holding
such Registrable Securities, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the occurrence of an
event requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and
promptly prepare and make available to each such Stockholder any such
supplement or amendment.
(f) The LLC will have the right, in its sole discretion, to select
an underwriter or underwriters in connection with any Public Offering, which
underwriter or underwriters may include any Affiliate of any DLJ Entity. In
connection with any Public Offering, the Company will enter into customary
agreements (including an underwriting agreement in customary form) and take
such other actions as are reasonably required in order to expedite or
facilitate the disposition of Registrable Securities in any such Public
Offering, including the engagement of a "qualified independent underwriter" in
connection with the qualification of the underwriting arrangements with the
NASD.
(g) Upon the execution of confidentiality agreements in form and
substance satisfactory to the Company, the Company will make available for
inspection by any Stockholder and any underwriter participating in any
disposition pursuant to a registration statement being filed by the Company
pursuant to this Section 5.04 and any attorney, accountant or other
professional retained by any such Stockholder or underwriter (collectively,
the "Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records") as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any Inspectors in connection
with such registration statement. Records that the Company determines, in good
faith, to be confidential and that it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
registration statement or (ii) the release of such Records is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction. Each
Stockholder agrees that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the Company Securities or its Affiliates
unless and until such is made generally available to the public. Each
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Stockholder further agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of the Records deemed confidential.
(h) The Company will furnish to each such Stockholder and to each
such underwriter, if any, a signed counterpart, addressed to such underwriter,
of (i) an opinion or opinions of counsel to the Company and (ii) a comfort
letter or comfort letters from the Company's independent public accountants,
each in customary form and covering such matters of the type customarily
covered by opinions or comfort letters, as the case may be, as a majority of
such Stockholders or the managing underwriter therefor reasonably requests.
(i) The Company will otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
stockholders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
The Company may require each such Stockholder to promptly furnish in
writing to the Company such information regarding the distribution of the
Registrable Securities as the Company may from time to time reasonably request
and such other information as may be legally required in connection with such
registration.
Each such Stockholder agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
5.04(e), such Stockholder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Stockholder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 5.04(e), and, if so
directed by the Company, such Stockholder will deliver to the Company all
copies, other than any permanent file copies then in such Stockholder's
possession, of the most recent prospectus covering such Registrable Securities
at the time of receipt of such notice. In the event that the Company shall
give such notice, the Company shall extend the period during which such
registration statement shall be maintained effective (including the period
referred to in Section 5.04(a)) by the number of days during the period from
and including the date of the giving of notice pursuant to Section 5.04(e) to
the date when the Company shall make available to such Stockholder a
prospectus supplemented or amended to conform with the requirements of Section
5.04(e).
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SECTION 5.05. Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Stockholder holding Registrable Securities
covered by a registration statement, its officers, directors and agents, and
each person, if any, who controls such Stockholder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in
any registration statement or prospectus relating to the Registrable
Securities (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon information furnished in writing to the Company by such Stockholder
or on such Stockholder's behalf expressly for use therein; provided that with
respect to any untrue statement or omission or alleged untrue statement or
omission made in any preliminary prospectus, or in any prospectus, as the case
may be, the indemnity agreement contained in this paragraph shall not apply to
the extent that any such loss, claim, damage, liability or expense results
from the fact that a current copy of the prospectus (or, in the case of a
prospectus, the prospectus as amended or supplemented) was not sent or given
to the person asserting any such loss, claim, damage, liability or expense at
or prior to the written confirmation of the sale of the Registrable Securities
concerned to such person if it is determined that the Company has provided
such prospectus and it was the responsibility of such Stockholder to provide
such person with a current copy of the prospectus (or such amended or
supplemented prospectus, as the case may be) and such current copy of the
prospectus (or such amended or supplemented prospectus, as the case may be)
would have cured the defect giving rise to such loss, claim, damage, liability
or expense. The Company also agrees to indemnify any underwriters of the
Registrable Securities, their officers and directors and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Stockholders provided in this Section 5.05.
SECTION 5.06. Indemnification by Participating Stockholders. Each
Stockholder holding Registrable Securities included in any registration
statement agrees, severally but not jointly, to indemnify and hold harmless
the Company, its officers, directors and agents and each person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Stockholder, but only (i) with respect to
information furnished in writing by such Stockholder or on such Stockholder's
behalf expressly for use in any registration statement or prospectus relating
to the Registrable Securities, or any
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amendment or supplement thereto, or any preliminary prospectus or (ii) to the
extent that any loss, claim, damage, liability or expense described in Section
5.05 results from the fact that a current copy of the prospectus (or, in the
case of a prospectus, the prospectus as amended or supplemented) was not sent
or given to the person asserting any such loss, claim, damage, liability or
expense at or prior to the written confirmation of the sale of the Registrable
Securities concerned to such person if it is determined that it was the
responsibility of such Stockholder to provide such person with a current copy
of the prospectus (or such amended or supplemented prospectus, as the case may
be) and such current copy of the prospectus (or such amended or supplemented
prospectus, as the case may be) would have cured the defect giving rise to
such loss, claim, damage, liability or expense. Each such Stockholder also
agrees to indemnify and hold harmless underwriters of the Registrable
Securities, their officers and directors and each person who controls such
underwriters on substantially the same basis as that of the indemnification of
the Company provided in this Section 5.06. As a condition to including
Registrable Securities in any registration statement filed in accordance with
Article 5 hereof, the Company may require that it shall have received an
undertaking reasonably satisfactory to it from any underwriter to indemnify
and hold it harmless to the extent customarily provided by underwriters with
respect to similar securities.
SECTION 5.07. Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnity may be sought pursuant to
this Article 5, such person (an "Indemnified Party") shall promptly notify the
person against whom such indemnity may be sought (the "Indemnifying Party") in
writing and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Party,
and shall assume the payment of all fees and expenses; provided that the
failure of any Indemnified Party so to notify the Indemnifying Party shall not
relieve the Indemnifying Party of its obligations hereunder except to the
extent that the Indemnifying Party is materially prejudiced by such failure to
notify. In any such proceeding, any Indemnified Party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party unless (i) the Indemnifying Party and
the Indemnified Party shall have mutually agreed to the retention of such
counsel or (ii) in the reasonable judgment of such Indemnified Party
representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them. It is understood that
the Indemnifying Party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) at any time for all such Indemnified Parties, and that all such fees
and expenses shall be reimbursed as they are
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incurred. In the case of any such separate firm for the Indemnified Parties,
such firm shall be designated in writing by the Indemnified Parties. The
Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent, or if
there be a final judgment for the plaintiff, the Indemnifying Party shall
indemnify and hold harmless such Indemnified Parties from and against any loss
or liability (to the extent stated above) by reason of such settlement or
judgment. No Indemnifying Party shall, without the prior written consent of
the Indemnified Party, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Party is or could have been a
party and indemnity could have been sought hereunder by such Indemnified
Party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability arising out of such proceeding.
SECTION 5.08. Contribution. If the indemnification provided for in
this Article 5 is unavailable to the Indemnified Parties in respect of any
losses, claims, damages or liabilities referred to herein, then each such
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities (i) as between the Company and
the Stockholders holding Registrable Securities covered by a registration
statement on the one hand and the underwriters on the other, in such
proportion as is appropriate to reflect the relative benefits received by the
Company and such Stockholders on the one hand and the underwriters on the
other, from the offering of the Registrable Securities, or if such allocation
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits but also the relative fault of the
Company and such Stockholders on the one hand and of such underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations and (ii) as between the Company on the one hand and
each such Stockholder on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of each such Stockholder in
connection with such statements or omissions, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
such Stockholders on the one hand and such underwriters on the other shall be
deemed to be in the same proportion as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by the Company and such Stockholders bear to the total underwriting
discounts and commissions received by such underwriters, in each case as set
forth in the table on the cover page of the prospectus. The relative fault of
the Company and such Stockholders on the one hand and of such underwriters on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact
29
<PAGE>
relates to information supplied by the Company and such Stockholders or by
such underwriters. The relative fault of the Company on the one hand and of
each such Stockholder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Stockholders agree that it would not be just and
equitable if contribution pursuant to this Section 5.08 were determined by pro
rata allocation (even if the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages or liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 5.08, no
underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Registrable Securities underwritten by
it and distributed to the public were offered to the public exceeds the amount
of any damages which such underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission, and no Stockholder shall be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities of such Stockholder were offered to the public exceeds the amount
of any damages which such Stockholder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Each such
Stockholder's obligation to contribute pursuant to this Section 5.08 is
several in the proportion that the proceeds of the offering received by such
Stockholder bears to the total proceeds of the offering received by all such
Stockholders and not joint.
SECTION 5.09. Participation in Public Offering. No Person may
participate in any Public Offering hereunder unless such Person (a) agrees to
sell such Person's securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
and customarily required under the terms of such underwriting arrangements and
the provisions of this Agreement in respect of registration rights.
30
<PAGE>
SECTION 5.10. Other Indemnification. Indemnification similar to that
specified herein (with appropriate modifications) shall be given by the
Company and each Stockholder participating therein with respect to any
required registration or other qualification of securities under any federal
or state law or regulation or governmental authority other than the Securities
Act.
SECTION 5.11. Cooperation by the Company. In the event any
Stockholder shall transfer any Registrable Securities pursuant to Rule 144A
under the Securities Act, the Company shall cooperate with such Stockholder
(which shall include, without limitation, making registration rights with
respect to the Registrable Securities to be sold (or securities issuable or to
be issued in exchange therefor) available to the ultimate purchasers thereof)
and shall provide to such Stockholder such information as such Stockholder
shall reasonably request, provided that any registration rights made available
pursuant hereto shall not be on terms substantially more favorable to the
possessors thereof than the registration rights granted herein to the LLC.
ARTICLE 6
MISCELLANEOUS
SECTION 6.01. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof.
SECTION 6.02. Binding Effect; Benefit; Treatment of TCW Entities. (a)
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, successors, legal representatives and
permitted assigns. Nothing in this Agreement, expressed or implied, shall
confer on any Person other than the parties hereto, their respective heirs,
successors, legal representatives and permitted assigns, the DLJ Entities, and
DLJ Merchant Banking II, Inc., any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
(b) It is acknowledged and understood by all parties hereto that this
agreement shall be binding in the absence of executed counterparts from the
TCW Entities. It is further understood that if the TCW Entities do not deliver
executed counterparts to the Company within 30 days from the Closing Date, all
references herein to the TCW Entities shall be deemed to be removed without
any further action on the part of any party hereto.
31
<PAGE>
SECTION 6.03. Exclusive Financial and Investment Banking Advisor.
During the period from and including the date hereof through and including the
fifth anniversary of the date hereof, Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJSC"), or any Affiliate of DLJSC that the LLC may choose in
its sole discretion, shall be engaged as the exclusive financial and
investment banking advisor of the Company.
SECTION 6.04. Put Right. (a) During the period, if any, beginning on
(i) the earlier of (A) the date that all of the Indebtedness (as defined in,
and for the purposes hereof such term shall include, the Subordinated Discount
Note Due 2010 issued by the Company to CRL Holdings, Inc.) of the Company and
its subsidiaries incurred on or prior to the Closing Date has been repaid in
full (including any refinancings or replacements of such Indebtedness) or (B)
the date that (1) all of the Indebtedness of the Company and its subsidiaries
incurred on or prior to the Closing Date has been repaid in full, refinanced
or replaced and (2) the documentation relating to all of the refinanced or
replacement Indebtedness referred to in the preceding clause (A) permits the
Put (as defined below) to be exercised, provided that in connection with any
refinancing or replacement referred to in the preceding clause (A) the Company
shall make a good faith effort to obtain such permission in the documentation
thereof, and ending on (ii) the earliest of (X) the date of the Initial Public
Offering, (Y) the date on which the LLC shall own less than 50% of the
outstanding Common Stock, and (Z) twelve years from the Closing Date, CRL
shall have the right to sell (the "Put") all, but not less than all, of the
Common Stock owned by it (excluding any Common Stock acquired by it after the
Closing Date) to the Company. The price per share for the Common Stock
purchased pursuant to the Put shall be the fair market value thereof as
determined by an investment bank of nationally recognized standing selected by
the Board, which shall not be an affiliate of the LLC or the DLJ Entities.
(b) In the event that CRL proposes to exercise its rights under this
section, it shall provide the Company with written notice thereof (the
"Section 6.04 Notice"). The Company shall then have 75 days from the date of
its receipt of the Section 6.04 Notice in which to obtain the determination of
the price per share set forth in clause (a) above, and to provide written
notice to CRL of such price per share (the "Value Notice"). CRL shall then
have 10 Business Days from the date of its receipt of the Value Notice in
which it may provide written notice to the Company of its intention to
exercise the Put (the "Put Notice"). If CRL does not provide the Put Notice to
the Company within such 10 day period, it shall forfeit all its rights under
this Section 6.04. If CRL does provide the Put Notice to the Company within
such 10 day period: (i) the Company shall deliver to CRL the price per share
set forth in the Value Notice for the Common Stock to be sold by CRL, and (ii)
CRL shall simultaneously deliver to the Company
32
<PAGE>
certificates representing such Common Stock, together with duly executed stock
powers, on a date to be determined by mutual agreement (but not less than 10
days after the date of the Company's receipt of the Put Notice).
SECTION 6.05. Pre-emptive Rights. (a) If the Company proposes to
issue any Company Securities (other than (i) to employees of the Company or
any subsidiary pursuant to employee benefit plans or arrangements approved by
the Board (including upon the exercise of employee stock options), (ii) in
connection with any bona fide, arm's length direct or indirect merger,
acquisition or similar transaction, (iii) pursuant to a Public Offering, (iv)
upon the exercise of Warrants or High Yield Warrants, or (v) on or prior to
the Closing Date), each Other Stockholder shall have the pre-emptive right to
acquire its pre-emptive portion of such Company Securities, at the same price
per Company Security at which such Company Securities are sold in such
issuance. For these purposes, "pre-emptive portion" shall mean a fraction, the
numerator of which is the Initial Ownership of such Stockholder and the
denominator of which is the Initial Ownership of all Stockholders.
(b) The Company shall provide written notice to each Other
Stockholder at least twenty days prior to any issuance of Company Securities
with respect to which such Other Stockholder would have pre-emptive rights
pursuant to clause (a) above. Each Other Stockholder shall then have ten days
from its receipt of such notice in which to provide written notice to the
Company of its exercise of its rights pursuant to this Section 6.05.
(c) The rights of any Other Stockholder under this Section 6.05
shall expire at such time as such Other Stockholder owns less than 40% of its
Initial Ownership of Common Stock.
(d) The Company shall not be under any obligation to consummate any
proposed issuance of Company Securities, regardless of whether it shall have
delivered a written notice in respect of such issuance.
SECTION 6.06. Assignability. This Agreement shall not be assignable
by any party hereto, except that any Person acquiring Shares who is required
by the terms of this Agreement or any employment agreement or stock purchase,
option, stock option or other compensation plan of the Company or any
Subsidiary to become a party hereto shall (unless already bound hereby)
execute and deliver to the Company an agreement to be bound by this Agreement
and shall thenceforth be a "Stockholder". Any Stockholder who ceases to own
beneficially any Shares shall cease to be bound by the terms hereof (other
than the provisions of Sections 5.05, 5.06, 5.07, 5.08, and 5.10 applicable to
such Stockholder with respect to any
33
<PAGE>
offering of Registrable Securities completed before the date such Stockholder
ceased to own any Shares).
SECTION 6.07. Amendment; Waiver; Termination. No provision of this
Agreement may be waived except by an instrument in writing executed by the
party against whom the waiver is to be effective. No provision of this
Agreement may be amended or otherwise modified except by an instrument in
writing executed by (i) the Company with the approval of the Board, (ii) DLJ
Merchant Banking II, Inc., and (iii) CRL, until such time as CRL is no longer
entitled to nominate a director to the Board; provided that if any such
amendment or modification has an adverse effect on any Stockholder that is
materially disproportionate to the effect of such amendment or modification on
Stockholders generally, the approval of such Stockholder shall also be
required.
SECTION 6.08. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile transmissions
and shall be given,
if to the Company or the Management Stockholders, to
Charles River Laboratories Holdings, Inc.
251 Ballardvale Street
Wilmington, MA 01887
Attention: Dennis R. Shaughnessy
Fax: (978) 988-5665
and a copy to the LLC at its address listed below;
if to the LLC, to:
CRL Acquisition LLC
c/o DLJ Merchant Banking Partners II, L.P.
277 Park Avenue
New York, New York 10172
Attention: Thompson Dean
Fax: (212) 892-7272
with a copy to:
34
<PAGE>
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: George R. Bason, Jr.
Fax: (212) 450-4800
if to CRL, to:
B&L CRL, Inc.
c/o Bausch & Lomb Incorporated
One Bausch & Lomb Place
Rochester, NY 14604
Attention: Alan Farnsworth
Fax: 716-338-8017
with a copy to:
Nixon Peabody LLP
Clinton Square
Rochester, NY 14603
Attention: Deborah McLean Quinn
Fax: (716) 263-1600
if to DLJ Investment Partners, L.P., to:
DLJ Investment Partners, L.P.
277 Park Avenue
New York, NY 10172
Attention: Ivy Dodes
Fax: 212-892-7272
if to DLJ Investment Funding, Inc., to:
DLJ Investment Funding, Inc.
277 Park Avenue
New York, NY 10172
Attention: John Moriarty
Fax: 212-892-7555
if to DLJ ESC II, L.P., to:
35
<PAGE>
DLJ ESC II L.P.
c/o DLJ LBO Plans
Management Corporation
277 Park Avenue
New York, NY 10172
Attention: John Moriarty
Fax: 212-892-7555
if to BB, to:
Brown Brothers Harriman & Co.
59 Wall Street
New York, NY 10005
Attention: Joseph P. Donlan
Fax: 212-493-8429
with a copy to:
Paul Weiss Rifkind Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Marilyn Sobel
Fax: 212-757-3990
if to Carlyle, to:
Carlyle Group L.P.
520 Madison Avenue
41st Floor
New York, NY 10022
Attention: Mr. Mark Alter
Fax: 212-381-4950
if to the TCW Entities, to:
Trust Company of the West
11100 Santa Monica Blvd.
Suite 2000
Los Angeles, CA 90025
36
<PAGE>
Attention: Mr. Jim Shevlet
Fax: 310-235-5967
All notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if received prior to
5 p.m. in the place of receipt and such day is a business day in the place of
receipt. Otherwise, any such notice, request or communication shall be deemed
not to have been received until the next succeeding business day in the place
of receipt. Any notice, request or other written communication sent by
facsimile transmission shall be confirmed by certified mail, return receipt
requested, posted within one Business Day, or by personal delivery, whether
courier or otherwise, made within two Business Days after the date of such
facsimile transmission.
Any Person who becomes a Stockholder shall provide its address and
fax number to the Company, which shall promptly provide such information to
each other Stockholder.
SECTION 6.09. Headings. The headings contained in this Agreement are
for convenience only and shall not affect the meaning or interpretation of this
Agreement.
SECTION 6.10. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument.
SECTION 6.11. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE CONFLICTS OF LAW RULES OF SUCH STATE.
SECTION 6.12. Specific Enforcement. Each party hereto acknowledges
that the remedies at law of the other parties for a breach or threatened
breach of this Agreement would be inadequate and, in recognition of this fact,
any party to this Agreement, without posting any bond, and in addition to all
other remedies which may be available, shall be entitled to obtain equitable
relief in the form of specific performance, a temporary restraining order, a
temporary or permanent injunction or any other equitable remedy which may then
be available.
SECTION 6.13. Consent to Jurisdiction. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
37
<PAGE>
brought in the United States District Court for the Southern District of New
York or any other New York State court sitting in New York City, and each of
the parties hereby consents to the non-exclusive jurisdiction of such courts
(and of the appropriate appellate courts therefrom) in any such suit, action
or proceeding and irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of the venue of
any such suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 6.08 shall
be deemed effective service of process on such party.
38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
CHARLES RIVER LABORATORIES
HOLDINGS, INC.
By:
---------------------------------
Name:
Title:
CRL ACQUISITION LLC
By:
---------------------------------
Name:
Title:
B&L CRL, INC.
By:
---------------------------------
Name:
Title:
DLJ INVESTMENT PARTNERS, L.P.
By: DLJ INVESTMENT PARTNERS, INC.,
Managing General Partner
By:
---------------------------------
Name:
Title:
39
<PAGE>
DLJ ESC II L.P.
By: DLJ LBO PLANS MANAGEMENT
CORPORATION,
General Partner
By:
---------------------------------
Name:
Title:
DLJ INVESTMENT FUNDING, INC.
By:
---------------------------------
Name:
Title:
THE 1818 MEZZANINE FUND, L.P.
By: BROWN BROTHERS HARRIMAN & CO.
General Partner
By:
---------------------------------
Name:
Title:
CARLYLE HIGH YIELD PARTNERS, L.P.
By: TCG High Yield, L.L.C.
General Partner
By:
---------------------------------
Name: Jack Mann
Title: Executive Managing Director
40
<PAGE>
MANAGEMENT STOCKHOLDERS
-----------------------------------------
James C. Foster
-----------------------------------------
Henry L. Foster
-----------------------------------------
Thomas F. Ackerman
-----------------------------------------
Dennis R. Shaughnessy
-----------------------------------------
Julia D. Palm
-----------------------------------------
Real H. Renaud
-----------------------------------------
Gilbert M. Slater
-----------------------------------------
David P. Johst
-----------------------------------------
Dr. Charn Sun Lee
-----------------------------------------
Dr. Jorg M. Geller
41
<PAGE>
-----------------------------------------
Dr. Christophe Berthoux
-----------------------------------------
Dr. Raj Bhalla
-----------------------------------------
Toshihide Kashiwagi
42
<PAGE>
TCW/CRESCENT MEZZANINE PARTNERS II, L.P.
By: TCW/Crescent Mezzanine II, L.P.
its general partner or managing owner
By: TCW/Crescent Mezzanine, L.L.C.
its general partner
By:
--------------------------------------
Name:
Title:
TCW/CRESCENT MEZZANINE TRUST II
By: TCW/Crescent Mezzanine II, L.P.
its general partner or managing owner
By: TCW/Crescent Mezzanine, L.L.C.
its general partner
By:
--------------------------------------
Name:
Title:
CRESCENT/MACH I PARTNERS, L.P.
By: TCW Asset Management Company,
as Portfolio Manager and as
Attorney-in-Fact for the Partnership
By:
--------------------------------------
Name:
Title:
43
<PAGE>
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW Investment Management Company,
as Investment Advisor
By:
--------------------------------------
Name:
Title:
By: TCW Advisors (Bermuda), Ltd.,
as general partner
By:
--------------------------------------
Name:
Title:
TCW LEVERAGED INCOME TRUST II, L.P.
By: TCW Investment Management Company,
as Investment Advisor
By:
--------------------------------------
Name:
Title:
By: TCW (LINC II), L.P., as general
partner
By: TCW Advisors (Bermuda), Ltd.,
as its general partner
By:
--------------------------------------
Name:
Title:
44
EXHIBIT 5.1
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
212-450-4000
December 8, 1999
Charles River Laboratories Holdings, Inc.
251 Ballardvale Street
Wilmington, MA 01887
Ladies and Gentlemen:
We have acted as counsel for Charles River Laboratories Holdings, Inc.,
a Delaware corporation (the "Company"), in connection with the Registration
Statement on Form S-1 (the "Registration Statement") filed with the Securities
and Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Act"). The Registration Statement relates to registration under the Act of (i)
the resale of 150,000 warrants (the "Warrants") to purchase shares of Common
Stock, par value $.01 per share (the "Common Stock"), of the Company by certain
holders named in an accompanying supplement thereto and (ii) the issuance of up
to 591,366 shares of Common Stock ("Warrant Shares") upon exercise of such
Warrants to persons who have purchased Warrants under the immediately preceding
clause (i).
The Warrants were issued pursuant to a Warrant Agreement (the "Warrant
Agreement") dated as of September 29, 1999 between the Company and State Street
Bank and Trust Company, as Warrant Agent.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments as we have deemed necessary for the
purposes of rendering this opinion.
Based upon the foregoing, we are of the opinion that:
i. . The Warrants have been duly authorized, executed
and delivered by the Company and are valid and
<PAGE>
binding obligations of the Company,
enforceable against the Company in
accordance with their terms, except as (x)
such enforcement may be limited by
bankruptcy, insolvency or similar laws
affecting creditors' rights generally and
(y) such enforcement may be limited by
equitable principles of general
applicability, regardless of whether
enforcement is sought in a proceeding at law
or in equity.
ii. . The Company has duly authorized and reserved for
issuance the Warrant Shares to be issued upon the
exercise of the Warrants and, when issued and
delivered upon the exercise of the Warrants against
payment of the exercise price as provided in the
Warrant Agreement, the Warrant Shares will have
been validly issued and will be fully paid and non-
assessable.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our name under the heading "Legal
Matters" in the related Prospectus.
Very truly yours,
/s/ DAVIS POLK & WARDWELL
EXHIBIT 10.3
[EXECUTION COPY]
U.S. $190,000,000
CREDIT AGREEMENT,
dated as of September 29, 1999
among
CHARLES RIVER LABORATORIES, INC.,
as the Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders,
UNION BANK OF CALIFORNIA, N.A.,
as the Administrative Agent
for the Lenders,
DLJ CAPITAL FUNDING, INC.,
as the Syndication Agent
for the Lenders,
and
NATIONAL CITY BANK,
as the Documentation Agent
for the Lenders.
LEAD ARRANGER:
DLJ CAPITAL FUNDING, INC.
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms.........................................................4
1.2. Use of Defined Terms.................................................37
1.3. Cross-References.....................................................37
1.4. Accounting and Financial Determinations..............................37
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES,
NOTES AND LETTERS OF CREDIT
2.1. Commitments..........................................................38
2.1.1. Term Loan Commitments................................................38
2.1.2. Revolving Loan Commitment and Swing Line Loan Commitment.............39
2.1.3. Letter of Credit Commitment..........................................40
2.1.4. Lenders Not Permitted or Required to Make the Loans..................40
2.1.5. Issuer Not Permitted or Required to Issue Letters of Credit..........41
2.2. Reduction of Revolving Loan Commitment Amount........................41
2.3. Borrowing Procedures and Funding Maintenance.........................41
2.3.1. Term Loans and Revolving Loans.......................................41
2.3.2. Swing Line Loans.....................................................42
2.4. Continuation and Conversion Elections................................43
2.5. Funding..............................................................43
2.6. Issuance Procedures..................................................44
2.6.1. Other Lenders' Participation.........................................45
2.6.2. Disbursements; Conversion to Revolving Loans.........................45
2.6.3. Reimbursement........................................................46
2.6.4. Deemed Disbursements.................................................46
2.6.5. Nature of Reimbursement Obligations..................................47
2.7. Register; Notes......................................................48
-ii-
<PAGE>
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments; Application..............................49
3.1.1. Repayments and Prepayments...........................................49
3.1.2. Application..........................................................54
3.2. Interest Provisions..................................................54
3.2.1. Rates................................................................54
3.2.2. Post-Maturity Rates..................................................55
3.2.3. Payment Dates........................................................55
3.3. Fees.................................................................55
3.3.1. Commitment Fee.......................................................56
3.3.2. Administrative Agent Fee.............................................56
3.3.3. Letter of Credit Fee.................................................56
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
4.1. LIBO Rate Lending Unlawful...........................................56
4.2. Deposits Unavailable.................................................57
4.3. Increased LIBO Rate Loan Costs, etc..................................57
4.4. Funding Losses.......................................................57
4.5. Increased Capital Costs..............................................58
4.6. Taxes................................................................58
4.7. Payments, Computations, etc..........................................61
4.8. Sharing of Payments..................................................61
4.9. Setoff...............................................................62
4.10. Mitigation...........................................................62
4.11. Replacement of Lenders...............................................63
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
5.1. Initial Credit Extension.............................................63
5.1.1. Resolutions, etc.....................................................63
5.1.2. Transaction Documents................................................64
5.1.3. Consummation of Recapitalization and Merger..........................64
-iii-
<PAGE>
5.1.4. Closing Date Certificate.............................................64
5.1.5. Delivery of Notes....................................................64
5.1.6. Subsidiary Guaranty..................................................64
5.1.7. Pledge and Security Agreements, etc..................................64
5.1.8. UCC Filing Service...................................................66
5.1.9. Financial Information, etc...........................................66
5.1.10. Solvency, etc........................................................67
5.1.11. Equity Contributions, Subordinated Debt Issuance, Discount
Debentures Issuance, Seller Note Issuance and Subco Dividend.....67
5.1.12. Ownership of Holdco..................................................67
5.1.13. Litigation...........................................................67
5.1.14. Material Adverse Effect..............................................67
5.1.15. Reliance Letters.....................................................67
5.1.16. Opinions of Counsel..................................................68
5.1.17. Insurance............................................................68
5.1.18. Closing Fees, Expenses, etc..........................................68
5.1.19. Satisfactory Legal Form..............................................68
5.2. All Credit Extensions................................................68
5.2.1. Compliance with Warranties, No Default, etc..........................68
5.2.2. Credit Extension Request.............................................69
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Organization, etc....................................................69
6.2. Due Authorization, NonContravention, etc.............................70
6.3. Government Approval, Regulation, etc.................................70
6.4. Validity, etc........................................................70
6.5. Financial Information................................................71
6.6. No Material Adverse Change...........................................71
6.7. Litigation, etc......................................................71
6.8. Subsidiaries.........................................................71
6.9. Ownership of Properties..............................................71
6.10. Taxes................................................................71
6.11. Pension and Welfare Plans............................................72
6.12. Environmental Matters................................................72
6.13. Regulations U and X..................................................73
6.14. Accuracy of Information..............................................73
6.15. Solvency.............................................................74
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6.16. Year 2000 Compliance..................................................74
ARTICLE VII
COVENANTS
7.1. Affirmative Covenants................................................74
7.1.1. Financial Information, Reports, Notices, etc.........................74
7.1.2. Compliance with Laws, etc............................................76
7.1.3. Maintenance of Properties............................................76
7.1.4. Insurance............................................................77
7.1.5. Books and Records....................................................77
7.1.6. Environmental Covenant...............................................77
7.1.7. Future Subsidiaries..................................................78
7.1.8. Future Leased Property and Future Acquisitions of Real Property;
Future Acquisition of Other Property...............................79E
7.1.9. Use of Proceeds, etc.................................................80
7.1.10. Hedging Obligations..................................................80
7.1.11. Undertaking..........................................................81
7.1.12. Mortgages............................................................81
7.1.13. Year 2000 Compliance.................................................82
7.2. Negative Covenants...................................................82
7.2.1. Business Activities..................................................82
7.2.2. Indebtedness.........................................................82
7.2.3. Liens................................................................84
7.2.4. Financial Covenants..................................................86
7.2.5. Investments..........................................................87
7.2.6. Restricted Payments, etc.............................................90
7.2.7. Capital Expenditures, etc............................................92
7.2.8. Consolidation, Merger, etc...........................................93
7.2.9. Asset Dispositions, etc..............................................94
7.2.10. Modification of Certain Agreements...................................95
7.2.11. Transactions with Affiliates.........................................95
7.2.12. Negative Pledges, Restrictive Agreements, etc........................96
7.2.13. Securities of Subsidiaries...........................................96
7.2.14. Sale and Leaseback...................................................96
7.2.15. Designation of Senior Indebtedness...................................97
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ARTICLE VIII
EVENTS OF DEFAULT
8.1. Listing of Events of Default..........................................97
8.1.1. Non-Payment of Obligations............................................97
8.1.2. Breach of Warranty....................................................97
8.1.3. Non-Performance of Certain Covenants and Obligations..................97
8.1.4. Non-Performance of Other Covenants and Obligations....................97
8.1.5. Default on Other Indebtedness.........................................97
8.1.6. Judgments.............................................................98
8.1.7. Pension Plans.........................................................98
8.1.8. Change in Control.....................................................98
8.1.9. Bankruptcy, Insolvency, etc...........................................98
8.1.10. Impairment of Security, etc...........................................99
8.1.11. Subordinated Notes....................................................99
8.2. Action if Bankruptcy, etc............................................100
8.3. Action if Other Event of Default.....................................100
ARTICLE IX
THE AGENTS
9.1. Actions..............................................................100
9.2. Funding Reliance, etc................................................101
9.3. Exculpation; Notice of Default.......................................102
9.4. Successor............................................................102
9.5. Credit Extensions by each Agent......................................103
9.6. Credit Decisions.....................................................103
9.7. Copies, etc..........................................................103
9.8. The Syndication Agent and the Administrative Agent...................103
9.9. Documentation Agent..................................................104
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1. Waivers, Amendments, etc.............................................104
10.2. Notices..............................................................106
10.3. Payment of Costs and Expenses........................................106
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10.4. Indemnification.....................................................107
10.5. Survival............................................................108
10.6. Severability........................................................109
10.7. Headings............................................................109
10.8. Execution in Counterparts, Effectiveness, etc.......................109
10.9. Governing Law; Entire Agreement.....................................109
10.10. Successors and Assigns..............................................109
10.11. Sale and Transfer of Loans and Notes; Participation in Loans and
Notes...........................................................109
10.11.1. Assignments.........................................................110
10.11.2. Participations......................................................112
10.12. Other Transactions..................................................113
10.13. Forum Selection and Consent to Jurisdiction.........................113
10.14. Waiver of Jury Trial................................................114
10.15. Confidentiality.....................................................114
SCHEDULE I - Disclosure Schedule
SCHEDULE II - Percentages and Administrative Information
EXHIBIT A-1 - Form of Revolving Note
EXHIBIT A-2 - Form of Term-A Note
EXHIBIT A-3 - Form of Term-B Note
EXHIBIT A-4 - Form of Swing Line Note
EXHIBIT B-1 - Form of Borrowing Request
EXHIBIT B-2 - Form of Issuance Request
EXHIBIT C - Form of Continuation/Conversion Notice
EXHIBIT D - Form of Closing Date Certificate
EXHIBIT E - Form of Compliance Certificate
EXHIBIT F - Form of Restricted Payments Compliance Certificate
EXHIBIT G-1 - Form of Holdco Guaranty and Pledge Agreement
EXHIBIT G-2 - Form of Borrower Pledge and Security Agreement
EXHIBIT G-3 - Form of Subsidiary Pledge and Security Agreement
EXHIBIT H - Form of Subsidiary Guaranty
EXHIBIT I - Form of Lender Assignment Agreement
EXHIBIT J-1 - Form of New York Counsel Opinion
EXHIBIT J-2 - Form of New York Counsel Opinion
EXHIBIT J-3 - Form of General Counsel Opinion
EXHIBIT J-4 - Form of Nevada Counsel Opinion
EXHIBIT J-5 - Form of California Counsel Opinion
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of September 29, 1999, is among Charles
River Laboratories, Inc., a Delaware corporation (the "Borrower"), the various
financial institutions as are or may become parties hereto (collectively, the
"Lenders") and DLJ Capital Funding, Inc. ("DLJ"), as lead arranger, as sole
book runner and as syndication agent for the Lenders (as syndication agent, the
"Syndication Agent" and collectively, the "Lead Arranger"), Union Bank of
California, N.A. ("UBOC"), as administrative agent (the "Administrative Agent")
for the Lenders (the Syndication Agent and the Administrative Agent are
sometimes referred to herein as the "Agents" and each as an "Agent"), and
National City Bank, as documentation agent (in such capacity, the
"Documentation Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, DLJ Merchant Banking Partners II, L.P. and certain affiliated
entities (collectively, "DLJMBP") intend to acquire certain businesses and
operations of the Borrower, B&L CRL, Inc., formerly known as Charles River
Laboratories, Inc., a Delaware corporation ("CRL"), and certain other
Subsidiaries or Affiliates of Bausch & Lomb Inc., a Delaware corporation
("B&L"), which is the current 100% indirect owner of CRL, through a leveraged
recapitalization (the "Recapitalization"). The Recapitalization will be
consummated pursuant to the Recapitalization Agreement as amended (the
"Recapitalization Agreement"), dated as of July 25, 1999 entered into with B&L
and certain of its Subsidiaries and Affiliates (including CRL and the Borrower)
and DLJMBP;
WHEREAS, the Recapitalization will be accomplished through (i) the
contribution to the Borrower of (a) substantially all of CRL's assets and (b)
certain related assets by certain other Subsidiaries and Affiliates of B&L (the
"Other Asset Contributors"), (ii) the formation of a holding company to be
named Charles River Laboratories Holdings, Inc., a Delaware corporation
("Holdco") that will hold directly all of the Capital Stock of the Borrower,
(iii) the formation by DLJMBP of (a) CRL Acquisition LLC ("Acquisition LLC"), a
Delaware limited liability company and a Subsidiary of DLJMBP, and (b) Charles
River Acquisition Corp. ("Acquisition Subco"), a Delaware corporation and a
Subsidiary of Acquisition LLC, (iv) the making of an equity contribution (the
"Member Contribution") by the members of Acquisition LLC (including DLJMBP and
certain members of management of the Borrower and its Affiliates) in an amount
equal to at least $90,000,000 to Acquisition LLC, (v) the making of an equity
contribution (the "Acquisition LLC Contribution" and together with the Member
Contribution, the "Equity Contributions") by Acquisition LLC of the Member
Contribution to Acquisition Subco, (vi) the issuance by Holdco of the Senior
Discount Debentures (such term and all other capitalized terms used in the
preamble and recitals hereto not otherwise defined therein shall have the
meanings
<PAGE>
assigned to such terms in Article I), (vii) the issuance by the Borrower of the
Senior Subordinated Notes and Warrants, (viii) the borrowing by the Borrower of
Loans to be made on the Closing Date, (ix) the payment of a dividend by the
Borrower to Holdco (the "Subco Dividend") in an aggregate principal amount
equal to the sum of the aggregate principal amounts of the debt incurred by the
Borrower under the preceding clauses (vii) and (viii) (less the amount of the
proceeds of such debt so incurred used to pay (A) the consideration for the
Sierra Acquisition in an amount not to exceed $24,000,000 plus reasonable fees
and expenses as described in clause (B) and (B) all reasonable and customary
fees and expenses paid by the Borrower in connection with the Transaction in an
amount not to exceed $20,000,000), (x) the redemption of all shares of all
Capital Stock of Holdco held by the Other Asset Contributors and all Capital
Stock of Holdco held by CRL except for the Rollover Equity and (xi) the merger
(the "Merger") of Acquisition Subco with and into Holdco, with Holdco to be the
surviving corporation of such merger (such Recapitalization and all
transactions related thereto, including those described in all of the recitals
hereto, being herein referred to as the "Transaction");
WHEREAS, in connection with the Transaction, (i) the Other Asset
Contributors will receive cash in consideration for the redemption of their
shares by Holdco, (ii) the shares of Acquisition Subco held by Acquisition LLC
will be converted into approximately 87.5% of the outstanding common stock of
Holdco (after giving effect to the Merger), (iii) the shares of Holdco held by
CRL (other than the Rollover Equity) will be converted into (A) the right to
receive cash and (B) the Seller Subordinated Discount Note and (iv) CRL will
retain the Rollover Equity;
WHEREAS, in connection with the Transaction, and pursuant to the
Transaction Documents, the Borrower will purchase all of the outstanding shares
of common stock of SBI in consideration for approximately $24,000,000 (the
"Sierra Acquisition") pursuant to an Amended and Restated Stock Purchase
Agreement, dated as of September 4, 1999 (the "Sierra Acquisition Agreement"),
among SBI Holdings, Inc., a Nevada corporation ("SBI"), and certain
shareholders of SBI;
WHEREAS, in connection with the Transaction, and pursuant to the
Transaction Documents, the following capital-raising transactions will occur
prior to or contemporaneously with the consummation of the Transaction and the
making of the initial Credit Extensions hereunder:
(a) the Borrower will issue not more than $150,000,000 in aggregate
principal amount of its Senior Subordinated Notes (the "Senior
Subordinated Notes") pursuant to the Senior Subordinated Note Indenture
and Warrants (the "Warrants") to purchase 591,366 shares of common stock
of Holdco pursuant to the Warrant Agreement, dated as of September 29,
1999 (the "Warrant Agreement"), between Holdco and State Street
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Bank and Trust Company, as warrant agent (the issuance thereof being
herein referred to as the "Subordinated Debt Issuance");
(b) Holdco will issue not more than $40,000,000 in aggregate initial
principal amount of its Senior Discount Debentures (the issuance thereof
being herein referred to as the "Discount Debentures Issuance");
(c) DLJMBP and the other members of Acquisition LLC will make the
DLJMBP Contribution and Acquisition LLC will subsequently make the
Acquisition LLC Contribution in each case, in cash in an amount of equal
to at least $90,000,000;
(d) Holdco will issue its Seller Subordinated Discount Note (the
issuance thereof being herein referred to as the "Seller Note Issuance")
in an initial principal amount of $43,000,000 to CRL; and
(e) CRL will retain the Rollover Equity;
WHEREAS, in connection with the Transaction and the ongoing working
capital and general corporate needs of the Borrower and its Subsidiaries, the
Borrower desires to obtain the following financing facilities from the Lenders:
(a) a Term-A Loan Commitment and a Term-B Loan Commitment pursuant to
which Borrowings of Term Loans will be made to the Borrower on the Closing
Date in a maximum, original principal amount of $40,000,000 (in the case
of Term-A Loans) and $120,000,000 (in the case of Term-B Loans);
(b) a Revolving Loan Commitment (to include availability for
Revolving Loans, Swing Line Loans and Letters of Credit) pursuant to which
Borrowings of Revolving Loans, in a maximum aggregate principal amount
(together with all Swing Line Loans and Letters of Credit Outstanding) not
to exceed $30,000,000 (subject to a $25,000,000 increase under clause (c)
of Section 2.1.2) will be made to the Borrower from time to time on and
subsequent to the Closing Date but prior to the Revolving Loan Commitment
Termination Date;
(c) a Letter of Credit Commitment pursuant to which the Issuer will
issue Letters of Credit for the account of the Borrower and its Restricted
Subsidiaries from time to time on and subsequent to the Closing Date but
prior to the Revolving Loan Commitment Termination Date in a maximum
aggregate Stated Amount at any one time outstanding not to exceed
$15,000,000 (provided, that the aggregate outstanding principal amount of
Revolving Loans, Swing Line Loans and Letter of Credit Outstandings at any
time shall not exceed the then existing Revolving Loan Commitment Amount);
and
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(d) a Swing Line Loan Commitment pursuant to which Borrowings of
Swing Line Loans in an aggregate outstanding principal amount not to
exceed $5,000,000 will be made on and subsequent to the Closing Date but
prior to the Revolving Loan Commitment Termination Date (provided, that
the aggregate outstanding principal amount of such Swing Line Loans,
together with Revolving Loans and Letter of Credit Outstandings, at any
time shall not exceed the then existing Revolving Loan Commitment Amount);
and
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth (including Article V), to extend the
Commitments and make the Loans described herein to the Borrower and issue (or
participate in) Letters of Credit for the account of the Borrower and its
Restricted Subsidiaries;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Acquired Controlled Person" means any Person (i) in which the Borrower or
any of its Restricted Subsidiaries has made an Investment permitted under
clause (l)(i)(y) of Section 7.2.5 and (ii) as to which the Borrower or such
Restricted Subsidiary exercises control. For purposes hereof, "control" means
the power to appoint a majority of the board of directors (or other equivalent
governing body) of such Person or to otherwise direct or cause the direction of
the management or policies of such Person, whether by contractual arrangement
or otherwise.
"Acquisition LLC" is defined in the second recital.
"Acquisition Subco" is defined in the second recital.
"Administrative Agent" is defined in the preamble and includes each other
Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 9.4.
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"Administrative Agent Fee Letter" means the confidential fee letter, dated
September 29, 1999, between the Borrower and the Administrative Agent.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power (i)
to vote 10% or more of the securities (on a fully diluted basis) having
ordinary voting power for the election of directors or managing general
partners, or (ii) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Agents" means, collectively, the Administrative Agent and the Syndication
Agent.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Closing Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Alternate Base Rate" means, for any day and with respect to all Base Rate
Loans, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate;
and (b) the reference rate of interest in effect for such day as most recently
publicly announced or established by the Administrative Agent in Los Angeles.
Any change in the reference rate established or announced by the Administrative
Agent shall take effect at the opening of business on the day of such
establishment or announcement. As used herein, the reference rate shall mean an
index rate determined by the Administrative Agent from time to time as a means
of pricing certain extensions of credit and is neither directly tied to any
external rate of interest or index nor necessarily the lowest rate of interest
charged by the Administrative Agent at any given time.
"Annualized" means (i) with respect to the end of the first Fiscal Quarter
of the Borrower ending after the Closing Date, the applicable amount for such
Fiscal Quarter multiplied by four, (ii) with respect to the second Fiscal
Quarter of the Borrower ending after the Closing Date, the applicable amount
for such Fiscal Quarter and the immediately preceding Fiscal Quarter multiplied
by two, and (iii) with respect to the third Fiscal Quarter of the Borrower
ending after the Closing Date, the applicable amount for such Fiscal Quarter
and the immediately preceding two Fiscal Quarters multiplied by one and
one-third.
"Applicable Commitment Fee" means, (i) for each day from the Closing Date
through (but excluding) the date upon which the Compliance Certificate for the
second full Fiscal Quarter ending after the Closing Date is delivered or
required to be delivered by the Borrower to the Administrative Agent pursuant
to clause (c) of Section 7.1.1, a fee which shall accrue at a rate of 1/2 of 1%
per annum, and (ii) for each day thereafter, a fee which shall accrue at the
applicable
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rate per annum set forth below under the column entitled "Applicable Commitment
Fee", determined by reference to the applicable Leverage Ratio referred to
below:
Applicable
Leverage Ratio Commitment Fee
-------------- --------------
greater than or
equal to 4.0:1.0 0.500%
less than 4.0:1.0 0.375%
The Leverage Ratio used to compute the Applicable Commitment Fee for any
day referred to in clause (ii) above shall be the Leverage Ratio set forth in
the Compliance Certificate most recently delivered by the Borrower to the
Administrative Agent on or prior to such day pursuant to clause (c) of Section
7.1.1. Changes in the Applicable Commitment Fee resulting from a change in the
Leverage Ratio shall become effective on the first day following delivery by
the Borrower to the Administrative Agent of a new Compliance Certificate
pursuant to clause (c) of Section 7.1.1. If the Borrower shall fail to deliver
a Compliance Certificate within the number of days after the end of any Fiscal
Quarter as required pursuant to clause (c) of Section 7.1.1 (without giving
effect to any grace period), the Applicable Commitment Fee from and including
the first day after the date on which such Compliance Certificate was required
to be delivered to and including the date the Borrower delivers to the
Administrative Agent the next Compliance Certificate shall conclusively equal
the highest Applicable Commitment Fee set forth above. Notwithstanding the
foregoing, the Borrower may, in its sole discretion, within ten Business Days
following the end of any Fiscal Quarter, deliver to the Administrative Agent a
written estimate (the "Leverage Ratio Estimate") setting forth the Borrower's
good faith estimate of the Leverage Ratio (based on calculations contained in
an estimated Compliance Certificate) that will be set forth in the next
Compliance Certificate required to be delivered by the Borrower to the
Administrative Agent pursuant to clause (c) of Section 7.1.1. In the event that
the Leverage Ratio Estimate indicates that there would be a change in the
Applicable Commitment Fee resulting from a change in the Leverage Ratio, such
change will become effective on the first day following delivery of the
Leverage Ratio Estimate. In the event that, once the next Compliance
Certificate is delivered, the Leverage Ratio as set forth in such Compliance
Certificate differs from that calculated in the Leverage Ratio Estimate
delivered for the Fiscal Quarter with respect to which such Compliance
Certificate has been delivered, and such difference results in an Applicable
Commitment Fee which is greater than the Applicable Commitment Fee theretofore
in effect, then (A) such greater Applicable Commitment Fee shall be deemed to
be in effect for all purposes of this Agreement from the first day following
the delivery of the Leverage Ratio Estimate and (B) if the Borrower shall have
theretofore made any payment of commitment fees in respect of the period from
the first day following the delivery of the Leverage Ratio Estimate to the
actual date of delivery of such Compliance Certificate, then, on the next
Quarterly
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Payment Date, the Borrower shall pay as a supplemental payment of commitment
fees, an amount which equals the difference between the amount of commitment
fees that would otherwise have been paid based on such new Leverage Ratio and
the amount of such commitment fees actually so paid.
"Applicable Margin" means at all times during the applicable periods set
forth below,
(a) with respect to the unpaid principal amount of each Term-B Loan
maintained as a (i) Base Rate Loan, 2.50% per annum and (ii) LIBO Rate
Loan, 3.75% per annum;
(b) from the Closing Date through (but excluding) the date upon which
the Compliance Certificate for the second full Fiscal Quarter ending after
the Closing Date is delivered by the Borrower to the Administrative Agent
pursuant to clause (c) of Section 7.1.1, with respect to the unpaid
principal amount of each (i) Swing Line Loan (which shall be borrowed and
maintained only as a Base Rate Loan) and each Revolving Loan and Term-A
Loan maintained as a Base Rate Loan, 1.75% per annum, and (ii) Revolving
Loan and Term-A Loan maintained as a LIBO Rate Loan, 3.00% per annum; and
(c) at all times after the date of delivery of the Compliance
Certificate described in clause (b) above, with respect to the unpaid
principal amount of each Swing Line Loan (which shall be borrowed and
maintained only as a Base Rate Loan) and each Revolving Loan and Term-A
Loan, the rate determined by reference to the applicable Leverage Ratio
and at the applicable percentage per annum set forth below under the
column entitled "Applicable Margin for Base Rate Loans", in the case of
Base Rate Loans, or by reference to the applicable Leverage Ratio and at
the applicable percentage per annum set forth below under the column
entitled "Applicable Margin for LIBO Rate Loans" in the case of LIBO Rate
Loans:
Applicable Margin For Revolving Loans, Swing Line Loans and Term-A Loans
------------------------------------------------------------------------
Applicable Applicable
Margin For Base Margin For LIBO
Leverage Ratio Rate Loans Rate Loans
-------------- ---------- ----------
greater than or equal to 5.0:1.0 1.75% 3.00%
greater than or equal to 4.0:1.0 and
less than 5.0:1.0 1.25% 2.50%
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Applicable Applicable
Margin For Base Margin For LIBO
Leverage Ratio Rate Loans Rate Loans
-------------- ---------- ----------
greater than or equal to 3.0:1.0 and
less than 4.0:1.0 0.75% 2.00%
less than 3.0:1.0 0.25% 1.50%
The Leverage Ratio used to compute the Applicable Margin for Swing Line
Loans, Revolving Loans and Term-A Loans for any day referred to in clause (c)
above shall be the Leverage Ratio set forth in the Compliance Certificate most
recently delivered by the Borrower to the Administrative Agent on or prior to
such day pursuant to clause (c) of Section 7.1.1. Changes in the Applicable
Margin for Swing Line Loans, Revolving Loans and Term-A Loans resulting from a
change in the Leverage Ratio shall become effective on the first day following
delivery by the Borrower to the Administrative Agent of a new Compliance
Certificate pursuant to clause (c) of Section 7.1.1. If the Borrower shall fail
to deliver a Compliance Certificate within the number of days after the end of
any Fiscal Quarter as required pursuant to clause (c) of Section 7.1.1 (without
giving effect to any grace period), the Applicable Margin for Swing Line Loans,
Revolving Loans and Term-A Loans from and including the first day after the
date on which such Compliance Certificate was required to be delivered to the
date the Borrower delivers to the Administrative Agent the next Compliance
Certificate shall conclusively equal the highest Applicable Margin for Swing
Line Loans, Revolving Loans and Term-A Loans set forth above. Notwithstanding
the foregoing, the Borrower may, in its sole discretion, within ten Business
Days following the end of any Fiscal Quarter, deliver to the Administrative
Agent a Leverage Ratio Estimate setting forth the Borrower's good faith
estimate of the Leverage Ratio (based on calculations set forth in an estimated
Compliance Certificate) that will be set forth in the next Compliance
Certificate required to be delivered by the Borrower to the Administrative
Agent pursuant to clause (c) of Section 7.1.1. In the event that the Leverage
Ratio Estimate indicates that there would be a change in the Applicable Margin
resulting from a change in the Leverage Ratio, such change will become
effective on the first day following delivery of the Leverage Ratio Estimate.
In the event that, once the next Compliance Certificate is delivered, the
Leverage Ratio as set forth in such Compliance Certificate differs from that
calculated in the Leverage Ratio Estimate delivered for the Fiscal Quarter with
respect to which such Compliance Certificate has been delivered, and such
difference results in an Applicable Margin which is greater than the Applicable
Margin theretofore in effect, then (A) such greater Applicable Margin shall be
deemed to be in effect for all purposes of this Agreement from the first day
following the delivery of the Leverage Ratio Estimate and (B) if the Borrower
shall have theretofore made any payment of interest in respect of Swing Line
Loans, Revolving Loans or Term-A Loans, or of letter of credit fees pursuant to
the first sentence of Section 3.3.3, in any such case in respect of the period
from the first day following the delivery of the Leverage Ratio Estimate to the
actual
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date of delivery of such Compliance Certificate, then, on the next Quarterly
Payment Date, the Borrower shall pay as a supplemental payment of interest
and/or letter of credit fees, an amount which equals the difference between the
amount of interest and letter of credit fees that would otherwise have been
paid based on such new Leverage Ratio and the amount of such interest and
letter of credit fees actually so paid.
"Assignee Lender" is defined in Section 10.11.1.
"Assignor Lender" is defined in Section 10.11.1.
"Assumed Indebtedness" means Indebtedness of a Person which is (i) in
existence at the time such Person becomes a Restricted Subsidiary of the
Borrower or (ii) is assumed in connection with an Investment in or acquisition
of such Person, and has not been incurred or created by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Restricted Subsidiary of the Borrower.
"Authorized Officer" means, relative to any Obligor, those of its officers
whose signatures and incumbency shall have been certified to the Administrative
Agent and the Lenders pursuant to Section 5.1.1.
"Base Financial Statements" is defined in clause (a) of Section 5.1.9.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"B&L" is defined in the first recital.
"Borrower" is defined in the preamble.
"Borrower Pledge and Security Agreement" means the Pledge and Security
Agreement executed and delivered by an Authorized Officer of the Borrower
pursuant to clause (b) of Section 5.1.7, substantially in the form of Exhibit
G-2 hereto, together with any supplemental Foreign Pledge Agreements delivered
pursuant to the terms of this Agreement, in each case as amended, supplemented,
amended and restated or otherwise modified from time to time.
"Borrowing" means Loans of the same type and, in the case of LIBO Rate
Loans, having the same Interest Period made by the relevant Lenders on the same
Business Day and pursuant to the same Borrowing Request in accordance with
Section 2.1.
"Borrowing Request" means a loan request and certificate duly executed by
an Authorized Officer of the Borrower, substantially in the form of Exhibit B-1
hereto.
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"Business Day" means any day which is neither a Saturday or Sunday nor a
legal holiday on which banks are authorized or required to be closed in Los
Angeles and, with respect to Borrowings of, Interest Periods with respect to,
payments of principal and interest in respect of, and conversions of Base Rate
Loans into, LIBO Rate Loans, on which dealings in Dollars are carried on in the
London interbank market.
"Capital Expenditures" means for any period, the sum, without duplication,
of (i) the aggregate amount of all expenditures of the Borrower and its
Restricted Subsidiaries for fixed or capital assets made during such period
which, in accordance with GAAP, would be classified as capital expenditures,
and (ii) the aggregate amount of the principal component of all Capitalized
Lease Liabilities incurred during such period by the Borrower and its
Restricted Subsidiaries; provided that Capital Expenditures shall not include
(i) any such expenditures or any such principal component funded with (x) any
Casualty Proceeds, as permitted under clause (e) of Section 3.1.1, or (y) any
Net Disposition Proceeds of any asset sale permitted under clause (c) of
Section 7.2.9 or any asset sale of obsolete or worn out equipment permitted
under subclause (a)(i) of Section 7.2.9 or (ii) any Investment made under
Section 7.2.5 (other than pursuant to clause (d) thereof).
"Capital Stock" means, (i) in the case of a corporation, any and all
capital or corporate stock, including shares of preferred or preference stock
of such corporation, (ii) in the case of an association or business entity, any
and all shares, interests, participations, rights or other equivalents (however
designated) in respect of corporate or capital stock, (iii) in the case of a
partnership or limited liability company, any and all partnership or membership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Capitalized Lease Liabilities" means, without duplication, all monetary
obligations of the Borrower or any of its Subsidiaries under any leasing or
similar arrangement which, in accordance with GAAP, would be classified as
capitalized leases, and, for purposes of this Agreement and each other Loan
Document, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP, and the stated maturity thereof
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be terminated by
the lessee without payment of a penalty.
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"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one year
after such time, issued directly by the United States of America or any
agency thereof or guaranteed by the United States of America or any agency
thereof;
(b) commercial paper, maturing not more than nine months from the
date of issue, which is (i) rated at least A-l by S&P or P-l by Moody's
and not issued by an Affiliate of any Obligor, or (ii) issued by any
Lender (or its holding company);
(c) any time deposit, certificate of deposit or bankers acceptance,
maturing not more than one year after such time, maintained with or issued
by either (i) a commercial banking institution (including U.S. branches of
foreign banking institutions) that is a member of the Federal Reserve
System and has a combined capital and surplus and undivided profits of not
less than $500,000,000, or (ii) any Lender;
(d) short-term tax-exempt securities rated not lower than MIG-1/1+ by
either Moody's or S&P with provisions for liquidity or maturity
accommodations of 183 days or less;
(e) repurchase agreements which (i) are entered into with any entity
referred to in clause (b) or (c) above or any other financial institution
whose unsecured long-term debt (or the unsecured long-term debt of whose
holding company) is rated at least A- or better by S&P or Baa1 or better
by Moody's and maturing not more than one year after such time, (ii) are
secured by a fully perfected security interest in securities of the type
referred to in clause (a) above and (iii) have a market value at the time
of such repurchase agreement is entered into of not less than 100% of the
repurchase obligation of such counterparty entity with whom such
repurchase agreement has been entered into;
(f) any money market or similar fund not less than 95% of the assets
of which are comprised of any of the items specified in clauses (a)
through (e) above and as to which withdrawals are permitted at least every
90 days; or
(g) in the case of any Restricted Subsidiary of the Borrower
organized or having its principal place of business outside the United
States, investments denominated in the currency of the jurisdiction in
which such Subsidiary is organized or has its principal place of business
which are similar to the items specified in clauses (a) through (f) above.
"Casualty Event" means the damage, destruction or condemnation, as the
case may be, of any property of the Borrower or any of its Restricted
Subsidiaries.
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"Casualty Proceeds" means, with respect to any Casualty Event, the amount
of any insurance proceeds or condemnation awards received by the Borrower or
any of its Restricted Subsidiaries in connection therewith, but excluding any
proceeds or awards required to be paid to a creditor (other than the Lenders)
which holds a Lien on the property which is the subject of such Casualty Event
which Lien (x) is permitted by Section 7.2.3 and (y) has priority over the
Liens securing the Obligations.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means (i) the failure of Holdco at any time to own,
free and clear of all Liens and encumbrances (other than Liens of the types
permitted to exist under clauses (b), (d) and (g) of Section 7.2.3), all right,
title and interest in 100% of the Capital Stock of the Borrower; (ii) the
failure of the DLJMBP at any time to own, free and clear of all Liens and
encumbrances (other than Liens (x) arising under the Investors' Agreement and
(y) of the types permitted to exist under clause (d) or (g) of Section 7.2.3)
all right, title and interest in at least 51% (on a fully diluted basis) of the
economic and voting interest in the Voting Stock of Holdco; or (iii) the
failure of DLJMBP and its Affiliates at any time to have the right to designate
or cause to be elected a majority of the Board of Directors of Holdco.
"Charles River China" means SPAFAS Jinan Poultry Company, Ltd., a Chinese
corporation and Zhanjiang A&C Biological Ltd., a Chinese corporation.
"Charles River Mexico" means Avers Libers de Patogenos Especificos, S.A.
de C.V., a Mexican corporation.
"Charles River Japan" means Charles River Japan, Inc., a Japanese
corporation.
"Charter Document" means, relative to any Obligor, its certificate of
incorporation, its by-laws or other constituent documents and all shareholder
agreements, voting trusts and similar arrangements to which such Obligor is a
party applicable to any of its authorized shares of Capital Stock.
"Closing Date" means the date of the initial Credit Extension, not to be
later than September 29, 1999.
"Closing Date Certificate" means a certificate of an Authorized Officer of
the Borrower substantially in the form of Exhibit D hereto, delivered pursuant
to Section 5.1.4.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means, as the context may require, (i) a Lender's Term-A Loan
Commitment, and Term-B Loan Commitment, Revolving Loan Commitment or Letter of
Credit Commitment or (ii) the Swing Line Lender's Swing Line Loan Commitment.
"Commitment Amount" means, as the context may require, the Term-A Loan
Commitment Amount, the Term-B Loan Commitment Amount, the Revolving Loan
Commitment Amount, the Letter of Credit Commitment Amount or the Swing Line
Loan Commitment Amount.
"Commitment Letter" means the commitment letter, dated July 23, 1999,
between DLJ Merchant Banking II, Inc. and DLJ, including all annexes and
exhibits thereto.
"Commitment Termination Date" means, as the context may require, the
Revolving Loan Commitment Termination Date or any Term Loan Commitment
Termination Date.
"Commitment Termination Event" means (i) the occurrence of any Event of
Default described in clauses (b) through (d) of Section 8.1.9 with respect to
any Obligor (other than Subsidiaries that are not Material Subsidiaries), or
(ii) the occurrence and continuance of any other Event of Default and either
(x) the declaration of the Loans to be due and payable pursuant to Section 8.3,
or (y) in the absence of such declaration, the giving of notice to the Borrower
by the Administrative Agent, acting at the direction of the Required Lenders,
that the Commitments have been terminated.
"Compliance Certificate" means a certificate duly completed and executed
by an Authorized Officer that is the president, the chief executive officer or
the chief financial or accounting officer of the Borrower, substantially in the
form of Exhibit E hereto.
"Contingent Liability" means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other
Person. The amount of any Person's obligation under any Contingent Liability
shall (subject to any limitation set forth therein) be deemed to be the
outstanding principal amount of the debt, obligation or other liability
guaranteed thereby.
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"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit C hereto.
"Controlled Group" means all members of a controlled group of corporations
and all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Borrower, are
treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA, or for purposes of Section 412 of the Code, Section
414(m) or Section 414(o) of the Code.
"Credit Extension" means, as the context may require, (i) the making of a
Loan by a Lender, or (ii) the issuance of any Letter of Credit, or the
extension of any Stated Expiry Date of any previously issued Letter of Credit,
by any Issuer.
"Credit Extension Request" means, as the context may require, any
Borrowing Request or Issuance Request.
"CRL" is defined in the first recital.
"Current Assets" means, on any date, without duplication, all assets
which, in accordance with GAAP, would be included as current assets on a
consolidated balance sheet of the Borrower and its Restricted Subsidiaries at
such date as current assets (excluding, however, amounts due and to become due
from Affiliates of the Borrower which have arisen from transactions which are
other than arm's-length and in the ordinary course of its business).
"Current Liabilities" means, on any date, without duplication, all amounts
which, in accordance with GAAP, would be included as current liabilities on a
consolidated balance sheet of the Borrower and its Restricted Subsidiaries at
such date, excluding current maturities of Indebtedness.
"Debt" means, without duplication, the outstanding principal amount of all
Indebtedness of the Borrower and its Restricted Subsidiaries that (i) is of the
type referred to in clause (a), (b) (other than undrawn commercial letters of
credit and undrawn letters of credit in respect of workers' compensation,
insurance, performance and surety bonds and similar obligations, in each case
incurred in the ordinary course of business) or (c) of the definition of
"Indebtedness" and (ii) any Contingent Liability in respect of any of the
foregoing types of Indebtedness.
"Default" means any Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would, unless cured or waived,
constitute an Event of Default.
"Disbursement" is defined in Section 2.6.2.
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"Disbursement Date" is defined in Section 2.6.2.
"Disbursement Due Date" is defined in Section 2.6.2.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Required Lenders.
"Discount Debentures Issuance" is defined in clause (b) of the fifth
recital.
"DLJ" is defined in the preamble.
"DLJMBP" is defined in the first recital.
"DLJMBP Contribution" is defined in the second recital.
"Documentation Agent" is defined in the preamble.
"Dollar" and the sign "$" mean lawful money of the United States.
"Earn-outs" means any obligations by the Borrower or any of its Restricted
Subsidiaries to pay any amounts constituting the payment of deferred purchase
price with respect to any acquisition of a business (whether through the
purchase of assets or shares of Capital Stock), the amount of which payments is
calculated on the basis of, or by reference to, the bona fide financial or
other operating performance of such business or specified portion thereof or
any other similar arrangement.
"EBITDA" means, for any applicable period, subject to clause (b) of
Section 1.4, the sum (without duplication) for the Borrower and its Restricted
Subsidiaries on a consolidated basis of
(a) Net Income,
plus
(b) the amount deducted in determining Net Income representing
non-cash charges or expenses, including depreciation and amortization
(excluding any non-cash charges representing an accrual of or reserve for
cash charges to be paid within the next twelve months),
plus
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(c) the amount deducted in determining Net Income representing income
taxes (whether paid or deferred),
plus
(d) the amount deducted in determining Net Income representing
Interest Expense and Transaction Payments,
minus
(e) Restricted Payments of the type referred to in clause (c)(i) of
Section 7.2.6 made during such period.
"Eligible Institution" means a financial institution that has combined
capital and surplus of not less than $500,000,000 or its equivalent in foreign
currency, whose the long-term certificate of deposit rating or long-term senior
unsecured debt rating is rated "BBB" or higher by S&P and "Baa2" or higher by
Moody's or an equivalent or higher rating by a nationally recognized rating
agency if both of the two named rating agencies cease publishing ratings of
investments.
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules and regulations (including consent
decrees and administrative orders) relating to the protection of the
environment or the effect of the environment on human health and safety.
"Equity Contributions" is defined in the second recital.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" is defined in Section 8.1.
"Excess Cash Flow" means, for any applicable period, the excess (if any),
of
(a) EBITDA for such applicable period;
over
(b) the sum, without duplication (for such applicable period) of
(i) the cash portion of Interest Expense (net of interest
income) for such applicable period;
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plus
(ii) scheduled payments, to the extent actually made, of the
principal amount of the Term Loans and scheduled payments and
optional and mandatory prepayments of the principal of any other
funded Debt (including Capitalized Lease Liabilities) and mandatory
prepayments of the principal amount of Revolving Loans pursuant to
clause (f) of Section 3.1.1 in connection with a permanent reduction
of any Revolving Loan Commitment Amount, in each case to the extent
actually made and for such applicable period;
plus
(iii) all federal, state and foreign income taxes actually paid
in cash by the Borrower and its Restricted Subsidiaries for such
applicable period;
plus
(iv) Capital Expenditures actually made during such applicable
period pursuant to clause (a) of Section 7.2.7 (excluding Capital
Expenditures constituting Capitalized Lease Liabilities and by way of
the incurrence of Indebtedness permitted pursuant to clause (c) of
Section 7.2.2 to a vendor of any assets permitted to be acquired
pursuant to Section 7.2.7 to finance the acquisition of such assets);
plus
(v) the amount of the net increase (if any) of Current Assets,
other than cash and Cash Equivalent Investments, over Current
Liabilities of the Borrower and its Restricted Subsidiaries for such
applicable period;
plus
(vi) Investments permitted and actually made, in cash, pursuant
to clause (d), (h), (l) or (p) of Section 7.2.5 during such
applicable period (excluding Investments financed with the proceeds
of any issuance of Capital Stock or Indebtedness other than Revolving
Loans);
plus
(vii) Restricted Payments of the type described in clauses
(c)(ii) and (c)(iii) of Section 7.2.6 made during such applicable
period.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Equity Proceeds" means any proceeds received by Holdco, the
Borrower or any of their respective Subsidiaries from the sale or issuance by
such Person of its Capital Stock or any warrants or options in respect of any
such Capital Stock or the exercise of any such warrants or options, in each
case pursuant to any such sale, issuance or exercise constituting or resulting
from (i) capital contributions to, or Capital Stock issuances by, Holdco, the
Borrower or any of their respective Subsidiaries (exclusive of any such
contribution or issuance resulting from a Public Offering or a widely
distributed private offering exempted from the registration requirements of
Section 5 of the Securities Act of 1933, as amended), (ii) any subscription
agreement, option plan, incentive plan or similar arrangement with any officer,
employee or director of such Person or any of its Subsidiaries, (iii) any loan
made by Holdco, the Borrower or any of their respective Subsidiaries pursuant
to clause (g) of Section 7.2.5, (iv) the sale of any Capital Stock of Holdco to
any officer, director or employee described in clause (ii) above; provided such
proceeds do not exceed $15,000,000 in the aggregate, (v) the exercise of any
options or warrants issued to any officer, employee or director pursuant to any
agreement, plan or arrangement described in clause (ii) above or (vi) the
exercise of any Warrants.
"Existing Business" means the businesses of the commercial production and
supply of animal research models and related biomedical products and services
of CRL and the Other Asset Contributors contributed to the Borrower as such
businesses were in existence and carried on immediately prior to the Closing
Date.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to (i) the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or (ii) if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by it.
"Fee Letter" means the confidential fee letter, dated as of July 23, 1999,
among DLJ Merchant Banking Funding II, Inc. and DLJ.
"Filing Agent" is defined in Section 5.1.8.
"Filing Statement" means any UCC financing statement (Form UCC-1) or other
similar statement or UCC termination statement (Form UCC-3) required pursuant
to the Loan Documents.
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"Fiscal Quarter" means any fiscal quarter of a Fiscal Year.
"Fiscal Year" means any twelve-month period ending on December 31 of any
calendar year.
"Fixed Charge Coverage Ratio" means, at the end of any Fiscal Quarter,
subject to clause (b) of Section 1.4, the ratio computed for the period
consisting of such Fiscal Quarter and each of the three immediately prior
Fiscal Quarters of
(a) (i) EBITDA for all such Fiscal Quarters; minus
(ii) Capital Expenditures actually made during all such Fiscal
Quarters pursuant to clause (a) of Section 7.2.7 (excluding Capital
Expenditures constituting Capitalized Lease Liabilities and by way of the
incurrence of Indebtedness permitted pursuant to Section 7.2.2(c) to a
vendor of any assets permitted to be acquired pursuant to Section 7.2.7 to
finance the acquisition of such assets).
over
(b) the sum (without duplication) of
(i) the cash portion of Interest Expense (net of interest
income) for all such Fiscal Quarters, provided that for the first
full three Fiscal Quarters ending after the Closing Date, Interest
Expense shall be determined on an Annualized basis;
plus
(ii) all scheduled payments of principal of the Term Loans and
other funded Debt (including the principal portion of any Capitalized
Lease Liabilities) during all such Fiscal Quarters, provided that for
the first full three Fiscal Quarters ending after the Closing Date,
such payments shall be determined on an Annualized basis;
plus
(iii) Restricted Payments made or permitted to be made pursuant
to clauses (c)(ii) and (c)(iii)(y) of Section 7.2.6 during all such
Fiscal Quarters;
plus
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(iv) all federal, state and foreign income taxes actually paid
or payable in cash by the Borrower and its Restricted Subsidiaries
for all such Fiscal Quarters.
"Foreign Pledge Agreement" means any supplemental pledge agreement
governed by the laws of a jurisdiction other than the United States or a State
thereof executed and delivered by the Borrower or any of its Restricted
Subsidiaries pursuant to the terms of this Agreement, in form and substance
satisfactory to the Administrative Agent, as may be necessary or desirable
under the laws of organization or incorporation of a Subsidiary to further
protect or perfect the Lien on and security interest in any Collateral (as
defined in a Pledge Agreement).
"Foreign Subsidiary" means any Subsidiary that is not a U.S. Subsidiary.
"F.R.S. Board" means the Board of Governors of the Federal Reserve System
or any successor thereto.
"Future Pledged Foreign Subsidiary" is a Restricted Subsidiary and a
Foreign Subsidiary having, at any time of determination, total assets with a
value of at least $5,000,000.
"GAAP" is defined in Section 1.4.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource Conservation
and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within the meaning of any other applicable
Environmental Law.
"Hedging Obligations" means, with respect to any Person, all liabilities
of such Person under interest rate or currency swap agreements, interest or
exchange rate cap agreements and interest or exchange rate collar agreements,
and all other agreements or arrangements designed to protect such Person
against fluctuations in interest rates, currency exchange rates or commodity
prices.
"herein", "hereof", "hereto", "hereunder" and similar terms contained in
this Agreement or any other Loan Document refer to this Agreement or such other
Loan Document, as the case
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may be, as a whole and not to any particular Section, paragraph or provision of
this Agreement or such other Loan Document.
"Holdco" is defined in the second recital.
"Holdco Guaranty and Pledge Agreement" means the Guaranty and Pledge
Agreement executed and delivered by an Authorized Officer of Holdco pursuant to
clause (a) of Section 5.1.7, substantially in the form of Exhibit G-1 hereto,
as amended, supplemented, amended and restated or otherwise modified from time
to time.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial
statement of any Obligor, any qualification or exception to such opinion or
certification (i) which is of a "going concern" or similar nature, (ii) which
relates to the limited scope of examination of matters relevant to such
financial statement (except, in the case of matters relating to any acquired
business or assets, in respect of the period prior to the acquisition by such
Obligor of such business or assets), or (iii) which relates to the treatment or
classification of any item in such financial statement and which, as a
condition to its removal, would require an adjustment to such item the effect
of which would be to cause the Borrower to be in default of any of its
obligations under Section 7.2.4.
"including" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of ejusdem generis
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money or for the
deferred purchase price of property or services (exclusive of (i) deferred
purchase price arrangements in the nature of open or other accounts
payable owed to suppliers on normal terms in connection with the purchase
of goods and services in the ordinary course of business and (ii)
Earn-outs (until such time as the obligation associated with the Earn-out
is recorded as a liability on the balance sheet of the Borrower in
accordance with GAAP)) and all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
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(c) all Capitalized Lease Liabilities;
(d) net liabilities of such Person under all Hedging Obligations;
(e) whether or not so included as liabilities in accordance with
GAAP, all Indebtedness of the types referred to in clauses (a) through (d)
above (excluding prepaid interest thereon) secured by a Lien on property
owned or being purchased by such Person (including Indebtedness arising
under conditional sales or other title retention agreements), whether or
not such Indebtedness shall have been assumed by such Person or is limited
in recourse; provided, however, that, to the extent such Indebtedness is
limited in recourse to the assets securing such Indebtedness, the amount
of such Indebtedness shall be limited to the fair market value of such
assets; and
(f) all Contingent Liabilities of such Person in respect of any of
the foregoing.
For all purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer (to the extent such Person is
liable for such Indebtedness).
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
"Initial Public Offering" means for any Person, any sale of the Capital
Stock of such Person to the public pursuant to an initial primary offering
registered under the Securities Act of 1933.
"Interest Coverage Ratio" means, at the end of any Fiscal Quarter, subject
to clause (b) of Section 1.4, the ratio computed for the period consisting of
such Fiscal Quarter and each of the three immediately prior Fiscal Quarters of:
(a) EBITDA (for all such Fiscal Quarters)
to
(b) the cash portion of Interest Expense (net of interest income)
(for all such Fiscal Quarters; provided that for the first full three
Fiscal Quarters ending after the Closing Date, Interest Expense shall be
determined on an Annualized basis).
"Interest Expense" means, for any applicable period, the aggregate
consolidated interest expense of the Borrower and its Restricted Subsidiaries
for such applicable period, as determined
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in accordance with GAAP, including the portion of any payments made in respect
of Capitalized Lease Liabilities allocable to interest expense, but excluding
(to the extent included in interest expense) up-front fees and expenses and the
amortization of all deferred financing costs.
"Interest Period" means, as to any LIBO Rate Loan, the period commencing
on the Borrowing date of such Loan or on the date on which the Loan is
converted into or continued as a LIBO Rate Loan, and ending on the date one,
two, three, six or, if consented to by each applicable Lender, nine or twelve
months thereafter as selected by the Borrower in its Borrowing Request or its
Conversion/Continuation Notice; provided however that:
(i) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the
end of such Interest Period;
(iii) no Interest Period for any Loan shall extend beyond the Stated
Maturity Date for such Loan;
(iv) no Interest Period applicable to a Term Loan or portion thereof
shall extend beyond any date upon which is due any scheduled principal
payment in respect of the Term Loans unless the aggregate principal amount
of Term Loans represented by Base Rate Loans, or by LIBO Rate Loans having
Interest Periods that will expire on or before such date, equals or
exceeds the amount of such principal payment; and
(v) there shall be no more than ten Interest Periods in effect at any
one time;
provided that with respect to each Borrowing of Term Loans consisting of LIBO
Rate Loans made on the Closing Date, Interest Period means the period
commencing on (and including) the Business Day on which such Borrowing is made
and ending on (and including) the last Business Day of the calendar month
following the month in which such Borrowing is made.
"Investors' Agreement" means the Investors' Agreement dated as of
September 29, 1999 among Holdco, DLJMBP, Acquisition LLC and certain other
holders of the Capital Stock of Holdco from time to time party thereto.
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"Investment" means, relative to any Person, (i) any loan or advance made
by such Person to any other Person (excluding commission, travel, relocation
and similar advances to officers, directors and employees (or individuals
acting in similar capacities) made in the ordinary course of business), and
(ii) any ownership or similar interest (in the nature of Capital Stock) held by
such Person in any other Person. The amount of any Investment shall be the
original principal or capital amount thereof less all returns of principal or
equity thereon (and without adjustment by reason of the financial condition of
such other Person) and shall, if made by the transfer or exchange of property
other than cash, be deemed to have been made in an original principal or
capital amount equal to the fair market value of such property at the time of
such transfer or exchange.
"Issuance Request" means a Letter of Credit request and certificate duly
executed by an Authorized Officer of the Borrower, substantially in the form of
Exhibit B-3 hereto.
"Issuer" means the Administrative Agent in its capacity as issuer of
Letters of Credit and any Lender as may be designated by the Borrower (and
consented to by the Agents and such Lender, such consent by the Agents not to
be unreasonably withheld) in its capacity as issuer of Letters of Credit.
"Lead Arranger" means DLJ.
"Lender Assignment Agreement" means a Lender Assignment Agreement
substantially in the form of Exhibit I hereto.
"Lenders" is defined in the preamble.
"Letter of Credit" is defined in Section 2.1.3.
"Letter of Credit Commitment" means, with respect to any Issuer, such
Issuer's obligation to issue Letters of Credit pursuant to Section 2.1.3 and,
with respect to each of the other Lenders that has a Revolving Loan Commitment,
the obligation of each such Lender to participate in such Letters of Credit
pursuant to Section 2.6.1.
"Letter of Credit Commitment Amount" means, on any date, a maximum amount
of $15,000,000, as such amount may be reduced from time to time pursuant to
Section 2.2.
"Letter of Credit Outstandings" means, on any date, an amount equal to the
sum of
(a) the then aggregate amount which is undrawn and available under
all issued and outstanding Letters of Credit,
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plus
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations in respect of such Letters of Credit.
"Leverage Ratio" means, at the end of any Fiscal Quarter, subject to
clause (b) of Section 1.4, the ratio of
(a) total Debt less cash and Cash Equivalent Investments of the
Borrower and its Restricted Subsidiaries on a consolidated basis
outstanding at such time;
to
(b) EBITDA for the period of four consecutive Fiscal Quarters ended
on such date.
"Leverage Ratio Estimate" is defined in the definition of Applicable
Commitment Fee.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans,
the applicable London interbank offered rate for deposits in U.S. dollars
appearing on Dow Jones Markets (Telerate Page 3750) as of 11:00 a.m. (London
time) two Business Days prior to the first day of such Interest Period, and
having a maturity equal to such Interest Period; provided that, if Dow Jones
Markets (Telerate Page 3750) is not available for any reason, the applicable
Eurodollar Base Rate for the relevant Interest Period shall instead be the
applicable London interbank offered rate for deposits in U.S. Dollars appearing
on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior
to the first day of such Interest Period, and having a maturity equal to such
Interest Period.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any
Interest Period, the rate of interest per annum (rounded upwards to the next
1/100th of 1%) determined by the Administrative Agent as follows:
LIBO Rate = LIBO Rate
-------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
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The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be adjusted automatically as to all LIBO Rate Loans then outstanding
as of the effective date of any change in the LIBOR Reserve Percentage.
"LIBOR Office" means, relative to any Lender, the office of such Lender
designated as such on Schedule II hereto or in the Lender Assignment Agreement
pursuant to which such Lender became a Lender hereunder or such other office of
a Lender as shall be so designated from time to time by notice from such Lender
to the Borrower and the Administrative Agent, which shall be making or
maintaining LIBO Rate Loans of such Lender hereunder.
"LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO
Rate Loans, the percentage (expressed as a decimal, rounded upward to the next
1/100th of 1%) in effect on such day (whether or not applicable to any Lender)
under regulations issued from time to time by the F.R.S. Board for determining
the maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the F.R.S. Board).
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property, or any filing or recording of any
instrument or document in respect of the foregoing, to secure payment of a debt
or performance of an obligation or any other priority or preferential treatment
of any kind or nature whatsoever that has the practical effect of creating a
security interest in property.
"Loan" means, as the context may require, a Revolving Loan, a Term-A Loan,
a Term-B Loan or a Swing Line Loan, of any type.
"Loan Document" means this Agreement, the Notes, the Letters of Credit,
each Rate Protection Agreement under which the counterparty to such agreement
is (or at the time such Rate Protection Agreement was entered into, was) a
Lender or an Affiliate of a Lender relating to Hedging Obligations of the
Borrower or any of its Subsidiaries, each Borrowing Request, each Issuance
Request, the Fee Letter, the Administrative Agent Fee Letter, each Pledge
Agreement, the Subsidiary Guaranty, each Mortgage (upon execution and delivery
thereof), and each other agreement, document or instrument delivered in
connection with this Agreement or any other Loan Document, whether or not
specifically mentioned herein or therein.
"Material Adverse Effect" means (a) a material adverse effect on the
financial condition, operations, assets, business, properties or prospects of
the Borrower and its Restricted Subsidiaries, taken as a whole, (b) a material
impairment of the ability of the Borrower or any other Obligor to perform its
respective material obligations under the Loan Documents to which it is or will
be a party, or (c) an impairment of the validity or enforceability of, or a
material
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impairment of the rights, remedies or benefits available to each Issuer, the
Agents, the Lead Arranger or the Lenders under, this Agreement or any other
Loan Document.
"Material Documents" means the Recapitalization Agreement, the Sierra
Acquisition Agreement, the Charter Documents of each of the Borrower and
Holdco, the Investors' Agreement, Seller Subordinated Discount Note, Senior
Discount Debentures, the Warrants, the Warrant Agreement and the Senior
Subordinated Debt Documents, each as amended, supplemented, amended and
restated or otherwise modified from time to time as permitted in accordance
with the terms hereof or of any other Loan Document.
"Material Subsidiary" means (i) any direct or indirect Restricted
Subsidiary of the Borrower which holds, owns or contributes, as the case may
be, 3% or more of the gross revenues, assets or EBITDA of the Borrower and its
Restricted Subsidiaries, on a consolidated basis, and (ii) any Restricted
Subsidiary of the Borrower designated by the Borrower as a Material Subsidiary.
The Borrower shall designate one or more Restricted Subsidiaries of the
Borrower as Material Subsidiaries if, in the absence of such designation, the
aggregate gross revenues, assets or EBITDA of all Restricted Subsidiaries of
the Borrower that are not Material Subsidiaries would exceed 5% of the gross
revenues, assets or EBITDA of the Borrower and its Restricted Subsidiaries, on
a consolidated basis.
"Merger" is defined in the second recital.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means, collectively, each Mortgage or Deed of Trust executed
and delivered pursuant to the terms of this Agreement, including Section
7.1.8(b) or 7.1.12, in form and substance reasonably satisfactory to the
Agents.
"Net Debt Proceeds" means with respect to the incurrence, sale or issuance
by Holdco, the Borrower or any Restricted Subsidiary of the Borrower of any
Debt (other than Debt incurred as part of the Transaction and other Debt
permitted by Section 7.2.2 and clause (b)(i) of Section 5.9 of the Holdco
Guaranty and Pledge Agreement) the excess of:
(a) the gross cash proceeds received by Holdco, the Borrower or any
such Restricted Subsidiary from such incurrence, sale, or issuance,
over
(b) the sum (without duplication) of (i) all reasonable and customary
underwriting commissions and legal, investment banking, brokerage and
accounting and other professional fees, sales commissions and
disbursements and all other reasonable
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fees, expenses and charges, in each case actually incurred in connection
with such incurrence, sale or issuance and (ii) in the case of any Debt
incurred, sold or issued by any Foreign Subsidiary, any taxes or other
costs or expenses resulting from repatriating any such proceeds to the
United States.
"Net Disposition Proceeds" means, with respect to any sale, transfer or
other disposition of any assets of the Borrower or any of its Restricted
Subsidiaries (other than transfers made as part of the Transaction and other
sales permitted pursuant to clause (a), (b), (d) (to the extent the proceeds of
the transfer permitted thereunder constitute Net Casualty Proceeds) or (e) of
Section 7.2.9, but including any sale or issuance of Capital Stock of any such
Subsidiary to any Person other than the Borrower or any of its Restricted
Subsidiaries), the excess of
(a) the sum of the gross cash proceeds received, directly or
indirectly, by the Borrower or any of its Restricted Subsidiaries from any
such sale, transfer or other disposition and any cash payments received in
respect of promissory notes or other non-cash consideration delivered to
the Borrower or such Restricted Subsidiary in respect thereof,
less
(b) the sum (without duplication) of (i) all reasonable and customary
fees and expenses with respect to legal, investment banking, brokerage,
accounting and other professional fees, sales commissions and
disbursements and all other reasonable fees, expenses and charges, in each
case actually incurred in connection with such sale, transfer or other
disposition, (ii) all taxes and other governmental costs and expenses
actually paid or estimated by the Borrower (in good faith) to be payable
in cash in connection with such sale, transfer or other disposition
(including, in the event of a transfer, sale or other disposition of
non-U.S. assets, any such taxes or other costs or expenses resulting from
repatriating any such proceeds to the United States), (iii) payments made
by the Borrower or any of its Restricted Subsidiaries to retire
Indebtedness (other than the Loans) of the Borrower or any of its
Restricted Subsidiaries where payment of such Indebtedness is required in
connection with such sale, transfer or other disposition and (iv) reserves
for purchase price adjustments and retained fixed liabilities reasonably
expected to be payable by the Borrower and its Restricted Subsidiaries in
cash in connection therewith;
provided, however, that if, after the payment of all taxes, purchase price
adjustments and retained fixed liabilities with respect to such sale, transfer
or other disposition, the amount of estimated taxes, purchase price adjustments
or retained fixed liabilities, if any, pursuant to clause (b)(ii) or (b)(iv)
above exceeded the tax, purchase price adjustment or retained fixed liabilities
amount actually paid in cash in respect of such sale, transfer or other
disposition, the aggregate amount of such excess shall, at such time,
constitute Net Disposition Proceeds.
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"Net Equity Proceeds" means with respect to any sale or issuance by Holdco
or the Borrower to any Person of any Capital Stock of Holdco or the Borrower,
as the case may be, or any warrants or options with respect to any such Capital
Stock or the exercise of any such warrants or options after the Closing Date
(exclusive of any such proceeds constituting Excluded Equity Proceeds) the
excess of:
(a) the gross cash proceeds received by Holdco or the Borrower from
such sale, exercise or issuance,
over
(b) the sum, without duplication, of all reasonable and customary
underwriting commissions and legal, investment banking, brokerage,
accounting and other professional fees, sales commissions and
disbursements and all other reasonable fees, expenses and charges, in each
case actually incurred in connection with such sale or issuance.
"Net Income" means, for any period, the net income of the Borrower and its
Subsidiaries for such period on a consolidated basis, excluding (a) net losses
or gains realized in connection with any sale, lease, conveyance or other
disposition of any asset (other than in the ordinary course of business) and
(b) extraordinary or non-recurring losses or gains; provided, however, that the
Net Income or loss of any Person that is not a Restricted Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid to the Borrower or a
Restricted Subsidiary in cash.
"Non-Consenting Lender" means any Lender that, in response to any request
by the Borrower or any Agent to a departure from, waiver of or amendment to any
provision of any Loan Document that requires the agreement of all Lenders or
all Lenders with respect to a particular Tranche, which departure, waiver or
amendment receives the consent of the Required Lenders or the holders of a
majority of the Commitments or (if the applicable Commitments in respect of
such Tranche shall have expired or been terminated) outstanding Credit
Extensions in respect of such Tranche, as the case may be, shall not have given
its consent to such departure, waiver or amendment.
"Non-Funding Lender" means a Lender that shall have failed to fund any
Loan hereunder that it was required to have funded in accordance with the terms
hereof, which Loan was included in any Borrowing in respect of which a majority
of the aggregate principal amount of all Loans included in such Borrowing were
funded by the Lenders party thereto.
"Non-Recourse Debt" means Indebtedness (i) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other
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Indebtedness of the Borrower or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity, and (ii) as to which the
lenders have been notified in writing that they will not have any recourse to
the Capital Stock or assets of the Borrower or any of its Restricted
Subsidiaries (other than Capital Stock of Unrestricted Subsidiaries pledged by
the Borrower or a Restricted Subsidiary to secure Debt of such Unrestricted
Subsidiary); provided, however, that in no event shall Indebtedness of any
Unrestricted Subsidiary fail to be Non-Recourse Debt solely as a result of any
default provisions contained in a guarantee thereof by the Borrower or any of
its Restricted Subsidiaries if the Borrower or such Restricted Subsidiary was
otherwise permitted to incur such guarantee under this Agreement.
"Non-U.S. Lender" means any Lender (including each Assignee Lender) that
is not (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any state thereof, or (iii) an estate or trust that is subject
to U.S. Federal income taxation regardless of the source of its income.
"Note" means, as the context may require, a Revolving Note, a Term-A Note,
a Term-B Note or a Swing Line Note.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower and each other Obligor arising under or in connection with this
Agreement and each other Loan Document.
"Obligor" means the Borrower or any other Person (other than any Agent,
the Lead Arranger, any Issuer, the Swing Line Lender or any Lender) obligated
under any Loan Document.
"Other Asset Contributors" is defined in the second recital.
"Participant" is defined in Section 10.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
entity.
"Pension Plan" means a "pension plan", as such term is defined in Section
3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the
Borrower or any corporation, trade or business that is, along with the
Borrower, a member of a Controlled Group, has or within the prior six years has
had any liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any time
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.
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"Percentage" means, relative to any Lender, the applicable percentage
relating to Term-A Loans, Term-B Loans or Revolving Loans, as the case may be,
as set forth opposite its name in Schedule II hereto or in a Lender Assignment
Agreement(s) under the applicable column heading, as such percentage may be
adjusted from time to time pursuant to Lender Assignment Agreement(s) executed
by such Lender and its Assignee Lender(s) and delivered pursuant to Section
10.11 or, in the case of a Lender's Percentage relating to Revolving Loans,
pursuant to clause (c) of Section 2.1.2. A Lender shall not have any Commitment
to make Revolving Loans, Term-A Loans or Term-B Loans (as the case may be) if
its percentage under the respective column heading is zero.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency, limited liability company
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreement" means, as the context may require, the Borrower Pledge
and Security Agreement, the Holdco Guaranty and Pledge Agreement or the
Subsidiary Pledge and Security Agreement.
"Pledge and Security Agreement" means, as the context may require, the
Borrower Pledge and Security Agreement or the Subsidiary Pledge and Security
Agreement.
"Pro Forma Financial Statements" is defined in clause (b) of Section
5.1.9.
"Public Offering" means, for any Person, any sale after the Closing Date
of the Capital Stock of such Person to the public pursuant to a primary
offering registered under the Securities Act of 1933, as amended.
"Quarterly Payment Date" means the last day of each of March, June,
September and December, or, if any such day is not a Business Day, the next
succeeding Business Day, commencing with December 31, 1999.
"Rate Protection Agreement" means any interest rate swap, cap, collar or
similar agreement entered into by the Borrower pursuant to the terms of this
Agreement under which the counterparty to such agreement is (or at the time
such Rate Protection Agreement was entered into, was) a Lender or an Affiliate
of a Lender.
"Recapitalization Agreement" is defined in the first recital.
"Refunded Swing Line Loans" is defined in clause (b) of Section 2.3.2.
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"Register" is defined in clause (b) of Section 2.7.
"Reimbursement Obligation" is defined in Section 2.6.3.
"Reinstatement Date" is defined in Section 4.1.
"Related Fund" means, with respect to any Lender that is a fund that
invests in commercial loans, any other fund that invests in commercial loans
and is managed or advised by the same investment advisor as such Lender or by
an Affiliate of such investment advisor.
"Release" means a "release", as such term is defined in CERCLA.
"Replacement Lender" is defined in Section 4.11.
"Replacement Notice" is defined in Section 4.11.
"Required Lenders" means, at any time, (i) prior to the date of the making
of the initial Credit Extension hereunder, Lenders having at least 51% of the
sum of the Revolving Loan Commitments, Term-A Loan Commitments and Term-B Loan
Commitments, and (ii) on and after the date of the initial Credit Extension,
Lenders holding at least 51% of the Total Exposure Amount.
"Resource Conservation and Recovery Act" means the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect from time to
time.
"Restricted Payments" is defined in Section 7.2.6.
"Restricted Payments Compliance Certificate" means a certificate duly
completed and executed by an Authorized Officer that is the president, the
chief executive officer or the chief financial or accounting officer of the
Borrower, substantially in the form of Exhibit F hereto.
"Restricted Subsidiary" means any Subsidiary of the Borrower that is not
an Unrestricted Subsidiary.
"Revolving Loans" is defined in Section 2.1.2.
"Revolving Loan Commitment" is defined in Section 2.1.2.
"Revolving Loan Commitment Amount" means, on any date, $30,000,000, as
such amount may be increased from time to time pursuant to clause (c) of
Section 2.1.2 or reduced from time to time pursuant to Section 2.2.
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"Revolving Loan Commitment Termination Date" means the earliest of (i)
September 29, 1999 if the Term Loans have not been made on or prior to such
date, (ii) the sixth anniversary of the Closing Date, (iii) the date on which
the Revolving Loan Commitment Amount is terminated in full or reduced to zero
pursuant to Section 2.2, and (iv) the date on which any Commitment Termination
Event occurs.
"Revolving Note" means a promissory note of the Borrower payable to any
Lender, substantially in the form of Exhibit A-1 hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the Borrower to such Lender resulting
from outstanding Revolving Loans, and also means all other promissory notes
accepted from time to time in substitution therefor or renewal thereof.
"Rollover Equity" means the shares equal to approximately 12.5% of Holdco
outstanding after the Merger which will either be retained by CRL or exchanged
by CRL for such percentage of a new class of shares of common stock of Holdco.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc.
"SBI" is defined in the fourth recital.
"Secured Parties" means, collectively, the Lenders, the Issuers, the
Agents and each counterparty to a Rate Protection Agreement that is (or at the
time such Rate Protection Agreement was entered into, was) a Lender or an
Affiliate of a Lender.
"Seller Note Issuance" is defined in clause (d) of the fifth recital.
"Seller Subordinated Discount Note" means the Subordinated Discount Note
in an initial principal amount of $43,000,000 issued by Holdco to CRL on the
Closing Date.
"Senior Discount Debentures" the Senior Discount Debentures in an initial
principal amount of $40,000,000 issued by Holdco on the Closing Date.
"Senior Subordinated Debt" means the Senior Subordinated Notes.
"Senior Subordinated Debt Documents" means the Senior Subordinated Notes
and all other instruments, agreements or other documents evidencing or
governing any Senior Subordinated Debt or pursuant to which any Senior
Subordinated Debt has been issued.
"Senior Subordinated Notes" is defined in clause (a) of the fifth recital.
"Sierra Acquisition" is defined in the fourth recital.
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"Sierra Acquisition Agreement" is defined in the fourth recital.
"Solvent" means, with respect to any Person on a particular date, that on
such date (a) the fair value of the property of such Person is greater than the
total amount of liabilities, including contingent liabilities, of such Person,
(b) the present fair salable value of the assets of such Person is not less
than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature, and
(d) such Person is not engaged in business or a transaction, and such Person is
not about to engage in business or a transaction, for which such Person's
property would constitute an unreasonably small capital. The amount of
contingent liabilities at any time shall be computed as the amount that, in
light of all the facts and circumstances existing at such time, can reasonably
be expected to become an actual or matured liability.
"Stated Amount" of each Letter of Credit means the total amount available
to be drawn under such Letter of Credit upon the issuance thereof.
"Stated Expiry Date" is defined in Section 2.6.
"Stated Maturity Date" means (i) in the case of any Revolving Loan, the
sixth anniversary of the Closing Date, (ii) in the case of any Term-A Loan, the
sixth anniversary of the Closing Date, (iii) in the case of any Term-B Loan,
the eighth anniversary of the Closing Date or, in the case of any such day that
is not a Business Day, the first Business Day following such day.
"Subject Lender" is defined in Section 4.11.
"Subco Dividend" is defined in the second recital.
"Subordinated Debt Issuance" is defined in clause (a) of the fifth
recital.
"Subordination Provisions" is defined in Section 8.1.11.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other business entity of which more than 50% of the outstanding
Capital Stock (or other ownership interest) having ordinary voting power to
elect a majority of the board of directors, managers or other voting members of
the governing body of such entity (irrespective of whether at the time Capital
Stock (or other ownership interests) of any other class or classes of such
entity shall or might have voting power upon the occurrence of any contingency)
is at the time directly or indirectly owned by such Person, by such Person and
one or more other Subsidiaries of such Person, or by one or more other
Subsidiaries of such Person. For purposes of this Agreement
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and the other Loan Documents, any Acquired Controlled Person shall be deemed to
be a "Subsidiary" of the Borrower for purposes of Sections 6.1, 6.7, 6.9, 6.10,
6.11, 6.12, 7.1.2, 7.1.3, 7.1.4, 7.1.5, 7.1.6, 7.1.7(a)(ii), 7.2.1, 7.2.2,
7.2.3, 7.2.5, 7.2.6, 7.2.9, 7.2.11, 7.2.12 and 7.2.14 and, to the extent (and
only to the extent) that it relates to any of the foregoing Sections, Article
VIII.
"Subsidiary Guarantor" means each U.S. Subsidiary of the Borrower that has
executed and delivered a Subsidiary Guaranty (or a supplement thereto).
"Subsidiary Guaranty" means the Guaranty, if any, executed and delivered
by an Authorized Officer of a Subsidiary Guarantor pursuant to Section 5.1.6 or
Section 7.1.7, substantially in the form of Exhibit H hereto, as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Subsidiary Pledge and Security Agreement" means the Pledge and Security
Agreement executed and delivered by an Authorized Officer of each Subsidiary
Guarantor pursuant to the terms of this Agreement, substantially in the form of
Exhibit G-3 hereto, together with any supplemental Foreign Pledge Agreements
delivered pursuant to the terms of this Agreement, in each case as amended,
supplemented, amended and restated or otherwise modified from time to time.
"Swing Line Lender" means the Administrative Agent in its capacity as
Swing Line Lender hereunder.
"Swing Line Loan" is defined in clause (b) of Section 2.1.2.
"Swing Line Loan Commitment" is defined in clause (b) of Section 2.1.2.
"Swing Line Loan Commitment Amount" means, on any date, $5,000,000, as
such amount may be reduced from time to time pursuant to Section 2.2.
"Swing Line Note" means a promissory note of the Borrower payable to the
Swing Line Lender, in the form of Exhibit A-4 hereto (as such promissory note
may be amended, endorsed or otherwise modified from time to time), evidencing
the aggregate Indebtedness of the Borrower to the Swing Line Lender resulting
from outstanding Swing Line Loans, and also means all other promissory notes
accepted from time to time in substitution therefor or renewal thereof.
"Syndication Agent" is defined in the preamble.
"Taxes" is defined in Section 4.6.
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"Term-A Loans" is defined in clause (a) of Section 2.1.1.
"Term-A Loan Commitment" is defined in clause (a) of Section 2.1.1.
"Term-A Loan Commitment Amount" means $40,000,000.
"Term-A Loan Commitment Termination Date" means the earliest of (i)
September 29, 1999, if the Term-A Loans have not been made on or prior to such
date, (ii) the Closing Date (immediately after the making of the Term-A Loans
on such date), and (iii) the date on which any Commitment Termination Event
occurs.
"Term-A Note" means a promissory note of the Borrower payable to the order
of any Lender, in the form of Exhibit A-2 hereto (as such promissory note may
be amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Term-A Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"Term-B Loans" is defined in clause (b) of Section 2.1.1.
"Term-B Loan Commitment" is defined in clause (b) of Section 2.1.1.
"Term-B Loan Commitment Amount" means $120,000,000.
"Term-B Loan Commitment Termination Date" means the earliest of (i)
September 29, 1999, if the Term-B Loans have not been made on or prior to such
date, (ii) the Closing Date (immediately after the making of the Term-B Loans
on such date), and (iii) the date on which any Commitment Termination Event
occurs.
"Term-B Note" means a promissory note of the Borrower payable to the order
of any Lender, in the form of Exhibit A-3 hereto (as such promissory note may
be amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from
outstanding Term-B Loans, and also means all other promissory notes accepted
from time to time in substitution therefor or renewal thereof.
"Term Loan Commitment Termination Date" means, as the context may require,
the Term-A Loan Commitment Termination Date or the Term-B Loan Commitment
Termination Date.
"Term Loans" means collectively, the Term-A Loans or the Term-B Loans.
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"Termination Date" means the date on which all Obligations have been paid
in full in cash, all Letters of Credit have been terminated, expired or Cash
Collateralized, all Rate Protection Agreements have been terminated and all
Commitments shall have terminated.
"Total Exposure Amount" means, on any date of determination, (a) with
respect to any provision of this Agreement other than the declaration of the
acceleration of the maturity of all or any portion of the outstanding principal
amount of the Loans and other Obligations to be due and payable pursuant to
Section 8.3, the sum of (i) the aggregate principal amount of all Term Loans
outstanding at such time and (ii) (x) the then effective Revolving Loan
Commitment Amount, if there are any Revolving Loan Commitments then
outstanding, or (y) if all Revolving Loan Commitments shall have expired or
been terminated, the sum of (1) the aggregate principal amount of all Revolving
Loans and Swing Line Loans outstanding at such time and (2) the Letter of
Credit Outstandings at such time; and (b) with respect to the declaration of
the acceleration of the maturity of all or any portion of the outstanding
principal amount of the Loans and other Obligations to be due and payable
pursuant to Section 8.3, the sum of (i) the aggregate principal amount of all
Loans outstanding at such time and (ii) the Letter of Credit Outstandings at
such time.
"Tranche" means, as the context may require, the Loans constituting Term-A
Loans, Term-B Loans, Revolving Loans or Swing Line Loans.
"Transaction" is defined in the second recital.
"Transaction Documents" means each of the Material Documents and all other
agreements, documents, instruments, certificates, filings, consents, approvals,
board of directors resolutions and opinions furnished pursuant to or in
connection with the Recapitalization, Merger, Equity Contributions, Subco
Dividend, Subordinated Debt Issuance, Discount Debentures Issuance, the Seller
Note Issuance and the Sierra Acquisition and the transactions contemplated
hereby or thereby, each as amended, supplemented, amended and restated or
otherwise modified from time to time as permitted in accordance with the terms
hereof or of any other Loan Document.
"Transaction Payments" means the retention bonus payments, performance
bonus payments, Earn-outs and any fees, expenses and financing and other
transaction costs to be paid by the Borrower under any present or future
acquisition agreement.
"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UBOC" is defined in the preamble.
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"UCC" means the Uniform Commercial Code as in effect from time to time in
the State of New York; provided, that if, with respect to any Filing Statement
or by reason of any mandatory provisions of law, the perfection or the effect
of perfection or non-perfection of the security interests granted to the
Administrative Agent pursuant to the applicable Loan Document is governed by
the Uniform Commercial Code as in effect in a jurisdiction of the United States
other than New York, UCC means the Uniform Commercial Code as in effect from
time to time in such other jurisdiction for purposes of the provisions of this
Agreement, each Loan Document and any Filing Statement relating to such
perfection or effect of perfection or non-perfection.
"United States" or "U.S." means the United States of America, its fifty
states and the District of Columbia.
"U.S. Subsidiary" means any Subsidiary of the Borrower that is
incorporated or organized in or under the laws of the United States, any state
thereof or the District of Columbia.
"Unrestricted Subsidiary" means any Subsidiary of the Borrower that is
designated by a resolution of the Board of Directors of the Borrower as an
Unrestricted Subsidiary, but only to the extent that such Subsidiary: (i) has
no Indebtedness other than Non-Recourse Debt; (ii) is not party to any
agreement, contract, arrangement or understanding with the Borrower or any
Restricted Subsidiary of the Borrower unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Borrower or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Borrower; (iii) is a Person with respect
to which neither the Borrower nor any of its Restricted Subsidiaries has any
direct or indirect obligation (a) to subscribe for additional Capital Stock or
warrants, options or other rights to acquire Capital Stock or (b) to maintain
or preserve such Person's financial condition or to cause such Person to
achieve any specified levels of operating results; and (iv) has not guaranteed
or otherwise directly or indirectly provided credit support for any
Indebtedness of the Borrower or any of its Restricted Subsidiaries. If, at any
time, any Unrestricted Subsidiary would fail to meet the foregoing requirements
as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes hereof. The Board of Directors of the Borrower may at
any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Borrower of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if no Default or Event of Default would be in existence following
such designation.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees (or Persons performing similar functions) of any Person
(irrespective of whether or not, at the time, Capital Stock of any other class
or classes shall have, or might have, voting power by reason of the happening
of any contingency).
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"Waiver" means an agreement in favor of the Agents for the benefit of the
Lenders in form and substance reasonably satisfactory to the Agents.
"Warrants" is defined in clause (a) of the fifth recital.
"Warrant Agreement" is defined in clause (a) of the fifth recital.
"Welfare Plan" means a "welfare plan", as such term is defined in Section
3(1) of ERISA, and to which the Borrower has any liability.
"wholly-owned Subsidiary" means, with respect to any Person, any
Subsidiary of such Person all of the Capital Stock (and all rights and options
to purchase such Capital Stock) of which, other than directors' qualifying
shares, are owned, beneficially and of record, by such Person and/or one or
more wholly-owned Subsidiaries of such Person.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context
otherwise requires, terms for which meanings are provided in this Agreement
shall have such meanings when used in the Disclosure Schedule and in each other
Loan Document, notice and other communication delivered from time to time in
connection with this Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references in
this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in
any Article, Section or definition to any clause are references to such clause
of such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations.
(a) Unless otherwise specified and subject to Section 1.4(b) below,
all accounting terms used herein or in any other Loan Document shall be
interpreted, all accounting determinations and computations hereunder or
thereunder (including under Section 7.2.4) shall be made, and all
financial statements required to be delivered hereunder or thereunder
shall be prepared in accordance with, those generally accepted accounting
principles ("GAAP"), as in effect on December 31, 1998 and, unless
otherwise expressly provided herein, shall be computed or determined on a
consolidated basis and without duplication.
(b) For purposes of computing the Fixed Charge Coverage Ratio,
Interest Coverage Ratio and Leverage Ratio (and any financial calculations
required to be made or included within such ratios) as of the end of any
Fiscal Quarter, all components of such ratios, including Capital
Expenditures, in the case of any disposition, but excluding
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Capital Expenditures, in the case of any acquisition, for the period of
four Fiscal Quarters ending at the end of such Fiscal Quarter shall
include or exclude, as the case may be, without duplication, such
components of such ratios attributable to any business or assets that have
been acquired or disposed of by the Borrower or any of its Subsidiaries
(including through mergers or consolidations) after the first day of such
period of four Fiscal Quarters and prior to the end of such period, as
determined in good faith by the Borrower on a pro forma basis for such
period of four Fiscal Quarters as if such acquisition or disposition had
occurred on such first day of such period (including cost savings that
would have been realized had such acquisition occurred on such day and
which inclusion when not otherwise permitted under GAAP has been approved
by a majority of the board of directors of Holdco).
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES,
NOTES AND LETTERS OF CREDIT
SECTION 2.1. Commitments. On the terms and subject to the conditions of
this Agreement (including Sections 2.1.4, 2.1.5 and Article V),
(a) each Lender severally agrees to make Loans (other than Swing Line
Loans) pursuant to each of its Commitments and the Swing Line Lender
agrees to make Swing Line Loans pursuant to the Swing Line Loan
Commitment, in each case as described in this Section 2.1; and
(b) each Issuer severally agrees that it will issue Letters of Credit
pursuant to Section 2.1.3, and each other Lender that has a Revolving Loan
Commitment severally agrees that it will purchase participation interests
in such Letters of Credit pursuant to Section 2.6.1.
SECTION 2.1.2. Term Loan Commitments. Subject to compliance by the
Borrower with the terms of Sections 2.1.4, 5.1 and 5.2, on (but solely on) the
Closing Date (which shall be a Business Day), each Lender that has a Percentage
in excess of zero of the Term-A Loan Commitment or the Term-B Loan Commitment,
as applicable,
(a) will make a loan (relative to such Lender, its "Term-A Loans") to
the Borrower equal to such Lender's Percentage of the aggregate amount of
the Borrowing or Borrowings of Term-A Loans requested by the Borrower to
be made on the Closing Date (with the commitment of each such Lender
described in this clause (a) herein referred to as its "Term-A Loan
Commitment") and
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(b) will make a loan (relative to such Lender, its "Term-B Loans") to
the Borrower equal to such Lender's Percentage of the aggregate amount of
the Borrowing or Borrowings of Term-B Loans requested by the Borrower to
be made on the Closing Date (with the commitment of each such Lender
described in this clause (b) herein referred to as its "Term-B Loan
Commitment").
No amounts paid or prepaid with respect to Term-A Loans or Term-B Loans may be
reborrowed.
SECTION 2.1.3. Revolving Loan Commitment and Swing Line Loan Commitment.
Subject to compliance by the Borrower with the terms of Section 2.1.4, Section
5.1 and Section 5.2, from time to time on any Business Day occurring
concurrently with (or after) the making of the Term Loans but prior to the
Revolving Loan Commitment Termination Date,
(a) each Lender that has a Percentage of the Revolving Loan
Commitment in excess of zero will make loans (relative to such Lender, its
"Revolving Loans") to the Borrower equal to such Lender's Percentage of
the aggregate amount of the Borrowing or Borrowings of Revolving Loans
requested by the Borrower to be made on such day. The Commitment of each
Lender described in this Section 2.1.2 is herein referred to as its
"Revolving Loan Commitment". On the terms and subject to the conditions
hereof, the Borrower may from time to time borrow, prepay and reborrow
Revolving Loans.
(b) the Swing Line Lender will make a loan (a "Swing Line Loan") to
the Borrower equal to the principal amount of the Swing Line Loan
requested by the Borrower to be made on such day. The Commitment of the
Swing Line Lender described in this clause (b) is herein referred to as
its "Swing Line Loan Commitment". On the terms and subject to the
conditions hereof, the Borrower may from time to time borrow, prepay and
reborrow Swing Line Loans.
(c) At any time that no Default has occurred and is continuing, and
prior to the Revolving Loan Commitment Termination Date, the Borrower may
notify the Agents that the Borrower is requesting that, on the terms and
subject to the conditions contained in this Agreement, the Lenders and/or
other lenders not then a party to this Agreement provide up to an
aggregate amount of $25,000,000 in additional Revolving Loan Commitments.
Upon receipt of such notice, the Syndication Agent shall use commercially
reasonable efforts to arrange for the Lenders or other Eligible
Institutions to provide such additional Revolving Loan Commitments;
provided that the Syndication Agent will first offer each of the Lenders
that then has a Percentage of the Revolving Loan Commitment a pro rata
portion of any such additional Revolving Loan Commitment. Alternatively,
DLJ may commit to provide the full amount of the requested additional
Revolving Loan Commitment and then offer portions of such additional
Revolving Loan Commitment to the Lenders or other Eligible Institutions,
subject to the proviso to the immediately preceding sentence. Nothing
contained in this
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clause (c) or otherwise in this Agreement is intended to commit any Lender
or any Agent to provide any portion of any such additional Revolving Loan
Commitments. If and to the extent that any Lenders and/or other lenders
agree, in their sole discretion, to provide any such additional Revolving
Loan Commitments, (i) the Revolving Loan Commitment Amount shall be
increased by the amount of the additional Revolving Loan Commitments
agreed to be so provided, (ii) the Percentages of the respective Lenders
in respect of the Revolving Loan Commitment shall be proportionally
adjusted (provided that the Percentage of each Lender shall not be
increased without the consent of such Lender), (iii) at such time and in
such manner as the Borrower and the Syndication Agent shall agree (it
being understood that the Borrower and the Agents will use commercially
reasonable efforts to avoid the prepayment or assignment of any LIBO Rate
Loan on a day other than the last day of the Interest Period applicable
thereto), the Lenders shall assign and assume outstanding Revolving Loans
and participations in outstanding Letters of Credit so as to cause the
amounts of such Revolving Loans and participations in Letters of Credit
held by each Lender to conform to the respective Percentages of the
Revolving Loan Commitment of the Lenders and (iv) the Borrower shall
execute and deliver any additional Notes or other amendments or
modifications to this Agreement or any other Loan Document as the Agents
may reasonably request.
SECTION 2.1.4. Letter of Credit Commitment. Subject to compliance by the
Borrower with the terms of Section 2.1.5, 5.1 and 5.2, from time to time on any
Business Day occurring concurrently with (or after) the Closing Date but prior
to the Revolving Loan Commitment Termination Date, the applicable Issuer will
(i) issue one or more standby or commercial letters of credit (each referred to
as a "Letter of Credit") for the account of the Borrower or any of its
Restricted Subsidiaries in the Stated Amount requested by the Borrower on such
day, or (ii) extend the Stated Expiry Date of an existing standby or commercial
Letter of Credit previously issued hereunder to a date not later than the
earlier of (x) the sixth anniversary of the Closing Date and (y) one year from
the date of such extension (subject to automatic renewal provisions); provided
that, notwithstanding the terms of this clause (y), a Letter of Credit may, if
required by the beneficiary thereof, contain automatic renewal provisions
pursuant to which the Stated Expiry Date shall be automatically extended (to a
date not beyond the date specified in clause (x) above), unless notice to the
contrary shall have been given to the beneficiary prior to the then existing
Stated Expiry Date in accordance with the terms specified in such Letter of
Credit by the applicable Issuer or the account party of such Letter of Credit
(which notice by the account party shall also have been provided to the
applicable Issuer in writing).
SECTION 2.1.5. Lenders Not Permitted or Required to Make the Loans. No
Lender shall be permitted or required to, and the Borrower shall not request
any Lender to, make
(a) any Term-A Loan or Term-B Loan (as the case may be) if, after
giving effect thereto, the aggregate original principal amount of all the
Term-A Loans or Term-B Loans (as the case may be) of such Lender would
exceed such Lender's Percentage of the
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Term-A Loan Commitment Amount (in the case of Term-A Loans) or the Term-B
Loan Commitment Amount (in the case of Term-B Loans);
(b) any Revolving Loan if, after giving effect thereto, the aggregate
outstanding principal amount of all the Revolving Loans (i) of all the
Lenders with Revolving Loan Commitments, together with the Letter of
Credit Outstandings and the aggregate outstanding principal amount of all
Swing Line Loans, would exceed the then existing Revolving Loan Commitment
Amount, or (ii) of such Lender, together with such Lender's Percentage of
the aggregate amount of all Letter of Credit Outstandings, and such
Lender's Percentage of the outstanding principal amount of all Swing Line
Loans, would exceed such Lender's Percentage of the then existing
Revolving Loan Commitment Amount.
(c) any Swing Line Loan if, after giving effect thereto (i) the
aggregate outstanding principal amount of all Swing Line Loans would
exceed the Swing Line Loan Commitment Amount or (ii) the sum of the
aggregate amount of all Letter of Credit Outstandings plus the aggregate
principal amount of all Revolving Loans and Swing Line Loans then
outstanding would exceed the then existing Revolving Loan Commitment
Amount.
SECTION 2.1.6. Issuer Not Permitted or Required to Issue Letters of
Credit. No Issuer shall be permitted or required to issue any Letter of Credit
if, after giving effect thereto, (a) the aggregate amount of all Letter of
Credit Outstandings would exceed the Letter of Credit Commitment Amount or (b)
the sum of the aggregate amount of all Letter of Credit Outstandings plus the
aggregate principal amount of all Revolving Loans and Swing Line Loans then
outstanding would exceed the then existing Revolving Loan Commitment Amount.
SECTION 2.2. Reduction of Revolving Loan Commitment Amount. The Borrower
may, from time to time on any Business Day occurring after the time of the
initial Credit Extension hereunder, voluntarily reduce the Revolving Loan
Commitment Amount; provided, however, that all such reductions shall require at
least three Business Days' prior notice to the Administrative Agent and be
permanent, and any partial reduction of any Commitment Amount shall be in an
aggregate amount of $500,000 or any larger integral multiple of $100,000. Any
such reduction of the Revolving Loan Commitment Amount which reduces the
Revolving Loan Commitment Amount below the Letter of Credit Commitment Amount
or the Swing Line Loan Commitment Amount shall result in an automatic and
corresponding reduction of the Letter of Credit Commitment Amount or the Swing
Line Loan Commitment Amount, as the case may be, to an aggregate amount not in
excess of the Revolving Loan Commitment Amount, as so reduced, without any
further action on the part of the applicable Issuer or the Swing Line Lender.
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SECTION 2.3. Borrowing Procedures and Funding Maintenance. Loans (other
than Swing Line Loans) shall be made by the Lenders in accordance with Section
2.3.1, and Swing Line Loans shall be made by the Swing Line Lender in
accordance with Section 2.3.2.
SECTION 2.3.1. Term Loans and Revolving Loans. By delivering a Borrowing
Request to the Administrative Agent on or before 12:00 p.m. (noon), Los Angeles
time, on a Business Day, the Borrower may from time to time irrevocably
request, on not less than one Business Day's notice (in the case of Base Rate
Loans) or three Business Days' notice (in the case of LIBO Rate Loans) nor more
than five Business Days' notice (in the case of any Loans), that a Borrowing be
made in an aggregate amount of $500,000 or any larger integral multiple of
$100,000, or in the unused amount of the applicable Commitment. No Borrowing
Request shall be required, and the minimum aggregate amounts specified under
this Section 2.3.1 shall not apply, in the case of Revolving Loans made under
clause (b) of Section 2.3.2 to refund Refunded Swing Line Loans or Revolving
Loans deemed made under Section 2.6.2 in respect of unreimbursed Disbursements.
On the terms and subject to the conditions of this Agreement, each Borrowing
shall be comprised of the type of Loans, and shall be made on the Business Day,
specified in such Borrowing Request. On or before 1:00 p.m., Los Angeles time,
on such Business Day each Lender shall deposit with the Administrative Agent
same day funds in an amount equal to such Lender's Percentage of the requested
Borrowing. Such deposit will be made to an account which the Administrative
Agent shall specify from time to time by notice to the Lenders. To the extent
funds are received from the Lenders, the Administrative Agent shall make such
funds available to the Borrower by wire transfer to the accounts the Borrower
shall have specified in its Borrowing Request. No Lender's obligation to make
any Loan shall be affected by any other Lender's failure to make any Loan.
SECTION 2.3.2. Swing Line Loans. (a) By telephonic notice, promptly
followed (within one Business Day) by the delivery of a confirming Borrowing
Request, to the Swing Line Lender and the Administrative Agent on or before
10:00 a.m., Los Angeles time, on the Business Day the proposed Swing Line Loan
is to be made, the Borrower may from time to time irrevocably request that a
Swing Line Loan be made by the Swing Line Lender in a minimum principal amount
of $500,000 or any larger integral multiple of $100,000. All Swing Line Loans
shall be made as Base Rate Loans and shall not be entitled to be converted into
LIBO Rate Loans. The proceeds of each Swing Line Loan shall be made available
by the Swing Line Lender, by 3:00 p.m., Los Angeles time, on the Business Day
telephonic notice is received by it as provided in this clause (a), to the
Borrower by wire transfer to the account the Borrower shall have specified in
its notice therefor.
(b) If (i) any Swing Line Loan shall be outstanding for more than four
Business Days or (ii) any Default shall occur and be continuing, each Lender
with a Revolving Loan Commitment (other than the Swing Line Lender) irrevocably
agrees that it will, at the request of the Swing Line Lender and upon notice
from the Administrative Agent, unless such Swing Line Loan shall have been
earlier repaid in full, make a Revolving Loan (which shall initially be funded
as a Base
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Rate Loan) in an amount equal to such Lender's Percentage in respect of the
Revolving Loan Commitments of the aggregate principal amount of all such Swing
Line Loans then outstanding (such outstanding Swing Line Loans hereinafter
referred to as the "Refunded Swing Line Loans"); provided, that the Swing Line
Lender shall not request, and no Lender with a Revolving Loan Commitment shall
make, any Refunded Swing Line Loan if, after giving effect to the making of
such Refunded Swing Line Loan, the sum of all Swing Line Loans and Revolving
Loans made by such Lender, plus such Lender's Percentage in respect of the
Revolving Loan Commitments of the aggregate amount of all Letter of Credit
Outstandings, would exceed such Lender's Percentage of the then existing
Revolving Loan Commitment Amount. On or before 12:00 p.m., Los Angeles time, on
the first Business Day following receipt by each Lender of a request to make
Revolving Loans as provided in the preceding sentence, each such Lender with a
Revolving Loan Commitment shall deposit in an account specified by the Swing
Line Lender the amount so requested in same day funds and such funds shall be
applied by the Swing Line Lender to repay the Refunded Swing Line Loans. At the
time the aforementioned Lenders make the above referenced Revolving Loans, the
Swing Line Lender shall be deemed to have made, in consideration of the making
of the Refunded Swing Line Loans, a Revolving Loan in an amount equal to the
Swing Line Lender's Percentage in respect of the Revolving Loan Commitments of
the aggregate principal amount of the Refunded Swing Line Loans. Upon the
making (or deemed making, in the case of the Swing Line Lender) of any
Revolving Loans pursuant to this clause (b), the amount so funded shall become
outstanding as a Revolving Loan of such Lender and to the extent to made (or
deemed made, in the case of the Swing Line Lender) shall no longer constitute a
portion of the applicable Swing Line Loan. All interest payable with respect to
any Revolving Loans made (or deemed made, in the case of the Swing Line Lender)
pursuant to this clause (b) shall be appropriately adjusted to reflect the
period of time during which the Swing Line Lender had outstanding Swing Line
Loans in respect of which such Revolving Loans were made. Each Lender's
obligation (in the case of Lenders with a Revolving Loan Commitment) to make
the Revolving Loans referred to in this clause (b) shall be absolute and
unconditional and shall not be affected by any circumstance, including (i) any
set-off, counterclaim, recoupment, defense or other right which such Lender may
have against the Swing Line Lender, the Borrower or any other Person for any
reason whatsoever; (ii) the occurrence or continuance of any Default; (iii) any
adverse change in the condition (financial or otherwise) of the Borrower or any
other Obligor; (iv) the acceleration or maturity of any Loans or the
termination of any Commitment after the making of any Swing Line Loan; (v) any
breach of this Agreement or any other Loan Document by the Borrower or any
Lender; or (vi) any other circumstance, happening or event whatsoever, whether
or not similar to any of the foregoing.
SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 12:00
p.m. (noon), Los Angeles time, on a Business Day, the Borrower may from time to
time irrevocably elect, on not less than one Business Day's notice (in the case
of a conversion of LIBO Rate Loans to Base Rate Loans) or three Business Days'
notice (in the case of a continuation of LIBO Rate Loans or a conversion of
Base Rate Loans into LIBO Rate Loans) nor more than five Business Days'
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notice (in the case of any Loans) that all, or any portion in a minimum amount
of $500,000 or any larger integral multiple of $100,000, be, in the case of
Base Rate Loans, converted into LIBO Rate Loans or, in the case of LIBO Rate
Loans, converted into Base Rate Loans or continued as LIBO Rate Loans (in the
absence of delivery of a Continuation/Conversion Notice with respect to any
LIBO Rate Loan at least three Business Days before the last day of the then
current Interest Period with respect thereto, such LIBO Rate Loan shall, on
such last day, automatically convert to a Base Rate Loan); provided, however,
that (x) each such conversion or continuation shall be pro rated among the
applicable outstanding Loans of the relevant Lenders, and (y) no portion of the
outstanding principal amount of any Loans may be continued as, or be converted
into, LIBO Rate Loans when any Default has occurred and is continuing.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing
one of its foreign branches or Affiliates (or an international banking facility
created by such Lender) to make or maintain such LIBO Rate Loan, so long as
such action does not result in increased costs to the Borrower; provided,
however, that such LIBO Rate Loan shall nonetheless be deemed to have been made
and to be held by such Lender, and the obligation of the Borrower to repay such
LIBO Rate Loan shall nevertheless be to such Lender for the account of such
foreign branch, Affiliate or international banking facility; and provided,
further, however, that, except for purposes of determining whether any such
increased costs are payable by the Borrower, such Lender shall cause such
foreign branch, Affiliate or international banking facility to comply with the
applicable provisions of clause (b) of Section 4.6 with respect to such LIBO
Rate Loan. In addition, the Borrower hereby consents and agrees that, for
purposes of any determination to be made for purposes of Section 4.1, 4.2, 4.3
or 4.4, it shall be conclusively assumed that each Lender elected to fund all
LIBO Rate Loans by purchasing Dollar deposits in its LIBOR Office's interbank
Eurodollar market.
SECTION 2.6. Issuance Procedures. By delivering to the applicable Issuer
and the Administrative Agent an Issuance Request on or before 12:00 p.m.
(noon), Los Angeles time, on a Business Day, the Borrower may, from time to
time irrevocably request, on not less than five Business Days' notice (or such
shorter or longer notice as may be acceptable to the applicable Issuer), in the
case of an initial issuance of a Letter of Credit, and not less than five nor
more than ten Business Days' notice (unless a shorter or longer notice period
is acceptable to the applicable Issuer) prior to the then existing Stated
Expiry Date of a Letter of Credit, in the case of a request for the extension
of the Stated Expiry Date of a Letter of Credit, that such Issuer issue, or
extend the Stated Expiry Date of, as the case may be, an irrevocable Letter of
Credit on behalf of the Borrower (whether issued for the account of or on
behalf of the Borrower or any of its Restricted Subsidiaries) in such form as
may be requested by the Borrower and approved by such Issuer, for the purposes
described in Section 7.1.9. Notwithstanding anything to the contrary contained
herein or in any separate application for any Letter of Credit, the Borrower
hereby acknowledges and agrees that it shall be obligated to reimburse the
applicable Issuer upon each Disbursement paid under a Letter of Credit, and it
shall be deemed to be the obligor for purposes of each such
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Letter of Credit issued hereunder (whether the account party on such Letter of
Credit is the Borrower or a Subsidiary of the Borrower). Upon receipt of an
Issuance Request, the Administrative Agent shall promptly notify the applicable
Issuer and each Lender that has a Revolving Loan Commitment thereof. Each
Letter of Credit shall by its terms be stated to expire on a date (its "Stated
Expiry Date") no later than the earlier to occur of (i) the sixth anniversary
of the Closing Date or (ii) one year from the date of its issuance (subject to
automatic renewal provisions); provided that, notwithstanding the terms of this
clause (ii), a Letter of Credit may, if required by the beneficiary thereof,
contain automatic renewal provisions pursuant to which the Stated Expiry Date
shall be automatically extended (to a date not beyond the date specified in
clause (i) above), unless notice to the contrary shall have been given to the
beneficiary prior to the then existing Stated Expiry Date in accordance with
the terms specified in such Letter of Credit by the applicable Issuer or the
account party of such Letter of Credit (which notice by the account party shall
also have been provided to the applicable Issuer in writing). The applicable
Issuer will make available to the beneficiary thereof the original of each
Letter of Credit which it issues hereunder. In the event that the Issuer is
other than the Administrative Agent, such Issuer will send by facsimile
transmission to the Administrative Agent, promptly on the first Business Day of
each week, its daily maximum amount available to be drawn under the Letters of
Credit issued by such Issuer for the previous week. The Administrative Agent
shall deliver to each Lender upon each calendar month end, and upon each
payment of the letter of credit fees payable pursuant to Section 3.3.3, a
report setting forth the daily maximum amount available to be drawn for all
Issuers during such period. Notwithstanding anything to the contrary herein,
any Issuance Request delivered to the applicable Issuer or Administrative Agent
by the Borrower by telecopier shall be confirmed promptly in an original
writing delivered to such Issuer or Administrative Agent, as the case may be.
SECTION 2.6.1. Other Lenders' Participation. Upon the issuance of each
Letter of Credit issued by an Issuer pursuant hereto, and without further
action, each Lender (other than such Issuer) that has a Revolving Loan
Commitment shall be deemed to have irrevocably purchased from such Issuer, to
the extent of its Percentage in respect of the Revolving Loan Commitments, and
such Issuer shall be deemed to have irrevocably granted and sold to such Lender
a participation interest in such Letter of Credit (including the Contingent
Liability and any Reimbursement Obligation and all rights with respect
thereto), and such Lender shall, to the extent of its Percentage in respect of
the Revolving Loan Commitments, be responsible for reimbursing promptly (and in
any event within one Business Day) the applicable Issuer for Reimbursement
Obligations which have not been reimbursed by the Borrower in accordance with
Section 2.6.3. In addition, such Lender shall, to the extent of its Percentage
in respect of the Revolving Loan Commitments, be entitled to receive a ratable
portion of the letter of credit fees payable pursuant to Section 3.3.3 with
respect to each Letter of Credit and of interest payable pursuant to Section
3.2 with respect to any Reimbursement Obligation. To the extent that any Lender
has reimbursed the applicable Issuer for a Disbursement as required by this
Section, such Lender shall be entitled to receive its ratable portion of any
amounts subsequently received (from the Borrower or otherwise) in respect of
such Disbursement.
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SECTION 2.6.2. Disbursements; Conversion to Revolving Loans. The
applicable Issuer will notify the Borrower and the Administrative Agent
promptly of the presentment for payment of any drawing under any Letter of
Credit issued by such Issuer, together with notice of the date (the
"Disbursement Date") such payment shall be made (each such payment, a
"Disbursement"). Subject to the terms and provisions of such Letter of Credit
and this Agreement, such Issuer shall make such payment to the beneficiary (or
its designee) of such Letter of Credit. Prior to 12:30 p.m., Los Angeles time,
on the first Business Day following the Disbursement Date (the "Disbursement
Due Date"), the Borrower will reimburse the Administrative Agent, for the
account of such Issuer, for all amounts which such Issuer has disbursed under
such Letter of Credit, together with interest thereon at the rate per annum
otherwise applicable to Revolving Loans (made as Base Rate Loans) from and
including the Disbursement Date to but excluding the Disbursement Due Date and,
thereafter (unless such Disbursement is converted into a Base Rate Loan on the
Disbursement Due Date), at a rate per annum equal to the rate per annum then in
effect with respect to overdue Revolving Loans (made as Base Rate Loans)
pursuant to Section 3.2.2 for the period from the Disbursement Due Date through
the date of such reimbursement; provided, however, that, if no Default shall
have then occurred and be continuing, unless the Borrower has notified the
Administrative Agent no later than one Business Day prior to the Disbursement
Due Date that it will reimburse such Issuer for the applicable Disbursement,
then the amount of the Disbursement shall be deemed to be a Borrowing of
Revolving Loans constituting Base Rate Loans and following the giving of notice
thereof by the Administrative Agent to the Lenders, each Lender with a
Revolving Loan Commitment (other than such Issuer) will deliver to such Issuer
on the Disbursement Due Date immediately available funds in an amount equal to
such Lender's Percentage of such Borrowing. Each conversion of Disbursement
amounts into Revolving Loans shall constitute a representation and warranty by
the Borrower that on the date of the making of such Revolving Loans all of the
statements set forth in Section 5.2.1 are true and correct.
SECTION 2.6.3. Reimbursement. The obligation (a "Reimbursement
Obligation") of the Borrower under Section 2.6.2 to reimburse the applicable
Issuer with respect to each Disbursement (including interest thereon) not
converted into a Base Rate Loan pursuant to Section 2.6.2, and, upon the
Borrower failing or electing not to reimburse such Issuer and the giving of
notice thereof by the Administrative Agent to the Lenders, each Lender's (to
the extent it has a Revolving Loan Commitment) obligation under Section 2.6.1
to reimburse such Issuer or fund its Percentage of any Disbursement converted
into a Base Rate Loan, shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Borrower or such Lender, as the case may be, may have or have
had against such Issuer or any such Lender, including any defense based upon
the failure of any Disbursement to conform to the terms of the applicable
Letter of Credit (if, in such Issuer's good faith opinion, such Disbursement is
determined to be appropriate) or any non-application or misapplication by the
beneficiary of the proceeds of such Letter of Credit; provided, however, that
after paying in full its Reimbursement Obligation hereunder, nothing herein
shall adversely affect the right of the Borrower or such Lender, as the case
may be, to commence any proceeding
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against such Issuer for any wrongful Disbursement made by such Issuer under a
Letter of Credit as a result of acts or omissions constituting gross negligence
or willful misconduct on the part of such Issuer.
SECTION 2.6.4. Deemed Disbursements. Upon the occurrence and during the
continuation of any Event of Default of the type described in clauses (b)
through (d) of Section 8.1.9 with respect to any Obligor (other than
Subsidiaries that are not Material Subsidiaries) or, with notice from the
Administrative Agent acting at the direction of the Required Lenders, upon the
occurrence and during the continuation of any other Event of Default,
(a) an amount equal to that portion of all Letter of Credit
Outstandings attributable to the then aggregate amount which is undrawn
and available under all Letters of Credit issued and outstanding shall,
without demand upon or notice to the Borrower or any other Person, be
deemed to have been paid or disbursed by the applicable Issuer under such
Letters of Credit (notwithstanding that such amount may not in fact have
been so paid or disbursed); and
(b) upon notification by the Administrative Agent to the Borrower of
its obligations under this Section, the Borrower shall be immediately
obligated to reimburse the applicable Issuer for the amount deemed to have
been so paid or disbursed by such Issuer.
Any amounts so payable by the Borrower pursuant to this Section shall be
deposited in cash with the Administrative Agent and held as collateral security
for the Obligations in connection with the Letters of Credit issued by the
applicable Issuer. At such time as the Events of Default giving rise to the
deemed disbursements hereunder shall have been cured or waived, the
Administrative Agent shall return to the Borrower all amounts then on deposit
with the Administrative Agent pursuant to this Section, together with accrued
interest at the Federal Funds Rate, which have not been applied to the
satisfaction of such Obligations.
SECTION 2.6.5. Nature of Reimbursement Obligations. The Borrower and, to
the extent set forth in Section 2.6.1, each Lender with a Revolving Loan
Commitment, shall assume all risks of the acts, omissions or misuse of any
Letter of Credit by the beneficiary thereof. No Issuer (except to the extent of
its own gross negligence or willful misconduct) shall be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any Letter of Credit or any document submitted by any party in
connection with the application for and issuance of a Letter of Credit,
even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged;
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(b) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any instrument transferring or assigning or purporting to
transfer or assign a Letter of Credit or the rights or benefits thereunder
or the proceeds thereof in whole or in part, which may prove to be invalid
or ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise;
or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a Letter
of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to any Issuer or any Lender with a Revolving Loan
Commitment hereunder. In furtherance and extension and not in limitation or
derogation of any of the foregoing, any action taken or omitted to be taken by
the applicable Issuer in good faith (and not constituting gross negligence or
willful misconduct) shall be binding upon the Borrower, each Obligor and each
such Lender, and shall not put such Issuer under any resulting liability to the
Borrower, any Obligor or any such Lender, as the case may be.
SECTION 2.7. Register; Notes.
(a) Each Lender may maintain in accordance with its usual practice an
account or accounts evidencing the Indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to
time hereunder. In the case of a Lender that does not request, pursuant to
clause (b)(ii) below, execution and delivery of a Note evidencing the
Loans made by such Lender to the Borrower, such account or accounts shall,
to the extent not inconsistent with the notations made by the
Administrative Agent in the Register, be conclusive and binding on the
Borrower absent manifest error; provided, however, that the failure of any
Lender to maintain such account or accounts shall not limit or otherwise
affect any Obligations of the Borrower or any other Obligor.
(b)(i) The Borrower hereby designates the Administrative Agent to
serve as the Borrower's agent, solely for the purpose of this clause (b),
to maintain a register (the "Register") on which the Administrative Agent
will record each Lender's Commitments, the Loans made by each Lender and
each repayment in respect of the principal amount of the Loans of each
Lender and annexed to which the Administrative Agent shall retain a copy
of each Lender Assignment Agreement delivered to the Administrative Agent
pursuant to Section 10.11.1. Failure to make any recordation, or any error
in such
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recordation, shall not affect the Borrower's obligation in respect of such
Loans. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Administrative Agent and the Lenders
shall treat each Person in whose name a Loan (and as provided in clause
(ii) the Note evidencing such Loan, if any) is registered as the owner
thereof for all purposes of this Agreement, notwithstanding notice or any
provision herein to the contrary. A Lender's Commitment and the Loans made
pursuant thereto may be assigned or otherwise transferred in whole or in
part only by registration of such assignment or transfer in the Register.
Any assignment or transfer of a Lender's Commitment or the Loans made
pursuant thereto shall be registered in the Register only upon delivery to
the Administrative Agent of a Lender Assignment Agreement duly executed by
the assignor thereof. No assignment or transfer of a Lender's Commitment
or the Loans made pursuant thereto shall be effective unless such
assignment or transfer shall have been recorded in the Register by the
Administrative Agent as provided in this Section.
(ii) The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Borrower will execute and deliver to such Lender,
as applicable, a Revolving Note, a Term-A Note, a Term-B Note and a Swing
Line Note evidencing the Loans made by such Lender. The Borrower hereby
irrevocably authorizes each Lender to make (or cause to be made)
appropriate notations on the grid attached to such Lender's Notes (or on
any continuation of such grid), which notations, if made, shall evidence,
inter alia, the date of, the outstanding principal amount of, and the
interest rate and Interest Period applicable to the Loans evidenced
thereby. Such notations shall, to the extent not inconsistent with the
notations made by the Administrative Agent in the Register, be conclusive
and binding on the Borrower absent manifest error; provided, however, that
the failure of any Lender to make any such notations or any error in any
such notations shall not limit or otherwise affect any Obligations of the
Borrower or any other Obligor. The Loans evidenced by any such Note and
interest thereon shall at all times (including after assignment pursuant
to Section 10.11.1) be represented by one or more Notes payable to the
order of the payee named therein and its registered assigns. A Note and
the obligation evidenced thereby may be assigned or otherwise transferred
in whole or in part only by registration of such assignment or transfer of
such Note and the obligation evidenced thereby in the Register (and each
Note shall expressly so provide). Any assignment or transfer of all or
part of an obligation evidenced by a Note shall be registered in the
Register only upon surrender for registration of assignment or transfer of
the Note evidencing such obligation, accompanied by a Lender Assignment
Agreement duly executed by the assignor thereof, and thereupon, if
requested by the assignee, one or more new Notes shall be issued to the
designated assignee and the old Note shall be returned by the
Administrative Agent to the Borrower marked "exchanged". No assignment of
a Note and the obligation evidenced thereby shall be effective unless it
shall have been recorded in the Register by the Administrative Agent as
provided in this Section.
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ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments; Application.
SECTION 3.1.1. Repayments and Prepayments. The Borrower shall repay in
full the unpaid principal amount of each Loan upon the Stated Maturity Date
therefor. Prior thereto, payments and repayments of Loans shall or may be made
as set forth below.
(a) From time to time on any Business Day, the Borrower may make a
voluntary prepayment, in whole or in part, of the outstanding principal
amount of any
(i) Loans (other than Swing Line Loans); provided, however, that
(A) any such prepayment of the Term-A Loans or Term-B Loans
shall be made pro rata among Term-A Loans and Term-B Loans, as
applicable, of the same type and, if applicable, having the same
Interest Period of all Lenders that have made such Term-A Loans
or Term-B Loans, and any such prepayment of Revolving Loans
shall be made pro rata among the Revolving Loans of the same
type and, if applicable, having the same Interest Period of all
Lenders that have made such Revolving Loans;
(B) the Borrower shall comply with Section 4.4 in the event
that any LIBO Rate Loan is prepaid on any day other than the
last day of the Interest Period for such Loan;
(C) all such voluntary prepayments shall require at least
one Business Day's notice in the case of Base Rate Loans, three
Business Days' notice in the case of LIBO Rate Loans, but no
more than five Business Days' notice in the case of any Loans,
in each case in writing to the Administrative Agent; and
(D) all such voluntary partial prepayments shall be in an
aggregate amount of $500,000 or any larger integral multiple of
$100,000 or in the aggregate principal amount of all Loans of
the applicable Tranche and type then outstanding; or
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(ii) Swing Line Loans, provided that
(A) all such voluntary prepayments shall require prior
telephonic notice to the Swing Line Lender on or before 11:00
a.m., Los Angeles time, on the day of such prepayment (such
notice to be confirmed in writing by the Borrower within 24
hours thereafter); and
(B) all such voluntary partial prepayments shall be in an
aggregate amount of $500,000 and an integral multiple of
$100,000 or in the aggregate principal amount of all Swing Line
Loans then outstanding.
(b) No later than five Business Days following the delivery by the
Borrower of its annual audited financial reports required pursuant to
clause (b) of Section 7.1.1 (beginning with the financial reports
delivered in respect of the 2000 Fiscal Year), the Borrower shall deliver
to the Administrative Agent a calculation of the Excess Cash Flow for the
Fiscal Year last ended and, no later than five Business Days following the
delivery of such calculation, make or cause to be made a mandatory
prepayment of the Term Loans in an amount equal to 50% of the Excess Cash
Flow (if any) for such Fiscal Year less (ii) the aggregate amount of all
voluntary prepayments of the principal of the Term Loans actually made in
such Fiscal Year pursuant to clause (a) of Section 3.1.1, to be applied as
set forth in Section 3.1.2; provided, however, that such prepayment shall
only be required to be made to the extent that the amount of Debt, as
reduced by giving effect to such prepayment, would result in a Leverage
Ratio of greater than 3.50:1 on a pro forma basis as of the date of such
prepayment.
(c) No later than one Business Day (in the case of Net Debt Proceeds)
or 30 calendar days (in the case of Net Disposition Proceeds) following
the receipt of any Net Disposition Proceeds or Net Debt Proceeds by (x) in
the case of Net Debt Proceeds, Holdco, the Borrower or any Restricted
Subsidiary of the Borrower and (y) in the case of Net Disposition
Proceeds, the Borrower or any Restricted Subsidiary of the Borrower, the
Borrower shall deliver to the Administrative Agent a calculation of the
amount of such Net Disposition Proceeds or Net Debt Proceeds, as the case
may be, and, to the extent the amount of such Net Disposition Proceeds or
Net Debt Proceeds, as the case may be, with respect to any single
transaction or series of related transactions, exceeds $2,000,000, make a
mandatory prepayment of the Term Loans in an amount equal to 100% of such
Net Disposition Proceeds or Net Debt Proceeds, as the case may be, to be
applied as set forth in Section 3.1.2; provided, that no mandatory
prepayment on account of such Net Disposition Proceeds shall be required
under this clause if the Borrower informs the Agents no later than 30 days
following the receipt of any Net Disposition Proceeds of its or its
Restricted Subsidiary's good faith intention to apply such Net Disposition
Proceeds to the acquisition of other assets or property consistent with
the business permitted to be conducted pursuant to Section 7.2.1
(including by way of merger or Investment) within
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365 days following the receipt of such Net Disposition Proceeds, with the
amount of such Net Disposition Proceeds unused after such 365 day period
being applied to the Loans pursuant to Section 3.1.2.
(d) The Borrower shall, concurrently with the receipt of any Net
Equity Proceeds by Holdco, the Borrower or any Restricted Subsidiary of
the Borrower, deliver to the Administrative Agent a calculation of the
amount of such Net Equity Proceeds, and no later than five Business Days
following the delivery of such calculation, and, to the extent that the
amount of such Net Equity Proceeds with respect to any single transaction
or series of related transactions exceeds $2,000,000, and subject to the
proviso below, make or cause to be made a mandatory prepayment of the Term
Loans in an amount equal to 50% of such Net Equity Proceeds to be applied
as set forth in Section 3.1.2; provided, however, that such prepayment
shall only be required to be made to the extent that the amount of Debt,
as reduced by giving effect to such prepayment would result in a Leverage
Ratio of greater than 3.50:1 on a pro forma basis as of the date of such
prepayment;
(e) The Borrower shall, no later than the 60th calendar day following
the receipt by the Borrower or any of its Restricted Subsidiaries of any
Casualty Proceeds in excess of $2,000,000 (individually or in the
aggregate in any Fiscal Year), make or cause to be made a mandatory
prepayment of the Term Loans in an amount equal to 100% of such Casualty
Proceeds, to be applied as set forth in Section 3.1.2; provided, that no
mandatory prepayment on account of Casualty Proceeds shall be required
under this clause if the Borrower informs the Agents no later than 60 days
following the occurrence of the Casualty Event resulting in such Casualty
Proceeds of its or its Restricted Subsidiary's good faith intention to
apply such Casualty Proceeds to the rebuilding or replacement of the
damaged, destroyed or condemned assets or property subject to such
Casualty Event or the acquisition of other assets or property consistent
with the business permitted to be conducted pursuant to Section 7.2.1
(including by way of merger or Investment) and in fact uses such Casualty
Proceeds to rebuild or replace the damaged, destroyed or condemned assets
or property subject to such Casualty Event or to acquire such other
property or assets within 365 days following the receipt of such Casualty
Proceeds, with the amount of such Casualty Proceeds unused after such 365
day period being applied to the Loans pursuant to Section 3.1.2; provided
further, however, that at any time when any Event of Default shall have
occurred and be continuing or Casualty Proceeds not applied as provided
above shall exceed $2,000,000, such Casualty Proceeds will be deposited in
an account maintained with the Administrative Agent for disbursement at
the request of the Borrower to pay for such rebuilding, replacement or
acquisition.
(f) On each date when any reduction in the Revolving Loan Commitment
Amount shall become effective, the Borrower shall make a mandatory
prepayment of
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Revolving Loans and (if necessary) Swing Line Loans and (if necessary)
deposit with the Administrative Agent cash collateral for Letter of Credit
Outstandings in an aggregate amount equal to the excess, if any, of the
sum of (i) the aggregate outstanding principal amount of all Revolving
Loans and Swing Line Loans and (ii) the aggregate amount of all Letter of
Credit Outstandings over the Revolving Loan Commitment Amount as so
reduced;
(g) The Borrower shall, on the Stated Maturity Date and on each
Quarterly Payment Date occurring during any period set forth below, make a
scheduled repayment of the outstanding principal amount, if any, of Term-A
Loans in an aggregate amount equal to the amount set forth below opposite
such Stated Maturity Date or period, as applicable (as such amounts may
have otherwise been reduced pursuant to this Agreement):
Scheduled
Principal
Period Repayment
------------------------------- ---------
10/15/00 to 10/14/01 $ 500,000
10/15/01 to 10/14/02 $1,000,000
10/15/02 to 10/14/03 $2,000,000
10/15/03 to 10/14/04 $2,500,000
10/15/04 to the Sixth $4,000,000
Anniversary of the Closing
Date
(h) The Borrower shall, on the Stated Maturity Date and on each
Quarterly Payment Date occurring during any period set forth below, make a
scheduled repayment of the outstanding principal amount, if any, of Term-B
Loans in an aggregate amount equal to the amount set forth below opposite
such Stated Maturity Date or period, as applicable (as such amounts may
have otherwise been reduced pursuant to this Agreement):
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Scheduled
Principal
Period Repayment
-------------------------- ---------
10/15/99 to 10/14/06 $300,000
10/15/06 to the Eighth $27,900,000
Anniversary of the
Closing Date
(i) Following the prepayment in full of the Term Loans, on the date
the Term Loans would otherwise have been required to be prepaid on account
of any Net Disposition Proceeds, Net Debt Proceeds, Excess Cash Flow, Net
Equity Proceeds or Casualty Proceeds, the Borrower shall first, prepay
Revolving Loans and Swing Line Loans, and, second, deposit with the
Administrative Agent cash collateral for Letter of Credit Outstandings, in
an aggregate amount equal to the amount by which the Term Loans would
otherwise have been required to be prepaid if Term Loans had been
outstanding.
(j) The Borrower shall, immediately upon any acceleration of the
Stated Maturity Date of any Loans or Obligations pursuant to Section 8.2
or Section 8.3, repay all outstanding Loans and other Obligations, unless,
pursuant to Section 8.3, only a portion of all Loans and other Obligations
are so accelerated (in which case the portion so accelerated shall be so
prepaid).
Each prepayment of any Loans made pursuant to this Section shall be
without premium or penalty, except as may be required by Section 4.4. No
prepayment of principal of any Revolving Loans or Swing Line Loans pursuant to
clause (a) or (i) of this Section 3.1.1 shall cause a reduction in the
Revolving Loan Commitment Amount or the Swing Line Loan Commitment Amount, as
the case may be.
SECTION 3.1.2. Application. (a) Subject to clause (b) below, each
prepayment or repayment of principal of the Loans of any Tranche shall be
applied, to the extent of such prepayment or repayment, first, to the principal
amount thereof being maintained as Base Rate Loans, and second, to the
principal amount thereof being maintained as LIBO Rate Loans.
(b) Each prepayment of Term Loans made pursuant to clauses (a), (b), (c),
(d) and (e) of Section 3.1.1 shall be applied, (i) on a pro rata basis, to the
outstanding principal amount of all remaining Term-A Loans and Term-B Loans and
(ii) in respect of each Tranche of Term Loans, in direct order of maturity of
the remaining scheduled quarterly amortization payments in respect thereof,
until all such Term-A Loans and Term-B Loans have been paid in full (provided,
however, that if the Borrower at any time elects in writing, in its sole
discretion, to permit any
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Lender that has Term-B Loans to decline to have such Loans prepaid, then any
Lender having Term-B Loans outstanding may, by delivering a notice to the
Agents at least one Business Day prior to the date that such prepayment is to
be made, decline to have such Loans prepaid with the amounts set forth above,
in which case 50% of the amounts that would have been applied to a prepayment
of such Lender's Term-B Loans, as the case may be, shall instead be applied to
a prepayment of the Term-A Loans (until paid in full), with the balance being
retained by the Borrower).
SECTION 3.2. Interest Provisions. Interest on the outstanding principal
amount of the Loans shall accrue and be payable in accordance with this Section
3.2.
SECTION 3.2.1. Rates. (a) Each Base Rate Loan shall accrue interest on the
unpaid principal amount thereof for each day from and including the day upon
which such Loan was made or converted to a Base Rate Loan to but excluding the
date such Loan is repaid or converted to a LIBO Rate Loan at a rate per annum
equal to the sum of the Alternate Base Rate for such day plus the Applicable
Margin for such Loan on such day.
(b) Each LIBO Rate Loan shall accrue interest on the unpaid principal
amount thereof for each day during each Interest Period applicable thereto at a
rate per annum equal to the sum of the LIBO Rate (Reserve Adjusted) for such
Interest Period plus the Applicable Margin for such Loan on such day.
All LIBO Rate Loans shall bear interest from and including the first day of the
applicable Interest Period to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such LIBO Rate Loan.
SECTION 3.2.2. Post-Maturity Rates. After the date any principal amount of
any Loan shall have become due and payable (whether on the applicable Stated
Maturity Date, upon acceleration or otherwise), or any other monetary
Obligation (other than overdue Reimbursement Obligations which shall bear
interest as provided in Section 2.6.2) of the Borrower shall have become due
and payable, the Borrower shall pay, but only to the extent permitted by law,
interest (after as well as before judgment) on such amounts at a rate per annum
equal to (a) in the case of any overdue principal of Loans, overdue interest
thereon, overdue commitment fees or other overdue amounts in respect of Loans
or other obligations (or the related Commitments) under a particular Tranche,
the rate that would otherwise be applicable to Base Rate Loans under such
Tranche pursuant to Section 3.2.1 plus 2% and (b) in the case of other overdue
monetary Obligations, the rate that would otherwise be applicable to Revolving
Loans that were Base Rate Loans plus 2%.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
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(a) on the Stated Maturity Date therefor;
(b) in the case of a LIBO Rate Loan, on the date of any payment or
prepayment, in whole or in part, of principal outstanding on such Loan, to
the extent of the unpaid interest accrued through such date on the
principal so paid or prepaid;
(c) with respect to Base Rate Loans, on each Quarterly Payment Date
occurring after the date of the initial Borrowing hereunder;
(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed
three months, at intervals of three months after the first day of such
Interest Period); and
(e) on that portion of any Loans the Stated Maturity Date of which is
accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such
acceleration.
Interest accrued on Loans, Reimbursement Obligations or other monetary
Obligations arising under this Agreement or any other Loan Document after the
date such amount is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise) shall be payable upon demand.
SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in this
Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender that has a Revolving Loan
Commitment, for each day during the period (including any portion thereof when
any of the Lenders' Revolving Loan Commitments are suspended by reason of the
Borrower's inability to satisfy any condition of Article V) commencing on the
Closing Date and continuing to but excluding the Revolving Loan Commitment
Termination Date, a commitment fee on such Lender's Percentage of the unused
portion, whether or not then available, of the Revolving Loan Commitment Amount
(net of Letter of Credit Outstandings) for such day at a rate per annum equal
to the Applicable Commitment Fee for such day. Such commitment fee shall be
payable by the Borrower in arrears on each Quarterly Payment Date, commencing
with the first such day following the Closing Date, and on the Revolving Loan
Commitment Termination Date. The making of Swing Line Loans shall not
constitute usage of the Revolving Loan Commitment with respect to the
calculation of commitment fees to be paid by the Borrower to the Lenders. Any
term or provision hereof to the contrary notwithstanding, commitment fees
payable for any period prior to the Closing Date shall be payable in accordance
with the Fee Letter. Payments by the Borrower to the Swing Line Lender in
respect of accrued interest on Swing Line Loans shall be net of the commitment
fee payable in respect of the Swing Line Lender's Revolving Loan Commitment.
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SECTION 3.3.2. Administrative Agent Fee. The Borrower agrees to pay an
annual administration fee to the Administrative Agent, for its own account, in
the amount set forth in the Administrative Agent Fee Letter, payable in advance
on the Closing Date and quarterly thereafter.
SECTION 3.3.3. Letter of Credit Fee. The Borrower agrees to pay to the
Administrative Agent, for the pro rata account of the applicable Issuer and
each other Lender that has a Revolving Loan Commitment, a letter of credit fee
for each day on which there shall be any Letters of Credit outstanding in an
amount equal to (i) with respect to each standby Letter of Credit, a rate per
annum equal to the then Applicable Margin for Revolving Loans maintained as
LIBO Rate Loans, multiplied by the Stated Amount of each such Letter of Credit;
and (ii) with respect to each documentary Letter of Credit, 1.25% per annum
multiplied by the Stated Amount of each such Letter of Credit, such fees being
payable quarterly in arrears on each Quarterly Payment Date. The Borrower
further agrees to pay to the applicable Issuer an issuance fee at the rates and
on such dates agreed to between the Borrower and such Issuer.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall determine
(which determination shall, in the absence of manifest error, upon notice
thereof to the Borrower and the Lenders, be conclusive and binding on the
Borrower) that the introduction of or any change in or in the interpretation of
any law, in each case after the date upon which such Lender shall have become a
Lender hereunder, makes it unlawful, or any central bank or other governmental
authority asserts, after such date, that it is unlawful, for such Lender to
make, continue or maintain any Loan as, or to convert any Loan into, a LIBO
Rate Loan, the obligations of such Lender to make, continue, maintain or
convert any Loans as or to LIBO Rate Loans shall, upon such determination,
forthwith be suspended until such Lender shall notify the Administrative Agent
that the circumstances causing such suspension no longer exist (with the date
of such notice being the "Reinstatement Date"), and (i) all LIBO Rate Loans
previously made by such Lender shall automatically convert into Base Rate Loans
at the end of the then current Interest Periods with respect thereto or sooner,
if required by such law or assertion and (ii) all Loans thereafter made by such
Lender and outstanding prior to the Reinstatement Date shall be made as Base
Rate Loans, with interest thereon being payable on the same date that interest
is payable with respect to the corresponding Borrowing of LIBO Rate Loans made
by Lenders not so affected.
SECTION 4.2. Deposits Unavailable. If the Administrative Agent shall have
determined that (i) Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to the Administrative Agent in its relevant
market, or (ii) by reason of circumstances
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affecting the Administrative Agent's relevant market, adequate means do not
exist for ascertaining the interest rate applicable hereunder to LIBO Rate
Loans, then, upon notice from the Administrative Agent to the Borrower and the
Lenders, the obligations of all Lenders under Section 2.3 and Section 2.4 to
make or continue any Loans as, or to convert any Loans into, LIBO Rate Loans
shall forthwith be suspended until the Administrative Agent shall notify the
Borrower and the Lenders that the circumstances causing such suspension no
longer exist.
SECTION 4.3. Increased LIBO Rate Loan Costs, etc. The Borrower agrees to
reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
making, continuing or maintaining (or of its obligation to make, continue or
maintain) any Loans as, or of converting (or of its obligation to convert) any
Loans into, LIBO Rate Loans (excluding any amounts, whether or not constituting
Taxes, referred to in Section 4.6) arising as a result of any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority that occurs after the date upon which such
Lender became a Lender hereunder. Such Lender shall promptly notify the
Administrative Agent and the Borrower in writing of the occurrence of any such
event, such notice to state, in reasonable detail, the reasons therefor and the
additional amount required fully to compensate such Lender for such increased
cost or reduced amount. Such additional amounts shall be payable by the
Borrower directly to such Lender within five days of its receipt of such
notice, and such notice shall, in the absence of manifest error, be conclusive
and binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender shall incur any loss
or expense (including any loss or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such Lender to make,
continue or maintain any portion of the principal amount of any Loan as, or to
convert any portion of the principal amount of any Loan into, a LIBO Rate Loan,
but excluding any loss of margin after the date of any such conversion,
repayment, prepayment or failure to borrow, continue or convert) as a result of
(i) any conversion or repayment or prepayment of the principal amount of any
LIBO Rate Loans on a date other than the scheduled last day of the Interest
Period applicable thereto, whether pursuant to Section 3.1 or otherwise, (ii)
any Loans not being borrowed as LIBO Rate Loans in accordance with the
Borrowing Request therefor, or (iii) any Loans not being continued as, or
converted into, LIBO Rate Loans in accordance with the Continuation/ Conversion
Notice therefor, then, upon the written notice of such Lender to the Borrower
(with a copy to the Administrative Agent), the Borrower shall, within five days
of its receipt thereof, pay directly to such Lender such amount as will (in the
reasonable determination of such Lender) reimburse such Lender for such loss or
expense. Such written notice (which shall include calculations in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the Borrower.
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SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law or regulation, directive, guideline, decision or request
(whether or not having the force of law) of any court, central bank, regulator
or other governmental authority, in each case occurring after the applicable
Lender becomes a Lender hereunder, affects or would affect the amount of
capital required or expected to be maintained by any Lender or any Person
controlling such Lender, and such Lender determines (in its sole and absolute
discretion) that the rate of return on its or such controlling Person's capital
as a consequence of its Commitments, participation in Letters of Credit or the
Loans made by such Lender is reduced to a level below that which such Lender or
such controlling Person could have achieved but for the occurrence of any such
circumstance, then, in any such case upon notice from time to time by such
Lender to the Borrower, the Borrower shall immediately pay directly to such
Lender additional amounts sufficient to compensate such Lender or such
controlling Person for such reduction in rate of return. A statement of such
Lender as to any such additional amount or amounts (including calculations
thereof in reasonable detail) shall, in the absence of manifest error, be
conclusive and binding on the Borrower. In determining such amount, such Lender
may use any method of averaging and attribution that it (in its sole and
absolute discretion) shall deem applicable; provided, that such Lender may not
impose materially greater costs on the Borrower than on other similarly
situated borrowers by virtue of any such averaging or attribution method.
SECTION 4.6. Taxes. (a) All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder or under any
other Loan Document (including Reimbursement Obligations, fees and expenses)
shall be made free and clear of and without deduction for any present or future
income, excise, stamp or franchise taxes and other taxes, fees, duties,
withholdings or other charges of any nature whatsoever imposed by any taxing
authority from or through which payments originate or are made or deemed made
by or to the Borrower, but excluding (i) any income, excise, stamp or franchise
taxes and other similar taxes, fees, duties, withholdings or other charges
imposed on any Lender or either of the Agents by a jurisdiction under the laws
of which such Lender or Agent is organized or in which its principal executive
office is located, or otherwise as a result of a present or former connection
between the applicable lending office (or office through which it performs any
of its actions as Lender or Agent) of such Lender or Agent and the jurisdiction
of the governmental authority imposing such tax or any political subdivision or
taxing authority thereof or therein (other than any such connection arising
solely from such Agent or such Lender having executed, delivered or performed
its obligations or received a payment under, or taken any action to enforce,
this Agreement and any Note) or (ii) any income, excise, stamp or franchise
taxes and other similar taxes, fees, duties, withholdings or other charges to
the extent that they are in effect and would apply as of the date any Person
becomes a Lender or Assignee Lender, or as of the date that any Lender changes
its applicable lending office, to the extent such taxes become applicable as a
result of such change (other than a change in an applicable lending office made
pursuant to Section 4.10 below) (such non-excluded items being called "Taxes").
In the event that any withholding or deduction from any payment to be made by
the Borrower hereunder is required in
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respect of any Taxes pursuant to any applicable law, rule or regulation, then
the Borrower will (i) pay directly to the relevant taxing authority the full
amount required to be so withheld or deducted, (ii) promptly forward to the
Administrative Agent an official receipt or other documentation available to
the Borrower reasonably satisfactory to the Administrative Agent evidencing
such payment to such authority, and (iii) pay to the Administrative Agent for
the account of the Lenders such additional amount or amounts as is necessary to
ensure that the net amount actually received by each Lender will equal the full
amount such Lender would have received had no such withholding or deduction
been required, provided, however, that the Borrower shall not be required to
pay any such additional amounts in respect of amounts payable to any Lender
that is not organized under the laws of the United States or a state thereof to
the extent that the related tax is imposed (or an exemption therefrom is not
available) as a result of such Lender or Agent failing to comply with the
requirements of clause (b) of Section 4.6.
Moreover, if any Taxes are directly asserted against either of the Agents
or any Lender with respect to any payment received by such Agents or such
Lender hereunder, such Agents or such Lender may pay such Taxes and the
Borrower will promptly pay to such Person such additional amount (including any
penalties, interest or expenses) as is necessary in order that the net amount
received by such Person (including any Taxes on such additional amount) shall
equal the amount of such Taxes paid by such Person; provided, however, that the
Borrower shall not be obligated to make payment to the Lenders or the Agents
(as the case may be) pursuant to this sentence in respect of penalties or
interest attributable to any Taxes, if written demand therefor has not been
made by such Lenders or the Agents within 60 days from the date on which such
Lenders or the Agents knew of the imposition of Taxes by the relevant taxing
authority or for any additional imposition which may arise from the failure of
the Lenders or the Agents to apply payments in accordance with the tax law
after the Borrower has made the payments required hereunder; provided, further,
that the Borrower shall not be required to pay any such additional amounts in
respect of any amounts payable to any Lender or any Agent (as the case may be)
that is not organized under the laws of the United States or a state thereof to
the extent the related Tax is imposed as a result of such Lender failing to
comply with the requirements of clause (b) of Section 4.6. After the Lenders or
the Agents (as the case may be) learn of the imposition of Taxes, such Lenders
and the Agents will act in good faith to notify the Borrower of its obligations
hereunder as soon as reasonably possible.
If the Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent, for the account of the
respective Lenders, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure.
(b) Each Non-U.S. Lender shall, (i) on or prior to the date of the
execution and delivery of this Agreement, in the case of each Lender listed on
the signature pages hereof, or, in the case of an Assignee Lender, on or prior
to the date it becomes a Lender, execute and deliver to the
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Borrower and the Administrative Agent, two or more (as the Borrower or the
Agents may reasonably request) United States Internal Revenue Service Forms
W-8ECI or Forms W-8BEN (or successor forms) establishing the Lender's exemption
from United States federal withholding tax, or, solely if such Lender is
claiming exemption from United States withholding tax under Section 871(h) or
881(c) of the Code with respect to payments of "portfolio interest", United
States Internal Revenue Service Forms W-8BEN and a certificate signed by a duly
authorized officer of such Lender representing that such Lender is not a "bank"
within the meaning of Section 881(c)(3)(A) of the Code, or such other forms or
documents (or successor forms or documents), appropriately completed,
establishing that payments to such Lender are exempt from withholding or
deduction of United States federal withholding taxes; and (ii) deliver to the
Borrower and the Administrative Agent two further copies of any such form or
documents on or before the date that any such form or document expires or
becomes obsolete and after the occurrence of any event requiring a change in
the most recent such form or document previously delivered by it to the
Borrower. Each Lender and each Agent agrees, to the extent reasonable and
without material cost to it, to provide to the Borrower and the Administrative
Agent such other applicable forms or certificates as would reduce or eliminate
any Tax otherwise applicable.
(c) If the Borrower determines in good faith that a reasonable basis
exists for contesting the imposition of a Tax with respect to a Lender or
either of the Agents, the relevant Lender or Agent, as the case may be, shall
cooperate with the Borrower in challenging such Tax at the Borrower's expense
if requested by the Borrower; provided, however, that nothing in this Section
4.6 shall require any Lender or Agent to submit to the Borrower or any Person
any tax returns or any part thereof, or to prepare or file any tax returns
other than as such Lender or Agent in its sole discretion shall determine.
(d) If a Lender or an Agent shall receive a refund (including any offset
or credits from a taxing authority (as a result of any error in the imposition
of Taxes by such taxing authority) of any Taxes paid by the Borrower pursuant
to subsection 4.6(a) above, such Lender or such Agent (as the case may be)
shall promptly pay the Borrower the amount so received, with interest from the
taxing authority with respect to such refund, net of any tax liability incurred
by such Lender or Agent that is attributable to the receipt of such refund and
such interest.
(e) Each Lender and each Agent agrees, to the extent reasonable and
without material cost to it, to cooperate with the Borrower to minimize any
amounts payable by the Borrower under this Section 4.6; provided, however, that
nothing in this Section 4.6 shall require any Lender or Agent to take any
action which, in the sole discretion of such Lender or Agent, is inconsistent
with its internal policy and legal and regulatory restrictions.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Lender or Agent pursuant to clause (a) of this Section 4.6 as a
result of a change of law occurring after the date hereof, then such Lender or
Agent, at the request of the Borrower, will change the jurisdiction of its
applicable lending office (or office through which it performs any of its
actions
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as Agent) if such change (i) would eliminate or reduce any such additional
payment which may thereafter accrue and (ii) is not, in the good faith
determination of such Lender or Agent, otherwise disadvantageous to such Lender
or Agent.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by or on behalf of the Borrower pursuant to this
Agreement or any other Loan Document shall be made by the Borrower to the
Administrative Agent for the pro rata account of the Lenders, Agents or Lead
Arranger, as applicable, entitled to receive such payment. All such payments
required to be made to the Administrative Agent shall be made, without setoff,
deduction or counterclaim, not later than 11:00 a.m., Los Angeles time, on the
date due, in same day or immediately available funds, to such account as the
Administrative Agent shall specify from time to time by notice to the Borrower.
Funds received after that time shall be deemed to have been received by the
Administrative Agent on the next succeeding Business Day. The Administrative
Agent shall promptly remit in same day funds to each Lender, Agent or Lead
Arranger, as the case may be, its share, if any, of such payments received by
the Administrative Agent for the account of such Lender, Agent or Lead
Arranger, as the case may be. All interest and fees shall be computed on the
basis of the actual number of days (including the first day but excluding the
last day) occurring during the period for which such interest or fee is payable
over a year comprised of 360 days (or, in the case of interest on a Base Rate
Loan, 365 days or, if appropriate, 366 days). Whenever any payment to be made
shall otherwise be due on a day which is not a Business Day, such payment shall
(except as otherwise required by clause (i) of the definition of the term
"Interest Period") be made on the next succeeding Business Day and such
extension of time shall be included in computing interest and fees, if any, in
connection with such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any payment
or other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan or Reimbursement Obligation (other than
pursuant to the terms of Sections 4.3, 4.4 and 4.5) in excess of its pro rata
share of payments then or therewith obtained by all Lenders entitled thereto,
such Lender shall purchase from the other Lenders such participation in the
Credit Extensions made by them as shall be necessary to cause such purchasing
Lender to share the excess payment or other recovery ratably with each of them;
provided, however, that if all or any portion of the excess payment or other
recovery is thereafter recovered from such purchasing Lender, the purchase
shall be rescinded and each Lender which has sold a participation to the
purchasing Lender shall repay to the purchasing Lender the purchase price to
the ratable extent of such recovery together with an amount equal to such
selling Lender's ratable share (according to the proportion of (i) the amount
of such selling Lender's required repayment to the purchasing Lender in respect
of such recovery, to (ii) the total amount so recovered from the purchasing
Lender) of any interest or other amount paid or payable by the purchasing
Lender in respect of the total amount so recovered. The Borrower agrees that
any Lender so purchasing a participation from another Lender pursuant to this
Section may, to the fullest extent permitted by law, exercise all its rights of
payment (including pursuant to Section 4.9) with respect to such
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participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a setoff to which this Section applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Lenders entitled under this Section
to share in the benefits of any recovery on such secured claim.
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of any Event
of Default described in clauses (b) through (d) of Section 8.1.9 with respect
to any Obligor (other than a Subsidiary that is not a Material Subsidiary) or,
with the consent of the Required Lenders, upon the occurrence of any other
Event of Default, to the fullest extent permitted by law, have the right to
appropriate and apply to the payment of the Obligations then due to it, and (as
security for such Obligations) the Borrower hereby grants to each Lender a
continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of the Borrower then or thereafter maintained with or
otherwise held by such Lender; provided, however, that any such appropriation
and application shall be subject to the provisions of Section 4.8. Each Lender
agrees promptly to notify the Borrower and the Administrative Agent after any
such setoff and application made by such Lender; provided, however, that the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including other rights of setoff under applicable
law or otherwise) which such Lender may have.
SECTION 4.10. Mitigation. Each Lender agrees that if it makes any demand
for payment under Sections 4.3, 4.4, 4.5, or 4.6, or if any adoption or change
of the type described in Section 4.1 shall occur with respect to it, it will
use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrower to make payments under Section 4.3, 4.4, 4.5,
or 4.6, or would eliminate or reduce the effect of any adoption or change
described in Section 4.1.
SECTION 4.11. Replacement of Lenders. Each Lender hereby severally agrees
as set forth in this Section. If any Lender (a "Subject Lender") (i) makes
demand upon the Borrower for (or if the Borrower is otherwise required to pay)
amounts pursuant to Section 4.3, 4.5 or 4.6, (ii) gives notice pursuant to
Section 4.1 requiring a conversion of such Subject Lender's LIBO Rate Loans to
Base Rate Loans or any change in the basis upon which interest is to accrue in
respect of such Subject Lender's LIBO Rate Loans or suspending such Lender's
obligation to make Loans as, or to convert Loans into, LIBO Rate Loans, (iii)
becomes a Non-Consenting Lender or (iv) becomes a Non-Funding Lender, the
Borrower may, within 180 days of receipt by the Borrower of such demand or
notice (or the occurrence of such other event causing the Borrower to be
required to pay such compensation) or within 180 days of such Lender becoming a
Non-Consenting Lender or a Non-Funding Lender, as the case may be, give notice
(a
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"Replacement Notice") in writing to the Agents and such Subject Lender of its
intention to replace such Subject Lender with a financial institution (a
"Replacement Lender") designated in such Replacement Notice. If the Agents
shall, in the exercise of their reasonable discretion and within 30 days of
their receipt of such Replacement Notice, notify the Borrower and such Subject
Lender in writing that the designated financial institution is satisfactory to
the Agents (such consent not being required where the Replacement Lender is
already a Lender), then such Subject Lender shall, subject to the payment of
any amounts due pursuant to Section 4.4, assign, in accordance with Section
10.11.1, all of its Commitments, Loans and other rights and obligations under
this Agreement and all other Loan Documents (including Reimbursement
Obligations) to such designated financial institution; provided, however, that
(i) such assignment shall be without recourse, representation or warranty and
shall be on terms and conditions reasonably satisfactory to such Subject Lender
and such designated financial institution and (ii) the purchase price paid by
such designated financial institution shall be in the amount of such Subject
Lender's Loans and its Percentage in respect of any Revolving Loan Commitment
under which there are outstanding Reimbursement Obligations of such
Reimbursement Obligation, together with all accrued and unpaid interest and
fees in respect thereof, plus all other amounts (including the amounts demanded
and unreimbursed under Sections 4.3, 4.5 and 4.6), owing to such Subject Lender
hereunder. Upon the effective date of an assignment described above, the
designated financial institution or Replacement Lender shall become a "Lender"
for all purposes under this Agreement and the other Loan Documents.
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
SECTION 5.1. Initial Credit Extension. The obligations of the Lenders and,
if applicable, the Issuer to fund the initial Credit Extension shall be subject
to the prior or concurrent satisfaction of each of the conditions precedent set
forth in this Section 5.1.
SECTION 5.1.1. Resolutions, etc. The Agents shall have received from each
Obligor a certificate, dated the date of the initial Credit Extension, of its
Secretary or Assistant Secretary as to (i) resolutions of its Board of
Directors then in full force and effect authorizing the execution, delivery and
performance of each Loan Document to be executed by it, and (ii) the incumbency
and signatures of those of its officers authorized to act with respect to each
Loan Document executed by it, upon which certificate each Agent and each Lender
may conclusively rely until it shall have received a further certificate of the
Secretary or Assistant Secretary of such Obligor canceling or amending such
prior certificate.
SECTION 5.1.2. Transaction Documents. The Agents shall have received (with
copies for each Lender that shall have expressly requested copies thereof)
copies of fully executed versions of the Transaction Documents, certified to be
true and complete copies thereof by an
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Authorized Officer of the Borrower. The Recapitalization Agreement shall be in
full force and effect and shall not have been modified or waived in any
material respect, nor shall there have been any forbearance to exercise any
material rights with respect to any of the terms or provisions relating to the
conditions to the consummation of the Recapitalization and the Merger as set
forth in the Recapitalization Agreement unless otherwise agreed to by the
Required Lenders.
SECTION 5.1.3. Consummation of Recapitalization and Merger. The Agents
shall have received evidence satisfactory to each of them that all actions
necessary to consummate the Recapitalization and the Merger shall have been
taken.
SECTION 5.1.4. Closing Date Certificate. Each of the Agents shall have
received, with counterparts for each Lender, the Closing Date Certificate,
substantially in the form of Exhibit D hereto, dated the date of the initial
Credit Extension and duly executed and delivered by an Authorized Officer that
is the president, the chief executive officer or the chief financial or
accounting officer of the Borrower, in which certificate the Borrower shall
agree and acknowledge that the statements made therein shall be deemed to be
true and correct representations and warranties of the Borrower made as of such
date under this Agreement, and, at the time such certificate is delivered, such
statements shall in fact be true and correct.
SECTION 5.1.5. Delivery of Notes. The Agents shall have received, for the
account of each Lender that has submitted, at least two Business Days prior to
the Closing Date, a written request pursuant to Section 2.7(b)(ii), a Note of
the applicable Tranche duly executed and delivered by the Borrower.
SECTION 5.1.6. Subsidiary Guaranty. The Agents shall have received a
Subsidiary Guaranty, dated the date hereof, duly executed and delivered by an
Authorized Officer of each U.S. Subsidiary of the Borrower that is a Restricted
Subsidiary and that is in existence on the date of the initial Credit Extension
(after giving effect to the Transaction).
SECTION 5.1.7. Pledge and Security Agreements, etc. The Agents shall have
received executed counterparts of
(a) the Holdco Guaranty and Pledge Agreement, dated as of the Closing
Date, duly executed by an Authorized Officer of Holdco, together with the
certificates evidencing all of the issued and outstanding shares of
Capital Stock of the Borrower pledged pursuant to the Holdco Guaranty and
Pledge Agreement, which certificates shall in each case be accompanied by
undated powers of transfer duly executed in blank; and
(b) each Pledge and Security Agreement, dated as of the Closing Date,
duly executed and delivered by an Authorized Officer of the Borrower and
each Restricted Subsidiary that is a U.S. Subsidiary, as applicable,
together with
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(i) the certificates evidencing all of the issued and
outstanding shares of Capital Stock pledged pursuant to the
applicable Pledge and Security Agreement, which certificates shall in
each case be accompanied by undated powers of transfer duly executed
in blank, or, if any such shares of Capital Stock of each U.S.
Subsidiary of such Obligor pledged pursuant to such Pledge and
Security Agreement are uncertificated securities or are held through
a securities intermediary, the Administrative Agent shall have
obtained "control" (as defined in the UCC) over such shares of
Capital Stock and such other instruments and documents as the
Administrative Agent shall deem necessary or in the reasonable
opinion of the Administrative Agent desirable under applicable law to
perfect the security interest of the Administrative Agent in such
shares of Capital Stock;
(ii) all promissory notes evidencing intercompany Indebtedness
payable to the Borrower or any Subsidiary Guarantor duly endorsed to
the order of the Administrative Agent;
(iii) executed UCC financing statements (Form UCC-1) naming such
Obligor as the debtor and the Administrative Agent as the secured
party, or other similar instruments or documents, suitable for filing
under the UCC of all jurisdictions as may be necessary or, in the
opinion of the Agents, desirable to perfect the security interest of
the Administrative Agent in the interests of such Obligor in the
collateral pledged pursuant to the applicable Pledge and Security
Agreement (provided that perfection of security interests in (i)
motor vehicles shall not be required and (ii) certain intellectual
property owned as of the Closing Date by the Borrower or its U.S.
Subsidiaries shall be completed in accordance with Section 7.1.11);
(iv) executed copies of proper UCC termination statements (Form
UCC-3), if any, necessary to release all Liens and other rights of
any Person (other than Liens permitted under Section 7.2.3)
(A) in any collateral described in the applicable Pledge
and Security Agreement previously granted by any Person, and
(B) securing any of the Indebtedness to be repaid in
connection with the Transaction on or prior to the Closing Date,
together with such other UCC termination statements (Form UCC-3) as
the Agents may reasonably request from such Obligor; and
(v) certified copies of UCC Requests for Information or Copies
(Form UCC-11), or a similar search report certified by a party
acceptable to the Agents,
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dated a date reasonably near to the Closing Date, listing all
effective financing statements which name such Obligor (under its
present names and any previous names) as the debtor and which are
filed in the jurisdictions in which filings are to be made pursuant
to clause (iii) above, together with copies of such financing
statements.
SECTION 5.1.8. UCC Filing Service. All UCC financing statements (Form
UCC-1), termination statements (Form UCC-3) or other similar financing
statements required pursuant to the Loan Documents (collectively, the "Filing
Statements") shall have been made available on the Closing Date to CT
Corporation System or another similar filing service company reasonably
acceptable to the Agents (the "Filing Agent"). The Filing Agent shall have
acknowledged in writing reasonably satisfactory to the Agents and their counsel
(i) the Filing Agent's receipt of all such Filing Statements, (ii) that such
Filing Statements have either been submitted for filing in the appropriate
filing offices therefor or will be submitted for filing in such appropriate
offices within ten days of the Closing Date and (iii) that the Filing Agent
will notify the Agents and their counsel of the result of such submissions
within 30 days of the Closing Date.
SECTION 5.1.9. Financial Information, etc. The Agents shall have received,
with copies for each Lender,
(a) the (i) audited consolidated balance sheets of the Borrower and
its Subsidiaries as at December 28, 1996, December 27, 1997 and December
26, 1998 and the audited consolidated statements of income, cash flows and
equity interests for the fiscal years ended December 28, 1996, December
27, 1997 and December 26, 1998 and (ii) unaudited consolidated balance
sheet of the Borrower and its Subsidiaries as at June 26, 1999 and
unaudited consolidated statements of income, cash flows and equity
interests as at June 26, 1999 (collectively, the "Base Financial
Statements") ; and
(b) a pro forma consolidated balance sheet and consolidated
statements of income, cash flows and equity interests of the Borrower and
its Subsidiaries, as of December 26, 1998 (the "Pro Forma Financial
Statements"), certified by the chief financial or accounting Authorized
Officer of the Borrower, giving effect to the consummation of the
Transaction and reflecting the proposed legal and capital structure of the
Borrower, which legal and capital structure shall be satisfactory in all
respects to the Lead Arranger and the Syndication Agent.
SECTION 5.1.10. Solvency, etc. The Agents shall have received a solvency
certificate from an Authorized Officer that is the chief financial or
accounting officer of the Borrower, dated the date of the initial Borrowing, in
form and substance satisfactory to the Agents.
SECTION 5.1.11. Equity Contributions, Subordinated Debt Issuance, Discount
Debentures Issuance, Seller Note Issuance and Subco Dividend. The Agents shall
have received
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evidence satisfactory to each of them that (i) the members of Acquisition LLC
(including DLJMBP and certain members of management of the Borrower and its
Affiliates) shall have made a cash equity contribution in an amount equal to at
least $90,000,000 to Acquisition LLC and Acquisition LLC shall have made a cash
equity contribution in an amount equal to such amount that was received by it
from its members to Acquisition Subco, (ii) the Borrower shall have received
not less than $150,000,000 in gross cash proceeds from the issuance of its
Senior Subordinated Notes and Warrants, (iii) Holdco shall have received not
less than $40,000,000 in gross cash proceeds from the issuance of its Senior
Discount Debentures, (iv) Holdco shall have issued its Seller Subordinated
Discount Note having an initial principal amount equal to $43,000,000 to CRL
and (v) the Borrower shall have paid the Subco Dividend to Holdco in an
aggregate principal amount equal to the sum of (x) the aggregate amount of
Borrowings hereunder on the Closing Date and (y) an amount equal to the
proceeds received by it from the issuance of the Senior Subordinated Notes and
Warrants (less the amount of the proceeds of such debt used to pay (A) the
consideration for the Sierra Acquisition in an amount not to exceed $24,000,000
(plus reasonable and fees and expenses described in clause (B) and (B) all
reasonable and customary fees paid by the Borrower in connection with the
Transaction in an amount not to exceed $20,000,000.
SECTION 5.1.12. Ownership of Holdco. Following the Recapitalization and
the Merger, Acquisition LLC shall own not less than 87.5% of Holdco's issued
and outstanding common equity and CRL shall own the Rollover Equity
representing no more than 12.5% of Holdco's issued and outstanding common
equity.
SECTION 5.1.13. Litigation. There shall exist no pending or threatened
material litigation, proceedings or investigations which (x) could reasonably
be expected to materially, adversely affect the consummation of the Transaction
or (y) could reasonably be expected to have a Material Adverse Effect.
SECTION 5.1.14. Material Adverse Effect. Since December 26, 1998, there
shall not have occurred any event, circumstance or condition constituting or
having a Material Adverse Effect.
SECTION 5.1.15. Reliance Letters. The Agents shall, unless otherwise
agreed, have received reliance letters, dated the date of the making of the
initial Credit Extension and addressed to each Lender and each Agent, in
respect of each of the legal opinions (other than "disclosure" and other
similar opinions) delivered in connection with the Transaction.
SECTION 5.1.16. Opinions of Counsel. The Agents shall have received
opinions, dated the date of the initial Credit Extension and addressed to the
Agents and all Lenders from
(a) Davis Polk & Wardwell, special New York counsel to each of the
Obligors, in substantially the form of Exhibit J-1 hereto; and
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(b) Haythe & Curley, special local counsel to the Obligors, in
substantially the form of Exhibit J-2 hereto.
(c) Mr. Dennis Shaughnessy, Esq., General Counsel to the Obligors, in
substantially the form of Exhibit J-3 hereto.
(d) Goold Patterson, special Nevada Counsel to the Sierra Companies,
in substantially the form of Exhibit J-4 hereto.
(e) Hyller & Irwin, special California Counsel to the Sierra
Companies, in substantially the form of Exhibit J-5 hereto.
SECTION 5.1.17. Insurance. The Agents shall have received satisfactory
evidence of the existence of insurance in compliance with Section 7.1.4
(including all endorsements included therein), and the Administrative Agent
shall be named additional insured or loss payee, on behalf of the Lenders,
pursuant to documentation reasonably satisfactory to the Agents and the
Borrower.
SECTION 5.1.18. Closing Fees, Expenses, etc. The Agents and the Lead
Arranger shall have received, each for its own respective account, or, in the
case of the Administrative Agent, for the account of each Lender, as the case
may be, all fees, costs and expenses due and payable pursuant to Sections 3.3
and 10.3, if then invoiced.
SECTION 5.1.19. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any of its
Subsidiaries or any other Obligors, shall be reasonably satisfactory in form
and substance to the Agents and their counsel; the Agents and their counsel
shall have received all information, approvals, opinions, documents or
instruments that the Agents or their counsel shall have reasonably requested.
SECTION 5.2. All Credit Extensions. The obligation of each Lender and, if
applicable, the Issuer, to make any Credit Extension (including its initial
Credit Extension) shall be subject to the satisfaction of each of the
conditions precedent set forth in this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before
and after giving effect to any Credit Extension the following statements shall
be true and correct:
(a) the representations and warranties set forth in Article VI and in
each other Loan Document shall, in each case, be true and correct in all
material respects with the same effect as if then made (unless stated to
relate solely to an earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of such
earlier date);
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(b) the sum of (i) the aggregate outstanding principal amount of all
Revolving Loans and Swing Line Loans, plus (ii) the aggregate amount of
all Letter of Credit Outstandings, does not exceed the then existing
Revolving Loan Commitment Amount; and
(c) no Default shall have then occurred and be continuing.
SECTION 5.2.2. Credit Extension Request. The Agents shall have received a
Borrowing Request if Loans are being requested, or an Issuance Request if a
Letter of Credit is being requested or extended. Each of the delivery of a
Borrowing Request or Issuance Request and the acceptance by the Borrower of
proceeds of any Credit Extension shall constitute a representation and warranty
by the Borrower that on the date of such Credit Extension (both immediately
before and after giving effect thereto and the application of the proceeds
thereof) the statements made in Section 5.2.1 are true and correct.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, the Issuers and the Agents to enter into
this Agreement and to make Credit Extensions hereunder, the Borrower represents
and warrants unto the Agents, the Issuers and each Lender as set forth in this
Article VI.
SECTION 6.1. Organization, etc. The Borrower and each of its Restricted
Subsidiaries (a) is validly organized and existing and in good standing to the
extent required under the laws of the jurisdiction of its incorporation, except
to the extent that the failure to be in good standing would not reasonably be
expected to have a Material Adverse Effect, (b) is duly qualified to do
business and is in good standing to the extent required under the laws of each
jurisdiction where the nature of its business requires such qualification,
except to the extent that the failure to qualify would not reasonably be
expected to result in a Material Adverse Effect, and (c) has full power and
authority and holds all requisite governmental licenses, permits and other
approvals to (i) enter into and perform its obligations in connection with the
Transaction and its Obligations under this Agreement and each other Loan
Document to which it is a party and (ii) own and hold under lease its property
and to conduct its business substantially as currently conducted by it except,
in the case of this clause (c)(ii), where the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Borrower of this Agreement and each other Loan
Document executed or to be executed by it, and the execution, delivery and
performance by each other Obligor of each Loan Document executed or to be
executed by it and the Borrower's and, where applicable, each
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such other Obligor's participation in the consummation of the Transaction, are
within the Borrower's and each such Obligor's company powers, have been duly
authorized by all necessary company action, and do not (i) contravene the
Borrower's or any such Obligor's Charter Documents, (ii) contravene any
contractual restriction (other than any such contractual restriction that shall
have been waived on or prior to the Closing Date), law or governmental
regulation or court decree or order binding on or affecting the Borrower or any
such Obligor, where such contravention, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, or (iii) result in,
or require the creation or imposition of, any Lien on any of the Borrower's or
any other Obligor's properties, except pursuant to the terms of a Loan
Document.
SECTION 6.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person, is required for the due
execution, delivery or performance by the Borrower or any other Obligor of this
Agreement or any other Loan Document to which it is a party, except as have
been duly obtained or made and are in full force and effect or those which the
failure to obtain or make could not reasonably be expected to have a Material
Adverse Effect. All authorizations, approvals and other actions by, and all
notices to and filings with, any governmental authority or regulatory body that
are required pursuant to the Recapitalization Agreement in connection with the
Transaction have been duly obtained or made and are in full force and effect,
except those which the failure to obtain or make could not reasonably be
expected to have a Material Adverse Effect. None of the Borrower or any other
Obligor is an "investment company" within the meaning of the Investment Company
Act of 1940, as amended, or a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
SECTION 6.4. Validity, etc. This Agreement constitutes, and each other
Loan Document executed by the Borrower will, on the due execution and delivery
thereof, constitute, the legal, valid and binding obligations of the Borrower
enforceable in accordance with their respective terms; and each Loan Document
executed pursuant hereto by each other Obligor will, on the due execution and
delivery thereof by such Obligor, be the legal, valid and binding obligation of
such Obligor enforceable in accordance with its terms, in each case with
respect to this Section 6.4 subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
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SECTION 6.5. Financial Information. The Borrower has delivered to the
Agents and each Lender copies of each of (i) the Base Financial Statements, and
(ii) Pro Forma Financial Statements. Each of the financial statements described
above (A) has been prepared (1) in the case of clause (i), in accordance with
GAAP consistently applied, (2) in the case of clause (ii), on a basis
substantially consistent with the basis used to prepare the financial
statements referred to in clause (i), and (B) (1) in the case of clause (i),
present fairly the consolidated financial condition of the corporations covered
thereby as at the date thereof and the results of their operations for the
periods then ended, and (2) in the case of clause (ii), include appropriate pro
forma adjustments to give pro forma effect to the Transaction.
SECTION 6.6. No Material Adverse Change. Since December 26, 1998, there
has occurred no event, circumstance or condition that constitutes a Material
Adverse Effect.
SECTION 6.7. Litigation, etc. There is no pending or, to the knowledge of
the Borrower, threatened litigation, action, proceeding, arbitration or
governmental investigation affecting any Obligor, or any of their respective
properties, businesses, assets or revenues, which could reasonably be expected
to result in a Material Adverse Effect except as disclosed in Item 6.7
("Litigation") of the Disclosure Schedule. No development has occurred in any
litigation, action or governmental investigation or other proceeding disclosed
in Item 6.7 ("Litigation") of the Disclosure Schedule which could reasonably be
expected to have a Material Adverse Effect.
SECTION 6.8. Subsidiaries. After giving effect to the consummation of the
Transaction, the Borrower has only those Subsidiaries (i) which are identified
in Item 6.8 ("Existing Subsidiaries") of the Disclosure Schedule, or (ii) which
are permitted to have been acquired in accordance with Section 7.2.5 or 7.2.8.
SECTION 6.9. Ownership of Properties. Except to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect, the Borrower and each of its Restricted Subsidiaries owns good title
to, or leasehold interests in, all of its properties and assets (other than
insignificant properties and assets), real and personal, tangible and
intangible, of any nature whatsoever (including patents, trademarks, trade
names, service marks and copyrights), free and clear of all Liens or material
claims (including material infringement claims with respect to patents,
trademarks, copyrights and the like), except as permitted pursuant to Section
7.2.3.
SECTION 6.10. Taxes. Each of Holdco, the Borrower and each of their
respective Subsidiaries has filed all Federal, State and other material tax
returns required by law to have been filed by it and has paid all material
taxes and governmental charges thereby shown to be owing, except any such taxes
or charges which are being contested in good faith by appropriate proceedings
and for which adequate reserves in accordance with GAAP shall have been set
aside on its books.
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SECTION 6.11. Pension and Welfare Plans. During the
twelve-consecutive-month period prior to the date of the execution and delivery
of this Agreement, no steps have been taken to terminate any Pension Plan, and
no contribution failure has occurred with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA, which, in
either case, is reasonably expected to lead to a liability to such Pension Plan
in excess of $5,000,000. No condition exists or event or transaction has
occurred with respect to any Pension Plan which could reasonably be expected to
result in the incurrence by the Borrower or any member of the Controlled Group
of any material liability, fine or penalty other than such condition, event or
transaction which would not reasonably be expected to have a Material Adverse
Effect. Except as disclosed in Item 6.11 ("Employee Benefit Plans") of the
Disclosure Schedule or otherwise approved by the Agents (such approval not to
be unreasonably withheld or delayed), since the date of the last financial
statement the Borrower has not increased any contingent liability with respect
to any post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Subtitle B of Title I of ERISA,
except as would not have a Material Adverse Effect.
SECTION 6.12. Environmental Matters. Except as set forth in Item 6.12
("Environmental Matters") of the Disclosure Schedule or as, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect:
(a) all facilities and property owned or leased by the Borrower or
any of its Subsidiaries are, and continue to be, owned or leased by the
Borrower and its Subsidiaries in compliance with all Environmental Laws;
(b) there are no pending or threatened (i) written claims,
complaints, notices or requests for information received by the Borrower
or any of its Subsidiaries with respect to any alleged violation of any
Environmental Law, or (ii) written complaints, notices or inquiries to the
Borrower or any of its Subsidiaries regarding potential liability under
any Environmental Law;
(c) the Borrower and its Subsidiaries have been issued and are in
compliance with all permits, certificates, approvals, licenses and other
authorizations relating to environmental matters and necessary or
desirable for their businesses;
(d) no property now or, to the best knowledge of the Borrower,
previously owned or leased by the Borrower or any of its Subsidiaries is
listed or, to the knowledge of the Borrower, proposed for listing (with
respect to owned property only) on the National Priorities List pursuant
to CERCLA, on the CERCLIS or on any similar state list of sites requiring
investigation or clean-up;
(e) to the knowledge of the Borrower, the Borrower and its
Subsidiaries have not directly transported or directly arranged for the
transportation of any Hazardous Material
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to any location (i) which is listed or, to the knowledge of the Borrower,
proposed for listing on the National Priorities List pursuant to CERCLA,
on the CERCLIS or on any similar state list, or (ii) which is the subject
of federal, state or local enforcement actions or other investigations in
respect of any Environmental Law;
(f) to the knowledge of the Borrower, there are no underground
storage tanks, active or abandoned, including petroleum storage tanks, on
or under any property now or previously owned or leased by the Borrower or
any of its Subsidiaries;
(g) to the knowledge of the Borrower, there are no polychlorinated
biphenyls or friable asbestos present in a manner or condition requiring
remedial action to comply with any Environmental Law; and
(h) to the best knowledge of the Borrower, no conditions exist at, on
or under any property now or previously owned or leased by the Borrower or
any of its Subsidiaries which, with the passage of time, or the giving of
notice or both, would give rise to liability to the Borrower or any of its
Subsidiaries under any Environmental Law.
SECTION 6.13. Regulations U and X. Neither the Borrower nor Holdco is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock, and no proceeds of any Credit Extension will be used in
violation of F.R.S. Board Regulation U or X. Terms for which meanings are
provided in F.R.S. Board Regulation U or X or any regulations substituted
therefor, as from time to time in effect, are used in this Section with such
meanings.
SECTION 6.14. Accuracy of Information. All material factual information
concerning the financial condition, operations or prospects of the Borrower,
Holdco and their respective Subsidiaries heretofore or contemporaneously
furnished by or on behalf of the Borrower in writing to the Agents, the Lead
Arranger, the Issuers or any Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby or with respect to the
Transaction is, and all other such factual information hereafter furnished by
or on behalf of the Borrower, Holdco or any of their respective Subsidiaries to
the Agents, the Lead Arranger, the Issuers or any Lender will be, taken as a
whole, true and accurate in every material respect on the date as of which such
information is dated or certified and such information is not, or shall not be,
taken as a whole, as the case may be, incomplete by omitting to state any fact
necessary to make such information not materially misleading.
Any term or provision of this Section to the contrary notwithstanding,
insofar as any of the factual information described above includes assumptions,
estimates, projections or opinions, no representation or warranty is made
herein with respect thereto; provided, however, that to the extent any such
assumptions, estimates, projections or opinions are based on factual matters,
the Borrower has reviewed such factual matters and nothing has come to its
attention in the context of such review which would lead it to believe that
such factual matters were not or are not true
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and correct in all material respects or that such factual matters omit to state
any material fact necessary to make such assumptions, estimates, projections or
opinions not misleading in any material respect.
SECTION 6.15. Solvency. The Transaction (including, among other things,
the incurrence of the initial Credit Extension hereunder, the incurrence by the
Borrower of the Indebtedness represented by the Notes and the Senior
Subordinated Notes, the execution and delivery by the Subsidiary Guarantor, if
any, of a Subsidiary Guaranty, and the application of the proceeds of the
Credit Extensions), will not involve or result in any fraudulent transfer or
fraudulent conveyance under the provisions of Section 548 of the Bankruptcy
Code (11 U.S.C. ss.101 et seq., as from time to time hereafter amended, and any
successor or similar statute) or any applicable state law respecting fraudulent
transfers or fraudulent conveyances. On the Closing Date, after giving effect
to the Transaction, the Borrower is Solvent.
SECTION 6.16. Year 2000 Compliance. The Borrower believes that its and its
Restricted Subsidiaries' computer applications that are material to its or its
Restricted Subsidiaries' businesses and operations will on a timely basis be
able to perform properly date- sensitive functions for all dates before, on and
after January 1, 2000 (that is, be "Year 2000 compliant") except to the extent
that a failure to do so could not reasonably be expected to have a Material
Adverse Effect.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower agrees with the Agents,
the Issuers and each Lender that, until the Termination Date has occurred, the
Borrower will perform the obligations set forth in this Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The Borrower
will furnish, or will cause to be furnished, to each Lender and each Agent
copies of the following financial statements, reports, notices and information:
(a) as soon as available and in any event within 60 days after the
end of each of the first three Fiscal Quarters of each Fiscal Year of the
Borrower (or, if the Borrower is required to file such information on a
Form 10-Q with the Securities and Exchange Commission, promptly following
such filing), a consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such Fiscal Quarter, together with the
related consolidated statements of operations and cash flows for such
Fiscal Quarter and for the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal Quarter (it being
understood that the foregoing requirement may be
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satisfied by delivery of the Borrower's report to the Securities and
Exchange Commission on Form 10-Q, if any), certified by an Authorized
Officer that is the president, chief executive officer, treasurer,
assistant treasurer, controller or chief financial or accounting officer
of the Borrower;
(b) as soon as available and in any event within 105 days after the
end of each Fiscal Year of the Borrower (or, if the Borrower is required
to file such information on a Form 10-K with the Securities and Exchange
Commission, promptly following such filing), a copy of the annual audit
report for such Fiscal Year for the Borrower and its Subsidiaries,
including therein a consolidated balance sheet for the Borrower and its
Subsidiaries as of the end of such Fiscal Year, together with the related
consolidated statements of operations and cash flows for such Fiscal Year
(it being understood that the foregoing requirement may be satisfied by
delivery of the Borrower's report to the Securities and Exchange
Commission on Form 10-K, if any), in each case certified (without any
Impermissible Qualification) by PricewaterhouseCoopers or another "Big
Five" firm of independent public accountants, together with a certificate
from such accountants as to whether, in making the examination necessary
for the signing of their report on such annual report by such accountants,
they have become aware of any Default in respect of any term, covenant,
condition or other provision of this Agreement (including any Default in
respect of any of the financial covenants contained in Section 7.2.4) that
relates to accounting matters that has occurred and is continuing or, if
in the opinion of such accounting firm such a Default has occurred and is
continuing, a statement as to the nature thereof;
(c) together with the delivery of the financial information required
pursuant to clauses (a) and (b), a Compliance Certificate, in
substantially the form of Exhibit E-1, executed by an Authorized Officer
that is the president, the chief executive officer or the chief financial
or accounting officer of the Borrower, showing (in reasonable detail and
with appropriate calculations and computations in all respects
satisfactory to the Agents) compliance with the financial covenants set
forth in Section 7.2.4;
(d) as soon as possible and in any event within five Business Days
after obtaining knowledge of the occurrence of any Default, if such
Default is then continuing, a statement of an Authorized Officer that is
the president, chief executive officer, treasurer, assistant treasurer,
controller or chief financial or accounting officer of the Borrower
setting forth details of such Default and the action which the Borrower
has taken or proposes to take with respect thereto;
(e) promptly and in any event within five Business Days after (x) the
occurrence of any development with respect to any litigation, action,
proceeding or labor controversy described in Section 6.7 which could
reasonably be expected to have a Material Adverse Effect or (y) the
commencement of any labor controversy, litigation, action or proceeding
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of the type described in Section 6.7, notice thereof and of the action
which the Borrower has taken or proposes to take with respect thereto;
(f) promptly after the sending or filing thereof, copies of all
reports and registration statements (other than exhibits thereto and any
registration statement on Form S-8 or its equivalent) which the Borrower
or any of its Subsidiaries files with the Securities and Exchange
Commission or any national securities exchange;
(g) as soon as practicable after the controller, chief financial or
accounting officer or the chief executive officer of the Borrower or a
member of the Borrower's Controlled Group becomes aware of (i) formal
steps in writing to terminate any Pension Plan or (ii) the occurrence of
any event with respect to a Pension Plan which, in the case of clause (i)
or (ii), could reasonably be expected to result in a contribution to such
Pension Plan by (or a liability to) the Borrower or a member of the
Borrower's Controlled Group in excess of $5,000,000, (iii) the failure to
make a required contribution to any Pension Plan if such failure is
sufficient to give rise to a Lien under section 302(f) of ERISA in an
amount in excess of $5,000,000, (iv) the taking of any action with respect
to a Pension Plan which could reasonably be expected to result in the
requirement that the Borrower furnish a bond to the PBGC or such Pension
Plan in an amount in excess of $5,000,000 or (v) any material increase in
the contingent liability of the Borrower with respect to any
post-retirement Welfare Plan benefit as a result of a change in the level
or scope of benefits thereunder, notice thereof and copies of all
documentation relating thereto; and
(h) such other information respecting the condition or operations,
financial or otherwise, of the Borrower or any of its Subsidiaries as any
Lender through the Administrative Agent may from time to time reasonably
request.
SECTION 7.1.2. Compliance with Laws, etc. The Borrower will, and will
cause each of its Subsidiaries to, comply in all material respects with all
applicable laws, rules, regulations and orders, such compliance to include (i)
except as permitted under Section 7.2.8, the maintenance and preservation of
its existence and qualification as a foreign business entity, except where the
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect, and (ii) the payment, before the same become delinquent, of all
material taxes, assessments and governmental charges imposed upon it or upon
its property except to the extent being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books.
SECTION 7.1.3. Maintenance of Properties. Except to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect, the Borrower will, and will cause each of its Restricted Subsidiaries
to, maintain, preserve, protect and keep its properties (other than
insignificant properties) in good repair, working order and condition (ordinary
wear and tear excepted), and make necessary and proper repairs, renewals and
replacements so that its
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business carried on in connection therewith may be properly conducted at all
times, unless the Borrower determines in good faith that the continued
maintenance of any of its properties is no longer economically desirable.
SECTION 7.1.4. Insurance. The Borrower will, and will cause each of its
Restricted Subsidiaries to, maintain or cause to be maintained with responsible
insurance companies insurance with respect to its properties and business
against such casualties and contingencies and of such types and in such amounts
as is customary in the case of similar businesses and with such provisions and
endorsements as the Agents may reasonably request and will, upon request of the
Agents, furnish to the Agents and each Lender a certificate of an Authorized
Officer of the Borrower setting forth the nature and extent of all insurance
maintained by the Borrower and its Restricted Subsidiaries in accordance with
this Section.
SECTION 7.1.5. Books and Records. The Borrower will, and will cause each
of its Restricted Subsidiaries to, keep books and records which accurately
reflect in all material respects all of its business affairs and transactions
and permit the Agents, the Issuers and each Lender or any of their respective
representatives, at reasonable times and intervals, and upon reasonable notice,
but, unless an Event of Default shall have occurred and be continuing, not more
frequently than once in each Fiscal Year, to visit its business offices, to
discuss its financial matters with its officers and, after notice to the
Borrower and provision of an opportunity for the Borrower to participate in
such discussion, its independent public accountants (and the Borrower hereby
authorizes such independent public accountants to discuss the Borrower's
financial matters with each Issuer and each Lender or its representatives,
whether or not any representative of the Borrower is present so long as the
Borrower has been afforded a reasonable opportunity to be present) and to
examine, and to photocopy extracts from, any of its books or other financial
records. The cost and expense of each such visit shall be borne by the
applicable Agent or Lender, except that the Administrative Agent may make one
such visit each Fiscal Year and the cost and expense thereof shall be borne by
the Borrower.
SECTION 7.1.6. Environmental Covenant. The Borrower will and will cause
each of its Subsidiaries to,
(a) use and operate all of its facilities and properties in
compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in compliance therewith, and
handle all Hazardous Materials in compliance with all applicable
Environmental Laws, in each case except where the failure to comply with
the terms of this clause could not reasonably be expected to have a
Material Adverse Effect;
(b) promptly notify the Agents and provide copies of all written
claims, complaints, notices or inquiries relating to the condition of its
facilities and properties which relate to environmental matters or
compliance with Environmental Laws which
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would have, or would reasonably be expected to have, a Material Adverse
Effect, and promptly cure and have dismissed with prejudice any material
actions and proceedings relating to compliance with Environmental Laws,
except to the extent being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP have been set aside on its books; and
(c) provide such information and certifications which the Agents may
reasonably request from time to time to evidence compliance with this
Section 7.1.6.
SECTION 7.1.7. Future Subsidiaries. (a) Upon any Person becoming, after
the Closing Date, a Future Pledged Foreign Subsidiary or U.S. Subsidiary of the
Borrower that is a Restricted Subsidiary, or (in the case of clause (b) below
only) upon the Borrower or any such Subsidiary acquiring additional Capital
Stock of any existing Subsidiary that is a Restricted Subsidiary and a U.S.
Subsidiary or a Future Pledged Foreign Subsidiary, the Borrower shall notify
the Agents of such acquisition, and
(i) the Borrower shall promptly cause such U.S. Subsidiary to execute
and deliver to the Administrative Agent, with counterparts for each
Lender, a supplement to the Subsidiary Pledge and Security Agreement (and,
if such U.S. Subsidiary owns any real property, to the extent required by
clause (b) of Section 7.1.8, a Mortgage), together with UCC financing
statements (form UCC-1) executed and delivered by such U.S. Subsidiary
naming such U.S. Subsidiary as the debtor and the Administrative Agent as
the secured party, or other similar instruments or documents, in
appropriate form for filing under the UCC and any other applicable
recording statutes, in the case of real property, of all jurisdictions as
may be necessary or, in the reasonable opinion of the Administrative
Agent, desirable to perfect the security interest of the Administrative
Agent pursuant to the Subsidiary Pledge and Security Agreement or a
Mortgage, as the case may be (other than the perfection of security
interests in motor vehicles); and
(ii) the Borrower shall promptly deliver, or cause to be delivered,
to the Administrative Agent under a Pledge Agreement (as supplemented, if
necessary, by a Foreign Pledge Agreement or other supplement thereto)
certificates (if any) representing all of the issued and outstanding
shares of Capital Stock of such Subsidiary owned by the Borrower or any
Restricted Subsidiary of the Borrower that is a U.S. Subsidiary, as the
case may be, along with undated powers of transfer for such certificates,
executed in blank, or, if any securities subject thereto are
uncertificated securities or are held through a securities intermediary,
the Administrative Agent shall have obtained "control" (as defined in the
UCC applicable to the perfection of such securities) over such securities,
or other appropriate steps shall have been taken under applicable law
resulting in the perfection and "control" (as defined in the UCC) of the
security interest granted in favor of the Administrative Agent pursuant to
the terms of a Pledge Agreement,
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together, in each case, with such opinions, in form and substance and from
counsel satisfactory to the Agents, as the Agents may reasonably require;
provided, however, that notwithstanding the foregoing, no Foreign Subsidiary
shall be required to execute and deliver a Mortgage or a supplement to the
Subsidiary Pledge and Security Agreement, nor will the Borrower or any U.S.
Subsidiary of the Borrower be required to deliver in pledge pursuant to a
Pledge Agreement in excess of 65% of the Voting Stock of a Foreign Subsidiary.
(b) (i) The Borrower shall, within 10 days of the Closing Date, (A)
deliver to the Administrative Agent (to the extent such shares are
certificated) 65% of all of the Voting Stock of each of the Foreign
Subsidiaries identified on Item 7.1.7(b) ("Existing Foreign Subsidiaries") of
the Disclosure Schedule, which certificates shall in each case be accompanied
by undated powers of transfer duly executed in blank, or, (B) ensure that (to
the extent any such shares are uncertificated securities or are held through a
securities intermediary) the Administrative Agent shall have obtained "control"
(as defined in the UCC) over 65% of all of the shares of such Voting Stock and
deliver such other instruments and documents as the Administrative Agent shall
deem necessary or in the reasonable opinion of the Administrative Agent
desirable under applicable law to perfect the security interest of the
Administrative Agent in such shares of Voting Stock.
(ii) In connection with the pledge of 65% of the Voting Stock of each
of the Foreign Subsidiaries identified on Item 7.1.7(b) ("Existing Foreign
Subsidiaries") of the Disclosure Schedule, the Agents shall have received from
counsel satisfactory to the Agents, no later than the date set forth opposite
each such Foreign Subsidiary in such Item, an opinion addressed to the Agents
and the Lenders in form and substance satisfactory to the Agents.
SECTION 7.1.8. Future Leased Property and Future Acquisitions of Real
Property; Future Acquisition of Other Property.
(a) Prior to entering into any new lease of real property or renewing
any existing lease of real property following the Closing Date, the
Borrower shall, and shall cause each of its U.S. Subsidiaries that are
Restricted Subsidiaries to, use its (and their) best efforts (which shall
not require the expenditure of cash or the making of any material
concessions under the relevant lease) to deliver to the Administrative
Agent a Waiver executed by the lessor of any real property that is to be
leased by the Borrower or such U.S. Subsidiary for a term in excess of one
year in any state which by statute grants such lessor a "landlord's" (or
similar) Lien which is superior to the Administrative Agent's, to the
extent the value of any personal property of the Borrower or its U.S.
Subsidiaries that are Restricted Subsidiaries to be held at such leased
property exceeds (or it is anticipated that the value of such personal
property will, at any point in time during the term of such leasehold
term, exceed) $3,000,000.
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(b) In the event that the Borrower or any of its U.S. Subsidiaries
that are Restricted Subsidiaries shall acquire any real property having a
value as determined in good faith by the Administrative Agent in excess of
$2,000,000 in the aggregate, the Borrower or the applicable U.S.
Subsidiary shall, promptly after such acquisition, execute a Mortgage in
favor of the Administrative Agent, as mortgagee for the ratable benefit of
the Lenders, and provide the Administrative Agent with (i) evidence of the
completion (or satisfactory arrangements for the completion) of all
recordings and filings of such Mortgage as may be necessary or, in the
reasonable opinion of the Administrative Agent, desirable effectively to
create a valid, perfected, first priority Lien, subject to Liens permitted
by Section 7.2.3, against the properties purported to be covered thereby,
(ii) mortgagee's title insurance policies in favor of the Administrative
Agent, as mortgagee for the ratable benefit of the Lenders, in amounts and
in form and substance and issued by insurers, in each case reasonably
satisfactory to the Agents, with respect to the property purported to be
covered by such Mortgage, insuring that title to such property is
indefeasible and that the interests created by the Mortgage constitute
valid first Liens thereon free and clear of all defects and encumbrances
other than as permitted by Section 7.2.3 or as approved by the Agents, and
such policies shall also include, to the extent available, a revolving
credit endorsement and such other endorsements as the Agents shall
reasonably request and shall be accompanied by evidence of the payment in
full of all premiums thereon, and (iii) such other approvals, opinions, or
documents as the Agents may reasonably request.
(c) In accordance with the terms and provisions of the Pledge
Agreements, the Borrower and each U.S. Subsidiary that is a Restricted
Subsidiary shall provide the Agents with evidence of all recordings and
filings as may be necessary or, in the reasonable opinion of the
Administrative Agent, desirable to create a valid, perfected first
priority Lien, subject to the Liens permitted by Section 7.2.3, against
all property acquired after the Closing Date (excluding motor vehicles,
leases of real property and (except to the extent required under clause
(b) of this Section 7.1.8) fee interests in real property) and not
otherwise subject to Section 7.1.11 or 7.1.12.
SECTION 7.1.9. Use of Proceeds, etc. The Borrower shall
(a) apply the proceeds of the Loans
(i) in the case of the Term Loans and Revolving Loans in an
aggregate principal amount not in excess of $2,000,000 made on the
Closing Date, to pay, in part, the cash portion of the obligations of
Holdco in connection with the Transaction and to pay the transaction
fees and expenses associated with the Transaction (directly or by
paying the Subco Dividend); provided, that the aggregate amount of
such transaction fees and expenses shall not exceed $20,000,000; and
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(ii) in the case of Revolving Loans (other than Revolving Loans
described in clause (a)(i) above) and Swing Line Loans, for working
capital and general corporate purposes of the Borrower and its
Subsidiaries; and
(b) use Letters of Credit only for purposes of supporting working
capital and general corporate purposes of the Borrower and its Restricted
Subsidiaries.
SECTION 7.1.10. Hedging Obligations. Within six months following the
Closing Date, the Administrative Agent shall have received evidence
satisfactory to it that the Borrower has entered into interest rate swap, cap,
collar or similar arrangements (including such Indebtedness accruing interest
at a fixed rate by its terms) designed to protect the Borrower against
fluctuations in interest rates with respect to at least 50% of the aggregate
principal amount of the Term Loans and the Senior Subordinated Notes for a
period of at least three years from the Closing Date, with terms reasonably
satisfactory to the Borrower and the Agents.
SECTION 7.1.11. Undertaking. The Borrower will deliver to the Agents no
later than 60 days after the Closing Date instruments or documents, in
appropriate form for filing with the United States Patent and Trademark Office,
sufficient to create and perfect a security interest in all intellectual
property owned as of the Closing Date by the Borrower and the U.S. Subsidiaries
that are Restricted Subsidiaries as identified in Item 7.1.11 ("Intellectual
Property") of the Disclosure Schedule.
SECTION 7.1.12. Mortgages. Within 60 days after the Closing Date, the
Borrower shall deliver to the Administrative Agent, as mortgagee for the
ratable benefit of the Lenders, counterparts of each Mortgage relating to each
property listed on Item 7.1.12 ("Mortgaged Properties") of the Disclosure
Schedule, each dated as of the date of such delivery, duly executed by the
Borrower or the applicable U.S. Subsidiary that is a Restricted Subsidiary,
together with
(a) evidence of the completion (or satisfactory arrangements for the
completion) of all recordings and filings of such Mortgage as may be
necessary or, in the reasonable opinion of the Administrative Agent,
desirable effectively to create a valid, perfected first priority Lien,
subject to Liens permitted by Section 7.2.3, against the properties
purported to be covered thereby;
(b) mortgagee's title insurance policies in favor of the
Administrative Agent, as mortgagee for the ratable benefit of the Lenders,
in amounts and in form and substance and issued by insurers, in each case
reasonably satisfactory to the Agents, with respect to the property
purported to be covered by such Mortgage, insuring that title to such
property is marketable and that the interests created by the Mortgage
constitute valid first Liens thereon free and clear of all defects and
encumbrances other than as permitted by Section 7.2.3 or as approved by
the Agents, and such policies shall also include, to the extent available,
a revolving credit endorsement and such other endorsements as the
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Administrative Agent shall reasonably request (provided, however, that if
the Administrative Agent requests, any survey endorsement or coverage
other than with respect to the existing survey, if any, of the Mortgaged
Property that was previously delivered to the Borrower by B&L or CRL or
any of their respective Subsidiaries or in the possession of the Borrower
or any of its Subsidiaries on the Closing Date, then the 60-day period
referred to in the lead-in to this Section shall be extended by an
additional 30 days) and shall be accompanied by evidence of the payment in
full of all premiums thereon; and
(c) such other approvals, opinions or documents as the Agents may
reasonably request.
SECTION 7.1.13. Year 2000 Compliance. The Borrower will promptly notify
the Administrative Agent in the event the Borrower discovers or determines that
any computer application (including those of its suppliers and vendors) that is
material to its or any of its Restricted Subsidiaries' businesses and
operations will not be Year 2000 compliant as of January 1, 2000, except to the
extent that such failure could not reasonably be expected to have a Material
Adverse Effect.
SECTION 7.2. Negative Covenants. The Borrower agrees with the Agents and
each Lender that, until the Termination Date has occurred, the Borrower will
perform the obligations set forth in this Section 7.2.
SECTION 7.2.1. Business Activities. The Borrower will not, and will not
permit any of its Restricted Subsidiaries to, engage in any business activity,
except the business activities of the type in which the Borrower and its
Subsidiaries are engaged on the date hereof (after giving effect to the
Transaction) and any businesses reasonably ancillary, incidental or related
thereto.
SECTION 7.2.2. Indebtedness. The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist
or otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
(a) Indebtedness outstanding on the Closing Date and identified in
Item 7.2.2(a) ("Ongoing Indebtedness") of the Disclosure Schedule, and
refinancings and replacements thereof in a principal amount not exceeding
the principal amount of the Indebtedness so refinanced or replaced and
with an average life to maturity of not less than the then average life to
maturity of the Indebtedness so refinanced or replaced;
(b) Indebtedness in respect of the Credit Extensions and other
Obligations;
(c) Indebtedness incurred by the Borrower or any of its Restricted
Subsidiaries that is represented by Capitalized Lease Liabilities,
mortgage financings or purchase
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money obligations (but only to the extent otherwise permitted by Section
7.2.7); provided, that the maximum aggregate amount of all Indebtedness
permitted under this clause (c) shall not at any time exceed $10,000,000;
(d) intercompany Indebtedness of (i) (x) any U.S. Subsidiary that is
a Restricted Subsidiary of the Borrower owing to the Borrower or any of
its Restricted Subsidiaries or (y) the Borrower owing to any of its
Restricted Subsidiaries, and (ii) any Foreign Subsidiary that is a
Restricted Subsidiary of the Borrower owing to the Borrower or any U.S.
Subsidiary that is a Restricted Subsidiary of the Borrower; provided that
(A) any such Indebtedness described in this clause (d)(ii) (other than (I)
any such Indebtedness owing by Charles River Japan, which is subject to
the provisions of clause (B) and (II) any such Indebtedness constituting
an Investment made pursuant to clause (a)(ii) of Section 7.2.5 and (III)
other than any such intercompany Indebtedness incurred to finance any
acquisition permitted hereunder) shall not exceed, when taken together
with the aggregate amount at such time of all outstanding Investments made
in all such Foreign Subsidiaries pursuant to clause (l) of Section 7.2.5
(other than any Investments made as part of, or to finance, any
acquisition permitted hereunder), $10,000,000 at any time outstanding and
(B) any Indebtedness described in this clause (d)(ii) owing by Charles
River Japan shall not exceed, when taken together with all Investments in
Charles River Japan (whether debt or equity), $40,000,000; provided
further that any Indebtedness described in this clause (d) which is owing
to the Borrower or any of its U.S. Subsidiaries that are Restricted
Subsidiaries, (1) to the extent requested by the Agents, such Indebtedness
shall be evidenced by one or more promissory notes in form and substance
satisfactory to the Agents which shall be duly executed and delivered to
(and indorsed to the order of) the Administrative Agent in pledge pursuant
to a Pledge Agreement and (2) in the case of any such Indebtedness owed by
a Person other than the Borrower or a Subsidiary Guarantor, such
Indebtedness shall not be forgiven or otherwise discharged for any
consideration other than payment (Dollar for Dollar) in cash unless the
Agents otherwise consent;
(e) Indebtedness evidenced by the Senior Subordinated Debt in an
aggregate outstanding principal amount not to exceed $150,000,000 and
subordinated guarantees thereof;
(f) Assumed Indebtedness of the Borrower and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $10,000,000 at
any time outstanding;
(g) Hedging Obligations of the Borrower or any of its Restricted
Subsidiaries in respect of the Credit Extensions or otherwise entered into
by the Borrower or any Restricted Subsidiary to hedge against interest
rate, currency exchange rate or commodity price risk, in each case arising
in the ordinary course of business of the Borrower and its Restricted
Subsidiaries and not for speculative purposes;
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(h) Indebtedness of Foreign Subsidiaries of the Borrower in an
aggregate principal amount not to exceed $5,000,000 at any time
outstanding;
(i) other unsecured Indebtedness of the Borrower and its Restricted
Subsidiaries in an aggregate principal amount at any time outstanding not
to exceed $10,000,000 plus the difference between the maximum amount of
additional Revolving Loan Commitments that have been or could be provided
under clause (c) of Section 2.1.2 and the then outstanding amount of
additional Revolving Loans made pursuant to clause (c) of Section 2.1.2;
(j) Indebtedness of any Foreign Subsidiary owing to any other Foreign
Subsidiary; and
(k) from and after the time that it becomes a Restricted Subsidiary,
Indebtedness of Charles River Japan, which when taken together with all
Investments in Charles River Japan (whether in debt or equity), does not
exceed an aggregate principal amount equal to $40,000,000.
provided, however, that (i) no Indebtedness otherwise permitted by clause (c),
(d) (as such clause (d) relates to loans made by the Borrower or any Subsidiary
Guarantor to Restricted Subsidiaries which are not party to a Subsidiary
Guaranty), (f), (h) or (i) may be incurred if, immediately before or after
giving effect to the incurrence thereof, any Default shall have occurred and be
continuing, and (ii) all such Indebtedness of the type described in clause
(d)(i)(y) above that is owed to Subsidiaries that are not Subsidiary Guarantors
shall be subordinated, in writing, to the Obligations upon terms satisfactory
to the Agents.
SECTION 7.2.3. Liens. The Borrower will not, and will not permit any of
its Restricted Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon any of its property, revenues or assets, whether now owned or
hereafter acquired, except:
(a) Liens existing on the Closing Date and identified in Item
7.2.2(b) ("Ongoing Liens") of the Disclosure Schedule and extensions and
renewals thereof; provided that no such extension or renewal shall
increase the obligations secured by such Lien, extend such Lien to
additional assets or otherwise result in a Default hereunder;
(b) Liens securing payment of the Obligations or any obligation under
any Rate Protection Agreement granted pursuant to any Loan Document;
(c) Liens granted to secure payment of Indebtedness of the type
permitted and described in clause (c) of Section 7.2.2;
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(d) Liens for taxes, assessments or other governmental charges or
levies, including Liens pursuant to Section 107(l) of CERCLA or other
similar law, not at the time delinquent or thereafter payable without
penalty or being contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP shall have been set
aside on its books;
(e) Liens of carriers, warehousemen, mechanics, repairmen,
materialmen, contractors, laborers and landlords or other like Liens
incurred in the ordinary course of business for sums not overdue for a
period of more than 30 days or being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books;
(f) Liens incurred in the ordinary course of business in connection
with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
bids, statutory or regulatory obligations, insurance obligations, leases
and contracts (other than for borrowed money) entered into in the ordinary
course of business or to secure obligations on surety or appeal bonds;
(g) judgment Liens in existence less than 30 days after the entry
thereof or with respect to which execution has been stayed or the payment
of which is covered in full by a bond or a letter of credit or (subject to
a customary deductible) by insurance maintained with responsible insurance
companies and Liens in existence less than 30 days, which Liens secure any
such bond or reimbursement obligation with respect to such letter of
credit;
(h) (i) Liens with respect to minor imperfections of title and
easements, rights-of-way, restrictions, reservations, permits, servitudes
and other similar encumbrances on real property and fixtures which do not
materially detract from the value or materially impair the use by the
Borrower or any such Restricted Subsidiary in the ordinary course of their
business of the property subject thereto; (ii) in the case of any property
covered by a Mortgage, encumbrances disclosed in the title insurance
policy issued to, and reasonably approved by the Agents insuring the
Mortgage; and (iii) in the case of any property covered by a Mortgage,
upon certification by the Borrower that an easement, right-of-way,
restriction, reservation, permit, servitude or other similar encumbrance
granted or to be granted by the Borrower or any such Restricted Subsidiary
does not materially detract from the value of or materially impair the use
by the Borrower or such Restricted Subsidiary in the ordinary course of
its business of the property subject to or to be subject to such
encumbrance, the Administrative Agent shall execute such documents as are
reasonably requested to subordinate its Mortgage to such encumbrance;
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(i) leases or subleases granted by the Borrower or any of its
Restricted Subsidiaries to any other Person in the ordinary course of
business;
(j) Liens in the nature of trustees' Liens granted pursuant to any
indenture governing any Indebtedness permitted by Section 7.2.2, in each
case in favor of the trustee under such indenture and securing only
obligations to pay compensation to such trustee, to reimburse its expenses
and to indemnify it under the terms thereof;
(k) Liens of sellers of goods to the Borrower and its Restricted
Subsidiaries arising under Article 2 of the UCC or similar provisions of
applicable law in the ordinary course of business, covering only the goods
sold and securing only the unpaid purchase price for such goods and
related expenses;
(l) Liens securing Assumed Indebtedness of the Borrower and its
Restricted Subsidiaries permitted pursuant to clause (f) of Section 7.2.2;
provided, however, that (i) any such Liens attach only to the property of
the Subsidiary acquired, or the property acquired, in connection with such
Assumed Indebtedness and shall not attach to any assets of the Borrower or
any of its Restricted Subsidiaries theretofore existing or which arise
after the date thereof and (ii) the Assumed Indebtedness and other secured
Indebtedness of the Borrower and its Restricted Subsidiaries secured by
any such Lien shall not exceed 100% of the fair market value of the assets
being acquired in connection with such Assumed Indebtedness;
(m) Liens on assets of Foreign Subsidiaries of the Borrower securing
Indebtedness permitted pursuant to clause (h) or (j) of Section 7.2.2; and
(n) Liens on the Capital Stock of Unrestricted Subsidiaries securing
Debt incurred by such Unrestricted Subsidiaries.
SECTION 7.2.4. Financial Covenants.
(a) EBITDA. The Borrower will not permit EBITDA for the period of four
consecutive Fiscal Quarters ending on the last day of any Fiscal Quarter
occurring during any period set forth below to be less than the amount set
forth opposite such period:
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Period EBITDA
------ ------
01/01/00 to 12/31/00 $50,000,000
01/01/01 to 12/31/01 $50,000,000
01/01/02 to 12/31/02 $55,000,000
01/01/03 to 12/31/03 $60,000,000
01/01/04 to 12/31/04 $65,000,000
01/01/05 and thereafter $70,000,000;
provided that, to the extent the amount of EBITDA for any period of four
consecutive Fiscal Quarters exceeds the amount of EBITDA required to be
maintained for such period pursuant to this clause (a), an amount equal to 50%
of such excess amount may be carried forward to (but only to) the next
succeeding period of four consecutive Fiscal Quarters.
(b) Leverage Ratio. The Borrower will not permit the Leverage Ratio as of
the end of any Fiscal Quarter occurring during any period set forth below to be
greater than the ratio set forth opposite such period:
Period Leverage Ratio
------ --------------
01/01/00 to 12/31/00 6.00:1
01/01/01 to 12/31/01 5.75:1
01/01/02 to 12/31/02 5.25:1
01/01/03 to 12/31/03 4.25:1
01/01/03 to 12/31/04 3.50:1
01/01/04 and thereafter 3.00:1.
(c) Interest Coverage Ratio. The Borrower will not permit the Interest
Coverage Ratio as of the end of any Fiscal Quarter ending after the Closing
Date and occurring during any period set forth below to be less than the ratio
set forth opposite such period:
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Interest Coverage
Period Ratio
------ --------------
01/01/00 to 12/31/00 1.40:1
01/01/01 to 12/31/01 1.50:1
01/01/02 to 12/31/02 1.75:1
01/01/03 to 12/31/03 2.00:1
01/01/03 to 12/31/04 2.25:1
01/01/05 and thereafter 2.50:1.
(d) Fixed Charge Coverage Ratio. The Borrower will not permit the Fixed
Charge Coverage Ratio as of the end of any Fiscal Quarter ending after the
Closing Date to be less than 1:1.
SECTION 7.2.5. Investments. The Borrower will not, and will not permit any
of its Restricted Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) (i) Investments existing on the Closing Date and identified in
Item 7.2.5(a) ("Ongoing Investments") of the Disclosure Schedule and
extensions or renewals thereof, provided that no such extension or renewal
shall be permitted if it would (x) increase the amount of such Investment
at the time of such extension or renewal or (y) result in a Default
hereunder and (ii) Investments resulting from the conversion or
recharacterization of Ongoing Investments (including the conversion of any
Ongoing Investments constituting equity Investments into debt
Investments), provided that no such Investment may be made in reliance on
this clause (a)(ii) if such Investment would require, at the time of the
making thereof, the contribution or other payment by the Borrower or any
of its U.S. Subsidiaries that are Restricted Subsidiaries of any
additional cash or other assets to any Subsidiary that is not a Subsidiary
Guarantor;
(b) Cash Equivalent Investments;
(c) without duplication, Investments permitted as Indebtedness
pursuant to Section 7.2.2;
(d) without duplication, Investments permitted as Capital
Expenditures pursuant to Section 7.2.7 (including any such Investments
which would otherwise constitute
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Capital Expenditures but for the operation of clause (i) of the proviso to
the definition of "Capital Expenditures");
(e) Investments made by the Borrower or any of its Restricted
Subsidiaries, solely with proceeds which have been contributed, directly
or indirectly after the Closing Date, to the Borrower or such Restricted
Subsidiary as cash equity from holders of Holdco's Capital Stock for the
purpose of making an Investment identified in a notice to the Agents on or
prior to the date that such capital contribution is made, which
Investments shall result in the Borrower or such Restricted Subsidiary
acquiring a majority controlling interest in the Person in which such
Investment was made or increasing any such controlling interest already
maintained by it;
(f) Investments to the extent the consideration received pursuant to
clause (c)(i) of Section 7.2.9 is not all cash;
(g) Investments in the form of loans to officers, directors and
employees of the Borrower and its Restricted Subsidiaries for the sole
purpose of purchasing Holdco Capital Stock or the Capital Stock of any
entity that directly or indirectly holds Holdco Capital Stock or of
refinancing any such loans made by others (or purchases of such loans made
by others);
(h) Investments made in one or more transactions by the Borrower or
any of its Restricted Subsidiaries for the acquisition by the Borrower or
such Restricted Subsidiary of the Capital Stock of Charles River Japan;
provided, however, that (i) Investments made pursuant to this clause (h)
shall not exceed (whether in debt or equity) an amount equal to, in the
aggregate, the product of (x) $40,000,000 and (y) a fraction, the
numerator of which is the percentage of ownership of Charles River Japan
acquired by the Borrower after the Closing Date (including in connection
with any such Investment) and the denominator of which is 50 (provided
that the first such Investment made by the Borrower or such Restricted
Subsidiary on or subsequent to the Closing Date may be increased by an
additional $5,000,000 so long as the aggregate amount of all such
Investments does not exceed $40,000,000), (ii) the Borrower and its
Restricted Subsidiaries shall vote their respective direct or indirect
equity interest in Charles River Japan against Charles River Japan
entering into any agreement of the type described in clause (b) of Section
7.2.12 and (iii) the Borrower and its Restricted Subsidiaries shall vote
their respective direct or indirect equity interest in Charles River Japan
against Charles River Japan making any dividend or distribution to, or
Investment in, or entering into (or suffering to exist) any profit,
revenue or cash flow sharing arrangement with any owner (beneficial or
otherwise) of Charles River Japan's common equity or any Affiliate thereof
which shall be disproportional to the fully diluted common equity
ownership percentage of such Person (except for (i) permitting the common
owners of Charles River Japan to pay taxes from such dividend or
distribution and (ii) in the case of a
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recapitalization, pursuant to which the Borrower and its Restricted
Subsidiaries become the sole owner of Charles River Japan);
(i) Letters of Credit issued in support of, and guarantees by the
Borrower or any Restricted Subsidiary of, Indebtedness permitted under
clauses (b), (c), (g) and (i) of Section 7.2.2;
(j) Investments made or held by any Foreign Subsidiary of the
Borrower that is a Restricted Subsidiary in any other Foreign Subsidiary
of the Borrower that is a Restricted Subsidiary;
(k) (i) Investments of the Borrower or any U.S. Subsidiary of the
Borrower that is a Restricted Subsidiary in the Borrower or any U.S.
Subsidiary of the Borrower that is a Restricted Subsidiary and (ii)
Investments by the Borrower or any U.S. Subsidiary of the Borrower that is
a Restricted Subsidiary in a Foreign Subsidiary of the Borrower that is a
Restricted Subsidiary in connection with the creation of such Foreign
Subsidiary; provided that in the case of clause (k)(ii), such Investment
is in the form of Capital Stock of one or more other Foreign Subsidiaries;
(l) Investments (other than Investments made under other clauses of
this Section 7.2.5) made by the Borrower or any of its Restricted
Subsidiaries in an aggregate amount not to exceed $25,000,000 in any
single transaction (or a series of related transactions) or $50,000,000 in
an aggregate amount over the term of this Agreement; provided that (i)
such Investments (x) result in the Borrower or the relevant Restricted
Subsidiary acquiring (subject to Section 7.2.1) a majority controlling
interest in the Person (or its assets and businesses) in which such
Investment was made, or increasing any such controlling interest
maintained by it in such Person or (y) result in the Person in which such
Investment was made becoming an Acquired Controlled Person and a
Restricted Subsidiary for the purposes set forth in the last sentence of
the definition of the term "Subsidiary"; (ii) to the extent any Assumed
Indebtedness permitted pursuant to clause (f) of Section 7.2.2 would be
incurred in connection with any such Investment to be made pursuant to
this clause (l), the permitted amounts set forth in this clause shall be
reduced, Dollar for Dollar, by the outstanding principal amount of any
such Assumed Indebtedness to be assumed; and (iii) the amount of
Investments made by the Borrower or any of its U.S. Subsidiaries that are
Restricted Subsidiaries in any of its Foreign Subsidiaries that are
Restricted Subsidiaries, when taken together with the outstanding
aggregate principal amount of Indebtedness incurred by such Foreign
Subsidiaries from the Borrower and such U.S. Subsidiaries pursuant to
clause (d)(ii) of Section 7.2.2, shall not exceed $10,000,000;
(m) extensions of trade credit in the ordinary course of business;
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(n) Investments in Hedging Obligations permitted hereunder;
(o) Investments (including debt obligations and Capital Stock)
received in connection with the bankruptcy or reorganization of suppliers
and customers and in settlement of delinquent obligations of and other
disputes with customers and suppliers arising in the ordinary course of
business; and
(p) other Investments in an aggregate amount at any time outstanding
not to exceed $10,000,000.
provided, however, that
(q) any Investment which when made complies with the requirements of
the definition of the term "Cash Equivalent Investment" may continue to be
held notwithstanding that such Investment if made thereafter would not
comply with such requirements; and
(r) no Investment otherwise permitted by clause (c) (except to the
extent permitted under Section 7.2.2), (g), (i) (to the extent that the
applicable Letter of Credit relates to Indebtedness permitted under clause
(c) or (j) of Section 7.2.2), (l) or (p) shall be permitted to be made if,
immediately before or after giving effect thereto, any Default shall have
occurred and be continuing.
SECTION 7.2.6. Restricted Payments, etc. On and at all times after the
date hereof:
(a) the Borrower will not, and will not permit any of its Restricted
Subsidiaries to, declare, pay or make any payment, dividend, distribution
or exchange (in cash, property or obligations) on or in respect of any
shares of any class of Capital Stock (now or hereafter outstanding) of the
Borrower or on any warrants, options or other rights with respect to any
shares of any class of Capital Stock (now or hereafter outstanding) of the
Borrower (other than (i) dividends or distributions payable in its Capital
Stock or warrants to purchase its Capital Stock and (ii) splits or
reclassifications of its Capital Stock into additional or other shares of
its Capital Stock) or apply, or permit any of its Restricted Subsidiaries
to apply, any of its funds, property or assets to the purchase,
redemption, exchange, sinking fund or other retirement of, or agree or
permit any of its Subsidiaries to purchase, redeem or exchange, any shares
of any class of Capital Stock (now or hereafter outstanding) of the
Borrower, warrants, options or other rights with respect to any shares of
any class of Capital Stock (now or hereafter outstanding) of the Borrower;
(b) the Borrower will not, and will not permit any of its Restricted
Subsidiaries to, (i) directly or indirectly make any payment or prepayment
of principal of, or make any
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payment of interest on, any Senior Subordinated Debt on any day other than
the stated, scheduled date for such payment or prepayment set forth in the
Senior Subordinated Debt Documents or which would violate the
subordination provisions of such Senior Subordinated Debt, or (ii) redeem,
purchase or defease any Senior Subordinated Debt;
(the foregoing prohibited acts referred to in clauses (a) and (b) above are
herein collectively referred to as "Restricted Payments"); provided, however,
that
(c) notwithstanding the provisions of clauses (a) and (b) above, the
Borrower shall be permitted to make Restricted Payments to Holdco to the
extent necessary to enable Holdco to
(i) pay its overhead expenses (including advisory fees in an
amount not to exceed $500,000 in the aggregate in any Fiscal Year) in
an amount not to exceed $2,000,000 in the aggregate in any Fiscal
Year;
(ii) pay taxes;
(iii) so long as (A) no Default shall have occurred and be
continuing on the date such Restricted Payment is declared or to be
made, nor would a Default result from the making of such Restricted
Payment, (B) after giving effect to the making of such Restricted
Payment, the Borrower shall be in pro forma compliance with the
covenant set forth in clause (b) of Section 7.2.4 for the most recent
full Fiscal Quarter immediately preceding the date of the making of
such Restricted Payment for which the relevant financial information
has been delivered pursuant to clause (a) or clause (b) of Section
7.1.1, and (C) an Authorized Officer of the Borrower shall have
delivered a certificate to the Administrative Agent in form and
substance satisfactory to the Administrative Agent (including a
calculation of the Borrower's pro forma compliance with the covenant
set forth in clause (b) of Section 7.2.4 in reasonable detail)
certifying as to the accuracy of clauses (c)(iii)(A) and (c)(iii)(B)
above,
(x) repurchase, redeem or otherwise acquire or retire for
value any Capital Stock of Holdco, or any warrant, option or
other right to acquire any such Capital Stock of Holdco or the
Capital Stock of any entity that directly or indirectly holds
the Capital Stock of Holdco, held by any director, member of
management or an employee of the Borrower or any of its
Restricted Subsidiaries pursuant to any employment agreement,
management equity subscription agreement, restricted stock plan,
stock option agreement or other similar arrangement so long as
the total amount of such repurchases, redemptions, acquisitions,
retirements and payments shall not exceed (I) $5,000,000 in any
calendar year, subject to a
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maximum amount of $10,000,000 of the term of this Agreement plus
(II) the aggregate cash proceeds and aggregate principal amount
of any notes received by the Borrower during such calendar year
from any reissuance of Capital Stock of Holdco, and warrants,
options and other rights to acquire Capital Stock of Holdco, by
Holdco or the Borrower to directors, members of management and
employees of the Borrower and its Restricted Subsidiaries (to
the extent such proceeds are not otherwise required to be
applied pursuant to clause (d) of Section 3.1.1); and
(y) make cash payments of interest with respect to the
Senior Discount Debentures in accordance with the terms thereof;
and
(d) notwithstanding the provisions of clauses (a) and (b) above, the
Borrower and its Restricted Subsidiaries shall be permitted to make the
Restricted Payments included in the Transaction (including the Subco
Dividend).
SECTION 7.2.7. Capital Expenditures, etc. With respect to Capital
Expenditures, the parties covenant and agree as follows:
(a) The Borrower will not, and will not permit any of its Restricted
Subsidiaries to, make or commit to make Capital Expenditures in any Fiscal
Year ending on or after to December 31, 2000, except Capital Expenditures
of the Borrower and its Restricted Subsidiaries, not to exceed an amount
(the "Base Amount") equal to (i) $17,500,000 in the case of any Fiscal
Year; plus (ii) an aggregate amount in addition to the Base Amount over
the term of this Agreement equal to $25,000,000; provided, however, that,
to the extent the Base Amount exceeds the aggregate amount of Capital
Expenditures (other than amounts permitted to be made pursuant to clause
(a)(ii) above or clause (b) below) actually made during such Fiscal Year,
such excess amount (up to an aggregate of 50% of the amount of the Base
Amount for such Fiscal Year) may be carried forward to (but only to) the
next succeeding Fiscal Year (any such amount to be certified by the
Borrower to the Agents in the Compliance Certificate delivered for the
last Fiscal Quarter of such Fiscal Year, and any such amount carried
forward to a succeeding Fiscal Year shall be deemed to be used prior to
the Borrower and its Restricted Subsidiaries using the Base Amount for
such succeeding Fiscal Year, without giving effect to such carry-forward).
(b) The parties acknowledge and agree that the permitted Capital
Expenditure level set forth in clause (a) above shall be exclusive of (i)
the amount of Capital Expenditures actually made with cash capital
contributions made to the Borrower or any of its Restricted Subsidiaries,
directly or indirectly, by any Person other than the Borrower and its
Restricted Subsidiaries, after the Closing Date and specifically
identified in a certificate delivered by an Authorized Officer of the
Borrower to the Agents on or about the time such capital contribution or
equity issuance is made (but in
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any event prior to the time of the Capital Expenditure made with such
capital contribution or equity issuance) (provided that, to the extent
such cash capital contributions or any proceeds from such equity issuance
constitute Net Equity Proceeds arising from the issuance by Holdco or the
Borrower of their respective Capital Stock, only that portion of such Net
Equity Proceeds which are not required to be applied as a prepayment
pursuant to clause (d) of Section 3.1.1 may be used for Capital
Expenditures pursuant to this clause (b)) and (ii) any portion of any
acquisition that is permitted under Section 7.2.5 (other than pursuant to
clause (d) thereof) that is accounted for as a Capital Expenditure.
SECTION 7.2.8. Consolidation, Merger, etc. The Borrower will not, and will
not permit any of its Restricted Subsidiaries to, liquidate or dissolve,
consolidate with, or merge into or with, any other corporation, or purchase or
otherwise acquire all or substantially all of the assets of any Person (or of
any division thereof), except
(a) any such Restricted Subsidiary may liquidate or dissolve
voluntarily into, and may merge with and into, the Borrower (so long as
the Borrower is the surviving corporation of such combination or merger)
or any other Restricted Subsidiary, and the assets or Capital Stock of any
Restricted Subsidiary may be purchased or otherwise acquired by the
Borrower or any other Restricted Subsidiary; provided, that
notwithstanding the above, a Restricted Subsidiary may only liquidate or
dissolve into, or merge with and into, another Restricted Subsidiary of
the Borrower if, after giving effect to such combination or merger, the
Borrower continues to own (directly or indirectly), and the Administrative
Agent continues to have pledged to it pursuant to a Pledge Agreement, a
percentage of the issued and outstanding shares of Capital Stock (on a
fully diluted basis) of the Restricted Subsidiary surviving such
combination or merger that is equal to or in excess of the percentage of
the issued and outstanding shares of Capital Stock (on a fully diluted
basis) of the Restricted Subsidiary that does not survive such combination
or merger that was (immediately prior to the combination or merger) owned
by the Borrower or pledged to the Administrative Agent;
(b) so long as no Default has occurred and is continuing or would
occur after giving effect thereto, the Borrower or any of its Restricted
Subsidiaries may purchase all or substantially all of the assets of any
Person (or any division thereof) not then a Restricted Subsidiary, or
acquire such Person by merger, if permitted (without duplication) pursuant
to Section 7.2.7 or clause (e), (f), (l), (o) or (p) of Section 7.2.5;
(c) the Borrower and its Restricted Subsidiaries may consummate the
Transaction; and
(d) the Borrower and its Restricted Subsidiaries may liquidate or
dissolve Charles River China and Charles River Mexico and may take any
action described in clause (b) or (d) of Section 8.1.9.
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SECTION 7.2.9. Asset Dispositions, etc. The Borrower will not, and will
not permit any of its Restricted Subsidiaries to, sell, transfer, lease,
contribute or otherwise convey, or grant options, warrants or other rights with
respect to, all or any part of its assets, whether now owned or hereafter
acquired (including accounts receivable and Capital Stock of Restricted
Subsidiaries) to any Person, unless:
(a) such sale, transfer, lease, contribution or conveyance of such
assets is (i) in the ordinary course of its business (and does not
constitute a sale, transfer, lease, contribution or other conveyance of
all or a substantial part of the Borrower's and its Restricted
Subsidiaries' assets, taken as a whole) or is of obsolete or worn out
property, (ii) permitted by Section 7.2.8, or (iii) between the Borrower
and one of its Restricted Subsidiaries or between Restricted Subsidiaries
of the Borrower;
(b) such sale, transfer, lease, contribution or conveyance
constitutes (i) an Investment permitted under Section 7.2.5, (ii) a Lien
permitted under Section 7.2.3, or (iii) a Restricted Payment permitted
under Section 7.2.6;
(c) (i) such sale, transfer, lease, contribution or conveyance of
such assets is for fair market value and the consideration consists of no
less than 75% in cash or is a Lien permitted under Section 7.2.3(h)(iii),
(ii) the Net Disposition Proceeds received from such assets, together with
the Net Disposition Proceeds of all other assets sold, transferred,
leased, contributed or conveyed pursuant to this clause (c) since the
Closing Date (but excluding any Net Disposition Proceeds received from the
sale to Merck & Co. by the Borrower and/or any of its Restricted
Subsidiaries of the two islands in the Florida Keys that were previously
used by them to study a non-human primate breeding colony), does not
exceed (individually or in the aggregate) $20,000,000 over the term of
this Agreement and (iii) an amount equal to the Net Disposition Proceeds
generated from such sale, transfer, lease (except leases or subleases
pursuant to Section 7.2.3(i)), contribution or conveyance, is reinvested
in the Business of the Borrower and its Restricted Subsidiaries or, to the
extent required thereunder, is applied to prepay the Loans pursuant to the
terms of Section 3.1.1 and Section 3.1.2;
(d) such sale, transfer, lease, contribution or conveyance results
from a casualty or condemnation in respect of such property or assets; or
(e) such sale, transfer or conveyance consists of the sale or
discount of overdue accounts receivable in the ordinary course of
business, but only in connection with the compromise or collection
thereof.
SECTION 7.2.10. Modification of Certain Agreements. Without the prior
written consent of the Required Lenders, the Borrower will not, and will not
permit any of its Restricted Subsidiaries to, consent to any amendment,
supplement, amendment and restatement, waiver or
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other modification of any of the terms or provisions contained in, or
applicable to, any Senior Subordinated Debt Document (including any agreement
or indenture related thereto or to the Subordinated Debt Issuance) or any
Material Document or any schedules, exhibits or agreements related thereto (the
"Restricted Agreements"), in each case which would materially adversely affect
the rights or remedies of the Lenders, or the Borrower's or any other Obligor's
ability to perform hereunder or under any Loan Document or which would (a)
increase the cash consideration payable in respect of the Recapitalization,
(b), in the case of the Recapitalization Agreement, increase the Borrower's or
any of its Restricted Subsidiaries' obligations or liabilities, contingent or
otherwise (other than adjustments to the cash consideration payable in respect
of the Acquisition made pursuant to the terms of the Recapitalization
Agreement), (c) increase the principal amount of, or increase the interest rate
on, or add or increase any fee with respect to the Indebtedness evidence by
such Senior Subordinated Debt or any such Restricted Agreement, advance any
dates upon which payments of principal or interest are due thereon or change
any of the covenants with respect thereto in a manner which is more restrictive
to the Borrower or any of its Restricted Subsidiaries or (d) in the case of any
Senior Subordinated Debt Document, change the subordination provisions thereof
(including any default or conditions to an event of default relating thereto),
or change any collateral therefor (other than to release such collateral), if
(in the case of this clause (d)), the effect of such amendment or change,
individually or together with all other amendments or changes made, is to
increase the obligations of the obligor thereunder or to confer any additional
rights on the holders of such Senior Subordinated Debt, or any such Restricted
Agreement (or a trustee or other representative on their behalf).
SECTION 7.2.11. Transactions with Affiliates. The Borrower will not, and
will not permit any of its Restricted Subsidiaries to, enter into, or cause,
suffer or permit to exist any arrangement or contract with any of its other
Affiliates (other than any Obligor or any other Restricted Subsidiary of the
Borrower) unless such arrangement or contract is fair and equitable to the
Borrower or such Restricted Subsidiary and is an arrangement or contract of the
kind which would be entered into by a prudent Person in the position of the
Borrower or such Restricted Subsidiary with a Person which is not one of its
Affiliates; provided, however that the Borrower and its Restricted Subsidiaries
shall be permitted to (i) enter into and perform their obligations, or take any
actions contemplated or permitted, under the Transaction Documents (including
the Investors' Agreement), (ii) make any Restricted Payment permitted under
Section 7.2.6 and (iii) enter into and perform their obligations under
arrangements with DLJ and its Affiliates for underwriting, investment banking
and advisory services (including payments of the fees in respect of advisory
services referred to in clause (c)(i) of Section 7.2.6) on usual and customary
terms, (iv) make payment of reasonable and customary fees and reimbursement of
expenses payable to directors of Holdco and (v) enter into employment
arrangements with respect to the procurement of services of directors, officers
and employees in the ordinary course of business and pay reasonable fees in
connection therewith.
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SECTION 7.2.12. Negative Pledges, Restrictive Agreements, etc. The
Borrower will not, and will not permit any of its Restricted Subsidiaries to,
enter into any agreement prohibiting
(a) the (i) creation or assumption of any Lien upon its properties,
revenues or assets, whether now owned or hereafter acquired securing any
Obligation or any senior refinancing thereof (other than, in the case of
any assets acquired with the proceeds of any Indebtedness permitted under
Section 7.2.2(c), customary limitations and prohibitions contained in such
Indebtedness and in the case of any Indebtedness permitted under clauses
(f), (h), (i) and (j) of Section 7.2.2, customary limitations in respect
of the Foreign Subsidiaries of the Borrower that are Restricted
Subsidiaries that shall have incurred such Indebtedness and its assets),
or (ii) ability of the Borrower or any other Obligor to amend or otherwise
modify this Agreement or any other Loan Document; or
(b) any Restricted Subsidiary from making any payments, directly or
indirectly, to the Borrower by way of dividends, advances, repayments of
loans or advances, reimbursements of management and other intercompany
charges, expenses and accruals or other returns on investments, or any
other agreement or arrangement which restricts the ability of any such
Restricted Subsidiary to make any payment, directly or indirectly, to the
Borrower (other than customary limitations and prohibitions in any
Indebtedness permitted under clauses (b), (e), (g), (h) and (i) of Section
7.2.2 that are applicable to the Restricted Subsidiary of the Borrower
that has incurred such Indebtedness and its assets; provided, that such
limitations shall be limited solely to such Restricted Subsidiary (and any
of its Restricted Subsidiaries) and its (and their) assets).
SECTION 7.2.13. Securities of Subsidiaries. The Borrower will not permit
any Restricted Subsidiary to issue any Capital Stock (whether for value or
otherwise) to any Person other than the Borrower or another wholly-owned
Subsidiary of the Borrower that is a Restricted Subsidiary.
SECTION 7.2.14. Sale and Leaseback. The Borrower will not, and will not
permit any of its Restricted Subsidiaries to, enter into any agreement or
arrangement with any other Person providing for the leasing by the Borrower or
any of its Restricted Subsidiaries of real or personal property which has been
or is to be sold or transferred by the Borrower or any of its Restricted
Subsidiaries to such other Person or to any other Person to whom funds have
been or are to be advanced by such Person on the security of such property or
rental obligations of the Borrower or any of its Restricted Subsidiaries.
SECTION 7.2.15. Designation of Senior Indebtedness. The Borrower will not
permit any Indebtedness (other than the Indebtedness incurred hereunder or
under any other the Loan Document) to constitute "Designated Senior
Indebtedness" (or any other similar term) under the Senior Subordinated Debt
Documents, without the consent of the Required Lenders.
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ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following events or
occurrences described in this Section 8.1 shall constitute an "Event of
Default".
SECTION 8.1.1. Non-Payment of Obligations. (a) The Borrower shall default
in the payment or prepayment of any principal of any Loan when due or any
Reimbursement Obligations or any deposit of cash for collateral purposes
pursuant to Section 2.6.4, as the case may be, or (b) any Obligor (including
the Borrower) shall default (and such default shall continue unremedied for a
period of three Business Days) in the payment when due of any interest or
commitment fee with respect to the Loans or Commitments or of any other
monetary Obligation.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of the
Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate
(including the Closing Date Certificate) furnished by or on behalf of the
Borrower or any other Obligor to the Agents, the Issuers, the Lead Arranger or
any Lender for the purposes of or in connection with this Agreement or any such
other Loan Document (including any certificates delivered pursuant to Article
V) is or shall be incorrect when made in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations. The
Borrower shall default in the due performance and observance of any of its
obligations under Sections 7.1.1(e), 7.1.7(b), 7.1.9, 7.1.10, 7.1.11, 7.1.12 or
7.2 (other than Section 7.2.1).
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. Any
Obligor shall default in the due performance and observance of any other
agreement contained herein or in any other Loan Document executed by it, and
such default shall continue unremedied for a period of 30 days after notice
thereof shall have been given to the Borrower by the Administrative Agent at
the direction of the Required Lenders.
SECTION 8.1.5. Default on Other Indebtedness. A default shall occur (i) in
the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness, other than Indebtedness
described in Section 8.1.1, of the Borrower or any of its Restricted
Subsidiaries or Holdco having a principal amount, individually or in the
aggregate for Holdco, the Borrower and its Restricted Subsidiaries, in excess
of $5,000,000, or (ii) a default shall occur in the performance or observance
of any obligation or condition with respect to such Indebtedness having a
principal amount, individually or in the aggregate, in excess of $5,000,000 if
the effect of such default is to accelerate the maturity of any such
Indebtedness or such default shall continue unremedied for any applicable
period of time sufficient to permit the holder or
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holders of such Indebtedness, or any trustee or agent for such holders, to
cause such Indebtedness to become due and payable prior to its expressed
maturity.
SECTION 8.1.6. Judgments. Any judgment or order for the payment of money
in excess of $5,000,000 in the aggregate for Holdco, the Borrower and its
Restricted Subsidiaries (not covered by insurance from a responsible insurance
company that is not denying its liability with respect thereto) shall be
rendered against the Borrower or any of its Restricted Subsidiaries or Holdco
and remain unvacated and unpaid and either (i) enforcement proceedings shall
have been commenced by any creditor upon such judgment or order, or (ii) there
shall be any period of 30 consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect.
SECTION 8.1.7. Pension Plans. Any of the following events shall occur with
respect to any Pension Plan (i) the termination of any Pension Plan if, as a
result of such termination, the Borrower would be required to make a
contribution to such Pension Plan, or would reasonably expect to incur a
liability or obligation to such Pension Plan, in excess of $5,000,000, or (ii)
a contribution failure occurs with respect to any Pension Plan sufficient to
give rise to a Lien under Section 302(f) of ERISA in an amount in excess of
$5,000,000.
SECTION 8.1.8. Change in Control. Any Change in Control shall occur.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower or any of its
Restricted Subsidiaries (other than Subsidiaries that are not Material
Subsidiaries) or any other Obligor shall
(a) become insolvent or generally fail to pay, or admit in writing
its inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for the Borrower or any
of its Restricted Subsidiaries (other than Subsidiaries that are not
Material Subsidiaries) or any other Obligor or any material property of
any thereof, or make a general assignment for the benefit of creditors;
(c) in the absence of such application, consent, acquiescence or
assignment, permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Borrower or any of its
Restricted Subsidiaries (other than Subsidiaries that are not Material
Subsidiaries) or any other Obligor or for a substantial part of the
property of any thereof, and such trustee, receiver, sequestrator or other
custodian shall not be discharged within 60 days, provided that the
Borrower, each such Restricted Subsidiary and each other Obligor hereby
expressly authorizes the Agents, the Issuers
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and each Lender to appear in any court conducting any relevant proceeding
during such 60-day period to preserve, protect and defend their rights
under the Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or
liquidation proceeding, in respect of the Borrower or any of its
Restricted Subsidiaries (other than Subsidiaries that are not Material
Subsidiaries) or any other Obligor, and, if any such case or proceeding is
not commenced by the Borrower or such Restricted Subsidiary or such other
Obligor, such case or proceeding shall be consented to or acquiesced in by
the Borrower or such Restricted Subsidiary or such other Obligor or shall
result in the entry of an order for relief or shall remain for 60 days
undismissed, provided that the Borrower, such Restricted Subsidiary and
each other Obligor hereby expressly authorizes the Agents, the Issuers and
each Lender to appear in any court conducting any such case or proceeding
during such 60-day period to preserve, protect and defend their rights
under the Loan Documents; or
(e) take any action (corporate or otherwise) authorizing, or in
furtherance of, any of the foregoing.
SECTION 8.1.10. Impairment of Security, etc. Any Loan Document, or any
Lien granted thereunder, shall (except in accordance with its terms or pursuant
to an agreement of the parties thereto), in whole or in part, terminate, cease
to be in full force and effect or cease to be the legally valid, binding and
enforceable obligation of any Obligor party thereto; the Borrower or any other
Obligor shall, directly or indirectly, contest in any manner the effectiveness,
validity, binding nature or enforceability thereof; or any Lien securing any
Obligation shall, in whole or in part, cease to be a perfected first priority
Lien, subject only to those exceptions expressly permitted by the Loan
Documents, except to the extent any event referred to above (a) relates to
assets of the Borrower or any of its Restricted Subsidiaries which are
immaterial, (b) results from the failure of the Administrative Agent to
maintain possession of certificates representing securities pledged under any
Pledge Agreement or to file continuation statements under the UCC of any
applicable jurisdiction or (c) is covered by a lender's title insurance policy
and the relevant insurer promptly after the occurrence thereof shall have
acknowledged in writing that the same is covered by such title insurance
policy.
SECTION 8.1.11. Subordinated Notes. The subordination provisions relating
to the Senior Subordinated Notes or any other subordinated debt of the Borrower
or any of its Restricted Subsidiaries (the "Subordination Provisions") shall
fail to be enforceable by the Lenders (which have not effectively waived the
benefits thereof) in accordance with the terms thereof, or the principal or
interest on any Loan, Reimbursement Obligation or other Obligations shall fail
to constitute "Senior Indebtedness" (as defined in any Senior Subordinated
Note) or "senior indebtedness" (or any other similar term) under any document
instrument or agreement
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evidencing any such other subordinated debt; or the Borrower or any of its
Subsidiaries shall, directly or indirectly, disavow or contest in any manner
(i) the effectiveness, validity or enforceability of any of the Subordination
Provisions, or (ii) that any of such Subordination Provisions exist for the
benefit of the Agents and the Lenders.
SECTION 8.2. Action if Bankruptcy, etc. If any Event of Default described
in clauses (b), (c) and (d) of Section 8.1.9 shall occur with respect to any
Obligor (other than Subsidiaries that are not Material Subsidiaries), the
Commitments (if not theretofore terminated) shall automatically terminate and
the outstanding principal amount of all outstanding Loans and all other
Obligations (including Reimbursement Obligations) shall automatically be and
become immediately due and payable, without notice or demand and the Borrower
shall automatically and immediately be obligated to deposit with the
Administrative Agent cash collateral in an amount equal to all Letter of Credit
Outstandings.
SECTION 8.3. Action if Other Event of Default. If any Event of Default
(other than an Event of Default described in clauses (b), (c) and (d) of
Section 8.1.9 with respect to any Obligor (other than Subsidiaries that are not
Material Subsidiaries)) shall occur for any reason, whether voluntary or
involuntary, and be continuing, the Administrative Agent, upon the direction of
the Required Lenders, shall by notice to the Borrower declare all or any
portion of the outstanding principal amount of the Loans and other Obligations
(including Reimbursement Obligations) to be due and payable, require the
Borrower to provide cash collateral to be deposited with the Administrative
Agent in an amount equal to the undrawn amount of all Letters of Credit
outstanding and/or declare the Commitments (if not theretofore terminated) to
be terminated, whereupon the full unpaid amount of such Loans and other
Obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand or presentment,
and/or, as the case may be, the Commitments shall terminate and the Borrower
shall deposit with the Administrative Agent cash collateral in an amount equal
to all Letters of Credit Outstandings.
ARTICLE IX
THE AGENTS
SECTION 9.1. Actions. Each Lender hereby appoints DLJ as its Syndication
Agent and UBOC as its Administrative Agent under and for purposes of this
Agreement and each other Loan Document. Each Lender authorizes the Agents to
act on behalf of such Lender under this Agreement and each other Loan Document
and, in the absence of other written instructions from the Required Lenders
received from time to time by the Agents (with respect to which each of the
Agents agrees that it will comply, except as otherwise provided in this Section
or as otherwise advised by counsel), to exercise such powers hereunder and
thereunder as are specifically delegated to or required of the Agents by the
terms hereof and thereof, together with
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such powers as may be reasonably incidental thereto. Each Lender hereby
indemnifies (which indemnity shall survive any termination of this Agreement)
the Agents, ratably in accordance with their respective Term Loans outstanding
and Commitments (or, if no Term Loans or Commitments are at the time
outstanding and in effect, then ratably in accordance with the principal amount
of Term Loans held by such Lender and their respective Commitments as in effect
in each case on the date of the termination of this Agreement), from and
against any and all liabilities, obligations, losses, damages, claims, costs or
expenses of any kind or nature whatsoever which may at any time be imposed on,
incurred by, or asserted against, either of the Agents in any way relating to
or arising out of this Agreement and any other Loan Document, including
reasonable attorneys' fees, and as to which any Agent is not reimbursed by the
Borrower or any other Obligor (and without limiting the obligation of the
Borrower or any other Obligor to do so); provided, however, that no Lender
shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, claims, costs or expenses which are determined by
a court of competent jurisdiction in a final proceeding to have resulted solely
from such Agent's gross negligence or willful misconduct. The Agents shall not
be required to take any action hereunder or under any other Loan Document, or
to prosecute or defend any suit in respect of this Agreement or any other Loan
Document, unless it is indemnified hereunder to its satisfaction. If any
indemnity in favor of either of the Agents shall be or become, in such Agent's
determination, inadequate, such Agent may call for additional indemnification
from the Lenders and cease to do the acts indemnified against hereunder until
such additional indemnity is given. The Borrower and the Lenders agree that the
Administrative Agent may delegate any of its duties under this Agreement to any
of its Affiliates. Any such Affiliate (and such Affiliate's directors,
officers, agents and employees) which performs duties in connection with this
Agreement shall be entitled to the same benefits of the indemnification, waiver
and other protective provisions to which such Agent is entitled under Articles
IX and X.
SECTION 9.2. Funding Reliance, etc. Unless the Administrative Agent shall
have been notified by telephone, confirmed in writing, by any Lender by 1:00
p.m., Los Angeles time, on the Business day prior to a Borrowing or
disbursement with respect to a Letter of Credit pursuant to Section 2.6.2 that
such Lender will not make available the amount which would constitute its
Percentage of such Borrowing on the date specified therefor, the Administrative
Agent may assume that such Lender has made such amount available to the
Administrative Agent and, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If and to the extent that such Lender
shall not have made such amount available to the Administrative Agent, such
Lender severally agrees and the Borrower agrees to repay the Administrative
Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date the Administrative Agent made such amount
available to the Borrower to the date such amount is repaid to the
Administrative Agent, at the interest rate applicable at the time to Loans
comprising such Borrowing.
SECTION 9.3. Exculpation; Notice of Default. (a) None of the Agents or the
Lead Arranger nor any of their respective directors, officers, employees or
agents shall be liable to any
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Lender for any action taken or omitted to be taken by it under this Agreement
or any other Loan Document, or in connection herewith or therewith, except for
its own willful misconduct or gross negligence, nor responsible for any
recitals or warranties herein or therein, nor for the effectiveness,
enforceability, validity or due execution of this Agreement or any other Loan
Document, nor for the creation, perfection or priority of any Liens purported
to be created by any of the Loan Documents, or the validity, genuineness,
enforceability, existence, value or sufficiency of any collateral security, nor
to make any inquiry respecting the performance by the Borrower of its
obligations hereunder or under any other Loan Document. Any such inquiry which
may be made by any Agent or any Issuer shall not obligate it to make any
further inquiry or to take any action. The Agents and each Issuer shall be
entitled to rely upon advice of counsel concerning legal matters and upon any
notice, consent, certificate, statement or writing which the Agents or the
Issuers, as applicable, believe to be genuine and to have been presented by a
proper Person.
(b) No Agent shall be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default hereunder unless such Agent has received
written notice from (A) in the case of the Administrative Agent, a Lender or
the Borrower referring to this Agreement describing such Default or Event of
Default and stating that such notice is a "notice of default" and (B) in the
case of the Syndication Agent, from the Administrative Agent as set forth in
the immediately following sentence. In the event that the Administrative Agent
receives such a notice, the Administrative Agent shall give prompt notice
thereof to the Syndication Agent and the Lenders.
SECTION 9.4. Successor. The Syndication Agent may resign as such upon one
Business Day's notice to the Borrower and the Administrative Agent. The
Administrative Agent may resign as such at any time upon at least 30 days'
prior notice to the Borrower and all Lenders. If the Administrative Agent at
any time shall resign, the Required Lenders may, with the prior consent of the
Borrower (which consent shall not be unreasonably withheld), appoint another
Lender as a successor Administrative Agent which shall thereupon become the
Administrative Agent hereunder. If no successor Administrative Agent shall have
been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Administrative Agent's giving
notice of resignation, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which shall be one of
the Lenders or a commercial banking institution organized under the laws of the
United States or a United States branch or agency of a commercial banking
institution, and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall be entitled to receive from the retiring Administrative Agent such
documents of transfer and assignment as such successor Administrative Agent may
reasonably request, and shall thereupon succeed to and become vested with all
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring
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Administrative Agent's resignation hereunder as the Administrative Agent, the
provisions of (i) this Article IX shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Administrative Agent under
this Agreement, and (ii) Section 10.3 and Section 10.4 shall continue to inure
to its benefit.
SECTION 9.5. Credit Extensions by each Agent. Each Agent and each Issuer
shall have the same rights and powers with respect to (x) (i) in the case of an
Agent, the Credit Extensions made by it or any of its Affiliates and (ii) in
the case of an Issuer, the Loans made by it or any of its Affiliates, and (y)
the Notes held by it or any of its Affiliates as any other Lender and may
exercise the same as if it were not an Agent or Issuer. Each Agent, each Issuer
and each of their respective Affiliates may accept deposits from, lend money
to, and generally engage in any kind of business with the Borrower or any
Subsidiary or Affiliate of the Borrower as if such Agent or Issuer were not an
Agent or Issuer hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has,
independently of each Agent, the Lead Arranger, each Issuer and each other
Lender, and based on such Lender's review of the financial information of the
Borrower, this Agreement, the other Loan Documents (the terms and provisions of
which being satisfactory to such Lender) and such other documents, information
and investigations as such Lender has deemed appropriate, made its own credit
decision to extend its Commitments. Each Lender also acknowledges that it will,
independently of each Agent, the Lead Arranger, each Issuer and each other
Lender, and based on such other documents, information and investigations as it
shall deem appropriate at any time, continue to make its own credit decisions
as to exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any other Loan Document.
SECTION 9.7. Copies, etc. The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by the Borrower pursuant to the terms of this
Agreement (unless concurrently delivered to the Lenders by the Borrower). The
Administrative Agent will distribute to each Lender each document or instrument
received for such Lender's account and copies of all other communications
received by the Administrative Agent from the Borrower for distribution to the
Lenders by the Administrative Agent in accordance with the terms of this
Agreement.
SECTION 9.8. The Syndication Agent and the Administrative Agent.
Notwithstanding anything else to the contrary contained in this Agreement or
any other Loan Document, the Agents, in their respective capacities as such,
each in such capacity, shall have no duties or responsibilities under this
Agreement or any other Loan Document nor any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against either Agent, as applicable, in such capacity except as are explicitly
set forth herein or in the other Loan Documents.
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SECTION 9.9. Documentation Agent. The Lender identified on the signature
pages of this Agreement as the "Documentation Agent" shall not have any right,
power, obligation, liability, responsibility or duty under this Agreement (or
any other Loan Document) other than those applicable to all Lenders as such.
Without limiting the foregoing, the Lender so identified as the "Documentation
Agent" shall not have or be deemed to have any fiduciary relationship with any
other Lender. Each Lender acknowledges that it has not relied, and will not
rely, on the Lender so identified as the "Documentation Agent" in deciding to
enter into this Agreement and each other Loan Document to which it is a party
or in taking or not taking action hereunder or thereunder.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this Agreement
and of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented
to by the Borrower and each Obligor party thereto and by the Required Lenders;
provided, however, that any such amendment, modification or waiver of the type
set forth below shall require the consent of the Person or Persons described
below for such amendment, modification or waiver:
(a) Unless consented to by each Lender, no such amendment,
modification or waiver shall be effective if it would modify any
requirement hereunder that any particular action be taken by all the
Lenders, all the Lenders with respect to any Tranche of Loans or
Commitments or by the Required Lenders, release Holdco from its
obligations under the Holdco Guaranty and Pledge Agreement, release any
Subsidiary Guarantor that is a Material Subsidiary from its obligations
under the Subsidiary Guaranty (except as otherwise provided in the
Subsidiary Guaranty), if any, or release all or substantially all of the
collateral security (except in each case as otherwise specifically
provided in this Agreement, any such Subsidiary Guaranty or a Pledge
Agreement).
(b) Unless consented to by each Lender adversely affected thereby, no
such amendment, modification or waiver shall be effective if it would
modify this Section 10.1, or clause (i) of Section 10.10, change the
definition of "Required Lenders", increase any Commitment Amount or the
Percentage of any Lender (other than pursuant to clause (c) of Section
2.1.2), reduce any fees described in Section 3.3 (other than the
administration fee referred to in Section 3.3.2) or extend any Commitment
Termination Date.
(c) No such amendment, modification or waiver shall be effective if
it would extend the Stated Maturity Date for any Loan or reduce the
principal amount of or rate of
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interest on or fees payable in respect of any Loan or any Reimbursement
Obligations (which shall in each case include the conversion of all or any
part of the Obligations into equity of any Obligor), unless such
amendment, modification or waiver shall have been consented to by the
Lender which has made such Loan or, in the case of a Reimbursement
Obligation, the Issuer owed, and those Lenders participating in, such
Reimbursement Obligation.
(d) No such amendment, modification or waiver shall be effective if
it would affect adversely the interests, rights or obligations of any
Agent, Issuer or Lead Arranger (in its capacity as Agent, Issuer or Lead
Arranger), unless such amendment, modification or waiver shall have been
consented to by such Agent, Issuer or Lead Arranger, as the case may be.
(e) No such amendment, modification or waiver shall be effective if
it would have the effect (either immediately or at some later time) of
enabling the Borrower to satisfy a condition precedent to the making of a
Revolving Loan or the issuance of a Letter of Credit unless such
amendment, modification or waiver shall have been consented to by the
holders of at least 51% of the Revolving Loan Commitments.
(f) No such amendment, modification or waiver shall be effective if
it would amend, modify or waive the provisions of clause (a)(i) of Section
3.1.1 or clause (b) of Section 3.1.2 or effect any amendment, modification
or waiver that by its terms adversely affects the rights of Lenders
participating in any Tranche differently from those of Lenders
participating in other Tranches, unless such amendment, modification or
waiver shall have been consented to by the holders of at least 51% of the
aggregate amount of Loans outstanding under the Tranche or Tranches
affected by such modification, or, in the case of a modification affecting
the Revolving Loan Commitments, the Lenders holding at least 51% of the
Revolving Loan Commitments.
No failure or delay on the part of any Agent, any Issuer, any Lender or any
other Secured Party in exercising any power or right under this Agreement or
any other Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Borrower in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by any Agent, any Issuer
or any Lender under this Agreement or any other Loan Document shall, except as
may be otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
For purposes of this Section 10.1, the Syndication Agent, in coordination
with the Administrative Agent, shall have primary responsibility, together with
the Borrower, in the negotiation, preparation and documentation relating to any
amendment, modification or waiver
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under this Agreement, any other Loan Document or any other agreement or
document related hereto or thereto contemplated pursuant to this Section.
SECTION 10.2. Notices. All notices and other communications provided to
any party under this Agreement or any other Loan Document shall be in writing
or by facsimile and addressed, delivered or transmitted to such party (a) in
the case of any Lender by any party other than the Administrative Agent, to
such Lender in care of the Administrative Agent at its address or facsimile
number set forth on its signature page hereto or on Schedule II hereto (and the
Administrative Agent shall promptly forward such notice to the address or
facsimile number of such Lender set forth on such Lender's signature page
hereto or on Schedule II hereto or in the Lender Assignment Agreement pursuant
to which such Lender became a Lender hereunder), (b) in the case of any Lender
by the Administrative Agent, to such Lender at its address or facsimile number
set forth on its signature page hereto or in the Lender Assignment Agreement
pursuant to which it became a party hereto, (c) in the case of any Agent, at
its address or facsimile number set forth below its signature hereto, and (d)
in the case of the Borrower, to its address or facsimile number set forth on
its signature page hereto, or, in any case, at such address or facsimile number
as may be designated by such party in a notice to the other parties. Any
notice, if mailed and properly addressed with postage prepaid or if properly
addressed and sent by pre-paid courier service, shall be deemed given when
received; any notice, if transmitted by facsimile, shall be deemed given when
transmitted (receipt acknowledged).
SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to pay on
demand all reasonable expenses of each of the Agents (including the reasonable
fees and out-of-pocket expenses of counsel to the Agents and of local or
foreign counsel, if any, who may be retained by counsel to the Agents) in
connection with
(a) the syndication by the Syndication Agent and the Lead Arranger of
the Loans, the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated;
(b) the filing, recording, refiling or rerecording of each Mortgage
and each Pledge Agreement and/or any UCC financing statements relating
thereto and all amendments, supplements and modifications to any thereof
and any and all other documents or instruments of further assurance
required to be filed or recorded or refiled or rerecorded by the terms
hereof or of such Mortgage or Pledge Agreement; and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
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The Borrower further agrees to pay, and to save the Agents, the Issuers and the
Lenders harmless from all liability for, any stamp or other similar taxes which
may be payable in connection with the execution or delivery of this Agreement,
the Credit Extensions made hereunder or the issuance of any Notes or Letters of
Credit or any other Loan Documents. The Borrower also agrees to reimburse each
Agent, each Issuer and each Lender upon demand for all reasonable out-of-pocket
expenses (including reasonable attorneys' fees and legal expenses) incurred by
such Agent, such Issuer or such Lender in connection with (x) the negotiation
of any restructuring or "work-out", whether or not consummated, of any
Obligations and (y) the enforcement of any Obligations.
SECTION 10.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Borrower hereby, to the fullest extent permitted under applicable law,
indemnifies, exonerates and holds each Agent, each Issuer, the Lead Arranger
and each Lender and each of their respective Affiliates, and each of their
respective partners, officers, directors, employees and agents, and each other
Person controlling any of the foregoing within the meaning of either Section 15
of the Securities Act of 1933, as amended, or Section 20 of the Securities
Exchange Act of 1934, as amended (collectively, the "Indemnified Parties"),
free and harmless from and against any and all actions, causes of action,
suits, losses, costs, liabilities and damages, and expenses actually incurred
in connection therewith (irrespective of whether any such Indemnified Party is
a party to the action for which indemnification hereunder is sought), including
reasonable attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them as a result
of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Credit Extension;
(b) the entering into and performance of this Agreement and any other
Loan Document by any of the Indemnified Parties (excluding any successful
action brought by or on behalf of the Borrower as the result of any
failure by any Lender to make any Credit Extension hereunder);
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the Capital Stock or assets of any
Person, whether or not such Agent, such Issuer, such Lead Arranger or such
Lender is party thereto;
(d) any alleged or actual investigation, litigation or proceeding
related to any environmental cleanup, audit or noncompliance with or
liability under any Environmental Law relating to the use, ownership or
operation by Holdco, the Borrower or any of their respective Subsidiaries
of any Hazardous Material; or
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<PAGE>
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission or release from, any real property owned or
operated by Holdco, the Borrower or any Subsidiary thereof of any
Hazardous Material present on or under such property in a manner giving
rise to liability at or prior to the time Holdco, the Borrower or such
Subsidiary owned or operated such property (including any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or
arising under any Environmental Law), regardless of whether caused by, or
within the control of, Holdco, the Borrower or such Subsidiary,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or willful misconduct or any Hazardous Materials that are
manufactured, emitted, generated, treated, released, stored or disposed of on
any real property of the Borrower or any of its Subsidiaries or any violation
of Environmental Law that occurs on or with respect to any real property of the
Borrower or any of its Subsidiaries to the extent occurring after such real
property is transferred to any Indemnified Person or its successor by
foreclosure sale, deed in lieu of foreclosure, or similar transfer, except to
the extent such manufacture, emission, release, generation, treatment, storage
or disposal or violation is actually caused by Holdco, the Borrower or any of
the Borrower's Subsidiaries. The Borrower and its permitted successors and
assigns hereby waive, release and agree not to make any claim, or bring any
cost recovery action against, any Agent, any Issuer, the Lead Arranger or any
Lender under CERCLA or any state equivalent, or any similar law now existing or
hereafter enacted, except to the extent arising out of the gross negligence or
willful misconduct of any Indemnified Party or arising out of any Hazardous
Materials that are manufactured, emitted, generated, treated, released, stored
or disposed of on any real property of the Borrower or any of its Subsidiaries
or any violation of Environmental Law that occurs on or with respect to any
real property of the Borrower or any of its Subsidiaries to the extent
occurring after such real property is transferred to any Indemnified Person or
its successor by foreclosure sale, deed in lieu of foreclosure, or similar
transfer. It is expressly understood and agreed that to the extent that any
Indemnified Party is strictly liable under any Environmental Laws, the
Borrower's obligation to such Indemnified Party under this indemnity shall
likewise be without regard to fault on the part of the Borrower, to the extent
permitted under applicable law, with respect to the violation or condition
which results in liability of such Indemnified Party. Notwithstanding anything
to the contrary herein, each Agent, each Issuer, the Lead Arranger and each
Lender shall be responsible with respect to any Hazardous Materials that are
manufactured, emitted, generated, treated, released, stored or disposed of on
any real property of the Borrower or any of its Subsidiaries or any violation
of Environmental Law that occurs on or with respect to any such real property
to the extent it occurs after such real property is transferred to any Agent,
Issuer, Lead Arranger or Lender to its successor by foreclosure sale, deed in
lieu of foreclosure, or similar transfer, except to the extent such
manufacture, emission, release, generation, treatment, storage or disposal or
violation is actually caused by Holdco, the Borrower or any of the Borrower's
Subsidiaries. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, the
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Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law.
SECTION 10.5. Survival. The obligations of the Borrower under Sections
4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders under
Sections 4.8 and 9.1, shall in each case survive any termination of this
Agreement, the payment in full of all Obligations and the termination of all
Commitments. The representations and warranties made by the Borrower and each
other Obligor in this Agreement and in each other Loan Document shall survive
the execution and delivery of this Agreement and each such other Loan Document.
SECTION 10.6. Severability. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall,
as to such provision and such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 10.7. Headings. The various headings of this Agreement and of each
other Loan Document are inserted for convenience only and shall not affect the
meaning or interpretation of this Agreement or such other Loan Document or any
provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement.
SECTION 10.9. Governing Law; Entire Agreement. THIS AGREEMENT, ANY NOTES
AND, EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED THEREIN, EACH OTHER LOAN
DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement and the other Loan
Documents constitute the entire understanding among the parties hereto with
respect to the subject matter hereof and supersede any prior agreements,
written or oral, with respect thereto. Upon the execution and delivery of this
Agreement by the parties hereto, all obligations and liabilities of DLJ
Merchant Banking II, Inc. under or relating or with respect to the Commitment
Letter shall be terminated and of no further force or effect.
SECTION 10.10. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that (i) the Borrower may not assign
or transfer its rights or obligations hereunder without the prior written
consent of each of the Agents and all Lenders, and (ii) the rights of sale,
assignment and transfer of the Lenders are subject to Section 10.11.
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SECTION 10.11. Sale and Transfer of Loans and Notes; Participations in
Loans and Notes. Each Lender may assign, or sell participations in, its Loans
and Commitments to one or more other Persons, on a non pro rata basis (except
as provided below), in accordance with this Section 10.11.
SECTION 10.11.1. Assignments. Any Lender (the "Assignor Lender"),
(a) with the written consents of the Borrower, the Agents and (in the
case of any assignment of participations in Letters of Credit or Revolving
Loan Commitments) the Issuers (which consents (i) shall not be
unreasonably delayed or withheld, (ii) of the Borrower shall not be
required upon the occurrence and during the continuance of any Event of
Default and (iii) of the Agents and the Issuers shall not be required in
the case of assignments made by DLJ or any of its Affiliates), may at any
time assign and delegate to one or more commercial banks, funds that are
regularly engaged in making, purchasing or investing in loans or
securities, or other financial institutions, and
(b) with notice to the Borrower, the Agents, and (in the case of any
assignment of participations in Letters of Credit or Revolving Loan
Commitments) the Issuers, but without the consent of the Borrower, the
Agents or the Issuers, may assign and delegate to any of its Affiliates or
Related Funds or to any other Lender or any Affiliate or Related Fund of
any other Lender
(each Person described in either of the foregoing clauses as being the Person
to whom such assignment and delegation is to be made, being hereinafter
referred to as an "Assignee Lender"), all or any fraction of such Assignor
Lender's Loans, participations in Letters of Credit and Letter of Credit
Outstandings with respect thereto and Commitments (which assignment and
delegation shall be, as among Revolving Loan Commitments, Revolving Loans and
participations in Letters of Credit, of a constant, and not a varying,
percentage) is in a minimum aggregate amount of (i) $2,000,000 (provided that
(1) assignments that are made on the same day to funds that (x) invest in
commercial loans and (y) are managed or advised by the same investment advisor
or any Affiliate of such investment advisor may be treated as a single
assignment for purposes of the minimum amount and (2) no minimum amount shall
be required in the case of any assignment between two Lenders so long as the
Assignor Lender has an aggregate amount of Loans and Commitments of at least
$2,000,000 following such assignment) unless the Borrower and the Agents
otherwise consent or (ii) the then remaining amount of such Assignor Lender's
Loans and Commitments; provided, however, that any such Assignee Lender will
comply, if applicable, with the provisions contained in Section 4.6 and the
Borrower, each other Obligor and the Agents shall be entitled to continue to
deal solely and directly with such Assignor Lender in connection with the
interests so assigned and delegated to an Assignee Lender until
(c) written notice of such assignment and delegation, together with
payment instructions, addresses and related information with respect to
such Assignee Lender,
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<PAGE>
shall have been given to the Borrower and the Agents by such Assignor
Lender and such Assignee Lender;
(d) such Assignee Lender shall have executed and delivered to the
Borrower and the Agents a Lender Assignment Agreement, accepted by the
Agents;
(e) the processing fees described below shall have been paid; and
(f) the Administrative Agent shall have registered such assignment
and delegation in the Register pursuant to clause (b) of Section 2.7.
From and after the date that the Agents accept such Lender Assignment Agreement
and such assignment and delegation is registered pursuant to clause (b) of
Section 2.7, (x) the Assignee Lender thereunder shall be deemed automatically
to have become a party hereto and to the extent that rights and obligations
hereunder have been assigned and delegated to such Assignee Lender in
connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (y)
the Assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Any Assignor Lender that shall have previously requested and
received any Note or Notes in respect of any Tranche to which any such
assignment applies shall, upon the acceptance by the Administrative Agent of
the applicable Lender Assignment Agreement, mark such Note or Notes "exchanged"
and deliver them to the Borrower (against, if the Assignor Lender has retained
Loans or Commitments with respect to the applicable Tranche and has requested
replacement Notes pursuant to clause (b)(ii) of Section 2.7, its receipt from
the Borrower of replacement Notes in the principal amount of the Loans and
Commitments of the applicable Tranche retained by it). Such Assignor Lender or
such Assignee Lender (unless the Assignor Lender or the Assignee Lender is DLJ
or one of its Affiliates) must also pay a processing fee to the Administrative
Agent upon delivery of any Lender Assignment Agreement in the amount of $2,500,
unless such assignment and delegation is by a Lender to its Affiliate or
Related Fund or if such assignment and delegation is by a Lender to a Federal
Reserve Bank, as provided below or is otherwise consented to by the
Administrative Agent. Any attempted assignment and delegation not made in
accordance with this Section 10.11.1 shall be null and void. Nothing contained
in this Section 10.11.1 shall prevent or prohibit any Lender from pledging its
rights (but not its obligations to make Loans or participate in Letters of
Credit of Letter of Credit Outstandings) under this Agreement and/or its Loans
hereunder to a Federal Reserve Bank in support of borrowings made by such
Lender from such Federal Reserve Bank and any Lender that is a fund that
invests in bank loans may pledge all or any portion of its rights (but not its
obligations to make Loans or participate in Letters of Credit or Letter of
Credit Outstandings) hereunder to any trustee or any other representative of
holders of obligations owed or securities issued by such fund as security for
such obligations or securities. In the event that S&P, Moody's or Thompson's
BankWatch (or InsuranceWatch Ratings Service, in the case of
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<PAGE>
Lenders that are insurance companies (or Best's Insurance Reports, if such
insurance company is not rated by Insurance Watch Ratings Service)) shall,
after the date that any Lender with a Commitment to make Revolving Loans or
participate in Letters of Credit becomes a Lender, downgrade the long-term
certificate of deposit rating or long-term senior unsecured debt rating of such
Lender, and the resulting rating shall be below BBB-, Baa3 or C (or BB, in the
case of Lender that is an insurance company (or B, in the case of an insurance
company not rated by InsuranceWatch Ratings Service)) respectively, then the
applicable Issuer or the Borrower shall have the right, but not the obligation,
upon notice to such Lender and the Agents, to replace such Lender with an
Assignee Lender in accordance with and subject to the restrictions contained in
this Section, and such Lender hereby agrees to transfer and assign without
recourse (in accordance with and subject to the restrictions contained in this
Section) all its interests, rights and obligations in respect of its Revolving
Loan Commitment under this Agreement to such Assignee Lender; provided,
however, that (i) no such assignment shall conflict with any law, regulation or
order of any governmental authority and (ii) such Assignee Lender shall pay to
such Lender in immediately available funds on the date of such assignment the
principal of and interest and fees (if any) accrued to the date of payment on
the Loans made, and Letters of Credit participated in, by such Lender hereunder
and all other amounts accrued for such Lender's account or owed to it
hereunder.
SECTION 10.11.2. Participations. Any Lender may at any time sell to one or
more commercial banks or other Persons (each such commercial bank and other
Person being herein called a "Participant") participating interests in any of
the Loans, Commitments, participations in Letters of Credit and Letters of
Credit Outstandings or other interests of such Lender hereunder; provided,
however, that
(a) no participation contemplated in this Section shall relieve such
Lender from its Commitments or its other obligations hereunder or under
any other Loan Document;
(b) such Lender shall remain solely responsible for the performance
of its Commitments and such other obligations;
(c) the Borrower and each other Obligor and the Agents shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and each of the other
Loan Documents;
(d) no Participant, unless such Participant is an Affiliate of such
Lender, or is itself a Lender, shall be entitled to require such Lender to
take or refrain from taking any action hereunder or under any other Loan
Document, except that such Lender may agree with any Participant that such
Lender will not, without such Participant's consent, agree to (i) any
reduction in the interest rate or amount of fees that such Participant is
otherwise entitled to, (ii) a decrease in the principal amount, or an
extension of the final Stated Maturity Date, of any Loan in which such
Participant has purchased a participating
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<PAGE>
interest or (iii) a release of all or substantially all of the collateral
security under the Loan Documents or any Material Subsidiary that is a
Subsidiary Guarantor under the Subsidiary Guaranty, in each case except as
otherwise specifically provided in a Loan Document; and
(e) the Borrower shall not be required to pay any amount under
Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4 that is greater than the amount
which it would have been required to pay had no participating interest
been sold.
The Borrower acknowledges and agrees, subject to clause (e) above, that, to the
fullest extent permitted under applicable law, each Participant, for purposes
of Sections 4.3, 4.4, 4.5, 4.6, 4.8, 4.9, 10.3 and 10.4, shall be considered a
Lender.
SECTION 10.12. Other Transactions. Nothing contained herein shall preclude
any Agent or any other Lender from engaging in any transaction, in addition to
those contemplated by this Agreement or any other Loan Document, with the
Borrower or any of its Affiliates in which the Borrower or such Affiliate is
not restricted hereby from engaging with any other Person.
SECTION 10.13. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE LENDERS,
THE ISSUERS OR THE BORROWER RELATING THERETO SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY (TO THE EXTENT PERMITTED UNDER APPLICABLE LAW) IN THE COURTS OF THE
STATE OF NEW YORK, NEW YORK COUNTY, OR IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
ADMINISTRATIVE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK,
NEW YORK COUNTY, AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH SUCH LITIGATION. THE BORROWER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR WITHOUT THE STATE OF NEW YORK. THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE
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FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH
COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN
AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE
BORROWER HEREBY IRREVOCABLY WAIVES (TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW) SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
SECTION 10.14. Waiver of Jury Trial. THE AGENTS, THE ISSUERS, THE LENDERS
AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE ISSUERS, THE LENDERS OR
THE BORROWER RELATING THERETO. THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER
PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS AND THE LENDERS ENTERING INTO
THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
SECTION 10.15. Confidentiality. The Agents, the Issuers, the Lead Arranger
and the Lenders shall hold all non-public information obtained pursuant to or
in connection with this Agreement or obtained by them based on a review of the
books and records of the Borrower or any of its Subsidiaries in accordance with
their customary procedures for handling confidential information of this
nature, but may make disclosure to any of their examiners, Affiliates, Related
Funds, investment advisors or Affiliates thereof, outside auditors, counsel and
other professional advisors in connection with this Agreement or as reasonably
required by any potential bona fide transferee, participant or assignee, or to
any direct or indirect contractual counterparties in swap agreements or such
contractual counterparties' professional advisors, or in connection with the
exercise of remedies under a Loan Document, or as requested by any governmental
or regulatory agency, any rating agency or the National Association of
Insurance Commissioners, or representative of any thereof or pursuant to legal
process; provided, however, that
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(a) unless specifically prohibited by applicable law or court order,
each Agent, each Issuer, the Lead Arranger and each Lender shall promptly
notify the Borrower of any request by any governmental agency or
representative thereof (other than any such request in connection with an
examination of the financial condition of such Agent, such Issuer, the
Lead Arranger and such Lender by such governmental agency) for disclosure
of any such non-public information prior to disclosure of such
information;
(b) prior to any such disclosure pursuant to this Section 10.15, each
Agent, each Issuer, the Lead Arranger and each Lender shall require any
such bona fide transferee, participant and assignee receiving a disclosure
of non-public information to agree in writing
(i) to be bound by this Section 10.15; and
(ii) to require such Person to require any other Person to whom
such Person discloses such non-public information to be similarly
bound by this Section 10.15; and
(c) except as may be required by an order of a court of competent
jurisdiction and to the extent set forth therein, no Lender shall be
obligated or required to return any materials furnished by the Borrower or
any Subsidiary.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
CHARLES RIVER LABORATORIES, INC.
By:________________________________
Name:
Title:
251 Ballardvale Street
Wilmington, MA 01877-1096
Attention: Dennis R. Shaughnessy
Telecopier: (978) 694-9504
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<PAGE>
DLJ CAPITAL FUNDING, INC.,
as Syndication Agent and as a Lender
By:________________________________
Name:
Title:
277 Park Avenue
New York, NY 10172
Attention: James Paradise
Telecopier: (212) 892-7542
Commitment Percentages:
-----------------------
Percentage of Revolving Loans:
Percentage of Term-A Loans:
Percentage of Term-B Loans:
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UNION BANK OF CALIFORNIA, N.A.,
as Administrative Agent and as a Lender
By:________________________________
Name:
Title:
445 South Figueroa Street
16th Floor
Los Angeles, CA 90071
Attention: Ronald Launsbach
Telecopier: (213) 629-5328
Commitment Percentages:
----------------------
Percentage of Revolving Loans:
Percentage of Term-A Loans:
Percentage of Term-B Loans:
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<PAGE>
NATIONAL CITY BANK,
as Documentation Agent and as a Lender
By:________________________________
Name:
Title:
1900 East Ninth Street
Mail Locator 2077
Cleveland, OH 44114
Attention: Joseph Robison
Telecopier: (216) 222-0003
Commitment Percentages:
----------------------
Percentage of Revolving Loans:
Percentage of Term-A Loans:
Percentage of Term-B Loans:
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SCHEDULE I
DISCLOSURE SCHEDULE
ITEM 6.7 Litigation.
Description of Proceeding Action or Claim Sought
------------------------- ----------------------
ITEM 6.8 Existing Subsidiaries.
ITEM 6.11 Employee Benefit Plans.
ITEM 6.12 Environmental Matters.
ITEM 7.1.11 Intellectual Property.
ITEM 7.1.12 Mortgaged Properties.
ITEM 7.2.2(a) Ongoing Indebtedness.
ITEM 7.2.2 (b) Ongoing Liens.
ITEM 7.2.5(a) Ongoing Investments.
<PAGE>
SCHEDULE II
Percentages and Administrative Information
<TABLE>
Revolving Term-A Term-B Address for Notices
Loan Loan Loan (other than Notices
Lender Commitment Commitment Commitment relating to LIBO Rate Loans) LIBOR Office
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DLJ Capital 64.2857143% 64.2857143% 100% 277 Park Avenue 277 Park Avenue
Funding, Inc. New York, NY 10172 New York, NY 10172
Attention: James Paradise Attention: James
Telephone: (212) 892-7740 Paradise
Telecopier: (212) 892-7542 Telephone: (212) 892-7740
Telecopier: (212) 892-7542
Union Bank of 35.7142857% 35.7142857% 0% 445 South Figueroa St. 445 South Figueroa St.
California, N.A. Mail Code: 916-075 Mail Code: 916-075
Los Angeles, CA 90071 Los Angeles, CA 90071
Attention: Amelita Akim Attention: Amelita Akim
Telephone: (213) 236-5276 Telephone: (213) 236-5276
Telecopier: (213) 236-7544
Telecopier: (213) 236-7544
</TABLE>
III-2
EXHIBIT 10.4
===============================================================================
CHARLES RIVER LABORATORIES, INC.
13 1/2% SENIOR SUBORDINATED NOTES DUE 2009
Guaranteed to the extent set forth herein by
SBI HOLDINGS, INC.
SIERRA BIOMEDICAL, INC.
SIERRA BIOMEDICAL SAN DIEGO, INC.
---------------------------
INDENTURE
Dated as of September 29, 1999
---------------------------
STATE STREET BANK AND TRUST COMPANY
TRUSTEE
---------------------------
===============================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
310 (a)(1)...............................................................7.10
(a)(2) ..................................................................7.10
(a)(3)...................................................................N.A.
(a)(4)...................................................................N.A.
(a)(5)...................................................................7.10
(b)......................................................................7.10
(c)......................................................................N.A.
311(a)...................................................................7.11
(b)......................................................................7.11
(c)......................................................................N.A.
312 (a)..................................................................2.05
(b).....................................................................11.03
(c).....................................................................10.03
313(a)...................................................................7.06
(b)(1)...................................................................N.A.
(b)(2)..................................................................7.06;
7.07
(c).....................................................................7.06;
11.02
(d)......................................................................7.06
314(a)..................................................................11.05
(b)......................................................................N.A.
(c)(1)..................................................................11.04
(c)(2)..................................................................11.04
(c)(3)...................................................................N.A.
(d)......................................................................N.A.
(e).....................................................................11.05
(f)......................................................................N.A.
315 (a)..................................................................7.01
(b).....................................................................7.05;
10.02
(c)......................................................................7.01
(d)......................................................................7.01
(e)......................................................................6.11
316 (a)(last sentence)...................................................2.09
(a)(1)(A)................................................................6.05
(a)(1)(B)................................................................6.04
(a)(2)...................................................................N.A.
(b)......................................................................6.07
(c)......................................................................2.12
317 (a)(1)...............................................................6.08
(a)(2)...................................................................6.09
(b)......................................................................2.04
318 (a).................................................................10.01
(b)......................................................................N.A.
(c).....................................................................10.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
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TABLE OF CONTENTS
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Page
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ARTICLE 1DEFINITIONS AND INCORPORATION BY REFERENCE............................2
Section 1.01 Definitions.............................................2
Section 1.02 Other Definitions......................................22
Section 1.03 Incorporation of TIA Provisions........................23
Section 1.04 Rules of Construction..................................23
ARTICLE 2THE NOTES............................................................24
Section 2.01 Form and Dating........................................24
Section 2.02 Execution and Authentication...........................25
Section 2.03 Registrar and Paying Agent.............................25
Section 2.04 Paying Agent to Hold Money in Trust....................26
Section 2.05 Holder Lists...........................................26
Section 2.06 Transfer and Exchange..................................26
Section 2.07 Replacement Notes......................................38
Section 2.08 Outstanding Notes......................................38
Section 2.09 Treasury Notes.........................................39
Section 2.10 Temporary Notes........................................39
Section 2.11 Cancellation...........................................39
Section 2.12 Defaulted Interest.....................................39
ARTICLE 3REDEMPTION AND PREPAYMENT............................................40
Section 3.01 Notices to Trustee.....................................40
Section 3.02 Selection of Notes to Be Redeemed......................40
Section 3.03 Notice of Redemption...................................40
Section 3.04 Effect of Notice of Redemption.........................41
Section 3.05 Deposit of Redemption Price............................41
Section 3.06 Notes Redeemed in Part.................................41
Section 3.07 Optional Redemption....................................42
Section 3.08 Mandatory Redemption...................................42
Section 3.09 Offer to Purchase by Application of Excess Proceeds....42
ARTICLE 4COVENANTS............................................................44
Section 4.0 Payment of Notes.......................................44
Section 4.02 Maintenance of Office or Agency........................44
Section 4.03 Reports................................................45
Section 4.04 Compliance Certificate.................................45
Section 4.05 Taxes..................................................46
Section 4.06 Stay, Extension and Usury Laws.........................46
Section 4.07 Restricted Payments....................................46
Section 4.08 Dividend and Other Payment Restrictions Affecting
Subsidiaries.........................................50
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Section 4.09 Incurrence of Indebtedness and Issuance of Preferred
Stock................................................51
Section 4.10 Asset Sales............................................53
Section 4.11 Transactions with Affiliates...........................54
Section 4.12 Liens..................................................55
Section 4.13 Corporate Existence....................................55
Section 4.14 Offer to Repurchase Upon Change of Control.............55
Section 4.15 No Senior Subordinated Indebtedness....................56
Section 4.16 Limitation on Sale and Leaseback Transactions..........56
Section 4.17 Additional Note Guarantees.............................57
ARTICLE 5SUCCESSORS...........................................................57
Section 5.01 Merger, Consolidation, or Sale of Assets...............57
Section 5.02 Successor Corporation Substituted......................58
ARTICLE 6DEFAULTS AND REMEDIES................................................58
Section 6.01 Events of Default......................................58
Section 6.02 Acceleration...........................................59
Section 6.03 Other Remedies.........................................60
Section 6.04 Waiver of Past Defaults................................60
Section 6.05 Control by Majority....................................61
Section 6.06 Limitation on Suits....................................61
Section 6.07 Rights of Holders of Notes to Receive Payment..........61
Section 6.08 Collection Suit by Trustee.............................61
Section 6.09 Trustee May File Proofs of Claim.......................62
Section 6.10 Priorities.............................................62
Section 6.11 Undertaking for Costs..................................62
ARTICLE 7TRUSTEE..............................................................63
Section 7.01 Duties of Trustee......................................63
Section 7.02 Rights of Trustee......................................64
Section 7.03 Individual Rights of Trustee...........................65
Section 7.04 Trustee's Disclaimer...................................65
Section 7.05 Notice of Defaults.....................................65
Section 7.06 Reports by Trustee to Holders of the Notes.............65
Section 7.07 Compensation and Indemnity.............................65
Section 7.08 Replacement of Trustee.................................66
Section 7.09 Successor Trustee by Merger, etc.......................67
Section 7.10 Eligibility; Disqualification..........................67
Section 7.11 Preferential Collection of Claims Against Company......67
ARTICLE 8LEGAL DEFEASANCE AND COVENANT DEFEASANCE.............................68
Section 8.01 Option to Effect Legal Defeasance or Covenant
Defeasance...........................................68
Section 8.02 Legal Defeasance and Discharge.........................68
Section 8.03 Covenant Defeasance....................................68
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Section 8.04 Conditions to Legal or Covenant Defeasance.............69
Section 8.05 Deposited Money and Government Securities to be Held
in Trust; Other Miscellaneous Provisions.............70
Section 8.06 Repayment to Company...................................70
Section 8.07 Reinstatement..........................................71
ARTICLE 9AMENDMENT, SUPPLEMENT AND WAIVER.....................................71
Section 9.01 Without Consent of Holders of Notes....................71
Section 9.02 With Consent of Holders of Notes.......................72
Section 9.03 Compliance with Trust Indenture Act....................73
Section 9.04 Revocation and Effect of Consents......................73
Section 9.05 Notation on or Exchange of Notes.......................73
Section 9.06 Trustee to Sign Amendments, etc........................74
ARTICLE 10SUBORDINATION.......................................................74
Section 10.01 Agreement to Subordinate...............................74
Section 10.02 Certain Definitions....................................74
Section 10.03 Liquidation; Dissolution; Bankruptcy...................75
Section 10.04 Default on Designated Senior Indebtedness..............75
Section 10.05 Acceleration of Securities.............................76
Section 10.06 When Distribution Must Be Paid Over....................76
Section 10.07 Notice by Company......................................76
Section 10.08 Subrogation............................................77
Section 10.09 Relative Rights........................................77
Section 10.10 Subordination May Not Be Impaired by Company...........77
Section 10.11 Distribution or Notice to Representative...............77
Section 10.12 Rights of Trustee and Paying Agent.....................78
Section 10.13 Authorization to Effect Subordination..................78
Section 10.14 No Waiver of Subordination Provisions..................78
Section 10.15 Amendments.............................................78
Section 10.16 Trustee's Compensation not Prejudiced..................79
ARTICLE 11NOTE GUARANTEES.....................................................79
Section 11.01 Guarantee..............................................79
Section 11.02 Subordination of Note Guarantee........................80
Section 11.03 Limitation of Guarantor Liability......................80
Section 11.04 Execution And Delivery Of Note Guarantee...............80
Section 11.05 Guarantors May Consolidate, Etc., On Certain Terms.....81
Section 11.06 Releases Following Sale Of Assets......................81
ARTICLE 12MISCELLANEOUS.......................................................82
Section 12.01 Trust Indenture Act Controls...........................82
Section 12.02 Notices................................................82
Section 12.03 Communication by Holders of Notes with Other Holders
of Notes.............................................83
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Section 12.04 Certificate and Opinion as to Conditions Precedent.....83
Section 12.05 Statements Required in Certificate or Opinion..........83
Section 12.06 Rules by Trustee and Agents............................84
Section 12.07 No Personal Liability of Directors, Officers, Employees
and Stockholders.....................................84
Section 12.08 Governing Law..........................................84
Section 12.09 No Adverse Interpretation of Other Agreements..........84
Section 12.10 Successors.............................................84
Section 12.11 Severability...........................................84
Section 12.12 Counterpart Originals..................................84
Section 12.13 Table of Contents, Headings, etc.......................85
EXHIBITS
Exhibit A1: FORM OF NOTE
Exhibit A2: FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B: FORM OF CERTIFICATE OF TRANSFER
Exhibit C: FORM OF CERTIFICATE OF EXCHANGE
Exhibit D: FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL
ACCREDITED INVESTOR
Exhibit E: FORM OF NOTE GUARANTEE
Exhibit F: FORM OF SUPPLEMENTAL INDENTURE
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INDENTURE dated as of September 29, 1999, by and among Charles River
Laboratories, Inc., a Delaware corporation (the "Company"), the guarantors
listed on the signature pages hereto and State Street Bank and Trust Company,
as trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 13 1/2% Senior Subordinated Notes due 2009 (the "Notes"). Interest on the
Notes will accrue at the rate of 13.5% per year; provided that the rate at
which interest accrues will increase to 14.0% per year on August 15, 2000 in
the event that the Ratio of Consolidated Net Debt to Consolidated Cash Flow
for the Company as of June 30, 2000 is equal to or greater than 5.00 to 1.
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions.
"144A Global Note" means the form of the Notes initially sold to QIBs.
"Accounts Receivable Subsidiary" means an Unrestricted Subsidiary of
the Company to which the Company or any of its Restricted Subsidiaries sells
any of its accounts receivable pursuant to a Receivables Facility.
"Acquired Indebtedness" means, with respect to any specified Person,
(1) Indebtedness of any other Person existing at the time that
other Person is merged with or into or became a Subsidiary
of that specified Person, including, without limitation,
Indebtedness incurred in connection with, or in
contemplation of, that other Person merging with or into or
becoming a Subsidiary of that specified Person; and
(2) Indebtedness secured by a Lien encumbering an asset acquired by
that specified Person at the time that asset is acquired by that
specified Person.
"Additional Notes" means Notes (other than the Initial Notes)issued
under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as part
of the same series as the Initial Notes.
"Affiliate" of any specified Person means any other Person which,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, that specified Person. For purposes of this
definition, "control," when used with respect to any Person, means the power
to direct the management and policies of that Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedelbank that apply to such
transfer or exchange.
"Asset Sale" means:
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(1) the sale, lease, conveyance, disposition or other transfer
(a "disposition") of any properties, assets or rights
(including, without limitation, by way of a sale and
leaseback); provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets
of the Company and its Subsidiaries taken as a whole will be
governed by the provisions of Sections 4.14 and/or 5.01 and
not by the provisions of Section 4.10; and
(2) the issuance, sale or transfer by the Company or any of its
Restricted Subsidiaries of Equity Interests of any of the
Company's Restricted Subsidiaries,
in the case of either clause (1) or (2), whether in a single
transaction or a series of related transactions,
(a) that have a fair market value in excess of $5.0 million; or
(b) for net proceeds in excess of $5.0 million.
Notwithstanding the foregoing, the following items shall not be
deemed to be Asset Sales:
(1) dispositions in the ordinary course of business;
(2) a disposition of assets by the Company to a Restricted Subsidiary
or by a Restricted Subsidiary to the Company or to another
Restricted Subsidiary;
(3) a disposition of Equity Interests by a Restricted Subsidiary to
the Company or to another Restricted Subsidiary;
(4) the sale and leaseback of any assets within 90 days of the
acquisition thereof;
(5) foreclosures on assets;
(6) any exchange of like property pursuant to Section 1031 of the
Internal Revenue Code of 1986, as amended, for use in a
Permitted Business;
(7) any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary;
(8) a Permitted Investment or a Restricted Payment that is permitted
by Section 4.07 hereof; and
(9) sales of accounts receivable, or participations therein, in
connection with any Receivables Facility.
"Attributable Indebtedness" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in that sale and leaseback transaction,
including any period for which that lease has been extended or may, at the
option of the lessor, be extended.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
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"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Expenditure Indebtedness" means Indebtedness incurred by any
Person to finance the purchase or construction or any property or assets
acquired or constructed by that Person which have a useful life of more than
one year so long as:
(1) the purchase or construction price for that property or assets
is included in "addition to property, plant or equipment" in
accordance with GAAP;
(2) the acquisition or construction of that property or assets is
not part of any acquisition of a Person or line of business;
and
(3) that Indebtedness is incurred within 90 days of the
acquisition or completion of construction of that property or
assets.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital
lease that would at that time be required to be capitalized on a balance sheet
in accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and
all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or
limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalents" means;
(1) Government Securities;
(2) any certificate of deposit maturing not more than 365 days
after the date of acquisition issued by, or demand deposit
or time deposit of, an Eligible Institution or any lender
under the New Credit Facility;
(3) commercial paper maturing not more than 365 days after the
date of acquisition of an issuer (other than an Affiliate of
the Company) with a rating, at the time as of which any
investment therein is made, of "A-3" (or higher) according
to S&P or "P-2" (or higher) according to Moody's or carrying
an equivalent rating by a nationally recognized rating
agency if both of the two named rating agencies cease
publishing ratings of investments;
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(4) any bankers acceptances of money market deposit accounts issued
by an Eligible Institution;
(5) any fund investing exclusively in investments of the types
described in clauses (1) through (4) above; and
(6) in the case of any Subsidiary organized or having its
principal place of business outside the United States,
investments denominated in the currency of the jurisdiction
in which that Subsidiary is organized or has its principal
place of business which are similar to the items specified
in clauses (1) through (5) above, including without
limitation any deposit with a bank that is a lender to any
Restricted Subsidiary.
"Cedelbank" means Cedelbank, a limited liability company (a societe
anonyme) organized under Luxembourg law.
"Change of Control" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition,
other than by way of merger or consolidation, in one or a
series of related transactions, of all or substantially all
of the assets of the Company and its Subsidiaries, taken as
a whole, to any "person" or "group" (as those terms are used
in Section 13(d) of the Exchange Act), other than the
Principals and their Related Parties;
(2) the adoption of a plan for the liquidation or dissolution of the
Company;
(3) the consummation of any transaction, including, without
limitation, any merger or consolidation, the result of which
is that any "person" or "group" (as those terms are used in
Section 13(d) of the Exchange Act), other than the
Principals and their Related Parties, becomes the
"beneficial owner" (as that term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or
indirectly through one or more intermediaries, of 50% or
more of the voting power of the outstanding voting stock of
the Company; or
(4) the first day on which a majority of the members of the board of
directors of the Company are not Continuing Members.
"Commission" means the Securities and Exchange Commission.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of that Person and its Restricted
Subsidiaries for that period plus, to the extent deducted in computing
Consolidated Net Income,
(1) provision for taxes based on income or profits of that Person and
its Restricted Subsidiaries for that period;
(2) Fixed Charges of that Person for that period;
(3) depreciation, amortization (including amortization of
goodwill and other intangibles) and all other non-cash
charges, but excluding any other non-cash charge to the
extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization
5
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of a prepaid cash expense that was paid in a prior period, of
that Person and its Restricted Subsidiaries for that period;
(4) net periodic post-retirement benefits;
(5) other income or expense net as set forth on the face of that
Person's statement of operations;
(6) expenses and charges of the Company related to the
Transactions, including any purchase price adjustment or any
other payments made pursuant to or as contemplated in the
Transaction Agreements or any financial advisory agreements
with Donaldson, Lufkin & Jenrette Securities Corporation and
Transaction Financing, the New Credit Facility and the
application of the proceeds thereof; and
(7) any non-capitalized transaction costs incurred in connection
with actual, proposed or abandoned financings, acquisitions
or divestitures, including, but not limited to, financing
and refinancing fees and costs incurred in connection with
the Transactions and Transaction Financing,
in each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes based on the income or
profile of, the Fixed Charges of, and the depreciation and amortization and
other non-cash charges of, a Restricted Subsidiary of a Person shall be added
to Consolidated Net Income to compute Consolidated Cash Flow only to the
extent (and in the same proportion) that Net Income of such Restricted
Subsidiary was included in calculating the Consolidated Net Income of such
Person.
"Consolidated Interest Expense" means, with respect to any Person for
any period, the sum of, without duplication,
(1) the interest expense of that Person and its Restricted
Subsidiaries for that period, on a consolidated basis,
determined in accordance with GAAP, including amortization
of original issue discount, non-cash interest payments, the
interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to
Attributable Indebtedness, commissions, discounts and other
fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments, if any,
pursuant to Hedging Obligations; provided that in no event
shall any amortization of deferred financing costs be
included in Consolidated Interest Expense; and
(2) the consolidated capitalized interest of that Person and its
Restricted Subsidiaries for that period, whether paid or
accrued; provided, however, that Receivables Fees shall be
deemed not to constitute Consolidated Interest Expense.
Notwithstanding the foregoing, the Consolidated Interest Expense with
respect to any Restricted Subsidiary that is not a Wholly Owned Restricted
Subsidiary shall be included only to the extent and in the same proportion
that the net income of that Restricted Subsidiary was included in calculating
Consolidated Net Income.
"Consolidated Net Debt" means, with respect to any Person as of any
date of determination, the aggregate principal amount of Indebtedness for
borrowed money of such Person and its Restricted
6
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Subsidiaries as of such date, less the aggregate amount of cash and Cash
Equivalents of such Person and its Restricted Subsidiaries, in each case
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of that Person and its Restricted
Subsidiaries for that period, on a consolidated basis, determined in
accordance with GAAP; provided that
(1) the Net Income (or loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity
method of accounting shall be included only to the extent of
the amount of dividends or distributions paid in cash to the
referent Person or a Restricted Subsidiary thereof;
(2) the Net Income (or loss) of any Restricted Subsidiary other
than a Subsidiary organized or having its principal place of
business outside the United States shall be excluded to the
extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that
Net Income (or loss) is not at the date of determination
permitted without any prior governmental approval (that has
not been obtained) or, directly or indirectly, by operation
of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary;
(3) the Net Income (or loss) of any Person acquired in a pooling of
interests transaction for any period prior to the date of that
acquisition shall be excluded; and
(4) the cumulative effect of a change in accounting principles shall
be excluded.
Continuing Members" means, as of any date of determination, any
member of the Board of Directors who:
(1) was a member of Board of Directors immediately after consummation
of the Recapitalization and the Recapitalization Financing; or
(2) was nominated for election or elected to the Board of
Directors with the approval of, or whose election to the
Board of Directors was ratified by, at least a majority of
the Continuing Members who were members of the Board of
Directors at the time of that nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which
the Trustee may give notice to the Company.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A-1 hereto except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
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"Depositary" means The Depository Trust Company.
"Designated Noncash Consideration" means the fair market value of
non-cash consideration received by the Company or one of its Restricted
Subsidiaries in connection with an Asset Sale that is so designated as
Designated Noncash Consideration pursuant to an Officers' Certificate, setting
forth the basis of that valuation, executed by the principal executive officer
and the principal financial officer of the Company, less the amount of cash or
Cash Equivalents received in connection with a sale of that Designated Noncash
Consideration.
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible, or for which it is
exchangeable), or upon the happening of any event (other than any event solely
within the control of the issuer thereof), matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, is
exchangeable for Indebtedness (except to the extent exchangeable at the option
of that Person subject to the terms of any debt instrument to which that
Person is a party) or redeemable at the option of the Holder thereof, in whole
or in part, on or prior to the date on which the Notes mature; provided that
any Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase that
Capital Stock upon the occurrence of a Change of Control or an Asset Sale
shall not constitute Disqualified Stock if the terms of that Capital Stock
provide that the Company may not repurchase or redeem any such Capital Stock
pursuant to those provisions unless that repurchase or redemption complies
with Section 4.07 hereof; and provided further that, if that Capital Stock is
issued to any plan for the benefit of employees of the Company or its
Subsidiaries or by any such plan to those employees, that Capital Stock shall
not constitute Disqualified Stock solely because it may be required to be
repurchased by the Company in order to satisfy applicable statutory or
regulatory obligations.
"DLJ Merchant Banking Funds" means DLJ Merchant Banking Partners II,
L.P. and its Affiliates.
"Domestic Subsidiary" means a Subsidiary that is organized under the
laws of the United States or any State, district or territory thereof.
"Eligible Institution" means a commercial banking institution that
has combined capital and surplus not less than $100.0 million or its
equivalent in foreign currency, whose short-term debt is rated "A-3" or higher
according to Standard & Poor's Ratings Group ("S&P") or "P-2" or higher
according to Moody's Investor Services, Inc. ("Moody's") or carrying an
equivalent rating by a nationally recognized rating agency if both of the two
named rating agencies cease publishing ratings of investments.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
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"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the New Credit
Facility) in existence on the date of this Indenture, until those amounts are
repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of,
(1) the Consolidated Interest Expense of that Person for that period;
and
(2) all dividend payments on any series of preferred stock of
that Person (other than dividends payable solely in Equity
Interests that are not Disqualified Stock),
in each case, on a consolidated basis and in accordance with GAAP.
Fixed Charge Coverage Ratio" means, with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of that Person for that
period (exclusive of amounts attributable to discontinued operations, as
determined in accordance with GAAP, or operations and businesses disposed of
prior to the Calculation Date) to the Fixed Charges of that Person for that
period (exclusive of amounts attributable to discontinued operations, as
determined in accordance with GAAP, or operations and businesses disposed of
prior to the Calculation Date).
In the event that the referent Person or any of its Subsidiaries
incurs, assumes, guarantees or redeems any Indebtedness (other than revolving
credit borrowings) or issues or redeems preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to
that incurrence, assumption, guarantee or redemption of Indebtedness, or that
issuance or redemption of preferred stock and the use of the proceeds
therefrom, as if the same had occurred at the beginning of the applicable
four-quarter reference period.
In addition, for purposes of making the computation referred to
above, the Recapitalization and acquisitions that have been made by the
Company or any of its Subsidiaries, including all mergers or consolidations
and any related financing transactions, during the four-quarter reference
period or subsequent to that reference period and on or prior to the
Calculation Date shall be deemed to have occurred on the first day of the
four-quarter reference period and Consolidated Cash Flow for that reference
period shall be calculated to include the Consolidated Cash Flow of the
acquired entities on a pro forma basis after giving effect to cost savings
reasonably expected to be realized in connection with that acquisition, as
determined in good faith by an officer of the Company (regardless of whether
those cost savings could then be reflected in pro forma financial statements
under GAAP, Regulation S-X promulgated by the Commission or any other
regulation or policy of the Commission) and without giving effect to clause
(3) of the proviso set forth in the definition of Consolidated Net Income.
"Foreign Credit Facilities" means any Indebtedness of a Restricted
Subsidiary organized or having its principal place of business outside the
United States. Indebtedness under the Foreign Credit Facilities outstanding on
the date on which the Notes are first issued and authenticated under this
Indenture shall be deemed to have been incurred on that date in reliance on
the first paragraph of Section 4.09 hereof.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
9
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other statements by such other entity as have been approved by a significant
segment of the accounting profession, which are in effect on the date of this
Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit or reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Guarantors" means (i) each Restricted Subsidiary of the Company on
the date of this Indenture that is a Domestic Subsidiary and (ii) any other
Subsidiary that executes a Note Guarantee in accordance with the provisions of
this Indenture.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (a) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (b) other
agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of
that Person in respect of borrowed money or evidenced by bonds, notes,
debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or banker's acceptances or representing Capital
Lease Obligations or the balance deferred and unpaid of the purchase price of
any property or representing any Hedging Obligations, except any such balance
that constitutes an accrued expense, trade payable or customer contract
advances, if and to the extent any of the foregoing Indebtedness (other than
letters of credit and Hedging Obligations) would appear as a liability upon a
balance sheet of that Person prepared in accordance with GAAP, as well as all
Indebtedness of others secured by a Lien on any asset of that Person (whether
or not that Indebtedness is assumed by that Person) and, to the extent not
otherwise included, the guarantee by that Person of any Indebtedness of any
other Person, provided that Indebtedness shall not include the pledge by the
Company of the Capital Stock of an Unrestricted Subsidiary of the Company to
secure Non-Recourse Debt of that Unrestricted Subsidiary.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, (together with any interest thereon
that is more than 30 days past due), in the case of any
Indebtedness that does not require current payments of interest;
and
(2) the principal amount thereof (together with any interest
thereon that is more than 30 days past due), in the case of
any other Indebtedness provided that the principal amount of
any Indebtedness that is denominated in any currency other
than United States dollars shall be the amount thereof, as
determined pursuant to the foregoing provision, converted
into
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United States dollars at the Spot Rate in effect on the date
that Indebtedness was incurred or, if that indebtedness was
incurred prior to the date of this Indenture, the Spot Rate in
effect on the date of this Indenture.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Notes" means the first $150,000,000 aggregate principal
amount of Notes issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all investments by
that Person in other Persons, including Affiliates, in the forms of direct or
indirect loans (including guarantees by the referent Person of, and Liens on
any assets of the referent Person securing, Indebtedness or other obligations
of other Persons), advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the ordinary
course of business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, together with all items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP, provided that an investment by the Company for
consideration consisting of common equity securities of the Company shall not
be deemed to be an Investment other than for purposes of clause (3) of the
definition of "Qualified Proceeds."
If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect
Restricted Subsidiary of the Company such that, after giving effect to any
such sale or disposition, that Person is no longer a Subsidiary of the
Company, the Company shall be deemed to have made an Investment on the date of
any such sale or disposition equal to the fair market value of the Equity
Interests of that Restricted Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or the city in which the principal
corporate trust office of the Trustee is located, or at a place of payment,
are authorized by law, regulation or executive order to remain closed. If a
payment date is a Legal Holiday at a place of payment, payment may be made at
that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of that asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction.
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
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"Management Loans" means one or more loans by the Company or Parent
to officers and/or directors of the Company and any of its Restricted
Subsidiaries to finance the purchase by such officers and directors of common
stock of Parent or the Company or membership interests in CRL Acquisition LLC;
provided that the aggregate principal amount of all such Management Loans
outstanding at any time shall not exceed $1.5 million.
"Net Income" means, with respect to any Person, the net income (loss)
of that Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(1) any gain (or loss), together with any related provision for taxes
on that gain (or loss), realized in connection with:
(a) any Asset Sale, including, without limitation, dispositions
pursuant to sale and leaseback transactions; or
(b) the extinguishment of any Indebtedness of that Person or
any of its Restricted Subsidiaries; and
(2) any extraordinary or nonrecurring gain (or loss), together with
any related provision for taxes on that extraordinary or
nonrecurring gain (or loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of,
without duplication,
(1) the direct costs relating to that Asset Sale, including,
without limitation, legal, accounting and investment banking
fees, and sales commissions, recording fees, title transfer
fees and appraiser fees and cost of preparation of assets
for sale, and any relocation expenses incurred as a result
thereof;
(2) taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax
sharing arrangements);
(3) amounts required to be applied to the repayment of
Indebtedness (other than revolving credit Indebtedness
incurred pursuant to the New Credit Facility) secured by a
Lien on the asset or assets that were the subject of that
Asset Sale; and
(4) any reserve established in accordance with GAAP or any
amount placed in escrow, in either case for adjustment in
respect of the sale price of such asset or assets until such
time as that reserve is reversed or that escrow arrangement
is terminated, in which case Net Proceeds shall include only
the amount of the reserve so reversed or the amount returned
to the Company or its Restricted Subsidiaries from that
escrow arrangement, as the case may be.
"New Credit Facility" means that certain Credit Agreement, dated as
of September 29, 1999 among the Company, certain subsidiaries of the Company
from time to time party thereto as guarantors, various financial institutions
party thereto, and DLJ Capital Funding, Inc., as syndication agent and
administrative agent, including any related notes, guarantees, letters of
credit collateral documents, rate
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protection or hedging arrangement, instruments and agreements executed in
connection therewith, and, in each case, as amended, modified, renewed,
refunded, replaced or refinanced from time to time, including any agreement:
(1) extending or shortening the maturity of any Indebtedness incurred
thereunder or contemplated thereby;
(2) adding or deleting borrowers or guarantors thereunder;
(3) increasing the amount of Indebtedness incurred thereunder or
available to be borrowed thereunder, provided that on the
date that Indebtedness is incurred it would not be
prohibited by clause (i) of Section 4.09 hereof; or
(4) otherwise altering the terms and conditions thereof.
Indebtedness under the New Credit Facility outstanding on the date on
which the Notes are first issued and authenticated under this Indenture shall
be deemed to have been incurred on that date in reliance on the first
paragraph of Section 4.09 hereof.
"Non-Recourse Debt" means Indebtedness,
(1) no default with respect to, which (including any rights that
the holders thereof may have to take enforcement action
against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other
Indebtedness of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness
or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and
(2) as to which the lenders have been notified in writing that
they will not have any recourse to the stock (other than the
stock of an Unrestricted Subsidiary pledged by the Company
to secure debt of that Unrestricted Subsidiary) or assets of
the Company or any of its Restricted Subsidiaries;
provided that in no event shall Indebtedness of any Unrestricted Subsidiary
fail to be Non-Recourse Debt solely as a result of any default provisions
contained in a guarantee thereof by the Company or any of its Restricted
Subsidiaries if the Company or that Restricted Subsidiary was otherwise
permitted to incur that guarantee pursuant to this Indenture.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Note Guarantee" means the guarantee by each Guarantor of the
Company's payment obligations under this Indenture and on the Notes, executed
pursuant to the provisions of this Indenture.
"Notes" has the meaning assigned to it in the preamble to this
Indenture. The Initial Notes and the Additional Notes shall be treated as a
single class for all purposes under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
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"Offering" means the offering of the Units by the Company.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person or any
other officer designated by the Board of Directors.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Sections 12.04 and 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Sections
12.04 and 12.05 hereof. The counsel may be an employee of or counsel to the
Company, any Subsidiary of the Company or the Trustee.
"Parent" means Charles River Laboratories Holdings, Inc., the
corporate parent of the Company, or its successors.
"Pari Passu Indebtedness" means Indebtedness of the Company that
ranks pari passu in right of payment to the Notes.
"Participant" means, with respect to the Depositary, Euroclear or
Cedelbank, a Person who has an account with the Depositary, Euroclear or
Cedelbank, respectively (and, with respect to The Depository Trust Company,
shall include Euroclear and Cedelbank).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Business" means any person engaged, directly or
indirectly, in the animal research or biomedical products and services
business or any business reasonably related, incidental or ancillary thereto.
"Permitted Investments" means:
(1) any Investment in the Company or in a Restricted Subsidiary of
the Company;
(2) any Investment in cash or Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of that Investment,
(a) that Person becomes a Restricted Subsidiary of the Company;
or
(b) that Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the
Company or a Wholly Owned Restricted Subsidiary of
the Company;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and
in compliance with Section 4.10 hereof;
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(5) any Investment acquired solely in exchange for Equity Interests
(other than Disqualified Stock) of the Company;
(6) any Investment in a Person engaged in a Permitted Business
(other than an Investment in an Unrestricted Subsidiary)
having an aggregate fair market value, taken together with
all other Investments made pursuant to this clause (6) that
are at that time outstanding, not to exceed 15% of Total
Assets at the time of that Investment (with the fair market
value of each Investment being measured at the time made and
without giving effect to subsequent changes in value);
(7) Investments relating to any special purpose Wholly Owned
Subsidiary of the Company organized in connection with a
Receivables Facility that, in the good faith determination
of the Board of Directors, are necessary or advisable to
effect that Receivables Facility;
(8) the Management Loans or Investments in Parent to fund the
Management Loans; and
(9) Hedging Obligations permitted to be incurred under Section 4.09
hereof.
"Permitted Liens" means:
(1) Liens on property of a Person existing at the time that
Person is merged into or consolidated with the Company or
any Restricted Subsidiary, provided that those Liens were
not incurred in contemplation of that merger or
consolidation and do not secure any property or assets of
the Company or any Restricted Subsidiary other than the
property or assets subject to the Liens prior to that merger
or consolidation;
(2) Liens existing on the date of this Indenture;
(3) Liens securing Indebtedness consisting of Capitalized Lease
Obligations, purchase money Indebtedness, mortgage
financings, industrial revenue bonds or other monetary
obligations, in each case incurred solely for the purpose of
financing all or any part of the purchase price or cost of
construction or installation of assets used in the business
of the Company or its Restricted Subsidiaries, or repairs,
additions or improvements to those assets, provided that:
(a) those Liens secure Indebtedness in an amount not in
excess of the original purchase price or the
original cost of any such assets or repair,
additional or improvement thereto (plus an amount
equal to the reasonable fees and expenses in
connection with the incurrence of that
Indebtedness);
(b) those Liens do not extend to any other assets of
the Company or its Restricted Subsidiaries (and, in
the case of repair, addition or improvements to any
such assets, that Lien extends only to the assets
(and improvements thereto or thereon) repaired,
added to or improved);
(c) the Incurrence of that Indebtedness is permitted by Section
4.09 hereof;" and
(d) those Liens attach within 365 days of that purchase,
construction, installation, repair, addition or improvement;
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(4) Liens to secure any refinancings, renewals, extensions,
modification or replacements (collectively, "refinancing")
(or successive refinancings), in whole or in part, of any
Indebtedness secured by Liens referred to in the clauses
above so long as that Lien does not extend to any other
property (other than improvements thereto);
(5) Liens securing letters of credit entered into in the ordinary
course of business and consistent with past business practice;
(6) Liens on and pledges of the capital stock of any Unrestricted
Subsidiary securing Non-Recourse Debt of that Unrestricted
Subsidiary;
(7) Liens securing (a) Indebtedness (including all Obligations)
under the New Credit Facility or any Foreign Credit Facility
(b) Hedging Obligations payable to a lender under the New
Credit Facility or an Affiliate thereof or to a Person that
was a lender of Affiliate thereof at the time the contract
was entered into to the extent such Hedging Obligations are
secured by Liens on assets also securing Indebtedness
(including all Obligations) under the New Credit Facility;
and
(8) other Liens securing Indebtedness that is permitted by the
terms of this Indenture to be outstanding having an
aggregate principal amount at any one time outstanding not
to exceed $50.0 million.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued within 60 days after
repayment of, in exchange for, or the net proceeds of which are used to
extend, refinance, renew, replace, defease or refund other Indebtedness of the
Company or any of its Restricted Subsidiaries; provided that:
(1) the principal amount (or accreted value, if applicable) of
that Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus
premium, if any, and accrued interest on the Indebtedness so
extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in
connection therewith);
(2) that Permitted Refinancing Indebtedness has a final maturity
date no earlier than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness
being extended, refinanced, renewed, replaced, defeased or
refunded; and
(3) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of
payment to the Notes, that Permitted Refinancing
Indebtedness is subordinated in right of payment to, the
Notes on terms at least as favorable, taken as a whole, to
the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"Principals" means the DLJ Merchant Banking Funds.
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"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means:
any issuance of common stock by the Company, other than to
Parent and other than Disqualified Stock; or
any issuance of common stock or preferred stock by Parent,
other than Disqualified Stock.
that is registered pursuant to the Securities Act, other than issuances
registered on Form S-8 and issuances registered on Form S-4, excluding
issuances of common stock pursuant to employee benefit plans of Parent or the
Company or otherwise as compensation to employees of Parent or the Company.
"Qualified Proceeds" means any of the following or any combination of
the following:
(1) cash;
(2) Cash Equivalents;
(3) assets (other than Investments) that are used or useful in a
Permitted Business; and
(4) the Capital Stock of any Person engaged in a Permitted
Business if, in connection with the receipt by the Company
or any Restricted Subsidiary of the Company of that Capital
Stock,
(a) that Person becomes a Restricted Subsidiary of the Company
or any Restricted Subsidiary of the Company; or
(b) that Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the
Company or any Restricted Subsidiary of the
Company.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Ratio of Consolidated Net Debt to Consolidated Cash Flow" means,
with respect to any Person as of any date of determination, the ratio of (x)
the Consolidated Net Debt of such Person as of such date of determination
(exclusive of amounts attributable to discontinued operations, as determined
in accordance with GAAP, or operations and businesses disposed of prior to the
date of determination) to (y) the Consolidated Cash Flow of such Person for
the four full fiscal quarters ending on or immediately preceding such date of
determination (exclusive of amounts attributable to discontinued operations,
as determined in accordance with GAAP, or operations and businesses disposed
of prior to the date of determination).
In the event that the referent Person or any of its Subsidiaries
incurs, assumes, guarantees or redeems any Indebtedness (other than revolving
credit borrowings) or issues or redeems preferred stock subsequent to the
commencement of the period for which the Ratio of Consolidated Net Debt to
Consolidated Cash Flow is being calculated but prior to the date of
determination, then the Ratio of Consolidated Net Debt to Consolidated Cash
Flow shall be calculated giving pro forma effect to that incurrence,
assumption, guarantee or redemption of Indebtedness, or that
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issuance or redemption of preferred stock and the use of the proceeds therefrom,
as if the same had occurred at the beginning of the applicable four-quarter
reference period.
In addition, for purposes of making the computation referred to
above, the Recapitalization and acquisitions that have been made by Charles
River or any of its Subsidiaries, including all mergers or consolidations and
any related financing transactions, during the four-quarter reference period
shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow of the acquired entities on a pro
forma basis after giving effect to cost savings reasonably expected to be
realized in connection with that acquisition, as determined in good faith by
an officer of Charles River (regardless of whether those cost savings could
then be reflected in pro forma financial statements under GAAP, Regulation S-X
promulgated by the SEC or any other regulation or policy of the SEC) and
without giving effect to clause (3) of the proviso set forth in the definition
of Consolidated Net Income.
"Recapitalization" means the recapitalization of the Company by the
Principals and their Related Parties pursuant to the terms of the
Recapitalization Agreement.
"Recapitalization Agreement" means that certain Recapitalization
Agreement dated as of July 25, 1999 among the Company, Bausch & Lomb
Incorporated, Parent, Charles River SPAFAS, Inc., Bausch & Lomb International,
Inc., Wilmington Partners, L.P., Bausch & Lomb Canada, Inc., CRL Acquisition
LLC and DLJ Merchant Banking Partners II, L.P.
"Receivables Facility" means one or more receivables financing
facilities, as amended from time to time, pursuant to which the Company or any
of its Restricted Subsidiaries sells its accounts receivable to an Accounts
Receivable Subsidiary.
"Receivables Fees" means distributions or payments made directly or
by means of discounts with respect to any participation interests issued or
sold in connection with, and other fees paid to a Person that is not a
Restricted Subsidiary in connection with, any Receivables Facility.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of September 29, 1999, by and among the Company and the
other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time, and, with respect to any
Additional Notes, one or more registration rights agreements between the
Company and the other parties thereto, as such agreement(s) may be amended,
modified or supplemented from time to time, relating to rights given by the
Company to the purchasers of Additional Notes to register such Additional
Notes under the Securities Act.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend, if applicable, and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Regulation S
Temporary Global Note upon expiration of the Restricted Period.
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"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A-2 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Notes initially sold in reliance on Rule
903 of Regulation S.
"Related Party" means, with respect to any Principal,
(1) any controlling stockholder or partner of that Principal on the
date of this Indenture; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Person
beneficially holding (directly or through one or more
Subsidiaries) a 51% or more controlling interest of which
consist of the Principals and/or such other Persons referred
to in the immediately preceding clauses (1) or (2).
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the
above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day distribution compliance period
as defined in Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Guarantees" means the Guarantees by the Guarantors of
Obligations under the New Credit Facility.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Sierra Acquisition" means the acquisition of SBI Holdings, Inc.
by the Company pursuant to the terms of the Sierra Acquisition Agreement.
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"Sierra Acquisition Agreement" means Stock Purchase Agreement among
the Company and SBI Holdings, Inc. and its stockholders dated September 3, 1999.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as that Regulation is in effect on
the date hereof.
"Spot Rate" means, for any currency, the spot rate at which such
currency is offered for sale against United States dollars as determined by
reference to the New York foreign exchange selling rates, as published in The
Wall Street Journal on that date of determination for the immediately
preceding business day or, if that rate is not available, as determined in any
publicly available source of similar market data.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which that payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person,
(1) any corporation, association or other business entity of
which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or
more of the other Subsidiaries of that Person (or a
combination thereof); and
(2) any partnership or limited liability company,
(a) the sole general partner or the managing general
partner or managing member of which is that Person
or a Subsidiary of that Person; or
(b) the only general partners or managing members of
which are that Person or of one or more
Subsidiaries of that Person (or any combination
thereof).
"Tax Sharing Agreement" means any tax sharing agreement or
arrangement between the Company and Parent, as the same may be amended from
time to time; provided that in no event shall the amount permitted to be paid
pursuant to all such agreements and/or arrangements exceed the amount the
Company would be required to pay for income taxes were it to file a
consolidated tax return for itself and its consolidated Restricted
Subsidiaries as if it were a corporation that was a parent of a consolidated
group.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.ss.ss.77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Total Assets" means the total consolidated assets of the Company and
its Restricted Subsidiaries, as shown on the most recent balance sheet
(excluding the footnotes thereto) of the Company.
"Transactions" means the Recapitalization and the Sierra Acquisition.
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"Transaction Agreements" means the Recapitalization Agreement and the
Sierra Acquisition Agreement.
"Transaction Financing" means;
(1) the issuance and sale by Parent of senior discount debentures
with warrants and senior subordinated discount note for
consideration
(2) the issuance and sale by the Company of the Notes; and
(3) the execution and delivery by the Company and certain of its
subsidiaries of the New Credit Facility and the borrowing of
loans, if any, and issuance of letters of credit thereunder
to fund the Transactions and any related transactions,
including without limitation, the payment of fees and
expenses and the refinancing of outstanding indebtedness of
the Company and its subsidiaries;
the proceeds of each of which were used to fund the purchase price for the
Recapitalization and related fees and expenses.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in the form
of Exhibit A-1 attached hereto that bears the Global Note Legend and that has
the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes
that do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a board
resolution, but only to the extent that Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary
of the Company unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable
to the Company or that Restricted Subsidiary than those that
might be obtained at the time from Persons who are not
Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect
obligation,
(a) to subscribe for additional Equity Interests (other than
Investments described in clause (7) of the definition of
Permitted Investments); or
(b) to maintain or preserve that Person's financial
condition or to cause that Person to achieve any
specified levels of operating results; and
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(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries.
Any such designation by the board of directors shall be evidenced to
the Trustee by filing with the Trustee a certified copy of the board
resolution giving effect to that designation and an Officers' Certificate
certifying that designation complied with the foregoing conditions and was
permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as a Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of this
Indenture and any Indebtedness of that Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary of the Company as of that date (and, if
that Indebtedness is not permitted to be incurred as of that date under
Section 4.09 hereof, the Company shall be in default of that covenant).
The Board of Directors may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that the designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of
the Company of any outstanding Indebtedness of that Unrestricted Subsidiary
and that designation shall only be permitted if:
(1) that Indebtedness is permitted under Section 4.09 hereof; and
(2) no Default or Event of Default would be in existence following
that designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying,
(a) the amount of each then remaining installment,
sinking fund, serial maturity or other required
payments of principal, including payment at final
maturity, in respect thereof; by
(b) the number of years (calculated to the nearest
one-twelfth) that will elapse between that date and
the making of that payment; by
(2) the then outstanding principal amount of that Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of that Person all the outstanding Capital Stock or other ownership
interests of which (other than directors' qualifying shares) shall at the time
be owned by that Person or by one or more Wholly Owned Restricted Subsidiaries
of that Person or by that Person and one or more Wholly Owned Restricted
Subsidiaries of that Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of that
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
that Person or by one or more Wholly Owned Subsidiaries of that Person.
Section 1.02 Other Definitions.
Defined in
Term Section
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"Affiliate Transaction".....................................4.11
"Asset Sale"................................................4.10
"Asset Sale Offer"..........................................3.09
"Authentication Order"......................................2.02
"Bankruptcy Law"............................................4.01
"Change of Control Offer"...................................4.15
"Change of Control Payment".................................4.15
"Change of Control Payment Date" ...........................4.15
"Covenant Defeasance".......................................8.03
"Designated Senior Indebtedness"...........................10.02
"Event of Default"..........................................6.01
"Excess Proceeds"...........................................4.10
"incur".....................................................4.09
"Legal Defeasance" .........................................8.02
"Offer Amount"..............................................3.09
"Offer Period"..............................................3.09
"Paying Agent"..............................................2.03
"Permitted Indebtedness"....................................4.09
"Permitted Junior Securities"..............................10.02
"Purchase Date".............................................3.09
"Registrar".................................................2.03
"Representative"...........................................10.02
"Restricted Payments".......................................4.07
"Senior Indebtedness"......................................10.02
Section 1.03 Incorporation of TIA Provisions.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes means the Company and any successor obligor upon
the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule
under the TIA have the meanings so assigned to them.
Section 1.04 Rules of Construction.
Unless the context otherwise requires:
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(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement of successor sections or rules
adopted by the Commission from time to time.
ARTICLE 2
THE NOTES
Section 2.01 Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions
of this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibit A-1 attached hereto (including the Global Note Legend
thereon and the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Notes issued in definitive form shall be substantially in
the form of Exhibit A-1 attached hereto (but without the Global Note Legend
thereon and without the "Schedule of Exchanges of Interests in the Global
Note" attached thereto). Each Global Note shall represent such of the
outstanding Notes as shall be specified therein and each shall provide that it
shall represent the aggregate principal amount of outstanding Notes from time
to time endorsed thereon and that the aggregate principal amount of
outstanding Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions. Any
endorsement of a Global Note to reflect the amount of any increase or decrease
in the aggregate principal amount of outstanding Notes represented thereby
shall be made by the Trustee or the Note Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as
required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of Exhibit A-2 attached
hereto, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary, and registered in the name of the Depositary or the nominee of
the Depositary for the accounts of designated agents holding on behalf of
Euroclear or Cedelbank, duly executed by the
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Company and authenticated by the Trustee as hereinafter provided. The
Restricted Period shall be terminated upon the receipt by the Trustee of (i) a
written certificate from the Depositary, together with copies of certificates
from Euroclear and Cedelbank certifying that they have received certification
of non-United States beneficial ownership of 100% of the aggregate principal
amount of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who acquired an interest therein during the
Restricted Period pursuant to another exemption from registration under the
Securities Act and who will take delivery of a beneficial ownership interest
in a 144A Global Note, all as contemplated by Section 2.06 (a) (ii) hereof),
and (ii) an Officers' Certificate from the Company. Following the termination
of the Restricted Period, beneficial interests in the Regulation S Temporary
Global Note shall be exchanged for beneficial interests in Regulation S
Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously
with the authentication of Regulation S Permanent Global Notes, the Trustee
shall cancel the Regulation S Temporary Global Note. The aggregate principal
amount of the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
(d) Euroclear and Cedelbank Procedures Applicable. The provisions of
the "Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of
Cedelbank" and "Customer Handbook" of Cedelbank shall be applicable to
transfers of beneficial interests in the Regulation S Temporary Global Note
and the Regulation S Permanent Global Notes that are held by Participants
through Euroclear or Cedelbank.
Section 2.02 Execution and Authentication.
One Officer shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by one
Officer (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes, plus
Additional Notes issued pursuant to this Section 2.02 and Section 4.09 hereof.
The aggregate principal amount of Notes outstanding at any time may not exceed
such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or
an Affiliate of the Company.
Section 2.03 Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Notes and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any co-registrar and
the term "Paying Agent" includes any
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additional paying agent. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company shall notify the Trustee in writing
of the name and address of any Agent not a party to this Indenture. If the
Company fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. The Company or any of its Subsidiaries
may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC")
to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar
and Paying Agent and to act as Note Custodian with respect to the Global
Notes.
Section 2.04 Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes,
and will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon
payment over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Holders all money held by it as Paying
Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Notes.
Section 2.05 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA ss. 312(a).
Section 2.06 Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary. All Global Notes will be
exchanged by the Company for Definitive Notes if (i) the Company delivers to
the Trustee notice from the Depositary that it is unwilling or unable to
continue to act as Depositary or that it is no longer a clearing agency
registered under the Exchange Act and, in either case, a successor Depositary
is not appointed by the Company within 90 days after the date of such notice
from the Depositary, (ii) the Company in its sole discretion determines that
the Global Notes (in whole but not in part) should be exchanged for Definitive
Notes and delivers a written notice to such effect to the Trustee or (iii)
there shall have occurred and be continuing to occur a Default or Event of
Default with respect to the Notes; provided that in no event shall the
Regulation S Temporary Global Note be exchanged by the Company for Definitive
Notes prior to (x) the expiration of the Restricted Period and (y) the receipt
by the Registrar of any certificates required
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pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act. Upon the
occurrence of any of the preceding events in (i), (ii) or (iii) above,
Definitive Notes shall be issued in such names as the Depositary shall
instruct the Trustee. In addition, beneficial interests in a Global Note may
be exchanged for certificated Notes upon request but only upon at least 20
days' prior written notice given to the Trustee by or on behalf of DTC in
accordance with customary procedures. Global Notes also may be exchanged or
replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof.
Every Note authenticated and delivered in exchange for, or in lieu of, a
Global Note or any portion thereof, pursuant to this Section 2.06 or Section
2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and
shall be, a Global Note, except as provided in this Section 2.06. A Global
Note may not be exchanged for another Note other than as provided in this
Section 2.06(a), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act. Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well
as one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be
transferred to Persons who take delivery thereof in the form of
a beneficial interest in the same Restricted Global Note in
accordance with the transfer restrictions set forth in the
Private Placement Legend; provided, however, that prior to the
expiration of the Restricted Period, a beneficial interest in
the Regulation S Temporary Global Note may be transferred to a
person who takes delivery in the form of an interest in the
corresponding 144A Global Note only upon receipt by the Trustee
of a written certification from the transferor to the effect
that such transfer is being made (i)(a) to a person whom the
transferor reasonably believes is a QIB in a transaction
meeting the requirements of Rule 144A or (b) pursuant to
another exemption from the registration requirements under the
Securities Act which is accompanied by an opinion of counsel
regarding the availability of such exemption and (ii) in
accordance with all applicable securities laws of any state of
the United States or any other jurisdiction. Beneficial
interests in any Unrestricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar
to effect the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i)
above, the transferor of such beneficial interest must deliver
to the Registrar either (A) (1) a written order from a
Participant or an Indirect Participant given to the Depositary
in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial
interest in another Global Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be
credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary
in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Note in an amount
equal to the beneficial interest to be transferred or exchanged
and (2) instructions given by the Depositary to the Registrar
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containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above; provided that in no event
shall Definitive Notes be issued upon the transfer or exchange
of beneficial interests in the Regulation S Temporary Global
Note prior to (x) the expiration of the Restricted Period and
(y) the receipt by the Registrar of any certificates required
pursuant to Rule 903 under the Securities Act. Upon
consummation of an Exchange Offer by the Company in accordance
with Section 2.06(f) hereof, the requirements of this Section
2.06(b)(ii) shall be deemed to have been satisfied upon receipt
by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial
interests in the Restricted Global Notes. Upon satisfaction of
all of the requirements for transfer or exchange of beneficial
interests in Global Notes contained in this Indenture and the
Notes or otherwise applicable under the Securities Act, the
Trustee shall adjust the principal amount of the relevant
Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global
Note may be transferred to a Person who takes delivery thereof
in the form of a beneficial interest in another Restricted
Global Note if the transfer complies with the requirements of
Section 2.06(b)(ii) above and the Registrar receives the
following:
(A) if the transferee will take delivery in the form
of a beneficial interest in the 144A Global Note, then the
transferor must deliver a certificate in the form of Exhibit
B hereto, including the certifications in item (1) thereof;
and
(B) if the transferee will take delivery in the form of
a beneficial interest in the Regulation S Temporary Global
Note or the Regulation S Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof and, if the
transfer occurs prior to the expiration of the Restricted
Period, the interest transferred shall be held immediately
thereafter through Euroclear or Cedelbank.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global
Note. A beneficial interest in any Restricted Global Note may
be exchanged by any holder thereof for a beneficial interest in
an Unrestricted Global Note or transferred to a Person who
takes delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note if the exchange or transfer
complies with the requirements of Section 2.06(b)(ii) above
and:
(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration
Rights Agreement and the holder of the beneficial interest
to be transferred, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is
an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
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(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such
beneficial interest for a beneficial interest in an
Unrestricted Global Note, a certificate from such
holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take delivery
thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such
holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof,
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial
interest in a Restricted Global Note proposes to exchange such
beneficial interest for a Restricted Definitive Note or to
transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Restricted Definitive Note,
then, upon receipt by the Registrar of the following
documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such
beneficial interest for a Restricted Definitive Note, a
certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred
to a QIB in accordance with Rule 144A under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
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(C) if such beneficial interest is being transferred
to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities
Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule
144 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to
an Institutional Accredited Investor in reliance on an
exemption from the registration requirements of the
Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such beneficial interest is being transferred
to the Company or any of its Subsidiaries, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item
(3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions
a Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall
instruct the Registrar through instructions from the Depositary and
the Participant or Indirect Participant. The Trustee shall deliver
such Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section
2.06(c)(i) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof,
a beneficial interest in the Regulation S Temporary Global Note
may not be exchanged for a Definitive Note or transferred to a
Person who takes delivery thereof in the form of a Definitive
Note prior to (x) the expiration of the Restricted Period and
(y) the receipt by the Registrar of any certificates required
pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act,
except in the case of a transfer pursuant to an exemption from
the registration requirements of the Securities Act other than
Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial
interest in a Restricted Global Note may exchange such
beneficial interest for an Unrestricted Definitive Note or may
transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Note
only if:
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(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration
Rights Agreement and the holder of such beneficial
interest, in the case of an exchange, or the transferee,
in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer,
(2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in
a Restricted Global Note proposes to exchange such
beneficial interest for a Definitive Note that does
not bear the Private Placement Legend, a certificate
from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(b) thereof;
or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such
beneficial interest to a Person who shall take
delivery thereof in the form of a Definitive Note
that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof,
(E) and, in each such case set forth in this
subparagraph (D), if the Registrar so requests or if the
Applicable Procedures so require, an Opinion of Counsel in
form reasonably acceptable to the Registrar to the effect
that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with
the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial
interest in an Unrestricted Global Note proposes to exchange
such beneficial interest for a Definitive Note or to transfer
such beneficial interest to a Person who takes delivery thereof
in the form of a Definitive Note, then, upon satisfaction of
the conditions set forth in Section 2.06(b)(ii) hereof, the
Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to
Section 2.06(h) hereof, and the Company shall execute and the
Trustee shall authenticate and deliver to the Person designated
in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iii) shall
be registered in such name or names and in such authorized
denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from
the Depositary and the Participant or Indirect Participant. The
Trustee shall deliver such Definitive Notes to the Persons in
whose names such Notes are so registered. Any Definitive Note
issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall not bear the Private Placement
Legend.
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(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted
Definitive Note proposes to exchange such Note for a beneficial
interest in a Restricted Global Note or to transfer such
Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted
Global Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in
a Restricted Global Note, a certificate from such Holder in
the form of Exhibit C hereto, including the certifications
in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under
the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item
(1) thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore
transaction in accordance with Rule 903 or Rule 904 under
the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item
(2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule
144 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration
requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration
statement under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case
of clause (A) above, the appropriate Restricted Global Note, in the
case of clause (B) above, the 144A Global Note, and in the case of
clause (c) above, the Regulation S Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive
Note may exchange such Note for a beneficial interest in an
Unrestricted Global Note or transfer such Restricted Definitive
Note to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note only if:
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(A) such exchange or transfer is effected pursuant to
the Exchange Offer in accordance with the Registration
Rights Agreement and the Holder, in the case of an
exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it
is not (1) a broker-dealer, (2) a Person participating in
the distribution of the Exchange Notes or (3) a Person who
is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes
proposes to exchange such Notes for a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c)
thereof; or
(2) if the Holder of such Definitive Notes
proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of a beneficial
interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof,
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order
to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.06(d)(ii), the Trustee shall cancel the Definitive
Notes and increase or cause to be increased the aggregate principal
amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests
in Unrestricted Global Notes. A Holder of an Unrestricted
Definitive Note may exchange such Note for a beneficial
interest in an Unrestricted Global Note or transfer such
Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note at
any time. Upon receipt of a request for such an exchange or
transfer, the Trustee shall cancel the applicable Unrestricted
Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global
Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an Authentication Order
in accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
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(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of
transfer or exchange, the requesting Holder shall present or surrender to the
Registrar the Definitive Notes duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing. In addition, the
requesting Holder shall provide any additional certifications, documents and
information, as applicable, required pursuant to the following provisions of
this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes.
Any Restricted Definitive Note may be transferred to and registered
in the name of Persons who take delivery thereof in the form of a
Restricted Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A
under the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or
Rule 904, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item
(2) thereof; and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities
Act, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications, certificates
and Opinion of Counsel required by item (3) thereof, if
applicable.
(ii) estricted Definitive Notes to Unrestricted Definitive Notes.
Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a
Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration
Rights Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted
Definitive Note, a certificate from such
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Holder in the form of Exhibit C hereto, including the
certifications in item (1)(d) thereof; or
(2) f the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive
Note, a certificate from such Holder in the form of
Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder
thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue
and, upon receipt of an Authentication Order in accordance with Section 2.02,
the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons
that certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the
Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the
Company, and accepted for exchange in the Exchange Offer and (ii) Definitive
Notes in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Notes accepted for exchange in the Exchange Offer.
Concurrently with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of
Definitive Notes so accepted Definitive Notes in the appropriate principal
amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each
Global Note and each Definitive Note (and all Notes issued in
exchange therefor or substitution thereof) shall bear the
legend in substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, UNITED STATES PERSONS, EXCEPT AS SET FORTH IN
THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN,
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THE HOLDER: (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"),
(B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A) (1),
(2), (3) OR (7) OR REGULATION D UNDER THE SECURITIES ACT (AN "IAI")),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH
TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE
(THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS
THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION
OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(iii), c(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to
this Section 2.06 (and all Notes issued in exchange therefor or
substitution thereof) shall not bear the Private Placement
Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE
TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE
TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE
MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE
DELIVERED TO THE
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TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF CHARLES
RIVER LABORATORIES, INC."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the
following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL
NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE
FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS
DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF
THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO
RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11
hereof. At any time prior to such cancellation, if any beneficial interest in
a Global Note is exchanged for or transferred to a Person who will take
delivery thereof in the form of a beneficial interest in another Global Note
or for Definitive Notes, the principal amount of Notes represented by such
Global Note shall be reduced accordingly and an endorsement shall be made on
such Global Note by the Trustee or by the Depositary at the direction of the
Trustee to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note, such other Global Note
shall be increased accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Depositary at the direction of the Trustee to
reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon the Company's order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 3.06, 3.09, 4.10 and 4.14
hereof).
(iii) The Registrar shall not be required to register the transfer
of or exchange any Note selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such
registration of transfer or exchange.
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(v) The Company shall not be required (A) to issue, to register
the transfer of or to exchange any Notes during a period beginning at
the opening of business 15 days before the day of any selection of
Notes for redemption under Section 3.02 hereof and ending at the
close of business on the day of selection, (B) to register the
transfer of or to exchange any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being
redeemed in part or (c) to register the transfer of or to exchange a
Note between a record date and the next succeeding Interest Payment
Date.
(vi) Prior to due presentment for the registration of a transfer
of any Note, the Trustee, any Agent and the Company may deem and
treat the Person in whose name any Note is registered as the absolute
owner of such Note for the purpose of receiving payment of principal
of and interest and Liquidated Damages, if any, on such Notes and for
all other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
Section 2.07 Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note, the Company shall issue and the Trustee, upon receipt of
an Authentication Order, shall authenticate a replacement Note if the
Trustee's requirements are met. If required by the Trustee or the Company, an
indemnity bond must be supplied by the Holder that is sufficient in the
judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may
suffer if a Note is replaced. The Company may charge for its expenses in
replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08 Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by
the Trustee in accordance with the provisions hereof, and those described in
this Section as not outstanding. Except as set forth in Section 2.09 hereof, a
Note does not cease to be outstanding because the Company or an Affiliate of
the Company holds the Note; however, Notes held by the Company or a Subsidiary
of the Company shall not be deemed to be outstanding for purposes of Section
3.07 hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
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If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
Section 2.09 Treasury Notes.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes owned by
the Company, or by any Person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Company, shall be
considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
Section 2.10 Temporary Notes.
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall
prepare and the Trustee shall, as soon as practicable upon receipt of the
written order of the Company signed by an Officer of the Company, authenticate
definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits
of this Indenture.
Section 2.11 Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for
registration of transfer, exchange, payment, replacement or cancellation and
shall destroy cancelled Notes (subject to the record retention requirement of
the Exchange Act). Certification of the destruction of all cancelled Notes
shall be delivered to the Company. The Company may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation.
Section 2.12 Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each
Note and the date of the proposed payment. The Company shall fix or cause to
be fixed each such special record date and payment date, provided that no such
special record date shall be less than 10 days prior to the related payment
date for such defaulted interest. At least 15 days before the special record
date, the Company (or, upon the written request of the Company, the Trustee in
the name and at the expense of the Company) shall mail or cause to be mailed
to Holders a notice that states the special record date, the related payment
date and the amount of such interest to be paid.
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ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01 Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant
to which the redemption shall occur, (ii) the redemption date, (iii) the
principal amount of Notes to be redeemed and (iv) the redemption price.
Section 3.02 Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed at any time,
selection of Notes for redemption will be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any,
on which the Notes are listed, or, if the Notes are not so listed, on a pro
rata basis, by lot or by another method as the Trustee shall deem fair and
appropriate; provided that no Notes of $1,000 or less shall be redeemed in
part.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03 Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, notices of
redemption shall be mailed by first class mail at least 30 but not more than
60 days before the redemption date to each Holder of Notes to be redeemed at
its registered address. If any Note is to be redeemed in part only, the notice
of redemption that relates to that Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal
to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. Notes called for redemption
become due on the date fixed for redemption. On and after the redemption date,
interest ceases to accrue on Notes or portions of them called for redemption.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
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(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that
the Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give
such notice and setting forth the information to be stated in such notice as
provided in the preceding paragraph.
Section 3.04 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05 Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess
of the amounts necessary to pay the redemption price of, and accrued interest
on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is
redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest shall be paid to
the Person in whose name such Note was registered at the close of business on
such record date. If any Note called for redemption shall not be so paid upon
surrender for redemption because of the failure of the Company to comply with
the preceding paragraph, interest shall be paid on the unpaid principal, from
the redemption date until such principal is paid, and to the extent lawful on
any interest and Liquidated Damages, if any, not paid on such unpaid
principal, in each case at the rate provided in the Notes and in Section 4.01
hereof.
Section 3.06 Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
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Section 3.07 Optional Redemption.
(a) Except as provided below, the Notes will not be redeemable at the
Company's option prior to October 1, 2004. Thereafter, the Notes will be
subject to redemption at any time at the option of the Company, in whole or in
part, upon not less than 30 nor more than 60 days' notice, in cash at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on October 1 of the years indicated below:
Year Percentage
---- ----------
2004......................................................106.750%
2005......................................................104.500%
2006......................................................102.250%
2007 and thereafter.......................................100.000%
Notwithstanding the foregoing, on or prior to October 1, 2002, the
Company may redeem up to 35% of the aggregate principal amount of Notes from
time to time originally issued under this Indenture in cash at a redemption
price of 113.500%% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, with
the net cash proceeds of one or more Public Equity Offerings; provided that at
least 65% of the aggregate principal amount of Notes from time to time
originally issued under this Indenture remains outstanding immediately after
the occurrence of the redemption; and provided further that the redemption
shall occur within 90 days of the date of the closing of any such Public
Equity Offering.
(b) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08 Mandatory Redemption.
The Company is not required to make mandatory redemption of, or
sinking fund payments with respect to, the Notes.
Section 3.09 Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an Asset Sale Offer, it shall follow the procedures
specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later
than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Note is
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registered at the close of business on such record date, and no additional
interest shall be payable to Holders who tender Notes pursuant to the Asset Sale
Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Company, a depositary,
if appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, the
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Depositary or the Paying Agent, as the case may be, shall promptly (but in any
case not later than five days after the Purchase Date) mail or deliver to each
tendering Holder an amount equal to the purchase price of the Notes tendered
by such Holder and accepted by the Company for purchase, and the Company shall
promptly issue a new Note, and the Trustee, upon written request from the
Company shall authenticate and mail or deliver such new Note to such Holder,
in a principal amount equal to any unpurchased portion of the Note
surrendered. Any Note not so accepted shall be promptly mailed or delivered by
the Company to the Holder thereof. The Company shall publicly announce the
results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the
provisions of Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01 Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in
the Notes. Interest on the Notes will accrue at the rate of 13.5% per year;
provided that the rate at which interest accrues will increase to 14.0% per
year on August 15, 2000 in the event that the Ratio of Consolidated Net Debt
to Consolidated Cash Flow for the Company as of June 30, 2000 is equal to or
greater than 5.00 to 1. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, (i) holds as of 10:00 a.m. Eastern Time on the due
date money deposited by the Company in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due and (ii) is not prohibited from paying such money to the
Holders pursuant to the terms of this Indenture or the Notes. The Company
shall pay all Liquidated Damages, if any, in the same manner on the dates and
in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate
equal to 1% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful; and shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments
of interest and Liquidated Damages (without regard to any applicable grace
period) at the same rate to the extent lawful.
Section 4.02 Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
Affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may
be served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of
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New York for such purposes. The Company shall give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03 hereof.
Section 4.03 Reports.
Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Company will furnish to
the Holders of Notes (a) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if the Company were required to file those Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants; and (b) all current
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file those reports, in each case, within the time
periods specified in the Commission's rules and regulations.
In addition, following the consummation of the Exchange Offer
contemplated by the Registration Rights Agreement, whether or not required by
the rules and regulations of the Commission, the Company will file a copy of
all such information and reports referred to in clauses (a) and (b) above with
the Commission for public availability within the time periods specified in
the Commission's rules and regulations (unless the Commission will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request.
In addition, the Company and the Guarantors have agreed that, for so
long as any Notes remain outstanding, they will furnish to the Holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
Section 4.04 Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 90 days after the end of
each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal
year have been made under the supervision of the signing Officers with a view
to determining whether the Company have kept, observed, performed and
fulfilled its obligations under this Indenture, and further stating, as to
each such Officer signing such certificate, that to the best of his or her
knowledge the Company has kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of
this Indenture (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action the Company is taking or propose to take with
respect thereto) and that to the best of his or her knowledge no event has
occurred and remains in existence by reason of which payments on account of
the principal of or interest or Liquidated Damages, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by
a written statement of the Company's independent public accountants (which
shall be a firm of established national reputation) that in making the
examination necessary for certification of such financial statements, nothing
has come to their attention that would lead them to believe that the Company
has violated any provisions of Article 4 or Article 5 hereof or, if any such
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violation has occurred, specifying the nature and period of existence thereof,
it being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any
Default or Event of Default, an Officers' Certificate specifying such Default
or Event of Default and what action the Company is taking or proposes to take
with respect thereto.
Section 4.05 Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate
proceedings or where the failure to effect such payment is not adverse in any
material respect to the Holders of the Notes.
Section 4.06 Stay, Extension and Usury Laws.
The Company covenants that (to the extent permitted by law) it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants
or the performance of this Indenture; and the Company hereby expressly waives
(to the extent permitted by law) all benefit or advantage of any such law, and
covenants that (to the extent permitted by law) it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
Section 4.07 Restricted Payments.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, (1) declare or pay any dividend or
make any other payment or distribution on account of the Company's or any of
its Restricted Subsidiaries' Equity Interests other than dividends or
distributions payable in Equity Interests other than Disqualified Stock of the
Company or dividends or distributions payable to the Company or any Wholly
Owned Restricted Subsidiary of the Company; (2) purchase, redeem or otherwise
acquire or retire for value any Equity Interests of the Company or Parent
other than any of those Equity Interests owned by the Company or any
Restricted Subsidiary of the Company; (3) make any principal payment on or
with respect to, or purchase, redeem, defease or otherwise acquire or retire
for value, any Indebtedness of the Company that is subordinated in right of
payment to the Notes, except in accordance with the mandatory redemption or
repayment provisions set forth in the original documentation governing that
Indebtedness (but not pursuant to any mandatory offer to repurchase upon the
occurrence of any event); or (4) make any Restricted Investment (all payments
and other actions set forth in clauses (1) through (4) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(i) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof;
(ii) the Company would, immediately after giving pro forma
effect thereto as if that Restricted Payment had been made at
the beginning of the applicable four-quarter period, have
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been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of Section 4.09 hereof; and
(iii) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and
its Restricted Subsidiaries after the date of this Indenture
(excluding Restricted Payments permitted by clauses (a) (to the
extent that the declaration of any dividend referred to therein
reduces amounts available for Restricted Payments pursuant to
this clause (iii)), (b) through (i), (k ) through (o) and (q)
of the next succeeding paragraph), is less than the sum,
without duplication, of (A) 50% of the Consolidated Net Income
of the Company for the period (taken as one accounting period)
commencing June 27, 1999 to the end of the Company's most
recently ended fiscal quarter for which internal financial
statements are available at the time of that Restricted Payment
(or, if Consolidated Net Income for that period is a deficit,
less 100% of the deficit), plus (B) 100% of the Qualified
Proceeds received by the Company on or after the date of this
Indenture from contributions to the Company's capital or from
the issue or sale on or after the date of this Indenture of
Equity Interests of the Company or of Disqualified Stock or
convertible debt securities of the Company to the extent that
they have been converted into those Equity Interests, other
than Equity Interests, Disqualified Stock or convertible debt
securities sold to a Subsidiary of the Company and Disqualified
Stock or convertible debt securities that have been converted
into Disqualified Stock; plus (C) the amount equal to the net
reduction in Investments in Persons after the date of this
Indenture who are not Restricted Subsidiaries (other than
Permitted Investments) resulting from (x) Qualified Proceeds
received as a dividend, repayment of a loan or advance or other
transfer of assets (valued at the fair market value thereof) to
the Company or any Restricted Subsidiary from those Persons;
(y) Qualified Proceeds received upon the sale or liquidation of
those Investments and (z) the redesignation of Unrestricted
Subsidiaries (excluding any increase in the amount available
for Restricted Payments pursuant to clause (j) or (n) below
arising from the redesignation of that Unrestricted Subsidiary)
whose assets are used or useful in, or which is engaged in, one
or more Permitted Business as Restricted Subsidiaries (valued,
proportionate to the Company's equity interest in that
Subsidiary, at the fair market value of the net assets of that
Subsidiary at the time of such redesignation).
The foregoing provisions will not prohibit:
(a) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration, payment would have
complied with the provisions of this Indenture;
(b) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the
Company in exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Equity
Interests of the Company (other than any Disqualified Stock), provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (iii)(B) of the preceding paragraph;
(c) the defeasance, redemption, repurchase, retirement or other
acquisition of subordinated Indebtedness of the Company with the net cash
proceeds from an incurrence of, or in exchange for, Permitted Refinancing
Indebtedness;
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(d) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or Parent or CRL Acquisition LLC
held by any member of Parent's, the Company's (or any of its Restricted
Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement and any dividend to Parent to fund any
such repurchase, redemption, acquisition or retirement; provided that (i) the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed (x) $5.0 million in any calendar year, with
unused amounts in any calendar year being carried over to succeeding calendar
years subject to a maximum (without giving effect to the following clause (y))
of $10.0 million in any calendar year; plus (y) the aggregate net cash
proceeds received by the Company during that calendar year from any reissuance
of Equity Interests by the Company or Parent to members of management of the
Company and its Restricted Subsidiaries; provided that the amount of any such
net cash proceeds that are used to permit an acquisition or retirement for
value pursuant to this clause (d) shall be excluded from clause (iii)(B) of
the preceding paragraph; and (ii) no Default or Event of Default shall have
occurred and be continuing immediately after that transaction;
(e) payments and transactions in connection with the Transactions,
including any purchase price adjustment or any other payments made pursuant to
or contemplated in the Transaction Agreements or any financial advisory
agreements with Donaldson, Lufkin & Jenrette Securities Corporation, the
Transaction Financing, the Offering, the New Credit Facility (including
commitment, syndication and arrangement fees payable thereunder) and the
application of the proceeds thereof, and the payment of fees and expenses with
respect thereto;
(f) the payment of dividends or the making of loans or advances by
the Company to Parent not to exceed $2.5 million in any fiscal year for costs
and expenses incurred by Parent in its capacity as a holding company or for
services rendered by Parent on behalf of the Company;
(g) payments or distributions to Parent pursuant to any Tax Sharing
Agreement;
(h) the payment of dividends by a Restricted Subsidiary on any class
of common stock of that Restricted Subsidiary if (i) that dividend is paid pro
rata to all holders of that class of common stock; and (ii) at least 50.1% of
that class of common stock is held by the Company or one or more of its
Restricted Subsidiaries;
(i) the repurchase of any class of common stock of a Restricted
Subsidiary if (i) that repurchase is made pro rata with respect to that class
of common stock; and (ii) at least 50.1% of that class of common stock is held
by the Company or one or more of its Restricted Subsidiaries;
(j) any other Restricted Investment made in a Permitted Business
which, together with all other Restricted Investments made pursuant to this
clause (j) since the date of this Indenture, does not exceed $5.0 million (in
each case, after giving effect to all subsequent reductions in the amount of
any Restricted Investment made pursuant to this clause (j), either as a result
of (i) the repayment or disposition thereof for cash or (ii) the redesignation
of an Unrestricted Subsidiary as a Restricted Subsidiary (valued,
proportionate to the Company's equity interest in that Subsidiary at the time
of that redesignation) at the fair market value of the net assets of that
Subsidiary at the time of such redesignation), in the case of clause (i) and
(ii), not to exceed the amount of the Restricted Investment previously made
pursuant to this clause (j); provided that no Default or Event of Default
shall have occurred and be continuing immediately after making that Restricted
Investment;
(k) the declaration and payment of dividends to holders of any class
or series of Disqualified Stock of the Company or any Restricted Subsidiary
issued on or after the date of this Indenture in
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accordance with Section 4.09 hereof; provided that no Default or Event of
Default shall have occurred and be continuing immediately after making that
Restricted Payment;
(l) repurchases of Equity Interests deemed to occur upon exercise of
stock options if those Equity Interests represent a portion of the exercise
price of those options;
(m) any other Restricted Payment which, together with all other
Restricted Payments made pursuant to this clause (n) since the date of this
Indenture, does not exceed $5.0 million, in each case, after giving effect to
all subsequent reductions in the amount of any Restricted Investment made
pursuant to this clause (n) either as a result of (i) the repayment or
disposition thereof for cash or (ii) the redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary (valued, proportionate to the Company's
equity interest in that Subsidiary at the time of such redesignation at the
fair market value of the net assets of that Subsidiary at the time of that
redesignation), in the case of clause (i) and (ii), not to exceed the amount
of the Restricted Investment previously made pursuant to this clause (n);
provided that no Default or Event of Default shall have occurred and be
continuing immediately after making that Restricted Payment;
(n) the pledge by the Company of the Capital Stock of an Unrestricted
Subsidiary of the Company to secure Non-Recourse Debt of that Unrestricted
Subsidiary;
(o) the purchase, redemption or other acquisition or retirement for
value of any Equity Interests of any Restricted Subsidiary issued after the
date of this Indenture, provided that the aggregate price paid for any such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
the sum of (i) the amount of cash and Cash Equivalents received by that
Restricted Subsidiary from the issue or sale thereof; and (ii) any accrued
dividends thereon the payment of which would be permitted pursuant to clause
(k) above;
(p) any Investment in an Unrestricted Subsidiary that is funded by
Qualified Proceeds received by the Company on or after the date of this
Indenture from contributions to the Company's capital or from the issue and
sale on or after the date of this Indenture of Equity Interests of the Company
or of Disqualified Stock or convertible debt securities to the extent they
have been converted into such Equity Interests (other than Equity Interests,
Disqualified Stock or convertible debt securities sold to a Subsidiary of the
Company and other than Disqualified Stock or convertible debt securities that
have been converted into Disqualified Stock) in an amount (measured at the
time such Investment is made and without giving effect to subsequent changes
in value) that does not exceed the amount of such Qualified Proceeds
(excluding any such Qualified Proceeds to the extent utilized to permit a
prior "Restricted Payment" pursuant to clause (iii)(B) of the preceding
paragraph); and
(q) distributions or payments of Receivables Fees.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if that designation would not cause a Default. For
purposes of making that designation, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at
the time of that designation and will reduce the amount available for
Restricted Payments under the first paragraph of this Section 4.07. All such
outstanding Investments will be deemed to constitute Restricted Investments in
an amount equal to the greater of (i) the net book value of those Investments
at the time of that designation and (ii) the fair market value of those
Investments at the time of that designation. Such designation will only be
permitted if that Restricted Investment would be permitted at that time and if
that Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
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The amount of (i) all Restricted Payments (other than cash) shall be
the fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment
and (ii) Qualified Proceeds (other than cash) shall be the fair market value
on the date of receipt thereof by the Company of such Qualified Proceeds.
The fair market value of any non-cash Restricted Payment shall be
determined by the Board of Directors whose resolution with respect thereto
shall be delivered to the Trustee.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that the
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed.
Section 4.08 Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any encumbrance or restriction on the ability of
any Restricted Subsidiary to (a)(i) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (A) on its
Capital Stock or (B) with respect to any other interest or participation in,
or measured by, its profits; or (ii) pay any Indebtedness owed to the Company
or any of its Restricted Subsidiaries; (b) make loans or advances to the
Company or any of its Restricted Subsidiaries; or (c) transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries.
However, the foregoing restrictions will not apply to encumbrances or
restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the date of this Indenture; (b) the New Credit Facility as in effect
as of the date of this Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof; (c) this Indenture and the Notes; (d) applicable law and
any applicable rule, regulation or order; (e) any agreement or instrument of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of that acquisition (except to the extent created in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, that Indebtedness was permitted by
the terms of this Indenture to be incurred; (f) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices; (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (e) above on the property so acquired; (h)
contracts for the sale of assets, including, without limitation, customary
restrictions with respect to a Subsidiary pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all of
the Capital Stock or assets of that Subsidiary; (i) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing that Permitted Refinancing Indebtedness are, in the good faith
judgment of the Company's board of directors, not materially less favorable,
taken as a whole, to the Holders of the Notes than those contained in the
agreements governing the Indebtedness being refinanced; (j) secured
Indebtedness otherwise permitted to be incurred pursuant to Sections 4.09 and
4.12 hereof that limit the right of the debtor to dispose of the assets
securing that Indebtedness; (k) restrictions on cash or other deposits or net
worth imposed by customers under contracts entered into in the ordinary course
of business; (l) other Indebtedness or Disqualified Stock of Restricted
Subsidiaries permitted to be incurred subsequent to the Issuance Date pursuant
to the provisions of Section 4.09 hereof; (m) customary provisions in joint
venture agreements and other similar agreements entered into in the ordinary
course of business; and (n) restrictions created in connection with any
Receivables Facility that, in the good faith determination of the board of
directors of the Company, are necessary or advisable to effect that
Receivables Facility.
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Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock.
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Indebtedness); the Company will not, and will not permit any of its
Restricted Subsidiaries to, issue any shares of Disqualified Stock; and the
Company will not permit any of its Restricted Subsidiaries to issue any shares
of preferred stock; provided that the Company or any Restricted Subsidiary may
incur Indebtedness, including Acquired Indebtedness, or issue shares of
Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which that
additional Indebtedness is incurred or that Disqualified Stock is issued would
have been at least 2.0 to 1 if such four-quarter period ended prior to
September 30, 2002 and 2.25 to 1 thereafter, determined on a consolidated pro
forma basis, including a pro forma application of the net proceeds therefrom,
as if the additional Indebtedness had been incurred, or the Disqualified Stock
had been issued, as the case may be, at the beginning of that four-quarter
period.
The provisions of the first paragraph of this Section 4.09 will not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Indebtedness"):
(i) the incurrence by the Company and its Restricted
Subsidiaries of Indebtedness under the New Credit Facility and the
Foreign Credit Facilities; provided that the aggregate principal
amount of all Indebtedness (with letters of credit being deemed to
have a principal amount equal to the maximum potential liability of
the Company and those Restricted Subsidiaries thereunder) then
classified as having been incurred in reliance upon this clause (i)
that remains outstanding under the New Credit Facility and the
Foreign Credit Facilities after giving effect to that incurrence does
not exceed an amount equal to $215.0 million;
(ii) the incurrence by the Company and its Restricted
Subsidiaries of Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented
by the Notes and this Indenture and the Note Guarantees;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Expenditure
Indebtedness, Capital Lease Obligations or other obligations, in each
case, the proceeeds of which are used solely for the purpose of
financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment
(including acquisitions of Capital Stock of a Person that becomes a
Restricted Subsidiary to the extent of the fair market value of the
property, plant or equipment so acquired) used in the business of the
Company or that Restricted Subsidiary, in an aggregate principal
amount (or accreted value, as applicable) not to exceed $20.0 million
outstanding after giving effect to that incurrence;
(v) Indebtedness arising from agreements of the Company or any
Restricted Subsidiary providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or
assumed in connection with the disposition of any business, assets or
a Subsidiary, other than guarantees of Indebtedness incurred by any
Person acquiring all or any portion of such business, assets or
Restricted Subsidiary for the purpose of financing that acquisition;
provided that (A) that Indebtedness is not reflected on the balance
sheet of the Company or any Restricted Subsidiary (contingent
obligations referred to in a footnote or footnotes to financial
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statements and not otherwise reflected on the balance sheet will not
be deemed to be reflected on that balance sheet for purposes of this
clause (A)) and (B) the maximum assumable liability in respect of
that Indebtedness shall at no time exceed the gross proceeds
including non-cash proceeds (the fair market value of those non-cash
proceeds being measured at the time received and without giving
effect to any subsequent changes in value) actually received by the
Company and/or that Restricted Subsidiary in connection with that
disposition;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for,
or the net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was
permitted by this Indenture to be incurred;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the
Company and/or any of its Restricted Subsidiaries; provided that (i)
if the Company is the obligor on that Indebtedness, that Indebtedness
is expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes; and (ii)(A) any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary thereof and (B) any sale or other transfer of
any such Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be, that was not permitted by
this clause (vii);
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging; (A) interest rate risk with respect to any
floating rate Indebtedness that is permitted by the terms of this
Indenture to be outstanding; and (B) exchange rate risk with respect
to agreements or Indebtedness of such Person payable denominated in a
currency other than United States dollars, provided that those
agreements do not increase the Indebtedness of the obligor
outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or interest rates or by reason of
fees, indemnities and compensation payable thereunder;
(ix) the guarantee by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or a Restricted
Subsidiary of the Company that was permitted to be incurred by
another provision of this Section 4.09;
(x) obligations in respect of performance and surety bonds and
completion guarantees (including related letters of credit) provided
by the Company or any Restricted Subsidiary in the ordinary course of
business; and
(xi) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) outstanding after giving
effect to that incurrence, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (xi), not to exceed
$30.0 million.
For purposes of determining compliance with this Section 4.09, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in clauses (i) through (xi)
above or is entitled to be incurred pursuant to the first paragraph of this
Section 4.09, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies
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with this Section 4.09 and such item of Indebtedness will be treated as having
been incurred pursuant to only one of those clauses or pursuant to the first
paragraph hereof of this Section 4.09. In addition, the Company may, at any
time, change the classification of an item of Indebtedness (or any portion
thereof) to any other clause or to the first paragraph hereof; provided that
the Company would be permitted to incur such item of Indebtedness (or such
portion thereof) pursuant to such other clause or the first paragraph hereof
of this Section 4.09, as the case may be, at the time of reclassification.
Accrual of interest, accretion or amortization of original issue discount will
not be deemed to be an incurrence of Indebtedness for purposes of this Section
4.09.
All Indebtedness under the New Credit Facility and the Foreign Credit
Facilities outstanding on the date on which Notes are first issued and
authenticated under this Indenture shall be deemed to have been incurred on
such date in reliance on the first paragraph of this Section 4.09.
Section 4.10 Asset Sales.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (a) the Company or the
Restricted Subsidiary, as the case may be, receives consideration at the time
of that Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of; and (b) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of (i)
cash or Cash Equivalents; or (ii) property or assets that are used or useful
in a Permitted Business, or the Capital Stock of any Person engaged in a
Permitted Business if, as a result of the acquisition by the Company or any
Restricted Subsidiary thereof, such Person becomes a Restricted Subsidiary;
provided that the amount of (x) any liabilities, as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet, of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that
are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or the Restricted Subsidiary from
further liability; (y) any securities, notes or other obligations received by
the Company or the Restricted Subsidiary from the transferee that are
converted within 180 days of their receipt by the Company or the Restricted
Subsidiary into cash or Cash Equivalents but only to the extent of the cash or
Cash Equivalents received; and (z) any Designated Noncash Consideration
received by the Company or any of its Restricted Subsidiaries in that Asset
Sale having an aggregate fair market value, taken together with all other
Designated Noncash Consideration received pursuant to this clause (z) that is
at that time outstanding, not to exceed 15% of Total Assets at the time of the
receipt of that Designated Noncash Consideration, with the fair market value
of each item of Designated Noncash Consideration being measured at the time
received and without giving effect to subsequent changes in value, shall be
deemed to be cash for purposes of this Section 4.10; and provided further that
the 75% limitation referred to in clause (b) above will not apply to any Asset
Sale in which the cash or Cash Equivalents portion of the consideration
received therefrom, determined in accordance with the foregoing proviso, is
equal to or greater than what the after-tax proceeds would have been had such
Asset Sale complied with the aforementioned 75% limitation.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or the Restricted Subsidiary, as the case may be, shall
apply such Net Proceeds, at its option (or to the extent the Company is
required to apply such Net Proceeds pursuant to the terms of the New Credit
Facility), to (a) repay or purchase Senior Indebtedness or Pari Passu
Indebtedness of the Company or any Indebtedness of any Restricted Subsidiary,
as the case may be, provided that if the Company shall so repay or purchase
Pari Passu Indebtedness of the Company, (i) it will equally and ratably reduce
Indebtedness under the Notes if the Notes are then redeemable; or, (ii) if the
Notes may not then be redeemed, the Company shall make an
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offer, in accordance with the procedures set forth below for an Asset Sale
Offer, to all Holders of Notes to purchase at a purchase price equal to 100%
of the principal amount of the Notes, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase, the Notes that
would otherwise be redeemed; or (b)(i) an investment in property, the making
of a capital expenditure or the acquisition of assets that are used or useful
in a Permitted Business; or (ii) the acquisition of Capital Stock of any
Person primarily engaged in a Permitted Business if (x) as a result of the
acquisition by the Company or any Restricted Subsidiary thereof, that Person
becomes a Restricted Subsidiary; or (y) the Investment in that Capital Stock
is permitted by clause (6) of the definition of Permitted Investments. Pending
the final application of any Net Proceeds, the Company may temporarily reduce
Indebtedness or otherwise invest those Net Proceeds in any manner that is not
prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will
be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $10.0 million, the Company will be required to make an offer
to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of Notes that may be purchased out of the Excess Proceeds, at
an offer price in cash in an amount equal to 100% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase, in accordance with the procedures set forth
in this Indenture. To the extent that any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by this Indenture. If the aggregate
principal amount of Notes surrendered by Holders thereof in connection with an
Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall
select the Notes to be purchased as set forth under Sections 3.02 and 3.03
hereof. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable in connection with the
repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Indenture relating to such Asset Sale Offer, the Company
will comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations described in this Indenture by
virtue thereof.
Section 4.11 Transactions with Affiliates.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate of the Company (each of the foregoing, an "Affiliate
Transaction"), unless (a) such Affiliate Transaction is on terms that are no
less favorable to the Company or such Restricted Subsidiary than those that
would have been obtained in a comparable transaction by the Company or that
Restricted Subsidiary with an unrelated Person; and (b) the Company delivers
to the Trustee, with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $7.5
million, either (i) a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that the relevant Affiliate Transaction
complies with clause (a) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors;
or (ii) an opinion as to the fairness to the Holders of that Affiliate
Transaction from a financial point of view issued by an accounting, appraisal
or investment banking firm of national standing.
Notwithstanding the foregoing, the following items shall not be
deemed to be Affiliate Transactions: (a) customary directors' fees,
indemnification or similar arrangements or any employment agreement or other
compensation plan or arrangement entered into by the Company or any of its
Restricted
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Subsidiaries in the ordinary course of business (including ordinary course
loans to employees not to exceed (i) $5.0 million outstanding in the aggregate
at any time and (ii) $2.0 million to any one employee) and consistent with the
past practice of the Company or that Restricted Subsidiary; (b) transactions
between or among the Company and/or its Restricted Subsidiaries; (c) payments
of customary fees by the Company or any of its Restricted Subsidiaries to DLJ
Merchant Banking Funds and their Affiliates made for any financial advisory,
financing, underwriting or placement services or in respect of other
investment banking activities, including, without limitation, in connection
with acquisitions or divestitures which are approved by a majority of the
Board of Directors in good faith; (d) any agreement as in effect on the date
of this Indenture or any amendment thereto (so long as that amendment is not
disadvantageous to the Holders of the Notes in any material respect) or any
transaction contemplated thereby; (e) payments and transactions in connection
with the Transactions, including any purchase price adjustment or any other
payments made pursuant to the Transaction Agreements or any financial advisory
agreements with Donaldson, Lufkin & Jenrette Securities Corporation and the
Transaction Financing, the New Credit Facility (including commitment,
syndication and arrangement fees payable thereunder) and the Offering
(including underwriting discounts and commissions in connection therewith) and
the application of the proceeds thereof, and the payment of the fees and
expenses with respect thereto; (f) Restricted Payments that are permitted by
Section 4.07 hereof and any Permitted Investments; and (g) sales of accounts
receivable, or participations therein, in connection with any Receivables
Facility.
Section 4.12 Liens.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien, other than a Permitted Lien, that secures obligations under
any Pari Passu Indebtedness or subordinated Indebtedness of the Company on any
asset or property now owned or hereafter acquired by the Company or any of its
Restricted Subsidiaries, or any income or profits therefrom or assign or
convey any right to receive income therefrom, unless the Notes are equally and
ratably secured with the obligations so secured until such time as those
obligations are no longer secured by a Lien; provided that, in any case
involving a Lien securing subordinated Indebtedness of the Company, that Lien
is subordinated to the Lien securing the Notes to the same extent that that
subordinated Indebtedness is subordinated to the Notes.
Section 4.13 Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) the
corporate, partnership or other existence of itself and each of its
Subsidiaries, in accordance with the respective organizational documents (as
the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of itself and any
of its Subsidiaries, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries, taken as a whole, and that the loss thereof
is not adverse in any material respect to the Holders of the Notes.
Section 4.14 Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in
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cash equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
repurchase (the "Change of Control Payment"). Within 60 days following any
Change of Control, the Company will, or will cause the Trustee to, mail a
notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the date
specified in that notice, which date shall be no earlier than 30 days and no
later than 60 days from the date that notice is mailed (the "Change of Control
Payment Date"), pursuant to the procedures required by this Indenture and
described in that notice. The Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable
in connection with the repurchase of the Notes as a result of a Change of
Control. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Indenture relating to a
Change of Control Offer, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in this Indenture by virtue thereof.
(b) On the Change of Control Payment Date, the Company will, to the
extent lawful, (a) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer; (b) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered; and (c) deliver or cause to be delivered to
the Trustee the Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Notes or portions thereof being
purchased by the Company. The Paying Agent will promptly mail to each Holder
of Notes so tendered the Change of Control Payment for that Holder's Notes,
and the Trustee will promptly authenticate and mail, or cause to be
transferred by book-entry, to each Holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered, if any; provided that
each new Note will be in a principal amount of $1,000 or an integral multiple
thereof. Prior to complying with the provisions of this Section 4.14, but in
any event within 90 days following a Change of Control, the Company will
either repay all outstanding Senior Indebtedness or obtain the requisite
consents, if any, under all agreements governing outstanding Senior
Indebtedness to permit the repurchase of Notes required by this Section 4.14.
The Company shall publicly announce the results of the Change of Control Offer
on or as soon as practicable after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.14,
the Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in this Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
Section 4.15 No Senior Subordinated Indebtedness.
Notwithstanding the provisions of Section 4.09 hereof, (i) the
Company shall not incur any Indebtedness that is subordinate or junior in
right of payment to any Senior Indebtedness and senior in right of payment to
the Notes, and (ii) no Guarantor will incur any Indebtedness that is
subordinate or junior in right of payment to any Senior Indebtedness and
senior in right of payment to that Guarantor's Note Guarantee.
Section 4.16 Limitation on Sale and Leaseback Transactions.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company or any Restricted Subsidiary may enter into a sale and leaseback
transaction if (a) the Company or such Restricted Subsidiary, as the case may
be, could have (i)
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incurred Indebtedness in an amount equal to the Attributable Indebtedness
relating to such sale and leaseback transaction pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof;
and (ii) incurred a Lien to secure that Indebtedness pursuant to Section 4.12
hereof; (b) the gross cash proceeds of such sale and leaseback transaction are
at least equal to the fair market value (as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of that sale and leaseback
transaction; and (c) the transfer of assets in that sale and leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, Section 4.10 hereof.
Section 4.17 Additional Note Guarantees.
If the Company or any of its Subsidiaries shall acquire or create a
Wholly-Owned Restricted Subsidiary after the date of this Indenture, then such
newly acquired or created a Wholly-Owned Restricted Subsidiary shall execute a
Note Guarantee in the form of a Supplemental Indenture and deliver an Opinion
of Counsel, in accordance with the terms of this Indenture, except for (i) all
Subsidiaries organized outside of the United States and its territories, (ii)
all Subsidiaries that have properly been designated as Unrestricted
Subsidiaries in accordance with this Indenture for so long as they continue to
constitute Unrestricted Subsidiaries and (iii) all Subsidiaries that have not
guaranteed any Indebtedness under the New Credit Facility.
ARTICLE 5
SUCCESSORS
Section 5.01 Merger, Consolidation, or Sale of Assets.
The Company may not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, convey
or otherwise dispose of all or substantially all of its properties or assets
in one or more related transactions to, another Person unless (a) the Company
is the surviving corporation or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which that sale,
assignment, transfer, conveyance or other disposition shall have been made is
a corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia; (b) the Person formed by or
surviving any such consolidation or merger (if other than the Company) or the
Person to which that sale, assignment, transfer, conveyance or other
disposition shall have been made assumes all the obligations of the Company
under the Registration Rights Agreement, the Notes and this Indenture pursuant
to a supplemental indenture in a form reasonably satisfactory to the Trustee;
(c) immediately after that transaction no Default or Event of Default exists;
and (d) the Company or the Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which that sale,
assignment, transfer, conveyance or other disposition shall have been made (i)
will, at the time of such transaction and after giving pro forma effect
thereto as if that transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof or (ii) would, together with its
Restricted Subsidiaries, have a higher Fixed Charge Coverage Ratio immediately
after that transaction (after giving pro forma effect thereto as if that
transaction had occurred at the beginning of the applicable four-quarter
period) than the Fixed Charge Coverage Ratio of the Company and its Restricted
Subsidiaries immediately prior to that transaction. The foregoing clause (d)
will not prohibit (i) a merger between the Company and a Wholly Owned
Subsidiary of Parent created for the purpose of holding the Capital Stock of
the Company; (ii) a merger between the Company and a Wholly Owned Restricted
Subsidiary; or (iii) a merger between the Company and an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
State of the United States so long as, in each
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case, the amount of Indebtedness of the Company and its Restricted
Subsidiaries is not increased thereby. The Company will not lease all or
substantially all of its assets to any Person.
Section 5.02 Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the
assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest or Liquidated Damages, if any,
on the Notes except in the case of a sale of all or substantially all of the
Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.
Each of the following constitutes an Event of Default:
(a) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by
Article 10 hereof);
(b) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by Article 10 hereof);
(c) failure by the Company or any of its Restricted Subsidiaries for
30 days after receipt of notice from the Trustee or Holders of at least 25% in
principal amount of the Notes then outstanding to comply with Sections 4.07,
4.09, 4.10, 4.14 or Article 5 hereof;
(d) failure by the Company for 60 days after notice from the Trustee
or the Holders of at least 25% in principal amount of the Notes then
outstanding to comply with any of its other agreements in this Indenture or
the Notes;
(e) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of
its Restricted Subsidiaries), whether that Indebtedness or guarantee now
exists, or is created after the date of this Indenture, which default (i) is
caused by a failure to pay Indebtedness at its stated final maturity (after
giving effect to any applicable grace period provided in such Indebtedness) (a
"Payment Default") or (ii) results in the acceleration of that Indebtedness
prior to its stated final maturity and, in each case, the principal amount of
any such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $10.0 million or more;
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(f) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $10.0 million (net of any amounts
with respect to which a reputable and creditworthy insurance company has
acknowledged liability in writing), which judgments are not paid, discharged
or stayed for a period of 60 days;
(g) except as permitted by this Indenture, if any Note Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full force and effect or any Guarantor, or
any Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Note Guarantee;
(h) the Company or any of its Restricted Subsidiaries that is a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken as
a whole, would constitute a Significant Subsidiary pursuant to or within the
meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its Restricted
Subsidiaries that is a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary in an involuntary case;
(ii) appoints a Custodian of the Company or any of its
Restricted Subsidiaries that is a Significant Subsidiary or any group
of Restricted Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary or for all or substantially all of the
property of the Company or any of its Restricted Subsidiaries that is
a Significant Subsidiary or any group of Restricted Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Restricted Subsidiaries that is a Significant Subsidiary or any group
of Restricted Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days.
Section 6.02 Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (h) or (i) of Section 6.01 hereof with respect to the Company, any
Restricted Subsidiaries that is a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary) occurs and is continuing, the Holders of at least 25% in principal
amount of the then outstanding Notes
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may direct the Trustee to declare all the Notes to be due and payable
immediately. However, so long as any Indebtedness permitted to be incurred
pursuant to the New Credit Facility shall be outstanding, such acceleration
shall not be effective until the earlier of (i) an acceleration under any such
Indebtedness under the New Credit Facility; or (ii) five Business Days after
receipt by the Company and the administrative agent under the New Credit
Facility of written notice of such acceleration. Except as stated in the prior
sentence, upon any such declaration, the Notes shall become due and payable
immediately. Notwithstanding the foregoing, if an Event of Default specified
in clause (h) or (i) of Section 6.01 hereof occurs with respect to the
Company, any of its Restricted Subsidiaries that is a Significant Subsidiary
or any group of Restricted Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary, all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes may not enforce
this Indenture or the Notes except as provided in this Indenture. The Holders
of a majority in aggregate principal amount of the then outstanding Notes by
written notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with
any judgment or decree and if all existing Events of Default (except
nonpayment of principal, interest or premium or Liquidated Damages, if any,
that has become due solely because of the acceleration) have been cured or
waived, provided that, in the event of a declaration of acceleration of the
Notes because an Event of Default has occurred and is continuing as a result
of the acceleration of any Indebtedness described in clause (e) of Section
6.01 hereof, the declaration of acceleration of the Notes shall be
automatically annulled if the holders of any Indebtedness described in clause
(e) of Section 6.01 hereof have rescinded the declaration of acceleration in
respect of such Indebtedness within 30 days of the date of such declaration
and if (i) the annulment of the acceleration of the Notes would not conflict
with any judgment or decree of a court of competent jurisdiction; and (ii) all
existing Events of Default, except non-payment of principal or interest on the
Notes that became due solely because of the acceleration of the Notes, have
been cured or waived.
Section 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest and Liquidated Damages, if any, on the Notes or to enforce
the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
Section 6.04 Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the
Holders of all of the Notes waive an existing Default or Event of Default and
its consequences hereunder, except a continuing Default or Event of Default in
the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal
amount of the then outstanding Notes may rescind an acceleration and its
consequences, including any related payment default that resulted from such
acceleration). Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
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Section 6.05 Control by Majority.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture that the Trustee determines may be
unduly prejudicial to the rights of other Holders of Notes or that may involve
the Trustee in personal liability.
Section 6.06 Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07 Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due
dates expressed in the Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder.
Section 6.08 Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest and Liquidated Damages, if any, on overdue
principal and, to the extent lawful, interest and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
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Section 6.09 Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders of the Notes allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and
distribute any money or other property payable or deliverable on any such
claims and any custodian in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
and any other amounts due the Trustee under Section 7.07 hereof. To the extent
that the payment of any such compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 6.10 Priorities.
If the Trustee collects any money pursuant to this Article 6, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to holders of Senior Indebtedness to the extent required by
Article 10 or Section 11.02 hereof;
Third: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as a Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit, and
the court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in
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the suit, having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section does not apply to a suit by
the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or
a suit by Holders of more than 10% in principal amount of the then outstanding
Notes.
ARTICLE 7
TRUSTEE
Section 7.01 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture,
and use the same degree of care and skill in its exercise, as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture
and no others, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture, but need not verify the contents
thereof.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Sections 6.02, 6.04 or 6.05
hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), (c), (e) and (f) of this Section 7.01 and Section 7.02 hereof.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability
or expense.
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(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
Section 7.02 Rights of Trustee.
(a) The Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any document believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection from liability in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights
or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(g) Except with respect to Section 4.01 hereof, the Trustee shall
have no duty to inquire as to the performance of the Company's covenants in
Article 4 hereof. In addition, the Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any Event of Default
occurring pursuant to Sections 6.01(a), 6.01(b) and 4.01 or (ii) any Default
or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.
(h) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee may, in its discretion, make such further inquiry or investigation
into such facts or matters as it may see fit and if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled
to examine the books, records and premises of the Company personally or by
agent or attorney.
(i) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(j) Delivery of reports, information and documents to the Trustee
under Section 4.03 is for informational purposes only and the Trustee's
receipt of the foregoing shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including
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the Company's compliance with any of the covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
Section 7.03 Individual Rights of Trustee.
The Trustee may become the owner or pledgee of Notes and may
otherwise deal with the Company or any Affiliate of the Company with the same
rights it would have if it were not Trustee. However, in the event that the
Trustee acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue as trustee
or resign. Any Agent may do the same with like rights and duties. The Trustee
is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of
this Indenture, it shall not be responsible for the use or application of any
money received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes
or any other document in connection with the sale of the Notes or pursuant to
this Indenture other than its certificate of authentication.
Section 7.05 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders of Notes a notice
of the Default or Event of Default within 90 days after such Default or Event
of Default becomes known to the Trustee. Except in the case of a Default or
Event of Default in payment of principal of, premium, if any, or interest or
Liquidated Damages, if any, on any Note, the Trustee may withhold the notice
if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of the Holders of
the Notes.
Section 7.06 Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA ss. 313(a) (but if no event described in
TIA ss. 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
ss. (b)(2). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the Commission and each
stock exchange on which the Notes are listed in accordance with TIA ss.
313(d). The Company shall promptly notify the Trustee when the Notes are
listed on any stock exchange.
Section 7.07 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by
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any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee promptly upon request for all reasonable disbursements,
advances and expenses incurred or made by it in addition to the compensation
for its services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company and any Guarantor shall jointly and severally indemnify
the Trustee and its agents, employees, officers, directors and shareholders
for, and hold the same harmless against, any and all losses, liabilities or
expenses (including without limitation reasonable attorney's fees and
expenses) incurred by it arising out of or in connection with the acceptance
or administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against the Company (including this
Section 7.07) and defending itself against any claim (whether asserted by the
Company or any Holder or any other person) or liability in connection with the
exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. At the
Trustee's sole discretion, the Company shall defend the claim and the Trustee
shall cooperate in the defense at the Company's expense. The Trustee may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The obligations of the Company and any Guarantor under this Section
7.07 shall survive the resignation or removal of the Trustee and/or the
satisfaction and discharge or termination of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the resignation or
removal of the Trustee and/or the satisfaction and discharge or termination of
this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration
under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
Section 7.08 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of
a majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company
may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
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(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Notes
may appoint a successor Trustee to replace the successor Trustee appointed by
the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10 hereof, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Company's obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
Section 7.10 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or
state authorities and that has a combined capital and surplus of at least $100
million as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIAss. 310(a)(1), (2) and (5). The Trustee is subject to TIAss.
310(b).
Section 7.11 Preferential Collection of Claims Against Company.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
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ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes and
Note Guarantees upon compliance with the conditions set forth below in this
Article 8.
Section 8.02 Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
deemed to have been discharged from its obligations with respect to all
outstanding Notes, Note Guarantees and this Indenture on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance").
For this purpose, Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire Indebtedness represented by the
outstanding Notes, Note Guarantees and this Indenture, which Notes shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.05
hereof and the other Sections of this Indenture referred to in (a) and (b)
below, and to have satisfied all its other obligations under such Notes, Note
Guarantees and this Indenture (and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following provisions which shall survive until otherwise
terminated or discharged hereunder:
(a) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest and Liquidated
Damages, if any, on those Notes when those payments are due from the trust
referred to below;
(b) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and money
for security payments held in trust;
(c) the rights, powers, trusts, duties and immunities of the Trustee,
and the Company's obligations in connection therewith; and
(d) the Legal Defeasance provisions of this Indenture.
Section 8.03 Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
released from its obligations under the covenants contained in Sections 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.14, 4.15, 4.16 and 4.17 hereof with respect to
the outstanding Notes on and after the date the conditions set forth in
Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes
shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant
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Defeasance means that, with respect to the outstanding Notes, the Company and
the Guarantors may omit to comply with and shall have no liability in respect
of any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any
such covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall
not constitute a Default or an Event of Default under Section 6.01 hereof,
but, except as specified above, the remainder of this Indenture and such Notes
shall be unaffected thereby. In addition, upon the Company's exercise under
Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04
hereof, Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of
Default.
Section 8.04 Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes and Note Guarantees:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Notes, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in those amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest and Liquidated Damages, if any, on the outstanding Notes on the
stated maturity or on the applicable redemption date, as the case may be, and
the Company must specify whether the Notes are being defeased to maturity or
to a particular redemption date;
(b) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that (i) the Company has received from,
or there has been published by, the Internal Revenue Service; a ruling or (ii)
since the date of this Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, subject to customary assumptions
and exclusions, the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred;
(c) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that, subject to customary assumptions
and exclusions, the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of that deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such deposit)
or, insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 123rd day after the date of
deposit;
(e) that Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under, any material agreement
or instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
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(f) the Company must have delivered to the Trustee an Opinion of
Counsel to the effect that, subject to customary assumptions and exclusions,
after the 123rd day following the deposit, the trust funds will not be subject
to the effect of Section 547 of the United States Bankruptcy Code or any
analogous New York State law provision or any other applicable federal or New
York bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Notes over the other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and
(h) the Company must deliver to the Trustee an Officers' Certificate
and an Opinion of Counsel (which opinion may be subject to customary
assumptions and exclusions), each stating that all conditions precedent
provided for relating to the Legal Defeasance or the Covenant Defeasance have
been complied with.
Section 8.05 Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly
or through any Paying Agent (including the Company acting as Paying Agent) as
the Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest and
Liquidated Damages, if any, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the
principal and interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
Section 8.06 Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest or Liquidated Damages, if any, on any Note and remaining
unclaimed for two years after such principal, and premium, if any, or interest
or Liquidated Damages, if any, has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Note shall thereafter, as a secured
creditor, look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as
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trustees thereof, shall thereupon cease; provided, however, that the Trustee
or such Paying Agent, before being required to make any such repayment, may at
the expense of the Company cause to be published once, in the New York Times
and The Wall Street Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less
than 30 days from the date of such notification or publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
Section 8.07 Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02
or 8.03 hereof, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture, the Notes and the Note Guarantees shall be revived and reinstated
as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof
until such time as the Trustee or Paying Agent is permitted to apply all such
money in accordance with Section 8.02 or 8.03 hereof, as the case may be;
provided, however, that, if the Company makes any payment of principal of,
premium, if any, or interest or Liquidated Damages, if any, on any Note
following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01 Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the Note
Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including
the related definitions) in a manner that does not materially adversely affect
any Holder;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Notes by a successor to the Company pursuant to Article 5 or
Article 11 hereof or to provide for the assumption of any Guarantor's
obligations under its Note Guarantee in the case of a merger or consolidation
of the Guarantor;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not materially adversely
affect the legal rights hereunder of any Holder of the Note;
(e) to comply with requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance
with the limitations set forth in this Indenture as of the date hereof; or
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(g) to allow any Guarantor to execute a supplemental indenture and/or
a Note Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company and
the Guarantors in the execution of any amended or supplemental Indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into such amended or supplemental
Indenture that affects its own rights, duties or immunities under this
Indenture or otherwise.
Section 9.02 With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture (including
Section 3.09, 4.10 and 4.14 hereof), the Note Guarantees and the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Notes (including Additional Notes, if any) then
outstanding voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or
Event of Default (other than a Default or Event of Default in the payment of
the principal of, premium, if any, or interest or Liquidated Damages, if any,
on the Notes, except a payment default resulting from an acceleration that has
been rescinded) or compliance with any provision of this Indenture, the Note
Guarantees or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including
Additional Notes, if any) voting as a single class (including consents
obtained in connection with a tender offer or exchange offer for, or purchase
of, the Notes). Notwithstanding the foregoing, any (i) amendment to or waiver
of Section 4.14 hereof, and (ii) amendment to Article 10 herein will require
the consent of the Holders of at least two-thirds in aggregate principal
amount of the Notes then outstanding if such amendment would materially
adversely affect the rights of Holders of Notes. Section 2.08 hereof shall
determine which Notes are considered to be "outstanding" for purposes of this
Section 9.02.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Company and the
Guarantors in the execution of such amended or supplemental Indenture unless
such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof,
the Holders of a majority in aggregate principal amount
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of the Notes (including Additional Notes, if any) then outstanding voting as a
single class may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Notes. However, without the consent of
each Holder affected, an amendment or waiver under this Section 9.02 may not
(with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other
than Section 4.14 hereof);
(c) reduce the rate of or extend the time for payment of interest on
any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest or Liquidated Damages, if any, on the Notes
(except a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults;
(g) waive a redemption payment with respect to any Note (other than
Section 4.14 hereof);
(h) release any Guarantor from any of its obligations under its Note
Guarantee or this Indenture, except in accordance with the terms of this
Indenture; or
(i) make any change in the foregoing amendment and waiver provisions.
Section 9.03 Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in an amended or supplemental Indenture that complies with the TIA
as then in effect.
Section 9.04 Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note
and every subsequent Holder of a Note or portion of a Note that evidences the
same debt as the consenting Holder's Note, even if notation of the consent is
not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives
written notice of revocation before the date the waiver, supplement or
amendment becomes effective. An amendment, supplement or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
Section 9.05 Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
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Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
Section 9.06 Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until its
Board of Directors approves it. In executing any amended or supplemental
indenture, the Trustee shall be entitled to receive and (subject to Section
7.01 hereof) shall be fully protected in relying upon, in addition to the
documents required by Section 11.04 hereof, an Officer's Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
indenture is authorized or permitted by this Indenture.
ARTICLE 10
SUBORDINATION
Section 10.01 Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note agrees, that
the payment of Subordinated Note Obligations are subordinated in right of
payment, to the extent and in the manner set forth in this Article 10, to the
prior payment in full in cash or cash equivalents of all Senior Indebtedness,
whether outstanding on the date of this Indenture or thereafter incurred and
that the subordination is for the benefit of the holders of Senior
Indebtedness. The provisions of this Article 10 shall constitute a continuing
offer to all Persons that, in reliance upon such provisions, become holders
of, or continue to hold Senior Indebtedness, and they or each of them may
enforce the rights of holders of Senior Indebtedness hereunder, subject to the
terms and provisions hereof.
Section 10.02 Certain Definitions.
"cash equivalents" means Cash Equivalents of the type described in
clause (i) of the definition thereof maturing not more than 90 days after the
date of the acquisition thereof.
"Designated Senior Indebtedness" means (a) any Indebtedness
outstanding under the New Credit Facility; and (b) any other Senior
Indebtedness permitted under this Indenture the principal amount of which is
$25.0 million or more and that has been designated by the Company in writing
to the Trustee as "Designated Senior Indebtedness."
"Permitted Junior Securities" means Equity Interests in the Company
or debt securities of the Company that are subordinated to all Senior
Indebtedness and any debt securities issued in exchange for Senior
Indebtedness to substantially the same extent as, or to a greater extent than,
the Notes are subordinated to Senior Indebtedness.
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Indebtedness.
"Senior Indebtedness" means, with respect to any Person, (a) all
Obligations of that Person outstanding under the New Credit Facility and all
Hedging Obligations payable to a lender or an Affiliate thereof or to a Person
that was a lender or an Affiliate thereof at the time the contract was entered
into under the New Credit Facility or any of its Affiliates, including,
without limitation, interest accruing
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subsequent to the filing of, or which would have accrued but for the filing
of, a petition for bankruptcy, whether or not that interest is an allowable
claim in that bankruptcy proceeding; (b) any other Indebtedness, unless the
instrument under which that Indebtedness is incurred expressly provides that
it is subordinated in right of payment to any other Senior Indebtedness of
that Person; and (c) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (i) any liability for federal, state, local or other taxes;
(ii) any Indebtedness of that Person, other than pursuant to the New Credit
Facility, to any of its Subsidiaries or other Affiliates; (iii) any trade
payables; or (iv) any Indebtedness that is incurred in violation of this
Indenture.
"Subordinated Note Obligations" means all Obligations with respect to
the Notes, including, without limitation, principal, premium, if any, interest
and Liquidated Damages, if any, payable pursuant to the terms of the Notes
(including upon the acceleration or redemption thereof), together with and
including any amounts received or receivable upon the exercise of rights of
rescission or other rights of action, including claims for damages, or
otherwise.
A "distribution" or "payment" may consist of a distribution, payment
or other transfer of assets by or on behalf of the Company (including, without
limitation, a redemption, repurchase or other acquisition of the Notes) from
any source, of any kind or character, whether in cash, securities or other
property, by set-off or otherwise.
Section 10.03 Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, (a) the holders of Senior Indebtedness will be
entitled to receive payment in full in cash or cash equivalents of all
Obligations due in respect of such Senior Indebtedness, including interest
after the commencement of any such proceeding at the rate specified in the
applicable Senior Indebtedness, before the Holders of Notes will be entitled
to receive any payment with respect to the Subordinated Note Obligations
(except that Holders of Notes may receive and retain Permitted Junior
Securities and payments and other distributions made from the trust described
in Section 8.04 hereof), and (b) until all Obligations with respect to Senior
Indebtedness are paid in full in cash or cash equivalents, any distribution to
which the Holders of Notes would be entitled but for this Article 10 shall be
made to the holders of Senior Indebtedness (except that Holders of Notes may
receive and retain Permitted Junior Securities and payments and other
distributions made from the trust described in Section 8.04 hereof) as their
interests appear.
Section 10.04 Default on Designated Senior Indebtedness.
The Company may not make any payment or distribution to the Trustee
or any Holder upon or in respect of the Subordinated Note Obligations (except
in Permitted Junior Securities or from the trust described in Section 8.04
hereof) until all principal and other obligations with respect to Senior
Indebtedness have been paid in full in cash or cash equivalents, if:
(a) a default in the payment of the principal (including
reimbursement obligations in respect of letters of credit) of, premium, if
any, or interest on or commitment, letter of credit or administrative fees
relating to, Designated Senior Indebtedness occurs and is continuing beyond
any applicable period of grace in the agreement, indenture or other document
governing such Designated Senior Indebtedness; or
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(b) any other default occurs and is continuing with respect to
Designated Senior Indebtedness that permits holders of the Designated Senior
Indebtedness as to which that default relates to accelerate its maturity and
the Trustee receives a notice of such default (a "Payment Blockage Notice")
from the Company or the holders of any Designated Senior Indebtedness (or
their Representative).
Payments on the Notes may and shall be resumed (a) in the case of a
payment default, upon the date on which that default is cured or waived; and
(b) in case of a nonpayment default, the earlier of the date on which that
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Indebtedness has been accelerated. No new period of payment
blockage may be commenced unless and until 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless that default shall have been waived
or cured for a period of not less than 90 days.
Section 10.05 Acceleration of Securities.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of
the acceleration.
Section 10.06 When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment of
any Subordinated Note Obligations at a time when the Trustee or such Holder,
as applicable, has actual knowledge that such payment is prohibited by Section
10.03 or 10.04 hereof, such payment shall be held by the Trustee or such
Holder, in trust for the benefit of, and shall be paid forthwith over and
delivered, upon written request, to, the holders of Senior Indebtedness as
their interests may appear or their Representative under the indenture or
other agreement (if any) pursuant to which Senior Indebtedness may have been
issued, as their respective interests may appear, for application to the
payment of all Obligations with respect to Senior Indebtedness remaining
unpaid to the extent necessary to pay such Obligations in full in accordance
with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or
on behalf of Holders or the Company or any other Person money or assets to
which any holders of Senior Indebtedness shall be entitled by virtue of this
Article 10, except if such payment is made as a result of the willful
misconduct or gross negligence of the Trustee.
Section 10.07 Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give such
notice shall not affect the subordination of the Notes to the Senior
Indebtedness as provided in this Article 10.
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Section 10.08 Subrogation.
After all Senior Indebtedness is paid in full in cash or cash
equivalents and until the Notes are paid in full, Holders of Notes shall be
subrogated (equally and ratably with all other Indebtedness pari passu with
the Notes) to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness to the extent that
distributions otherwise payable to the Holders of Notes have been applied to
the payment of Senior Indebtedness. A distribution made under this Article 10
to holders of Senior Indebtedness that otherwise would have been made to
Holders of Notes is not, as between the Company and Holders, a payment by the
Company on the Notes.
Section 10.09 Relative Rights.
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest and Liquidated Damages, if any, on the Notes in
accordance with their terms;
(2) affect the relative rights of Holders of Notes and creditors of
the Company other than their rights in relation to holders of Senior
Indebtedness; or
(3) prevent the Trustee or any Holder of Notes from exercising its
available remedies upon a Default or Event of Default, subject to the rights
of holders and owners of Senior Indebtedness to receive distributions and
payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of
or interest or Liquidated Damages, if any, on a Note on the due date, the
failure is still a Default or Event of Default.
Section 10.10 Subordination May Not Be Impaired by Company.
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of
the Company or any Holder to comply with this Indenture.
Section 10.11 Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto
or to this Article 10.
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Section 10.12 Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge
of the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any
Obligations with respect to the Notes to violate this Article 10. Only the
Company or a Representative may give the notice. Nothing in this Article 10
shall impair the claims of, or payments to, the Trustee under or pursuant to
Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
Section 10.13 Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representative is hereby authorized to file an appropriate
claim for and on behalf of the Holders of the Notes.
Section 10.14 No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act by any such
holder.
(b) Without in any way limiting the generality of paragraph (a) of
this Section 10.14, the holders of Senior Indebtedness may, at any time and
from time to time, without the consent of or notice to the Trustee or any
Holder, without incurring responsibility to any Holder and without impairing
or releasing the subordination provided in this Article 10 or the obligations
hereunder of the Holders to the holders of Senior Indebtedness, do any one or
more of the following: (i) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, any Senior Indebtedness or
any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any
rights against either Company or any other Person.
Section 10.15 Amendments.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Indebtedness.
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Section 10.16 Trustee's Compensation not Prejudiced.
Nothing in this Article 10 shall apply to amounts due to the Trustee
pursuant to other Sections of this Indenture.
ARTICLE 11
NOTE GUARANTEES
Section 11.01 Guarantee.
Subject to this Article 11, each of the Guarantors hereby, jointly
and severally, unconditionally guarantees to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of
this Indenture, the Notes or the obligations of the Company hereunder or
thereunder, that: (1) the principal of and interest on the Notes will be
promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of and interest
on the Notes, if any, if lawful, and all other obligations of the Company to
the Holders or the Trustee hereunder or thereunder will be promptly paid in
full or performed, all in accordance with the terms hereof and thereof; and
(2) in case of any extension of time of payment or renewal of any Notes or any
of such other obligations, that same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing payment when due of any
amount so guaranteed or any performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay the same
immediately. Each Guarantor agrees that this is a guarantee of payment and not
a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of
the Notes or this Indenture, the absence of any action to enforce the same,
any waiver or consent by any Holder of the Notes with respect to any
provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a Guarantor.
Each Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy of the
Company, any right to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenant that this Note Guarantee shall
not be discharged except by complete performance of the obligations contained
in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on the one
hand, and the Holders and the Trustee, on the other hand, (1) the maturity of
the obligations guaranteed hereby may be accelerated as provided in Article 6
hereof for the purposes of this Note Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (2) in the event of any declaration of
acceleration of such obligations as provided in Article 6 hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Note Guarantee. The
Guarantors shall have the right to seek
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contribution from any non-paying Guarantor so long as the exercise of such right
does not impair the rights of the Holders under the Guarantee.
Section 11.02 Subordination of Note Guarantee.
The Obligations of each Guarantor under its Note Guarantee pursuant
to this Article 11 shall be junior and subordinated to the Senior Guarantee of
such Guarantor on the same basis as the Notes are junior and subordinated to
Senior Indebtedness of the Company. For the purposes of the foregoing
sentence, the Trustee and the Holders shall have the right to receive and/or
retain payments by any of the Guarantors only at such times as they may
receive and/or retain payments in respect of the Notes pursuant to this
Indenture, including Article 10 hereof with respect to subordination.
Section 11.03 Limitation of Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Note Guarantee
of such Guarantor not constitute a fraudulent transfer or conveyance for
purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar federal or state law to the extent
applicable to any Note Guarantee. To effectuate the foregoing intention, the
Trustee, the Holders and the Guarantors hereby irrevocably agree that the
obligations of such Guarantor will, after giving effect to such maximum amount
and all other contingent and fixed liabilities of such Guarantor that are
relevant under such laws, and after giving effect to any collections from,
rights to receive contribution from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under
this Article 11, result in the obligations of such Guarantor under its Note
Guarantee not constituting a fraudulent transfer or conveyance.
Section 11.04 Execution And Delivery Of Note Guarantee.
To evidence its Note Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Note Guarantee substantially
in the form included in Exhibit E shall be endorsed by an Officer of such
Guarantor on each Note authenticated and delivered by the Trustee and that
this Indenture shall be executed on behalf of such Guarantor by its President
or one of its Vice Presidents.
Each Guarantor hereby agrees that its Note Guarantee set forth in
Section 11.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Note Guarantee.
If an Officer whose signature is on this Indenture or on the Note
Guarantee no longer holds that office at the time the Trustee authenticates
the Note on which a Note Guarantee is endorsed, the Note Guarantee shall be
valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Note Guarantee set
forth in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new
Subsidiaries subsequent to the date of this Indenture, if required by Section
4.17 hereof, the Company shall cause such Subsidiaries to execute supplemental
indentures to this Indenture and Note Guarantees in accordance with Section
4.17 hereof and this Article 11, to the extent applicable.
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Section 11.05 Guarantors May Consolidate, Etc., On Certain Terms.
Except as otherwise provided in Section 11.06, no Guarantor may
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person whether or not affiliated with such Guarantor
unless:
(a) subject to Section 11.06 hereof, the Person formed by or
surviving any such consolidation or merger (if other than a Guarantor or the
Company) unconditionally assumes all the obligations of such Guarantor,
pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, under the Notes, this Indenture, the Note
Guarantees and the Registration Rights Agreement on the terms set forth herein
or therein; and
(b) immediately after giving effect to such transaction, no Default
or Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor Person, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the Note Guarantees endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Note Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Note Guarantees so issued shall in all
respects have the same legal rank and benefit under this Indenture as the Note
Guarantees theretofore and thereafter issued in accordance with the terms of
this Indenture as though all of such Note Guarantees had been issued at the
date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of
the Notes shall prevent any consolidation or merger of a Guarantor with or
into the Company or another Guarantor, or shall prevent any sale or conveyance
of the property of a Guarantor as an entirety or substantially as an entirety
to the Company or another Guarantor.
Section 11.06 Releases Following Sale Of Assets.
In the event of a sale or other disposition of all of the assets of a
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all to the capital stock of a Guarantor, in each case to a
Person that is not (either before or after giving effect to such transactions)
a Restricted Subsidiary of the Company, then such Guarantor (in the event of a
sale or other disposition, by way of merger, consolidation or otherwise, of
all of the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of such Guarantor) will be released and relieved of any
obligations under its Note Guarantee; provided that the Net Proceeds of such
sale or other disposition are applied in accordance with the applicable
provisions of this Indenture, including without limitation Section 4.10
hereof. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of this
Indenture, including without limitation Section 4.10 hereof, the Trustee shall
execute any documents reasonably required in order to evidence the release of
any Guarantor from its obligations under its Note Guarantee.
Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this
Indenture as provided in this Article 11.
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ARTICLE 12
MISCELLANEOUS
Section 12.01 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA Sec. 318(c), the imposed duties shall control.
Section 12.02 Notices.
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt
requested), telex, telecopier or overnight air courier guaranteeing next day
delivery, to the others' address.
If to the Company or any Guarantor:
251 Ballardvale Street
Wilmington, MA 01887
Telecopier No.: 978-988-5665
Attention: General Counsel
With a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopier No.: (212) 450-4800
Attention: Richard Truesdell, Esq.
If to the Trustee:
State Street Bank and Trust Company
Goodwin Square, 23rd Floor
225 Asylum Street
Hartford, CT 06103
Telecopier No.: (860) 244-1897
Attention: Corporate Trust Administration
With a copy to:
Brown Rudnick Freed & Gesmer, P.C.
City Place 1
Hartford, CT 06103
Telecopier No.: (860) 509-6501
Attention: James E. Rosenbluth, Esq.
The Company, any Guarantor or the Trustee, by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
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All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA ss. 313(c), to the extent required by
the TIA. Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 12.03 Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA
ss. 312(c).
Section 12.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
Section 12.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of
TIA ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
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(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 12.06 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07 No Personal Liability of Directors, Officers, Employees and
Stockholders.
No member, director, officer, employee, incorporator or stockholder
of the Company or any Guarantor, as such, shall have any liability for any
obligations of the Company and the Guarantors under the Notes, the Note
Guarantees or this Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
Section 12.08 Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 12.09 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 12.10 Successors.
All agreements of the Company and the Guarantors in this Indenture,
the Notes and the Note Guarantees shall bind their successors. All agreements
of the Trustee in this Indenture shall bind its successors.
Section 12.11 Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
Section 12.12 Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
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Section 12.13 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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SIGNATURES
Dated as of September 29, 1999
CHARLES RIVER LABORATORIES, INC.
By:_____________________________________
Name:
Title:
SBI HOLDINGS, INC.
By:_____________________________________
Name:
Title:
SIERRA BIOMEDICAL, INC.
By:_____________________________________
Name:
Title:
SIERRA BIOMEDICAL SAN DIEGO, INC.
By:_____________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:_________________________________
Name:
Title:
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EXHIBIT A-1
(Face of Global Note)
===============================================================================
CUSIP/CINS ______________
13 1/2% Senior Subordinated Notes due 2009
No. __ $
-----------------
CHARLES RIVER LABORATORIES, INC.
promises to pay to _______________, or registered assigns, the principal sum of
____________________________________ Dollars on October 1, 2009.
Interest Payment Dates: October 1 and April 1
Record Dates: September 15 and March 15
Dated: ______
CHARLES RIVER LABORATORIES, INC.
BY:_____________________________________
Name:
Title:
This is one of the Global Notes referred
to in the within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:_____________________________________
Name:
Title:
================================================================================
A1-1
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(Back of Note)
13 1/2% [Series A] [Series B] Senior Subordinated Notes due 2009
[Insert the following if the Note is issued in global form.]
[Unless and until it is exchanged in whole or in part for Notes in definitive
form, this Note may not be transferred except as a whole by the Depositary to
a nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL in as much as the registered owner hereof, Cede & Co., has
an interest herein.]
[Insert the Private Placement legend, if applicable, pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Charles River Laboratories, Inc., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 13 1/2% per annum from September 29, 1999 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. Interest on the Notes will accrue at the rate of
13.5% per year; provided that the rate at which interest accrues will increase
to 14.0% per year on August 15, 2000 in the event that the Ratio of
Consolidated Net Debt to Consolidated Cash Flow for the Company as of June 30,
2000 is equal to or greater than 5.00 to 1. The Company will pay interest and
Liquidated Damages semi-annually on October 1 and April 1 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each,
an "Interest Payment Date"). Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in
the payment of interest, and if this Note is authenticated between a record
date referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such next succeeding Interest Payment Date;
and provided further that the first Interest Payment Date shall be April 1,
2000. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; it shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the September 15 or
March 15 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office of the Paying Agent and Registrar.
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Holders of Notes must surrender their Notes to the Paying Agent to collect
principal payments, and the Company may pay principal and interest and
Liquidated Damages, if any, by check and may mail checks to a Holder's
registered address; provided that all payments with respect to Global Notes
and Definitive Notes, the Holders of which have given wire transfer
instructions to the Company, will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust
Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of [September 24], 1999 ("Indenture"), between the Company and the Trustee.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement
of such terms. To the extent any provision of this Note conflicts with the
express provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling. The Notes are obligations of the Company initially
limited to $150.0 million in aggregate principal amount. Additional Notes may
be issued pursuant to Sections 2.02 and 4.09 of the Indenture and, if issued,
will be treated as a single class for all purposes under the Indenture.
5. OPTIONAL REDEMPTION.
(a) Except as provided in subparagraph (b) of this Paragraph 5, the
Notes will not be redeemable at the Company's option prior to October 1, 2004.
Thereafter, the Notes will be subject to redemption at any time at the option
of the Company, in whole or in part, upon not less than 30 nor more than 60
days' notice, in cash at the redemption prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on October 1 of the years
indicated below:
Year Percentage
---- ----------
2004.....................................................106.750%
2005.....................................................104.500%
2006.....................................................102.250%
2007 and thereafter......................................100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, on or prior to October 1, 2002, the Company may redeem up to 35%
of the aggregate principal amount of Notes ever issued under the Indenture in
cash at a redemption price of 113.500% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
redemption date, with the net cash proceeds of one or more Public Equity
Offerings; provided that at least 65% of the aggregate principal amount of
Notes ever issued under the Indenture remains outstanding immediately after
the occurrence of any such redemption; and provided further that such
redemption shall occur within 90 days of the date of the closing of any such
Public Equity Offering.
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(c) Any redemption pursuant to this subparagraph 5 shall be made
pursuant to the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below,
the Company shall not be required to make mandatory redemption payments with
respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes will have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described in Section 4.14 of the Indenture (the "Change
of Control Offer") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase (the "Change of Control
Payment"). Within 60 days following any Change of Control, the Company will,
or will cause the Trustee to, mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the date specified in such notice, which date shall be
no earlier than 30 days and no later than 60 days from the date such notice is
mailed, pursuant to the procedures required by the Indenture and described in
such notice.
(b) Within 365 days after the receipt of any Net Proceeds from
an Asset Sale, the Company or the Restricted Subsidiary, as the case may be,
shall apply the Net Proceeds, at its option (or to the extent the Company is
required to apply the Net Proceeds pursuant to the terms of the New Credit
Facility), to (a) repay or purchase Senior Indebtedness or Pari Passu
Indebtedness of the Company or any Indebtedness of any Restricted Subsidiary,
as the case may be, provided that, if the Company shall so repay or purchase
Pari Passu Indebtedness of the Company; (i) it will equally and ratably reduce
Indebtedness under the Notes if the Notes are then redeemable; or (ii) if the
Notes may not then be redeemed, the Company shall make an offer, in accordance
with the procedures set forth in the Indenture, to all Holders of Notes to
purchase at a purchase price equal to 100% of the principal amount of the
Notes, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase, the Notes that would otherwise be redeemed;
or (b)(i) an investment in property, the making of a capital expenditure or
the acquisition of assets that are used or useful in a Permitted Business; or
(ii) the acquisition of Capital Stock of any Person primarily engaged in a
Permitted Business if (x) as a result of the acquisition by the Company or any
Restricted Subsidiary thereof, such Person becomes a Restricted Subsidiary; or
(y) the Investment in that Capital Stock is permitted by clause (6) of the
definition of Permitted Investments. Pending the final application of any such
Net Proceeds, the Company may temporarily reduce Indebtedness or otherwise
invest those Net Proceeds in any manner that is not prohibited by this
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company will be required to make an offer to all
Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date of purchase, in accordance with the procedures set forth in this
Indenture. To the extent that any Excess Proceeds remain after consummation of
an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose
not otherwise prohibited by this Indenture. If the aggregate principal amount
of Notes surrendered by Holders thereof in connection with an Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to
be purchased as set forth under Sections 3.02 and 3.03 of the Indenture. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero. Holders of Notes that are the subject of an offer to purchase
may elect to have such Notes purchased by completing the form entitled "Option
of Holder to Elect Purchase" on the reverse of the Notes.
A1-4
<PAGE>
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected
for redemption, except for the unredeemed portion of any Note being redeemed
in part. Also, the Company need not exchange or register the transfer of any
Notes for a period of 15 days before a selection of Notes to be redeemed or
during the period between a record date and the corresponding Interest Payment
Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Note Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Notes (and Additional Notes, if any)
and any existing Default or compliance with any provision of the Indenture,
the Note Guarantees or the Notes may be waived with the consent of the Holders
of a majority in principal amount of the then outstanding Notes (and
Additional Notes, if any). Without the consent of any Holder of a Note, the
Indenture, the Note Guarantees or the Notes may be amended or supplemented to
cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's or Guarantor's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide
any additional rights or benefits to the Holders of the Notes or that does not
materially adversely affect the legal rights under the Indenture of any such
Holder, to comply with the requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture Act,
to provide for the Issuance of Additional Notes in accordance with the
limitations set forth in the Indenture, or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or a Note Guarantee with respect
to the Notes.
12. DEFAULTS AND REMEDIES. Each of the following constitutes an
"Event of Default": (a) default for 30 days in the payment when due of
interest on, or Liquidated Damages with respect to, the Notes (whether or not
prohibited by Article 10 of the Indenture); (b) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited
by Article 10 of the Indenture); (c) failure by the Company or any of its
Restricted Subsidiaries for 30 days after receipt of notice from the Trustee
or Holders of at least 25% in principal amount of the Notes (including
Additional Notes, if any) then outstanding to comply with Sections 4.07, 4.09,
4.10, 4.14 or Article 5 hereof; (d) failure by the Company for 60 days after
notice from the Trustee or the Holders of at least 25% in principal amount of
the Notes then outstanding to comply with any of its other agreements in this
Indenture or the Notes; (e) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee
now exists, or is created after the date of this Indenture, which default (i)
is caused by a failure to pay Indebtedness at its stated final maturity (after
giving effect to any applicable grace period provided in such Indebtedness) (a
"Payment Default") or (ii) results in the acceleration of such
A1-5
<PAGE>
Indebtedness prior to its stated final maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal amount
of any other such Indebtedness under which there has been a Payment Default or
the maturity of which has been so accelerated, aggregates $10.0 million or
more; (f) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments aggregating in excess of $10.0 million (net of any amounts
with respect to which a reputable and creditworthy insurance company has
acknowledged liability in writing), which judgments are not paid, discharged
or stayed for a period of 60 days; (g) except as permitted by the Indenture,
if any Note Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of a Guarantor, shall
deny or disaffirm its obligations under its Note Guarantee; and (h) certain
events of bankruptcy or insolvency as described in the Indenture.
If any Event of Default (other than certain events of bankruptcy or
insolvency) occurs and is continuing, Holders of at least 25% in principal
amount of the then outstanding Notes may direct the Trustee to declare all the
Notes to be due and payable immediately. However, so long as any Indebtedness
permitted to be incurred pursuant to the New Credit Facility shall be
outstanding, such acceleration shall not be effective until the earlier of (i)
an acceleration under any such Indebtedness under the New Credit Facility; or
(ii) five Business Days after receipt by the Company and the administrative
agent under the New Credit Facility of written notice of such acceleration.
Except as stated in the prior sentence, upon any such declaration, the Notes
shall become due and payable immediately. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. The Holders of a majority in
aggregate principal amount of the then outstanding Notes by written notice to
the Trustee may on behalf of all of the Holders rescind an acceleration and
its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except nonpayment of principal
or interest that has become due solely because of the acceleration) have been
cured or waived provided that, in the event of a declaration of acceleration
of the Notes because an Event of Default has occurred and is continuing as a
result of the acceleration of any Indebtedness described in clause (e) of
Section 12 above, the declaration of acceleration of the Notes shall be
automatically annulled if the holders of any Indebtedness described in clause
(e) of Section 12 above have rescinded the declaration of acceleration in
respect of such Indebtedness within 30 days of the date of such declaration
and if (i) the annulment of the acceleration of the Notes would not conflict
with any judgment or decree of a court of competent jurisdiction; and (ii) all
existing Events of Default, except non-payment of principal or interest on the
Notes that became due solely because of the acceleration of the Notes, have
been cured or waived, provided that, in the event of a declaration of
acceleration of the Notes because an Event of Default has occurred and is
continuing as a result of the acceleration of any Indebtedness described in
clause (e) of this Section 12, the declaration of acceleration of the Notes
shall be automatically annulled if the holders of any Indebtedness described
in clause (e) of this Section 12 have rescinded the declaration of
acceleration in respect of such Indebtedness within 30 days of the date of
such declaration and if (i) the annulment of the acceleration of the Notes
would not conflict with any judgment or decree of a court of competent
jurisdiction and (ii) all existing Events of Default, except non-payment of
principal or interest on the Notes that became due solely because of the
acceleration of the Notes, have been cured or waived. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. SUBORDINATION. The payment of Subordinated Note Obligations
will be subordinated in right of payment, as set forth in the Indenture, to
the prior payment in full in cash or cash equivalents of all Senior
Indebtedness, whether outstanding on the date of the Indenture or thereafter
incurred. the Company agrees, and each Holder by accepting a Note agrees, that
the payment of principal of, premium
A1-6
<PAGE>
and interest and Liquidated Damages, if any, on the Notes is subordinated in
right of payment, to the extent and in the manner provided in the Indenture,
to the prior payment in full in cash or cash equivalents of all Senior
Indebtedness (whether outstanding on the date hereof or thereafter created,
incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Indebtedness.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal
with the Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. No member, director, officer,
employee, incorporator or stockholder, of the Company or any Guarantor, as
such, shall have any liability for any obligations of the Company and the
Guarantors under the Notes, the Note Guarantees or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration
Rights Agreement dated as of September 29, 1999, between the Company and the
parties named on the signature pages thereof (the "Registration Rights
Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Charles River Laboratories, Inc.
251 Ballardvale Street
Wilmington, MA 01887
Telecopier No.: 978-988-5665
Attention: General Counsel
A1-7
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:_______________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:
Signature Guarantee:____________________________
A1-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature:________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:
-------------------------
Signature Guarantee:_______________________
A1-9
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE1
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
Principal Amount
Amount of decrease Amount of increase in of this Global Signature of
in Principal Amount Principal Amount Note following such authorized officer
of this of this decrease of Trustee or Note
Date of Exchange Global Note Global Note (or increase) Custodian
---------------- ------------------- --------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
____________
1 This should be included only if the Note is issued in global form.
A1-10
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
===============================================================================
CUSIP/CINS ___________
13 1/2% Senior Subordinated Notes due 2009
No.__ $
-----------------
CHARLES RIVER LABORATORIES, INC.
promises to pay to _________________, oe registered assigns, the principal sum
of ______________ Dollars on October 1, 2009.
Interest Payment Dates: October 1 and April 1
Record Dates: September 15 and March 15
Dated:
CHARLES RIVER LABORATORIES, INC.
BY:_____________________________________
Name:
Title:
This is one of the Global Notes referred
to in the within-mentioned Indenture:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:_____________________________________
Name:
Title:
================================================================================
A2-1
<PAGE>
(Back of Regulation S Temporary Global Note)
13 1/2% [Series A] [Series B] Senior Subordinated Notes due 2009
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE
AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A OR REGULATION S THEREUNDER. THE HOLDER OF
THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a)
INSIDE THE UNITED STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF THE
SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") THAT, PRIOR TO SUCH
TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT
OF SECURITIES LESS THAN $250,000, AN OPINION OF COUNSEL THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Charles River Laboratories, Inc., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount
of this Note at 13 1/2% per annum from September 29, 1999 until maturity and
shall pay the Liquidated Damages payable pursuant to Section 5 of the
Registration Rights Agreement referred to below. Interest on the Notes will
accrue at the rate of 13.5% per year; provided that the rate at which interest
accrues will increase to 14.0% per year on August 15,
A2-2
<PAGE>
2000 in the event that the Ratio of Consolidated Net Debt to Consolidated Cash
Flow for the Company as of June 30, 2000 is equal to or greater than 5.00 to
1. The Company will pay interest and Liquidated Damages semi-annually on
October 1 and April 1 of each year, or if any such day is not a Business Day,
on the next succeeding Business Day (each, an "Interest Payment Date").
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of issuance;
provided that if there is no existing Default in the payment of interest, and
if this Note is authenticated between a record date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue
from such next succeeding Interest Payment Date; and provided further that the
first Interest Payment Date shall be April 1, 2000. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under
any Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand
at the same rate to the extent lawful. Interest will be computed on the basis
of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who
are registered Holders of Notes at the close of business on the September 15
or March 15 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office of the Paying Agent and Registrar.
Holders of Notes must surrender their Notes to the Paying Agent to collect
principal payments, and the Company may pay principal and interest and
Liquidated Damages, if any, by check and may mail checks to a Holder's
registered address; provided that all payments with respect to Global Notes
and Definitive Notes, the Holders of which have given wire transfer
instructions to the Company, will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and
Trust Company, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of [September 24], 1999 ("Indenture"), between the Company and the
Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. To the extent any provision of this Note conflicts
with the express provisions of the Indenture, the provisions of the Indenture
shall govern and be controlling. The Notes are obligations of the Company
initially limited to $150.0 million in aggregate principal amount. Additional
Notes may be issued pursuant to Sections 2.02 and 4.09 of the Indenture and,
if issued, will be treated as a single class for all purposes under the
Indenture.
5. OPTIONAL REDEMPTION.
(a) Except as provided in subparagraph (b) of this Paragraph 5,
the Notes will not be redeemable at the Company's option prior to October 1,
2004. Thereafter, the Notes will be subject to redemption at any time at the
option of the Company, in whole or in part, upon not less than 30 nor more
A2-3
<PAGE>
than 60 days' notice, in cash at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on October 1 of the
years indicated below:
Year Percentage
---- ----------
2004.........................................................106.750%
2005.........................................................104.500%
2006.........................................................102.250%
2007 and thereafter..........................................100.000%
(b)......Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, on or prior to October 1, 2002, the Company may redeem up to 35%
of the aggregate principal amount of Notes ever issued under the Indenture in
cash at a redemption price of 113.500% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
redemption date, with the net cash proceeds of one or more Public Equity
Offerings; provided that at least 65% of the aggregate principal amount of
Notes ever issued under the Indenture remains outstanding immediately after
the occurrence of any such redemption; and provided further that such
redemption shall occur within 90 days of the date of the closing of any such
Public Equity Offering.
(c) Any redemption pursuant to this subparagraph 5 shall be made
pursuant to the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below,
the Company shall not be required to make mandatory redemption payments with
respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes will have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described in Section 4.14 of the Indenture (the "Change
of Control Offer") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase (the "Change of Control
Payment"). Within 60 days following any Change of Control, the Company will,
or will cause the Trustee to, mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the date specified in such notice, which date shall be
no earlier than 30 days and no later than 60 days from the date such notice is
mailed, pursuant to the procedures required by the Indenture and described in
such notice.
(b). Within 365 days after the receipt of any Net Proceeds from
an Asset Sale, the Company or the Restricted Subsidiary, as the case may be,
shall apply the Net Proceeds, at its option (or to the extent the Company is
required to apply the Net Proceeds pursuant to the terms of the New Credit
Facility), to (a) repay or purchase Senior Indebtedness or Pari Passu
Indebtedness of the Company or any Indebtedness of any Restricted Subsidiary,
as the case may be, provided that, if the Company shall so repay or purchase
Pari Passu Indebtedness of the Company; (i) it will equally and ratably reduce
Indebtedness under the Notes if the Notes are then redeemable; or (ii) if the
Notes may not then be redeemed, the Company shall make an offer, in accordance
with the procedures set forth in the Indenture, to all Holders of Notes to
purchase at a purchase price equal to 100% of the principal amount of the
Notes, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase, the Notes that would otherwise be redeemed;
A2-4
<PAGE>
or (b)(i) an investment in property, the making of a capital expenditure or
the acquisition of assets that are used or useful in a Permitted Business; or
(ii) the acquisition of Capital Stock of any Person primarily engaged in a
Permitted Business if (x) as a result of the acquisition by the Company or any
Restricted Subsidiary thereof, such Person becomes a Restricted Subsidiary; or
(y) the Investment in that Capital Stock is permitted by clause (6) of the
definition of Permitted Investments. Pending the final application of any such
Net Proceeds, the Company may temporarily reduce Indebtedness or otherwise
invest those Net Proceeds in any manner that is not prohibited by this
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company will be required to make an offer to all
Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date of purchase, in accordance with the procedures set forth in this
Indenture. To the extent that any Excess Proceeds remain after consummation of
an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose
not otherwise prohibited by this Indenture. If the aggregate principal amount
of Notes surrendered by Holders thereof in connection with an Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to
be purchased as set forth under Sections 3.02 and 3.03 of the Indenture. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero. Holders of Notes that are the subject of an offer to purchase
may elect to have such Notes purchased by completing the form entitled "Option
of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected
for redemption, except for the unredeemed portion of any Note being redeemed
in part. Also, the Company need not exchange or register the transfer of any
Notes for a period of 15 days before a selection of Notes to be redeemed or
during the period between a record date and the corresponding Interest Payment
Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Note Guarantees or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Notes (and Additional Notes, if any)
and any existing Default or compliance with any provision of the Indenture,
the Note Guarantees or the Notes may be waived with the consent of the Holders
of a majority in principal amount of the then outstanding Notes (and
Additional Notes, if any). Without the consent of any Holder of a Note, the
Indenture, the Note Guarantees or the Notes may be amended or supplemented to
cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's or Guarantor's obligations to Holders of the Notes
in case of a merger or
A2-5
<PAGE>
consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not materially
adversely affect the legal rights under the Indenture of any such Holder, to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act, to provide
for the Issuance of Additional Notes in accordance with the limitations set
forth in the Indenture, or to allow any Guarantor to execute a supplemental
indenture to the Indenture and/or a Note Guarantee with respect to the Notes.
12. DEFAULTS AND REMEDIES. Each of the following constitutes an
"Event of Default": (a) default for 30 days in the payment when due of
interest on, or Liquidated Damages with respect to, the Notes (whether or not
prohibited by Article 10 of the Indenture); (b) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited
by Article 10 of the Indenture); (c) failure by the Company or any of its
Restricted Subsidiaries for 30 days after receipt of notice from the Trustee
or Holders of at least 25% in principal amount of the Notes (including
Additional Notes, if any) then outstanding to comply with Sections 4.07, 4.09,
4.10, 4.14 or Article 5 hereof; (d) failure by the Company for 60 days after
notice from the Trustee or the Holders of at least 25% in principal amount of
the Notes then outstanding to comply with any of its other agreements in this
Indenture or the Notes; (e) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee
now exists, or is created after the date of this Indenture, which default (i)
is caused by a failure to pay Indebtedness at its stated final maturity (after
giving effect to any applicable grace period provided in such Indebtedness) (a
"Payment Default") or (ii) results in the acceleration of such Indebtedness
prior to its stated final maturity and, in each case, the principal amount of
any such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $10.0 million or more; (f) failure
by the Company or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $10.0 million (net of any amounts with respect to
which a reputable and creditworthy insurance company has acknowledged
liability in writing), which judgments are not paid, discharged or stayed for
a period of 60 days; (g) except as permitted by the Indenture, if any Note
Guarantee shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Guarantor, or any Person acting on behalf of a Guarantor, shall deny or
disaffirm its obligations under its Note Guarantee; and (h) certain events of
bankruptcy or insolvency as described in the Indenture.
If any Event of Default (other than certain events of bankruptcy or
insolvency) occurs and is continuing, Holders of at least 25% in principal
amount of the then outstanding Notes may direct the Trustee to declare all the
Notes to be due and payable immediately. However, so long as any Indebtedness
permitted to be incurred pursuant to the New Credit Facility shall be
outstanding, such acceleration shall not be effective until the earlier of (i)
an acceleration under any such Indebtedness under the New Credit Facility; or
(ii) five Business Days after receipt by the Company and the administrative
agent under the New Credit Facility of written notice of such acceleration.
Except as stated in the prior sentence, upon any such declaration, the Notes
shall become due and payable immediately. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. The Holders of a majority in
aggregate principal amount of the then outstanding Notes by written notice to
the Trustee may on behalf of all of the Holders rescind an acceleration and
its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except nonpayment of principal
or interest that has become due solely because of the acceleration) have been
cured or waived provided that, in the event of a declaration of acceleration
of the Notes because an Event of Default has occurred and is continuing as a
result of the acceleration of any
A2-6
<PAGE>
Indebtedness described in clause (e) of Section 12 above, the declaration of
acceleration of the Notes shall be automatically annulled if the holders of
any Indebtedness described in clause (e) of Section 12 above have rescinded
the declaration of acceleration in respect of such Indebtedness within 30 days
of the date of such declaration and if (i) the annulment of the acceleration
of the Notes would not conflict with any judgment or decree of a court of
competent jurisdiction; and (ii) all existing Events of Default, except
non-payment of principal or interest on the Notes that became due solely
because of the acceleration of the Notes, have been cured or waived, provided
that, in the event of a declaration of acceleration of the Notes because an
Event of Default has occurred and is continuing as a result of the
acceleration of any Indebtedness described in clause (e) of this Section 12,
the declaration of acceleration of the Notes shall be automatically annulled
if the holders of any Indebtedness described in clause (e) of this Section 12
have rescinded the declaration of acceleration in respect of such Indebtedness
within 30 days of the date of such declaration and if (i) the annulment of the
acceleration of the Notes would not conflict with any judgment or decree of a
court of competent jurisdiction and (ii) all existing Events of Default,
except non-payment of principal or interest on the Notes that became due
solely because of the acceleration of the Notes, have been cured or waived.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
13. SUBORDINATION. The payment of Subordinated Note Obligations
will be subordinated in right of payment, as set forth in the Indenture, to
the prior payment in full in cash or cash equivalents of all Senior
Indebtedness, whether outstanding on the date of the Indenture or thereafter
incurred. the Company agrees, and each Holder by accepting a Note agrees, that
the payment of principal of, premium and interest and Liquidated Damages, if
any, on the Notes is subordinated in right of payment, to the extent and in
the manner provided in the Indenture, to the prior payment in full in cash or
cash equivalents of all Senior Indebtedness (whether outstanding on the date
hereof or thereafter created, incurred, assumed or guaranteed), and that the
subordination is for the benefit of the holders of Senior Indebtedness.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal
with the Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. No member, director, officer,
employee, incorporator or stockholder, of the Company or any Guarantor, as
such, shall have any liability for any obligations of the Company and the
Guarantors under the Notes, the Note Guarantees or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the
A2-7
<PAGE>
Registration Rights Agreement dated as of September 29, 1999, between the
Company and the parties named on the signature pages thereof (the
"Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Charles River Laboratories, Inc.
251 Ballardvale Street
Wilmington, MA 01887
Telecopier No.: 978-988-5665
Attention: General Counsel
A2-8
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ______________________________ to transfer this Note on
the books of the Company. The agent may substitute another to act for him.
Date: Your Signature:________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:_________________________
Signature Guarantee:____________________________
A2-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature:________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:_________________________
Signature Guarantee:_______________________
A2-10
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
<TABLE>
Principal Amount
Amount of decrease Amount of increase in of this Global Signature of
in Principal Amount Principal Amount Note following such authorized officer
of this of this decrease of Trustee or Note
Date of Exchange Global Note Global Note (or increase) Custodian
---------------- ------------------- --------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A2-11
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Charles River Laboratories, Inc.
251 Ballardvale Street
Wilmington, MA 01887
Telecopier No.: 978-988-5665
Attention: General Counsel
State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, MA 02111
Telecopier No.: (617) 662-1452
Attention: Corporate Trust Department, Transfer Unit
Re: 13 1/2% Senior Subordinated Notes due 2009
Reference is hereby made to the Indenture, dated as of September 29,
1999 (the "Indenture"), among Charles River Laboratories, Inc. (the
"Company"), as issuer, the Guarantors listed on the signature pages thereto,
and State Street Bank and Trust Company, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] Check if Transferee will take delivery of a beneficial interest in the
144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Note for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and
such Person and each such account is a "qualified institutional buyer" within
the meaning of Rule 144A in a transaction meeting the requirements of Rule
144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the 144A Global Note and/or the Definitive Note and in the Indenture and the
Securities Act.
2. [ ] Check if Transferee will take delivery of a beneficial interest in the
Regulation S Temporary Global Note, the Regulation S Global Note or a
Definitive Note pursuant to Regulation S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities
Act and, accordingly, the Transferor hereby further certifies that (i) the
Transfer is not being
B-1
<PAGE>
made to a Person in the United States and (x) at the time the buy order was
originated, the Transferee was outside the United States or such Transferor
and any Person acting on its behalf reasonably believed and believes that the
Transferee was outside the United States or (y) the transaction was executed
in, on or through the facilities of a designated offshore securities market
and neither such Transferor nor any Person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements
of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act and
(iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend printed on
the Regulation S Global Note, the Regulation S Temporary Global Note and/or
the Definitive Note and in the Indenture and the Securities Act.
3. [ ] Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Note or a Definitive Note pursuant to any provision
of the Securities Act other than Rule 144A or Regulation S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive
Notes and pursuant to and in accordance with the Securities Act and any
applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance
with the prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or
Rule 904, and the Transferor hereby further certifies that it has not
engaged in any general solicitation within the meaning of Regulation
D under the Securities Act and the Transfer complies with the
transfer restrictions applicable to beneficial interests in a
Restricted Global Note or Restricted Definitive Notes and the
requirements of the exemption claimed, which certification is
supported by (1) a certificate executed by the Transferee in the form
of Exhibit D to the Indenture and (2) if such Transfer is in respect
of a principal amount of Notes at the time of transfer of less than
$250,000, an Opinion of Counsel provided by the Transferor or the
Transferee (a copy of which the Transferor has attached to this
certification), to the effect that such Transfer is in compliance
with the Securities Act. Upon consummation of the proposed transfer
in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend
printed on the IAI Global Note and/or the Definitive Notes and in the
Indenture and the Securities Act.
4. [ ] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
B-2
<PAGE>
(a) [ ] Check if Transfer is pursuant to Rule 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any state of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
(b) [ ] Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [ ] Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule 144,
Rule 903 or Rule 904 and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will not be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the
Restricted Global Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
------------------------------------
[Insert Name of Transferor]
BY:_______________________________
Name:
Title:
Dated: __________, ____
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _________), or
(ii) [ ] Regulation S Global Note (CUSIP __________), or
(iii) [ ] IAI Global Note (CUSIP __________), or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP __________), or (ii)
(ii) [ ] Regulation S Global Note (CUSIP __________), or
(iii) [ ] IAI Global Note (CUSIP __________), or (iv)
(iv) [ ] Unrestricted Global Note (CUSIP __________), or
(b) [ ] a Restricted Definitive Note, or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Charles River Laboratories, Inc.
251 Ballardvale Street
Wilmington, MA 01887
Telecopier No.: 978-988-5665
Attention: General Counsel
State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, MA 02111
Telecopier No.: (617) 662-1452
Attention: Corporate Trust Department, Transfer Unit
Re: 13 1/2% Senior Subordinated Notes Due 2009
Reference is hereby made to the Indenture, dated as of September 29,
1999 (the "Indenture"), among Charles River Laboratories, Inc. (the
"Company"), as issuer, the Guarantors listed on the signature pages thereto,
and State Street Bank and Trust Company, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the Note[s]
or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection
with the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial
Interests in an Unrestricted Global Note
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Note to beneficial interest in an Unrestricted Global Note. In
connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Note for a beneficial interest in an Unrestricted Global
Note in an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Global Notes and pursuant to and in accordance
with the United States Securities Act of 1933, as amended (the "Securities
Act"), (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the beneficial interest in an Unrestricted Global
Note is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(b) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Note to Unrestricted Definitive Note. In connection with the Exchange
of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive
Note is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the
C-1
<PAGE>
Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United
States.
(c) [ ] Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in
an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest
is being acquired in compliance with any applicable blue sky securities laws
of any state of the United States.
(d) [ ] Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note is being acquired for
the Owner's own account without transfer, (ii) such Exchange has been effected
in compliance with the transfer restrictions applicable to Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act,
(iii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the Unrestricted Definitive Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial
Interests in Restricted Global Notes
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Note to Restricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies
that the Restricted Definitive Note is being acquired for the Owner's own
account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Definitive Note and
in the Indenture and the Securities Act.
(b) [ ] Check if Exchange is from Restricted Definitive Note to
beneficial interest in a Restricted Global Note. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest
in the [CHECK ONE] [GRAPHIC OMITTED] "144A Global Note", [GRAPHIC OMITTED]
"Regulation S Global Note", [GRAPHIC OMITTED] "IAI Global Note" with an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance
with the Securities Act, and in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Exchange in accordance with the terms of the Indenture, the
beneficial interest issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the relevant Restricted
Global Note and in the Indenture and the Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
--------------------------------------
[Insert Name of Owner]
By:________________________________
Name:
Title:
Dated: __________, ____
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Charles River Laboratories, Inc.
251 Ballardvale Street
Wilmington, MA 01887
Telecopier No.: 978-988-5665
Attention: General Counsel
State Street Bank and Trust Company
2 Avenue de Lafayette
Boston, MA 02111
Telecopier No.: (617) 662-1452
Attention: Corporate Trust Department, Transfer Unit
Re: 13 1/2% Senior Subordinated Notes due 2009
Reference is hereby made to the Indenture, dated as of September 29,
1999 (the "Indenture"), among Charles River Laboratories, Inc. (the
"Company"), as issuer, the Guarantors listed on the signature pages thereto,
and State Street Bank and Trust Company, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions
set forth in the Indenture and the undersigned agrees to be bound by,
and not to resell, pledge or otherwise transfer the Notes or any
interest therein except in compliance with, such restrictions and
conditions and the United States Securities Act of 1933, as amended
(the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any
interest therein may not be offered or sold except as permitted in
the following sentence. We agree, on our own behalf and on behalf of
any accounts for which we are acting as hereinafter stated, that if
we should sell the Notes or any interest therein, we will do so only
(A) to the Company or any subsidiary thereof, (B) in accordance with
Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited
investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and
to the Company a signed letter substantially in the
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form of this letter and, if such transfer is in respect of a
principal amount of Notes, at the time of transfer of less than
$250,000, an Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule
904 of Regulation S under the Securities Act, (E) pursuant to the
provisions of Rule 144(k) under the Securities Act or (F) pursuant to
an effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing the Definitive Note
or beneficial interest in a Global Note from us in a transaction
meeting the requirements of clauses (A) through (E) of this paragraph
a notice advising such purchaser that resales thereof are restricted
as stated herein.
3. We understand that, on any proposed resale of the Notes or beneficial
interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as
you and the Company may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. We further
understand that the Notes purchased by us will bear a legend to the
foregoing effect. We further understand that any subsequent transfer
by us of the Notes or beneficial interest therein acquired by us must
be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its
investment.
5. We are acquiring the Notes or beneficial interest therein purchased
by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
---------------------------------------
[Insert Name of Accredited Investor]
By: _______________________________
Name:
Title:
Dated: __________________, ____
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EXHIBIT E
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of [September 24], 1999 (the "Indenture")
among Charles River Laboratories, Inc., the Guarantors listed on Schedule I
thereto and State Street Bank and Trust Company, as trustee (the "Trustee"),
(a) the due and punctual payment of the principal of, premium, if any, and
interest on the Notes (as defined in the Indenture), whether at maturity, by
acceleration, redemption or otherwise, the due and punctual payment of
interest on overdue principal and premium, and, to the extent permitted by
law, interest, and the due and punctual performance of all other obligations
of the Company to the Holders or the Trustee all in accordance with the terms
of the Indenture and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise. The obligations of the Guarantors to the Holders of Notes and to
the Trustee pursuant to the Note Guarantee and the Indenture are expressly set
forth in Article 11 of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Note Guarantee. Each Holder of a Note,
by accepting the same, (a) agrees to and shall be bound by such provisions,
(b) authorizes and directs the Trustee, on behalf of such Holder, to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in the Indenture and (c) appoints the Trustee attorney-in-fact of
such Holder for such purpose; provided, however, that the Indebtedness
evidenced by this Note Guarantee shall cease to be so subordinated and subject
in right of payment upon any defeasance of this Note in accordance with the
provisions of the Indenture.
[NAME OF GUARANTOR(S)]
By:_________________________________
Name:
Title:
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EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of [
___, 1999] among [__________________] (the "Guaranteeing Subsidiary"), a
subsidiary of Charles River Laboratories, Inc. (or its permitted successor), a
Delaware corporation (the "Company"), the Company, the other Guarantors (as
defined in the Indenture referred to herein) and State Street Bank and Trust
Company, as trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of September 29, 1999
providing for the issuance of an aggregate principal amount of up to $150.0
million of 13 1/2% Senior Subordinated Notes due 2009 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a
supplemental indenture pursuant to which the Guaranteeing Subsidiary shall
unconditionally guarantee all of the Company's Obligations under the Notes and
the Indenture on the terms and conditions set forth herein (the "Note
Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees
as follows:
(a) Along with all Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and
assigns, the Notes or the obligations of the Company hereunder or
thereunder, that:
(i) the principal of and interest on the Notes will be
promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise,
and interest on the overdue principal of and
interest on the Notes, if any, if lawful, and all
other obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or
renewal of any Notes or any of such other
obligations, that same will be promptly paid in
full when due or performed in accordance with the
terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.
Failing payment when due of any
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amount so guaranteed or any performance so guaranteed
for whatever reason, the Guarantors shall be jointly
and severally obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the
Indenture, the absence of any action to enforce the same, any waiver
or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company,
any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a
guarantor.
(c) The following is hereby waived: diligence presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever.
(d) This Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the
Indenture, and the Guaranteeing Subsidiary accepts all obligations of
a Guarantor under the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or any Custodian,
Trustee, liquidator or other similar official acting in relation to
either the Company or the Guarantors, any amount paid by either to
the Trustee or such Holder, this Note Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed
hereby.
(g) As between the Guarantors, on the one hand, and the Holders and
the Trustee, on the other hand, (x) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article 6 of the
Indenture for the purposes of this Note Guarantee, notwithstanding
any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y)
in the event of any declaration of acceleration of such obligations
as provided in Article 6 of the Indenture, such obligations (whether
or not due and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Note Guarantee.
(h) The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not
impair the rights of the Holders under the Guarantee.
(i) Pursuant to Section 11.03 of the Indenture, after giving effect
to any maximum amount and any other contingent and fixed liabilities
that are relevant under any applicable Bankruptcy or fraudulent
conveyance laws, and after giving effect to any collections from,
rights to receive contribution from or payments made by or on behalf
of any other Guarantor in respect of the obligations of such other
Guarantor under Article 11 of the Indenture, this new Note Guarantee
shall be limited to the maximum amount permissible such that the
obligations of such Guarantor under this Note Guarantee will not
constitute a fraudulent transfer or conveyance.
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3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that
the Note Guarantees shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Note Guarantee.
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such Guarantor
unless:
(i) subject to Sections 11.05 and 11.06 of the Indenture, the Person
formed by or surviving any such consolidation or merger (if other
than a Guarantor or the Company) unconditionally assumes all the
obligations of such Guarantor, pursuant to a supplemental indenture
in form and substance reasonably satisfactory to the Trustee, under
the Notes, the Indenture and the Note Guarantee on the terms set
forth herein or therein; and
(ii) immediately after giving effect to such transaction, no Default
or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the Note Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of the Indenture to be
performed by the Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Note Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Note Guarantees so issued shall in all
respects have the same legal rank and benefit under the Indenture as the Note
Guarantees theretofore and thereafter issued in accordance with the terms of
the Indenture as though all of such Note Guarantees had been issued at the
date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 and Section 11.06 of
Article 11 of the Indenture, and notwithstanding clauses (a) and (b) above,
nothing contained in the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or another
Guarantor, or shall prevent any sale or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety to the Company or
another Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the assets
of any Guarantor, by way of merger, consolidation or otherwise, or a sale or
other disposition of all to the capital stock of any Guarantor, in each case
to a Person that is not (either before or after giving effect to such
transaction) a Restricted Subsidiary of the Company, then such Guarantor (in
the event of a sale or other disposition, by way of merger, consolidation or
otherwise, of all of the capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be released and
relieved of any obligations under its Note Guarantee; provided that the Net
Proceeds of such sale or other disposition are applied in accordance with the
applicable provisions of the Indenture, including without limitation Section
4.10 of the Indenture. Upon delivery by the Company to the Trustee of an
Officers' Certificate and an Opinion of Counsel to the effect that such sale
or other disposition was made by the Company in accordance with the provisions
of the Indenture, including without limitation Section 4.10 of the Indenture,
the Trustee shall execute any
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documents reasonably required in order to evidence the release of any
Guarantor from its obligations under its Note Guarantee.
(b) Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under the
Indenture as provided in Article 11 of the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future member,
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Notes, any Note
Guarantees, the Indenture or this Supplemental Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of the Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance
of the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the SEC that such a waiver is
against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Company.
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IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: _______________, ____
[GUARANTEEING SUBSIDIARY]
By:________________________________________
Name:
Title:
SBI HOLDINGS, INC.
By:________________________________________
Name:
Title:
SIERRA BIOMEDICAL, INC.
By:________________________________________
Name:
Title:
SIERRA BIOMEDICAL SAN DIEGO, INC.
By:________________________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:________________________________________
Name:
Title:
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Schedule I
SCHEDULE OF GUARANTORS
The following schedule lists each Guarantor under the Indenture as of
the Issue Date:
SBI Holdings, Inc.
Sierra Biomedical, Inc.
Sierra Biomedical San Diego, Inc.
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EXHIBIT 10.5
================================================================================
CHARLES RIVER LABORATORIES, INC.
and
CHARLES RIVER LABORATORIES HOLDINGS, INC.
as Issuers
----------------------------------------
$150,000,000
150,000 Units Consisting of
13 1/2% Senior Subordinated Notes due 2009 and
Warrants to purchase 591,366 shares of Common Stock
----------------------------------------
-------------------
PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 23, 1999
-------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
================================================================================
<PAGE>
$150,000,000
150,000 Units Consisting of
13 1/2% Senior Subordinated Notes due 2009 and
Warrants to purchase 591,366 shares of Common Stock
PURCHASE AGREEMENT
September 23, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
Charles River Laboratories, Inc., a Delaware corporation (the
"Company"), and Charles River Laboratories Holdings, Inc., a Delaware
corporation ("Holdings" and, together with the Company, the "Issuers"),
propose to issue and sell to Donaldson, Lufkin & Jenrette Securities
Corporation (the "Initial Purchaser") 150,000 units (the "Units"), each
consisting of $1,000 in aggregate principal amount of the Company's 13 1/2%
Series A Senior Subordinated Notes due 2009 (the "Series A Notes"), together
with the Subsidiary Guarantees described below and one warrant (the
"Warrants") to purchase 591,366 shares of common stock of Holdings, par value
$0.01 per share (the "Common Stock"), subject to the terms and conditions set
forth herein. The Series A Notes are to be issued pursuant to the provisions
of an indenture (the "Indenture"), to be dated as of the Closing Date (as
defined below), among the Company, the Guarantors (as defined below) and State
Street Bank and Trust Company, as trustee (the "Trustee"). The Series A Notes
and the Series B Notes (as defined below) issuable in exchange therefor are
collectively referred to herein as the "Notes." As of the Consummation (as
defined), the Notes will be guaranteed (the "Subsidiary Guarantees") by each
of the Guarantors (as defined below). The Warrants will be issued pursuant to
a warrant agreement (the "Warrant Agreement"), to be dated as of the Closing
Date, between Holdings and State Street Bank and Trust Company, as warrant
agent (the "Warrant Agent"). Shares of Common Stock of Holdings issuable upon
exercise of the Warrants are collectively referred to herein as the "Warrant
Shares." The Units, the Notes, the Warrants and the Warrant Shares are
collectively referred to herein as the "Securities." Capitalized terms used
but not defined herein shall have the meanings given to such terms in the
Indenture. This Agreement, the Securities, the Warrant Agreement, the Warrant
Registration Rights Agreement (as defined), the Indenture, the Subsidiary
Guarantees, the Registration Rights Agreement (as defined) and the Credit
Agreement (as defined) are collectively referred to herein as the "Operative
Documents."
The Series A Notes are being issued and sold in connection with the
recapitalization (the "Recapitalization") of the Company, pursuant to a
Recapitalization Agreement dated as of July 25, 1999 among the Company,
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Holdings, certain subsidiaries of Bausch & Lomb Incorporated (the "Rollover
Shareholders"), CRL Acquisition LLC and DLJ Merchant Banking Partners II, L.P.
("DLJMB"). In connection with the Recapitalization, (i) the Company will enter
into a syndicated senior secured loan facility pursuant to a credit agreement
to be dated as of the Closing Date with a group of lenders, including DLJ
Capital Funding, Inc., as syndication agent (the "Credit Agreement") and (ii)
DLJMB and certain of its affiliated funds and entities, the Rollover
Shareholders and certain management of the Company will retain or purchase
capital stock of Holdings, in each case as described in the Offering
Memorandum (as defined below). The Company has also entered into a stock
purchase agreement to acquire SBI Holdings, Inc., and its wholly-owned
subsidiaries, Sierra Biomedical, Inc. and Sierra Biomedical San Diego, Inc.
(collectively, the "Sierra Entities"), which will be consummated on the
Closing Date (the "Sierra Acquisition"). Upon the consummation of the Sierra
Acquisition (the "Consummation"), the Sierra Entities will execute the
Indenture and become guarantors of the Notes issued thereunder (each, a
"Guarantor" and collectively, the "Guarantors").
1. Offering Memorandum. The Units will be offered and sold to the
Initial Purchaser pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "Securities
Act"). The Issuers have prepared a preliminary offering memorandum, dated
September 7, 1999 (the "Preliminary Offering Memorandum"), and a final
offering memorandum, dated September 23, 1999 (the "Offering Memorandum"),
relating to the Units.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture and the Warrant Agreement, the
Securities (and all securities issued in exchange therefor, in substitution
thereof or upon conversion thereof) shall bear the following legend:
"THIS [NOTE] [SECURITY] (OR ITS PREDECESSOR) [AND THE WARRANT SHARES
TO BE ISSUED UPON ITS EXERCISE HAVE] [HAS] NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, UNITED STATES PERSONS, EXCEPT AS SET FORTH IN
THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (As
defined in Rule 144A under the Securities Act) (A "QIB"), (B) IT HAS
ACQUIRED THIS [NOTE] [SECURITY] IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (As defined in Rule 501(A) (1),
(2), (3) or (7) of Regulation D under the Securities Act (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS [NOTE]
[SECURITY] EXCEPT (A) TO the COMPANY OR ANY OF ITS SUBSIDIARIES, (B)
TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION
MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF REGULATION S OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO SUCH
TRANSFER, FURNISHES THE [TRUSTEE] [WARRANT AGENT] A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS
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[NOTE] [SECURITY] (the form of which can be obtained from the
[Trustee] [warrant agent]) AND, IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE PRINCIPAL AMOUNT OF [NOTES] [SECURITIES] LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION, [AND]
[(3) AGREES NOT TO ENGAGE IN HEDGING TRANSACTIONS UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT AND]
(3) [4] AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
[NOTE] [SECURITY] OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE [INDENTURE] [WARRANT AGREEMENT] CONTAINS A
PROVISION REQUIRING THE [TRUSTEE] [WARRANT AGENT] TO REFUSE TO
REGISTER ANY TRANSFER OF THIS [NOTE] [SECURITY] IN VIOLATION OF THE
FOREGOING."
2. Agreements to Sell and Purchase. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Issuers agree to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Issuers, all of the Units initially at a purchase price
equal to $970.00 per Unit.
3. Terms of Offering. The Initial Purchaser has advised the Issuer
that the Initial Purchaser will make offers (the "Exempt Resales") of the
Units purchased hereunder on the terms set forth in the Offering Memorandum,
as amended or supplemented, solely to (i) persons whom the Initial Purchaser
reasonably believes to be "qualified institutional buyers" as defined in Rule
144A under the Securities Act ("QIBs"), and (ii) persons permitted to purchase
the Series A Notes in offshore transactions in reliance upon Regulation S
under the Securities Act (each, a "Regulation S Purchaser") (such persons
specified in clauses (i) and (ii) being referred to herein as the "Eligible
Purchasers"). The Initial Purchaser will offer the Units to Eligible
Purchasers initially at a price equal to $970.00 per Unit. Such price may be
changed at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will
have the registration rights set forth in the registration rights agreement
(the "Registration Rights Agreement"), to be dated the Closing Date, in
substantially the form of Exhibit A hereto, for so long as such Series A Notes
constitute "Transfer Restricted Securities" (as defined in the Registration
Rights Agreement). Pursuant to the Registration Rights Agreement, the Company
and the Guarantors will agree to file with the Securities and Exchange
Commission (the "Commission") under the circumstances set forth therein, (i) a
registration statement under the Securities Act (the "Exchange Offer
Registration Statement") relating to the Company's 13 1/2% Series B Senior
Subordinated Notes due 2009 (the "Series B Notes"), to be offered in exchange
for the Series A Notes (such offer to exchange being referred to as the
"Exchange Offer") and the Subsidiary Guarantees
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thereof (the "Series B Guarantees") and (ii) a shelf registration statement
pursuant to Rule 415 under the Securities Act (the "Shelf Registration
Statement" and, together with the Exchange Offer Registration Statement, the
"Registration Statements") relating to the resale by certain holders of the
Series A Notes and to use their reasonable best efforts to cause such
Registration Statements to be declared and remain effective and usable for the
periods specified in the Registration Rights Agreement and to consummate the
Exchange Offer.
Holders (including subsequent transferees) of the Warrants and the
Warrant Shares will have the rights set forth in the Warrant Agreement and the
warrant registration rights agreement (the "Warrant Registration Rights
Agreement"), to be dated the Closing Date. Pursuant to the Warrant
Registration Rights Agreement, Holdings will agree to grant to the holders of
the Warrant Shares the right to require Holdings to file a shelf registration
statement (the "Warrant Registration Statement") covering resales of the
Warrants and Warrant Shares and the exercise of the Warrants purchased
pursuant to such Warrant Registration Statement and to use its reasonable best
efforts to make such Warrant Registration Statement effective.
4. Delivery and Payment.
(a) Delivery of, and payment of the Purchase Price for, the Units
shall be made at the offices of Davis Polk & Wardwell or such other location
as may be mutually acceptable. Such delivery and payment shall be made at 9:00
a.m. New York City time, on September 29, 1999, or at such other time on the
same date or such other date as shall be agreed upon by the Initial Purchaser
and the Issuers in writing. The time and date of such delivery and the payment
for the Units are herein called the "Closing Date."
(b) One or more of the Units in definitive global form, registered in
the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"),
having an aggregate principal amount corresponding to the aggregate principal
amount of the Units sold pursuant to Exempt Resales (collectively, the "Global
Unit"), shall be delivered by the Issuers to the Initial Purchaser (or as the
Initial Purchaser directs) in each case with any transfer taxes thereon duly
paid by the Issuers against payment by the Initial Purchaser of the Purchase
Price thereof by wire transfer in immediately available funds to the order of
the Issuers. The Global Units shall be made available to the Initial Purchaser
for inspection not later than 9:30 a.m., New York City time, on the business
day immediately preceding the Closing Date.
5. Agreements of the Issuers and the Guarantors. As of the date
hereof, the Issuers, and as of the Consummation, the Guarantors, hereby agree
with the Initial Purchaser as follows:
(a) To advise the Initial Purchaser promptly and, if requested by the Initial
Purchaser, confirm such advice in writing, (i) of the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of any Securities for offering or sale in any
jurisdiction designated by the Initial Purchaser pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose, and (ii)
of the happening of any event during the period referred to in Section 5(c)
below that makes any statement of a material fact made in the Preliminary
Offering Memorandum or the Offering Memorandum untrue or that requires any
additions to or changes in the Preliminary Offering Memorandum or the Offering
Memorandum in order to make the statements therein not misleading. The Issuers
and the Guarantors shall use their reasonable best efforts to prevent the
issuance of any stop order or order suspending the qualification or exemption
of any of the Securities under any state securities or Blue Sky laws, and, if
at any time any state securities commission or other federal or state
regulatory authority shall issue an order suspending the qualification or
exemption of any Securities under any state securities or Blue Sky laws, the
Issuers and the Guarantors shall use their reasonable best efforts to obtain
the withdrawal or lifting of such
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order at the earliest possible time; provided, however, that the Issuers and
the Guarantors shall not be required in connection therewith to qualify as a
foreign entity in any jurisdiction in which it is not now so qualified or to
take any action that would subject it to general consent to service of process
or taxation, other than as to matters and transactions relating to the
Preliminary Offering Memorandum, the Offering Memorandum or Exempt Resales, in
any jurisdiction in which it is not now so subject.
(b) To furnish the Initial Purchaser and those persons identified by
the Initial Purchaser to the Issuers as many copies of the Preliminary
Offering Memorandum and the Offering Memorandum, and any amendments or
supplements thereto, as the Initial Purchaser may reasonably request for the
time period specified in Section 5(c). Subject to the Initial Purchaser's
compliance with its representations and warranties and agreements set forth in
Section 7 hereof, the Issuers and the Guarantors consent to the use of the
Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments and supplements thereto required pursuant hereto, by the Initial
Purchaser in connection with Exempt Resales.
(c) During such period as, in the opinion of counsel for the Initial
Purchaser, an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchaser and in connection with
market-making activities of the Initial Purchaser for so long as any Units are
outstanding, (i) not to make any amendment or supplement to the Offering
Memorandum of which the Initial Purchaser shall not previously have been
advised or to which the Initial Purchaser shall reasonably object after being
so advised and (ii) to prepare promptly, upon the Initial Purchaser's
reasonable request, any amendment or supplement to the Offering Memorandum
which may be necessary or advisable in connection with such Exempt Resales or
such market-making activities.
(d) If, during the period referred to in Section 5(c) above, any
event shall occur or condition shall exist as a result of which, in the
opinion of counsel to the Initial Purchaser, it becomes necessary to amend or
supplement the Offering Memorandum in order to make the statements therein, in
the light of the circumstances when such Offering Memorandum is delivered to
an Eligible Purchaser, not misleading, or if, in the opinion of counsel to the
Initial Purchaser, it is necessary to amend or supplement the Offering
Memorandum to comply with any applicable law, forthwith to prepare an
appropriate amendment or supplement to such Offering Memorandum so that the
statements therein, as so amended or supplemented, will not, in the light of
the circumstances when it is so delivered, be misleading, or so that such
Offering Memorandum will comply with applicable law, and to furnish to the
Initial Purchaser and such other persons as the Initial Purchaser may
designate such number of copies thereof as the Initial Purchaser may
reasonably request.
(e) Prior to the sale of all Units pursuant to Exempt Resales as
contemplated hereby, to cooperate with the Initial Purchaser and counsel to
the Initial Purchaser in connection with the registration or qualification of
the Units for offer and sale to the Initial Purchaser and pursuant to Exempt
Resales under the securities or Blue Sky laws of such jurisdictions as the
Initial Purchaser may request and to continue such registration or
qualification in effect so long as required for Exempt Resales and to file
such consents to service of process or other documents as may be necessary in
order to effect such registration or qualification; provided, however, that
neither of the Issuers nor any Guarantor shall be required in connection
therewith to qualify as a foreign entity in any jurisdiction in which it is
not now so qualified or to take any action that would subject it to general
consent to service of process or taxation, other than as to matters and
transactions relating to the Preliminary Offering Memorandum, the Offering
Memorandum or Exempt Resales, in any jurisdiction in which it is not now so
subject.
(f) So long as the Securities are outstanding and the Indenture so
requires, (i) to mail and make generally available as soon as practicable
after the end of each fiscal year to the record holders of the Series
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A Notes a financial report of the Issuers and their subsidiaries on a
consolidated basis all such financial reports to include a consolidated
balance sheet, a consolidated statement of operations, a consolidated
statement of cash flows and a consolidated statement of shareholders' equity
as of the end of and for such fiscal year, together with comparable
information as of the end of and for the preceding year, certified by the
Issuers' independent public accountants and (ii) to mail and make generally
available as soon as practicable after the end of each quarterly period
(except for the last quarterly period of each fiscal year) to such holders, a
consolidated balance sheet, a consolidated statement of operations and a
consolidated statement of cash flows as of the end of and for such period, and
for the period from the beginning of such year to the close of such quarterly
period, together with comparable information for the corresponding periods of
the preceding year.
(g) So long as the Securities are outstanding, to furnish to the
Initial Purchaser as soon as available copies of all reports or other
communications furnished by the Issuers and the Guarantors to their security
holders or furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the Issuers and the
Guarantors is listed and such other publicly available information concerning
the Issuers and/or their subsidiaries as the Initial Purchaser may reasonably
request.
(h) So long as any of the Securities remain outstanding and during
any period in which the Issuers and the Guarantors are not subject to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), to make available to any holder of Securities in connection with any
sale thereof and any prospective purchaser of such Securities from such
holder, the information ("Rule 144A Information") required by Rule 144A(d)(4)
under the Securities Act.
(i) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of the obligations of the Issuers and
the Guarantors under this Agreement, including: (i) the fees, disbursements
and expenses of counsel to the Issuers and the Guarantors and accountants of
the Issuers and the Guarantors in connection with the sale and delivery of the
Units to the Initial Purchaser and pursuant to Exempt Resales, and all other
fees and expenses in connection with the preparation, printing, filing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum
and all amendments and supplements to any of the foregoing (including
financial statements), including the mailing and delivering of copies thereof
to the Initial Purchaser and persons designated by them in the quantities
specified herein, (ii) all costs and expenses related to the transfer and
delivery of the Units to the Initial Purchaser and pursuant to Exempt Resales,
including any transfer or other taxes payable thereon, (iii) all costs of
printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale
or delivery of the Units, (iv) all expenses in connection with the
registration or qualification of the Units and the Subsidiary Guarantees for
offer and sale under the securities or Blue Sky laws of the several states and
all costs of printing or producing any preliminary and supplemental Blue Sky
memoranda in connection therewith (including the filing fees and fees and
disbursements of counsel for the Initial Purchaser in connection with such
registration or qualification and memoranda relating thereto), (v) the cost of
printing certificates representing the Units and the Subsidiary Guarantees,
(vi) all expenses and listing fees in connection with the application for
quotation of the Units in the National Association of Securities Dealers, Inc.
("NASD") Automated Quotation System - PORTAL ("PORTAL"), (vii) the fees and
expenses of the Trustee and the Trustee's counsel in connection with the
Indenture, the Notes and the Subsidiary Guarantees, (viii) the fees and
expenses of the Warrant Agent and the Warrant Agent's counsel in connection
with the Warrant Agreement, (ix) the costs and charges of any transfer agent,
registrar and/or depositary (including the DTC), (x) any fees charged by
rating agencies for the rating of the Notes, (xi) all costs and expenses of
the Exchange Offer and any Registration Statement, as set forth in the
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<PAGE>
Registration Rights Agreement, (xii) all costs and expenses of the Warrant
Registration Statement, as set forth in the Warrant Registration Rights
Agreement, and (xiii) all other costs and expenses incident to the performance
of the obligations of the Issuers and the Guarantors hereunder for which
provision is not otherwise made in this Section.
The Sierra Entities shall not be responsible for any fees and
expenses described in this paragraph unless and until the Sierra Acquisition
is Consummated.
(j) To use its reasonable best efforts to effect the inclusion of the
Securities in PORTAL and to maintain the listing of the Securities on PORTAL
for so long as the Securities are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of the
Securities, and to comply with all agreements set forth in the representation
letters of the Issuers and the Guarantors to DTC relating to the approval of
the Securities by DTC for "book-entry" transfer.
(l) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of the Issuers or any
Guarantor or any warrants, rights or options to purchase or otherwise acquire
debt securities of the Issuers or any Guarantor substantially similar to the
Securities and the Subsidiary Guarantees (other than (i) the Securities and
the Subsidiary Guarantees or (ii) commercial paper issued in the ordinary
course of business), without the prior written consent of the Initial
Purchaser.
(m) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act) that
would be integrated with the sale of the Units to the Initial Purchaser or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Units under the Securities Act.
(n) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Securities.
(o) To cause the Exchange Offer to be made in the appropriate form to
permit Series B Notes and guarantees thereof by the Guarantors registered
pursuant to the Securities Act to be offered in exchange for the Series A
Notes, subject to the limitations contemplated by the Registration Rights
Agreement, and to comply with all applicable federal and state securities laws
in connection with the Exchange Offer.
(p) To cause the Warrant Registration Statement to be made on the
appropriate form and to comply with all applicable federal and state
securities laws in connection therewith.
(q) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(r) To comply with all of its agreements set forth in the Warrant
Agreement.
(s) To use its reasonable best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by it
prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Units and the Subsidiary Guarantees.
(t) For so long as any of the Securities and the Subsidiary
Guarantees are outstanding and if, in the reasonable judgment of the Initial
Purchaser or its counsel, the Initial Purchaser or any of its affiliates (as
defined in the rules and regulations under the Securities Act) is required to
deliver a prospectus (any such prospectus, a "Market Making Prospectus") in
connection with sales of the Units, to (i) provide the Initial Purchaser and
its affiliates, without charge, as many copies of the Market Making Prospectus
as they may
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<PAGE>
reasonably request, (ii) periodically amend the Registration
Statement or the Warrant Registration Statement so that the information
contained therein complies with the requirements of Section 10(a) of the
Securities Act, (iii) amend the Registration Statement, the Warrant
Registration Statement or amend or supplement the Market Making Prospectus
when necessary to reflect any material changes in the information provided
therein and promptly file such amendment or supplement with the Commission,
(iv) provide the Initial Purchaser and its affiliates with copies of each
amendment or supplement so filed and such other documents, including opinions
of counsel and "comfort" letters, as they may reasonably request and (v)
indemnify the Initial Purchaser and its affiliates with respect to the Market
Making Prospectus and, if applicable, contribute to any amount paid or payable
by the Initial Purchaser and its affiliates in a manner substantially
identical to that specified in Section 8 hereof (with appropriate
modifications). The Issuers consent to the use, subject to the provisions of
the Securities Act and the state securities or Blue Sky laws of the
jurisdictions in which the Units are offered by the Initial Purchaser, of each
Market Making Prospectus.
6. Representations, Warranties and Agreements of the Issuers. As of
the date hereof, the Issuers, and as of the Consummation, the Guarantors,
represent and warrant to, and agree with, the Initial Purchaser that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum
do not, and any supplement or amendment to them will not, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchaser furnished to the Issuers in
writing by the Initial Purchaser expressly for use therein. No stop order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting
that any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act, has been issued.
(b) Each of the Issuers and their subsidiaries has been duly
organized, is validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite power and authority to
carry on its business as described in the Preliminary Offering Memorandum and
the Offering Memorandum and to own, lease and operate its properties, and each
is duly qualified and is in good standing as a foreign entity authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified would not (i) have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Issuers and their subsidiaries, taken as a whole or (ii) in any manner draw
into question the validity of any of the Operative Documents (the events
referred to in clauses (i) and (ii), each a "Material Adverse Effect").
(c) All equity interests of the Issuers have been duly authorized and
validly issued and are fully paid, non-assessable and not subject to any
preemptive or similar rights.
(d) The entities listed on Schedule B hereto are the only
subsidiaries, direct or indirect, of the Issuers. Except as otherwise set
forth in the Offering Memorandum, all of the outstanding equity interests of
each of the Issuers' subsidiaries have been duly authorized and validly issued
and are fully paid and non-assessable, as applicable, and are owned by the
Issuers, directly or indirectly through one or more subsidiaries, free and
clear of any security interest, claim, lien, encumbrance or adverse interest
of any nature (each, a "Lien")
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(e) This Agreement has been duly authorized, executed and delivered
by the Issuers and each of the Guarantors.
(f) The Indenture has been duly authorized by the Company and each of
the Guarantors, and on the Closing Date, will have been validly executed and
delivered by the Company and each of the Guarantors. When the Indenture has
been duly executed and delivered by the Company and each of the Guarantors,
the Indenture will be a valid and binding agreement of the Company and each of
the Guarantors, enforceable against the Company and each of the Guarantors in
accordance with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On
the Closing Date, the Indenture will conform in all material respects to the
requirements of the Trust Indenture Act of 1939, as amended (the "TIA" or
"Trust Indenture Act"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
(g) Each of the Issuers has duly and validly authorized the issuance
of the Notes and the Warrants as a Unit. On the Closing Date, the Units will
conform as to legal matters to the description thereof contained in the
Offering Memorandum.
(h) The Series A Notes have been duly authorized and, on the Closing
Date, will have been validly executed and delivered by the Company. When the
Series A Notes have been issued, executed and authenticated in accordance with
the provisions of the Indenture and delivered to and paid for by the Initial
Purchaser in accordance with the terms of this Agreement, the Series A Notes
will be entitled to the benefits of the Indenture and will be valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability. On
the Closing Date, the Series A Notes will conform as to legal matters to the
description thereof contained in the Offering Memorandum.
(i) On the Closing Date, the Series B Notes will have been duly
authorized by the Company. When the Series B Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Notes will be entitled to the benefits of the
Indenture and will be the valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles
of general applicability.
(j) The Warrants have been duly authorized by Holdings and, on the
Closing Date, will have been validly delivered by Holdings. When the Warrants
are issued, the Warrants will be valid and binding obligations of Holdings,
enforceable against Holdings in accordance with their terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) the rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability. On the Closing Date, the Warrants will
conform as to legal matters to the description thereof in the Offering
Memorandum.
(k) The Warrant Shares have been duly and validly authorized for
issuance by Holdings, and when issued pursuant to the terms of the Warrants
and the Warrant Agreement will be fully paid and
10
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nonassessable and will not be subject to any preemptive or similar rights. On
the Closing Date, the Warrant Shares will conform as to legal matters to the
description thereof contained in the Offering Memorandum.
(l) The Subsidiary Guarantee to be endorsed on the Series A Notes by
each Guarantor has been duly authorized by such Guarantor and, on the Closing
Date, will have been duly executed and delivered by each such Guarantor. When
the Series A Notes have been issued, executed and authenticated in accordance
with the Indenture and delivered to and paid for by the Initial Purchaser in
accordance with the terms of this Agreement, the Subsidiary Guarantee of each
Guarantor endorsed thereon will be entitled to the benefits of the Indenture
and will be the valid and binding obligation of such Guarantor, enforceable
against such Guarantor in accordance with its terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles
of general applicability. On the Closing Date, the Subsidiary Guarantees to be
endorsed on the Series A Notes will conform as to legal matters to the
description thereof contained in the Offering Memorandum.
(m) The Subsidiary Guarantee to be endorsed on the Series B Notes by
each Guarantor has been duly authorized by such Guarantor and, when issued,
will have been duly executed and delivered by each such Guarantor. When the
Series B Notes have been issued, executed and authenticated in accordance with
the terms of the Exchange Offer and the Indenture, the Subsidiary Guarantee of
each Guarantor endorsed thereon will be entitled to the benefits of the
Indenture and will be the valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms, except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditor's rights generally and (ii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles
of general applicability. When the Series B Notes are issued, authenticated,
and delivered, the Subsidiary Guarantees to be endorsed on the Series B Notes
will conform as to legal matters to the description thereof in the Offering
Memorandum.
(n) The Registration Rights Agreement has been duly authorized by the
Company and each of the Guarantors and, on the Closing Date, will have been
duly executed and delivered by the Company and each of the Guarantors. When
the Registration Rights Agreement has been duly executed and delivered by the
Company and each of the Guarantors, the Registration Rights Agreement will be
a valid and binding agreement of the Company and each of the Guarantors,
enforceable against the Company and each of the Guarantors in accordance with
its terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally,
(ii) rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability and (iii) rights to
indemnity and contribution thereunder may be limited by applicable law. On the
Closing Date, the Registration Rights Agreement will conform as to legal
matters to the description thereof in the Offering Memorandum.
(o) The Warrant Agreement has been duly and validly authorized by
Holdings and, when duly executed and delivered by Holdings, will be a valid
and binding agreement of Holdings, enforceable against it in accordance with
its terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally,
(ii) rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability and (iii) rights to
indemnity and contribution thereunder may be limited by applicable law. On the
Closing Date, the Warrant Agreement will conform as to legal matters to the
description thereof in the Offering Memorandum.
(p) The Warrant Registration Rights Agreement has been duly and
validly authorized by Holdings and, when duly executed and delivered by
Holdings, will be a valid and binding agreement of
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<PAGE>
Holdings, enforceable in accordance with its terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally, (ii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles
of general applicability and (iii) rights to indemnity and contribution
thereunder may be limited by applicable law. On the Closing Date, the Warrant
Registration Rights Agreement will conform as to legal matters to the
description thereof in the Offering Memorandum.
(q) The indebtedness represented by the Units is being incurred for
proper purposes and in good faith. On the Closing Date (after giving effect to
the application of the proceeds from the issuance of the Units), (a) the fair
value and present fair saleable value of the Issuers' assets exceeds and would
exceed its stated liabilities and identified contingent liabilities, (b) the
Issuers should be able to pay its debts as they become absolute and matured
and (c) the capital the Issuers is not and would not be unreasonably small for
the business in which it is engaged.
(r) Neither of the Issuers nor any of their subsidiaries is in
violation of its respective organizational documents or in default in the
performance of any obligation, agreement, covenant or condition contained in
any indenture, loan agreement, mortgage, lease or other agreement or
instrument to which the Issuers or any of their subsidiaries is a party or by
which the Issuers or any of their subsidiaries or their respective property is
bound, except for such defaults which, singly or in the aggregate, would not
have a Material Adverse Effect.
(s) The execution, delivery and performance of this Agreement and the
other Operative Documents by the Issuers and each of the Guarantors (as
applicable), compliance by the Issuers and each of the Guarantors (as
applicable) with all provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (i) require any consent,
approval, authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under federal
securities or Blue Sky laws of the various states or have been or will be
obtained prior to the Closing Date), (ii) conflict with or constitute a breach
of any of the terms or provisions of, or a default under, (A) the charter or
by-laws of the Issuers or any of their subsidiaries or (B) any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material
to the Issuers and their subsidiaries, taken as a whole, to which the Issuers
or any of their subsidiaries is a party or by which the Issuers or any of
their subsidiaries or their respective property is bound, (iii) violate or
conflict with any applicable law or any rule, regulation, judgment, order or
decree of any court or any governmental body or agency having jurisdiction
over the Issuers, any of their subsidiaries or their respective property, (iv)
result in the imposition or creation of (or the obligation to create or
impose) a Lien under, any agreement or instrument to which the Issuers or any
of their subsidiaries is a party or by which the Issuers or any of their
subsidiaries or their respective property is bound (other than the Liens to be
created under the Credit Agreement as set forth in the Offering Memorandum),
or (v) result in the termination, suspension or revocation of any
Authorization (as defined below) of the Issuers or any of their subsidiaries
or result in any other impairment of the rights of the holder of any such
Authorization, except (1) insofar as there is required any consent, approval,
authorization, filing, notification or other action that both (x) is described
in Section 3.4 of the Recapitalization Agreement or listed in Schedule 3.4 of
the Disclosure Schedule (as defined in the Recapitalization Agreement) and (y)
either has been or prior to the Closing Date will be obtained or made or (2)
in the case of clauses (i), (ii)(B), (iv) and (v), as would not, singly or in
the aggregate, have a Material Adverse Effect.
(t) No action has been taken and no law, statute, rule or regulation
or order has been enacted, adopted or issued by any governmental agency or
body which prevents the execution, delivery and performance of any of this
Agreement, the Indenture, the Units, the Subsidiary Guarantees or any of the
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<PAGE>
other Operative Documents or the issuance of the Units, or suspends the sale
of the Units in any jurisdiction referred to in Section 5(e) and no
injunction, restraining order or other order or relief of any nature by a
federal or state court or other tribunal of competent jurisdiction has been
issued with respect to the Issuers which would prevent or suspend the issuance
or sale of the Units in any jurisdiction referred to in Section 5(e).
(u) Except as disclosed in the Offering Memorandum, there are no
legal or governmental proceedings pending or threatened to which the Issuers
or any of their subsidiaries is or could be a party or to which any of their
respective property is or could be subject, which would reasonably be expected
to result, singly or in the aggregate, in a Material Adverse Effect.
(v) Except as disclosed in the Offering Memorandum, neither of the
Issuers nor any of their subsidiaries has violated any foreign, federal, state
or local law or regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), any provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any
provisions of the Foreign Corrupt Practices Act or the rules and regulations
promulgated thereunder, except for such violations which, singly or in the
aggregate, would not have a Material Adverse Effect.
(w) Except as otherwise set forth in the Offering Memorandum, there
are no costs or liabilities associated with Environmental Laws (including,
without limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws or any
Authorization, any related constraints on operating activities and any
potential liabilities to third parties) which would, singly or in the
aggregate, have a Material Adverse Effect.
(x) Each of the Issuers and their subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other approvals
(each, an "Authorization") of, and has made all filings with and notices to,
all governmental or regulatory authorities and self-regulatory organizations
and all courts and other tribunals, including without limitation, under any
applicable Environmental Laws, as are necessary to own, lease, license and
operate its respective properties and to conduct its business, except where
the failure to have any such Authorization or to make any such filing or
notice would not, singly or in the aggregate, have a Material Adverse Effect.
Except as disclosed in the Offering Memorandum, each such Authorization is
valid and in full force and effect and each of the Issuers and their
subsidiaries is in compliance with all the terms and conditions thereof and
with the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including,
without limitation, the receipt of any notice from any authority or governing
body) which allows or, after notice or lapse of time or both, would allow,
revocation, suspension or termination of any such Authorization or results or,
after notice or lapse of time or both, would result in any other impairment of
the rights of the holder of any such Authorization; and such Authorizations
contain no restrictions that are burdensome to the Issuers or any of their
subsidiaries; except, in each case, where such failure to be valid and in full
force and effect or to be in compliance, the occurrence of any such event or
the presence of any such restriction would not, singly or in the aggregate,
have a Material Adverse Effect.
(y) The accountants, PricewaterhouseCoopers LLP, that have certified
the financial statements included in the Preliminary Offering Memorandum and
the Offering Memorandum are independent public accountants with respect to the
Issuers as required by the Securities Act and the Exchange Act.
(z) The historical financial statements, together with related notes
forming part of the Offering Memorandum (and any amendment or supplement
thereto), present fairly the consolidated financial
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position, results of operations and changes in financial position of the
Issuers and their subsidiaries on the basis stated in the Offering Memorandum
at the respective dates or for the respective periods to which they apply;
such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data set forth in the Offering
Memorandum (and any amendment or supplement thereto) are, in all material
respects, accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Issuers.
(aa) Each of the Issuers has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
(bb) The pro forma financial statements included in the Preliminary
Offering Memorandum and the Offering Memorandum have been prepared on a basis
consistent with the historical financial statements of the Issuers and their
subsidiaries and give effect to assumptions used in the preparation thereof on
a reasonable basis and in good faith and present fairly the historical and
proposed transactions contemplated by the Preliminary Offering Memorandum and
the Offering Memorandum; and such pro forma financial statements comply as to
form in all material respects with the requirements applicable to pro forma
financial statements included in registration statements on Form S-1 under the
Securities Act. The other pro forma financial and statistical information and
data included in the Offering Memorandum are, in all material respects,
accurately presented and prepared on a basis consistent with the pro forma
financial statements.
(cc) The Issuers are not, and after giving effect to the offering and
sale of the Units and the application of the net proceeds thereof as described
in the Offering Memorandum, will not be, an "investment company," as such term
is defined in the Investment Company Act of 1940, as amended.
(dd) Except as otherwise disclosed in the Offering Memorandum, there
are no contracts, agreements or understandings that will remain in effect
after the issuance of the Securities between the Issuers and any person
granting such person the right to require the Issuers to file a registration
statement under the Securities Act with respect to any securities of the
Issuers or to require the Issuers to include such securities with the
Securities registered pursuant to any Registration Statement or the Warrant
Registration Statement.
(ee) Neither of the Issuers nor any of their subsidiaries nor any
agent thereof acting on the behalf of them has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale of
the Units to violate Regulation T (12 C.F.R. Part 220), Regulation U (12
C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System.
(ff) No "nationally recognized statistical rating organization" (as
such term is defined for purposes of Rule 436(g)(2) under the Securities Act)
(i) has imposed (or has informed the Issuers that it is considering imposing)
any condition (financial or otherwise) on any Issuer's retaining any rating
assigned to the Issuers or any securities of any Issuer or (ii) has indicated
to any Issuer that it is considering (A) the downgrading, suspension, or
withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (B) any change
in the outlook for any rating of any Issuer or any securities of any Issuer.
(gg) Since the respective dates as of which information is given in
the Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the
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earnings, business, management or operations of the Issuers and their
subsidiaries, taken as a whole, (ii) there has not been any material adverse
change or any development involving a prospective material adverse change in
the capital stock or in the long-term debt of the Issuers or any of their
subsidiaries and (iii) neither of the Issuers nor any of their subsidiaries
has incurred any material liability or obligation, direct or contingent.
(hh) Except as set forth in the Offering Memorandum under "SEC
Review," and except with respect to any financial statements of the Guarantors
and Holdings, each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Securities Act.
(ii) When the Securities and the Subsidiary Guarantees are issued and
delivered pursuant to this Agreement, neither the Securities nor the
Subsidiary Guarantees will be of the same class (within the meaning of Rule
144A under the Securities Act) as any security of any Issuer or the Guarantors
that is listed on a national securities exchange registered under Section 6 of
the Exchange Act or that is quoted in a United States automated inter-dealer
quotation system.
(jj) No form of general solicitation or general advertising (as
defined in Regulation D under the Securities Act) was used by any Issuer or
Guarantor or any of their respective representatives (other than the Initial
Purchaser, as to whom the Issuers and the Guarantors make no representation)
in connection with the offer and sale of the Units contemplated hereby,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising. No securities of
the same class as the Units have been issued and sold by any Issuer within the
six-month period immediately prior to the date hereof.
(kk) Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA.
(ll) Neither of the Issuers, the Guarantors, nor any of their
respective affiliates or any person acting on their behalf (other than the
Initial Purchaser, as to whom the Issuers and the Guarantors make no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S under the Securities Act ("Regulation S")
with respect to the Units.
(mm) The Units offered and sold in reliance on Regulation S have been
and will be offered and sold only in offshore transactions assuming the
accuracy of the Initial Purchaser's representations and warranties and
agreements set forth in Section 7 hereof.
(nn) The sale of the Units pursuant to Regulation S is not part of a
plan or scheme to evade the registration provisions of the Securities Act.
(oo) No registration under the Securities Act of the Units or the
Subsidiary Guarantees is required for the sale of the Units and the Subsidiary
Guarantees to the Initial Purchaser as contemplated hereby or for the Exempt
Resales assuming the accuracy of the Initial Purchaser's representations and
warranties and agreements set forth in Section 7 hereof.
(pp) There is no (i) material unfair labor practice complaint,
grievance or arbitration proceeding pending or threatened against the Issuers
before the National Labor Relations Board or any state or local labor
relations board or (ii) strike, labor dispute, slowdown or stoppage pending or
threatened against the
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Issuers, except for such actions specified in clause (i) or (ii) above, which,
singly or in the aggregate, would not have a Material Adverse Effect. To the
best of the Issuers' knowledge, no collective bargaining organizing activities
are taking place with respect to the Issuers, which, singly or in the aggregate,
would have a Material Adverse Effect.
(qq) The Issuers maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(rr) Except as otherwise set forth in the Offering Memorandum, the
Issuers and their subsidiaries own or possess, or can acquire on reasonable
terms, all patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures), trademarks, service marks
and trade names ("intellectual property") currently employed by them in
connection with the business now operated by them, except where the failure to
own or possess or otherwise be able to acquire such intellectual property
would not, singly or in the aggregate, have a Material Adverse Effect; and, to
the best of the Issuers' knowledge, neither of the Issuers nor any of their
subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any of such intellectual property
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect.
(ss) Each certificate signed by any officer of any Issuer and
delivered to the Initial Purchaser or counsel for the Initial Purchaser shall
be deemed to be a representation and warranty by such Issuer to the Initial
Purchaser as to the matters covered thereby.
(tt) The agreements listed on Exhibit C hereto are all the agreements
that are material to the conduct of the business of the Issuers and their
subsidiaries, taken as a whole.
The Issuers acknowledge that the Initial Purchaser and, for purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to the Issuers and counsel to the Initial Purchaser will rely
upon the accuracy and truth of the foregoing representations and hereby
consent to such reliance.
7. Initial Purchaser's Representations and Warranties. The Initial
Purchaser represents and warrants to the Issuers, that:
(a) The Initial Purchaser is either a QIB or an institutional
"accredited investor" (as such term is defined in rule 501(a)(1), (2), (3) or
(7) under the Securities Act, an "Accredited Institution") in either case,
with such knowledge and experience in financial and business matters as is
necessary in order to evaluate the merits and risks of an investment in the
Units.
(b) The Initial Purchaser (A) is not acquiring the Units with a view
to any distribution thereof or with any present intention of offering or
selling any of the Units in a transaction that would violate the Securities
Act or the securities laws of any state of the United States or any other
applicable jurisdiction and (B) will be reoffering and reselling the Units
only (x) to QIBs in reliance on the exemption from the
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registration requirements of the Securities Act provided by Rule 144A and (y)
in offshore transactions in reliance upon Regulation S under the Securities
Act.
(c) The Initial Purchaser agrees that no form of general solicitation
or general advertising (within the meaning of Regulation D under the
Securities Act) has been or will be used by the Initial Purchaser or any of
its representatives in connection with the offer and sale of the Securities
pursuant hereto, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
(d) The Initial Purchaser agrees that, in connection with Exempt
Resales, the Initial Purchaser will solicit offers to buy the Units only from,
and will offer to sell the Units only to, Eligible Purchasers. The Initial
Purchaser further agrees that it will offer to sell the Units only to, and
will solicit offers to buy the Units only from (A) Eligible Purchasers that
the Initial Purchaser reasonably believes are QIBs and (B) Regulation S
Purchasers, in each case, that agree that (x) the Securities purchased by them
may be resold, pledged or otherwise transferred within the time period
referred to under Rule 144(k) (taking into account the provisions of Rule
144(d) under the Securities Act, if applicable) under the Securities Act, as
in effect on the date of the transfer of such Units, only (I) to the Issuers
or any of their subsidiaries, (II) to a person whom the seller reasonably
believes is a QIB purchasing for its own account or for the account of a QIB
in a transaction meeting the requirements of Rule 144A under the Securities
Act, (III) in an offshore transaction (as defined in Rule 902 under the
Securities Act) meeting the requirements of Rule 904 of the Securities Act,
(IV) in a transaction meeting the requirements of Rule 144 under the
Securities Act, (V) to an Accredited Institution that, prior to such transfer,
furnishes the Trustee a signed letter containing certain representations and
agreements relating to the registration of transfer of such Unit (the form of
which may be obtained from the Trustee) and, if such transfer is in respect of
an aggregate principal amount of Units less than $250,000, an opinion of
counsel acceptable to the Issuers that such transfer is in compliance with the
Securities Act, (VI) in accordance with another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel acceptable to the Issuers) or (VII) pursuant to an effective
registration statement and, in each case, in accordance with the applicable
securities laws of any State of the United States or any other applicable
jurisdiction and (y) they will deliver to each person to whom such Units or an
interest therein is transferred a notice substantially to the effect of the
foregoing.
(e) The Initial Purchaser and its affiliates or any person acting on
its or their behalf have not engaged or will not engage in any directed
selling efforts within the meaning of Regulation S with respect to the Units.
(f) The Units offered and sold by the Initial Purchaser pursuant
hereto in reliance on Regulation S have been and will be offered and sold only
in offshore transactions.
(g) The sale of the Units offered and sold by the Initial Purchaser
pursuant hereto in reliance on Regulation S is not part of a plan or scheme to
evade the registration provisions of the Securities Act.
(h) With respect to Units to be sold pursuant to Regulation S of the
Securities Act, the Initial Purchaser agrees that it has not offered or sold
and will not offer or sell such Units in the United States or to, or for the
benefit or account of, a U.S. Person (other than a distributor), in each case,
as defined in Rule 902 under the Securities Act (i) as part of its
distribution at any time and (ii) otherwise until 40 days after the later of
the commencement of the offering of the Units pursuant hereto and the Closing
Date, other than in accordance with Regulation S of the Securities Act or
another exemption from the registration requirements of the Securities Act.
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The Initial Purchaser agrees that, during such 40-day restricted period, it
will not cause any advertisement with respect to the Units (including any
"tombstone" advertisement) to be published in any newspaper or periodical or
posted in any public sale and will not issue any circular relating to the
Units, except such advertisements that are permitted by and which include the
statements required by Regulation S.
The Initial Purchaser acknowledges that the Issuers and, for purposes
of the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to the Issuers and counsel to the Initial Purchaser will rely
upon the accuracy and truth of the foregoing representations, and the Initial
Purchaser hereby consents to such reliance.
8. Indemnification. (a) As of the date hereof, the Issuers, and as of
the Consummation, the Guarantors, agree, jointly and severally, to indemnify
and hold harmless the Initial Purchaser, its directors, its officers and each
person, if any, who controls the Initial Purchaser within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (or any amendment or
supplement thereto), the Preliminary Offering Memorandum or any Rule 144A
Information provided by the Issuers or any Guarantor to any holder or
prospective purchaser of Units pursuant to Section 5(h) or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Initial Purchaser furnished in
writing to the Issuers by the Initial Purchaser; provided, however, that the
foregoing indemnity agreement with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of the Initial Purchaser if the
Initial Purchaser fails to deliver an Offering Memorandum (as then amended or
supplemented, provided by the Issuers to the Initial Purchaser in the
requisite quantity and on a timely basis to permit proper delivery on or prior
to the Closing Date) to the person asserting any losses, claims, damages and
liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Offering Memorandum,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, if such material misstatement or omission or alleged material
misstatement or omission was cured in the Offering Memorandum.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Issuers and the Guarantors and their respective directors and officers and
each person, if any, who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) the Issuers or any Guarantor
to the same extent as the foregoing indemnity from the Issuers and the
Guarantors to the Initial Purchaser but only with reference to information
relating to the Initial Purchaser furnished in writing to the Issuers by the
Initial Purchaser expressly for use in the Preliminary Offering Memorandum or
the Offering Memorandum.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"Indemnified Party"), the Indemnified Party shall promptly notify the person
against whom such indemnity may be sought (the "Indemnifying Party") in
writing and the Indemnifying Party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses of such counsel, as incurred
(except that, in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), the Initial Purchaser shall
not be required to assume the defense of such action pursuant to this Section
8(c), but may employ separate counsel and participate in the defense
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thereof, but the fees and expenses of such counsel, except as provided below,
shall be at the expense of the Initial Purchaser). Any Indemnified Party shall
have the right to employ separate counsel in any such action and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of the Indemnified Party unless (i) the employment of such counsel
shall have been specifically authorized in writing by the Indemnifying Party,
(ii) the Indemnifying Party shall have failed to assume the defense of such
action or employ counsel reasonably satisfactory to the Indemnified Party or
(iii) the named parties to any such action (including any impleaded parties)
include both the Indemnified Party and the Indemnifying Party, and the
Indemnified Party shall have been advised by such counsel that there may be
one or more legal defenses available to it which are different from or
additional to those available to the Indemnifying Party (in which case the
Indemnifying Party shall not have the right to assume the defense of such
action on behalf of the Indemnified Party). In any such case, the Indemnifying
Party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all Indemnified Parties and all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by
Donaldson, Lufkin & Jenrette Securities Corporation, in the case of the
parties indemnified pursuant to Section 8(a), and by the Issuers, in the case
of parties indemnified pursuant to Section 8(b). The Indemnifying Party shall
indemnify and hold harmless the Indemnified Party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action (i) effected with its written consent or (ii) effected without
its written consent if the settlement is entered into more than twenty
business days after the Indemnifying Party shall have received a request from
the Indemnified Party for reimbursement for the fees and expenses of counsel
(in any case where such fees and expenses are at the expense of the
Indemnifying Party) and, prior to the date of such settlement, the
Indemnifying Party shall have failed to comply with such reimbursement
request. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement or compromise of, or consent to the
entry of judgment with respect to, any pending or threatened action in respect
of which the Indemnified Party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the Indemnified
Party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the Indemnified Party from all liability on claims
that are or could have been the subject matter of such action and (ii) does
not include a statement as to or an admission of fault, culpability or a
failure to act, by or on behalf of the Indemnified Party.
(d) To the extent the indemnification provided for in this Section 8
is unavailable to an Indemnified Party or insufficient in respect of any
losses, claims, damages, liabilities or judgments referred to therein, then
each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Issuers and the Guarantors, on the one hand, and the Initial Purchaser, on the
other hand, from the offering of the Units or (ii) if the allocation provided
by clause 8(d)(i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause 8(d)(i) above but also the relative fault of the Issuers and the
Guarantors, on the one hand, and the Initial Purchaser, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Issuers and
the Guarantors, on the one hand, and the Initial Purchaser, on the other hand,
shall be deemed to be in the same proportion as the total net proceeds from
the offering of the Units (after underwriting discounts and commissions, but
before deducting expenses) received by the Issuers, and the total discounts
and commissions received by the Initial Purchaser bear to the total price to
investors of the Units, in each case, as set forth in the table on the cover
page of the Offering Memorandum. The relative fault of the Issuers and the
Guarantors, on the one hand, and the Initial Purchaser, on the other hand,
shall be
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determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Issuers and the
Guarantors, on the one hand, or the Initial Purchaser, on the other hand, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Issuers and the Guarantors, and the Initial Purchaser agree that
it would not be just and equitable if contribution pursuant to this Section
8(d) were determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an Indemnified Party as a result of the losses, claims, damages,
liabilities or judgments referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses incurred by such Indemnified Party in connection with
investigating or defending any matter, including any action, that could have
given rise to such losses, claims, damages, liabilities or judgments.
Notwithstanding the provisions of this Section 8, the Initial Purchaser shall
not be required to contribute any amount in excess of the amount by which the
total discounts and commissions received by the Initial Purchaser exceeds the
amount of any damages which the Initial Purchaser has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
Indemnified Party at law or in equity.
9. Conditions of Initial Purchaser's Obligations. The obligations of
the Initial Purchaser to purchase the Units under this Agreement are subject
to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Issuers and the
Guarantors contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of the
Closing Date.
(b) On or after the date hereof, (i) there shall not have occurred
any downgrading, suspension or withdrawal of, nor shall any notice have been
given of any potential or intended downgrading, suspension or withdrawal of,
or of any review (or of any potential or intended review) for a possible
change that does not indicate the direction of the possible change in, any
rating of any Issuer or any Guarantor or any securities of any Issuer or any
Guarantor (including, without limitation, the placing of any of the foregoing
ratings on credit watch with negative or developing implications or under
review with an uncertain direction) by any "nationally recognized statistical
rating organization" (as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act), (ii) there shall not have occurred any change, nor
shall any notice have been given of any potential or intended change, in the
outlook for any rating of any Issuer or any Guarantor or any securities of any
Issuer or any Guarantor by any such rating organization and (iii) no such
rating organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to the Units than that on which the
Units were marketed.
(c) Since the respective dates as of which information is given in
the Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there shall not have occurred any change or any
development in the condition, financial or otherwise, or the earnings,
business, management or operations of the Issuers and their subsidiaries,
taken as a whole, (ii) there shall not have been any change or any development
involving a prospective change in the capital stock or in the long-term debt
of the Issuers or any of their
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subsidiaries and (iii) neither of the Issuers nor any of their subsidiaries
shall have incurred any liability or obligation, direct or contingent, the
effect of which, in any such case described in clause 9(c)(i), 9(c)(ii) or
9(c)(iii), in the judgment of the Initial Purchaser, is material and adverse
and, in the judgment of the Initial Purchaser, makes it impracticable to
market the Units on the terms and in the manner contemplated in the Offering
Memorandum.
(d) The Initial Purchaser shall have received on the Closing Date a
certificate dated the Closing Date and after the Consummation, signed by the
Chief Executive Officer, Chairman of the Board, President or a Vice President
and the chief financial officer, principal accounting officer or equivalent
financial officer responsible for the financial statements, of the Issuers and
the Guarantors, confirming the matters set forth in Sections 9(a), 9(b) and
9(c) and stating that the Issuers and each Guarantor has complied with all the
agreements and satisfied all of the conditions herein contained and required
to be complied with or satisfied on or prior to the Closing Date.
(e) The Initial Purchaser shall have received on the Closing Date a
certificate dated the Closing Date and after the Consummation, signed by the
Chief Executive Officer, Chairman of the Board, President or a Vice President
and the chief financial officer, principal accounting officer or equivalent
financial officer responsible for the financial statements, of the Issuers and
the Guarantors, substantially in the form set forth in Exhibit B hereto.
(f) The Initial Purchaser shall have received on the Closing Date an
opinion (satisfactory to the Initial Purchaser and counsel for the Initial
Purchaser), dated the Closing Date, of Davis Polk & Wardwell, counsel for the
Issuers, to the effect that:
(i) the execution and delivery of this Agreement, the
Registration Rights Agreement, the Indenture and the Notes and
compliance by the Issuers to the extent a party thereto, with the
provisions thereof will not conflict with, constitute a default under
or violate (i) any of the terms, conditions or provisions of the
certificate of incorporation or bylaws of the Issuers, (ii) any of
the terms, conditions or provisions of any Operative Document, and
(iii) any New York, Delaware corporate, or federal law or regulation
(other than federal and state securities or blue sky laws, as to
which we express no opinion);
(ii) no consent, approval, waiver, license or authorization or
other action by or filing with any New York, Delaware corporate, or
federal governmental authority is required in connection with the
execution and delivery by the Issuers of this Agreement, the
Registration Rights Agreement, the Warrant Agreement, the Warrant
Registration Rights Agreement, the Indenture and the Securities or
the consummation by the Issuers of their obligations thereunder,
except for (i) the applicable requirements of federal and state
securities or blue sky laws, as to which we express no opinion and
(ii) those already obtained and which are in full force and effect;
(iii) the Series A Notes have been duly authorized by the
Company and, when executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the
Initial Purchaser in accordance with the terms of this Agreement,
will be entitled to the benefits of the Indenture and will be valid
and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance or similar laws affecting creditors' rights
generally, (y) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability and (z) to the extent that a waiver of rights under any
usury or stay law may be unenforceable; we express no opinion,
however, as to the applicability
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<PAGE>
(and, if applicable, the effect) of Section 548 of the United States
Bankruptcy Code or any comparable provision of state law to the
questions addressed above or on the conclusions expressed with
respect thereto;
(iv) the Warrants have been duly authorized by Holdings and, on
the Closing Date, when countersigned by the Warrant Agent and issued
and delivered in accordance with the terms of this Agreement and the
Warrant Agreement, the Warrants will be the valid and binding
obligations of Holdings, enforceable against Holdings in accordance
with their terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance or similar
laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(v) the Warrant Shares have been duly and validly authorized
for issuance by Holdings, and when issued and delivered upon payment
of the exercise price pursuant to the terms of the Warrants and the
Warrant Agreement will be fully paid and nonassessable and will not
be subject to any preemptive or similar statutory rights;
(vi) the Indenture has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company, enforceable against the Company in accordance with its
terms, except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors' rights generally, (y) rights of acceleration and
the availability of equitable remedies may be limited by equitable
principles of general applicability and (z) to the extent that a
waiver of rights under any usury or stay law may be unenforceable; we
express no opinion, however, as to the applicability (and, if
applicable, the effect) of Section 548 of the United States
Bankruptcy Code or any comparable provision of state law to the
questions addressed above or on the conclusions expressed with
respect thereto;
(vii) this Agreement has been duly authorized, executed and
delivered by the Issuers;
(viii) the Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and is a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as (x) the enforceability thereof
may be limited by bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally, (y) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability and (z) as
rights to indemnity and contribution thereunder may be limited by
applicable law;
(ix) the Series B Notes have been duly authorized by the Company;
(x) the Warrant Agreement has been duly and validly authorized,
executed and delivered by Holdings and is a valid and binding
agreement of Holdings, enforceable against Holdings in accordance
with its terms, except as (i) the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance or similar
laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(xi) the Warrant Registration Rights Agreement has been duly
and validly authorized, executed and delivered by Holdings and is a
valid and binding agreement of Holdings, enforceable against Holdings
in accordance with its terms, except as (i) the enforceability
thereof may be limited
22
<PAGE>
by bankruptcy, insolvency or similar laws affecting creditors' rights
generally, (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability and (iii) as rights to indemnity and contribution
thereunder may be limited by applicable law;
(xii) the statements under the captions "Certain Relationships
and Related Party Transactions--the Recapitalization--Investors
Agreement," "Description of New Credit Facility," "Description of
Units," "Description of Notes," "Description of Warrants," and "Plan
of Distribution" in the Offering Memorandum, insofar as such
statements constitute a summary of legal matters or documents
referred to therein, fairly summarize in all material respects the
legal matters or documents referred to therein;
(xiii) the Indenture complies as to form in all material
respects with the requirements of the TIA, and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder; and
(xiv) it is not necessary in connection with the offer, sale
and delivery of the Units to the Initial Purchaser in the manner
contemplated by this Agreement or in connection with the initial
placement of the Units by the Initial Purchaser in the manner
contemplated by the Offering Memorandum pursuant to Exempt Resales to
qualify the Indenture under the TIA, and no registration under the
Securities Act of the Units is required for the sale of the Units to
the Initial Purchaser as contemplated by this Agreement or for the
initial placement of the Units by the Initial Purchaser in the manner
contemplated by the Offering Memorandum pursuant to Exempt Resales
assuming that (i) the Initial Purchaser is a QIB or a Regulation S
Purchaser, (ii) the accuracy of, and compliance with, the Initial
Purchaser's representations and agreements contained in Section 7 of
this Agreement, and (iii) the accuracy of the agreements and
representations of the Issuers set forth in Sections 5(h) and (m) and
6(hh), (ii), (jj), (kk), (ll), (mm) and (oo) of this Agreement. Such
counsel may state that it expresses no opinion as to any other offer
or resale.
In addition, such counsel shall state that it has participated in the
preparation of the Offering Memorandum and any amendments or supplements
thereto, if applicable, and that although such counsel has not independently
verified the accuracy, completeness or fairness of the statements contained
therein, no facts have come to such counsel's attention to cause it to believe
that, as of the date of the Offering Memorandum or as of the Closing Date, the
Offering Memorandum, as amended or supplemented, if applicable (except for the
financial statements and other financial or statistical data included therein
or omitted therefrom, as to which such counsel need not express any belief)
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
The opinion of Davis Polk & Wardwell described in this Section 9(f)
shall be rendered to the Initial Purchaser at the request of the Issuers and
shall so state therein.
(g) The Initial Purchaser shall have received on the Closing Date an opinion
(satisfactory to the Initial Purchaser and counsel for the Initial Purchaser),
dated the Closing Date, of Dennis R. Shaughnessy, Esq., general counsel for
the Issuer, to the effect that:
(i) each of the Issuers is a corporation duly formed, validly
existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as described in
the Offering
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Memorandum. Each of the Issuers is duly qualified to transact
business and is in good standing as a foreign corporation in each
jurisdiction where the character of its activities requires such
qualification, except where the failure of the Issuers to be so
qualified would not have a Material Adverse Effect;
(ii) the execution and delivery of this Agreement, the
Registration Rights Agreement, the Warrant Agreement, the Warrant
Registration Rights Agreement, the Indenture and the Securities and
compliance by the Issuers to the extent a party thereto, with the
provisions thereof will not conflict with, constitute a default under
or violate (i) any of the terms, conditions or provisions of the
certificate of incorporation or bylaws of the Issuers, (ii) any of
the terms, conditions or provisions of any document, agreement or
other instrument set forth on Exhibit C attached hereto, (iii) any
Delaware corporate, or federal law or regulation (other than federal
and state securities or blue sky laws, as to which such counsel
expresses no opinion), and (iii) any judgment, writ, injunction,
decree, order or ruling of any court or governmental authority
binding on the Issuers or any of their subsidiaries, except as
disclosed in the Offering Memorandum;
(iii) to such counsel's knowledge, there is no material
document, agreement or other instrument that will remain in effect
after the issuance of the Securities to which any Issuer is a party
(other than the Registration Rights Agreement and the Warrant
Registration Rights Agreement) granting any person the right to
require the Issuers to file a registration statement under the
Securities Act with respect to any securities of the Issuers or to
require the Issuers to include such securities with the Units
registered pursuant to any Registration Statement;
(iv) the Issuers are not and, after giving effect to the
offering and sale of the Units in accordance with the terms of this
Agreement and the application of the net proceeds thereof as
described in the Offering Memorandum under the captions "Use of
Proceeds," will not be, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended;
(v) to such counsel's knowledge, (a) neither of the Issuers nor
any of their domestic subsidiaries is in violation of its respective
organizational documents, (b) neither of the Issuers nor any of their
subsidiaries is in default in the performance of any obligation,
agreement, covenant or condition contained in any material document,
agreement or other instrument to which the Issuers or any of their
subsidiaries is a party or by which any of them or their respective
property is bound, in each case except where such violation or
default would not have a Material Adverse Effect; and
(vi) the statements under the captions "Certain Relationships
and Related Party Transactions" in the Offering Memorandum, insofar
as such statements constitute a summary of the legal matters or
documents referred to therein, fairly present in all material
respects such legal matters, or documents.
The opinion of Dennis R. Shaughnessy, Esq. described in this Section
9(g) shall be rendered to the Initial Purchaser at the request of the Issuers
and shall so state therein.
(h) The Initial Purchaser shall have received, at the Closing Date,
an opinion, dated the Closing Date, of Latham & Watkins, counsel for the
Initial Purchaser, in form and substance satisfactory to the Initial
Purchaser.
(i) The Initial Purchaser shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date hereof
or the Closing Date, as the case may be, in form and substance
24
<PAGE>
satisfactory to the Initial Purchaser from PricewaterhouseCoopers LLP,
independent public accountants, containing the information and statements of
the type ordinarily included in accountants' "comfort letters" with respect to
the financial statements and certain financial information contained in the
Offering Memorandum.
(j) The Securities shall have been approved by the NASD for trading
and duly listed in PORTAL.
(k) The Initial Purchaser shall have received a counterpart,
conformed as executed, of the Indenture which shall have been entered into by
the Company, the Guarantors and the Trustee.
(l) The Company shall have executed the Registration Rights Agreement
and the Initial Purchaser shall have received an original copy thereof, duly
executed by the Company and the Guarantors.
(m) The Issuers and the Guarantors shall have executed this Agreement
and the Initial Purchaser shall have received an original copy thereof, duly
executed by the Issuers and the Guarantors.
(n) Holdings shall have executed the Warrant Agreement and the
Warrant Registration Rights Agreement and the Initial Purchaser shall have
received counterparts, conformed as executed thereof.
(o) Neither of the Issuers nor the Guarantors shall have failed at or
prior to the Closing Date to perform or comply with any of the agreements
herein contained and required to be performed or complied with by the Issuers
or the Guarantors at or prior to the Closing Date.
10. Effectiveness of Agreement and Termination. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto other than the Sierra Entities.
This Agreement may be terminated at any time on or prior to the
Closing Date by the Initial Purchaser by written notice to the Issuers if any
of the following has occurred: (i) any outbreak or escalation of hostilities
or other national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere that,
in the Initial Purchaser's judgment, is material and adverse and, in the
Initial Purchaser's judgment, makes it impracticable to market the Units on
the terms and in the manner contemplated in the Offering Memorandum, (ii) the
suspension or material limitation of trading in securities or other
instruments on the New York Stock Exchange, the American Stock Exchange, the
Chicago Board of Options Exchange, the Chicago Mercantile Exchange, the
Chicago Board of Trade or the Nasdaq National Market or limitation on prices
for securities or other instruments on any such exchange or the Nasdaq
National Market, (iii) the suspension of trading of any securities of the
Issuers or any Guarantor on any exchange or in the over-the-counter market,
(iv) the enactment, publication, decree or other promulgation of any federal
or state statute, regulation, rule or order of any court or other governmental
authority which, in the Initial Purchaser's opinion, materially and adversely
affects, or will materially and adversely affect, the business, prospects,
financial condition or results of operations of the Issuers and their
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action
by any federal, state or local government or agency in respect of its monetary
or fiscal affairs which, in the Initial Purchaser's opinion, has a material
adverse effect on the financial markets in the United States.
11. Initial Purchaser's Information.
The Issuers and the Initial Purchaser acknowledge and agree for all
purposes under this Agreement that the statements with respect to the offering
of the Notes set forth in the stabilization language in the first
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<PAGE>
paragraph of page (i); and the first sentence of the third paragraph, the
fourth sentence of the sixth paragraph and the eighth paragraph under the
caption "Plan of Distribution" in such Offering Memorandum constitute the only
information furnished to the Issuers in writing by the Initial Purchaser
expressly for use in the Offering Memorandum.
12. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Issuers or any
Guarantor, at 251 Ballardvale Street, Wilmington, Massachusetts 01887,
Telecopier No.: 978-694-9504, and (ii) if to the Initial Purchaser, to
Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park Avenue, New
York, New York 10172, Attention: Syndicate Department, or in any case to such
other address as the person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Issuers, the Guarantors and the Initial
Purchaser set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery of and
payment for the Units, regardless of (i) any investigation, or statement as to
the results thereof, made by or on behalf of the Initial Purchaser, the
officers or directors of the Initial Purchaser, any person controlling the
Initial Purchaser, the Issuers, any Guarantor, the officers or directors of
the Issuers or any Guarantor, or any person controlling the Issuers or any
Guarantor, (ii) acceptance of the Units and payment for them hereunder and
(iii) termination of this Agreement.
If for any reason the Units are not delivered by or on behalf of the
Issuers as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 10), the Issuers and the Guarantors, jointly and
severally, agree to reimburse the Initial Purchaser for all out-of-pocket
expenses (including the fees and disbursements of counsel) incurred by them
(provided that the Sierra Entities shall not be responsible for any of the
fees and expenses described in this paragraph unless and until the
Consummation). Notwithstanding any termination of this Agreement, the Issuers
shall be liable for all expenses which they have agreed to pay pursuant to
Section 5(i) hereof. The Issuers and each Guarantor also agree, jointly and
severally, to reimburse the Initial Purchaser and its officers, directors and
each person, if any, who controls such Initial Purchaser within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act for any and
all fees and expenses (including without limitation the fees and expenses of
counsel) incurred by them in connection with enforcing their rights under this
Agreement (including without limitation their rights under Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Issuers, the
Guarantors, the Initial Purchaser, the Initial Purchaser's directors and
officers, any controlling persons of the Initial Purchaser referred to herein,
the directors and officers of the Issuers and the Guarantors, any controlling
persons of the Issuers or the Guarantors referred to herein and their
respective successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include
a purchaser of any of the Units from the Initial Purchaser merely because of
such purchase.
This Agreement shall be governed and construed in accordance with the
internal laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
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<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Issuers, the Guarantors and the Initial Purchaser.
Very truly yours,
CHARLES RIVER LABORATORIES, INC.
By:_____________________________________
Name:
Title:
CHARLES RIVER LABORATORIES HOLDINGS, INC.
By:_____________________________________
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:__________________________________
Name:
Title:
Accepted as of the consummation of the
Sierra Acquisition by SBI Holdings, Inc.,
Sierra Biomedical, Inc. and Sierra
Biomedical San Diego, Inc., each a
Guarantor, it being understood that the
provisions applicable hereto and binding
on the Guarantors are only effective
immediately upon the consummation of the
Sierra Acquisition:
SBI HOLDINGS, INC.
By:_________________________________
Name:
Title:
SIERRA BIOMEDICAL, INC.
By:_________________________________
Name:
Title:
SIERRA BIOMEDICAL SAN DIEGO, INC.
By:_________________________________
Name:
Title:
<PAGE>
SCHEDULE A
Subsidiaries
State/Country of
Name Incorporation
SBI Holdings, Inc. (simultaneously upon consummation of Nevada
the Sierra Acquisition)
Sierra Biomedical, Inc. (simultaneously upon consummation Nevada
of the Sierra Acquisition)
Sierra Biomedical San Diego, Inc. (simultaneously upon California
consummation of the Sierra Acquisition)
I.F.F.A. Credo France
S.A. Iffa Credo Belgium Belgium
Endosafe Amilabo S.A. France
CRIFFA Spain
Charles River France, S.A. France
Charles River WIGA (Deutschland) GmbH Germany
Elavages de Scientific Des Dombes S.A. France
Charles River Italia, S.p.A. Italy
Charles River Japan, Inc. Japan
Charles River U.K. Limited England
Shamrock (Great Britain) Limited England
Charles River Endosafe Limited England
Charles River Europe GmbH Germany
Charles River Anlab spol.s.r.o. Czech Republic
Charles River Consulting GmbH Germany
Charles River Sweden AB Sweden
Charles River Hungary Hungary
S-1
<PAGE>
ALPES SA Mexico
Spafas Jinan Poultry Company, Ltd. China
Zhanjiang A&C Biological Ltd. China
SPAFAS Australia Pty. Ltd. Australia
Charles River Canada Corporation Canada
S-2
<PAGE>
EXHIBIT A
Form of Registration Rights Agreement
<PAGE>
EXHIBIT B
Company's Certificate
Charles River Laboratories, Inc., a Delaware corporation (the
"Company") and Charles River Laboratories Holdings, Inc., a Delaware
corporation ("Holdings"), hereby certify through their Chief Executive
Officer, Chairman of the Board, President or a Vice President and the chief
financial officer, principal accounting officer or equivalent financial
officer responsible for the financial statements, pursuant to Section 9(e) of
the Purchase Agreement dated September 23, 1999, between the Company,
Holdings, the Guarantors that are a party thereto and Donaldson, Lufkin &
Jenrette Securities Corporation, as follows:
1. Attached hereto is a schedule listing the assumptions used by the
Company and Holdings in preparing the Company's and Holdings' calculation of
Adjusted EBITDA, which equals EBITDA plus restructuring charges, dividends
received or receivable from equity investments, Charles River non-cash
compensation, Sierra non-cash compensation, non-recurring transaction expenses
and expected cost savings, as set forth in the Offering Memorandum. Management
of the Company and Holdings believes that such assumptions are reasonable.
Capitalized terms used herein but not otherwise defined shall have
their respective meanings set forth in the Purchase Agreement.
In witness whereof, the Company and Holdings, through the
undersigned, have executed this certificate this 29th day of September, 1999.
CHARLES RIVER LABORATORIES, INC.
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
CHARLES RIVER LABORATORIES HOLDINGS, INC.
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT C
The following is a list of "Material Contracts," as required under Item
601(10) of Regulation S-K of the Exchange Act:
1. Credit Agreement, dated September 29, 1999 among Charles River
Laboratories, Inc. and DLJ Capital Funding, Inc.
2. Recapitalization Agreement, dated July 25, 1999, by and among Bausch &
Lomb Incorporated ("Bausch & Lomb"), certain subsidiaries of Bausch &
Lomb, CRL Acquisition LLC, and DLJ Merchant Banking Partners II, L.P.
3. Joint Venture Agreement between Ajinomoto Co., Inc. and Charles River
Breeding Laboratories, Inc. dated June 24, 1981, and ancillary
agreements, amendments and addendums. June 15, 1987 Amendment Agreement,
Amending the Joint Venture Agreement. January 17, 1994 Letter Amendment
of Joint Venture Agreement. August 30, 1996 Addendum to the Joint Venture
Agreement.
4. Merck Primate Supply Agreement between Merck & Co., Inc. and Charles River
Laboratories, Inc. dated September 30, 1994.
5. License and Technical Assistance Agreement CRL Breeding Labs and Ajinomoto
Co., Inc. Amendment Agreement, dated March 24, 1978.
6. Joint Venture Contract relating to setting up of Zhanjiang A&L Biological
Ltd. between Zhanjiang Scientific and Technical Service Centre and
Charles River Laboratories, Inc. dated March 8, 1997.
7. Technology License Contract between Charles River Laboratories
("Licensor") and Zhanjiang A&C Biological Ltd. ("Licensee") dated
September 1, 1997.
8. Joint venture and stock purchase agreement (unsigned) between SPAFAS,
Incorporated and Miguel Romero Sanchez, Margarita Berta, Martinez del
Sobral of Campa, Socorro Romero Sanchez, Luisa Romero Martinez del Sobrae
and Alejandro Romero Martinez del Sobral and Aves Libres de Patogenos
Especificies, S.A. dated August 15, 1996.
9. Award/Contract between National Institute on Drug Abuse and Charles River
Laboratories dated July 1, 1997.
10. FCRDC Contract between National Cancer Institute Research Contracts
Branch Frederick Cancer Research and Development Center (NCI-FCRDC) and
Charles River Laboratories, Inc. dated September 26, 1994.
11. Strategic Partnership Agreement between Multicase, Inc. and Charles River
Laboratories, Inc. dated January 1, 1999.
12. Ground Lease between HIC Associates (Lessor) and Charles River
Laboratories, Inc. (Lessee) dated June 5, 1992; Real Estate Lease between
Charles River Laboratories, Inc. (Landlord) and Charles River Partners
L.P. (Tenant) dated December 22, 1993; and Assignment and Assumption
Agreement between Charles River Partners, L.P. (Assignor) and Wilmington
Partners L.P. (Assignees) dated December 22, 1993.
<PAGE>
13. Lease between Kenneth J. and Vivianne Pickren and East Acres Farm, Inc.
(collectively, Landlord) and Charles River Laboratories, Inc. (Tenant)
dated November 30, 1994; Notice of Lease between Kenneth J. and Vivianne
Pickren and East Acres Farm, Inc. (collectively, Landlord) and Charles
River Laboratories, Inc. (Tenant) filed in the office of the Worchester
Registry of Deeds on December 16, 1994 in Book 16772, page 34.
14. Agreement of Lease between Rouse & Associates-Philadelphia (Landlord) and
Tektagen, Inc. (Tenant) dated May 19, 1987; First Amendment to Lease
between Rouse & Associates-Philadelphia Limited Partnership (Landlord)
and Tektagen, Inc. (Tenant) dated November 21, 1989 (changes renewal
notice requirement); Third Amendment to Lease between PBP Realty
Partnership (Landlord) and Bionetics Corporation, successor in interest
to Ketron, Inc. (Tenant) dated April 14, 1994 (increases space); Fourth
Amendment to Lease between PBP Realty Partnership (Landlord) and
Tektagen, Inc. (Tenant) dated April 1994 (increases space, extends term
and includes additional renewal options); Fifth Amendment to Lease
between PBP Realty Partnership (Landlord) and Tektagen, Inc. (Tenant)
dated August 1, 1997.
(extends term to 7/31/02 and gives one 5 year renewal option).
15. Lease Agreement between Wappoo Partners (Landlord) and Endosafe (Tenant)
dated February 28, 1993; and Assignment and Assumption of Lease Agreement
between Charles River Laboratories, Inc. (Acquiror) and Endosafe, Inc.
(Exchangor) dated January 27, 1994.
16. Amended and Restated Distribution Agreement between Charles River BRF,
Inc. Charles River Laboratories, Inc., Bioculture Mauritius Ltd. and Mary
Ann and Owen Griffiths, dated December 23, 1997.
17. Supply Agreement for non-human primates among Sierra Biomedical, Inc. and
Scientific Resources International, Ltd., dated March 18, 1997.
EXHIBIT 10.7
CHARLES RIVER LABORATORTIES, INC.
Merck Primate Supply Agreement
This PRIMATE SUPPLY AGREEMENT, by and between Merck & Co., Inc., a
New Jersey corporation with its principal offices at One Merck Drive,
Whitehouse Station, New Jersey 08889-0100 ("Customer"), and Charles River
Laboratories, Inc., 251 Ballardvale Street, Wilmington, Massachusetts 01887
("Charles River"), is made this 30th day of September, 1994.
WHEREAS, Customer desires to obtain colony-reared rhesus primates for
its operations and to acquire an option to purchase such primates under the
terms and conditions of this Agreement; and
WHEREAS, Charles River is willing to supply such primates to Customer
and to grant a purchase option to Customer, subject to the terms and
conditions specified below.
Now, therefore, intending to be legally bound, Customer and Charles
River hereby agree as follows;
1. Supply Commitment; Breeding and Resales.
(a) Charles River will make available for purchase annually by
Customer the number of specific pathogen free, colony raised Macaca mulatta or
rhesus primates set forth on Schedule I-A hereto (the "Bred Primates"). Any
and all production in excess of the numbers set forth in Schedule I-A shall be
the sole property of Charles River and shall be freely saleable by Charles
River to third parties. Such Bred Primates will be sourced from Charles River's
breeding colonies located in the State of Florida (collectively, the
"Colonies"), including those at Key Lois, Raccoon Key and the Mannheimer
Foundation. The Bred Primates will be made available for delivery to Customer
in accordance with a shipment schedule to be established quarterly by mutual
agreement of the parties.
(b) Customer may not resell or otherwise transfer to third
parties (other than its affiliates, being corporations in which Customer owns
at least a 51% equity interest) any Bred Primates it purchases from Charles
River under this Agreement, except that it may transfer those Bred Primates
which Customer purchases and takes actual possession of but does not require
for its then existing research and testing needs pursuant to the "take or pay"
commitment set forth in paragraph 2 and the inventory purchase option set
forth in paragraph 6.
<PAGE>
2. Purchase Commitment
(a) Customer hereby guarantees to purchase annually 100% of the
Bred Primates made available for sale by Charles River, as set forth on
Schedule I-A (in each case, the "Guaranteed Amount"). To the extent the number
of Bred Primates made available to Customer is less than the Guaranteed
Amount, then Customer shall be required to purchase only the actual available
amount. In no event will Customer have the right to cancel all or any part
of a given year's guaranteed purchase commitment.
(b) In the event that Customer does not accept delivery of Bred
Primates in accordance with any mutually agreed upon delivery schedule,
Customer shall nonetheless be deemed to take risk of loss of all Bred primates
included in such delivery on the scheduled delivery date. Notwithstanding the
foregoing, all liability associated with said Bred Primates shall remain with
Charles River until delivery of the Bred Primates to Customer, F.O.B.
Customer's designated facility. Bred primates for which Customer takes risk of
loss but not actual possession shall be physically segregated by Charles
River, such that each Bred Primate owned by Customer may be specifically
identified as such. Risk of loss shall not vest in Customer as set forth in
this paragraph in the event that Customer is unable to accept any delivery due
to any force majeure.
(c) To the extent that Customer fails to take delivery of the
Guaranteed Amount during the applicable calendar year, after consultation with
Customer, Charles River shall use commercially reasonable efforts to sell to
third-party customers the number of Bred Primates constituting the shortfall,
at prices to be determined by Charles River (following discussion with
Customer), and to credit 100% of the proceeds of such sales (net of reasonable
direct selling expenses) to Customer's account. Charles River's commitment to
sell Customers Bred Primates shall arise only after Charles River has sold all
of its excess production not committed to Customer. Except as specifically set
forth above, in no event shall Customer be released from its annual commitment
to pay Charles River for the Guaranteed Amount,
(d) Any Bred Primates not shipped to Customer in accordance
with the quarterly shipment schedule shall be subject to monthly per diem
maintenance payments until such time as said Bred Primates are shipped to
Customer. The per them rates shall be as set forth in Schedule 1-B.
3. Specifications. Schedule I hereto sets forth the number of Bred
Primates, which shall be 50% male and 50% female, to be supplied by Charles
River to Customer and comprising the Guaranteed Amount for each of the
calendar years indicated. Unless otherwise requested by Customer and agreed to
by Charles River, all the Bred Primates supplied hereunder will be of body
weight 2.0 to 2.9 kilograms for both males and females, and will meet the
health specifications set forth in Schedule II. Charles River
2
<PAGE>
shall exercise reasonable diligence in maintaining and expanding the Colony to
meet the quantities specified on Schedule I and the health status specified on
Schedule II.
4. Prices. Charles River will issue a quarterly written statement to
Customer for each Bred Primate at the time of shipment at the annual per-unit
prices specified on Schedule III within the desired weight range. An invoice
for shipping costs (including costs for crates, delivery and any excess per
diems) will be separately provided to Customer with each shipment. In no event
will per-unit prices charged to Customer for Bred Primates exceed the
then-current (i.e., in the same calendar year) price paid by other customers
purchasing primates sourced from the Colonies at the same male-to-female ratio
and within the desired (2.0 kg. - 2.9 kg.) weight range.
5. Funding of Extraordinary Colony Relocation Costs.
(a) Charles River has advised Customer that it intends to
transfer Bred Primates to a land-based colony established at the Mannheimer
Foundation ("MF") during the course of this Agreement, and Customer has agreed
to Charles River's designation of MF as the primary site for Charles River's
land-based colony of Bred Primates. For this purpose, the parties agree that
MF is a third party beneficiary of this Agreement. To the extent that Customer
reasonably requests Charles River to relocate Bred Primates to the MF colony
at a faster rate than currently proposed (i.e., at a rate which accelerates
Charles River's current 5-year plan to establish a self-sustaining colony of
900 Bred Primates suitable for breeding at MF's facilities by 1999 in
accordance with the schedule set forth on the attached Schedule IV), then
Customer hereby agrees to fully fund the actual additional costs associated
with any Customer requested accelerated relocation program, on payment terms
to be mutually agreed to by the parties, and supported by appropriate
documentation. To the extent that Bred Primates are transferred to the
land-based MF colony, they will still constitute "Inventory" for purposes of
Section 6 below.
(b) Customer will also support Charles River's program for a
land-based colony at MF by funding construction of "mini-crib" family units
not to exceed $100,000. Funds will be payable to Charles River upon
completion of construction of the family units.
6. Inventory Purchase Option.
(a) Charles River hereby grants Customer an irrevocable option
(the "Option") to purchase all or that portion of the Bred Primates
constituting the Colonies as set forth in Section 6 (b) hereof (in either
case, the "Inventory") at the time of expiration of the Initial Term (as
defined in Section 13 below) at a cash purchase price equal to the inventory
value of the Bred Primates carried on Charles River's books and records at the
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<PAGE>
time such Option is exercised. In the event this agreement is assigned and
the Inventory value is "stepped-up" by the assignee, for purposes of this
provision the Inventory value shall be deemed to exclude any such step-up.
Inventory will be valued consistent with Charles River's historical
practices, except that costs of transfers under Paragraph 5 borne by Customer
will not be included in the inventory value for purposes of calculating the
Option exercise price, Customer shall be obligated to deliver payment for
such Inventory no later than thirty (30) days following the expiration of the
Initial Term, at which time title to the Inventory purchased pursuant to the
Option shall transfer to Customer. Customer shall not be required to make any
advance payments in order to secure the Option granted pursuant to this
Section 6(a) at the time of execution of this Agreement. Continuation of
payments made under this Agreement, however, shall be deemed to constitute
current consideration for the continuing offer of such Option. Customer may
not exercise the Option during the specified exercise period if it is then
currently in default under the terms of this Agreement.
(b) At its election, Customer may exercise the Option either
(i) for the existing Inventory or (ii) for that part of the Inventory equal to
the number of Bred Primates necessay to produce offspring to fulfill
Customer's requirement of 650 equal sex Bred Primates annually. In the event
that Customer exercises the option for (ii), the number to fulfill such
requirement will be reduced by the aggregate number of offspring that were
purchased by Customer in the preceeding year pursuant to Paragraph 2 of this
agreement (the "take or pay" provision), but were not used for Customer's
research and testing. In any event, the Customer may not exercise the Option
for less than 50 percent of the Inventory as of the date of exercise.
(c) In the event the Option is not exercised by Customer in
accordance with this Section 6, this Agreement shall automatically renew for
a two-year period, with annual 10% per-unit price increases to automatically
take effect during each of the two years included in such renewal period. Such
price increases shall be applicable to Guaranteed Amounts which shall, for
each year included in the automatic renewal period, be no less than the
Guaranteed Amount required to be purchased by Customer during the last full
year of the Initial Term. In the event of such a renewal, all other terms of
this Agreement shall remain unchanged (giving effect to expiration of the
Option).
(d) In the event the Option is exercised by Customer in
accordance with this Section 6, Customer hereby agrees that in connection with
such exercise, it will simultaneously enter into a two-year primate colony
management agreement (the "Management Agreement") with Charles River on terms
mutually agreeable to the parties, pursuant to which CRL will manage (on a
full cost reimbursement basis plus 10%) the inventory acquired by Customer
through the exercise of the Option. In the event this Agreement is assigned to
a non-profit organization, the Management Agreement will be for cost only.
Said Management Agreement will include (i) indemnification by Charles
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<PAGE>
River of Customer for any environmental liabilities associated with the Bred
Primates owned by Customer and located on Key Lois or Raccoon Key, and (ii)
provision for inspection of books and records by Customer to verify costs and
expenses as the basis for the management fees. The indemnification provided
under (i), will continue to be provided by Charles River in the event of any
sale or assignment of this agreement to a third party. Charles River shall
comply in all material respects with applicable USDA regulations governing
the care of primates. Charles River will cooperate with Customer in the
transfer, assignment and recording of all necessary documentation and to take
such other actions for the transfer of ownership of the Colony at Customer's
sole expense.
(e) In the event Customer elects to exercise the Option for
less than the entire Colony, then the following conditions shall apply: (i)
the Bred Primates will be selected by Charles River on a representative cross
sectional basis, reflecting an equitable distribution of both sex, age, health
profiles and location and (ii) Charles River shall not be required to sell any
additional Bred Primates to Customer beginning with date on which the transfer
of ownership occurs.
(f) Customer shall provide Charles River with a non-binding
written notice of its intent to exercise, in whole or in part, the Option no
later than two years prior to the exercise date, and a binding written notice
of exercise, in whole or in part, no later than one year prior to the exercise
date. Said written notices shall specify the quantity of Inventory intended to
be purchased by Customer, and other relevant information reasonably requested
by Charles River.
7. Tests and Records. All of the Bred Primates supplied to Customer
will be tested by Charles River, in accordance with generally accepted testing
methods and techniques, to confirm that they meet the health specifications set
forth in Schedule II. The cost of testing will be charged and invoiced to
Customer separately only if said testing is not required to initially
demonstrate that the Bred Primates meet the specifications set forth in
Schedule II. Charles River shall provide Customer with a medical
history/record and a valid health certificate of each of the Bred Primates at
the time of shipment.
8. Payment Terms. Within fifteen (15) days of execution of this
Agreement and, thereafter, at the beginning of each quarter throughout each of
the remaining calendar years included in the term of this Agreement, Customer
shall pay to Charles River an amount equal to the product of (i) the
Guaranteed Amount required to be purchased in that quarter and (ii) that
quarter's per-unit price for Bred Primates. Charles River will ship the Bred
Primates FOB destination, which will be designated by Customer in advance of
shipment and will insure the Bred Primates to the destination point. Customer
will pay all shipping costs (excluding insurance). Shipments will be made in
accordance with all material applicable state and federal laws. The resulting
amount shall
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<PAGE>
constitute advance payment against Customer purchases to be made in that
quarter, and shall not be refundable to Merck so long as Charles River is
able to provide Merck with Bred Primates substantially in accordance with the
delivery schedule mutually agreed to by the parties.
9. Warranty; Disclaimer. Charles River represents and warrants that
each Bred Primate supplied by Charles River under this Agreement (or, if
applicable, to be transferred following exercise of the Option) shall meet all
of the specifications set forth in Schedule II hereto. THIS SHALL BE THE
EXCLUSIVE WRITTEN WARRANTY OF CHARLES RIVER AND THERE ARE NO FURTHER
WARRANTIES OR REPRESENTATIONS, EXPRESSED OR IMPLIED, INCLUDING AN IMPLIED
WARRANTY OF MERCHANTABILITY. IN NO EVENT SHALL CHARLES RIVER BE LIABLE FOR
CONSEQUENTIAL ECONOMIC DAMAGES OR CONSEQUENTIAL DAMAGE TO PROPERTY. If
Customer determines that any Bred Primate fails to meet such specifications
upon receipt, or if significant adverse health conditions develop within
twenty (20) days of receipt, it shall have the right to reject such Bred
Primate by notifying Charles River not later than twenty (20) days after
delivery of such Bred Primate to Customer; provided that for tuberculosis the
notice period shall be seventy (70) days after delivery (so long as the
TB-infected Bred Primate was not contaminated at Customer's facility).
Failure to reject any Bred Primate by such time shall constitute acceptance
thereof. If Customer rejects any Bred Primate hereunder, it shall have the
right to receive, at its option, either: (i) no charge replacement of such
Bred Primate from Charles River in accordance with the provisions hereof; or
(ii) a credit against future purchases equal to the purchase price of the
rejected Bred Primate and any shipping charges separately invoiced to Customer
in connection therewith.
10. Indemnification. As a condition precedent to the delivery by
Charles River of Bred Primates hereunder, Customer shall execute and deliver
to Charles River the Primate Customer Indemnity Statement attached as Exhibit
A.
11. Consultation Rights. Charles River shall actively and
continuously consult with appropriate representatives of Customer on all
strategic decisions affecting the Colony. Charles River shall also
periodically provide Customer with written information on the status of the
Colony, all material SOPs for its maintenance, and such other issues as the
parties may agree from time to time. In addition, Customer shall have the
right to direct Charles River's plan for Customer's capital contribution to
MF as provided in paragraph 5(b). Any input provided by Customer's
representatives shall not be binding upon Charles River, and Customer shall
not be liable therefore.
6
<PAGE>
12. Term and Termination. Subject to Section 6 above, this Agreement
shall take effect as of the date set forth above and will terminate on
December 31, 2000 (such six and one-half year period is referred to herein as
the "Initial Term"). Either party may terminate this Agreement for an
unremedied material breach of this Agreement which is not cured within ninety
(90) days of notice. This Agreement way be renewed by mutual written agreement
of the parties upon 12 months' prior written notice.
13. Miscellaneous Legal Provisions.
(a) It is not the intent of Charles River and Customer to form
any partnership or joint venture, and nothing contained herein shall be
construed to empower either party to act as agent for the other, The parties
agree that each of them shall, in relation to its obligations hereunder, be
acting as an independent contractor.
(b) No party may assign this Agreement in whole or in part
without the prior written consent of the other parties; except that Charles
River may assign this Agreement without Customer's consent to (i) a non-profit
organization for any reason and at any time, and (ii) after December 31, 1995
to a for-profit organization for any reason; provided, however, that in the
case of any assignment without Customer's prior consent Charles River shall
guarantee to Customer that the Colony will be managed by the assignee
substantially in accordance with all mandatory AAALAC standards applicable to
such a primate operation. In the event of any assignment to a for-profit by
Charles River resulting in the sale of the Colony, Customer shall have the
right to match the terms of said sale upon thirty (30) days written notice,
Once assigned, all of the provisions of this Agreement and all the rights and
obligations of the parties hereunder shall be binding upon and inure to the
benefit of and be enforceable by the successors and assigns of the respective
parties.
(c) Each party shall hold in confidence information concerning
this Agreement and the terms hereof and shall not make any public statements
or announcements about it, nor issue news releases relating to the existence
or implementation hereof. If either party receives requests for information
about this Agreement from outside organizations, each party will notify the
other party and in cooperation both parties will formulate a strategy and
response.
(d) Neither Charles River nor Customer shall be liable to the
other in damages for, nor shall this Agreement be terminable or cancellable by
reason of, any delay or default in such party's performance hereunder if such
default or delay is caused by events beyond such party's reasonable control
including, but not limited to, acts of God, regulation or law or other action
of any government or agency thereof, war, insurrection, civil commotion,
destruction of facilities or materials by earthquake, fire, flood or storm,
labor disturbances, loss of breeding colony due to disease or failure of
7
<PAGE>
suppliers, public utilities or common carriers or any actual or de facto import
embargoes or state import restrictions or limitations,
(e) This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Massachusetts (regardless of
its, or any other jurisdiction's choice of law principles).
(f) All correspondence and invoices pertaining to this
Agreement should be directed to Director, Laboratory Animal Resources,
WP44-201, Sunneytown Pike, West Point PA 19486 in the case of Customer, and
Mr. Robert C. Lorette in the case of Charles River.
MERCK & CO., INC. ) CHARLES RIVER LABORATORIES, INC,
By: /s/ Edward M. Scolnick, M.D. By: /s/ James C. Foster
------------------------------------- --------------------------------
Edward M. Scolnick, M.D. James C. Foster
Title: Exec. V.P., Science and President and CEO
Technology, Merck & Co., Inc. and
President, Merck Research Labs
8
<PAGE>
Exhibit A
CHARLES RIVER LABORATORIES
Primate Customer Indemnity Agreement
A. Charles River Laboratories, Inc. ("Charles River") is engaged
in the sale of nonhuman primates, such as cynomolgus and rhesus monkeys, and
their tissue.
B. These primates may harbor naturally occurring zoonotic infectious
agents, including viruses and bacteria that are dangerous and potentially
deadly to humans. Charles River employs the best practices commonly used by
the industry to detect these agents during a quarantine and conditioning
period and will carry out special supplemental examinations upon request,
Nevertheless, Charles River cannot guarantee that the primates it sells will
be free of these agents.
C. Primates and primate tissue can be safely handled to avoid risk
to the handler from these harmful agents, but the safe handling of these
primates or their tissue is out of the control of Charles River after
shipment. The responsibility for protecting individuals who may come in
contact with these primates after shipment must therefore, rest with the
purchaser.
D. Charles River is unwilling to sell primates or primate tissue to
the undersigned (Customer) in light of the potential risk of litigation and
liability to Charles River without indemnification from Customer.
E. Customer wishes to purchase primates or their tissue from Charles
River, and In order to induce Charles River to make such sales, Customer is
providing Charles River with the following indemnity.
In consideration of the foregoing, and intending to be legally
bound, Customer and Charles River agree as follows:
1. Indemnity. Customer hereby agrees, to indemnify and hold harmless Charles
River, its parent subsidiaries and affiliates and their respective officers,
employees and directors against any and all liability, loss, damage, cost or
expense (including attorneys' fees and expenses and costs of investigation)
which any of them may hereafter incur, suffer or be required to pay as the
result of any damage suffered or alleged to be suffered, including, without
limitation, death or personal injury and any direct, consequential, special and
punitive damages, as the result of a Charles River primate or primate tissue
after such primate or tissue has been delivered to Customer; provided,
however, that such loss, liability or damage is not attributable to the fraud,
gross negligence, malfeanance or willful misconduct of Charles River.
A-1
<PAGE>
2. Terms and Conditions of Sale. Notwithstanding anything else set forth in
any other document furnished by Customer to Charles River including any
purchase order, any sales of primates and primate tissue made by Charles River
to Customer shall be on Charles River's standard terms and conditions of sale
as set forth in the Primate Supply Agreement with Customer (the "'Agreement").
Except as specifically set forth in the Agreement, Charles River makes no
warranties of any kind with respect to primates or primate tissue it sells;
ALL OTHER WARRANTIES, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY
DISCLAIMED. CHARLES RIVER'S LIABILITY IS SPECIFICALLY LIMITED TO REPLACEMENT
OF PRODUCT SOLD OR REFUND Of PURCHASE PRICE AS PROVIDED IN THE AGREEMENT, AND
IN THE ABSENCE OF FRAUD, GROSS NEGLIGENCE, MALFEASANCE OR WILLFUL MISCONDUCT
BY CHARLES RIVER AND IN NO EVENT SHALL CHARLES RIVER BE LIABLE FOR ANY OTHER
DAMAGES, INCLUDING, WITHOUT LIMITATION, DIRECT, CONSEQUENTIAL, SPECIAL OR
PUNITIVE DAMAGES.
3. Miscellaneous. This agreement shall be binding on and inure to the benefit
of and be enforceable by Charles River and Customer and their respective
successors and assigns. This Agreement shall be governed by the laws of
Massachusetts. This Agreement is intended to take effect as a sealed
instrument.
IN WITNESS WHEREOF, Charles River and Customer have each caused
this Agreement to be executed on their respective behalves under seal by their
duly authorized officers as of the date below.
CHARLES RIVER LABORATORIES, INC. MERCK & CO., INC.
By: /s/ James C. Foster By: /s/ Edward M. Sculnick, M.D.
------------------------------- -------------------------------------
James C. Foster Edward M. Sculnick, M.D.
President and CEO Title: Exec. V.P., Science and
Technology. Merck & Co., Inc.
and President, Merck Research
Labs
Date: September 30, 1994
A-2
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Schedule I-A
ANNUAL GUARANTEED PURCHASES
Guaranteed Amount
of Annual Purchases
Calendar Year In Units (Equal Sex)
------------- --------------------
1994 400
1995 500
1996 550
1997 550
1998 600
1999 600
2000 650
* 164 to be shipped between October 1 and December 31, 1994, of which 80 have
been prepaid.
<PAGE>
Schedule I-B
PER DIEM PAYMENTS
Key Lois Facility: $2.00 per day for animals not taken in quarterly
distribution.
S4.00 per day for animals ready for shipment but delayed by
customer.
MF $2.00 per day for animals not taken in quarterly
distribution.
$5.00 per day for animals ready for shipment by delayed by
customer.
These costs increase 5% per calendar year.
<PAGE>
SCHEDULE II
SPECIFICATIONS FOR COLONY-REARED PRIMATES
All Bred Primates provided to Customer must meet the following specifications:
I The animals provided must be tested free of the following infectious
disease-causing agents:
o Common pathogenic external and internal hehminth and arthropod
parasites
o Tuberculosis
o Salmonella/Shigella
o Herpes B virus
o SAIDS virus complex (SRV1, SRV2, SIV)
o Rabies
o Tetanus
o Filovirus
2. Prior to shipping, vendor must notify Customer of any other known
significant infectious diseases causing agents in the breeding colony
of origin, such as hemo- and enteric-protozoal parasites; entetic
bacterial pathogens, and viral agents such as Hepatitis A, Measles,
and Monkey Pox.
3. The following veterinary and husbandry procedures must be performed
prior to shipment:
(a) Three negative TB tests given at intervals of approximately two weeks
within six weeks of shipment.
(b) Rectal cultures just prior to shipment negative for enteric bacterial
pathogens such as Salmonell and Shigella.
4. Each animal delivered is to have an individual animal record sent
with the animal, or under separate cover, which will include such
information as: month of birth; socialization information, such as
cage/pen mates; and health information, such as all treatments, test
results, etc.
5. Charles River will develop and implement a genetic monitoring plan
for the Colony.
<PAGE>
6. All Bred Primates will be permanently identified with a legible tattoo or
other means such as implantable micro-cbip as agreed to by Customer (chips
will be supplied by Customer).
7. A valid health certificate will be provided for each shipment of animals.
8. Charles River must notify customer of any known deviation from these
specifications prior to departure of any shipment of animals to a Merck
designated site.
<PAGE>
Schedule III
PRICES
Calendar Year Prices
-----------------------------------------------------
1994 (partial) $ 3,650
1995 $ 4,015
1996 $ 4,420
1997 $ 4,865
1998 $ 5,350
1999 $ 5,885
2000 $ 6,475
<PAGE>
Schedule IV
MANNHEIMER COLONY BUILD-UP PLAN
Number of Bred Primates
Calendar Year Comprising Colony
------------- -----------------------
1995 500
1996 650
1997 750
1998 850
1999 900
2000 900
EXHIBIT 10.8
Execution Copy
- -------------------------------------------------------------------------------
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
AMONG
CHARLES RIVER LABORATORIES, INC.
AND
SBI HOLDINGS, INC.
AND ITS STOCKHOLDERS
SEPTEMBER 4, 1999
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions...............................................................1
1.1. Defined Terms....................................................1
1.2. Additional Provisions............................................9
2. Acquisition of Stock by Buyer............................................10
2.1. Purchase and Sale of Stock......................................10
2.2. Purchase Price..................................................10
2.3. Working Capital Adjustment......................................11
2.4. Purchase Price Adjustment.......................................11
2.5. The Closing.....................................................12
2.6. Deliveries at the Closing.......................................12
3. Representations and Warranties Regarding the Company.....................12
3.1. Organization of the Company.....................................12
3.2. Capitalization and Ownership of the Company.....................12
3.3. Authorization of Transaction....................................13
3.4. Noncontravention................................................13
3.5. Brokers' Fees...................................................14
3.6. Title to Assets.................................................14
3.7. Subsidiaries....................................................14
3.8. Financial Statements............................................15
3.9. Absence of Certain Changes and Events...........................15
3.10. Absence of Undisclosed Liabilities..............................17
3.11. Legal and Other Compliance......................................18
3.12. No Material Adverse Change......................................18
3.13. Taxes...........................................................18
3.14. Property, Plant and Equipment...................................20
3.15. Intellectual Property...........................................22
3.16. Inventories.....................................................24
3.17. Contracts.......................................................24
3.18. Accounts Receivable.............................................26
3.19. Insurance and Risk Management...................................26
3.20. Litigation......................................................27
3.21. Product Warranties; Defects; Liability..........................27
3.22. Employees.......................................................27
3.23. Employee Benefits...............................................28
3.24. Environment, Health and Safety..................................30
3.25. Affiliated Transactions.........................................32
3.26. Distributors, Customers, Suppliers..............................32
3.27. No Illegal Payments, Etc........................................33
3.28. Books and Records...............................................33
3.29. Consents........................................................33
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<PAGE>
3.30 Disclosure......................................................33
3A. Representations and Warranties Regarding Sellers.........................34
3A.1. Title to Shares.................................................34
3A.2. Authorization of Transaction....................................34
3A.3. Noncontravention................................................34
4. Representations and Warranties of the Buyer..............................35
4.1. Organization of the Buyer.......................................35
4.2. Authority for Agreement.........................................35
4.3. Noncontravention................................................35
4.4. Brokers' Fees...................................................35
5. Covenants................................................................35
5.1. General.........................................................35
5.2. Notices and Consents............................................35
5.3. Operation of Business...........................................36
5.4. Preservation of Business........................................36
5.5. Full Access.....................................................36
5.6. Notice of Redemption of Series A Preferred Stock................37
5.7. Notice of Developments..........................................37
5.8. Exclusivity.....................................................37
5.9. Assistance in Financing.........................................37
5.10. Access to Records after Closing.................................37
5.11. Future Assurances...............................................38
5.12. Release of Guarantees...........................................38
6. Conditions to Obligation to Close........................................38
6.1. Conditions to Obligation of the Buyer...........................38
6.2. Conditions to Obligations of the Sellers........................40
7. Confidentiality..........................................................41
8. Noncompetition...........................................................42
9. Indemnification..........................................................42
9.1. Survival of Representations and Warranties......................42
9.2. Indemnity by Sellers Relating to the Company....................43
9.3. Indemnity by Sellers............................................44
9.4. Indemnity by Buyer..............................................44
9.5. Matters Involving Third Parties.................................45
9.6. Other Indemnification Provisions................................46
10. Termination..............................................................46
10.1. Termination of Agreement........................................47
10.2. Effect of Termination...........................................48
11. Miscellaneous............................................................48
11.1. Press Releases and Public Announcements.........................48
11.2. No Third Party Beneficiaries....................................48
11.3. Seller Representative...........................................48
11.4. Entire Agreement................................................48
11.5. Succession and Assignment.......................................49
ii
<PAGE>
11.6. Counterparts....................................................49
11.7. Headings........................................................49
11.8. Notices.........................................................49
11.9. Governing Law...................................................50
11.10. Arbitration.....................................................50
11.11. Amendments and Waivers..........................................51
11.12. Severability....................................................51
11.13. Expenses........................................................52
11.14. Construction....................................................52
11.15. Incorporation of Exhibits and Schedules.........................52
Exhibits
2.1 Sellers
2.2 Form of Escrow Agreement
2.3 Target Working Capital
3.8 Financial Statements
6.1(f)(i) Form of Employment Agreement
6.1(f)(ii) Form of Noncompetition Agreement
6.2(c) Form of Performance Bonus Plan
9.2 Indemnification
iii
<PAGE>
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
This Amended and Restated Stock Purchase Agreement (the "Agreement"),
dated as of September 4, 1999, is by and among Charles River Laboratories,
Inc., a Delaware corporation (the "Buyer"), SBI Holdings, Inc., a Nevada
corporation ("SBI" or the "Company"), and each of the persons listed on the
signature pages hereto as sellers (collectively, the "Sellers"). The Buyer, the
Company and the Sellers collectively are referred to herein as the "Parties."
Certain of the Parties are party to a stock Purchase Agreement dated as of
September 3, 1999 (the "Original Agreement").
This Agreement contemplates a transaction in which the Buyer will purchase
at the Closing all of the then outstanding shares of Common Stock of the
Company (the "Shares") in consideration of the Aggregate Purchase Price. Prior
to the Closing, all of the options and warrants to purchase Common Stock shall
have been exercised or terminated.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows: 1. Definitions. 1.1.
Defined Terms. As used herein, the following terms shall have the meaning
herein specified:
"AAA" has the meaning set forth in Section 11.10(a).
"Actual Working Capital" means the Working Capital as reflected in the
Closing Date Balance Sheet.
"Affiliate" of any specified Person means (i) any other Person which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person (for the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by" and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement
or otherwise), (ii) any Person who is or has been within two years prior to the
time in question an officer, director or direct or indirect beneficial holder
of at least 5% of any class of the outstanding capital stock or other evidence
of beneficial interest of such specified Person and the Members of the
Immediate Family of each such officer, director or holder (and, if such
specified Person is a natural person, of such specified Person) and (iii) each
Person of which such specified Person or an Affiliate (as defined in clauses
(i) or (ii) above) thereof shall, directly or
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indirectly, beneficially own at least 5% of any class of outstanding capital
stock or other evidence of beneficial interest at such time.
"Affiliated Group" means any affiliated group within the meaning of
Section 1504(a) of the Code or any similar group defined under a similar
provision of state, local, or foreign law.
"Aggregate Closing Payment" has the meaning set forth in Section 2.2.
"Aggregate Purchase Price" means $24,000,000 (Twenty-Four Million
Dollars), as such amount may be adjusted pursuant to Sections 2.3 and 2.4.
"Agreement" has the meaning set forth in the preamble above.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could reasonably form the basis
for any specified consequence.
"Buyer" has the meaning set forth in the preamble above.
"Chemical Substance" means any chemical substance, including but not
limited to any: (i) pollutant, contaminant, irritant, chemical, raw material,
intermediate, product, by-product, slag, construction debris; (ii) industrial,
solid, liquid or gaseous toxic or hazardous substance, material or waste; (iii)
petroleum or any fraction thereof; (iv) asbestos or asbestos-containing
material; (v) polychlorinated biphenyl; (vi) chlorofluorocarbons; and, (vii)
any other substance, material or waste, which is identified or regulated under
any Environmental Law or Safety Law, as now and hereinafter in effect, or other
comparable laws.
"Closing" has the meaning set forth in Section 2.5.
"Closing Agreements" means the Employment Agreements, the Noncompetition
Agreements, the Performance Bonus Plan and the Performance Bonus Agreements.
"Closing Balance Sheet" has the meaning set forth in Section 2.3(a).
"Closing Date" has the meaning set forth in Section 2.5.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning set forth in Section 3.2.
"Company" has the meaning set forth in the preamble above and, where
applicable, in Section 3.
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"Company Permits" has the meaning set forth in Section 3.11.
"Confidential Information" means any and all information concerning the
businesses and affairs of the Company other than that information which is
already generally or readily obtainable by the public or is publicly known or
becomes publicly known through no fault of the Sellers.
"Controlled Group of Corporations" has the meaning set forth in Section
1563 of the Code.
"Deferred Intercompany Transaction" has the meaning set forth in Treas.
Reg. Section 1.1502-13.
"Disclosure Schedule" has the meaning set forth in Section 3.
"Dispute Notice" has the meaning set forth in Section 2.3(b).
"Employee Benefit Plan" means any (i) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(ii) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (iii) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), (iv) Employee Welfare Benefit Plan or material fringe
benefit plan or program or (v) profit sharing, stock option, stock purchase,
equity, stock appreciation, bonus, incentive deferred compensation, severance
plan or other benefit plan.
"Employee Pension Benefit Plan" has the meaning set forth in Section 3(2)
of ERISA.
"Employee Welfare Benefit Plan" has the meaning set forth in Section 3(l)
of ERISA.
"Environment" means soil, land surface or subsurface strata, real
property, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins and wetlands), groundwater, water body sediments,
drinking water supply, stream sediments, ambient air (including indoor air),
plant and animal life and any other environmental medium or natural resource.
"Environmental Laws" mean the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act and
the Clean Air Act, the Clean Water Act, each, as amended or hereinafter in
effect, and any other law or legal requirement, as now or hereinafter in
effect, relating to: (i) the Release, containment, removal, remediation,
response, cleanup or abatement of any sort of any Chemical Substance; (ii) the
manufacture, generation, formulation, processing, labeling, distribution,
introduction into commerce, use, treatment, handling, storage, recycling,
disposal or transportation of any
3
<PAGE>
Chemical Substance; (iii) exposure of persons, including employees, to any
Chemical Substance; (iv) the physical structure, use or condition of a
building, facility, fixture or other structure, including, without limitation,
those relating to the management, use, storage, disposal, cleanup or removal of
asbestos, asbestos-containing materials, polychlorinated biphenyls or any other
Chemical Substance; (v) the pollution, protection or clean up of the
Environment; (vi) noise; or (vii) other environmental or natural resource
matters.
"Environmental Liabilities and Costs" means all Losses arising from,
imposed or incurred in connection with: (i) compliance with any Environmental
Law; (ii) a Release of any Chemical Substance; or (iii) any environmental
conditions present at, created by or arising out of the past or present
operations of the Company or its Subsidiaries (or any of their respective
predecessor entities) through the Closing Date or of any prior owner or
operator of a facility or site at which the Company or its Subsidiaries (or any
of their respective predecessor entities) now operates or has previously
operated.
"Environmental Permits" means any Permit or authorization from any
governmental authority required under, issued pursuant to, or authorized by any
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" has the meaning set forth in Section 2.2.
"Escrow Amount" has the meaning set forth in Section 2.2(a).
"Fiduciary" has the meaning set forth in Section 3(21) of ERISA.
"Financial Statements" has the meaning set forth in Section 3.8.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Imperial Warrant" means the Warrant to Purchase Stock issued by the
Company to Imperial Bancorp on January 21, 1999, as amended, restated or
otherwise modified.
"Indebtedness" means, with respect to any Person, the aggregate amount
received from customers in advance of work to be performed for such customers
by such Person and all obligations of such Person (i) for borrowed money, (ii)
evidenced by notes, bonds, debentures or similar instruments (including,
without limitation, any notes issued by the Company in connection with the
purchase of any of its Common Stock or other equity interests), (iii) for the
deferred purchase price of goods or services (other than trade payables or
accruals incurred
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<PAGE>
in the Ordinary Course of Business which are not more than 90 days past due),
(iv) under capital leases or (v) in the nature of guarantees of the obligations
described in clauses (i) through (iv) above of any other Person.
"Indemnified Party" has the meaning set forth in Section 9.4(a).
"Indemnifying Party" has the meaning set forth in Section 9.4(a).
"Independent Accountant" has the meaning set forth in Section 2.3(b).
"Intellectual Property" means the entire right, title and interest in and
to all proprietary rights of every kind and nature, including Patents,
copyrights, Trademarks, mask works, trade secrets and proprietary information,
all applications for any of the foregoing, and any licenses or agreements
granting rights related to the foregoing (i) subsisting in, covering, reading
on, directly applicable to or existing in the Products and Services or the
Technology, including, without limitation, all Intellectual Property identified
in Schedule 2.1(d), (ii) that are owned, licensed or controlled in whole or in
part by the Company and relate to the business of the Company or (iii) that are
used in or necessary to the development, manufacture, sales, marketing or
testing of the Products and Services.
"Laws" means all laws, rules, regulations, codes, injunctions, judgments,
decrees, rulings, interpretations, constitution, ordinance, common law, treaty,
regulations, or orders, of any federal, state, local, municipal and foreign,
international, or multinational governments or administration and all related
agencies, including, without limitation all laws, rules and regulations of the
United States Department of Agriculture.
"Liability" means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, whether incurred or
consequential and whether due or to become due), including, without limitation,
any liability for Taxes.
"Lien" means any mortgage, pledge, lien, security interest, charge, claim,
equitable interest, encumbrance, restriction on transfer, conditional sale or
other title retention device or arrangement (including, without limitation, a
capital lease), transfer for the purpose of subjection to the payment of any
Indebtedness, or restriction on the creation of any of the foregoing, whether
relating to any property or right or the income or profits therefrom; provided,
however, that the term "Lien" shall not include (i) statutory liens for Taxes
to the extent that the payment thereof is not in arrears or otherwise due, (ii)
encumbrances in the nature of zoning restrictions, easements, rights or
restrictions of record on the uses of real property if the same do not detract
from the value of the property encumbered thereby or impair the use of such
property in the business of the Company as currently conducted, (iii) statutory
or common law liens to secure landlords, lessors or renters under leases or
rental agreements confined to the premises rented to the extent that no payment
or performance
5
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under any such lease or rental agreement is in arrears or is otherwise due,
(iv) deposits or pledges made in connection with, or to secure payment of,
worker's compensation, unemployment insurance, old age pension programs
mandated under applicable laws or other social security regulations and (v)
statutory or common law liens in favor of carriers, warehousemen, mechanics and
materialmen, statutory or common law liens to secure claims for labor,
materials or supplies and other like liens, which secure obligations to the
extent that payment thereof is not in arrears or otherwise due in the case of
(i)-(v), which have been incurred in the Ordinary Course of Business.
"Losses" has the meaning set forth in Section 9.2.
"Material Adverse Effect" means a material adverse effect on (i) the
business, financial condition, operations, results of operations or prospects
of the Company or any of its Subsidiaries or (ii) the ability of the Sellers to
consummate the transactions contemplated by this Agreement and the Closing
Agreements and to perform their respective obligations hereunder and
thereunder.
"Member of the Immediate Family" of any specified Person, means each
spouse, parent, aunt, uncle, brother, sister or child of such Person, each
spouse and each child of any of the aforementioned Persons, each trust created
in whole or in part for the benefit of one or more of the aforementioned
Persons and each custodian or guardian of any property of one or more of the
aforementioned Persons.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" means, collectively, (i) the audited
Financial Statements of SBI and (ii) the unaudited Financial Statements of HTI
Bio-Services, Inc. for the Most Recent Fiscal Year End.
"Most Recent Fiscal Year End" has the meaning set forth in Section 3.8.
"Multiemployer Plan" has the meaning set forth in Section 3(37) of ERISA.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity,
timing and frequency).
"Original Agreement" has the meaning set forth in the Preamble.
"Parties" has the meaning set forth in the preamble above.
"Payment Date" has the meaning set forth in Section 10.3.
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"PBGC" means the Pension Benefit Guaranty Corporation.
"Performance Bonus Plan" has the meaning set forth in Section 6.2(e).
"Permit" has the meaning set forth in Section 3.11.
"Person" means any individual, partnership, corporation, limited liability
company, association, joint stock company, trust, joint venture, unincorporated
organization, governmental entity (or any department, agency, or political
subdivision thereof) or other legal entity of any kind.
"Pro Rata Share" means, with respect to any Seller, (a) the number of
shares of Common Stock of SBI sold by such Seller to the Buyer hereunder
divided by (b) the aggregate number of shares of Common Stock sold by all
Sellers to the Buyer hereunder.
"Product and Service" means all current products and services of the
Company and its Subsidiaries, any subsequent versions of such products and
services currently being developed, any products or services currently being
developed by the Company or its Subsidiaries which are designed to supersede,
replace or function as a component of such products or services, and any
upgrades, enhancements, improvements and modifications to the foregoing.
"Prohibited Transaction" has the meaning set forth in Section 406 of ERISA
and Section 4975 of the Code.
"Recap Agreement" has the meaning set forth in Section 2.1.
"Release" means any actual, threatened or alleged spilling, leaking,
pumping, pouring, emitting, dispersing, emptying, discharging, injecting,
escaping, leaching, dumping, or disposing of any Chemical Substance into the
Environment that may cause an Environmental Liability and Cost (including the
disposal or abandonment of barrels, containers, tanks or other receptacles
containing or previously containing any Chemical Substance).
"Reportable Event" has the meaning set forth in Section 4043 of ERISA.
"Safety Laws" means the Occupational Safety and Health Act and any other
federal, state, local and foreign law, regulation or legal requirement relating
to health or safety, each as now or hereinafter in effect, including any such
law, regulation or legal requirement relating to the (a) exposure of employees
to any Chemical Substance, air quality or working conditions or noise or (b)
the physical structure, use or condition of a building, facility, fixture or
other structure, including, without limitation, those relating to equipment or
manufacturing processes, or the management, use, storage, disposal, cleanup or
removal of any Chemical Substances, air quality or working conditions.
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<PAGE>
"Safety Liabilities and Costs" means all Losses arising from, imposed or
incurred in connection with compliance with any Safety Law or as a result of
any health or safety conditions present at, created by or arising out of the
past or present operations of the Company through the Closing Date.
"SBI" has the meaning set forth in the preamble above.
"SBI EBITDA" has the meaning set forth in the Performance Bonus Plan.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Seller Employees" means William Hobson, Jean Bees, Doug Kornbrust, Nancy
Gillett, Dave McCaslin, Karol Bice-Godwin, John Kapeghian, Donna Eisenhauer,
Belinda Fuller, Martin Brett, Glen Elliott and Mark Young.
"Seller Representative" has the meaning set forth in Section 11.3.
"Sellers" has the meaning set forth in the preamble above.
"Series A Preferred Stock" has the meaning set forth in Section 3.2.
"Shares" has the meaning set forth in the preamble above.
"Subsidiary" means, with respect to any Person, (i) any corporation at
least a majority of whose outstanding voting stock is owned, directly or
indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries, (ii) any general partnership, joint
venture or similar entity, at least a majority of whose outstanding partnership
or similar interests shall at the time be owned by such Person, or by one or
more of its Subsidiaries, or by such Person and one or more of its Subsidiaries
and (iii) any limited partnership of which such Person or any of its
Subsidiaries is a general partner. For the purposes of this definition, "voting
stock" means shares, interests, participations or other equivalents in the
equity interest (however designated) in such Person having ordinary voting
power for the election of a majority of the directors (or the equivalent) of
such Person, other than shares, interests, participations or other equivalents
having such power only by reason of contingency.
"Target Working Capital" means the amount set forth in Exhibit 2.3 as the
Target Working Capital.
"Tax" or "Taxes" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall
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profits, environmental (including taxes under Section 59A of the Code), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar, including FICA), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Technology" means all inventions, copyrightable works, discoveries,
innovations, know-how, information (including ideas, research and development,
know-how, formulas, compositions, processes and techniques, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and
cost information, business and marketing plans and proposals, documentation and
manuals), computer software, computer hardware, integrated circuits and
integrated circuit masks, electronic, electrical and mechanical equipment and
all other forms of technology, including improvements, modifications,
derivatives or changes, whether tangible or intangible, embodied in any form,
whether or not protected or able to be protected by patent, copyright, mask
work right, trade secret law or otherwise.
"Third Party Claim" has the meaning set forth in Section 9.4(a).
"Trademarks" means any trademarks, service marks, trade dress and logos,
together with all translations, adaptations, derivations and combinations
thereof and including all goodwill associated therewith.
"Working Capital" means the excess of (i) (a) cash and cash equivalents,
(b) net accounts receivable, (c) inventory and (c) prepaid expenses over (b)
(i) accounts payable (except for any accounts payable greater than 90 days),
(ii) accrued employee compensation and benefits and (iii) accrued liabilities
(except for obligations for deferred taxes and Indebtedness (x) to the Lee
Trust, (y) under capital leases and (z) to the Imperial Bank solely in respect
of the term loan); it being understood and agreed that the aggregate amount
received from customers in advance of work to be performed for such customers
shall not be included in the calculation of Working Capital.
1.2. Additional Provisions. In addition to the definitions set forth
above:
(a) The words "hereof," "herein," "hereunder" and words of similar
import shall refer to this Agreement as a whole and not to any particular
Section or provision of this Agreement, reference to a particular Article
of this Agreement shall include all Sections thereof and reference to a
particular Section of this Agreement shall include all subsections
thereof.
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(b) Definitions shall be equally applicable to both the singular and
plural forms of the terms defined, and references to the masculine,
feminine or neuter gender shall include each other gender.
2. Acquisition of Stock by Buyer.
2.1. Purchase and Sale of Stock. Immediately following the closing under
the Recapitalization Agreement dated as of July 25, 1999 among Bausch & Lomb,
Incorporated, CRL Holdings, Inc., the Buyer and certain other parties named
therein (as amended, the "Recap Agreement") and subject to and upon the terms
and conditions contained herein, each Seller agrees to sell and transfer to the
Buyer that number of Shares set forth opposite such Seller's name on Exhibit
2.1, and the Buyer agrees to purchase all and not less than all of the Shares
from each of the Sellers at the Closing in consideration of the payment of the
Aggregate Purchase Price; it being understood and agreed that each holder of an
option to purchase shares of Common Stock shall be deemed to have exercised
such option on the Closing Date immediately before the Closing.
2.2. Purchase Price. The Buyer agrees to pay to the Sellers at the Closing
an aggregate amount (the "Aggregate Closing Payment") equal to (a) the
Aggregate Purchase Price less (b) the amount of the Company's Indebtedness plus
accrued but unpaid interest thereon and all other amounts due in respect
thereof upon discharge in full on the Closing Date, including prepayment,
breakage or other related fees, expenses or penalties less (c) the amount
required to redeem on the Closing Date the outstanding Series A Preferred Stock
less (d) the amount payable to Gary Chellman in connection with the
consummation of the transaction contemplated hereby less (e) the amount, if
any, actually paid by the Company pursuant to or in connection with the
Imperial Warrant plus (f) the amount actually spent by the Company on capital
expenditures from the date of this Agreement through the Closing Date not in
excess of $250,000 plus (g) the amount, if any, actually paid by the Company
pursuant to Section 6.13 of the Share Purchase Agreement dated as of January 4,
1999 by and among Sierra Biomedical, Inc., the stockholders of HTI
Bio-Services, Inc. and HTI Bio-Services, Inc. The Aggregate Closing Payment
shall be payable as follows:
(i) $3,750,000 in cash (the "Escrow Amount") payable by wire transfer
to a Person designated by the Buyer subject to the reasonable consent of
the Seller Representative, as escrow agent (the "Escrow Agent"), to be
held in escrow pursuant to the Escrow Agreement among the Parties and the
Escrow Agent substantially in the form of Exhibit 2.2; and
(ii) cash payable by wire transfer to the Sellers, as more fully set
forth on Schedule 2.2, in accordance with written instructions of each
such Seller given to the Buyer at least two business days prior to the
Closing in an amount equal, in the aggregate, to the Aggregate Closing
Payment less the Escrow Amount
2.3. Working Capital Adjustment.
(a) As soon as practicable, but in no event later than 60 days after the
Closing Date, the Buyer shall prepare and deliver to the Sellers an unaudited
consolidated balance sheet of the Company as of the close of business on the
Closing Date (the "Closing Balance Sheet") prepared in accordance with GAAP on
a basis consistent with past practice. The Buyer shall prepare and deliver, or
cause to be prepared and delivered, to the Sellers, simultaneously with the
delivery of the Closing Date Balance Sheet, a statement setting forth in
reasonable detail the Buyer's calculation of the Actual Working Capital.
(b) The Closing Balance Sheet and the Buyer's calculation of Actual
Working Capital shall be conclusive and binding on the Sellers unless the
Seller Representative shall notify the Buyer in writing within 10 days after
receipt thereof that, in the opinion of the Seller Representative, (i) the
Closing Balance Sheet has not been prepared on a basis consistent with the
accounting principles set forth in Exhibit 2.3 or (ii) the Actual Working
Capital has not been calculated correctly. Such notice (the "Dispute Notice")
- -------------- shall set forth in reasonable detail, each item and amount with
which the Seller disagrees and the basis for each such disagreement. The Buyer
and the Seller Representative shall attempt to resolve each such disagreement
and shall set forth any resolution in writing. If they cannot so agree within
30 days after the delivery by the Seller Representative to the Buyer of the
Dispute Notice, then either the Seller Representative or the Buyer may submit
the dispute regarding the items and/or amounts identified by the Seller
Representative to a nationally recognized firm of certified public accountants
acceptable to both the Buyer and the Seller Representative (the "Independent
Accountant"). The fees and expenses of the Independent Accountant shall be
shared equally by the Sellers, on the one hand, and the Buyer, on the other
hand, and the decision of the Independent Accountant shall be final and binding
on the Parties.
(i) If the Target Working Capital exceeds the Actual Working Capital,
an amount equal to such excess shall be released from the Escrow Account
to the Buyer which amount shall be considered a purchase price adjustment
for all purposes. If the Actual Working Capital exceeds the Target Working
Capital, no payment shall be made by any Party or from the Escrow Funds.
2.4. Purchase Price Adjustment. If the SBI EBITDA for the calendar year
ending December 31, 2000 equals or exceeds $5.75 million, then the Buyer shall
pay to each Seller such Seller's Pro Rata Share of $2,000,000 not later than
five business days following release of the Buyer's audited financial
statements for such calendar year, in accordance with the written instructions
of each such Seller given to the Buyer at least two business days prior to such
payment.
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2.5. The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Ropes & Gray in
New York, New York, or in such other manner and at such other place as the
Buyer and the Seller Representative shall agree, commencing at 10:00 a.m.
eastern time on September 24, 1999 or on such later date as the conditions
precedent set forth in Section 6 shall have been satisfied or waived (the
"Closing Date").
2.6. Deliveries at the Closing. At the Closing, (a) the Sellers will
deliver to the Buyer (i) certificates evidencing the Shares duly endorsed (or
accompanied by duly executed blank stock powers), and otherwise in proper form
for transfer to the Buyer and (ii) the various certificates, instruments and
documents referred to in Section 6.1 below, and (b) the Buyer will deliver the
consideration specified as set forth in Section 2.2 above.
3. Representations and Warranties Regarding the Company. Each of the Seller
Employees jointly and severally represents and warrants to the Buyer that the
statements contained in this Section 3 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then) as though the Closing Date were substituted for the date of
this Agreement throughout this Section 3 (unless a date is specified in a
particular representation and warranty), except as specifically qualified in
the disclosure schedule accompanying this Agreement (the "Disclosure
Schedule"). For purposes of this Section 3, the term "Company" shall be deemed
to be a reference to the Company and its Subsidiaries, from time to time. The
Disclosure Schedule will be arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this Section 3.
3.1. Organization of the Company. SBI is a Nevada corporation, duly
organized, validly existing and in good standing under the laws of Nevada.
Copies of the articles of incorporation and by-laws of SBI as amended to date
have been heretofore delivered to Buyer and are accurate and complete. SBI is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction listed in Section 3.1 of the Disclosure Schedule, which such
jurisdictions are the only jurisdictions where the nature of the activities
conducted by it or the character of the property owned, leased or operated by
it make such qualification necessary or appropriate, except for those
jurisdictions where the failure to be so qualified will not have a Material
Adverse Effect.
3.2. Capitalization and Ownership of the Company. The authorized capital
stock of SBI consists of 90,000,000 shares of common stock, $0.001 par value
per share (the "Common Stock"), and 10,000,000 shares of preferred stock of
which 350,000 shares, $0.001 par value, are designated as Series A Preferred
(the "Series A Preferred Stock"). As of the date hereof, the only shares of
capital stock that are issued are (a) 4,990,281 shares of Common Stock, of
which 2,227,581 shares are outstanding and 2,762,700 shares are held as
treasury stock and (b) 337,403 shares of Series A Preferred Stock, all of which
are outstanding. All of the outstanding shares of capital stock of SBI have
been validly issued, are fully paid and nonassessable. Except as set forth in
Section 3.2 to the Disclosure Schedule,
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there are no (i) written or oral agreements or understandings restricting the
transfer of, or affecting the rights of any holder of, the Shares or any other
shares of SBI's capital stock, (ii) written or oral obligations in the nature
of preemptive rights on the part of any holder of any class of securities of
SBI or (iii) outstanding options, warrants, rights, or other written or oral
agreements, understandings or commitments of any kind obligating SBI,
contingently or otherwise, to issue or sell any shares of its capital stock or
any securities or obligations convertible into, or exchangeable for, any shares
of its capital stock, and no authorization therefor has been given. Section 3.2
of the Disclosure Schedule sets forth the names of the record holders of all
outstanding options, warrants or other rights to purchase, sell or otherwise
dispose of, or rights to exchange or convert into, any shares of SBI's capital
stock (whether written or oral) and the number of shares, exercise prices and
expiration dates of such options, warrants or other rights. As of the Closing,
all of SBI's outstanding options, warrants and other rights shall have been
exercised or otherwise exchanged for shares of Common Stock (which shares, when
issued, will be validly issued, fully paid and nonassessable) or terminated.
There are no stock appreciation, phantom stock, profit participation, or
similar rights with respect to SBI. None of the outstanding shares of capital
stock of the Company were issued in violation of the Securities Act or the
securities or blue sky laws of any state or jurisdiction.
3.3. Authorization of Transaction. SBI has the legal capacity, power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. The board of directors
of SBI has duly authorized the execution, delivery and performance of this
Agreement. All corporate and other actions or proceedings to be taken by or on
the part of SBI to authorize and permit the execution and delivery by it of
this Agreement and the instruments required to be executed and delivered by it
pursuant hereto, its performance of its obligations hereunder and thereunder,
and the consummation by it of the transactions contemplated herein, have been
duly and properly taken. This Agreement has been duly executed and delivered by
SBI and constitutes the legal, valid and binding obligation of SBI, enforceable
in accordance with its terms and conditions.
3.4. Noncontravention. None of the execution, delivery or performance of
this Agreement (or any of the Closing Agreements to which it is a party), or
the consummation of the sale of the Shares and the other transactions
contemplated hereby and thereby, will (a) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Company or any of its properties or assets are subject or any provision of the
charter or by-laws (or similar constitutional documents) of the Company, (b)
result in any conflict with, breach of, or default (or give rise to any Lien or
a right to termination, cancellation or acceleration or loss of any right or
benefit) under, or require any consent or approval which has not been, or prior
to Closing will not be, obtained or waived with respect to, any contract,
agreement, lease, Permit, instrument or other arrangement to which the Company
is a party or by which it or its properties or assets is subject or bound, or
constitute an event which, with notice, lapse of time or both, would result in
any such breach, default,
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termination, cancellation, acceleration or loss of right or benefit. The
Company need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement except for the required filings under the Hart-Scott-Rodino Act,
which filings have been made.
3.5. Brokers' Fees. Neither the Company nor any Seller has any Liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which the
Buyer or the Company is or could become liable or obligated.
3.6. Title to Assets. The Company has good and marketable title to, or a
valid and subsisting leasehold interest in, the properties and assets used by
it, located on its premises, or reflected on the Most Recent Balance Sheet or
acquired after the date thereof, free and clear of all Liens (other than those
Liens set forth on Section 3.6 of the Disclosure Schedule), except for
properties and assets disposed of in the Ordinary Course of Business since the
Most Recent Fiscal Year End.
3.7. Subsidiaries. Section 3.7(a) of the Disclosure Schedule sets forth
with respect to each of SBI's Subsidiaries: (a) its name and jurisdiction of
incorporation, (b) the number of shares of authorized capital stock of each
class of its capital stock, (c) the number of issued and outstanding shares of
each class of its capital stock, the names of the record holders thereof and
the number of shares held by each such holder, (d) the number of shares of its
capital stock held in treasury and (e) its directors and officers. Each such
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each such
Subsidiary is duly authorized to conduct business and is in good standing as a
foreign corporation in each jurisdiction listed opposite its name in Section
3.7(a) of the Disclosure Schedule, which jurisdictions are the only
jurisdictions where the nature of the activities conducted by it or the
character of the property owned, leased or operated by it make such
qualification necessary or appropriate, except for those jurisdictions where
the failure to be so qualified will not have a Material Adverse Effect. Each
such Subsidiary has full corporate power and authority and all Permits and
authorizations necessary to carry on the businesses in which it is engaged and
in which it presently proposes to engage and to own and use the properties
owned and used by it. SBI has delivered to the Buyer correct and complete
copies of the charter and by-laws of each Subsidiary (each as amended to date).
All of the issued and outstanding shares of capital stock of each such
Subsidiary have been duly authorized and are validly issued, fully paid and
nonassessable. SBI owns beneficially all of the outstanding shares of each of
its Subsidiary that it holds of record, free and clear of any Taxes, Liens
(other than those Liens set forth on Section 3.7(b) of the Disclosure
Schedule), options, warrants, purchase rights, contracts and commitments. There
are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require any of SBI or any of its Subsidiaries to sell,
transfer, or otherwise dispose of any capital stock of
any of its Subsidiaries or that could require any such Subsidiary to issue,
sell, or otherwise cause to become outstanding any of its own capital stock.
There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any such Subsidiary. There are
no voting trusts, proxies, or other agreements or understandings with respect
to the voting of any capital stock of any such Subsidiary. None of such
Subsidiaries is in default under or in violation of any provision of its
charter or by-laws. None of SBI or any of its Subsidiaries controls directly or
indirectly or has any direct or indirect equity participation or ownership
interest in any corporation, partnership, trust, or entity which is not a
Subsidiary of SBI.
3.8. Financial Statements. Attached hereto as Exhibit 3.8 are the
following financial statements (collectively, the "Financial Statements"): (i)
the audited balance sheet and statement of income, change in stockholders'
equity and cash flow as of and for the fiscal year ended December 31, 1998 (the
"Most Recent Fiscal Year End") for SBI, (ii) unaudited balance sheets and
statements of income, changes in stockholders' equity and cash flow as of and
for the fiscal years ended December 31, 1996 and December 31, 1997 for SBI,
(iii) unaudited balance sheets and statements of income, changes in
stockholders' equity and cash flow as of and for the fiscal years ended
December 31, 1996, December 31, 1997 and December 31, 1998 for HTI
Bio-Services, Inc. and (iv) unaudited consolidated balance sheets and
statements of income, changes in stockholders' equity and cash flows for the
seven months ended July 31, 1999 for SBI. The Financial Statements (including,
with respect to the audited financial statements only, the notes thereto) have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby, are correct and complete and present fairly the
consolidated financial condition of the Company as of such dates and the
consolidated results of operations of the Company for such periods and are
consistent with the books and records of the Company, subject, in the case of
the financial statements delivered pursuant to clause (iv) above, to normal and
recurring year end adjustments and the absence of notes.
3.9. Absence of Certain Changes and Events. Since the Most Recent Fiscal
Year End and except as disclosed in Section 3.9 of the Disclosure Schedule, the
Company has conducted its businesses only in the Ordinary Course of Business
and, without limiting the generality of the foregoing, there has not been, with
respect to the Company:
(a) any sale, lease, transfer, or assignment of any of the Company's
assets, tangible or intangible, other than sales of inventory for a fair
consideration in the Ordinary Course of Business;
(b) any agreement, contract, lease, or license (or series of related
agreements, contracts, leases and licenses) entered into other than (i) in
the Ordinary Course of Business and (ii) in an amount not in excess of
$50,000;
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(c) any acceleration, termination, modification, or cancellation of
any agreement, contract, lease, or license (or series of related
agreements, contracts, leases and licenses) to which the Company is a
party or by which it is bound;
(d) any Lien created or imposed upon the Company's assets, tangible
or intangible;
(e) any capital expenditure made (or series of related capital
expenditures) involving more than $10,000 singly or $50,000 in the
aggregate;
(f) any capital investment made in, any loan to, or any acquisition
of the securities or assets of, any other Person (or series of related
capital investments, loans and acquisitions);
(g) any issuance of any note, bond, or other debt security or the
creation, incurrence, assumption or guarantee of any indebtedness for
borrowed money or capitalized lease obligation;
(h) any delay or postponement of the payment of accounts payable and
other Liabilities outside the Ordinary Course of Business;
(i) any cancellation, compromise, waiver, or release any right or
claim or Indebtedness (or series of related rights and claims);
(j) any grant of a license or sublicense of any rights or
modification of any rights under or with respect to, or any settlement
entered into regarding any infringement of its rights to, any Intellectual
Property;
(k) any issuance, sale, or other disposition of any of its capital
stock, or grant of any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any capital
stock, other than upon the exercise of options outstanding on the date
hereof;
(l) any dividend or distribution (whether in cash or in kind) or
repurchase, redemption or retirement of any of its capital stock other
than a dividend or distribution of up to 150,000 shares of common stock of
Hybridon, Inc. held by the Company on the date hereof (or the proceeds
thereof);
(m) any material damage, destruction, or loss (whether or not covered
by insurance) to its property;
(n) any loan to, or any other transaction with, any Affiliate of the
Company;
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(o) any employment contract or collective bargaining agreement,
written or oral, entered into or any modification or change of the terms
of any existing such contract or agreement;
(p) any increase, modification or change in the compensation of any
of the officers or employees of the Company;
(q) any adoption, amendment, modification or termination of any
Employee Benefit Plan for the benefit of any director, officer, or
employee of the Company (or taken any such action with respect to any
other Employee Benefit Plan);
(r) any payment pursuant to any Employee Benefit Plan or other plan,
contract or commitment for the benefit of any of the directors, officers
and employees of the Company;
(s) any pledge to make or making of any charitable or other capital
contribution;
(t) any payment of any amount to any third party with respect to any
Liability (excluding any costs and expenses incurred or which may be
incurred in connection with this Agreement and the transactions
contemplated hereby) other than in the Ordinary Course of Business;
(u) any modification in its methods of accounting or accounting
practices (including, without limitation, practices regarding recognition
of revenue) or the application of GAAP from the manner in which it was
applied in the Most Recent Financial Statements;
(v) any other occurrence, event, incident, action, failure to act, or
transaction outside the Ordinary Course of Business involving the Company
or any of its Subsidiaries; or
(w) any commitment by the Company or the Sellers to any of the
foregoing.
3.10. Absence of Undisclosed Liabilities. The Company has no Liabilities,
except for (a) Liabilities set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto), (b) Liabilities which have arisen
after the Most Recent Fiscal Year End in the Ordinary Course of Business and
(c) Liabilities incurred in the Ordinary Course of Business and are not
required under GAAP to be reflected in the Most Recent Financial Statements.
3.11. Legal and Other Compliance.
(a) Each of the Company and its predecessors conduct, and have conducted,
their businesses in compliance with all applicable Laws, except to the extent
non-compliance therewith would not have a Material Adverse Effect, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure so to comply. There is no judgment, injunction, order or decree or
material agreement binding upon the Company which has or reasonably could be
expected to have the effect of prohibiting or materially impairing any current
or future business practice of the Company, any acquisition of property by the
Company or the conduct of business by the Company, as currently conducted or as
proposed to be conducted. Except as set forth on Section 3.11(a) of the
Disclosure Schedule, the Company holds all permits, licenses, easements,
variances, exemptions, consents, certificates, orders and approvals from
governmental authorities (collectively, the "Permits") which are necessary for
the lawful operation of its business (including, without limitation, all
Permits from the Centers for Disease Control, the United States Department of
Agriculture and the Association for Assessment and Accreditation of Laboratory
Animal Care relating to the importation of primates into the United States)
(collectively, the "Company Permits") and such Company Permits are in full
force and effect. The Company is in compliance with the terms of the Company
Permits, except where the failure so to comply would not have a Material
Adverse Effect, and the Company has not received any notice of violation of any
Company Permits.
(b) Without limiting the generality of the foregoing clause (a), (i) the
Company is in compliance with Good Laboratory Practices in respect of the
operations of the Company to which such Practices, by their terms, apply and
(ii) the Company has established an Internal Animal Care Use Committee which
committee is performing its responsibilities as set forth under applicable laws
and regulations.
3.12. No Material Adverse Change. Since the Most Recent Fiscal Year End,
there has not been any change which has resulted in a Material Adverse Effect
and no event has occurred or circumstance exists that may result in a Material
Adverse Effect.
3.13. Taxes.
(a) The Company has filed on a timely basis all Tax Returns required to be
filed by it as of the date hereof. All such Tax Returns were correct and
complete in all respects. The Company has no Liability for Taxes (whether or
not shown on any Tax Return) in respect of any period or portion thereof ending
on or prior to the Closing Date. The Company has not nor is currently the
beneficiary of any extension of time within which to file any Tax Return. No
claim has been made against the Company by an authority in a jurisdiction where
the Company does not file Tax Returns that the
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Company may be subject to taxation by that jurisdiction. There are no liens or
other encumbrances on any of the assets of the Company that arose in connection
with any failure (or alleged failure) to pay any Tax.
(b) The Company has withheld and paid all Taxes required to have been
withheld in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party.
(c) There is no Basis for any authority to assess any additional Taxes for
any period for which a Tax Return has been filed. There is no dispute, audit,
investigation, proceeding or claim concerning any Liability with respect to
Taxes of the Company either (i) claimed or raised by any authority in writing
or (ii) as to which the Company or any Seller has knowledge based upon contact
with any such authority. Except as set forth in Section 3.13(c) of the
Disclosure Schedule, all federal, state, local and foreign income Tax Returns
filed with respect to the Company have been audited or are not currently open
because the applicable statute of limitations has expired. The Sellers have
delivered to the Buyer correct and complete copies of all federal income Tax
Returns, examination reports and statements of deficiencies assessed against or
agreed to by the Company for the last three taxable years. No power of attorney
for Taxes of the Company is currently in force.
(d) The Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) The Company (i) is not nor has it been a party to any Tax allocation
or sharing agreement, or (ii) does not have any Liability for the Taxes of any
Person other than the Company and its Subsidiaries under Treas. Reg. Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise. The Company has not been a
member of an Affiliated Group filing a consolidated federal income Tax Return
(other than a group the common parent of which was the Company). The Company
has not agreed by contract nor is it obligated as a transferee or successor as
to how any item was or will be reported on a Tax Return.
(f) The Company has not filed a consent under Section 341(f) of the Code
concerning collapsible corporations. The Company has not made any payments, is
not obligated to make any payments, nor is a party to any Agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Sections 162, 280G or 404 of the Code. The Company has not
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. The Company has disclosed on its federal income
Tax Returns all positions taken therein that could give
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rise to a substantial understatement of federal income Tax within the meaning
of the Section 6662 of the Code.
(g) Section 3.13(g) of the Disclosure Schedule sets forth the following
information with respect to SBI and its Subsidiaries as of the most recent
practicable date, (i) the basis of SBI or such Subsidiary in its assets; (ii)
the amount of any net operating loss, net capital loss, unused investment or
other credit, unused foreign tax, or excess charitable contribution of SBI or
such Subsidiary; and (iii) the amount of any deferred gain or loss allocable to
SBI or such Subsidiary arising out of any Deferred Intercompany Transaction.
(h) The unpaid Taxes of the Company did not, as of the Most Recent Fiscal
Year End, exceed the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Most Recent Balance Sheet (rather than in
any notes thereto), and as of the date hereof do not exceed such reserve as
adjusted for the operations of the Company in the Ordinary Course of Business
since the date of the Most Recent Balance Sheet.
3.14. Property, Plant and Equipment.
(a) The Company does not own, nor has it or its predecessors ever owned,
any real property. (b) Section 3.14(b) of the Disclosure Schedule lists all
real property leased or subleased to the Company. The Company has delivered to
the Buyer correct and complete copies of the leases and subleases listed in
Section 3.14(b) of the Disclosure Schedule (as amended to date) which such
leases and subleases have not been amended or modified since the date thereof.
With respect to each lease and sublease listed in Section 3.14(b) of the
Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding, enforceable and
in full force and effect;
(ii) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby;
(iii) neither any of the Sellers, the Company nor to their knowledge
any other party to the lease or sublease, is in breach or default, and no
event has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
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(iv) neither any of the Sellers, the Company nor to their knowledge
any other party to the lease or sublease, has repudiated any provision
thereof;
(v) there are no disputes, oral or written agreements, or forbearance
programs in effect as to the lease or sublease;
(vi) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above are true and
correct with respect to the underlying lease;
(vii) the Company has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(viii) All facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof and have been operated
and maintained in accordance with applicable laws, rules and regulations;
and
(ix) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said
facilities.
(c) All of the tangible personal property of the Company other than
inventory is in good working order, operating condition and state of repair,
ordinary wear and tear excepted. Section 3.14(c) of the Disclosure Schedule
lists each lease or other agreement or understanding (including all amendments)
under which any tangible personal property other than inventory having a cost
or aggregate capital lease obligations in excess of $10,000 is held or used
(indicating for each lease (i) a description of the property leased thereunder,
including location, (ii) the term thereof and a description of any available
renewal periods, (iii) the rental and other material payment terms, (iv) the
owner of the property subject to such equipment lease and (v) whether any
consents are required under such lease in connection with the transactions
contemplated by this Agreement). The Company has delivered to the Buyer true
and complete copies of each equipment lease and any and all other material
contractual obligations relating to any of the equipment leases, in each case
as in effect on the date hereof and as it will be in effect at the Closing,
including, without limitation, all amendments.
(d) The Company owns or leases all buildings, real property, improvements,
machinery, equipment and other tangible assets necessary for the conduct of its
businesses as currently conducted and as proposed to be conducted. Each such
tangible asset is free from defects (patent and latent), has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal
21 wear and tear) and is suitable, adequate and sufficient for the purposes for
which it presently is used and presently is proposed to be used.
3.15. Intellectual Property.
(a) The Company owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary or
desirable for the operation of the businesses of the Company as currently
conducted and as proposed to be conducted. Each item of Intellectual Property
owned or used by the Company in its businesses immediately prior to the Closing
hereunder will be owned or available for use by the Company and the Buyer on
identical terms and conditions subsequent to the Closing hereunder. Except as
disclosed in Section 3.15(a) of the Disclosure Schedule, the Company has taken
all necessary and desirable action to maintain and protect each item of
Intellectual Property that the Company owns or uses.
(b) Except as disclosed in Section 3.15(b) of the Disclosure Schedule, the
Company has not interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of third parties, and
there has never been any charge, complaint, claim, demand, or notice alleging
any such interference, infringement, misappropriation, or violation (including
any claim that the Company must license or refrain from using any Intellectual
Property rights of any third party). To the knowledge of the Company or any
Seller, no third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of the
Company.
(c) Section 3.15(c) of the Disclosure Schedule identifies each patent or
registration which has been issued to the Company with respect to the Company's
Intellectual Property, identifies each pending patent application or
application for registration which has been made with respect to the Company's
Intellectual Property, and identifies each license, agreement, or other
permission which the Company has granted to any third party with respect to any
of the Intellectual Property (together with any exceptions). The Sellers have
delivered to the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements and permissions (as amended
to date) and have made available to the Buyer correct and complete copies of
all other written documentation evidencing ownership and prosecution (if
applicable) of each such item. Section 3.15(c) of the Disclosure Schedule also
identifies each trade name or unregistered trademark or servicemark used by the
Company. With respect to each item of Intellectual Property required to be
identified in Section 3.15(c) of the Disclosure Schedule:
(i) except as disclosed in Section 3.15(c) of the Disclosure
Schedule, the Company possesses all right, title and interest in and to
the item, free and clear of any Lien, license, or other restriction;
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(ii) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the knowledge of the Company
or any Seller, is threatened, which challenges the legality, validity,
enforceability, use, or ownership of the item; and
(iv) the Company has not agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(d) Section 3.15(d) of the Disclosure Schedule identifies each item of
material Intellectual Property that any Person other than the Company owns and
that the Company uses pursuant to license, sublicense, agreement, or
permission. The Sellers have delivered to the Buyer correct and complete copies
of all such licenses, sublicenses, agreements and permissions (as amended to
date). With respect to each item of Intellectual Property required to be
identified in Section 3.15(d) of the Disclosure Schedule:
(i) the license, sublicense, agreement, or permission covering the
item is legal, valid, binding, enforceable and in full force and effect;
(ii) the license, sublicense, agreement, or permission will continue
to be legal, valid, binding, enforceable and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby;
(iii) neither the Company nor, to the knowledge of the Company or any
Seller, no other party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iv) neither the Company, nor to the knowledge of the Company or any
Seller, no other party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(v) with respect to each sublicense, the representation and
warranties set forth in subsections (i) through (iv) above are true and
correct with respect to the underlying license;
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(vi) the underlying item of Intellectual Property is not subject to
any outstanding injunction, judgment, order, decree, ruling, or charge;
(vii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the knowledge of the Company
or any Seller, is threatened, which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property; and
(viii) the Company has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(e) To the knowledge of the Company or any Seller, the Company will not
interfere with, infringe upon, misappropriate, or otherwise come into conflict
with, any Intellectual Property rights of third parties as a result of the
continued operation of its businesses as presently conducted or proposed to be
conducted.
(f) Neither the Company nor any Seller has any knowledge of any new (i)
products, (ii) services, (iii) procedures, (iv) methods of manufacturing,
processing or delivery or (v) inventions that any competitors or other third
parties have developed which reasonably could be expected to supersede or make
obsolete any Product or Service, procedure or method of manufacturing
processing or delivery of the Company.
3.16. Inventories. The inventory of the Company is suitable and usable for
its intended purpose in the Ordinary Course of Business, and none of such
inventory is below standard quality, damaged, or defective, subject only to the
reserve for inventory writedown set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with GAAP and the past custom and
practice of the Company. Since the Most Recent Balance Sheet Date, no inventory
has been sold or disposed of except through sales in the Ordinary Course of
Business.
3.17. Contracts. Section 3.17 of the Disclosure Schedule lists the
following contracts and other agreements and understandings (whether written or
oral) to which the Company is a party:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $50,000;
(b) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year,
result in a loss to the Company, or involve consideration, in excess of
$50,000;
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(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any Indebtedness in excess of
$10,000 or under which it has imposed a Lien on any of its assets,
tangible or intangible;
(e) any agreement concerning confidentiality or noncompetition;
(f) any agreement relating to the Company, its assets, liabilities
and business, or relating to the Shares, in each case, between or among
the Company, any Seller and any or their respective Affiliates;
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other similar plan or
arrangement;
(h) any collective bargaining agreement;
(i) any agreement providing for the employment or consultancy with
any individual on a full-time, part-time, consulting or other basis in
excess of $50,000 or providing severance or retirement benefits;
(j) any agreement under which it has advanced or loaned any amount to
any of its stockholders, Affiliates, directors, officers, or employees
other than in the Ordinary Course of Business;
(k) any agreement under which the consequences of a default or
termination could have an material adverse effect on the business,
financial condition, operations, results of operations, or prospects of
any of SBI or its Subsidiaries;
(l) the standard terms and conditions of sale or lease for the
Company's Products and Services (containing applicable guaranty, warranty
and indemnity provisions); and
(m) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $50,000.
The Sellers have delivered to the Buyer a correct and complete copy of each
agreement listed in Section 3.17 of the Disclosure Schedule. Except as
disclosed in Section 3.17 of the Disclosure Schedule, with respect to each such
agreement: (i) the agreement is legal, valid, binding, enforceable and in full
force and effect; (ii) subject to the Buyer obtaining the necessary consents
disclosed in Section 3.29 of the Disclosure Schedule, the agreement will
continue to be legal, valid, binding, enforceable and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (iii) neither
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the Company nor, to the knowledge of the Company or any Seller, any other party
is in breach or default, and no event has occurred which with notice or lapse
of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; (iv) neither the Company
nor, to the knowledge of the Company or any Seller, any other party has
repudiated any provision of the agreement; and (v) none of such agreements is,
when considered singly or in the aggregate with others, unduly burdensome,
onerous or materially adverse to the Company's business, properties, assets,
earnings or prospects.
3.18. Accounts Receivable. All accounts receivable of the Company are
reflected properly on its books and records in accordance with GAAP, are valid
receivables, arose from bona fide transactions in the Ordinary Course of
Business subject to no setoffs or counterclaims except as recorded as accounts
payable are current and to the knowledge of the Company, are collectible in
accordance with their terms at their recorded amounts, except as reflected as
net of allowance for bad debts on the face of the Most Recent Balance Sheet
(rather than in any notes thereto or reserve therefor) as adjusted for the
passage of time in accordance with GAAP and past practice and custom of the
Company and are subject to no refunds or other adjustments and to no defenses,
right of set off, assignments, restrictions, encumbrances or condition
enforceable by third parties on or affecting any of such accounts receivable.
3.19. Insurance and Risk Management.
(a) Section 3.19(a) of the Disclosure Schedule sets forth a complete list
of all material insurance policies (including policies providing property,
casualty, liability and workers' compensation coverage and bond and surety
arrangements) to which the business operations of the Company is a party, a
named insured, or is otherwise the beneficiary of coverage. All such policies
are with reputable insurance carriers, provide adequate coverage for all normal
risks incident to the Company's assets, properties and business operations and
are in character and amount at least equivalent to that carried by Persons
engaged in a business subject to the same or similar risks, perils or hazards.
(b) Section 3.19(b) of the Disclosure Schedule sets forth the Company's
plan to provide Products and Services to its customers without material
interruption in the event (i) there is damage, destruction or loss to any of
its assets or properties (whether or not covered by insurance) or (ii) one or
more of its facilities becomes inaccessible to its officers and employees for
any reason whatsoever.
(c) There have not been, and there are no pending, or, to the knowledge of
the Company or any Seller, threatened, actions or activities relating to animal
rights that could reasonably be expected to lead to an interruption in the
provision of Products and Services to the customers the Company. The Company
has established a (i) security program and (ii) an employee training program
which are reasonable under the circumstances to address possible actions or
activities relating to animal rights.
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3.20. Litigation. Except as disclosed in Section 3.20 of the Disclosure
Schedule, there are no judicial or administrative actions, claims, suits,
proceedings or investigations pending or, to the knowledge of the Company or
any Seller, threatened, that would be reasonably likely to result in a Material
Adverse Effect, or that question the validity of this Agreement or of any
action taken or to be taken pursuant to or in connection with the provisions of
this Agreement or that relate to the purchase or sale of shares of capital
stock of the Company nor, to the knowledge of the Company or any Seller, is
there any Basis for any such action, claim, suit, proceeding or investigation.
There are no judgments, orders, decrees, citations, fines or penalties
heretofore assessed against the Company affecting adversely any of its assets,
businesses or operations under any federal, state or local law.
3.21. Product Warranties; Defects; Liability. Each Product and Service
delivered, provided, manufactured, sold or leased by the Company and its
predecessors is, and has been, in conformity with all applicable federal,
state, local or foreign laws and regulations, contractual commitments and all
express and implied warranties, and the Company has no Liability (and there is
no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand giving rise to any
Liability) for damages, replacement or repair thereof in connection therewith,
subject only to the reserve for product warranty claims set forth on the face
of the Most Recent Balance Sheet (rather than in any notes thereto) which such
reserve is adequate to address all such Liabilities. Except as disclosed in
Section 3.21 of the Disclosure Schedule, no Product or Service delivered,
provided, manufactured, sold or leased by the Company is subject to any
guaranty, warranty, or other indemnity beyond the standard terms and conditions
of sale or lease set forth in Section 3.17(l) of the Disclosure Schedule. The
Company has no Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any Liability) whether arising out of
any injury to individuals or property or otherwise as a result of the
ownership, possession, or use of any Product or Service delivered, provided,
manufactured, sold or leased by the Company or any of its predecessors and
there has been no inquiry or investigation made in respect thereof by any
Person including any governmental or administrative agency.
3.22. Employees. To the knowledge of the Company or any Seller, no
executive, key employee, or group of employees has any plans to terminate
employment with the Company or its Subsidiaries. The Company has not
experienced any labor disputes or work stoppage due to labor disagreements. The
Company is in compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours
and have not been and are not engaged in any unfair labor practice as defined
in the National Labor Relations Act, as amended, the violation of which could
have a Material Adverse Effect. The Company is not a party to any agreement
with any employee, officer or director that provides for payments or
acceleration of benefits upon a change of control of the Company. The Company
is not a party to any collective bargaining agreements. Section 3.22 of the
Disclosure Schedule lists each agreement, understanding or policy regarding
confidentiality applicable to any director, officer, employee or agent of, or
consultant to, the
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Company. The Company has no Liability in respect of compensation to employees
(other than any such compensation to be paid in accordance with the payroll
practices of the Company in the Ordinary Course of Business not later than 30
days following the Closing Date). 3.23. Employee Benefits.
(a) Section 3.23 of the Disclosure Schedule lists each Employee Benefit
Plan that the Company maintains or to which the Company contributes relating to
current or former employees, officers or directors of the Company.
(i) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) materially complies in form and in operation
in all respects with the applicable requirements of ERISA, the Code and
other applicable laws.
(ii) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-l's and Summary Plan
Descriptions) have been filed or distributed appropriately with
respect to each such Employee Benefit Plan. The requirements of Part
6 of Subtitle B of Title I of ERISA and of Section 4980B of the Code
have been met with respect to each such Employee Benefit Plan which
is an Employee Welfare Benefit Plan subject to such Part.
(iii) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been
paid to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan and all contributions for any period ending on or before
the Closing Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with the past
custom and practice of the Company. All premiums or other payments
for all periods ending on or before the Closing Date have been paid
with respect to each such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(iv) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan intended to be qualified under Section 401(a) of
the Code is so qualified.
(v) The market value of assets under each such Employee Benefit
Plan which is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the present value of all vested
and nonvested Liabilities thereunder determined in accordance with
PBGC methods, factors and assumptions applicable to an Employee
Pension Benefit Plan terminating on the date for determination.
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(vi) The Sellers have delivered to the Buyer correct and
complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts and other funding
agreements which implement each such Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that the Company and the
Controlled Group of Corporations which includes the Company maintains or ever
has maintained or to which any of them contributes, ever has contributed, or
ever has been required to contribute:
(i) Except as disclosed in Section 3.23(b)(i) of the Disclosure
Schedule, no such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been completely
or partially terminated or been the subject of a Reportable Event as
to which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension Benefit
Plan (other than any Multiemployer Plan) has been instituted or
threatened.
(ii) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any
such Employee Benefit Plan. No action, suit, proceeding, hearing, or
investigation with respect to the administration or the investment of
the assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or threatened. None of the Sellers or
the Company has any knowledge of any Basis for any such action, suit,
proceeding, hearing, or investigation.
(iii) The Company has not incurred, and none of the Sellers or
the Company has any reason to expect that the Company will incur, any
Liability to the PBGC (other than PBGC premium payments) or otherwise
under Title IV of ERISA (including any withdrawal Liability) or under
the Code with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(c) None of the Company and the other members of the Controlled Group of
Corporations that includes the Company contributes to, ever has contributed to,
or ever has been required to contribute to any Multiemployer Plan or has any
Liability (including withdrawal Liability) under any Multiemployer Plan.
(d) The Company does not maintain nor has it ever maintained or
contribute, ever has contributed, or ever has been required to contribute to
any
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Employee Welfare Benefit Plan providing medical, health, or life insurance or
other welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance with
Section 4980B of the Code).
(e) No promise or commitment to amend or improve any Employee Benefit Plan
for the benefit of current or former directors, officers, or employees of the
Company which is not reflected in the documentation provided to the Buyer has
been made.
(f) The transactions contemplated by this Agreement shall not alone or
upon the occurrence of any additional or subsequent event, result in any
payment, of severance or otherwise, or acceleration, vesting or increase in
benefits under any Employee Benefit Plan for the benefit of any current or
former director, officer, or employee of the Company.
3.24. Environment, Health and Safety.
(a) Except as disclosed in Section 3.24 of the Disclosure Schedule:
(i) the Company is and has been in compliance with all
applicable Environmental Laws and Safety Laws;
(ii) the Company has obtained, and is and has been in material
compliance with the conditions of, all Environmental Permits required
for the continued conduct of the business of the Company in the
manner now conducted and presently proposed to be conducted;
(iii) the Company has filed all required applications, notices
and other documents necessary to effect the timely renewal or
issuance of all Environmental Permits for the continued conduct of
the business of the Company in the manner now conducted and presently
proposed to be conducted;
(iv) there are no past or present events, conditions or
circumstances, including, without limitation, to the knowledge of the
Company or any Seller, pending changes in any Environmental Law or
Permit or Safety Laws, that are likely to materially interfere with
or otherwise materially affect the business of the Company in the
manner now conducted or which would materially interfere with
compliance with any Environmental Law or Permit or Safety Law;
(v) there are no circumstances or conditions present at or
arising out of the present or former assets, properties, leaseholds,
businesses or operations
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of the Company in respect of off-site storage, transportation or
disposal of, or any off-site Release of, a Chemical Substance which
reasonably may be expected to give rise to any Environmental
Liabilities and costs;
(vi) there are no circumstances or conditions present at or
arising out of the present or former assets, properties, leaseholds,
businesses or operations of the Company, including but not limited to
any on-site Storage, use, disposal or Release of a Chemical
Substance, which reasonably may be expected to give rise to any
Environmental Liabilities and Costs or Safety Liability and Costs;
(vii) none of the Company, the Sellers or the present or past
assets, properties, businesses, leaseholds or operations of the
Company has received or is subject to, or within the past three years
has been subject to, any outstanding order, decree, judgment,
complaint, agreement, claim, citation, or notice or is subject to any
ongoing judicial or administrative proceeding indicating that the
Company, the Sellers or the past and present assets of the Company
are or may be: (A) in violation of any Environmental Law; (B) in
violation of any Safety Laws; (C) responsible for the on-site or
off-site storage or Release of any Chemical Substance; or, (D) liable
for any Environmental Liabilities and Costs or Safety Liabilities and
Costs;
(viii) none of the Company or the Sellers have any reason to
believe that the Company will become subject to a matter identified
in subsection (vii); and, no investigation or review with respect to
such matters is pending or, to the knowledge of the Company or any
Seller, is threatened, nor has any Person indicated an intention to
conduct the same;
(ix) neither the business of the Company nor any of its
properties or assets is subject to, or as a result of the
transactions contemplated by this Agreement will be subject to, the
requirements of any Environmental Laws which require notice,
disclosure, cleanup or approval prior to transfer of the Shares or
the business of the Company or which will impose Liens on any such
asset or property or otherwise interfere with or affect the business
of the Company;
(x) Section 3.24(x) of the Disclosure Schedule lists all
property presently or previously leased, owned or operated by the
Company and identifies all such property (and the area within that
property) that has been used by the Company and its Subsidiaries or
by any other Person (including a prior owner or operator) for the
storage or disposal of Chemical Substances;
(xi) Section 3.24(xi) of the Disclosure Schedule lists all
off-site locations, including, without limitation, commercial waste
disposal facilities or municipal landfills, to which or at which
Chemical Substances originating from
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the Company or its assets, properties or business have been sent (or
otherwise have come to be located) in amounts that would require a
waste manifest under the Resource Conservation and Recovery Act of
1976 as now in effect for treatment, storage, disposal, reuse or
recycling;
(xii) Section 3.24(xii) of the Disclosure Schedule sets forth a
list of all underground storage tanks owned or operated at any time
by the Company and, except as disclosed in Section 3.24(xii) of the
Disclosure Schedule, no such tank is leaking or has leaked at any
time in the past, and there is no pollution or contamination of the
Environment caused by or contributed to or threatened by a Release of
a Chemical Substance from any such tank; and
(xiii) Section 3.24(xiii) of the Disclosure Schedule lists all
environmental audits, inspections, assessments, investigations or
similar reports in the Company's possession or of which the Company
is aware relating to the Company's assets, properties or business or
the compliance of the same with applicable Environmental Laws and
Safety Laws.
(b) For purposes of this Section 3.24 only, all references to the
"Company" are intended to include any and all other entities to which the
Company may be considered a successor under applicable Environmental Laws.
The representations and warranties in this Section are the only
representations and warranties with respect to Environmental Laws or
Environmental Liabilities and Costs, or Safety Laws or Safety Liabilities
and Costs notwithstanding any other language in this Agreement of general
applicability.
3.25. Affiliated Transactions. Except as set forth in Section 3.25 of the
Disclosure Schedule, the Company is not a party to or bound by any contract,
commitment or understanding with any of the stockholders, directors or officers
of the Company or any of their respective Affiliates and none of the
stockholders, directors or officers of the Company or any of their respective
Affiliates owns or otherwise has any rights to or interests in any asset,
tangible or intangible, which is used in the business of any of the Company.
3.26. Distributors, Customers, Suppliers.
(a) Section 3.26(a) of the Disclosure Schedule sets forth a complete and
accurate list of (i) all of the distributors for the Company's Products and
Services indicating the specific product and/or service, existing contractual
arrangements, if any, with each such distributor and the volume of products
distributed, (ii) the ten largest customers (by dollar volume) of the Company
during the Most Recent Fiscal Year, indicating the existing contractual
arrangements with each such customer by Product and Service and (iii) all
suppliers of significant materials or services to the Company, indicating the
contractual arrangements for continued supply from such Persons.
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(b) Except as set forth in Section 3.26(b) of the Disclosure
Schedule, since the Most Recent Fiscal Year End, (i) no significant
customer (or group of customers which in the aggregate is significant) of
the Company has given the Company notice or, to the knowledge of the
Company or any Seller, has taken any other action which has given the
Company or such Seller any reason to believe that such customer (or group
of customers) will cease to purchase Products or Services or reduce
significantly the amount of Products and Services purchased from the
Company and (ii) no significant supplier or vendor (or group of suppliers
or vendors which in the aggregate is significant) of the Company has given
the Company notice or, to the knowledge of the Company or any Seller, has
taken any other action which has given the Company or such Seller any
reason to believe that such supplier or vendor (or group of suppliers or
vendors) will cease to supply or restrict the amount supplied or adversely
change its price or terms to the Company of any products or services of
such supplier of vendor.
3.27. No Illegal Payments, Etc. None of the Sellers or the Company nor any
of the directors, officers, employees or agents of the Company, has (a)
directly or indirectly given or agreed to give any illegal gift, contribution,
payment or similar benefit to any supplier, customer, governmental official or
employee or other person who was, is or may be in a position to help or hinder
the Company(or assist in connection with any actual or proposed transaction) or
made or agreed to make any illegal contribution, or reimbursed any illegal
political gift or contribution made by any other person, to any candidate for
federal, state, local or foreign public office (i) which might subject any of
the Company to any damage or penalty in any civil, criminal or governmental
litigation or proceeding or (ii) the non-continuation of which has had or might
have, individually or in the aggregate, a Material Adverse Effect or (b)
established or maintained any unrecorded fund or asset or made any false
entries on any books or records for any purpose.
3.28. Books and Records. The minute books (containing the records of
meetings of stockholders, the board of directors and any committees of the
board of directors), the stock certificate books and the stock record books of
the Company are all correct and complete and have been maintained in accordance
with applicable sound business practices, laws and other requirements and
copies thereof have been made available to the Buyer.
3.29. Consents. Section 3.29 of the Disclosure Schedule sets forth a true,
correct and complete list of any Person whose consent or approval is required
and the matter, agreement or contract to which such consent relates in
connection with the transactions contemplated by this Agreement.
3.30. Disclosure. The representations and warranties contained in this
Section 3 (including the Disclosure Schedule and any other schedules and
exhibits required to be delivered by the Sellers to the Buyer pursuant to this
Agreement) and any certificate furnished or to be furnished by the Company or
the Sellers to the Buyer do not contain and will not
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contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements and information contained in
this Section 3 not misleading.
3A. Representations and Warranties Regarding Sellers . Each of the Sellers, as
to itself, represents and warrants to the Buyer that the statements contained
in this Section 3A are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then)
as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3A (unless a date is specified in a particular
representation and warranty):
3A.1. Title to Shares. Such Seller owns beneficially and of record all of
the outstanding shares of Common Stock as set forth on Exhibit 2.1, free and
clear of all Liens and each Seller has full right, power and authority to
transfer such Shares to Buyer free and clear of any Liens.
3A.2. Authorization of Transaction. Such Seller has the legal capacity,
power and authority to execute and deliver this Agreement and to perform it's
respective obligations hereunder. All required actions or proceedings to be
taken by or on the part of such Seller to authorize and permit the execution
and delivery by it of this Agreement and the instruments required to be
executed and delivered by it pursuant hereto, it's performance of its
obligations hereunder and thereunder, and the consummation by it of the
transactions contemplated herein, have been duly and properly taken. This
Agreement has been duly executed and delivered by such Seller and constitutes
the legal, valid and binding obligation of such Seller, enforceable in
accordance with its terms and conditions.
3A.3. Noncontravention. None of the execution, delivery or performance of
this Agreement (or any of the Closing Agreements to which it is a party), or
the consummation of the sale of the Shares and the other transactions
contemplated hereby and thereby, will (a) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which such
Seller or any of its properties or assets are subject or any provision of the
charter or by-laws (or similar constitutional documents) of such Seller, if
applicable, (b) result in any conflict with, breach of, or default (or give
rise to any Lien or a right to termination, cancellation or acceleration or
loss of any right or benefit) under, or require any consent or approval which
has not been, or prior to Closing will not be, obtained or waived with respect
to, any contract, agreement, lease, Permit, instrument or other arrangement to
which such Seller is a party or by which it or its properties or assets is
subject or bound, or constitute an event which, with notice, lapse of time or
both, would result in any such breach, default, termination, cancellation,
acceleration or loss of right or benefit. Such Seller need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate
the transactions contemplated by this Agreement.
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4. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Sellers that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then) as though the Closing
Date were substituted for the date of this Agreement throughout this Section 4
(unless a date is specified in a particular representation and warranty).
4.1. Organization of the Buyer. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation.
4.2. Authority for Agreement. The Buyer has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of the Buyer, enforceable in
accordance with its terms and conditions.
4.3. Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or by-laws or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Buyer is a party or by which it is bound or to which any of its assets is
subject. The Buyer does not need to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and assumptions
referred to in Section 2 above), except for required filings under the
Hart-Scott-Rodino Act, which filings have been made.
4.4. Brokers' Fees. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Sellers could become
liable or obligated.
5. Covenants. The Parties agree as follows:
5.1. General. Each of the Parties will use commercially reasonable efforts
to take all action and to do all things necessary, proper, or advisable in
order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions
set forth in Section 6 below).
5.2. Notices and Consents. The Company and the Sellers have given any
notices to third parties, and will each use their best efforts to obtain any
third party consents, that are required in connection with the transactions
contemplated by this Agreement, as set forth in Section 3.29 to the Disclosure
Schedule and any other consent that the Buyer may request.
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Each of the Parties has filed Notification and Report Forms and related
material that may be required to be filed with the Federal Trade Commission and
the Antitrust Division of the United States Department of Justice under the
Hart-Scott-Rodino Act, and will make any further filings pursuant thereto that
may be necessary in connection therewith.
5.3. Operation of Business. The Company will not (and will not cause or
permit any of its Subsidiaries to) engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, the Company (i) will not (and will
not cause or permit any of its Subsidiaries to) (A) issue, sell or otherwise
dispose of any of its capital stock or grant any options, warrants or other
rights to purchase or obtain (including upon conversion, exchange or exercise)
any of its capital stock, except upon exercise of options to purchase Common
Stock outstanding on the date hereof, declare, set aside, or pay any dividend
or make any distribution with respect to its capital stock or redeem, purchase,
or otherwise acquire any of its capital stock, (B) will not pay any amount to
any third party with respect to any Liability or obligation (including any
costs and expenses the Company has incurred or may incur in connection with
this Agreement and the transactions contemplated hereby) outside the Ordinary
Course of Business or in excess of $100,000, (C) otherwise engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 3.9 above or (D) repay or otherwise satisfy any Indebtedness for
borrowed money other than in the Ordinary Course of Business, factor, or
accelerate the collection of, accounts receivable or delay the payment of
accounts payables and (ii) will (A) keep available to the Buyer the services of
the Company's present officers, employees, agents and independent contractors,
and (B) preserve for the benefit of the Buyer the goodwill of Sellers'
customers, suppliers, landlords and others having business relations with it.
Notwithstanding the foregoing, the Company may (w) pay such amounts to the
holder of the Imperial Warrant as may be necessary in connection with the
purchase or termination of the Imperial Warrant, (x) distribute to its
stockholders (by dividend or otherwise) up to 150,000 shares of common stock of
Hybridon, Inc. held by the Company on the date hereof (or the proceeds
thereof), (y) make any capital expenditure in the Ordinary Course of Business
in excess of $250,000 and (z) repay Indebtedness under the $1,000,000
Promissory Note dated January 21, 1999 to Imperial Bank.
5.4. Preservation of Business. The Company will keep (and will cause each
of its Subsidiaries to keep) its business and properties substantially intact,
including its present operations, physical facilities, working conditions and
relationships with lessors, licensors, suppliers, customers and employees.
5.5. Full Access. The Company will permit (and will cause each of its
Subsidiaries to permit) representatives of the Buyer to have full access at all
reasonable times and upon reasonable notice, and in a manner so as not to
interfere with the normal business operations of the Company and its
Subsidiaries, to all premises, properties, personnel, books, records (including
Tax records), contacts and documents of or pertaining to each of the Company
and its Subsidiaries.
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5.6. Notice of Redemption of Series A Preferred Stock. Promptly following
the execution of this Agreement, the Company will provide a written notice to
the holders of the Series A Preferred Stock notifying such holders that the
Company will exercise its "call" right under Article 5.5 of the Company's
articles of incorporation in connection with the transactions contemplated by
this Agreement. Each holder of Series A Preferred Stock hereby agrees that he
will not exercise his right to convert such Series A Preferred Stock into
Common Stock on or prior the Closing Date.
5.7. Notice of Developments. Each Party will give prompt written notice to
the other Party of any development causing a breach of any of its own
representations and warranties in Section 3 and Section 4 above. No disclosure
by any Party pursuant to this Section 5.7, however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any
misrepresentations, breach of warranty, or breach of covenant.
5.8. Exclusivity. Until November 30, 1999, none of the Company and the
Sellers will (and the Company will not cause or permit any of its Subsidiaries,
or any of their officers, directors, employees, agents or Affiliates to) (i)
solicit, initiate, or encourage the submission of any proposal or offer from
any Person relating or enter into or consummate any transaction relating to the
acquisition of any capital stock or other voting securities, or any substantial
portion of the assets, of any of the Company and its Subsidiaries (other than
sales of inventory for a fair value in the Ordinary Course of Business)
(including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or
seek any of the foregoing. The Company and Sellers will notify the Buyer
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
5.9. Assistance in Financing. The Sellers acknowledge that the Buyer
currently intends that a payment of a certain amount of the Aggregate Purchase
Price pursuant to Section 2 will be financed by a debt financing. The Company
hereby consents to the use of its name and the names of its Subsidiaries in
connection with the efforts to raise such debt financing. Further, the Sellers
shall and shall cause the Company and its Subsidiaries and their respective
officers, directors, employees, accountants, counsel, financial advisors and
other agents to provide necessary assistance in connection with the Buyer's
efforts to raise such financing, including, without limitation, (a) the
preparation of audited and pro forma financial statements in accordance with
Regulation S-X under the Securities Exchange Act of 1934, as amended, giving
effect to the acquisition by the Buyer of the Company, (b) causing the
Company's accountants to provide all consents and opinions necessary in
connection with such financing and (c) causing the Company's officers to
participate in customary "road show" presentations that may be reasonably
requested by the Buyer.
5.10. Access to Records after Closing. For a period of five years after
the Closing Date, the Sellers and their representatives shall have reasonable
access to all of the books and
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records of the Company to the extent that such access may reasonably be
required by the Sellers in connection with matters relating to or affected by
the operations of the Company and its Subsidiaries prior to the Closing Date.
Such access shall be afforded by the Buyer upon receipt of reasonable advance
notice and during normal business hours. The Sellers shall be solely
responsible for any costs or expenses incurred by them pursuant to this Section
5.10. If the Buyer shall desire to dispose of any of such books and records
prior to the expiration of such five-year period, the Buyer shall, prior to
such disposition, give the Sellers a reasonable opportunity, at the Sellers'
expense, to segregate and remove such books and records as the Sellers may
select.
5.11. Future Assurances. At any time and from time to time after the
Closing, at the request of the Buyer and without further consideration, the
Sellers will execute and deliver such other instruments of sale, transfer,
conveyance, assignment and confirmation and take such action as the Buyer may
reasonably determine is necessary to transfer, convey and assign to the Buyer,
and to confirm the Buyer's title to or interest in the Company, to put the
Buyer in actual possession and operating control thereof and to assist the
Buyer in exercising all rights with respect thereto. Effective upon the
Closing, each of the Sellers hereby constitutes and appoints the Buyer and its
successors and assigns as its true and lawful attorney in fact in connection
with the transactions contemplated by this instrument, with full power of
substitution, in the name and stead of such Seller but on behalf of and for the
benefit of the Buyer and its successors and assigns, to demand and receive any
and all of the assets, properties, rights and business hereby conveyed,
assigned and transferred or intended so to be, and to give receipt and releases
for and in respect of the same and any part thereof, and from time to time to
institute and prosecute, in the name of one or more of the Sellers or
otherwise, for the benefit of the Buyer or its successors and assigns,
proceedings at law, in equity, or otherwise, which the Buyer or its successors
or assigns reasonably deem proper in order to collect or reduce to possession
or any of the assets of the Company to do all acts and things in relation to
the assets which the Buyer or its successors or assigns reasonably deem
desirable.
5.12. Release of Guarantees. Following the Closing, Buyer shall make
commercially reasonable efforts to have William C. Hobson, Douglas Kornbrust
and the William C. Hobson and Mary Beth Husemoller 1998 Revocable Trust Dated
October 7, 1998 released from their obligations under the Commercial Guaranties
dated January 21, 1999 executed by such persons in favor of Imperial Bank.
Buyer hereby agrees to indemnify, defend and hold each of the foregoing
harmless from any Liabilities and Losses arising from such guarantees.
6. Conditions to Obligation to Close.
6.1. Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions on, or prior to,
the Closing Date:
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(a) Representations and Warranties. The representations and
warranties set forth in Section 3 above shall be true and correct when
made and shall be deemed to have been made again at and as of the Closing
Date and shall then be true and correct;
(b) Performance by Sellers. The Sellers and the Company shall have
performed and complied with all of their covenants, agreements and
obligations hereunder through the Closing Date;
(c) Consents. The Sellers shall have procured all of the governmental
approvals, consents or authorizations and third party consents specified
in Section 3.29 and Section 5.2 above;
(d) Absence of Litigation. No action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (iii) affect adversely
the right of the Buyer to own the Shares or to operate the businesses of
the Company and its Subsidiaries (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(e) Anti-trust Matters. All applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated;
(f) Employment and Noncompetition Agreements. The Persons listed on
Schedule 6.1(f) shall have entered into an Employment Agreement and a
Noncompetition Agreement substantially in the form of Exhibits 6.1(f)(i)
and 6.1(f)(ii) and the same shall be in full force and effect;
(g) Certificates. The Sellers shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified in Section
6.1 are satisfied in all respects;
(h) [Reserved];
(i) Resignations. The Buyer shall have received the resignations,
dated as of the Closing Date, of each officer and director of the Company
and of each officer and director of its Subsidiaries;
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<PAGE>
(j) Opinion. The Buyer shall have received from counsel to the
Sellers and the Company an opinion in form and substance reasonably
satisfactory to the Buyer, addressed to the Buyer, and dated as of the
Closing Date;
(k) Escrow Agreement. The Sellers shall have executed and delivered
the Escrow Agreement, in form and substance the same or substantially the
same as the Escrow Agreement set forth in Exhibit 2.2;
(l) No Material Adverse Change. There shall not have been any change
which has resulted in a Material Adverse Effect and no event shall have
occurred or circumstance shall exist that may result in a Material Adverse
Effect;
(m) Financing. The closing under the Recap Agreement shall have
occurred on or prior to the Closing Date and the Buyer shall have obtained
financing, on terms and conditions satisfactory to it, sufficient to
consummate each of (i) the recapitalization contemplated by the Recap
Agreement and (ii) the transactions contemplated hereby;
(n) Acknowledgment and Consent by Equity Holders. The Buyer shall
have received the written acknowledgment and consent of each holder of any
equity interest in the Company on and after July 9, 1999 relating to this
transaction in form and substance satisfactory to the Buyer; and
(o) All Necessary Actions. All actions to be taken by the Company and
its Subsidiaries in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments and other
documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 if it executes
a writing so stating at or prior to the Closing and such waiver shall not be
considered a waiver of any other provision in this Agreement (including,
without limitation, the provisions of Section 9) unless the writing
specifically so states.
6.2. Conditions to Obligations of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions on, or
prior to, the Closing Date:
(a) Representations and
Warranties. The representations and warranties set forth in Section 4 above
shall be true and correct at and as of the Closing Date;
(b) Performance by Buyer. The Buyer shall have performed and complied
with all of its covenants, agreements and obligations hereunder through
the Closing;
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<PAGE>
(c) Absence of Litigation. No action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(i) prevent consummation of any of the transactions contemplated by this
Agreement or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(d) Certificate. The Buyer shall have delivered to the Company a
certificate to the effect that each of the conditions specified in Section
6.2 are satisfied in all respects;
(e) Performance Bonus Plan. The Buyer shall have adopted the
Performance Bonus Plan substantially in the form of Exhibit 6.2(e) (the
"Performance Bonus Plan").
(f) Employment and Noncompetition Agreements. The Company shall have
duly executed and delivered an Employment Agreement and a Noncompetition
Agreement substantially in the form of Exhibits 6.1(f)(i) and 6.1(f)(ii)
with each of the Persons listed on Schedule 6.1(f);
(g) Anti-trust Matters. All applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated;
(h) Opinion. The Company shall have received from counsel to the
Buyer an opinion in form and substance reasonably satisfactory to the
Company, addressed to the Company, and dated as of the Closing Date; and
(i) All Necessary Actions. All actions to be taken by the Buyer in
connection with the consummation of the transactions contemplated hereby
and all certificates, opinions, instruments and other documents required
to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Sellers.
The Sellers may waive any condition specified in this Section 6.2 if they
execute a writing so stating at or prior to the Closing and such waiver shall
not be considered a waiver of any other provision in this Agreement (including,
without limitation, Section 9) unless the writing specifically so states.
7. Confidentiality.
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7.1. No Party shall issue a press release or otherwise disclose the
existence of this Agreement, the contents hereof or the transactions
contemplated hereby except as the Buyer may determine is necessary or desirable
in connection with obtaining the financing described in Section 5.9.
7.2. From and after the Closing, each of the Sellers will treat and hold
as such all of the Confidential Information, refrain from disclosing or using
any of the Confidential Information except in connection with such Seller's
employment with, and for the benefit of, the Company. In the event that any of
the Sellers is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, such Person will notify the Buyer promptly of the request or
requirement so that the Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 7. If, in the absence of a
protective order or the receipt of a waiver hereunder, any of the Sellers is,
on the advice of counsel, compelled to disclose any Confidential Information to
any tribunal or else stand liable for contempt, that Person may disclose the
Confidential Information to the tribunal; provided, however, that the
disclosing Person shall use his best efforts to obtain, at the request of the
Buyer, an order or other assurance that confidential treatment will be accorded
to such portion of the Confidential Information required to be disclosed as the
Buyer shall designate.
8. Noncompetition. Each Seller who is employed by the Company and is or
becomes party to a Non-Competition Agreement and/or an Employment Agreement in
connection with the transactions contemplated hereby, agrees that, in
consideration of the purchase by the Buyer hereunder, he or she shall comply
with the provisions of the Non-Competition Agreement and Section 6 of the
Employment Agreement to which such Seller is party.
9. Indemnification.
9.1. Survival of Representations and Warranties. All of the
representations and warranties of the Sellers (except for those contained in
Sections 3.1 (Organization of the Company), 3.2 (Capitalization and Ownership
of the Company), 3.3 (Authorization of Transaction), 3.5 (Brokers' Fees), 3.13
(Taxes) and 3.24 (Environment, Health and Safety)) contained herein or in any
document, certificate or other instrument required to be delivered hereunder
shall survive the Closing and continue in full force and effect until two years
following the Closing. The representations and warranties of Sellers contained
in Section 3.24 shall survive the Closing and shall continue in full force and
effect for a period of three years thereafter. The representations and
warranties of Sellers contained in Sections 3.1, 3.2, 3.3, 3.5 and 3.13 shall
survive the Closing and shall continue in full force and effect without limit
as to time (subject to any applicable statutes of limitations and any
extensions or waivers thereof for Taxes). All of the representations and
warranties of the Buyer contained in Section 4 shall survive the Closing and
shall continue in full force and effect without limit as to time, except for
the representations and warranties of the Buyer contained in Section 4.3 which
shall survive the Closing and continue in full force and effect until two years
following
42
<PAGE>
the Closing. The termination of any such representation and warranty, however,
shall not affect any claim for breaches or inaccuracies of representations or
warranties if written notice thereof is given to the breaching party or parties
prior to such termination date. All covenants and indemnities of the Sellers
and the Buyer in this Agreement or in any document or certificate delivered
hereunder shall, unless otherwise specifically provided therein, remain in full
force and effect without limitation as to time.
9.2. Indemnity by Sellers Relating to the Company.
(a) Subject to the limitations set forth in this Section 9.2, the
Sellers (in the case of the Sellers other than those listed in Schedule
9.2, solely to the extent of such Seller's Pro Rata Share (as defined in
the Escrow Agreement) of the Escrow Amount) hereby agree to jointly and
severally indemnify, defend and hold harmless the Buyer and its directors,
officers and Affiliates against and in respect of all Liabilities,
obligations, judgments, Liens, injunctions, charges, orders, decrees,
rulings, damages, dues, assessments, Taxes, losses, fines, penalties,
expenses, fees, costs, amounts paid in settlement (including reasonable
attorneys' and expert witness fees and disbursements in connection with
investigating, defending or settling any action or threatened action),
arising out of any claim, damages, complaint, demand, cause of action,
audit, investigation, hearing, action, suit or other proceeding asserted
or initiated or otherwise existing in respect of any matter (collectively,
the "Losses") arising from, or in connection with, (i) the breach or
inaccuracy of any representation or warranty made by the Sellers in
Section 3, as if all materiality provisions were not contained therein or
(ii) nonfulfillment of any agreement or covenant of the Company, with
respect to periods on or prior to the Closing Date, contained herein or in
any agreement or instrument required to be entered into in connection
herewith (it being understood that the Employment Agreements and the
Noncompetition Agreements entered into pursuant to Section 6.1(f) shall be
excluded for purposes of this clause (ii)). Any Person claiming
indemnification under this Section 9.2 shall provide the Seller
Representative written notice of such claim, whether or not arising out of
a claim by a third party.
(b) Except as provided in clause (c), (i) the Sellers shall be
obligated to indemnify Persons pursuant to clause (a)(i) only to the
extent the aggregate of all such Losses exceeds $250,000 and (ii) the
aggregate liability of the Sellers to indemnify any and all Persons
pursuant to clause (a)(i) shall in no event exceed $10.0 million.
(c) The obligations of the Sellers to indemnify Losses under Section
9.2 shall be satisfied in cash; it being understood and agreed that (i) to
the extent there are funds in the Escrow Account, the Buyer will exercise
its rights to withdraw cash therefrom to satisfy such obligations and (ii)
the obligation of any Seller listed on Schedule 9.2 to indemnify Losses
under Section 9.2 shall in no event exceed the amount set forth on
Schedule 9.2.
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(d) Notwithstanding the foregoing provisions of clause (b) and (c),
no minimum or maximum dollar limitation shall apply to the liability of
the Sellers listed on Schedule 9.2 with respect to any claim (i) arising
from, or in connection with, the representations and warranties contained
in Sections 3.2 (Capitalization and Ownership of the Company), 3.3
(Authorization of Transaction), 3.5 (Brokers' Fees), 3.6 (Title to
Assets), 3.13 (Taxes) and 3.24 (Environment, Health and Safety) or (ii)
based on fraud.
9.3. Indemnity by Sellers .
(a) Each Seller hereby agrees to indemnify, defend and hold harmless
the Buyer and its directors, officers and Affiliates against and in
respect of all Liabilities, obligations, judgments, Liens, injunctions,
charges, orders, decrees, rulings, damages, dues, assessments, Taxes,
losses, fines, penalties, expenses, fees, costs, amounts paid in
settlement (including reasonable attorneys' and expert witness fees and
disbursements in connection with investigating, defending or settling any
action or threatened action), arising out of any claim, damages,
complaint, demand, cause of action, audit, investigation, hearing, action,
suit or other proceeding asserted or initiated or otherwise existing in
respect of any matter (collectively, the "Losses") arising from, or in
connection with, (i) the breach or inaccuracy of any representation or
warranty made by such Seller in Section 3A, as if all materiality
provisions were not contained therein or (ii) nonfulfillment of any
agreement or covenant of such Seller contained herein or in any agreement
or instrument required to be entered into in connection herewith. Any
Person claiming indemnification under this Section 9.3 shall provide the
applicable Seller(s) written notice of such claim, whether or not arising
out of a claim by a third party.
(b) The obligations of the Sellers to indemnify Losses under Section
9.3 shall be satisfied in cash.
(c) No minimum or maximum dollar limitation shall apply to the
liability of any Seller with respect to any claim under this Section 9.3;
provided, however, that the obligation of the Sellers who are not Seller
Employees to indemnify Losses under Section 9.3 shall in no event exceed
the proceeds such Seller, as the case may be, receives from the Buyer or
the Company in consideration of his capital stock of the Company in
connection with the transactions contemplated by this Agreement.
9.4. Indemnity by Buyer.
(a) Subject to Section 10.2 and the limitations set forth in this
Section 9.4, the Buyer hereby agrees to indemnify, defend and hold
harmless the Sellers and their respective directors, officers and
Affiliates against and in respect of all Losses arising from, or in
connection with, (i) the breach or inaccuracy of any representation or
44
<PAGE>
warranty made by the Buyer herein, as if all materiality provisions were
not contained therein or (ii) nonfulfillment of any agreement or covenant
of the Buyer or, with respect to periods after the Closing Date, the
Company contained herein or in any agreement or instrument required to be
entered into in connection herewith. Any Person claiming indemnification
under this Section 9.4 shall provide the Buyer written notice of such
claim, whether or not arising out of a claim by a third party.
(b) Except as provided in clause (c), (i) the Buyer shall be
obligated to indemnify Persons pursuant to clause (a)(i) only to the
extent the aggregate of all such Losses exceeds $250,000 and (ii) the
aggregate liability of the Buyer to indemnify any and all Persons pursuant
to clause (a)(i) shall in no event exceed $10.0 million.
(c) The obligations of the Buyer to indemnify Losses under Section
9.4 shall be satisfied in cash.
(d) Notwithstanding the foregoing provisions of clause (b), no
minimum or maximum dollar limitation shall apply to the liability of the
Buyer with respect to any claim (i) arising from or in connection with,
the representations and warranties contained in Sections 4.1 (Organization
of Buyer), 4.2 (Authority for Agreement) or 4.4 (Broker's Fee) or (ii)
based on fraud.
9.5. Matters Involving Third Parties.
(a) If any third party shall notify any Person (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other Person (the
"Indemnifying Party") under this Section 9, then the Indemnified Party
shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within 15
days after the Indemnified Party has given notice of the Third Party Claim
that the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Losses the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused
by the Third Party Claim, (ii) the Indemnifying Party provides the
Indemnified Party with evidence acceptable to the Indemnified Party that
the Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations
hereunder, (iii) the Third Party Claim involves only money damages and
does not seek
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<PAGE>
an injunction or other equitable relief, (iv) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential
custom or practice adverse to the continuing business interests of the
Indemnified Party and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 9.5(b) above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnifying Party (which consent shall not
unreasonably be withheld) and (iii) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim unless written agreement is obtained
releasing the Indemnified Party from all liability thereunder.
(d) In the event any of the conditions in Section 9.5(b) above is or
becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it may
deem appropriate (and the Indemnified Party need not consult with, or
obtain any consent from, any Indemnifying Party in connection therewith),
(ii) the Indemnifying Parties will reimburse the Indemnified Party
promptly and periodically for the costs of defending against the Third
Party Claim (including attorneys' fees and expenses) and (iii) the
Indemnifying Parties will remain responsible for any Losses the
Indemnified Party may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the Third Party Claim to the fullest extent
provided in this Section 9.
9.6. Other Indemnification Provisions. Each of the Sellers hereby agrees
that he, she or it will not make any claim for indemnification against any of
the Buyer, the Company and any of their Subsidiaries solely by reason of the
fact that he or it was a director, officer, employee, or agent of the Company
or was serving at the request of any such entity as a partner, trustee,
director, officer, employee, or agent of another entity (whether such claim is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such claim is pursuant to any
statute, charter document, bylaw, agreement, or otherwise) with respect to any
action, suit, proceeding, complaint, claim, or demand brought by the Buyer or
any other Person entitled to indemnification pursuant to this Agreement against
such Seller (whether such action, suit, proceeding, complaint, claim, or demand
is pursuant to this Agreement, applicable law, or otherwise).
10. Termination.
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10.1. Termination of Agreement. This Agreement may be terminated as
provided below:
(a) the Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written notice
to the Sellers on or prior to September 24, 1999 if the Buyer shall not
have satisfactorily completed its due diligence investigation of the
Company;
(c) this Agreement shall terminate without any action by any Party in
the event that the condition precedent set forth in Section 6.1(m) shall
not have been satisfied on or before September 24, 1999; provided,
however, that this Agreement shall not so terminate if, not later than the
close of business on September 24, 1999, the Buyer shall have delivered to
the Sellers a written binding commitment to the effect that if each of the
conditions precedent under Section 6.1 hereof (other than the condition
precedent set forth in Section 6.1(m)) shall be satisfied from and after
September 24, 1999 through and including the Payment Date (as if the term
Closing Date were replaced by the term Payment Date wherever it appears
therein), the Company shall be paid an amount equal to $5,000 multiplied
by the number of calendar days from and after September 25, 1999 through
and including the earlier of (a) the date on which this Agreement is
terminated pursuant to Section 10.1(d)(ii) and (b) November 30, 1999 (such
date, the "Payment Date").
(d) the Buyer may terminate this Agreement by giving written notice
to the Sellers at any time prior to the Closing (i) in the event the
Sellers have breached any representation, warranty, or covenant contained
in this Agreement in any material respect, the Buyer has notified the
Sellers of the breach, and the breach has continued without cure for a
period of 30 days after the notice of breach, (ii) if the Closing shall
not have occurred on or before November 30, 1999, by reason of the failure
of any condition precedent under Section 6.1 hereof (unless the failure
results primarily from the Buyer itself breaching any representation,
warranty, or covenant contained in this Agreement); and
(e) the Seller Representative may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (i) in the
event the Buyer has breached any representation, warranty, or covenant
contained in this Agreement in any material respect, the Sellers or the
Company have notified the Buyer of the breach, and the breach has
continued without cure for a period of 30 days after the notice of breach
or (ii) if the Closing shall not have occurred on or before November 30,
1999, by reason of the failure of any condition precedent under Section
6.2 hereof (unless the failure results primarily from the Sellers or the
Company itself breaching any representation, warranty, or covenant
contained in this Agreement).
10.2. Effect of Termination. If this Agreement is terminated pursuant to
Section 10.1 above, all rights and obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party (except for any
Liability of any Party then in breach and (b) as set forth in any agreement
delivered in accordance with the proviso to Section 10.1(c)); it being
understood that the Buyer shall not be, nor shall it be deemed to be, in breach
of this Agreement if the condition precedent set forth in Section 6.1(m) is not
satisfied or waived.
11. Miscellaneous.
11.1. Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior approval of the other
Party; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly traded securities (in which case the
disclosing Party will provide the other Party with the opportunity to review in
advance the disclosure).
11.2. No Third Party Beneficiaries. Except and solely to the extent set
forth in Sections 9.2, 9.3 and 9.4, this Agreement shall not confer any rights
or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
11.3. Seller Representative. Each of the Sellers hereby appoints William
C. Hobson, as the agent, proxy, and attorney-in-fact for the Sellers (in such
capacity, the "Seller Representative") for all purposes under this Agreement
(including without limitation full power and authority to act on the Sellers'
behalf, and retain legal counsel) to take any action, should it elect to do so
in its sole discretion, (i) to conduct or cease to conduct, should it elect to
do so in its sole discretion, the defense of all claims against the Sellers
under Section 9.2, and settle all such claims in its sole discretion on behalf
of all the Sellers and exercise any and all rights which the Sellers are
permitted or required to do or exercise in connection therewith and (ii) in
connection with the purchase price adjustment described in Section 2.3;
provided, however, that the Seller Representative shall have no obligation to
conduct any defense or settle any claim or take any other action whatsoever on
behalf of any Seller under this Section 11.3 or otherwise in its capacity as
Seller Representative. Each Seller hereby waives the conflict of interest
inherent in the service of the Seller Representative both in such capacity and
as an officer and director of SBI. Each Seller further agrees to hold the
Seller Representative free and harmless and to reimburse the Seller
Representative for any and all loss, cost, claim, expense, damage or liability
incurred or sustained by him as a result of any action taken by him in good
faith pursuant to his appointment as the Seller Representative under this
Agreement.
11.4. Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral
48
(including without limitation the Original Agreement), to the extent they
relate in any way to the subject matter hereof.
11.5. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Seller may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior
written approval of the Buyer. The Buyer may not assign either this Agreement
or any of its rights, interests, or obligations hereunder without the prior
written consent of the Seller Representative; provided, however, that the Buyer
may (a) assign any or all of its rights and interests hereunder to one or more
of its Affiliates, (b) designate one or more of its Affiliates to perform its
obligations hereunder and (c) transfer any or all of its rights and interests
hereunder to the Person(s) who, directly or indirectly, provide financing in
connection with the transactions contemplated by the Agreement.
11.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
11.7. Headings. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.8. Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) upon
confirmation of facsimile, (ii) one business day following the date sent when
sent by overnight delivery and (iii) five business days following the date
mailed when mailed by registered or certified mail return receipt requested and
postage prepaid at the following address:
If to the Sellers:
At the address set forth opposite their names on the signature pages
hereto.
If to the Company:
SBI Holdings, Inc.
587 Dunn Circle
Sparks, Nevada 89431
Attention: President
Copy to:
Hillyer & Irwin, PC
49
<PAGE>
550 West C Street, 16th Floor
San Diego, CA 92101
Attention: John C. O'Neill
If to the Buyer:
Charles River Laboratories, Inc.
251 Ballardvale St.
Wilmington, MA 01887
Attention:
Copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attention: Lauren I. Norton
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the intended recipient.
Any Party may change the address to which notices, requests, demands, claims
and other communications hereunder are to be delivered by giving the other
Party notice in the manner herein set forth.
11.9. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware.
11.10. Arbitration.
(a) Except solely as set forth in clauses (b) and (c), each dispute,
difference, controversy or claim arising in connection with or related or
incidental to, or question occurring under, this Agreement or the subject
matter hereof shall be finally settled under the Commercial Arbitration
Rules of the American Arbitration Association (the "AAA") by an arbitral
tribunal composed of three arbitrators, at least one of whom shall be an
attorney experienced in corporate transactions, appointed by agreement of
the parties in accordance with said Rules. In the event the parties fail
to agree upon a panel of arbitrators from the first list of potential
arbitrators proposed by the AAA, the AAA will submit a second list in
accordance with said Rules. In the event the parties
50
<PAGE>
shall have failed to agree upon a full panel of arbitrators from said
second list, any remaining arbitrators to be selected shall be appointed
by the AAA in accordance with said Rules. If, at the time of the
arbitration, the parties agree in writing to submit the dispute to a
single arbitrator, said single arbitrator shall be appointed by agreement
of the parties in accordance with the foregoing procedure, or, failing
such agreement, by the AAA in accordance with said Rules. The foregoing
arbitration proceedings may be commenced by any party by notice to the
other parties and shall take place at a location as shall be agreed by the
parties to the arbitration. In connection with any such arbitration, the
arbitrator(s) shall be empowered to consider the attorney's fees and
expenses as an element of such party's damages.
(b) The Parties hereby exclude any right of appeal to any court on
the merits of the dispute. The provisions of this Section 10.10 may be
enforced in any court having jurisdiction over the award or any of the
parties or any of their respective assets, and judgment on the award
(including, without limitation, equitable remedies) granted in any
arbitration hereunder may be entered in any such court. Nothing contained
in this Section 10.10 shall prevent any party from seeking interim
measures of protection in the form of pre-award attachment of assets or
preliminary or temporary equitable relief.
(c) Each of the Parties acknowledges and agrees that the other Party
would be damaged irreparably in the event any of the provisions of this
Section 5 are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, notwithstanding the foregoing
provisions of this Section 10.10, each of the Sellers, on the one hand,
and the Buyer, on the other hand, shall be entitled to an injunction or
injunctions, without the posting of any bond, to prevent breaches of the
provisions of Section 5 and to enforce specifically the terms and
provisions of Section 5 in any action instituted in any court of the
United States or any state thereof having jurisdiction over the Parties
and the matter in addition to any other remedy to which it may be
entitled, at law or in equity.
11.11. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by each
of the Parties. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
11.12. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
51
<PAGE>
11.13. Expenses. Each of the Buyer, the Company and the Sellers will bear
his or its own costs and expenses (including legal and accounting fees and
expenses and, in the case of the Buyer, fees in connection with required
filings under the Hart-Scott-Rodino Act) in connection with this Agreement and
the transactions contemplated hereby. The Sellers represent and warrant to the
Buyer that Hillyer & Irwin, PC has been retained by the Company to represent
the Company and certain of the Sellers (at the expense of the Company) in
connection with the transactions contemplated hereby and that the Company will
incur no other costs or expenses (including legal and accounting fees and
expenses), directly or indirectly, in connection with this Agreement and the
transactions contemplated hereby.
11.14. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure Schedule
identifies the exception with particularity and describes the relevant facts in
detail. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless
the representation or warranty has to do with the existence of the document or
other item itself). The Parties intend that each representation, warranty and
covenant contained herein shall have independent significance. If any Party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty, or covenant.
11.15. Incorporation of Exhibits and Schedules. The Exhibits and the
Disclosure Schedule identified in this Agreement and the other certificates and
instruments to be delivered in connection with this Agreement are incorporated
herein by reference and made a part hereof.
52
<PAGE>
Charles River Laboratories/SBI
Amended and Restated
Stock Purchase Agreement
September 4, 1999
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.
THE BUYER: CHARLES RIVER LABORATORIES, INC.
By:____________________________
Name:
Title:
THE COMPANY: SBI HOLDINGS, INC.
By:____________________________
Name:
Title:
THE SELLERS:
-------------------------------
Jean M. Bees
14225 Wind River Lane East
Reno, NV 89511
-------------------------------
Donna Eisenhauer
4055 Mustang Court
Reno, NV 89502
-------------------------------
Nancy A. Gillett
1100 Ivy Court
Reno, NV 89523
<PAGE>
Charles River Laboratories/SBI
Amended and Restated
Stock Purchase Agreement
September 4, 1999
-------------------------------
John Kapeghian
14240 Via Contento Court
Reno, NV 89511
-------------------------------
Doug Kornbrust
7245 Lingfield
Reno, NV 89502
-------------------------------
Ron Thielman
6285 Desert Star Drive
Las Cruces, NM 88005
-------------------------------
Karol Bice-Godwin
6164 Chandler Drive
San Diego, CA 92117
-------------------------------
Martin Brett
11222 Woodlush Court
San Diego, CA 92128
-------------------------------
William C. Hobson
--------------------
--------------------
<PAGE>
Charles River Laboratories/SBI
Amended and Restated
Stock Purchase Agreement
September 4, 1999
-------------------------------
Azim Khamisa
--------------------
--------------------
-------------------------------
Glen Elliott
--------------------
--------------------
-------------------------------
Dave McCaslin
--------------------
--------------------
-------------------------------
Mark Young
--------------------
--------------------
-------------------------------
Gary Chellman
--------------------
--------------------
<PAGE>
Charles River Laboratories/SBI
Amended and Restated
Stock Purchase Agreement
September 4, 1999
THE FULLER FAMILY JOINT REVOCABLE
INTER-VIVOS TRUST
By:____________________________
Name: Belinda Fuller
Title: Trustee
Address: 5204 Palo Alto Circle
Sparks, NV 89436
GILLIKIN LIVING TRUST
By:____________________________
Name: Phyllis C. Gillikin
Title: Trustee
Address: 5177 Aspen View
Reno, NV 89523
WILIIAM C. HOBSON AND/OR MARY BETH
HUSEMOLLER 1998 REVOCABLE TRUST
By:____________________________
Name: William C. Hobson
and/or
Mary Beth Husemoller
Title: Trustee
Address: 14185 Powder River Drive
Reno, NV 89511
<PAGE>
Charles River Laboratories/SBI
Amended and Restated
Stock Purchase Agreement
September 4, 1999
EMERALD K GISS TRUST dated May 13, 1999
By:____________________________
Name: Nancy G. Saunders
Title: Trustee
Address: c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
By:____________________________
Name: Gary E. Giss, as custodian for
Lisa N. Giss under the Virginia
Uniform Transfers to Minors Act
Address: c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
By:____________________________
Name: Gary E. Giss, as custodian for
Julie E. Giss under the Virginia
Uniform Transfers to Minors Act
Address: c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
-------------------------------
Barbara J. Giss
c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
<PAGE>
Charles River Laboratories/SBI
Amended and Restated
Stock Purchase Agreement
September 4, 1999
--------------------------------
Gary E. Giss
c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
--------------------------------
Kent Vincent Anderson
c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
By:____________________________
Name: Cheryl Ann Anderson, as custodian
for Michelle Suzanne Anderson
under the Virginia Uniform Transfers
to Minors Act
Address: c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
By:____________________________
Name: Cheryl Ann Anderson, as custodian
for Jennifer Lynn Anderson
under the Virginia Uniform Transfers
to Minors Act
Address: c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
<PAGE>
Charles River Laboratories/SBI
Amended and Restated
Stock Purchase Agreement
September 4, 1999
---------------------------------
Cheryl Giss Anderson
c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
By:____________________________
Name: Diane G. Probus, as custodian
for Ryan D. Probus under the
Virginia Uniform Transfers
to Minors Act
Address: c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
By:____________________________
Name: Diane G. Probus, as custodian
for Kathryn A. Probus under the
Virginia Uniform Transfers
to Minors Act
Address: c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
<PAGE>
Charles River Laboratories/SBI
Amended and Restated
Stock Purchase Agreement
September 4, 1999
By:____________________________
Name: Diane G. Probus, as custodian
for Aaron D. Probus under the
Virginia Uniform Transfers
to Minors Act
Address: c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
By:____________________________
Name: Diane G. Probus, as custodian
for Stephen P. Probus under the
Virginia Uniform Transfers
to Minors Act
Address: c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
---------------------------------
Diane G. Probus
c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
---------------------------------
Michael W. Saunders
c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
<PAGE>
Charles River Laboratories/SBI
Amended and Restated
Stock Purchase Agreement
September 4, 1999
By:____________________________
Name: Michael W. Saunders, as custodian
for Jacob E. Saunders under the
Virginia Uniform Transfers
to Minors Act
Address: c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
By:____________________________
Name: Michael W. Saunders, as custodian
for Matthew W. Saunders under the
Virginia Uniform Transfers
to Minors Act
Address: c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
---------------------------------
Nancy G. Saunders
c/o Cheryl Ann Anderson
3608 Woodland Trail
Eagan, MN 55123
<PAGE>
Exhibit 2.1
Number of
Seller Shares
- -------------------------------------------------------------------------------
Jean M. Bees 184,000
(options) 10,000
Donna Eisenhauer 42,300
Nancy A. Gillett 250,000
(options) 10,000
John Kapeghian 40,000
(options) 95,000
Doug Kornbrust 515,000
(options) 10,000
Ron Thielman 100,000
Karol Bice-Godwin 11,062
(options) 16,593
Martin Brett 9,219
(options) 8,296
William C. Hobson (options) 25,000
Azim Khamisa (options) 140,000
Glen Elliott (options) 30,000
Dave McCaslin (options) 110,623
Mark Young (options) 2,765
Gary Chellman (options) 75,000
The Fuller Family Joint Revocable Inter-Vivos Trust 331,000
Gillikin Living Trust 20,000
William C. Hobson and/or Mary Beth Husemoller 1998 Revocable Trust 650,000
Emerald K. Giss Trust 18,339
Gary E. Giss, as custodian for Lisa N. Giss 3,333
Gary E. Giss, as custodian for Julie E. Giss 3,333
Barbara J. Giss 3,333
Gary E. Giss 3,333
Kent Vincent Anderson 3,333
Cheryl Ann Anderson, as custodian for Michelle Suzanne Anderson 3,333
Cheryl Ann Anderson, as custodian for Jennifer Lynn Anderson 3,333
Cheryl Giss Anderson 3,333
Diane G. Probus, as custodian for Ryan D. Probus 3,333
Diane G. Probus, as custodian for Kathryn A. Probus 3,333
Diane G. Probus, as custodian for Aaron D. Probus 3,333
Diane G. Probus, as custodian for Stephen P. Probus 3,333
Diane G. Probus 3,333
Michael W. Saunders 3,333
Michael W. Saunders, as custodian for Jacob E. Saunders 3,333
Michael W. Saunders, as custodian for Matthew W. Saunders 3,333
Nancy G. Saunders 3,333
<PAGE>
Exhibit 2.3
Target Working Capital
Cash 201,000
A/R 2,400,000
Inventory 618,000
Prepaid 145,000
------------
Sub Total 3,364,000
Accounts Payable 805,440
Vacation 302,148
P/R Taxes 159,382
CA Tax 8,059
Misc. Accrual 95,000
LOC 849,000
------------
Sub Total 2,219,029
Target Working Capital 1,144,971
<PAGE>
Schedule 9.2
Indemnitors
Indemnator Amount
---------- ------
William Hobson
Jean Bees
Doug Kornbrust
Nancy Gillett
Dave McCaslin
Karol Bice-Godwin
John Kapeghian
Total $7,500,000
EXHIBIT 10.10
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
by and among
CHARLES RIVER BRF, INC.
a Delaware (US) corporation
and
CHARLES RIVER LABORATORIES, INC.
a Delaware (US) corporation,
and
BIOCULTURE MAURITIUS LTD.
A Mauritius corporation
December 23, 1997
1
<PAGE>
AMENDED AND RESTATED DISTRIBUTION AGREEMENT
This Amended and Restated Distribution Agreement (the "Agreement"), dated as
of the 23rd day of December, 1997, is made by and among Charles River
Laboratories, Inc., a Delaware (US) corporation ("CRL"); Charles River BRF,
Inc., a Delaware (US) corporation and a wholly-owned subsidiary of CRL; and
Bioculture Mauritius Ltd., a Mauritius corporation ("BCM"), and Owen and Mary
Ann Griffiths as related to Paragraph 12 only. For purposes of this Agreement,
references to "BRF" shall include all affiliates of BRF, including, without
limitation, CRL and Shamrock (Great Britain) Ltd.
WHEREAS, BCM, under the direction of the Griffiths, has been engaged for
several years in the capture, breeding and export for sale of Macaca
fascicularis, or cynomologus, primates and
WHEREAS, BRF is engaged in the breeding, import and sale of non-human primates
worldwide, as a wholly-owned subsidiary of CRL from 1978 to 1994, as an
independent not-for-profit corporation from 1994 to 1996, and again as a
wholly-owned subsidiary of CRL from 1996 to the present; and
WHEREAS, CRL and BCM entered into a Supply Agreement dated as of November 1,
1989, pursuant to which CRL acted as BCM's worldwide distributor of
Mauritius-source cynomologus primates; and
WHEREAS, CRL and BCM amended and restated the November 1989 Supply Agreement
as of June 1, 1994, in order to, among other things, extend its terms and add
BRF as a party; and
WHEREAS, BCM and CRL/BRF wish to amend and restate the June 1994 Distribution
Agreement in order to, among other things, further extend its term.
NOW, THEREFORE, for good and valuable consideration the parties intending to be
legally bound, hereby agree as follows:
1. Term
a. This Agreement will commence on the date hereof and shall continue
until December 31, 2005 (as such term may be extended pursuant to
Paragraph 1 (b) below, the "Term").
b. Unless BRF or BCM has been previously notified that it is in
material breach of this Agreement and such breach has not been cured
or waived, this Agreement as it relates to all areas of the world,
shall automatically renew for one additional five-year period, with
exception to the specific reference of clause 12. Should the parties
determine that the price adjustment mechanism set forth in Paragraph
5 below has not yielded prices which accurately reflect the market
price for Mauritian cynomologus primates at the time of renewal, then
BCM and BRF shall negotiate in good faith to
2
<PAGE>
establish an alternate pricing schedule for use in the renewal
period, which shall take into consideration then-current market
conditions. In establishing such an alternate pricing schedule, the
parties shall take into account the value of medical, conditioning,
quarantine, marketing and other services provided by BRF in
connection with BRF's worldwide distribution of primates sourced
from BCM and the value of breeding, medical, conditioning,
quarantine, export and other services provided by BCM, as well as
evidence of the then prevailing wholesale and retail world market
price for Macaca fascicularis.
c. In connection with any renewal of this Agreement, BCM and BRF
shall negotiate in good faith to establish annual minimum purchase
and supply requirements applicable to the renewal period, which will
be binding on the parties. The new minimums will be set on the basis
of: (a) BCM's ability to produce, (b) World demand, (c) BRF's market
share.
d. Notwithstanding the provisions of Paragraph 1(a) and 1(b) hereof,
BCM agrees to provide sufficient quantities of Qualified Primates to
BRF in a period beyond the term hereof to allow BRF to meet all of
its obligations to its contract customers, and the terms and
conditions of this agreement shall govern the sale of such primates
until BRF's obligations to its contract customers are satisfied in
full. For purposes of this agreement "Contract Customers" refers to
those customers who enter into agreements with BRF or CRL for the
purchase of Mauritius source cynomo1gus primates on or before
December 31, 2005 and those additional customers who enter into
similar agreements with BRF after December 31, 2005 with the consent
of BCM. No contracts between BRF and its affiliates will be eligible
to be treated as agreements with Contract Customers under this
paragraph without the consent of BCM. Proof of the existence of any
agreements with Contract Customers shall be provided to BCM at BCM's
request. The contracts listed on Schedule 1(d) are hereby irrevocably
designated as Customer Contracts by BCM as of the date of this
Agreement and shall be treated as such throughout the Term,
2. Commitment to Purchase
a. Subject to Paragraph 2(b) and 2(c) below, BRF hereby commits to
purchase from BCM, and BCM hereby agrees to supply to BRF, during
each calendar year included in the initial Term, the number of
"Qualified Primates" specified on Exhibit A hereto (in each case, the
"Annual Minimum"). In the event (i) BRF elects, at its discretion, to
purchase Qualified Primates during any calendar year included in the
Term and to hold such Qualified Primates in inventory for sale in the
subsequent calendar year and (ii) such purchases are in excess of the
Annual Minimum, in the year of purchase from BCM, then the number of
Qualified Primates so purchased may be applied against BRF's Annual
Minimum for the subsequent year as if those purchases were made in
the subsequent year, provided that BRF gives BCM notice of the number
of animals so applied at the time of the order, and provided BCM is
in agreement, such agreement not to be unreasonably withheld. If BCM
withholds agreement, then such
3
<PAGE>
animals shall not count against the following years minimums. For
purposes of this Agreement, the term "Qualified Primates" refers to
purpose-bred cynomologus Primates, to be made available by BCM, which
meet the following health, age and weight requirements, which are
detailed more specifically in the standard operating procedures
referenced in Paragraph 9 below:
(i) Herpes B-virus free (by any and all available tests)
(ii) Good general health (as evidenced by a thorough physical
examination performed by a qualified veterinarian no more
than two weeks prior to shipment)
(iii) No tuberculosis
(iv) No Simian AIDS (SIV, STLV-1, or any SRV serotype)
(v) Screened for Shigella and salmonella.
(vi) No apparent sign of respiratory disease.
(vii) Currently vaccinated for tetanus and measles (unless a
specific request is made not to vaccinate).
(viii) Minimum weight of 2.0 kilograms and maximum weight of 5.0 kg.
(ix) No clinical signs of enteritis, hepatitis, malaria, or any
other disease.
(x) Screened and treated for internal and external parasites
(xi) No apparent physical deformities,
Health reports shall accompany each animal shipment documenting
specific examinations and testing procedures to meet the health
requirements as set forth herein. Such examinations shall include a
thorough pre-shipment examination during the time that primates are
housed in single cages involving, among other things, an oral
examination.
b. Subject to Paragraph 2(c) below, BRF hereby agrees to purchase no
less than 20 % of its Annual Minimum for a given calendar year during
the first three (3) months of such year, and sufficient quantity in
the second three (3) month period such that in the first six months
BRF will have purchased not less than 40% of its Annual Minimum. In
calculating whether or not this target has been reached in the first
two periods of three months each, the Dollar value of ferals
purchased may be taken into consideration. However on an annual basis
ferals may not be taken into consideration in terms of BRF's
commitment to purchase the Annual Minimums. If BRF fails to meet 80%
of it purchase requirement during any one of these periods or does
not purchase 80% of its Annual Minimum during the applicable calendar
year, then BCM shall be free to sell the number of Qualified Primates
not purchased in each case, (the "Released Amount"), but no more, to
third-party purchasers. In this event BCM shall thereafter have the
right to make available to third-party purchasers a number of
Qualified Primates equal to the Released Amount during each of the
successive calendar years included in the Term, so long as BCM is not
then in default under this Agreement and BRF's Annual Minimum shall be
correspondingly reduced by the Released Amount, provided however,
that in no event will BCM fail to keep in stock a
4
<PAGE>
number of Qualified Primates meeting the age, health, weight and
other specifications necessary for BRF to meet its on-going
obligations under all customer contracts with its Contract Customers
identified pursuant to Paragraph 1(d) throughout the Term. BCM shall
not have this right to do any of the foregoing in the event that
BRF's failure to meet its purchase requirements is due to BCM's
inability to fill orders for Qualified Primates or due to reasons
beyond BRF's control (e.g. air embargoes or government action).
Enforcement of this Paragraph 2(b) shall be BCM's sole remedy in the
event BRF elects not to purchase its annual minimums hereunder,
c. BCM understands and agrees that it is essential for BRF to be able
to supply its primate customers with Qualified Primates of various
age and weight ranges in order to meet their respective research
needs. Consequently, BCM agrees on a best-effort basis, that it will
make Qualified Primates available to BRF at ages and body weights
distributed throughout the weight range specified in Paragraph 2 (a).
BCM further guarantees a male-to-female ratio of approximately 50/50
among Qualified Primates. Furthermore, BRF agrees that in each
calendar year total orders of Qualified Primates will be in an equal
sex ratio.
d. Given BCM's requirement by the UK home office to develop breeding
with captive bred (Fl) breeding stock, additional excess male
primates may become available for sale. In the event such excess
animals become available, BCM shall give BRF written notice of its
intention to sell such animals and BRF shall have sixty (60) days to
commit to purchase all or a portion of such animals at a price to be
negotiated between BRF and BCM, which price shall not be higher than
the price for Qualified Primates hereunder. Any excess animals so
purchased shall be credited against the Annual Minimum for the
applicable year. In the event BRF does not commit to purchase all the
excess animals offered by BCM, BCM shall have the right to sell the
unpurchased portion of such animals to a Qualified Distributor (as
hereinafter defined) at a price equal to or greater than the price
offered to BRF. At BRF's request, BCM shall provide BRF with
documentation sufficient to establish, to BRF's satisfaction, the
purchase price paid by any Qualified Distributor for excess animals
offered pursuant to this Paragraph 2(d) and the identity of such
Qualified Distributor.
e. If at any time BRF desires to increase the number of Qualified
Primates BCM guarantees to supply hereunder, BRF shall so notify BCM,
and the parties agree to re-negotiate in good faith an increase in
the Annual Minimum for each calendar year remaining in the Term.
f. If BRF fails to purchase the minimums for three consecutive years,
for (i) reasons other than BCM's inability to deliver Qualified
Primates ordered by BRF or (ii) without the prior approval of BCM
then BCM has the right to cancel this agreement. BCM may exercise
this right at any time subsequent to these three years upon three
months prior written notice, and failure to exercise this right by
BCM in any one year is not to be construed as a waiver of this
right.
5
<PAGE>
g. BRF will promote BCM as a supplier in its marketing efforts,
including trade show exhibits referencing BCM. BRF will give BCM at
least as much prominence as it does to any other suppliers in its
marketing efforts. In order to permit BRF to undertake such marketing
efforts, BCM shall, at its own cost and expense, prepare a quality
brochure in sufficient quantities for use by BRF.
h. The parties agree that BRF may, under certain circumstances, find
it necessary for BCM to house Qualified Primates purchased by BRF at
BCM's facilities pending delivery. BCM and BRF agree to negotiate in
good-faith regarding the per-unit per diem charges to be applied
under such circumstances, and BCM agrees to use its best efforts to
accommodate such Qualified Primates if so requested by BRF.
3. Sales of Feral Primates
a. Throughout the term of this Agreement BRF shall have the right,
but not the obligation, to purchase feral cynomologus primates
("Feral Primates") from BCM at the per-unit purchase prices specified
in Paragraph 5 below. All such Feral Primates shall meet each of the
health and testing requirements outlined in Paragraph 2(a) above and
shall be accompanied by documentation in the same manner as Qualified
Primates, except that the upper weight range will be restricted to 6
kilograms. Animals in excess of 6 kilograms will be accepted only
with the prior consent of BRF.
b. In addition. to whatever rights BRF may have pursuant to Paragraph
3(a) above, BCM shall, prior to the sale by it from time to time of
any Feral Primates to a Qualified Distributor (as hereinafter
defined), offer to BRF by written notice (the "Offer") the right, for
a period of sixty (60) days, to purchase all or a portion of the
Feral Primates then offered, at the purchase price specified in
Paragraph 5 below.
c. The offer shall describe the characteristics of the Feral Primates
being offered, and shall specify the number of Feral Primates to be
made available for sale. BRF may accept BCM's offer for all or any
portion of the Feral Primates offered by written notice of acceptance
(the "Acceptance"), given to BCM prior to the expiration of the
sixty-day notice period, in which case BCM shall sell, and BRF shall
purchase that number of Feral Primates agreed to be purchased by BRF
in the Acceptance.
BCM shall be free at any time after the sixty-day notice period to
offer and sell to any Qualified Distributor the number of Feral
Primates not agreed to be purchased by BRF in the Acceptance, but
only at a price which is not less than the price available to BRF. At
BRF's request, BCM shall provide BRF with documentation sufficient to
establish, to BRF's satisfaction, the purchase price paid by any
Qualified Distributor for Feral Primates offered pursuant to this
Paragraph 3(b) and the identity of such Qualified Distributor. For
the purpose of this agreement, Qualified Distributor shall be those
distributors of primates which BRF and BCM mutually agree in writing
have the qualifications and reputation that will serve to enhance the
reputation of Mauritian cynomolgus primates around the world.
6
<PAGE>
d. Throughout the term, BCM agrees, on behalf of itself and its
joint-venture partners, to sell feral Primates only to Qualified
Distributors and that the price charged by BCM for any Feral Primates
which may be sold during the Tenn of this Agreement shall in no event
be less than the price available to BRF.
e. If BCM is dissatisfied with the level of sales of Feral Primates
in Belgium and France, then BCM shall provide BRF with written
notice of its dissatisfaction. BRF shall have thirty days to satisfy
BCM that it has taken all reasonable actions to service the French
and Belgium markets with Feral Primates. If BRF fails to so satisfy
BCM within this thirty-day period, BCM shall have the right to sell
Feral Primates into France and Belgium without providing BRF with a
right of first refusal.
4. Dedicated Primate Production: Guaranteed fSupply
a. BCM on behalf of itself and its joint-venture partners, hereby
agrees to make available annually, out of those primates expected to
be produced by BCM and its joint-venture partners during the Term a
minimum of 5,000 primates (the "Dedicated Production Amount"). Such
Dedicated Production Amount shall at all times be reserved
exclusively for purchase by BRF and shall not be made available to
third parties without the express written consent of BRF unless BRF
has not taken minimums as per clause 2.
b. The parties agree that the Dedication Production Amount shall
consist of both Qualified Primates and other purpose-bred cynomologus
primates which are available for purchase from BCM, but which do not
meet the criteria set forth in Paragraph 2(a) above ("Non-Qualified
Primates"). BRF may, in its sole discretion, purchase Non-Qualified
Primates from BCM, in which event purchase of such Non-Qualified
Primates shall be counted against CRL's Annual Minimum.
5. Pricing
a. BRF shall pay to BCM the following firm and fixed US Dollar prices
(in each case, the "Prices") during 1998 (i.e., January 1, 1998
through December 31, 1998): (i) all Feral Primates (regardless of
weight), $546 each, and (ii) Qualified Primates, up to 2.9 kilograms
in weight, $1308 for BRF/Houston (US) and $1283 for Shamrock/UK, with
said Price for Qualified Primates increasing in equal increments of
$55 above the aforementioned US and UK base prices for each 250 gram
increase in weight above 3.0 kilograms (for example, the 1998 prices
for Qualified Primates in the US and UK weighing between 3.0 and 3.25
kilograms shall be $1363 and $1338, respectively). BRF shall pay to
BCM US $620 each for feral primates purchased during calendar year
1999.
7
<PAGE>
b. The prices set forth above shall remain in effect through the
period specified. Thereafter, revised Prices will be established for
each subsequent calendar year thirty (30) days prior to the
commencement of such year based on BRF's annual percentage price
increase for Feral Primates and Qualified Primates of various weights
and ages, as reflected in BRF's most recent price list (whether
publicly circulated or used internally) (in each case, the 'Annual
Percentage Price Increase'), such that the price paid to BCM
hereunder, shall in each case, be increased by a percentage which
equals the Annual Percentage Price increase. BRF shall make available
to BCM at the beginning of each year its annual price list for
primates. For the purpose of this clause, the 'BRF Price List' will
be the generally released BRF price list minus any trade or quantity
discounts. That is the actual price payable by BRF's customers which
is to be taken to be the price of Mauritian Qualified Primates, for
the purpose of this clause. BRF is to make available to BCM details
of quantities sold at various prices during the year so the average
selling price for the year can be established.
c. In the event BRF's or BCM's cost of doing business is
substantially increased, (for example as a result of airline
embargoes, government action or legislation or dramatically changed
exchange rates) which increase cost is also being incurred generally
by commercial primate distributors, in the case of BRF and by
commercial primate suppliers, in the case of BCM, the parties agree
to renegotiate in good faith the prices hereunder to adequately
reflect such increased costs.
d. The prices set forth above are inclusive of all tests and
conditioning carried out in Mauritius, including Salmonella and
Shigella tests.
e. BRF shall pay to BCM per diems for all Feral and Qualified
Primates held by BCM at BRF's direction and for BRF's (or BRF's
customers') account. The per diem rate for 1998 shall be $1.10 per
animal boarded, regardless of weight, age or feral/bred origin. The
maximum number of animals for which BRF may request boarding at any
one time BCM shall be 600. While title and risk of loss of animals
boarded by BCM shall remain with BCM, BRF shall otherwise assure BCM
that BRF will take ownership at some later date of all animals placed
on boarding. At BRF's option, either BRF or BCM shall obtain
insurance on the animals held on per them at BCM, in an amount equal
to BRF's selling price therefor. In the event that BRF requests BCM
to obtain insurance, said insurance shall be with a reputable and
financially secure Mauritian insurance company approved by BRF, in
the name of both BRF and BCM, with the proceeds from any loss claim
payable to BRF. The cost of insurance of animals held on per diem for
BRF's (or BRF's customers' account) shall in any case be borne
entirely by BRF.
6. Forecasts and Orders
a. Within ten (10) business days of the date hereof, and on the
10th day following the close of each calendar quarter included in the
Term, BRF shall provide BCM with a
8
<PAGE>
rolling twelve-month forecast of its anticipated purchase
requirements, with information provided on a quarterly basis. Such
forecasts are intended to assist BCM in its planning process and
shall not obligate BRF to purchase any primate from BCM in excess of
the applicable Annual Minimum. However, BCM shall use its best
efforts to make available those Qualified Primates necessary to meet
BRF's forecast supply requirements. BCM shall on at least a monthly
basis, inform BRF in writing of its primate stock on hand (with
reference to age, sex, weight, and health status), and shall
otherwise use its best efforts to assist BRF in preparing its
forecasts.
b. BRF shall order primates from BCM by submitting standard purchase
orders ('Orders') to BCM, Orders are to be executed by BRF and
acknowledged in a signed writing by BCM, and such Orders and
acknowledgments will become an integral pan of this Agreement.
Shipment terms, including delivery dates, will be specified by BRF in
each Order.
c. This Agreement and the terms of BRF's Orders shall exclusively
govern the purchase and sale of any Primates from BCM. In no event
shall BCM's standard terms and conditions of sale as set forth in its
acknowledgment or other sales documentation be applicable to the
Purchase and sale of primates, unless and to the extent such terms
and conditions are fully consistent with or in furtherance of the
terms and conditions set forth in this Agreement and BRF's Orders.
7. Terms of Sale
BRF will pay the prices for any primates purchased from BCM net
thirty days. BRF will be responsible for the costs of transporting
primates purchased to their ultimate destination, as well as any
sales, use, excise or similar taxes imposed by the government of
Mauritius (but excluding any conservation tax (currently US $50 per
primate exported).
8. Delivery and Acceptance
a. Delivery shall be FOB Mauritius with all freight expenses being
paid by BRF upon delivery. Title to and general risk of loss of
primates purchased by BRF shall pass to BRF at the time of delivery
to the initial customs airport in the country of destination.
Promptly following delivery, BCM shall invoice for all of the
primates tendered.
b. Each primate shipped under this Agreement shall be deemed accepted
by BRF within thirty (30) days following delivery to the initial
customs airport in the country of destination. Acceptance shall
not be deemed to occur, however, if prior to the expiration of such
period BRF informs BCM in accordance with Paragraph 9 that the BCM
product warranty (as described in Paragraph 9) has not been fully
satisfied for any such primate.
9
<PAGE>
9. Product Warranty
a. BCM warrants that each delivered Qualified Primate will meet all
of the health, age and weight requirements set forth in Paragraph 2,
or in any Order from BRF if the parties agree the requirements in the
Order shall apply.
b. BCM warrants that each delivered Feral or Non-Qualified Primate
will meet only those health, age and weight requirements set forth in
the applicable offer.
c. The foregoing warranties shall be subject to BRF's handling and
maintaining any primates received from BCM in accordance with
generally accepted procedures for the handling of non-human primates.
d. Upon notification of a defect by BRF within the respective
acceptance periods set forth in Paragraph 8(b) resulting in a severe
illness/mortality (naturally or by action of a BRF veterinarian in
accordance with BRF's standard veterinary protocols) of the defective
primate, BRF shall be entitled to deduct from its invoice the unit
price of said defective primate, and the cost of its transport.
However, BCM shall have the right to have an independent mutually
acceptable veterinarian verify any such defect notification by BRF at
BCM's sole expense.
e. Except for the remedy set forth in Paragraph 8(b) and 9(d), BCM
shall not otherwise be liable for damages to BRF or to BRF's
customers, following on from the supply of such a defective primate.
10. Management of BCM Primate Operation,
BCM's primate operations, and the operations of its joint-venture
partners, shall be conducted in accordance with the standard operating
procedures attached as Appendix 1 hereto (the "SOPs"), which have
been amended as of this date by mutual agreement of the parties. The
SOPs have been mutually developed by BRF and BCM and the parties
agree am implementation of and continuing conformance to the SOPs by
BCM and its joint-venture partners is an important part of this
Agreement.
In particular, the obligation to physically separate feral and bred
primate colonies in the manner specified in the SOPs is a critical
component of the SOPs and BCM must use its best endeavors to meet
this obligation during the Term. Appendix I may be further amended
from time to time during the Term upon mutual written agreement of
the parties,
11. Inspection and Audit
a. BRF shall have the right, during normal business hours, to inspect
BCM's facilities for the purpose of observing production and
maintenance activities, and auditing BCM's production records to
ensure compliance with this Agreement, in each
10
<PAGE>
case upon at least seventy-two (72) hours advance notice. For
purposes of this Paragraph 11, "production records" shall include all
operational documents (other than financial statements) relating to
the day-to-day business of BCM (including, without limitation,
inventory, veterinary and health records and worldwide export
figures), where such records relate directly to BCM's distribution
arrangement with BRF
b. In addition to the inspection rights granted in Paragraph 11(a),
throughout the Term, should BRF so request, BCM shall provide BRF
with a half-yearly report, prepared by BCM's qualified independent
auditor, which report shall be limited to stating whether BCM, as a
corporation, is a viable on-going concern, and in good or other
financial situation.
Such reports shall be prepared on the basis of six-month periods and
each shall be delivered to BRF as soon as possible after the auditors
have examined the books of BCM. BRF hereby agrees to treat all such
reports as confidential information, BRF will provide BCM with a copy
each year of a Report by its qualified independent auditor, which
report shall be limited to stating whether BRF, as a corporation is a
viable on-going concern, and in good or other financial situation.
c. In order to permit the parties of this agreement to be continually
updated on each other's on-going operations, BCM and BRF agree to
meet and conduct biennial reviews of their respective primate
operations throughout the Term. Such biennial business reviews will
be scheduled on dates which are mutually convenient for the parties
attending, with reviews being scheduled such that one review takes
place in Mauritius and the other in either the United States or
London. Each of the parties shall bear the costs and expenses
associated with its representatives attending any business review.
12. Employment and Non-Competition
BCM agrees to continue to employ the Griffiths throughout the Term
(unless they become unfit to carry out their job). During the Term
and for a period of three (3) years thereafter, each of the Griffiths
further agrees not to engage, directly or indirectly, as a supplier
or consultant to, or an employee, officer, director, stockholder,
partner or other owner or participant in, or lend his or her name to
any business entity in activities anywhere in the world which utilize
or involve Mauritius primates in competition with the primate
business then conducted by BCM or BRF with the specific exception of
BFC Ltd in Israel, provided BRF is not in material breach of the
agreement at the time, or fails to renew the agreement. However this
clause is not to be included in the automatic renewal period except
if Mary Ann and Owen Griffiths are still associated with or employed
by BCM at that time.
13. Breeding and Competition by BRF
11
<PAGE>
a. BCM expressly acknowledges and agrees that BRF or any subsidiary
or related company may, but only with approval of BCM, use all or any
portion of the Primates purchased from BCM as breeding stock for the
establishment of one or more breeding colonies in the United States
or elsewhere in the world.
b. In the event BRF obtains approval from BCM during the Term to
establish an independent venture dedicated to breeding and
distribution of purpose-bred B-virus free cynomologus primates
sourced from BCM, BRF agrees to offer BCM and/or the Mauritian
shareholders of BCM the opportunity to participate as a joint-venture
partner or equity holder in such venture, an reasonable business
terms, provided that BCM is not in material breach of this agreement
at the time such venture is proposed.
c. BRF or any subsidiary or related company agrees not to
competitively engage in the trapping, breeding or exporting of
primates in Mauritius during the Term. However, should BCM be unable
to meet the minimums (of captive bred monkeys) for any given year,
BRF may purchase from other Mauritian suppliers an amount equal to
the shortfall for that year. In addition, BRF agrees not to so
compete in such activities with BCM in Mauritius for three (3) years
after the end of the Term, but if and only if the failure to not
renew or extend this Agreement shall have been solely at BRF's
election for business reasons not covered by or resulting from the
unreasonable actions of BCM hereunder.
14. Restrictions on Use
BCM is required to inform BRF that the Government of Mauritius
prohibits the use of feral or bred primates for certain purposes.
Accordingly, BCM has advised BRF that use of Mauritian primates for
any of the following purposes is prohibited by Mauritian law; (i)
munitions testing for military research; (ii) radiation (other than
routine diagnostic x-rays); (iii) unmanned space flights; and (iv)
vivisection that sets the animal under heavy stress or torture.
15. Termination
a. Either party shall have the right to terminate this Agreement
during the Term if:
(i) the other party fails to remedy or to commence reasonable
corrective action to remedy any default in the performance of any
material condition or obligation under this Agreement within thirty
(30) days of written notice thereof; or
(ii) the other party files a petition in bankruptcy, or enters into
any arrangement with its creditors, or applies for and consents to
the appointment of a receiver or trustee, or makes an assignment for
the benefit of creditors, or suffers or permits the entry of an order
adjudicating it to be bankrupt or insolvent.
12
<PAGE>
b. The failure of either party to terminate this Agreement by reason
of the breach of any of its material provisions by the other party
shall not be construed as a waiver of the rights or remedies
available for any subsequent breach of the terms and provisions of
this Agreement.
16. Termination of Current Agreement
a. Upon execution of this Agreement, the Distribution Agreement dated
as of June 1, 1994, among CRL, BRF, BCM and the Griffiths shall
terminate and shall have no further force or effect.
17. Supply to Israel
BCM hereby agrees not to supply more than a total of five hundred
(500) female primates to Israel through delivery of animals prior to
or during the terms of this agreement provided, however, BCM may
contribute up to 50 additional animals per year to replace animals
culled or dead. If not applied in one year this quantity may be
carried forward to the subsequent year. In the event of a
catastrophic loss of more than one hundred (100) animals, the number
lost may be replaced in that year, such that the total of Mauritian
source animals does not exceed 500 females.
18. Force Majeure
Neither party shall be responsible for any failure to comply with the
terms of this Agreement, except for failure to make timely payments
hereunder, where such failure is due to force majeure, which shall
include, without limitation, cyclones, fire, flood, explosion,
strike, labor dispute, labor shortages, picketing, lockout,
transportation embargo or failures or delays in transportation,
strikes or labor disputes affecting supplies, or other governments or
any agency thereof, or judicial action, and all Government actions
preventing the export of monkeys. The time for performance where
delay is excusable hereunder shall be extended by a period of time
equal to the time lost by reason of the excused delay.
19. Expenses
Each of the parties to this Agreement shall bear its own expenses
(including, without limitation, all compensation and expenses of
counsel, financial advisors, consultants and independent accountants)
incurred in connection with the preparation and execution of this
Agreement and consummation of the transactions contemplated herein.
20. public Disclosure
Each of the parties to this Agreement hereby agrees with the other
parties that, except as may be required to comply with the
requirements of applicable law, no press release or similar public
announcement or communication will be made or caused to be made
13
<PAGE>
at any time whatsoever concerning the execution or performance of
this Agreement unless specifically approved in advance by BRF and
BCM.
21. Notices
Any notice or other communications required under this Agreement
shall be in writing (including telecopy communications), and shall be
sent by registered mail, telecopier or courier as follows:
(a) if to BRF, addressed to:
Charles River BRF, Inc.
305 Almeda Genoa Road
Houston, TX 77047, USA
Attention: President
Fax: (713) 433-6971
with a copy to:
(b) Charles River Laboratories, Inc.
251 Ballardvale Street
Wilmington, MA 01887, USA
Attention: General Counsel
Fax: (508) 988-5665
(b) if to BCM, addressed to:
Bioculture Mauritius Ltd,
Senneville
Riviere des Anguilles
Mauritius
Attention: Mr. Owen Griffiths
Fax: 230-6262-844
Any party hereto shall be entitled to specify a different address by
giving written notice as aforesaid to the other parties. All notices
shall be deemed to have been duly given or made when delivered
personally, or by facsimile or upon appropriate telex confirmation or
upon fifteen (15) business days after being deposited in the mail,
postage prepaid.
22. Section Headings
The paragraph headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or
interpretation of this Agreement,
14
<PAGE>
23. Counterparts
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
24. Amendment: Waiver
This Agreement may not be amended or modified except by a written
document duly executed by BRF and BCM. Waiver of any term of
condition of this Agreement shall only be effective if in writing and
shall not be construed as a waiver of any subsequent breach or waiver
of the same term or condition, or a waiver of any other term or
condition of this Agreement.
25. Entire Agreement
This Agreement (i) constitutes the entire agreement between the
parties and supersedes all prior agreements and understandings, both
written and oral, among the parties, with respect to the subject
matter hereof and (ii) is not intended to confer upon any other
persons any rights Or remedies hereunder.
26. Saving Clause
Should any clause or part of any clause of this Agreement be declared
null and void, it shall not affect the validity of this Agreement or
any other clauses contained herein, and the said other clauses will
remain in full force and effect between the parties.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or caused
this Agreement to be duly executed by their authorized representatives as of
the date first above written.
CHARLES RIVER BRF, INC.
By: /s/ Dr. Rajinder Bhalla
-------------------------------------
Dr. Rajinder Bhalla, President
CHARLES RIVER LABORATORIES, INC.
By: /s/ James C. Foster
-------------------------------------
James C. Foster, President
BIOCULTURE MAURITIUS LTD.
By: /s/ Owen Lee Griffiths
-------------------------------------
Owen Lee Griffiths, Director, and
individually as applies to
Paragraph 12 only
BIOCULTURE MAURITIUS LTD.
By: /s/ Mary Ann Griffiths
-------------------------------------
Mary Ann Griffiths, Director, and
individually as applies to
Paragraph 12 only
/s/ Elizabeth Mary Rountree
-------------------------------------
Elizabeth Mary Rountree, Director
16
EXHIBIT 10.11
SCIENTIFIC RESOURCES INTERNATIONAL
and SIERRA BIOMEDICAL INC.
SUPPLY AGREEMENT
This Agreement made by and between SCIENTIFIC RESOURCES INTERNATIONAL,
Ltd. (SRI), a Nevada Company having its principal offices at 1325 Airmotive
Way, Reno, Nevada 89502 and Sierra Biomedical Incorporated (SBI), located at:
587 Dunn Circle, Sparks, NV 89431 is entered into with reference to the
following facts:
A. SBI is a research firm which utilizes primates.
B. SRI supplies naive primates from the People's Republic of China
and has the requisite knowledge and experience to locate and negotiate primate
sources and pricing. SRI confirms that it has a signed long term primate
supply agreement with the Yunnan Primate center of the People's Republic of
China, or it's affiliates (see attached agreement).
NOW THEREFORE, in consideration of the premises and mutual covenants
and benefits contained herein, the parties agree as follows:
1. Contract: SRI hereby agrees to sell primates to SBI, and SBI
hereby agrees to buy primates from SRI subject to the terms and conditions
herein set forth.
2. Term: This Agreement shall terminate on the tenth (10th) annual
anniversary from the last date appearing on this agreement, unless sooner
terminated under the provisions of this Agreement.
3. SBT's Duties: SBI agrees to buy primates from SRI according to
SBI's specifications, which not greatly differ from their current
specifications. SBI agrees to purchase the minimum annual number of primates
stated in this agreement and in the issued SBI purchase orders. SBI agrees to
provide written reports concerning primate deaths, quality or complaints.
4. SRI's Duties: SRI will provide SBI with all pertinent documents
related to specific primate shipments such as; individual animal records,
CITES, animal quarantine certificates, route and contact sheets, Air Waybill,
packing lists etc.
5. Pricing: Primate prices will be stated and agreed to in SBI's each
year's annual primate purchase order. SRI shall have the right to change
selling prices of the primates during the term hereof, with 30 days written
notice, due to the volatility of the stated marketplace. SRI's stated contract
prices to SBI will be calculated on a cost plus basis. This cost plus basis
will equal no more than a $250 markup per primate based upon SRI's purchase
prices. All SRI pricing is FOB San Francisco International Airport and thus it
is further agreed and understood that SBI, or its assignees, will collect all
SBI shipments at this port of entry (San Francisco Airport), until further
notice.
6. Invoices and Collections: SBI will issue to SRI an annual primate
purchase order contract each October for the next calendar year's commitment.
This purchase order will state: the gross number of Rhesus and Cynomolgus
primates by sex, weight requirements, disease status requirements (untested
for B virus) etc. SRI will invoice SBI per shipment against SBI's individual
POs. SBI agrees to pay said SRI invoices according to the stated payment
terms. SRI's payment terms are: 20% upon arrival/80% net 35 days. SRI will not
charge sales or use taxes on SBI invoices since it is understood that SBI is
acting as a wholesale purchaser and will include these primates in contract
research billings, contract sales, or resell these primates to third parties,
7. Primate Contract Quantity: SBI commits to purchase a minimum of
800 naive primates per year. This minimum primate order will consist
of both Rhesus and Cynomolgus primates. SBI will usually require an equal
quantity of males and females per individual shipments and this specification
will be stated on their annual purchase order. SRI realizes and appreciates
the variables involved with
<PAGE>
page 2 - SRI/SRI 10 Year Agreement
SBI's primate needs, thus SRI will always attempt to deliver the mix of species,
sexes and the quantities in a timely manner. Furthermore, SBI has the first
right of refusal an SRI's annual primate supplies over and above SBI's annual
minimum commitment.
8. Primate Quality: SRI agrees to supply SBI with Naive Primates
according to SBI's specifications as stated on their annual contract purchase
order. If a primate(s) is outside of the specification then SRI agrees to
remedy the problem to satisfy SBI and it's customer(s). For example: if a
primate(s) is unacceptably under weight then SRI agrees to discount the price
of said primate(s) or replace the primate(s) or if a primate dies or has
diseases outside of the specifications then SRI agrees to replace or discount
the price of said primate(s) with SBI's agreement. SRI confirms that if any
primates are out of specification then SRI will work with SBI to remedy the
situation to SBI's satisfaction.
9. Termination and Penalties, if SBI terminates this agreement
without cause then SBI agrees to purchase 800 primates, as stated in this
agreement, over a period not to exceed one year from the date of termination.
If SBI terminates this agreement for cause, then the following procedure will
be followed: If a for cause problem occurs, it is agreed that SBI will notify
SRI in writing and SRI will have 60 days to redress. If the problem(s) is not
corrected, within the 60 day period, then SBI has the right to terminate this
agreement immediately without further obligation. Examples of for cause may
include the following: failure to deliver animals in a timely manner,
unacceptable animal quality and/or pricing becoming noncompetitive with other
licensed agents for equal specification animals.
10. Future Relationships: The parties intend to jointly develop a
primate quarantine facility in the form of a joint venture which will import,
quarantine, hold and sell primates to third parties. It is believed that if
and when this joint venture occurs, that this agreement will be modified or
terminated based upon the parties new relationship and agreements.
IN WITNESS WHEREOF the undersigned have executed this Agreement
Scientific Resources International, Limited (SRI)
By: /s/ Robert K. Pickup Title: Managing Director
-------------------------------
Print name: Robert K. Pickup
Dated: 3-18
----------------------------
Sierra Biomedical Incorporation (SBI)
By: /s/ William Hobson Title: President
-------------------------------
Print name: William Hobson
Dated: 3-17-97 , 19
----------------------------
By: /s/ D. Kornbrust Title: Vice President
-------------------------------
Print name: D.. Kornbrust
Dated: 3-17-97 , 19
----------------------------
See attached SRI/Chinese Supply Agreement
* * End of Agreement * *
<PAGE>
SCIENTIFIC RESOURCES INTERNATIONAL
and SHARED SCI-TECH
PURCHASE & SUPPLY AGREEMENT
This Agreement made by and between SCIENTIFIC RESOURCES INTERNATIONAL,
Ltd. (SRI), a Nevada Company having its principal offices at 1325 Airmotive
Way, Reno, Nevada 89502 and Shared Sci-Tech, Ltd. (SST) located at: 3918 Mead
Street, Antioch, CA 94509 is entered into with reference to the following facts:
A. SST is an American company which represents the Yunnan Primate
Center of the Peoples Republic of China. As such, SST markets Chinese Rhesus
and Cynomolgus primates.
B. SRI Supplies primates to American research laboratories, and has
the requisite knowledge and experience to locate and negotiate primate
sources, sales and pricing. SRI also has the knowledge and experience to
present other business opportunities to SST and/or present other parties to
SST for consul and/or working relationships.
NOW THEREFORE, in consideration of the premises and mutual covenants
and benefits contained herein, the parties agree as follows:
1. Contract: SST hereby agrees to sell primates to SRI, and SRI hereby
agrees to buy SST's primates subject to the terms and conditions herein set
forth.
2. Term: This Agreement shall terminate on the tenth (10th) annual
anniversary from the last date appearing an this agreement, unless sooner
terminated under the provisions of this Agreement.
3. SRI's Duties: SRI agrees to buy primates from SST according to
SRI'S specifications. SRI agrees to purchase the minimum annual number of
primates stated in this agreement and in issued SRI purchase orders. SRI
agrees to provide written reports concerning primate deaths, quality or
complaints.
4. SST's Duties: SST will provide SRI with all pertinent documents
related to specific primate shipments such as; individual animal records,
CITES, animal quarantine certificates, route and contact Sheets, Air Waybill,
packing lists etc.
5. Compensation: SRI further agrees to provide SST, each January, with
a purchase order(s) which equals SRI's calendar year primate required purchases.
SRI further agrees to pay SST invoices in a timely manner according to the
invoice's stated payment terms.
6. Pricing: SST shall have the right to change selling prices of the
primates during the term, hereof, with 60 days written notice, due to the
volatility of the stated marketplace. Since SRI's contracts are long term,
and Chinese pricing can be politically volatile, again it is understood by SST
that price changes may only occur with 60 days written notice and with a
detailed explanation as to the price change. Please note: Historically China
provides advance notice of price changes and SST will always attempt to
provide as much advance notice as possible to SRI. SST's stated contract
prices will always be honored for goods shipped. All SRI purchase orders
accepted, but not yet shipped, will also be honored. Now pricing will only go
into effect after the 60 day Written notice period. Due to SRI's most
favorable customer status with SST, SST agrees to offer SRI the lowest primate
pricing possible. All SST pricing is FOB San Francisco International Airport
and thus it is further agreed and understood that SRI, or its assignees, will
'collect all shipments at this port of entry (San Francisco Airport), until
further notice.
7. Primate Contract Quantity: SRI commits to purchase a minimum of
000 primates per year. This primate order will consist of both Rhesus and
Cynomolgus primates. SRI will require an equal quantity of males and females
per individual shipments so the annual total of 800 will be 400 male and 400
female. The mix of species is always unknown but we believe that we will
require a minimum of 600 Rhesus and 200 Cynos per year.
8. Primate Quality: SST agrees to supply SRI with Primates according
to SRI's specifications as stated an their annual contract purchase order, if
a primate(s) is outside of the specification then sST agrees to remedy the
problem to satisfy SRI and it's customer(s). For example: if a primate(s) is
under weight then SST agrees to discount the price of said primate(s) or
replace the primate(s), or if a primate dies or has diseases outside of the
specifications then SST agrees to replace or discount the price of said
primate(s) with SRI's agreement. SST confirms that if any primates are out of
specification then SST will work with SRI remedy the situation to SRI's
satisfaction.
9. Invoices and Collections: SST will invoice SRI per shipment against
SRI's individual POs. SRI agrees to pay said SST invoices according to the
stated payment terms. SST's current payment terms are: net 35 days post USA
arrival. SST will not charge sales or use taxes on SST invoices since it is
understood that SRI is acting as a wholesale purchaser and will include
these products in contract sales, resell these products or retail these
products to third parties.
<PAGE>
page 2 SRI/SST 10 Year Agreement
10. Future Relationships: The parties intend to jointly develop a
primate quarantine facility in the form of a joint venture which will import,
quarantine, hold and sell primates to third parties. It is believed that if
and when this joint venture occurs, that this agreement will be modified or
terminated based upon the parties new relationship and agreements.
IN WITNESS WHEREOF the undersigned have executed this Agreement
Scientific Resources International, Limited (SRI)
By: /s/ Robert K. Pickup Title: Managing Director, Partner
-------------------------------
Print name: Robert K. Pickup
Dated: Feb 3 , 1997
----------------------------
Scientific Resources International, Limited (SRI)
By: /s/ Lawrence C.K. Wong Title: Director Chinese Affairs, Partner
-------------------------------
Print name: L.C.K. Wong
Dated: Feb 4 , 1997
----------------------------
Shared Sci-Tech, Limited (SST)
By: /s/ Guogiang Li Title: General Manager
-------------------------------
Print name: Guogiang Li
Dated: Feb 8, , 1997
----------------------------
By: /s/ D. Kornbrust Title: Vice President
-------------------------------
Print name: D. Kornbrush
Dated: 3-17-97 , 19
----------------------------
EXHIBIT 12.1
Charles River Laboratories Inc.
Computation of Ratio of Earnings to Fixed Charges
(In millions, except ratio data)
<TABLE>
Pro Forma
-----------------------------
Nine Nine Fiscal Nine Twelve
Months Months Year Months Months
Ended Ended Ended Ended Ended
12/31/94 12/30/95 12/28/96 12/27/97 12/26/98 9/26/98 9/25/99 12/26/98 9/25/99 9/25/99
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income before taxes(*)................$ 20,822 27,773 26,134 23,839 37,501 29,739 36,855 1,831 7,193 5,770
Fixed charges:
Interest expense................... 464 768 491 501 421 311 207 35,013 28,330 37,083
Amortization of deferred
financing costs................. - - - - - - - 1,523 1,142 1,523
1/3 rent from operating leases..... 531 781 981 1,037 1,091 876 921 1,091 921 1,136
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Total fixed charges................$ 995 1,549 1,472 1,538 1,512 1,187 1,128 37,627 30,393 39,742
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Earnings + fixed charges..............$ 21,817 29,322 27,606 25,377 39,013 30,926 37,983 39,458 37,586 45,512
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Ratio of earnings to fixed charges.... 21.9 18.9 18.8 16.5 25.8 26.1 33.7 1.0 1.2 1.1
======== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
- -------------------
(*) Includes earnings from equity investments less minority interests.
EXHIBIT 12.2
Charles River Laboratories, Inc.
Computation of Ratio of Total Pro Forma Debt to Adjusted EBITDA
(In millions, except ratio data)
Pro Forma
Twelve Months Ended
September 25, 1999
-------------------
Total Debt.................................................. $ 311,128
Adjusted EBITDA............................................. 57,031
----------
Total Pro Forma Debt to Adjusted EBITDA..................... 5.5x
EXHIBIT 12.3
Charles River Laboratories, Inc.
Computation of Ratio of Adjusted EBITDA to Cash Interest Expense
(In millions, except ratio data)
Pro Forma Pro Forma Pro Forma
Fiscal Year Nine Months Ended Twelve Months Ended
Ended 1998 September 25, 1999 September 25, 1999
----------- ------------------ -------------------
Adjusted EBITDA.......... $ 51,453 $ 45,468 $ 57,031
Cash Interest Expense.... 35,013 28,330 37,134
-------- -------- ---------
Adjusted EBITDA to Cash
Interest Expense....... 1.5x 1.6x 1.5x
Charles River Laboratories, Inc.
EXHIBIT 23.2.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated June 30, 1999, except as to Note 2, which is as of September 29,
1999 relating to the consolidated financial statements and financial statement
schedule of Charles River Laboratories, Inc. which appear in such Registration
Statement. We also consent to the reference to us under the heading "Independent
Accountants" in such Registration Statement.
/s/: PricewaterhouseCoopers LLP
Boston, Massachusetts
December 7, 1999
EXHIBIT 23.2.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated June 30, 1999, except as to Note 2, which is as of September 29,
1999 relating to the combined financial statements and financial statement
schedule of Charles River Laboratories, Inc. and Charles River Laboratories
Holdings, Inc., which appear in such Registration Statement. We also consent to
the reference to us under the heading "Independent Accountants" in such
Registration Statement.
/s/: PricewaterhouseCoopers LLP
Boston, Massachusetts
December 7, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the consolidated
statement of earnings for the nine months ended September 30, 1999 and the
consolidated balance sheet at September 30, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 1100682
<NAME> CHARLES RIVER LABORATORIES HOLDINGS, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-28-1996 DEC-27-1997 DEC-26-1998 DEC-26-1998 DEC-25-1999
<PERIOD-END> DEC-28-1996 DEC-27-1997 DEC-26-1998 SEP-26-1998 SEP-25-1999
<CASH> 0 17,915 24,811 0 3,457
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 0 28,280 32,466 0 33,820
<ALLOWANCES> 0 688 898 0 854
<INVENTORY> 0 28,904 30,731 0 28,577
<CURRENT-ASSETS> 0 83,323 97,214 0 77,303
<PP&E> 0 76,889 82,690 0 79,349
<DEPRECIATION> 0 8,320 9,168 0 0
<TOTAL-ASSETS> 0 196,211 233,410 0 210,371
<CURRENT-LIABILITIES> 0 41,577 59,792 0 56,707
<BONDS> 0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
<COMMON> 0 1 1 0 1
<OTHER-SE> 0 17,836 17,836 0 17,836
<TOTAL-LIABILITY-AND-EQUITY> 0 196,211 233,410 0 210,371
<SALES> 155,604 170,713 193,301 145,519 161,096
<TOTAL-REVENUES> 155,604 170,713 193,301 145,519 161,096
<CGS> 97,777 111,460 122,547 91,041 97,230
<TOTAL-COSTS> 97,777 111,460 122,547 91,041 97,230
<OTHER-EXPENSES> 33,685 37,177 35,429 26,238 30,528
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 491 501 421 311 207
<INCOME-PRETAX> 15,245 15,340 23,378 18,459 19,952
<INCOME-TAX> 10,889 8,449 14,123 11,280 16,903
<INCOME-CONTINUING> 15,245 15,340 23,378 18,459 19,952
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 15,245 15,340 23,378 18,459 19,952
<EPS-BASIC> 0<F1> 0<F1> 0<F1> 0<F1> 0<F1>
<EPS-DILUTED> 0<F1> 0<F1> 0<F1> 0<F1> 0<F1>
<FN>
<F1>The Company's equity is not publicly stated.
</FN>
</TABLE>
