Exhibit 10.1

 

EXECUTION VERSION

 

Reference Number: 6797014

 

Account Number: 02304957

 

 

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MORGAN STANLEY & CO. INCORPORATED

 

1585 BROADWAY

 

NEW YORK, NY 10036-8293

 

(212) 761-4000

 

August 26, 2010

 

Fixed Dollar Accelerated Share Repurchase Transaction

 

Charles River Laboratories International, Inc.

251 Ballardvale Street

Wilmington, MA 01887

 

Dear Sir/Madam:

 

The purpose of this letter agreement (this “Confirmation”) is to confirm the
terms and conditions of the Transaction entered into between Morgan Stanley &
Co. Incorporated (“MSCO”) and Charles River Laboratories International, Inc.
(the “Issuer”) on the Trade Date specified below (the “Transaction”).  This
confirmation constitutes a “Confirmation” as referred to in the Agreement
specified below.

 

The definitions and provisions contained in the 2002 ISDA Equity Derivatives
Definitions (as published by the International Swaps and Derivatives
Association, Inc. (“ISDA”)) (the “Equity Definitions”) are incorporated into
this Confirmation.  In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation will govern.  Any reference
to a currency shall have the meaning contained in Annex A to the 1998 ISDA FX
and Currency Option Definitions, as published by ISDA.

 

1.  This Confirmation evidences a complete and binding agreement between MSCO
and Issuer as to the terms of the Transaction to which this Confirmation
relates.  This Confirmation shall be subject to an agreement (the “Agreement”)
in the form of the 2002 ISDA Master Agreement as if MSCO and Issuer had executed
an agreement in such form without any Schedule.  For the avoidance of doubt, the
Transaction shall be the only transaction under the Agreement.

 

2.  The terms of the particular Transaction to which this Confirmation relates
are as follows:

 

GENERAL TERMS:

 

Trade Date:

 

As specified in Schedule I

 

 

 

Buyer:

 

Issuer

 

 

 

Seller:

 

MSCO

 

 

 

Shares:

 

Common Stock of Issuer (Ticker: CRL)

 

 

 

Number of Shares:

 

The number of Shares delivered in accordance with Physical Settlement below.

 

 

 

Forward Price:

 

A price per Share (as determined by the Calculation Agent) equal to (i) the
arithmetic mean (not a weighted average) of the 10b-18 VWAPs on all Observation
Dates during the

 

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Calculation Period (subject to Averaging Date Disruption) minus (ii) the
Discount (as specified in Schedule I)

 

 

 

10b-18 VWAP:

 

For each Observation Date that is a Trading Day during the Calculation Period,
and for each Settlement Averaging Date that is a Trading Day during any
Settlement Valuation Period, a price per share (as determined by the Calculation
Agent) equal to the volume-weighted average price of the Rule 10b-18 eligible
trades in the Shares for such Trading Day as determined by reference to the
screen entitled “CRL <Equity> AQR SEC” or any successor page as reported by
Bloomberg L.P. (without regard to pre-open or after hours trading outside of any
regular trading session for such Trading Day or block trades (as defined in
Rule 10b-18(b)(5) of the Securities Exchange Act of 1934 as amended (the
“Exchange Act”)) on such Trading Day).

 

 

 

Observation Dates:

 

As specified in Schedule I

 

 

 

Calculation Period:

 

The period from and including the first Observation Date that is a Trading Day
that occurs on or after the Prepayment Date to but excluding the relevant
Valuation Date; provided, however, that if the Valuation Date is the Scheduled
Valuation Date, then the Valuation Date shall be included in the Calculation
Period.

 

 

 

Trading Day:

 

Any Exchange Business Day that is not a Disrupted Day.

 

 

 

Initial Shares:

 

As specified in Schedule I

 

 

 

Initial Share Delivery Date:

 

One Exchange Business Day following the Trade Date. On the Initial Share
Delivery Date, Seller shall deliver a number of Shares equal to the Initial
Shares to Buyer in accordance with Section 9.4 of the Equity Definitions, with
the Initial Share Delivery Date deemed to be a “Settlement Date” for purposes of
such Section 9.4.

 

 

 

Prepayment:

 

Applicable

 

 

 

Prepayment Amount:

 

As specified in Schedule I

 

 

 

Commission Amount:

 

As specified in Schedule I

 

 

 

Adjustment Amount:

 

As specified in Schedule I

 

 

 

Structuring Fee:

 

As specified in Schedule I

 

 

 

Prepayment Date:

 

One Exchange Business Day following the Trade Date. On the Prepayment Date,
Buyer shall pay to Seller the Prepayment Amount, the Commission Amount, the
Adjustment Amount and the Structuring Fee.

 

 

 

Exchange:

 

The New York Stock Exchange

 

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Related Exchange:

 

The primary exchange on which options or futures on the relevant Shares are
traded.

 

 

 

Market Disruption Event:

 

The definition of “Market Disruption Event” in Section 6.3(a) of the Equity
Definitions is hereby amended by deleting the words “at any time during the
one-hour period that ends at the relevant Valuation Time” in the third line
thereof.

 

 

 

 

 

Section 6.3(d) of the Equity Definitions is hereby amended by deleting the
remainder of the provision following the term “Scheduled Closing Time” in the
fourth line thereof.

 

 

 

Averaging Date Disruption:

 

Modified Postponement, determined as if (a) each Observation Date or each
Settlement Averaging Date, as the case may be, were an Averaging Date and
(b) the Scheduled Valuation Date (as defined herein) or the final Settlement
Averaging Date, as the case may be, were the final Averaging Date.

 

 

 

 

 

Notwithstanding anything to the contrary in the Equity Definitions, if a Market
Disruption Event occurs on any Observation Date or Settlement Averaging Date
(i) the Calculation Agent may extend the Calculation Period or Settlement
Valuation Period, as the case may be, by one Observation Date or Settlement
Averaging Date, as the case may be, unless the Disrupted Day is deemed to be an
Observation Date or Settlement Averaging Date, as the case may be, in accordance
with Section 6.7(c)(iii)(A)(1) of the Equity Definitions, and (ii) the
Calculation Agent may, if appropriate in light of market conditions, regulatory
considerations or otherwise, determine that the relevant Observation Date or
Settlement Averaging Date, as the case may be, is a Disrupted Day only in part,
in which case such Disrupted Day shall be deemed to be a Trading Day and the
Calculation Agent shall (x) determine the 10b-18 VWAP for such Disrupted Day
based on Rule 10b-18 eligible transactions in the Shares on such Disrupted Day
taking into account the nature and duration of such Market Disruption Event and
(y) determine the Forward Price or Cash Settlement Price, as the case may be,
based on an appropriately weighted average instead of the arithmetic average
described in the definition thereof.

 

VALUATION:

 

Valuation Time:

 

The Scheduled Closing Time on the relevant Exchange

 

 

 

Valuation Date:

 

The earlier of (i) the Scheduled Valuation Date (as specified in Schedule I) and
(ii) any date after the Lock-Out Date (as specified in Schedule I) specified by
MSCO as a Valuation Date, in each case, subject to extension in accordance with
“Averaging Date Disruption” above or Section 10 below; provided, however, that
if a Valuation Date occurs pursuant to

 

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clause (ii) above, then notice of the designation of a Valuation Date must be
given to Issuer by no later than 9:00am New York City time on the second
Exchange Business Day following such Valuation Date.

 

 

 

 

 

On each Valuation Date, Calculation Agent shall calculate the Settlement Amount.

 

SETTLEMENT TERMS:

 

Settlement Method Election:

 

If the Settlement Amount is less than zero, Settlement Method Election shall be
applicable. Otherwise, Physical Settlement shall be applicable.

 

 

 

Default Settlement Method:

 

Cash Settlement

 

 

 

Electing Party:

 

Buyer

 

 

 

Settlement Method Election Date:

 

(i) If the relevant Valuation Date occurs on the Scheduled Valuation Date, the
Valuation Date; and

 

 

 

 

 

(ii) If the relevant Valuation Date occurs prior to the Scheduled Valuation
Date, the later of (x) such Valuation Date and (y) the Exchange Business Day
immediately following the date Buyer receives notice from Seller of such
Valuation Date.

 

 

 

Physical Settlement:

 

Notwithstanding Section 9.2 of the Equity Definitions, on the Settlement Date,
Seller shall deliver to Buyer a number of Shares equal to (a) (i) the Prepayment
Amount divided by (ii) the Forward Price as determined on the relevant Valuation
Date, minus (b) the Initial Shares (such number of Shares, the “Settlement
Amount”), rounded to the nearest whole number of Shares; provided, however, that
if the Settlement Amount is less than zero, then Buyer shall deliver to Seller a
number of Shares equal to 102% of the absolute value of the Settlement Amount
(such number of Shares, the “Payment Shares”).

 

 

 

 

 

Section 9.11 of the Equity Definitions is hereby modified by excluding any
representations therein relating to restrictions, obligations, limitations or
requirements under applicable securities laws arising as a result of the fact
that Seller is the Issuer of the Shares.

 

 

 

Settlement Currency:

 

USD

 

 

 

Settlement Date:

 

Three Exchange Business Days after (x) the relevant Valuation Date (in the case
of Physical Settlement) or (y) the final Settlement Averaging Day in the
relevant Settlement Valuation Period (in the case of Cash Settlement) or, in
either case, if such date is not a Clearance System Business Day or if there is
a Settlement Disruption Event on such day, the immediately succeeding Clearance
System Business Day on

 

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which there is no Settlement Disruption Event.

 

 

 

Cash Settlement:

 

Notwithstanding Section 8.4(b) of the Equity Definitions, Buyer shall pay to
Seller on the Settlement Date an amount in cash equal to the Cash Settlement
Amount.

 

 

 

Cash Settlement Amount:

 

The product of the absolute value of the Settlement Amount and the Cash
Settlement Price.

 

 

 

Cash Settlement Price:

 

A price per Share (as determined by the Calculation Agent) equal to the
arithmetic mean (not a weighted average) of the 10b-18 VWAPs on all Settlement
Averaging Dates during the Settlement Valuation Period (subject to Averaging
Date Disruption).

 

 

 

Settlement Valuation Period:

 

A period consisting of a number of consecutive Scheduled Trading Days (each, a
“Settlement Averaging Day”) determined by the Calculation Agent in a
commercially reasonable manner and notified to the parties on the first day
thereof, beginning on the first Scheduled Trading Day following the later of
(x) the Settlement Method Election Date and (y) the relevant Valuation Date.

 

 

 

Consequences of Settlement:

 

For the avoidance of doubt, upon the date that Buyer satisfies its obligation to
(i) deliver the Payment Shares to Seller pursuant to “Physical Settlement” above
or (ii) pay the Cash Settlement Amount to Seller pursuant to “Cash Settlement”
above, then Buyer shall have no further delivery or payment obligations with
respect to the Transaction and the Transaction shall be deemed to have been
settled as of such date.

 

SHARE ADJUSTMENTS:

 

Potential Adjustment Event:

 

Notwithstanding anything to the contrary in Section 11.2(e) of the Equity
Definitions, the declaration or payment of an Extraordinary Dividend shall not
constitute a Potential Adjustment Event

 

 

 

Extraordinary Dividend:

 

Any dividend or distribution on the Shares with an ex-dividend date occurring
during the Calculation Period or any Settlement Valuation Period (other than any
dividend or distribution of the type described in Section 11.2(e)(i) or
Section 11.2(e)(ii)(A) or (B) of the Equity Definitions).

 

 

 

Method of Adjustment:

 

Calculation Agent Adjustment; provided that if the Calculation Period or any
Settlement Valuation Period is suspended or extended hereunder, such suspension
or extension shall constitute a Potential Adjustment Event, in which case the
Calculation Agent may, in its commercially reasonable discretion, adjust any
relevant terms of the Transaction as the Calculation Agent determines
appropriate to account for the economic effect on the Transaction of such
suspension or extension. In the case of a suspension pursuant

 

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to Section 10, the Calculation Agent shall make such adjustments prior to the
period of suspension, if it is practical to do so. Otherwise, and in all cases
of a suspension as contemplated under “Averaging Date Disruption” above, the
Calculation Agent shall make such adjustments promptly following the period of
suspension.

 

EXTRAORDINARY EVENTS:

 

Consequences of Merger Events:

 

Share-for-Share:

 

Modified Calculation Agent Adjustment

 

 

 

Share-for-Other:

 

Cancellation and Payment on that portion of the Other Consideration that
consists of cash; Modified Calculation Agent Adjustment on the remainder of the
Other Consideration

 

 

 

Share-for-Combined:

 

Modified Calculation Agent Adjustment

 

 

 

Tender Offer:

 

Applicable; provided that Section 12.1(d) of the Equity Definitions is hereby
amended by replacing “10%” with “25%” in the third line thereof.

 

CONSEQUENCES OF TENDER OFFERS:

 

Share-for-Share:

 

Modified Calculation Agent Adjustment

 

 

 

Share-for-Other:

 

Modified Calculation Agent Adjustment

 

 

 

Share-for-Combined:

 

Modified Calculation Agent Adjustment

 

For purposes of the Transaction, the definition of Merger Date in
Section 12.1(c) of the Equity Definitions shall be amended to read, “Merger Date
shall mean the Announcement Date.”  For purposes of the Transaction, the
definition of Tender Offer Date in Section 12.1(e) of the Equity Definitions
shall be amended to read, “Tender Offer Date shall mean the Announcement Date.”

 

Composition of Combined Consideration:

 

Applicable

 

 

 

Nationalization, Insolvency or Delisting:

 

Cancellation and Payment (Calculation Agent Determination)

 

Additional Disruption Events:

 

Change in Law:

 

Applicable

 

 

 

Insolvency Filing:

 

Applicable

 

 

 

Hedging Disruption:

 

Applicable

 

 

 

Loss of Stock Borrow:

 

Applicable; provided that Section 12.9(a)(vii) of the Equity Definitions is
hereby amended by deleting the words “at a rate equal to or less than the
Maximum Stock Loan Rate” at the end thereof.

 

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Increased Cost of Stock Borrow:

Initial Stock Loan Rate:

 

Applicable

25bps

 

Determining Party:

 

For all Extraordinary Events, MSCO

 

 

 

Hedging Party:

 

For all Additional Disruption Events, MSCO

 

 

 

Non-Reliance:

 

Applicable

 

AGREEMENTS AND ACKNOWLEDGMENTS:

 

Regarding Hedging Activities:

 

Applicable

 

 

 

Additional Acknowledgments:

 

Applicable

 

 

 

3.  Calculation Agent:

 

MSCO. The Calculation Agent shall deliver, within five Exchange Business Days of
a written request by Buyer, a written explanation of any calculation or
adjustment made by the Calculation Agent, including, where applicable, the
methodology and data applied; provided, however, that nothing in this provision
shall require Calculation Agent to disclose any proprietary models or violate
applicable laws, regulations or policies or contractual obligations in
connection with delivery of such explanation.

 

 

 

4.  Account Details:

 

To be provided.

 

5.                                       (a) Nationalization, Insolvency or
Delisting.  The words “the Transaction will be cancelled,” in the first line of
Section 12.6(c)(ii) are replaced with the words “MSCO will have the right to
cancel the Transaction,”.

 

(b)  Additional Termination Event.  The declaration of any Extraordinary
Dividend by Issuer during the period from and including the Trade Date to but
excluding the final Valuation Date shall constitute an Additional Termination
Event with the Transaction as the only “Affected Transaction” and Issuer as the
sole “Affected Party”.

 

(c) For the avoidance of doubt, the Transaction shall be deemed to be a “Share
Forward Transaction” for purposes of the Equity Definitions.

 

(d) The proviso appearing in parentheses beginning on the fifth row from the end
of Section 11.2(c) is removed.

 

(e) The definition of “Announcement Date” in Section 12.1 of the Equity
Definitions is hereby amended by (i) replacing the word “leads to the” with the
words “, if completed, would lead to a” in the third and the fifth lines
thereof, (ii) replacing the words “voting shares” with the word “Shares” in the
fifth line thereof, (iii) inserting the words “by any entity” after the word
“announcement” in the second and the fourth lines thereof, (iv) inserting the
words “or, in the case of an announcement by the Issuer, to explore the
possibility of engaging in” after the words “engage in” in the second line
thereof, and (v) inserting the words “or, in the case of an announcement by the
Issuer, to explore the possibility of purchasing or otherwise obtaining” after
the word “obtain” in the fourth line thereof.

 

(f) The definition of “Change in Law” provided in Section 12.9(a)(ii) of the
Equity Definitions is hereby amended by replacing the phrase “the
interpretation” in the third line thereof with the phrase “or public

 

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announcement of the formal or informal interpretation”.  Any determination as to
whether (A) the adoption of or any change in any applicable law or regulation
(including, without limitation, any tax law) or (B) the promulgation of or any
change in or public announcement of the formal or informal interpretation by any
court, tribunal or regulatory authority with competent jurisdiction of any
applicable law or regulation (including any action taken by a taxing authority),
in each case, constitutes a “Change in Law” shall be made without regard to
Section 739 of the Wall Street Transparency and Accountability Act of 2010.

 

6.  Certain Payments and Deliveries by MSCO.  Notwithstanding anything to the
contrary herein, or in the Equity Definitions, if at any time (i) an Early
Termination Date occurs and MSCO would be required to make a payment pursuant to
Sections 6(d) and 6(e) of the Agreement, (ii) a Tender Offer occurs and MSCO
would be required to make a payment pursuant to Sections 12.3 and 12.7 of the
Equity Definitions, (iii) a Merger Event occurs and MSCO would be required to
make a payment pursuant to Sections 12.2 and 12.7 of the Equity Definitions
(iv) an Additional Disruption Event occurs and MSCO would be required to make a
payment pursuant to Sections 12.8 and 12.9 of the Equity Definitions or (v) a
Nationalization, Insolvency or Delisting occurs and MSCO would be required to
make a payment pursuant to Sections 12.6 and 12.7 of the Equity Definitions,
then Issuer shall have the option to require MSCO to settle such payment amount
in Shares in lieu of a cash payment (any such payment described in Sections
6(i), (ii), (iii), (iv) or (v) above, an “MSCO Payment Amount”).  If Issuer
elects for MSCO to settle an MSCO Payment Amount in Shares, then on the date
such MSCO Payment Amount is due, MSCO shall deliver to Buyer a number of Shares
(the “MSCO Payment Shares”) with a market value equal to the MSCO Payment Amount
on such date, as determined by the Calculation Agent in a commercially
reasonable manner; provided that MSCO may defer the date on which such MSCO
Payment Shares are due if it reasonably determines that it is not practical on
such date to deliver the full number of MSCO Payment Shares.

 

7.  Certain Payments and Deliveries by Issuer.  Notwithstanding anything to the
contrary herein, or in the Equity Definitions, if at any time (i) an Early
Termination Date occurs and Issuer would be required to make a payment pursuant
to Sections 6(d) and 6(e) of the Agreement, (ii) a Tender Offer occurs and
Issuer would be required to make a payment pursuant to Sections 12.3 and 12.7 of
the Equity Definitions, (iii) a Merger Event occurs and Issuer would be required
to make a payment pursuant to Sections 12.2 and 12.7 of the Equity Definitions,
(iv) an Additional Disruption Event occurs and Issuer would be required to make
a payment pursuant to Sections 12.8 and 12.9 of the Equity Definitions or (v) a
Nationalization, Insolvency or Delisting occurs and Issuer would be required to
make a payment pursuant to Sections 12.6 and 12.7 of the Equity Definitions (any
such payment described in Sections 7(i), (ii), (iii),  (iv) or (v) above, an
“Early Settlement Payment”), then Issuer shall have the option, in lieu of
making such cash payment, to settle its payment obligations under Sections 7(i),
(ii), (iii), (iv) or (v) above in Shares (such Shares, the “Early Settlement
Shares”).  In order to elect to deliver Early Settlement Shares, (i) Issuer must
notify MSCO of its election by no later than 4 p.m. EST on the date that is
three Exchange Business Days before the date that the Early Settlement Payment
is due, (ii) Issuer must specify whether such Early Settlement Shares are to be
sold by means of a registered offering or by means of a private placement and
(iii) Issuer must comply with the provisions set forth in Section 8 below on
each day Early Settlement Shares are to be sold by Seller in connection with
Buyer’s election to deliver Early Settlement Shares in connection with the
settlement of an Early Settlement Payment.

 

8.                                       Provisions Relating to Delivery of
Early Settlement Shares.

 

If Issuer elects to deliver Early Settlement Shares and Make-Whole Shares (as
defined below), Issuer must comply with the following provisions:

 

(a) Issuer may only elect to deliver Early Settlement Shares and Make-Whole
Shares by means of a registered offering if the following conditions are
satisfied:

 

(i) On the later of (A) the Trading Day following the Issuer’s election to
deliver Early Settlement Shares and any Make-Whole Shares by means of a
registered offering (the “Registration Notice Date”), and (B) the date on which
the Registration Statement (as defined below) is declared

 

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effective by the Securities and Exchange Commission (the “SEC”) or becomes
effective (the “Registered Share Delivery Date”), the Issuer shall deliver to
MSCO a number of Early Settlement Shares equal to the quotient of (I) the
relevant Early Settlement Payment divided by (II) the per Share market value of
the Shares on the date of such delivery as reasonably determined by the
Calculation Agent.

 

(ii) Promptly following the Registration Notice Date, the Issuer shall file with
the SEC a registration statement (“Registration Statement”) covering the public
resale by MSCO of the Early Settlement Shares and any Make-Whole Shares
(collectively, the “Registered Securities”) on a continuous or delayed basis
pursuant to Rule 415 (or any similar or successor rule), if available, under the
Securities Act; provided that no such filing shall be required pursuant to this
paragraph (ii) if the Issuer shall have filed a similar registration statement
with unused capacity at least equal to the relevant Early Settlement Payment and
such registration statement has become effective or been declared effective by
the SEC on or prior to the Registration Notice Date and no stop order is in
effect with respect to such registration statement as of the Registration Notice
Date.  The Issuer shall use its commercially reasonable efforts to file an
automatic shelf registration statement or have the Registration Statement
declared effective by the SEC as promptly as possible.

 

(iii) Promptly following the Registration Notice Date, the Issuer shall afford
MSCO a reasonable opportunity to conduct a due diligence investigation with
respect to the Issuer customary in scope for underwritten offerings of equity
securities of similar size by similar issuers (including, without limitation,
the availability of senior management to respond to questions regarding the
business and financial condition of the Issuer and the right to have made
available to MSCO for inspection all financial and other records, pertinent
corporate documents and other information reasonably requested by MSCO), and
MSCO shall be satisfied in all material respects with the results of such due
diligence investigation of the Issuer.  For the avoidance of doubt, the Issuer
shall not have the right to deliver Shares pursuant to this Section 8(a) (and
the conditions to delivery of Early Settlement Shares specified in this
Section 8(a) shall not be satisfied) until MSCO is satisfied in all material
respects with the results of such due diligence investigation of the Issuer.

 

(iv) From the effectiveness of the Registration Statement until all Registered
Securities have been sold by MSCO, the Issuer shall, at the request of MSCO,
make available to MSCO a printed prospectus relating to the Registered
Securities in form and substance (including, without limitation, any sections
describing the plan of distribution) satisfactory to MSCO (a “Prospectus”, which
term shall include any prospectus supplement thereto), in such quantities as
MSCO shall reasonably request.

 

(v) The Issuer shall use its commercially reasonable efforts to prevent the
issuance of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any Prospectus
and, if any such order is issued, to obtain the lifting thereof as soon
thereafter as is possible.  If the Registration Statement, the Prospectus or any
document incorporated therein by reference contains a misstatement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make any statement therein not misleading, the Issuer shall as
promptly as practicable file any required document and prepare and furnish to
MSCO a reasonable number of copies of such supplement or amendment thereto as
may be necessary so that the Prospectus, as thereafter delivered to the
purchasers of the Registered Securities will not contain a misstatement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make any statement therein not misleading.

 

(vi) On or prior to the Registered Share Delivery Date, the Issuer shall enter
into an agreement (a “Transfer Agreement”) with MSCO (or any affiliate of MSCO
designated by MSCO) in connection with the public resale of the Registered
Securities, substantially similar to underwriting agreements customary for
underwritten offerings of equity securities of similar size by similar issuers,

 

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in form and substance satisfactory to MSCO (or such affiliate), which Transfer
Agreement shall (without limitation of the foregoing):

 

(A) contain provisions substantially similar to those contained in such
underwriting agreements relating to the indemnification of, and contribution in
connection with the liability of, MSCO and its affiliates,

 

(B) provide for delivery to MSCO (or such affiliate) of customary opinions
(including, without limitation, accounting comfort letters, opinions relating to
the due authorization, valid issuance and fully paid and non-assessable nature
of the Registered Securities and a negative assurance letter regarding the lack
of material misstatements and omissions in the Registration Statement, the
Prospectus and the Issuer’s filings under the Exchange Act); and

 

(C) provide for the payment by the Issuer of all fees and expenses in connection
with such resale, including all registration costs and all fees and expenses of
counsel for MSCO (or such affiliate), but such Transfer Agreement shall not
provide for any underwriter discount or commission.

 

(vii) On the Registered Share Delivery Date, a balance (the “Settlement
Balance”) shall be established with an initial balance equal to the applicable
amount of the relevant Early Settlement Payment.  Following the delivery of
Early Settlement Shares or any Make-Whole Shares, Seller shall sell all such
Early Settlement Shares or Make-Whole Shares in a commercially reasonable
manner.

 

(viii) At the end of each day upon which sales have been made, the Settlement
Balance shall be (A) reduced by an amount equal to the aggregate proceeds
received by MSCO upon settlement of the sale of such Shares, and (B) increased
by an amount (as reasonably determined by the Calculation Agent) equal to the
then-current Settlement Balance as of the close of business on such day
multiplied by overnight LIBOR, as determined by the Calculation Agent.

 

(ix) If, on any date, the Settlement Balance has been reduced to zero but not
all of the Early Settlement Shares have been sold, no additional Early
Settlement Shares shall be sold and MSCO shall promptly deliver to the Issuer
(A) any remaining Early Settlement Shares and (B) if the Settlement Balance has
been reduced to an amount less than zero, an amount in cash equal to the
absolute value of the then-current Settlement Balance.

 

(x) If, on any date, all of the Early Settlement Shares have been sold and the
Settlement Balance has not been reduced to zero, the Issuer shall promptly
deliver to MSCO an additional number of Shares (“Make-Whole Shares”) equal to
(A) the Settlement Balance as of such date divided by (B) the per Share market
value of the Shares on the date of such delivery as reasonably determined by the
Calculation Agent.  This clause (x) shall be applied successively until the
Settlement Balance is reduced to zero or the aggregate number of Early
Settlement Shares and Make Whole Shares is equal to the Share Cap.

 

(xi)  If at any time the number of Shares covered by the Registration Statement
is less than the number of Registered Securities required to be delivered
pursuant to this Section 8(a), the Issuer shall, at the request of MSCO, file
additional registration statement(s) to register the sale of all Registered
Securities required to be delivered to MSCO.

 

(xii) The Issuer shall cooperate with MSCO and use its reasonable best efforts
to take any other action necessary to effect the intent of the provisions set
forth in this Section 8(a).

 

(b)  If Issuer timely elects to deliver Early Settlement Shares and Make-Whole
Shares by means of a private placement, the following provisions shall apply:

 

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(i)   All Early Settlement Shares and Make-Whole Shares shall be delivered to
the Seller (or any affiliate of the Seller designated by the Seller) pursuant to
the exemption from the registration requirements of the Securities Act provided
by Section 4(2) thereof.

 

(ii)   Seller and any potential purchaser of any such Shares from the Seller (or
any affiliate of the Seller designated by the Seller) identified by Seller shall
have been afforded a commercially reasonable opportunity to conduct a due
diligence investigation with respect to Issuer customary in scope for private
placements of equity securities of similar size by similar issuers (including,
without limitation, the right to have made available to them for inspection all
financial and other records, pertinent corporate documents and other information
reasonably requested by them) and Buyer shall not be required to disclose
material non-public information in connection with such due diligence
investigation.

 

(iii)  An agreement (a “Private Placement Agreement”) shall have been entered
into between Issuer and the Seller (or any affiliate of the Seller designated by
the Seller) in connection with the private placement of such Shares by Issuer to
the Seller (or any such affiliate) and the private resale of such Shares by the
Seller (or any such affiliate), substantially similar to private placement
purchase agreements customary for private placements of equity securities of
similar size by similar issuers, in form and substance commercially reasonably
satisfactory to the Seller and the Issuer, which Private Placement Agreement
shall include, without limitation, provisions substantially similar to those
contained in such private placement purchase agreements relating to the
indemnification of, and contribution in connection with the liability of, the
Seller and its affiliates, and shall provide for the payment by Issuer of all
fees and expenses in connection with such resale, including all reasonable fees
and expenses of one counsel for the Seller but not including any underwriter,
initial purchaser or broker discounts and commissions, and shall contain
representations, warranties and agreements of Issuer and Seller reasonably
necessary or advisable to establish and maintain the availability of an
exemption from the registration requirements of the Securities Act for such
resales.

 

(iv)  If Issuer elects to deliver Early Settlement Shares to satisfy its payment
obligation of an Early Settlement Payment, neither Issuer nor Seller shall take
or cause to be taken any action that would make unavailable either (i) the
exemption set forth in Section 4(2) of the Securities Act for the sale of any
Early Settlement Shares or Make-Whole Shares by Issuer to the Seller or (ii) an
exemption from the registration requirements of the Securities Act reasonably
acceptable to the Seller for resales of Early Settlement Shares and Make-Whole
Shares by the Seller.

 

(v) On the date requested by MSCO, (A) Issuer shall deliver a number of Early
Settlement Shares equal to the quotient of (I) the relevant Early Settlement
Payment divided by (II) a per share value, determined by MSCO in a commercially
reasonable manner and which may be based on indicative bids from institutional
“accredited investors” (as defined in Rule 501 under the Securities Act of 1933,
as amended (the “Securities Act”)) and (B) the provisions of Sections 8(a)(vii)
—(x) shall apply to the Early Settlement Shares delivered pursuant to this
Section 8(b)(v).  For purposes of applying the foregoing, the Registered Share
Delivery Date referred to in 8(a)(vii) shall be the date on which Issuer
delivers the Early Settlement Shares.

 

(c)  The provisions of Section 8(b) shall apply to any then-current Settlement
Balance if (i) on any given day, Issuer cannot satisfy any of the conditions of
Section 8(a) or (ii) for a period of at least ten (10) consecutive Exchange
Business Days, MSCO has determined that it is inadvisable to effect sales of
Registered Securities.

 

(d)  If Issuer elects to deliver Early Settlement Shares to satisfy its payment
obligation of an Early Settlement Payment, then, if necessary, Issuer shall use
its commercially reasonable efforts to cause the number of authorized but
unissued Shares of Common Stock to be increased to an amount sufficient to
permit Issuer to

 

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fulfill its obligations to satisfy its payment obligation of an Early Settlement
Payment by delivering Early Settlement Shares.

 

9.  Special Provisions for Merger Events.  Notwithstanding anything to the
contrary herein or in the Equity Definitions, Issuer agrees that it (i) will not
during the period commencing on the Trade Date for the Transaction through the
last Valuation Date for such Transaction make any public announcement (as
defined in Rule 165(f) under the Securities Act) of any Merger Transaction or
potential Merger Transaction unless such public announcement is made prior to
the opening or after the close of the regular trading session on the Exchange
for the Shares.  To the extent that such announcement occurs during the term of
the Transaction and does not cause the Transaction to terminate in whole under
the provisions of “Extraordinary Event” in paragraph 2 above:

 

(a) As soon as practicable following the public announcement of such potential
Merger Transaction, Issuer shall provide MSCO with written notice of such
announcement;

 

(b) Promptly after request from MSCO, Issuer shall provide MSCO with written
notice specifying (i) Issuer’s average daily Rule 10b-18 Purchases (as defined
in Rule 10b-18) during the three full calendar months immediately preceding the
Announcement Date that were not effected through MSCO or its affiliates and (ii)
the number of Shares purchased pursuant to the block purchase proviso in Rule
10b-18(b)(4) under the Exchange Act for the three full calendar months preceding
the Announcement Date.  Such written notice shall be deemed to be a
certification by Issuer to MSCO that such information is true and correct. 
Issuer understands that MSCO will use this information in calculating the
trading volume for purposes of Rule 10b-18; and

 

(c) Buyer acknowledges that such announcement could result in a Regulatory
Disruption (as defined below) pursuant to Section 10 below.

 

“Merger Transaction” means any merger, acquisition or similar transaction
involving a recapitalization of Issuer as contemplated by Rule 10b-18(a)(13)(iv)
under the Exchange Act (other than any such transaction in which the
consideration consists solely of cash and there is no valuation period).

 

10.  Regulatory Disruption.  In the event that Seller reasonably determines,
based on the advice of counsel, that it is appropriate with regard to any legal,
regulatory or self-regulatory requirements or related policies and procedures
that Seller generally applies to transactions of this type (whether or not such
requirements, policies or procedures are imposed by law or have been voluntarily
adopted by Seller, and including, without limitation, Rule 10b-18, Rule 10b-5,
Regulation 13D-G and Regulation 14E, “Requirements”), for Seller to refrain from
purchasing Shares or to purchase fewer than the number of Shares Seller would
otherwise purchase on any Trading Day during the duration of the Transaction,
then Seller may, in its reasonable discretion, deem a Market Disruption Event to
have occurred on such day (a “Regulatory Disruption”). Seller shall notify the
Issuer upon the exercise of Seller’s rights pursuant to this Section 10 and
shall subsequently notify the Issuer on the day Seller believes that the
circumstances giving rise to such exercise have changed.

 

11.  Covenants.

 

(a) The Buyer covenants and agrees:

 

(i)  that during the Calculation Period and any Settlement Valuation Period,
Buyer shall not, and shall cause its affiliates (as defined in Rule 10b-18) not
to, directly or indirectly (which shall be deemed to include the writing or
purchase of any cash-settled derivative instrument) purchase Shares (or any
security convertible into or exchangeable for Shares) without the prior written
approval of Seller, except for any privately negotiated transactions that would
not reasonably be expected to lead to any open market purchases of Shares;

 

(ii)  that it is not relying, and has not relied, upon Seller or any of its
representatives or advisors with respect to the legal, accounting, tax or other
implications of the Transaction and that it has

 

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conducted its own analyses of the legal, accounting, tax and other implications
of the Transaction, and that Seller and its affiliates may from time to time
effect transactions for their own account or the account of customers and hold
positions in securities or options on securities of the Buyer and that Seller
and its affiliates may continue to conduct such transactions during the term of
the Transaction; and

 

(iii)  that, if Buyer reasonably concludes that it or any of its affiliates will
take any action that would cause Regulation M under the Exchange Act
(“Regulation M”), to be applicable to any purchases of Shares, or any security
for which Shares is a reference security (as defined in Regulation M), by Buyer
or any affiliated purchasers (as defined in Regulation M) during the Calculation
Period or any Settlement Valuation Period, Buyer will provide Seller with
written notice of such fact at least one Scheduled Trading Day prior to the
beginning of the applicable restricted period under Regulation M.  Buyer
acknowledges that delivery of any such notice could result in a Regulatory
Disruption pursuant to Section 10 above.

 

(b) Delivery of Additional Initial Shares.

 

(i) The Seller covenants that if at any time Seller is able, using its
commercially reasonable efforts, to borrow Shares in excess of the then-current
number of Initial Shares at a rate less than or equal to the Initial Stock Loan
Rate, Seller shall so notify Buyer and Buyer shall have the right to request
that Seller promptly deliver such excess Shares to Buyer; provided that (x) the
total number of Shares delivered pursuant to this Section 11(b)(i) shall not
exceed 2,000,000 and (y) Seller shall have no obligation to deliver Shares
pursuant to this Section 11(b)(i) unless the number of Shares so delivered would
be equal to or greater than 500,000.

 

(ii)  Furthermore, Seller may offer to increase the number of Initial Shares at
any time during the Calculation Period.  In such a case, Seller shall notify
Buyer of the amount by which it would like to increase the number of Initial
Shares and Buyer shall have the right to request that Seller promptly deliver
such Shares to Buyer.

 

12.  Representations, Warranties and Acknowledgments.

 

(a) The Buyer hereby represents and warrants to Seller that:

 

(i)  as of the date hereof, (A) all reports and other documents filed by Buyer
with the SEC pursuant to the Exchange Act when considered as a whole (with the
more recent such reports and documents deemed to amend inconsistent statements
contained in any earlier such reports and documents), do 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 in which they are made, not misleading and (B) Buyer agrees not to
alter or deviate from the terms of the Transaction or enter into or alter a
corresponding or hedging transaction or position with respect to the Shares
(including, without limitation, with respect to any securities convertible or
exchangeable into the Shares) during the term of the Transaction;

 

(ii)  the transactions contemplated by this Confirmation have been authorized
under Buyer’s publicly announced program to repurchase Shares;

 

(iii)  the Buyer is not entering into the Transaction to create actual or
apparent trading activity in the Shares (or any security convertible into or
exchangeable for Shares) or to raise or depress the price of the Shares (or any
security convertible into or exchangeable for Shares), in each case in violation
of the Exchange Act; and

 

(iv)  the Buyer is as of the date hereof, and after giving effect to the
transactions contemplated hereby will be, Solvent.  As used in this paragraph,
the term “Solvent” means, with respect to a particular date, that on such date
(A) the present fair market value (or present fair saleable value) of the assets
of the Buyer is not less than the total amount required to pay the liabilities
of the Buyer on its total existing debts and liabilities

 

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(including contingent liabilities) as they become absolute and matured, (B) the
Buyer is able to realize upon its assets and pay its debts and other
liabilities, contingent obligations and commitments as they mature and become
due in the normal course of business, (C) assuming consummation of the
transactions as contemplated by this Confirmation, the Buyer is not incurring
debts or liabilities beyond its ability to pay as such debts and liabilities
mature, (D) the Buyer is not engaged in any business or transaction, and does
not propose to engage in any business or transaction, for which its property
would constitute unreasonably small capital after giving due consideration to
the prevailing practice in the industry in which the Buyer is engaged and (E)
the Buyer is not a defendant in any civil action that could reasonably be
expected to result in a judgment that Buyer is or would become unable to
satisfy.

 

(b)  Seller and the Buyer each hereby acknowledges that any transactions by
Seller in the Shares will be undertaken by Seller, as the case may be, as
principal for its own account, except as provided in Sections 7 and 8, if
applicable.  All of the actions to be taken by Seller in connection with the
Transaction shall be taken by Seller independently and without any advance or
subsequent consultation with the Buyer, except as specifically provided herein.

 

13.  Acknowledgements of Buyer Regarding Hedging and Market Activity.  Buyer
agrees, understands and acknowledges that:

 

(a)                                  during the period from (and including) the
Trade Date to (and including) the Settlement Date, Seller and its affiliates may
buy or sell Shares or other securities or buy or sell options or futures
contracts or enter into swaps or other derivative securities in order to adjust
its hedge position with respect to the transactions contemplated by this
Confirmation;

 

(b)                                 Seller and its affiliates also may be active
in the market for the Shares other than in connection with hedging activities in
relation to the transactions contemplated by this Confirmation;

 

(c)                                  Seller shall make its own determination as
to whether, when and in what manner any hedging or market activities in the
Issuer’s securities shall be conducted and shall do so in a manner that it deems
appropriate to hedge its price and market risk with respect to 10b-18 VWAP; and

 

(d)                                 any market activities of Seller and its
affiliates with respect to the Shares may affect the market price and volatility
of the Shares, as well as the 10b-18 VWAP, each in a manner that may be adverse
to Buyer.

 

14.  The parties hereto agree and acknowledge that Seller is a “financial
participant” within the meaning of Section 101(22) of Title 11 of the United
States Code (the “Bankruptcy Code”).  The parties hereto further agree and
acknowledge that the Transaction is either (i) a “securities contract” as such
term is defined in Section 741(7) of the Bankruptcy Code, in which case each
payment and delivery made pursuant to the Transaction is a “settlement payment”,
as such term is defined in Section 741(8) of the Bankruptcy Code, and that
Seller is entitled to the protections afforded by, among other sections,
Sections 362(b)(6), 546(e) and 555 of the Bankruptcy Code, or (ii) a “swap
agreement”, as such term is defined in Section 101(53B) of the Bankruptcy Code,
in which case each party is a “swap participant”, as such term is defined in
Section 101(53C) of the Bankruptcy Code, and that Seller is entitled to the
protections afforded by, among other sections, Sections 362(b)(17), 546(g) and
560 of the Bankruptcy Code.

 

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15.  Seller and Issuer hereby agree and acknowledge that Seller has authorized
the Issuer and each of its employees, representatives and other agents to
disclose the Transaction, including the tax treatment and tax structure thereof
and all materials relating thereto, to any and all persons, and there are no
express or implied agreements, arrangements or understandings to the contrary,
and authorizes the Issuer to use any information that the Issuer receives or has
received with respect to the Transaction in any manner.

 

16.  Treatment in Bankruptcy; No Setoff; No Collateral; Delivery of Cash.

 

(a)  In the event the Buyer becomes the subject of proceedings (“Bankruptcy
Proceedings”) under the U.S. Bankruptcy Code or any other applicable bankruptcy
or insolvency statute from time to time in effect, any rights or claims of
Seller hereunder in respect of this transaction shall rank for all purposes no
higher than, but on a parity with, the rights or claims of holders of Shares,
and Seller hereby agrees that its rights and claims hereunder shall be
subordinated to those of all parties with claims or rights against the Buyer
(other than common stockholders) to the extent necessary to assure such ranking.
Without limiting the generality of the foregoing, after the commencement of
Bankruptcy Proceedings, the claims of Seller hereunder shall for all purposes
have rights equivalent to the rights of a holder of a percentage of the Shares
equal to the aggregate amount of such claims (the “Claim Amount”) taken as a
percentage of the sum of (i) the Claim Amount and (ii) the aggregate fair market
value of all outstanding Shares on the record date for distributions made to the
holders of such Shares in the related Bankruptcy Proceedings.  Notwithstanding
any right it might otherwise have to assert a higher priority claim in any such
Bankruptcy Proceedings, Seller shall be entitled to receive a distribution
solely to the extent and only in the form that a holder of such percentage of
the Shares would be entitled to receive in such Bankruptcy Proceedings, and,
from and after the commencement of such Bankruptcy Proceedings, Seller expressly
waives any other rights or distributions to which it might otherwise be entitled
in such Bankruptcy Proceedings in respect of its rights and claims hereunder.

 

(b)  Notwithstanding any provision of this Confirmation, the Agreement or any
other agreement between the parties to the contrary, neither the obligations of
the Buyer nor the obligations of Seller hereunder are secured by any collateral,
security interest, pledge or lien.

 

(c)  Each party waives any and all rights it may have to set off obligations
arising under the Agreement and the Transaction against other obligations
between the parties, whether arising under any other agreement, applicable law
or otherwise.

 

(d)  For the avoidance of doubt, nothing in this Confirmation or the Agreement
shall be interpreted as requiring Buyer to deliver cash in respect of the
settlement of the Transaction following payment by Buyer of the Prepayment
Amount, except in circumstances where the required cash settlement thereof is
permitted for classification of the contract as equity by ASC 815-40,
Derivatives and Hedging — Contracts in Entity’s Own Equity, as in effect on the
Trade Date (including, without limitation, where Buyer elects to deliver cash in
respect of the settlement of the Transaction).

 

17.  Share Cap.  Notwithstanding any other provision of this Confirmation or the
Agreement to the contrary, in no event shall the Buyer be required to deliver to
Seller a number of Shares that exceeds the Share Cap (as specified in Schedule
I), subject to reduction by the number of Shares delivered hereunder by the
Buyer on any prior date.

 

18.  Account Details:

 

 

Account for Payments to MSCO:

 

To be provided separately

 

 

 

 

 

Account for Payments to Issuer:

 

To be provided by Issuer

 

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19.  Governing law: The laws of the State of New York.

 

EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY WITH
RESPECT TO ANY LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS CONFIRMATION
OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

[The remainder of this page left intentionally blank]

 

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Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning it to us by facsimile to
the number provided on the attached facsimile cover page.

 

Confirmed as of the date first written above:

 

CHARLES RIVER LABORATORIES

 

MORGAN STANLEY & CO. INCORPORATED

INTERNATIONAL, INC.

 

 

 

 

 

 

 

 

By:

 

 

By:

 

 

Name:

 

 

Name:

 

Title:

 

 

Title:

 

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