UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
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(Name of Registrant as Specified in Its Charter)
- -----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing:
1) Amount previously paid:
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[LOGO]
April 6, 2001
Dear Stockholder,
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of Charles River Laboratories International, Inc. (the "Company") to be held at
10 a.m. on Tuesday, May 8, 2001, at the Lanam Club, 260 North Main Street,
Andover, Massachusetts.
At the Annual Meeting, ten persons will be elected to the Board of
Directors. The Company will seek Stockholder approval of an increase of
2,600,000 in the aggregate number of shares of stock that may be delivered in
satisfaction of awards under the the Company's 2000 Incentive Plan. In addition,
the Company will ask the Stockholders to ratify the selection of
PricewaterhouseCoopers LLP as the Company's independent public accountants. The
Board of Directors recommends the approval of each of these proposals. Such
other business will be transacted as may properly come before the Annual
Meeting.
We hope you will be able to attend the Annual Meeting. Whether you plan to
attend the Annual Meeting or not, it is important that your shares are
represented. Therefore, you are urged to complete, sign, date and return the
enclosed proxy card promptly in accordance with the instructions set forth on
the card. This will ensure your proper representation at the Annual Meeting.
Sincerely,
/s/ JAMES C. FOSTER
------------------------------------------------------------------
James C. Foster
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND
PRESIDENT
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY PROMPTLY.
CHARLES RIVER LABORATORIES
INTERNATIONAL, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 2001
------------------------
To the Stockholders of
Charles River Laboratories International, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Charles River Laboratories
International, Inc., a Delaware corporation (the "Company"), will be held on
Tuesday, May 8, 2001, at the Lanam Club, 260 North Main Street, Andover,
Massachusetts, at 10 a.m. for the following purposes:
1. To elect ten members to the Board of Directors to hold office until the
next annual meeting of Stockholders.
2. To consider and act upon a proposal to increase by 2,600,000 the
aggregate number of shares of the Company's common stock, $.01 par value
per share (the "Common Stock"), that may be delivered in satisfaction of
awards under the Company's 2000 Incentive Plan.
3. To consider and act upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent public
accountants for the fiscal year ending December 29, 2001.
4. To transact such other business as may be properly brought before the
Annual Meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on March 12, 2001 as
the record date for the determination of Stockholders entitled to notice of and
to vote at the Annual Meeting and at any adjournments thereof.
All Stockholders are cordially invited to attend the Annual Meeting. WHETHER
YOU PLAN TO ATTEND THE ANNUAL MEETING OR NOT, YOU ARE REQUESTED TO COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN ACCORDANCE
WITH THE INSTRUCTIONS ON THE PROXY CARD. A PRE-ADDRESSED, POSTAGE PREPAID RETURN
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ DENNIS R. SHAUGHNESSY
----------------------------------------------------------------------
Dennis R. Shaughnessy
SECRETARY
CHARLES RIVER LABORATORIES
INTERNATIONAL, INC.
251 BALLARDVALE STREET
WILMINGTON, MA 01887
(978) 658-6000
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PROXY STATEMENT
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GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Charles River Laboratories International, Inc. (the
"Company"), a Delaware corporation, of proxies, in the accompanying form, to be
used at the Annual Meeting of Stockholders to be held at the Lanam Club, 260
North Main Street, Andover, Massachusetts, on Tuesday, May 8, 2001, at 10 a.m.
and any adjournments thereof (the "Meeting").
Where the Stockholder specifies a choice on the proxy as to how his or her
shares are to be voted on a particular matter, the shares will be voted
accordingly. If no choice is specified, the shares will be voted:
- FOR the election of the ten nominees for director named herein,
- FOR the proposal to increase by 2,600,000 the aggregate number of shares
of the Company's common stock, $.01 par value per share (the "Common
Stock"), that may be delivered in satisfaction of awards under the
Company's 2000 Incentive Plan, and
- FOR the ratification of the appointment of PricewaterhouseCoopers LLP as
the Company's independent public accountants for the fiscal year ending
December 29, 2001.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date. Any
Stockholder who has executed a proxy but is present at the Meeting, and who
wishes to vote in person, may do so by revoking his or her proxy as described in
the preceding sentence. Shares represented by valid proxies in the form
enclosed, received in time for use at the Meeting and not revoked at or prior to
the Meeting, will be voted at the Meeting. The presence, in person or by proxy,
of the holders of a majority of the outstanding shares of the Company's Common
Stock is necessary to constitute a quorum at the Meeting. Votes of Stockholders
of record who are present at the Meeting in person or by proxy, abstentions, and
broker non-votes (as defined below) are counted as present or represented at the
Meeting for purposes of determining whether a quorum exists.
Nominees for election as directors at the Meeting will be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the Meeting. Withholding authority to vote for a nominee for director will
have no effect on the outcome of the vote. For the proposals to increase by
2,600,000 the aggregate number of shares of the Company's Common Stock that may
be delivered in satisfaction of awards under the Company's 2000 Incentive Plan
and to ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent public accountants for the fiscal year ending December 29, 2001, the
affirmative vote of a majority of votes cast is required. Because abstentions
are not part of the votes cast, they have no effect on the two proposals.
If you hold your shares of Common Stock through a broker, bank or other
representative, generally the broker or your representative may only vote the
Common Stock that it holds for you in accordance with your instructions.
However, if it has not timely received your instructions, the broker or your
representative may vote on certain matters for which it has discretionary voting
authority. If a
broker or your representative cannot vote on a particular matter because it does
not have discretionary voting authority, this is a "broker non-vote" on that
matter. Broker non-votes are not counted for the purpose of electing directors
and approving the proposals relating to the 2000 Incentive Plan and the
ratification of independent public accountants.
The close of business on March 12, 2001 has been fixed as the record date
for determining the Stockholders entitled to notice of and to vote at the
Meeting. As of the close of business on March 12, 2001, the Company had
36,627,642 shares of Common Stock outstanding and entitled to vote. Holders of
Common Stock at the close of business on the record date are entitled to one
vote per share on all matters to be voted on by Stockholders.
The cost of soliciting proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company. In
addition, the Company will reimburse brokerage firms and other persons
representing beneficial owners of Common Stock of the Company for their expenses
in forwarding proxy material to such beneficial owners. Solicitation of proxies
by mail or the Internet may be supplemented by telephone, telegram, telex and
personal solicitation by the Directors, officers or employees of the Company. No
additional compensation will be paid for such solicitation. The Company has
retained Corporate Investor Communications, Inc. to assist in the solicitation
of proxies at a cost of approximately $6,000 plus reimbursement of expenses.
This Proxy Statement and the accompanying proxy are being mailed on or about
April 6, 2001 to all Stockholders entitled to notice of and to vote at the
Meeting.
The Annual Report to Stockholders for the fiscal year ended December 30,
2000 is being mailed to Stockholders with this Proxy Statement, but does not
constitute a part hereof.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows information regarding the beneficial ownership of
the Company's Common Stock as of March 12, 2001, which is the record date for
the purposes of determining Stockholders entitled to vote at the Annual Meeting
and, as of March 22, 2001, one day following the March 21, 2001 closing of the
public offering in which we sold 3,500,000 shares of Common Stock and certain
Stockholders of the Company sold 4,550,000 shares of Common Stock. For each of
the two dates, the table covers:
- Each person or group of affiliated persons known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock,
- Each current member of the Board of Directors,
- Each executive officer named in the Summary Compensation Table on page 10
hereof, and
- All current directors and executive officers as a group.
The beneficial ownership has been determined in the table in accordance with the
rules of the Securities and Exchange Commission. In computing the number of
shares beneficially owned by a person and the percentage ownership of that
person on each of the two dates, we have deemed shares of Common Stock subject
to options or warrants held by that person that are currently exercisable or
will become exercisable within 60 days of March 12, 2001 and that are currently
exercisable or will become exercisable within 60 days of March 22, 2001, to be
outstanding, but we have not deemed these shares to be outstanding for computing
the percentage ownership of any other person. To our knowledge, except as set
forth in the footnotes below, each stockholder identified in the table possesses
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by that Stockholder. Beneficial ownership percentage
is based on 36,627,642, and 40,127,642 shares of Common Stock outstanding as of
March 12, 2001 and March 22, 2001, respectively.
The address for each listed director and officer is c/o Charles River
Laboratories International, Inc., 251 Ballardvale Street, Wilmington, MA 01887.
PERCENTAGE OF SHARES
NUMBER OF SHARES NUMBER OF SHARES OUTSTANDING
BENEFICIALLY OWNED BENEFICIALLY OWNED -------------------------------
NAME OF BENEFICIAL OWNER AS OF MARCH 12, 2001 AS OF MARCH 22, 2001 MARCH 12, 2001 MARCH 22, 2001
- ------------------------ -------------------- -------------------- -------------- --------------
DLJ Merchant Banking Partners II,
L.P. and related investors(1),
(2).............................. 16,131,347 12,670,253 42.1% 30.3%
Bausch & Lomb Incorporated(3)...... 2,477,547 1,939,586 6.8 4.8
James C. Foster.................... 490,646(5) 438,646(5) 1.3 1.1
Real H. Renaud..................... 117,569(6) 104,569(6) * *
Dennis R. Shaughnessy.............. 107,354(7) 94,357(7) * *
David P. Johst..................... 115,727(8) 115,727(8) * *
Thomas F. Ackerman................. 98,648(9) 85,648(9) * *
Robert Cawthorn(4)................. -- -- -- --
Stephen D. Chubb................... 36,895(10) 36,895(10) * *
Thompson Dean(4)................... -- -- -- --
Stephen C. McCluski(3)............. 2,477,547 1,939,586 6.8 4.8
Reid S. Perper(4).................. -- -- -- --
Douglas E. Rogers(4)............... -- -- -- --
Samuel O. Thier.................... 21,300(11) 21,300(11) * *
William Waltrip.................... 36,895(12) 36,895(12) * *
Henry Wendt III(4)................. -- -- -- --
Officers and directors as a group
(15 persons)..................... 3,558,111(13) 2,922,658(13) 9.7 7.2
- ------------------------
* Less than 1%.
3
(1) Consists of shares held directly or indirectly by the DLJMB Funds (defined
on page 7) and the following related investors: DLJ Merchant Banking
Partners, II, L.P.; 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.; DLJ Investment Funding, Inc.; DLJ Capital Corporation; Sprout Capital
VIII, L.P. and Sprout Venture Capital, L.P. See "Certain Relationships and
Related Transactions." 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.
(2) Includes 1,685,050 shares for the DLJMB Funds and affiliates underlying
currently exercisable warrants.
(3) Represents shares beneficially owned by Bausch & Lomb Incorporated through
a wholly-owned subsidiary. Mr. McCluski is Senior Vice President and Chief
Financial Officer of Bausch & Lomb Incorporated.
(4) Mr. Cawthorn is an independent consultant to Global Health Care Partners, a
group at DLJ Merchant Banking, Inc., having been a Managing Director from
1997 to 1999. Messrs. Dean, Perper, Rogers and Wendt are officers of DLJ
Merchant Banking, Inc., an affiliate of the DLJMB Funds. 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.
(5) Includes 95,384 shares of Common Stock subject to options held by
Mr. Foster that are exercisable within 60 days of March 12 and March 22,
2001, respectively.
(6) Includes 22,710 shares of Common Stock subject to options held by
Mr. Renaud that are exercisable within 60 days of March 12 and March 22,
2001.
(7) Includes 20,379 shares of Common Stock subject to options held by
Mr. Shaughnessy that are exercisable within 60 days of March 12 and
March 22, 2001.
(8) Includes 18,168 shares of Common Stock subject to options held by
Mr. Johst that are exercisable within 60 days of March 12 and March 22,
2001.
(9) Includes 18,168 shares of Common Stock subject to options held by
Mr. Ackerman that are exercisable within 60 days of March 12 and March 22,
2001.
(10) Includes 20,000 shares of Common Stock subject to options held by
Mr. Chubb that are exercisable within 60 days of March 12 and 22, 2001.
(11) Includes 20,000 shares of Common Stock subject to options held by
Mr. Thier that are exercisable within 60 days of March 12 and 22, 2001.
(12) Includes 20,000 shares of Common Stock subject to options held by
Mr. Waltrip that are exercisable within 60 days of March 12 and March 22,
2001.
(13) Includes 246,163 shares of Common Stock subject to options exercisable
within 60 days of March 12 and March 22, 2001.
4
MANAGEMENT
BOARD OF DIRECTORS
Under the Company's By-laws, the number of members of the Company's Board of
Directors is fixed from time to time by the Board of Directors but may be
increased or decreased either by the Stockholders or by the majority of
directors then in office. Directors serve in office until the next annual
meeting of Stockholders and until their successors have been elected and
qualified or until their earlier death, resignation or removal.
The Board of Directors has voted to set the size of the Board of Directors
at ten and to nominate James C. Foster, Robert Cawthorn, Stephen D. Chubb,
Thompson Dean, Stephen C. McCluski, Reid S. Perper, Douglas E. Rogers, Samuel O.
Thier, William Waltrip and Henry Wendt III for election at the Meeting.
Set forth below are the names of the persons nominated as directors, their
ages, their offices in the Company, if any, their principal occupations or
employment for the past five years, the length of their tenure as directors and
the names of other public companies in which such persons hold directorships.
NAME AGE POSITION WITH THE COMPANY
- ---- -------- ----------------------------------
James C. Foster................... 50 Chairman, Chief Executive Officer,
President and Director
Robert Cawthorn................... 65 Director
Stephen D. Chubb.................. 57 Director
Thompson Dean..................... 43 Director
Stephen C. McCluski............... 48 Director
Reid S. Perper.................... 41 Director
Douglas E. Rogers................. 46 Director
Samuel O. Thier................... 63 Director
William Waltrip................... 63 Director
Henry Wendt III................... 67 Director
JAMES C. FOSTER joined us in 1976 as General Counsel. Over the past
24 years, Mr. Foster has held various staff and managerial positions, with
Mr. Foster being named our President in 1991, Chief Executive Officer in 1992
and our Chairman in 2000. Mr. Foster also serves on the Board of Directors of
BioTransplant, Inc. Mr. Foster received a B.A. from Lake Forest College, a M.S.
from the Sloan School of Management at the Massachusetts Institute of
Technology, and a J.D. from Boston University School of Law.
ROBERT CAWTHORN is an independent consultant to Global Health Care Partners,
a group at DLJ Merchant Banking, Inc., having been a Managing Director from 1997
to 1999. Mr. Cawthorn was Chief Executive Officer and Chairman of Rhone-Poulenc
Rorer Inc. until May 1996. Further, he previously served as an executive officer
of Pfizer International and was the first President of Biogen Inc. Mr. Cawthorn
serves as Chairman of Actelion Ltd., and NextPharma Technologies S.A. and also
serves as a director of H(2)O Technologies, Inc., PharmaNet Inc. and Pharma
Marketing Ltd.
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. Mr. Chubb serves as a director
of i-Stat Corporation and CompuCyte Corp.
5
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 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.
STEPHEN C. MCCLUSKI has been Senior Vice President and the 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. Since 2000, Mr. McCluski has been a
director of Control Delivery Systems, Inc.
REID S. PERPER has been a Managing Director of DLJ Merchant Banking, Inc.
since January 2000. Mr. Perper was a Principal of DLJ Merchant Banking, Inc.
from 1996 to January 2000 and a Vice President from 1993 to 1996. Mr. Perper was
formerly a director of IVAC Holdings, Inc. and Fiberite Holdings, Inc.
DOUGLAS E. ROGERS has been a Managing Director of Global Health Care
Partners since 1996. Previously, Mr. Rogers was a 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.
SAMUEL O. THIER has been Chief Executive Officer of Partners HealthCare
System, Inc. since July 1996 and President of Partners HealthCare System since
1994. Previously, he served as President of The Massachusetts General Hospital
from 1994 through 1997 and as President of Brandeis University from 1991 to
1994. He has served as President of the Institute of Medicine of the National
Academy of Sciences and Chairman of the American Board of Internal Medicine, and
he is a Fellow of the American Academy of Arts and Sciences. He is a director of
Merck & Co., Inc. and Pranalytica, Inc.
WILLIAM WALTRIP has been a director of Bausch & Lomb Incorporated since
1985, and Chairman of the Board of Directors of Technology Solutions Company
since 1993. 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. He is a director of Teachers Insurance and
Annuity Association, Thomas & Betts Corporation and Technology Solutions
Company.
HENRY WENDT III has been the Chairman of Global Health Care Partners 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 Computerized
Medical Systems, The Egypt Investment Company, Focus Technologies, West Marine
Products and Wilson Greatbatch Ltd.
Each of the Company's directors serves until the next annual meeting of the
Stockholders and until a successor is duly elected and qualified or until his
earlier death, resignation or removal. All members of the Board of Directors,
other than Mr. Thier, were elected at the time of the recapitalization pursuant
to the investors' agreement that was entered into in connection with that
transaction. See "Agreement on Certain Director Nominations." Mr. Thier was
elected as a director in April 2000. There are no family relationships between
any of the Company's directors or executive officers. The Company's executive
officers are elected by, and serve at the discretion of, the Board of Directors.
6
AGREEMENT ON CERTAIN DIRECTOR NOMINATIONS
The Company, B&L CRL, Inc. (a subsidiary of Bausch & Lomb Incorporated), CRL
Acquisition LLC, DLJ Merchant Banking Partners II, L.P. and certain related
investors, DLJ Investment Partners, L.P., DLJ Investment Funding, Inc. (DLJ
Investment Partners, L.P. and DLJ Investment Partners, L.P. are collectively
referred to as "DLJIP"), James C. Foster, Stephen D. Chubb, William Waltrip, our
management and other of our investors are parties to an investors' agreement
entered into in connection with the Company's recapitalization on September 29,
1999 and amended and restated on June 19, 2000 (the "Investors' Agreement").
Under the terms of the Investors' Agreement (see "Certain Relationships and
Related Transactions--Investors' Agreement"), among other provisions, for so
long as the aggregate number of shares of our Common Stock held by DLJ Merchant
Banking Partners II, L.P. and its affiliated funds, which we refer to as the
DLJMB Funds, is at least 10% of the initial aggregate number of shares purchased
by the DLJMB Funds in the recapitalization, the parties to the Investors'
Agreement shall vote their shares in favor of a Board of Directors consisting of
at least nine but no more than twelve members, seven of whom (including the
chairman) are to be appointed by DLJ Merchant Banking Partners II, L.P. The
parties to the Investors' Agreement further agreed to vote for a director
nominee designated by B&L CRL, Inc. and to vote in favor of the appointment of
the Company's chief executive officer as a director.
In addition, the parties to the Investors' Agreement agreed that DLJIP shall
be entitled to designate one observer to the Board of Directors, who shall be
entitled to receive a copy of any materials distributed to all members of the
Board of Directors, until the date upon which DLJIP owns (directly or
indirectly) less than fifty percent (50%) of the equity interest in the Company
which it owned (indirectly) as of September 29, 1999. Brown Brothers Harriman
also has the right to designate an observer to the Board.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
MEETING ATTENDANCE. During the fiscal year 2000, there were five meetings
of the Board of Directors, and the various committees of the Board of Directors
met a total of seven additional times. No director attended fewer than 75% of
the total number of meetings of the Board and of committees of the Board of
Directors on which he served during fiscal 2000, except for Thompson Dean, who
attended two meetings of the Board of Directors and one meeting of the
Compensation Committee, and Reid Perper and Stephen McCluski, who attended three
of the five meetings of the Board of Directors.
AUDIT COMMITTEE. The Audit Committee, which met five times in fiscal 2000,
has three members, Messrs. Chubb, Thier and Waltrip. The Audit Committee reviews
the engagement of the Company's independent accountants, reviews annual
financial statements, considers matters relating to accounting policy and
internal controls and reviews the scope of annual audits. Please see also the
report of the Audit Committee set forth elsewhere in this Proxy Statement.
COMPENSATION COMMITTEE. The Compensation Committee, which met two times
during fiscal 2000, has four members, Messrs. Cawthorn, Dean, Waltrip and Wendt.
The Compensation Committee reviews, approves and makes recommendations on the
Company's compensation and benefit plans to ensure that they meet corporate
objectives. In addition, the Compensation Committee reviews compensation
policies, practices and procedures to ensure that legal and fiduciary
responsibilities of the Board of Directors are carried out and that such
policies, practices and procedures contribute to the success of the Company. The
Compensation Committee reviews the CEO's recommendations on compensation for all
of the Company's officers and on adopting and changing major compensation
policies and practices, and reports its recommendations to the entire Board of
Directors for approval and authorization. The Compensation Committee also
administers the Company's stock plans. Please see also the report of the
Compensation Committee set forth elsewhere in this Proxy Statement.
7
NOMINATING COMMITTEE. The Company does not have a standing nominating
committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. During 2000,
the Compensation Committee had four members, Messrs. Cawthorn, Dean, Waltrip and
Wendt. No executive officer or employee of the Company is a member of the
Compensation Committee. Since 1985, Mr. Waltrip has been a director of Bausch &
Lomb Incorporated and was its Chief Executive Officer in 1996 and Chairman of
the Board from 1996 to 1998, during which times the Company was a wholly-owned
subsidiary of Bausch & Lomb Incorporated. Except as provided below, no member of
the Compensation Committee had any relationship with the Company requiring
disclosure under Item 404 of Regulation S-K under the Securities Exchange Act of
1934.
COMPENSATION OF DIRECTORS
The Company pays each unaffiliated and non-employee director an annual fee
of $10,000 for service as a director of the Company, plus $1,000 for each Board
of Directors meeting attended and for each committee meeting attended on a day
other than when the Board of Directors meets. Expenses incurred in attending
Board of Directors meetings and committee meetings are reimbursed by the
Company.
Directors are eligible to participate in the Company's 2000 Directors Stock
Plan. The Company's 2000 Directors Stock Plan provides for the grant of both
automatic and discretionary nonstatutory stock options to directors. Pursuant to
the plan, each unaffiliated and non-employee director will be automatically
granted an option to purchase 20,000 shares of Common Stock on the date he or
she is first elected or named a director. On the day of each annual meeting of
Stockholders, each independent director who served during the prior year will be
awarded an option to purchase 4,000 shares of Common Stock (pro-rated if the
director did not serve for the entire preceding year). There are 100,000 shares
of Common Stock reserved under this plan. Options for 20,000 shares were granted
under the plan in June 2000 to each of Messrs. Waltrip, Thier and Chubb.
EXECUTIVE OFFICERS
The names of, and certain information regarding, executive officers of the
Company who are not also directors are set forth below. The executive officers
serve at the discretion of the Board of Directors.
NAME AGE POSITION WITH THE COMPANY
- ---- -------- ----------------------------------
Thomas F. Ackerman................ 46 Senior Vice President and Chief
Financial Officer
David P. Johst.................... 39 Senior Vice President, Human
Resources and Administration
Real H. Renaud.................... 54 Senior Vice President and General
Manager, European and North
American Animal Operations
Dennis R. Shaughnessy............. 43 Senior Vice President, Corporate
Development, General Counsel and
Secretary
Julia D. Palm..................... 53 Vice President and General
Manager, Biomedical Products and
Services
THOMAS F. ACKERMAN joined us 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. In 1999, he was named a Senior Vice President. He
8
is currently responsible for overseeing our Accounting and Finance Department,
as well as the Information Technology Group. Prior to joining us, Mr. Ackerman
was an accountant at Arthur Anderson & Co. Mr. Ackerman received a B.S. in
Accounting from the University of Massachusetts and is a certified public
accountant.
DAVID P. JOHST joined us in 1991 as Corporate Counsel and was named Vice
President, Human Resources in 1995. He became Vice President, Human Resources
Administration in 1996, and a Senior Vice President in 1999. He is responsible
for overseeing our Human Resources Department, as well as several other
corporate staff departments. He also serves as our counsel on labor relations
matters. Prior to joining the Company, Mr. Johst was a corporate associate at
Boston's Hale and Dorr. Mr. Johst is a graduate of Dartmouth College, holds an
M.B.A. from Northeastern University and received his J.D. from Harvard
University Law School.
REAL H. RENAUD joined us in 1964 and has 35 years of small animal production
and related management experience. In 1986, Mr. Renaud became the Company's Vice
President of Production, with responsibility for overseeing the Company's North
American small animal operations, and was named Vice President, Worldwide
Production in 1990. Mr. Renaud became Vice President and General Manager,
European and North American Animal Operations in 1996, following a two-year
European assignment during which he provided direct oversight to our European
operations. In 1999 he became a Senior Vice President. Mr. Renaud attended
Columbia University's executive education program, and has also studied at the
Lyon Veterinary School and the Montreal Business School.
DENNIS R. SHAUGHNESSY joined us in 1988 as Corporate Counsel and was named
Vice President, Business Affairs in 1991. He became Vice President, Corporate
Development and General Counsel in 1994 and is responsible for overseeing the
Company's business development initiatives on a worldwide basis, as well as
handling the Company's overall legal affairs. He became a Senior Vice President
in 1999. Mr. Shaughnessy also serves as our Corporate Secretary. Prior to
joining us, Mr. Shaughnessy was a corporate associate at Boston's Testa,
Hurwitz & Thibeault and previously served in government policy positions.
Mr. Shaughnessy has a B.A. from The Pennsylvania State University, an M.S. from
The University of Michigan, an M.B.A. from Northeastern University, and a J.D.
from The University of Maryland School of Law.
JULIA D. PALM joined us in 1995 with nearly 20 years of management and
marketing experience in the medical device and biotechnology industries. Prior
to joining us, she held various marketing positions with Becton Dickinson,
National Medical Care and W.R. Grace, and served as President of W.R. Grace's
Amicon Division immediately prior to joining us. Ms. Palm has responsibility for
overseeing a portfolio of most of our biomedical products and services companies
on a worldwide basis. Ms. Palm holds a B.A. in Biology from Denison University
and an M.B.A. from Farleigh Dickinson University.
9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth summary information as
to compensation received by the Company's Chief Executive Officer and each of
the four other most highly compensated executive officers who were employed by
the Company on December 30, 2000 (collectively, the "named executive officers")
for services rendered to the Company in all capacities during the three fiscal
years ended December 30, 2000.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------------- -----------------------
OTHER RESTRICTED SECURITIES
FISCAL ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARD(S) OPTIONS COMPENSATION(2)
- --------------------------- -------- -------- -------- ---------------- ---------- ---------- ----------------
James C. Foster .............. 2000 $341,250 $601,293 $ 32,010 -- 40,000 $132,292
Chairman, Chief Executive 1999 324,727 790,001 355,357 -- 558,824 135,200
Officer, President and 1998 308,700 230,705(3) 33,717 4,500(5) 19,000 171,268
Director
Real H. Renaud ............... 2000 236,250 208,490 12,760 -- 16,000 44,075
Senior Vice President and 1999 224,475 236,391 100,647 -- 163,793 42,252
General Manager, European 1998 212,000 99,814 21,559 -- 4,200 43,275
and North American Animal
Operations
Dennis R. Shaughnessy ........ 2000 185,000 240,873 14,511 -- 16,000 6,020
Senior Vice President, 1999 176,239 290,542 323,616(4) -- 134,642 61,057
Corporate Development, 1998 167,800 79,898 21,968 -- 4,200 60,088
General Counsel and
Secretary
David P. Johst ............... 2000 162,000 204,513 7,661 -- 16,000 20,203
Senior Vice President, Human 1999 154,209 238,767 84,569 -- 125,254 60,003
Resources and Administration 1998 146,800 69,911 11,689 -- 4,200 58,182
Thomas F. Ackerman ........... 2000 162,000 204,154 14,026 -- 16,000 38,400
Senior Vice President and 1999 141,621 245,954 92,574 -- 125,254 38,200
Chief Financial Officer 1998 135,000 64,378 10,670 -- 3,600 38,200
- ------------------------------
(1) Amounts in this column for 1999 include contractual payments made by
Bausch & Lomb Incorporated to the named executive officers in lieu of
accelerating their unvested Bausch & Lomb Incorporated options upon the
closing of the recapitalization.
(2) Includes employer contribution under the Company's Executive Supplemental
Life Insurance Retirement Plan (Mr. Foster (2000: $128,892), (1999:
$132,000), (1998: $168,068); Mr. Renaud (2000: $40,675), (1999: $39,052),
(1998: $40,075); Mr. Shaughnessy (2000: $2,620) (1999: $57,857), (1998:
$57,956); Mr. Johst (2000: $16,803), (1999: $56,803), (1998: $54,982);
Mr. Ackerman (2000: $35,000), (1999: $35,000), (1998: $35,000)) and Employee
Savings Plan (Mr. Foster (2000: $3,400), (1999: $3,200), (1998: $3,200);
Mr. Renaud (2000: $3,400), (1999: $3,200), (1998: $3,200); Mr. Shaughnessy
(2000: $3,400), (1999: $3,200), (1998: $2,132); Mr. Johst (2000: $3,400),
(1999: $3,200), (1998: $3,200); Mr. Ackerman (2000: $3,400), (1999: $3,200),
(1998: $3,200)).
(3) Includes $12,000 paid under Bausch & Lomb Incorporated's Long Term Incentive
Plan during 1998.
(4) Also includes a lump-sum payment of $253,000 made in return for
relinquishment of right to participate in the Company's Executive
Supplemental Life Insurance Retirement Plan.
(5) Represents the number of shares of Bausch & Lomb Incorporated common stock
that Mr. Foster received as a restricted stock award.
10
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding each stock option
granted during fiscal year 2000 to each of the named executive officers.
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ---- -------------- ------------ --------- ---------- --------- -----------
James C. Foster........... 40,000 8.4% $16.00 6/23/2010 $402,493 $1,019,995
Real H. Renaud............ 16,000 3.4% 16.00 6/23/2010 160,997 407,998
Dennis R. Shaughnessy..... 16,000 3.4% 16.00 6/23/2010 160,997 407,998
David P. Johst............ 16,000 3.4% 16.00 6/23/2010 160,997 407,998
Thomas F. Ackerman........ 16,000 3.4% 16.00 6/23/2010 160,997 407,998
- ------------------------
(1) The options were granted pursuant to the Company's 2000 Incentive Plan. The
options granted to the named executive officers are incentive stock options
to the extent permitted by law and vest annually in three equal
installments.
(2) The amounts shown in this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5% and
10% compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise price,
but do not include deductions for taxes or other expenses associated with
the exercise. Actual gains, if any, on stock option exercises will depend on
the future performance of the Common Stock, the optionee's continued
employment through the option period and the date on which the options are
exercised.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth for each of the named executive officers the
Company options exercised during the 2000 fiscal year, the number of shares
covered by both exercisable and unexercisable stock options as of December 30,
2000 and the value of "in-the-money" options as of December 30, 2000. None of
our named executive officers exercised Company stock options in 2000.
NUMBER OF SECURITIES
UNDERLYING VALUE OF THE UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END (#) AT FISCAL YEAR-END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
James C. Foster......... -- -- 23,123 575,701 $509,747 $12,264,529
Real H. Renaud.......... -- -- 5,505 174,288 121,358 3,671,459
Dennis R. Shaughnessy... -- -- 4,949 145,693 109,101 3,041,082
David P. Johst.......... -- -- 4,404 136,850 97,086 2,846,138
Thomas F. Ackerman...... -- -- 4,404 136,850 97,086 2,846,138
- ------------------------
(1) The value of unexercised in-the-money options at fiscal year end assumes a
fair market value for the Company's Common Stock of $27.35, the closing sale
price per share of the Company's Common Stock, as reported on the New York
Stock Exchange on December 30, 2000, less the option exercise price.
11
PENSION AND SAVINGS PLANS
One of the Company's sponsored defined benefit plans, the Charles River
Laboratories, Inc. Pension Plan, is a qualified, non-contributory plan that
covers most U.S. employees. Benefits are based on participants' highest five
consecutive years of compensation and years of service. The amount of pension
payable at normal retirement (the later of age 65 and 5 years of service) is
equal to the greater of: (1) 1 1/8% of participants' highest five consecutive
years of compensation multiplied by years of service up to 40 years, less the
maximum offset allowance determined in accordance with Internal Revenue Code
Section 401(l); and (2) $180 multiplied by years of service. Participant's
rights vest upon completion of five years of service.
Certain officers and key employees of the Company also participate in the
Company's amended and restated Executive Supplemental Life Insurance Retirement
Plan, or ESLIRP, which is a non-funded, non-qualified arrangement. Annual
benefits under this Plan will equal a percentage of the highest five consecutive
years of compensation, offset by amounts payable under the Charles River
Laboratories, Inc. Pension Plan and Social Security. The age-based percentages
are 46% at age 59, and up to 55% at age 62 and over. The normal retirement age
is 62. Eligible spouses (married one year or longer at the executive's
retirement date) receive survivor benefits at a rate of 100% of the benefit paid
to the executives during the first 15 years following retirement and thereafter
at the rate of 50%. Executive officer participants vest as to 50% of the total
benefit after five years of service with a 10% incremental increase in vesting
percentage for each year thereafter. The Company has taken out several key
person life insurance policies with the intention of using their cash surrender
value to fund the ESLIRP Plan.
The following table shows the total estimated annual benefits payable under
the ESLIRP beginning at retirement (age 62) and continuing until the executive's
death. These estimates are based on the assumptions that an employee will
continue to work for the Company until normal retirement with no change in
current 2000 compensation. The total benefit below is offset by the Charles
River Laboratories, Inc. Pension Plan and Social Security. Amounts shown are
paid as a 15 year certain and continuous annuity with a 50% spousal benefit
after the 15 years.
HIGHEST FIVE-YEAR RETIREMENT AT AGE 62
AVERAGE COMPENSATION ALL YEARS OF SERVICE
- -------------------- --------------------
$ 200,000.................... $110,000
300,000.................... 165,000
400,000.................... 220,000
500,000.................... 275,000
600,000.................... 330,000
700,000.................... 385,000
800,000.................... 440,000
900,000.................... 495,000
1,000,000................... 550,000
12
The (i) 2000 pensionable earnings (salary and bonus), (ii) current years of
service and (iii) projected total service at age 62 are as follows for each of
the named executive officers:
PROJECTED TOTAL
NAME COMPENSATION YEARS OF SERVICE YEARS OF SERVICE
- ---- ------------ ---------------- ----------------
Thomas F. Ackerman.................. $279,579 13.0 29.0
James C. Foster..................... 748,578 25.6 36.6
David P. Johst...................... 283,028 10.0 33.0
Real H. Renaud...................... 354,926 36.3 44.3
Dennis R. Shaughnessy............... 329,215 12.3 30.3
The estimated annual vested accrued benefits payable upon retirement at age
62, based on the 2000 pensionable earnings shown in the table above, is as
follows for the named executive officers participating in the ESLIRP, subject to
offset by amounts payable under the Charles River Laboratories, Inc. Pension
Plan and Social Security: Mr. Ackerman ($153,768), Mr. Foster ($411,718),
Mr. Johst ($155,665) and Mr. Renaud ($195,209). Mr. Shaughnessy is no longer a
participant in the ESLIRP. The estimated annual vested accrued benefits payable
upon retirement at age 65 (the normal retirement age under the pension plan) to
Mr. Shaughnessy under the Charles River Laboratories, Inc. Pension Plan is
$17,100.
EMPLOYEE AGREEMENTS AND COMPENSATION ARRANGEMENTS
The Company does not currently have employment agreements with any of its
named executive officers.
SEVERANCE PLANS
In January 1999, Charles River Laboratories, Inc. adopted the 1999 Charles
River Laboratories Officer Separation Plan. This plan provides for severance
payments to vice presidents and more senior officers who are terminated for
reasons other than cause, voluntary resignation, disability, early or normal
retirement or death and who have not been offered comparable positions within
the Company. A participant under the plan is entitled to a severance payment
equal to one year of the officer's base pay plus the accrued vacation pay
payable to the officer as of the separation date. Under certain circumstances, a
participant is also entitled to receive a PRO RATA portion of the participant's
incentive bonus under the terms of the plan. Each of the named executive
officers other than Mr. Renaud is a participant under the plan. In
January 1992, Mr. Renaud entered into an agreement with Charles River
Laboratories, Inc. providing for a severance payment equal to one year of his
base pay if he is terminated for any reason other than for cause, and up to one
additional year of base pay until he finds non-competing employment. The plan
and the 1992 agreement with Mr. Renaud each prohibit the participant from
competing with Charles River Laboratories, Inc. for one year after termination
of the participant's employment.
On July 25, 1999, Charles River Laboratories, Inc. entered into an agreement
with each of the named executive officers providing for a severance payment to
any covered officer terminated by Charles River Laboratories, Inc. prior to
September 29, 2000 for any reason other than cause. Under these agreements,
Mr. Foster is entitled to a severance payment equal to two and one-half times
his base salary and each of Messrs. Thomas F. Ackerman, David P. Johst and
Dennis R. Shaughnessy is entitled to a severance payment equal to two times his
base salary.
13
PERFORMANCE GRAPH
The following graph compares the annual percentage change in the Company's
cumulative total stockholder return on its Common Stock during a period
commencing on June 23, 2000 and ending on December 30, 2000 (as measured by
dividing (i) the sum of (A) the cumulative amount of dividends for the
measurement period, assuming dividend reinvestment, and (B) the difference
between the Company's share price at the end and the beginning of the
measurement period; by (ii) the share price at the beginning of the measurement
period) with the cumulative total return of the S&P 500 Index and the Nasdaq
Pharmaceutical Index during such period. The Company has not paid any dividends
on the Common Stock, and no dividends are included in the representation of the
Company's performance. The stock price performance on the graph below is not
necessarily indicative of future price performance. Prior to June 23, 2000, the
Company's Common Stock was not publicly traded. Comparative data is provided
only for the period since that date. This graph is not "soliciting material," is
not deemed filed with the Securities and Exchange Commission and is not to be
incorporated by reference in any filing of the Company under the Securities Act
of 1933 or the Securities Exchange Act of 1934 whether made before or after the
date hereof and irrespective of any general incorporation language in any such
filing. Information used on the graph was obtained from the Standard & Poor's
Institutional Market Services, a source believed to be reliable, but the Company
is not responsible for any errors or omissions in such information.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
TOTAL SHAREHOLDER RETURNS
CHARLES RIVER LABORATORIES S&P NASDAQ
MONTHS ENDING INTERNATIONAL, INC. 500 INDEX PHARMACEUTICAL INDEX
06/23/2000 $100.00 $100.00 $100.00
06/30/2000 $100.85 $100.91 $103.71
07/28/2000 $125.29 $98.57 $96.58
08/25/2000 $125.29 $104.72 $112.11
09/29/2000 $154.55 $99.93 $113.88
10/27/2000 $115.91 $96.04 $102.46
11/24/2000 $109.66 $93.54 $95.90
12/29/2000 $124.43 $92.12 $94.90
BASE PERIOD
COMPANY / INDEX 6/23/2000 6/30/2000 7/28/2000 8/25/2000 9/29/2000 10/27/2000 11/24/2000 12/29/2000
- --------------- ----------- --------- --------- --------- --------- ---------- ---------- ----------
CHARLES RIVER LABORATORIES
INTERNATIONAL, INC......... 100 100.85 125.29 125.29 154.55 115.91 109.66 124.43
S&P 500 INDEX................ 100 100.91 98.57 104.72 99.93 96.04 93.54 92.12
NASDAQ PHARMACEUTICAL
INDEX...................... 100 103.71 96.58 112.11 113.88 102.46 95.90 94.90
14
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is composed entirely of outside directors. The Compensation
Committee, which consists of Mr. Dean, Mr. Cawthorn, Mr. Waltrip and Mr. Wendt,
is responsible for establishing and administering the Company's executive
compensation policies. This report addresses the compensation policies for
fiscal year 2000 as they affect Mr. Foster, in his capacity as Chairman,
President and Chief Executive Officer of the Company, and the other executive
officers of the Company.
The objectives of the Company's executive compensation program are to:
- Provide a competitive compensation package that will attract and retain
superior talent and reward performance.
- Support the achievement of desired Company performance.
- Align the interests of executives with the long-term interests of
Stockholders through award opportunities that can result in ownership of
Common Stock, thereby encouraging the achievement of superior results over
an extended period.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's executive officer compensation program is comprised of:
(i) base salary, which is set on an annual basis; (ii) annual incentive bonuses,
which are based on the achievement of predetermined objectives; and
(iii) long-term incentive compensation in the form of periodic stock option
grants, with the objective of aligning the executive officers' long-term
interests with those of the Stockholders and encouraging the achievement of
superior results over an extended period.
The Compensation Committee performs annual reviews of executive compensation
to confirm the competitiveness of the overall executive compensation package as
compared with companies who compete with the Company to attract and retain
employees.
In considering compensation of the Company's executives, one of the factors
the Compensation Committee takes into account is the anticipated tax treatment
to the Company on various components of compensation. The Company does not
believe that Section 162(m) of the Internal Revenue Code of 1986, as amended,
which generally disallows a tax deduction for certain compensation in excess of
$1 million to any of the executive officers appearing in the Summary
Compensation Table above, will have an effect on the Company. The Compensation
Committee has considered the requirements of Section 162(m) of the Code and its
related regulations. It is the Compensation Committee's present policy to take
reasonable measures to preserve the full deductibility of substantially all
executive compensation, to the extent consistent with its other compensation
objectives.
BASE SALARY
The Compensation Committee reviews base salary levels for the Company's
executive officers on an annual basis. Base salaries are set competitively
relative to companies in the biotechnology industry and other comparable
companies. In determining salaries the Compensation Committee also takes into
consideration individual experience and performance. The Compensation Committee
seeks to compare the salaries paid by companies similar in size and stage of
development to the Company. Within this comparison group, the Company seeks to
make comparisons to executives at a comparable level of experience, who have a
comparable level of responsibility and expected level of contribution to the
Company's performance. In setting base salaries, the Compensation Committee also
takes into account the intense level of competition among biotechnology
companies, as well as a broader group of companies of comparable size and
complexity to attract talented personnel.
ANNUAL INCENTIVE BONUSES
The Company, along with each executive officer, establishes goals related
specifically to that officer's areas of responsibility. The Compensation
Committee determines the amount of each
15
executive's bonus based on performance against established financial objectives,
as well as a subjective assessment by the Compensation Committee of the
officer's individual contribution to the overall performance of the Company.
Bonuses are awarded on an annual basis.
LONG-TERM INCENTIVE COMPENSATION
Long-term incentive compensation, in the form of stock options, allows the
executive officers to share in any appreciation in the value of the Company's
Common Stock. The Compensation Committee believes that stock option
participation aligns executive officers' interests with those of the
Stockholders. The amounts of the awards are designed to reward past performance
and create incentives to meet long-term objectives. Awards are made at a level
calculated to be competitive within the biotechnology industry as well as a
broader group of companies of comparable size and complexity. In determining the
amount of each grant, the Compensation Committee takes into account the number
of shares held by the executive prior to the grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Foster has held the position of President since 1991, CEO since 1992 and
Chairman since June 2000. Mr. Foster currently receives an annual base salary,
which has been increased by the Board of Directors periodically. In 2000,
Mr. Foster had a base salary of $341,250, which was consistent with the range of
salary levels received by his counterparts in companies in the biotechnology
industry and other comparable companies. Mr. Foster also received an annual
bonus of $601,293, which was based primarily on the Company's overall financial
performance in fiscal 2000. The Compensation Committee believes Mr. Foster has
managed the Company well in a challenging business climate and has continued to
move the Company towards its long-term objectives.
The Company granted stock options to Mr. Foster to purchase 558,824 shares
at an exercise price of $5.33 in fiscal 1999 and 40,000 shares at an exercise
price of $16.00 in fiscal 2000. This option package is designed to align the
interests of Mr. Foster with those of the Company's stockholders with respect to
short-term operating results and long term increases in the price of the
Company's stock. The grant of these options is consistent with the goals of the
Company's stock option program as a whole.
THE COMPENSATION COMMITTEE:
Mr. Dean (Chairman)
Mr. Cawthorn
Mr. Waltrip
Mr. Wendt
16
REPORT OF AUDIT COMMITTEE
The Audit Committee of the Board of Directors, which consists entirely of
directors who meet the independence and experience requirements of the NYSE, has
furnished the following report:
The Audit Committee assists the Board in overseeing and monitoring the
integrity of the Company's financial reporting process, its compliance with
legal and regulatory requirements and the quality of its external audit
processes. The role and responsibilities of the Audit Committee are set forth in
a written Charter adopted by the Board, which is attached as Appendix A to this
Proxy Statement. The Audit Committee reviews and reassesses the Charter annually
and recommends any changes to the Board for approval. The Audit Committee is
responsible for overseeing the Company's overall financial reporting process. In
fulfilling its responsibilities for the financial statements for fiscal year
December 30, 2000, the Audit Committee took the following actions:
- Reviewed and discussed the audited financial statements for the fiscal
year ended December 30, 2000 with management and PricewaterhouseCoopers
LLP, the Company's independent auditors;
- Discussed with PricewaterhouseCoopers LLP the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit; and
- Received written disclosures and the letter from PricewaterhouseCoopers
LLP regarding its independence as required by Independence Standards Board
Standard No. 1. The Audit Committee further discussed with
PricewaterhouseCoopers LLP their independence and acknowledged their
independence. The Audit Committee also considered the status of pending
litigation, taxation matters and other areas of oversight relating to the
financial reporting and audit process that the Committee determined
appropriate.
Based on the Audit Committee's review of the audited financial statements
and discussions with management and PricewaterhouseCoopers LLP, the Audit
Committee recommended to the Board that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 30, 2000 for filing with the Securities and Exchange Commission.
Members of the Charles River
Laboratories
International, Inc. Audit Committee
Stephen D. Chubb (Chairman)
Samuel O. Thier
William Waltrip
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than 10% of the Common Stock,
to file with the Securities and Exchange Commission (the "SEC") initial reports
of beneficial ownership and reports of changes in beneficial ownership of the
Common Stock and other equity securities of the Company. Officers, directors and
greater than 10% beneficial owners are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 30, 2000, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with.
17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RECAPITALIZATION
Effective September 29, 1999, all assets, liabilities and operations of
Charles River Laboratories, Inc., which had been held by Bausch & Lomb
Incorporated and certain of its affiliated entities, were, pursuant to a
recapitalization agreement, contributed to an existing dormant subsidiary that
was subsequently renamed Charles River Laboratories, Inc. Under the terms of the
recapitalization, Charles River Laboratories, Inc., which had been a
wholly-owned subsidiary of Bausch & Lomb Incorporated, became a wholly-owned
subsidiary of the Company.
FINANCIAL ADVISORY FEES AND AGREEMENTS
Donaldson, Lufkin & Jenrette Securities Corporation (or DLJ Securities
Corporation), an affiliate of the DLJMB Funds, received customary fees and
expense reimbursement for its services as financial advisor for the
recapitalization and as the initial purchaser of the units. 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 Company's
credit facility and as a lender under the facility. 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.
We paid a fee to the lenders under our existing credit facility, including DLJ
Capital Funding, in connection with amendments to that facility and to DLJ
Capital Funding for an irrevocable commitment, which has since expired, to
provide the Company with a new credit facility. Credit Suisse First Boston, New
York branch is an affiliate of DLJ Capital Funding and had assumed such
commitment to provide us with a new credit facility. The aggregate fees payable
to DLJ Capital Funding in connection with such consent and commitment were
approximately $1.1 million. DLJ Securities Corporation, whose corporate parent
was recently acquired by Credit Suisse Group, of which Credit Suisse First
Boston Corporation is an indirect subsidiary, was co-managing underwriter in the
Company's initial public offering and received customary fees of approximately
$4.4 million, and DLJDIRECT, Inc., an affiliate of DLJ Securities Corporation
and Credit Suisse First Boston Corporation, was an underwriter and received
approximately $0.1 million. We also paid a premium of approximately
$24.5 million to DLJMB and the other investors for early repayment of our senior
discount debentures due in 2010. Credit Suisse First Boston Corporation acted as
a managing underwriter in a public offering of shares by the Company and certain
of its Stockholders that closed on March 21, 2001, and received fees of
approximately $1,171,875 from the Company and $1,515,820 from the selling
Stockholders for its services.
Under the Investors' Agreement, for a period of five years from the date of
the Investors' Agreement, we have agreed to engage Credit Suisse First Boston
Corporation or its affiliates as our exclusive financial and investment banking
advisor. We expect that Credit Suisse First Boston 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 any such engagement. We expect that any such
arrangement will include provisions for the indemnification of Credit Suisse
First Boston Corporation against some liabilities, including liabilities under
the federal securities laws.
CRL ACQUISITION LLC
Effective June 21, 2000, the Company's current Stockholders, including CRL
Acquisition LLC, transferred all of their shares to us in exchange for newly
issued shares of our common stock. Each old share was exchanged for 1.927 new
shares. In connection with the offering, CRL Acquisition LLC distributed a
substantial portion of these shares to its limited liability company unit
holders.
18
INVESTORS' AGREEMENT
The Company, B&L CRL, Inc. (a subsidiary of Bausch & Lomb Incorporated), CRL
Acquisition LLC, DLJ Merchant Banking Partners II, L.P. and certain related
investors, James C. Foster, Stephen D. Chubb, William Waltrip, our management
and other of our investors are parties to the Investors' Agreement, which was
entered into in connection with the Company's recapitalization on September 29,
1999 and amended and restated on June 19, 2000. See "MANAGEMENT--Agreement on
Certain Director Nominations." The Investors' Agreement provides, among other
things, that any person acquiring shares of Common Stock who is required by the
Investors' Agreement or by any other agreement or plan of the Company to become
a party to the Investors' Agreement will execute an agreement to be bound by the
Investors' Agreement.
The terms of the Investors' Agreement restrict transfers of the shares of
Common Stock by management and some other investors and some future
Stockholders. The agreement provides for, among other things:
- the ability of some Stockholders to participate in particular sales of the
Company's shares;
- the ability of DLJMB Funds or CRL Acquisition LLC to require the other
Stockholders to sell shares of Common Stock held by them in particular
circumstances if the DLJMB Funds or CRL Acquisition LLC choose to sell
shares owned by them;
- some registration rights with respect to shares of Common Stock, including
rights to indemnification against some liabilities, including liabilities
under the Securities Act; and
- pre-emptive rights of all the parties, other than CRL Acquisition LLC and
its permitted transferees, to acquire its pre-emptive portion of Common
Stock in particular instances when the Board proposes to issue Common
Stock.
The Investors' Agreement also provides that the Board of Directors will
consist of at least nine but no more than twelve members, seven of whom
(including the chairman) will be appointed by DLJ Merchant Banking Partners II,
LP for so long as the aggregate number of shares of our Common Stock held by the
DLJMB Funds is at least 10% of the initial aggregate number of shares purchased
by the DLJMB Funds in the recapitalization. The Investors' Agreement also
provides that B&L CRL, Inc. has the right to appoint one director and that the
chief executive officer appointed by the board will serve as a director.
TRANSACTIONS WITH OFFICERS AND DIRECTORS
In connection with the recapitalization, some 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 $300,000 and each of Real H. Renaud, Thomas F. Ackerman and
Dennis R. Shaughnessy borrowed $200,000. Two weeks after the consummation of the
recapitalization, the loans matured and were repaid. Following the repayment,
the officers borrowed the following amounts from us: Mr. Foster ($300,000),
Mr. Renaud ($150,000), Mr. Shaughnessy ($175,000) and Mr. Ackerman ($175,000).
The loans mature in ten years and interest accrues at 6.75%, the applicable
federal rate. Each loan is fully recourse to the officer. Any after-tax proceeds
from the sale of these shares and options by each officer will be used to repay
his loan until it is repaid in full. Each note accelerates upon the termination
of the borrower's employment with the Company for any reason.
REPAYMENT OF NOTES AND DEBENTURES
In the third quarter of 2000, the Company repaid to Bausch & Lomb
$46,884,000 of subordinated discount notes which were issued in connection with
the recapitalization transaction. In addition, also in the third quarter of
2000, the Company repaid a total of $66,792,000 (including a $24,444,000 premium
for early extinguishment) to the DLJMB Funds to extinguish senior discount
debentures issued in connection with the recapitalization.
19
ELECTION OF DIRECTORS
(NOTICE ITEM 1)
Under the Company's By-laws, the number of members of the Company's Board of
Directors is fixed from time to time by the Board of Directors but may be
increased or decreased either by the Stockholders or by the majority of
directors then in office. Directors serve in office until the next annual
meeting of Stockholders and until their successors have been elected and
qualified or until their earlier death, resignation or removal.
Under the terms of the Investors' Agreement (see "MANAGEMENT--Agreement on
Certain Director Nominations"), the Company, B&L CRL, Inc. (a subsidiary of
Bausch & Lomb Incorporated), CRL Acquisition LLC, DLJ Merchant Banking Partners
II, L.P. and related investors, James C. Foster, Stephen D. Chubb, William
Waltrip, our management and other of our investors agreed that, for so long as
the aggregate number of shares of our Common Stock held by the DLJMB Funds is at
least 10% of the initial aggregate number of shares purchased by the DLJMB Funds
in the Company's recapitalization, the parties to the Investors' Agreement shall
vote their shares in favor of a Board consisting of at least nine but no more
than twelve members, seven of whom (including the chairman) shall be appointed
by DLJ Merchant Banking Partners II, L.P., one of whom shall be appointed by B&L
CRL, Inc., and one of whom shall be the Company's chief executive officer.
The Board of Directors has voted (i) to set the size of the Board of
Directors at ten, and (ii) to nominate James C. Foster, Robert Cawthorn, Stephen
D. Chubb, Thompson Dean, Stephen C. McCluski, Reid S. Perper, Douglas E. Rogers,
Samuel O. Thier, William Waltrip and Henry Wendt III for election at the Meeting
to serve until the next annual meeting of Stockholders and until their
respective successors have been elected and qualified or until their earlier
death, resignation or removal.
Unless authority to vote for any of the nominees named above is withheld,
the shares represented by the enclosed proxy will be voted FOR the election as
directors of such nominees. In the event that any nominee shall become unable or
unwilling to serve, the shares represented by the enclosed proxy will be voted
for the election of such other person as the Board of Directors may recommend in
that nominee's place. The Board of Directors has no reason to believe that any
nominee will be unable or unwilling to serve.
A plurality of the shares voted affirmatively at the Meeting is required to
elect each nominee as a director.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF JAMES C. FOSTER, ROBERT
CAWTHORN, STEPHEN D. CHUBB, THOMPSON DEAN, STEPHEN C. MCCLUSKI, REID S. PERPER,
DOUGLAS E. ROGERS, SAMUEL O. THIER, WILLIAM WALTRIP AND HENRY WENDT III AS
DIRECTORS, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF
UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
20
INCREASE IN THE AGGREGATE NUMBER OF SHARES
THAT MAY BE DELIVERED IN SATISFACTION OF AWARDS UNDER THE COMPANY'S
2000 INCENTIVE PLAN
(NOTICE ITEM 2)
GENERAL
The Company's Board of Directors and the Stockholders approved the Company's
2000 Incentive Plan (the "Plan") in 2000. A total of 1,189,000 shares of Common
Stock were initially reserved for issuance under the Plan. The Plan may be
amended by the Board of Directors or the Compensation Committee of the Board of
Directors, provided that any amendment approved by the Board of Directors or the
Compensation Committee which is of a scope that requires Stockholder approval in
order to ensure favorable federal income tax treatment for any incentive stock
options under Code Section 422 and for awards to be eligible for the
performance-based exception under Code Section 162(m) is subject to obtaining
such Stockholder approval. The Board of Directors has voted to approve an
amendment to the Plan to increase by 2,600,000 the aggregate number of shares of
Common Stock that may be delivered in satisfaction of awards under the Plan.
This amendment is being submitted for Stockholder approval at the Meeting to
ensure continued qualification of the Plan under the New York Stock Exchange
rules, and Sections 422 and 162(m) of the Internal Revenue Code of 1986, as
amended ("the Code"). The Board believes that the increase is advisable to give
the Company the flexibility needed to attract, retain and motivate employees,
directors and consultants. All employees, consultants of the Company or its
affiliates and the members of the Board of Directors are eligible to participate
in the Plan.
ELIGIBILITY TO RECEIVE AWARDS
All employees, directors and individuals providing services to the Company
or its affiliates, (approximately 3,500 people in total) are eligible to
participate in the Plan. Eligibility for incentive stock options is limited to
those individuals whose employment status would qualify them for the tax
treatment of Sections 421 and 422 of the Code. The granting of awards under the
Plan is discretionary, and the Company cannot now determine the number or type
of awards to be granted in the future to any particular group or person.
ADMINISTRATION OF THE PLAN
The Compensation Committee administers the Plan. Subject to the provisions
of the Plan, the Compensation Committee determines the persons to whom awards
will be granted, the number of shares to be covered by each stock award and the
terms and conditions upon which each of the awards may be granted including
vesting periods, and transferability.
DESCRIPTION OF AWARDS
The Plan provides for a number of awards including stock options, SARs,
restricted stock, unrestricted stock, deferred stock, cash performance awards
and other performance awards and grants of cash, or loans, made in connection
with other awards in order to help defray in whole or in part the economic cost
(including tax cost) of the award to the participant.
STOCK OPTIONS. Stock options under the Plan may be either (i) options
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or (ii) non-qualified
stock options. Incentive stock options may be granted under the Plan to
employees of the Company and its affiliates. Non-qualified stock options may be
granted to employees of the Company and its affiliates, consultants and
directors.
21
The aggregate fair market value (determined at the time of grant) of shares
issuable pursuant to incentive stock options which become exercisable in any
calendar year under any incentive stock option plan of the Company may not
exceed $100,000. Incentive stock options granted under the Plan may not be
granted at a price less than the fair market value of the Common Stock on the
date of grant, or 110% of fair market value in the case of options granted to an
employee holding 10% or more of the voting stock of the Company. An option
granted under the Plan is not transferable by the option holder except by will
or by the laws of descent and distribution unless the Compensation Committee
states otherwise in the optionee's option agreement.
SARS. SARs are rights entitling the holder upon exercise to receive cash or
stock, as the Compensation Committee determines, equal to a function (determined
by such factors as the Compensation Committee deems appropriate) of the amount
by which the stock has appreciated in value since the date of the award.
RESTRICTED STOCK. Restricted stock is an award of stock subject to
restrictions requiring that such stock be redelivered to the Company if
specified conditions are not satisfied.
UNRESTRICTED STOCK. Unrestricted stock is an award of Stock not subject to
any restrictions under the Plan.
DEFERRED STOCK. Deferred stock is a promise to deliver stock or other
securities in the future on specified terms described in each deferred stock
agreement.
CASH PERFORMANCE AWARDS. A cash performance award is a performance award
payable in cash.
TRANSFERABILITY OF AWARDS
Any award granted under the Plan is not transferable by the holder except by
will or by the laws of descent and distribution unless the Compensation
Committee states otherwise in the specific award agreement.
CERTAIN SHARE LIMITS ON AWARDS UNDER THE PLAN
The maximum number of shares of stock for which stock options may be granted
to any person from and after adoption of the Plan and prior to June 5, 2010, the
maximum number of shares of stock subject to SARs granted to any person during
such period and the aggregate maximum number of shares of stock subject to other
awards that may be delivered (or the value of which may be paid) to any person
during such period, shall each be 2,000,000. For purposes of the preceding
sentence, the repricing of a stock option or SARs will be treated as a new grant
to the extent required under Section 162(m). Subject to these limitations, each
person eligible to participate in the Plan will be eligible to receive awards
covering up to the full number of shares of stock then available for awards
under the Plan. No awards may be granted under the Plan after June 5, 2010, but
previously granted awards may extend beyond that date.
In addition, no more than $2,000,000 may be paid to any individual with
respect to any cash performance award (other than an award expressed in terms of
shares of stock or units representing stock). In applying the dollar limitation
of the preceding sentence: multiple cash performance awards to the same
individual that are determined by reference to performance periods of one year
or less ending with or within the same fiscal year of the Company shall be
subject in the aggregate to the $2,000,000 limit. Multiple cash performance
awards to the same individual that are determined by reference to one or more
multi-year performance periods ending in the same fiscal year of the Company are
not included in the limit described above; instead they are subject in the
aggregate to a separate $2,000,000 limit.
22
RECLASSIFICATION OF STOCK
Under the Plan, if the shares of Common Stock shall be subdivided or
combined into a greater or smaller number of shares or if the Company shall
issue any shares of Common Stock as a stock dividend on its outstanding Common
Stock, the Compensation Committee will make appropriate adjustments to the
maximum number of shares that may be delivered under the Plan and to the maximum
share limits described above, and will also make appropriate adjustments to the
number and kind of shares of stock or securities subject to awards then
outstanding or subsequently granted, including any exercise prices relating to
the awards and any other provision of awards affected by such change.
CERTAIN TRANSACTIONS
If the Company undergoes any of (i) a consolidation or merger in which the
Company is not the surviving corporation or which results in any individual,
entity or "group" acquiring the beneficial ownership directly or indirectly of
more than 50% of either the then outstanding shares of Common Stock of the
Company or the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors, (ii) a
sale or transfer of all or substantially all the Company's assets, or (iii) a
dissolution or liquidation of the Company (each a "Covered Transaction"), all
outstanding awards under the Plan shall vest and, if relevant, become
exercisable, all performance criteria and other conditions to any award shall be
deemed satisfied, and all deferrals measured by reference to or payable in
shares of stock shall be accelerated. Upon consummation of a Covered
Transaction, all awards then outstanding and requiring exercise or delivery
shall terminate unless assumed by an acquiring or surviving entity or its
affiliate as provided below. In the event of a Covered Transaction, the
Compensation Committee may provide for substitute or replacement awards from, or
the assumption of awards by, the acquiring or surviving entity or its affiliates
on such terms as the Compensation Committee determines.
AMENDMENT
The Plan may be amended by the Board of Directors or the Compensation
Committee, provided that any amendment approved by the Board of Directors or the
Compensation Committee also be approved by the Stockholders if required to
ensure favorable federal income tax treatment for any incentive stock options
under Code Sections 422 and for awards to be eligible for the performance-based
exception under Code Section 162(m). NYSE rules also require stockholder
approval for certain amendments.
As of December 30, 2000, an aggregate of 476,300 shares had been issued upon
the exercise of options or are issuable upon the exercise of options outstanding
under the Plan. No awards granted under the Plan are currently exercisable. On
March 29, 2001, the closing market price per share of our Common Stock was
$23.85, as reported on the NYSE.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a description of certain U.S. federal income tax
consequences of the issuance and exercise of awards under the Plan:
INCENTIVE STOCK OPTIONS. An optionee is generally not taxed on the grant or
exercise of an incentive stock option. The difference between the exercise price
and the fair market value of the shares on the exercise date will, however, be a
preference item for purposes of the alternative minimum tax. If an optionee
holds the shares acquired upon the exercise of an incentive stock option for at
least two years following grant and at least one year following exercise, the
optionee's gain, if any, upon a subsequent disposition of such shares is a
capital gain (or loss). The measure of the gain is the difference between the
proceeds received on disposition and the optionee's basis in the shares
23
(which generally equals the exercise price). If an optionee disposes of stock
acquired pursuant to exercise of an incentive stock option before satisfying the
one and two-year holding periods described above, the optionee will recognize
both ordinary income and capital gain (or loss) in the year of disposition. The
amount of the ordinary income will be the lesser of (i) the amount realized on
disposition less the optionee's adjusted basis in the stock (usually the
exercise price) or (ii) the difference between the fair market value of the
stock on the exercise date and the exercise price. The balance of the
consideration received on such a disposition will be capital gain if the stock
had been held for at least one year following exercise of the incentive stock
option. The Company is not entitled to an income tax deduction on the grant or
exercise of an incentive stock option or on the optionee's disposition of the
shares after satisfying the holding period requirement described above. If the
holding periods are not satisfied, the Company will be entitled to a deduction
in the year the optionee disposes of the shares, in an amount equal to the
ordinary income recognized by the optionee.
NON-QUALIFIED STOCK OPTIONS. The grant of a non-qualified option will not
result in taxable income to the optionee or deduction to the Company at the time
of grant. The optionee will recognize taxable compensation, and the Company will
have a corresponding deduction, at the time of exercise in the amount of the
excess of the then fair market value of the shares acquired over the exercise
price, and the optionee will be required to satisfy the tax withholding
requirements applicable to such income. Upon disposition of the shares, the
optionee will generally realize capital gain or loss, and his basis for
determining gain or loss will be the sum of the exercise price paid for the
shares plus the amount of compensation income recognized on exercise of the
option.
The Company will generally be entitled to an income tax deduction equal to
the amount of ordinary income recognized by the optionee with respect to the
exercise of a non-qualified option or the disqualifying disposition of an
incentive stock option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
STOCK APPRECIATION RIGHTS. The amount of any cash or the fair market value
of any stock received by a participant upon the exercise of SARs under the Plan
will be subject to ordinary income tax in the year of receipt, and the Company
will be entitled to a deduction for such amount.
RESTRICTED STOCK. A participant who receives Restricted Stock will
recognize no income on the grant of the Restricted Stock and the Company will
not qualify for any deduction, unless the election described below is made by
the participant. At the time the Restricted Stock is no longer subject to a
substantial risk of forfeiture, a participant will recognize ordinary
compensation income in an amount equal to the excess, if any, of the fair market
value of the Restricted Stock at the time the restriction lapses over the
consideration paid for the Restricted Stock. A participant's shares are treated
as being subject to a substantial risk of forfeiture so long as his or her sale
of the shares at a profit could subject him or her to a suit under
Section 16(b) of the Exchange Act. The holding period that determines whether
the participant has long-term or short-term capital gain or loss begins when the
restriction period expires, and the tax basis for the shares will generally be
the fair market value of the shares on such date.
A participant may elect, under Section 83(b) of the Code, within 30 days of
the transfer of the Restricted Stock, to recognize ordinary compensation income
on the date of transfer in an amount equal to the excess, if any, of the fair
market value on the date of such transfer of the shares of Restricted Stock,
determined without regard to certain restrictions, over the consideration paid
for the restricted stock. If a participant makes such election and thereafter
forfeits the shares, no ordinary loss deduction will be allowed. Such forfeiture
will be treated as a sale or exchange upon which there is realized loss equal to
the excess, if any, of the consideration paid for the shares over the amount
realized on such forfeiture. Such loss will be a capital loss if the shares are
capital assets. If a participant makes an election under Section 83(b), the
holding period will commence on the day after the date of transfer and the tax
basis will equal the fair market value of shares, determined without
24
regard to the restrictions, on the date of transfer. On a disposition of the
shares, a participant will recognize gain or loss equal to the difference
between the amount realized and the tax basis for the shares.
Whether or not the participant makes an election under Section 83(b), the
Company generally will qualify for a deduction, subject to the reasonableness of
compensation limitation, equal to the amount that is taxable as ordinary income
to the participant, in its taxable year in which such income is included in the
participant's gross income. The income recognized by the participant will be
subject to applicable withholding tax requirements.
Dividends paid on Restricted Stock which is subject to a substantial risk of
forfeiture generally will be treated as compensation that is taxable as ordinary
compensation income to the participant and will be deductible by the Company
subject to the reasonableness limitation. If, however, the participant makes a
Section 83(b) election, the dividends will be treated as dividends and taxable
as ordinary income to the participant, but will not be deductible by the
Company.
UNRESTRICTED STOCK. Upon receiving an award of unrestricted stock under the
Plan, the participant will realize ordinary income to the extent of the fair
market value (determined at the time of transfer to the employee) of such
shares, over the amount, if any paid by the employee for the shares. Such
taxable amounts will be deductible as compensation by the Company.
DEFERRED STOCK. A participant who receives an award of deferred stock will
recognize no income on the grant of such award. However, he or she will
recognize ordinary compensation income on the transfer of the deferred stock, or
the later lapse of a substantial risk of forfeiture to which the deferred stock
is subject, if the participant does not make a Section 83(b) election, in
accordance with the same rules as discussed above under the caption "Restricted
Stock."
CASH PERFORMANCE AWARDS. Generally, a participant will recognize ordinary
income and the Company will be entitled to a deduction (and will be required to
withhold federal income taxes) with respect to such cash awards at the earliest
time at which the participant has an unrestricted right to receive the amount of
such cash payment.
Section 162(m) of the Internal Revenue Code provides that the deduction by a
publicly-held corporation for compensation paid in a taxable year to the chief
executive officer and the four other most highly compensated executive officers
of the corporation is limited to $1 million per each individual officer. For
purposes of Section 162(m), compensation which is performance-based is not
counted as subject to the deductibility limitation if the plan pursuant to which
the compensation is paid has been approved by Stockholders. Since the Plan has
been approved and adopted by the Stockholders of the Company, nondiscretionary
income pursuant to the Plan is fully deductible by the Company, by qualifying
such income as performance-based compensation and, therefore, exempt from the
limitations of Section 162(m).
OTHER. The tax consequences associated with any other stock-based awards
granted under the plan will vary depending on the specific terms of such award.
Among the relevant factors are whether or not the award has a readily
ascertainable fair market value, whether or not the award is subject to
forfeiture provisions or restrictions on transfer, the nature of the property to
be received by the participant under the award, and the participant's holding
period and tax basis for the award or underlying common stock.
The affirmative vote of a majority of the votes present or represented and
entitled to vote at the Meeting is required to approve the increase in the
aggregate number of shares of Common Stock available under the Plan.
25
SUMMARY OF THE 2000 INCENTIVE PLAN
The preceding summary of the 2000 Incentive Plan is qualified in its
entirety by reference to the 2000 Incentive Plan, a copy of which is attached as
Appendix B to the electronic copy of this Proxy Statement filed with the
Commission and may be accessed from the Commission's home page (WWW.SEC.GOV). In
addition, a copy may be obtained by making a written request to the General
Counsel of the Company.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE ADOPTION OF AN AMENDMENT
TO THE PLAN TO INCREASE BY 2,600,000 THE AGGREGATE NUMBER OF SHARES THAT MAY BE
DELIVERED IN SATISFACTION OF AWARDS UNDER THE PLAN, AND PROXIES SOLICITED BY THE
BOARD WILL BE VOTED IN FAVOR OF SUCH AMENDMENT UNLESS A STOCKHOLDER HAS
INDICATED OTHERWISE ON THE PROXY.
26
INDEPENDENT PUBLIC ACCOUNTANTS
(NOTICE ITEM 3)
The Board of Directors has appointed PricewaterhouseCoopers LLP, independent
public accountants, to audit the financial statements of the Company for the
fiscal year ending December 29, 2001. PricewaterhouseCoopers LLP were the
Company's independent public accountants for the fiscal year ended December 30,
2000 and audited the Company's financial statements for the fiscal year ended
December 30, 2000. The Board of Directors proposes that the Stockholders ratify
the appointment for the fiscal year ended December 29, 2001. The Company expects
that representatives of PricewaterhouseCoopers LLP will be present at the
Meeting, with the opportunity to make a statement if they so desire, and will be
available to respond to appropriate questions.
AUDIT FEES
Fees for the audit of the Company's annual consolidated financial statements
for the fiscal year ended December 30, 2000 and the reviews of the Company's
quarterly condensed consolidated financial statements filed on Forms 10-Q in
that year were $590,000, of which an aggregate amount of $298,000 was billed
through December 30, 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During the Company's fiscal year ended December 30, 2000,
PricewaterhouseCoopers LLP did not provide any financial information systems
design or implementation services to the Company.
ALL OTHER FEES
During the Company's fiscal year ended December 30, 2000, the Company paid
PricewaterhouseCoopers LLP a total of $1,859,000 for their provision of other
services. Of this amount, $868,000 was paid with respect to tax planning and
structuring projects, $689,000 was paid for the provision of accounting and
taxation services in connection with the Company's initial public offering,
$105,000 was paid for due diligence services performed with respect to
acquisitions of businesses and $197,000 was paid for other accounting and
taxation assistance.
The Audit Committee of the Board of Directors has considered whether the
provision of the services described above under the caption ALL OTHER FEES is
compatible with maintaining PricewaterhouseCoopers LLP's independence.
In the event that ratification of the appointment of PricewaterhouseCoopers
LLP as the independent public accountants for the Company is not obtained at the
Meeting, the Board of Directors will reconsider its appointment.
The affirmative vote of a majority of the shares present or represented and
entitled to vote at the Meeting is required to ratify the appointment of the
independent public accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT PUBLIC ACCOUNTANTS, AND
PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A
STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
27
OTHER MATTERS
The Board of Directors knows of no other business which will be presented to
the Meeting. If any other business is properly brought before the Meeting, it is
intended that proxies in the enclosed form will be voted in respect thereof in
accordance with the judgment of the persons voting the proxies.
STOCKHOLDER PROPOSALS
To be considered for inclusion in the proxy statement relating to the
Company's Annual Meeting of Stockholders to be held in 2002 (the "2002 Annual
Meeting"), stockholder proposals must be received no later than December 7,
2001. To be considered for presentation at the 2002 Annual Meeting, although not
included in our proxy materials, proposals must be received no later than
March 9, 2002 nor earlier than February 7, 2002. Proposals received after
March 9, 2002 will not be voted on at the 2002 Annual Meeting. If a proposal is
received before that date, the proxies that management solicits for the 2002
Annual Meeting may still exercise discretionary voting authority on the proposal
under circumstances consistent with the proxy rules of the Securities and
Exchange Commission. All stockholder proposals should be marked for the
attention of James C. Foster, Chairman, Chief Executive Officer and President,
Charles River Laboratories International, Inc., 251 Ballardvale Street,
Wilmington, MA 01887.
ANNUAL REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended
December 30, 2000 (other than exhibits thereto) filed with the Securities and
Exchange Commission, which provides additional information about the Company, is
available to beneficial owners of the Company's Common Stock without charge upon
written request to James C. Foster, Chairman, Chief Executive Officer and
President, Charles River Laboratories International, Inc., 251 Ballardvale
Street, Wilmington, MA 01887.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, YOU ARE URGED TO
FILL OUT, SIGN, DATE AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE.
By order of the Board of Directors:
/s/ DENNIS R. SHAUGHNESSY
----------------------------------------------------------------------
Dennis R. Shaughnessy
SECRETARY
Wilmington, Massachusetts
April 6, 2001
28
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
INTRODUCTION
Charles River Laboratories' executive management is responsible for the
completeness and accuracy of its financial reporting and the adequacy of its
internal financial and operating controls. Its Board of Directors has
responsibility to oversee management's discharge of these responsibilities. To
assist the Board, the Corporation has established, through its bylaws, an Audit
Committee whose authority and responsibilities are described by this Charter.
PURPOSE
This Charter is created in order to define the Audit Committee's objectives,
the range of its authority, the scope of its activities and its duties and
responsibilities. It is intended to give Audit Committee members, management,
external and internal auditors a clear understanding of their respective roles.
The audit committee and the board of directors will review and assess the
adequacy of this Charter annually.
MISSION STATEMENT
Oversight of the financial reporting process, the system of internal
financial and operating controls and the audit process.
GENERAL GUIDELINES
SIZE, COMPOSITION AND TERM OF APPOINTMENT
- The Audit Committee is a committee of the Board of Directors and shall
consist of no fewer than three directors, each of whom shall be
financially literate and at least one of whom shall have accounting or
related financial management expertise as defined by the relevant rules
promulgated by the Financial Accounting Standards Board ("FASB"),
Securities and Exchange Commission ("SEC"), National Association of
Securities Dealers ("NASD") or other regulatory body. The Committee shall
be made up entirely of outside directors who are independent of management
as defined by the relevant SEC, FASB and NASD rules. The Board of
Directors shall appoint the Audit Committee's Chairperson and members
annually.
MEETINGS
- The Committee will meet on a quarterly basis and special meetings may be
called when circumstances require.
OVERSIGHT BY THE BOARD OF DIRECTORS
- The Committee will report its activities to the full Board on a regular
basis so that the Board is kept informed of its activities on a current
basis. The Committee will perform all duties determined by the Board.
- The Board will determine annually that the Committee's members are
independent and that the Committee has fulfilled its duties and
responsibilities. The Board also will review and assess the adequacy of
the Committee's Charter.
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AUTHORITY
- The Committee derives its authority from the By-Laws of the Corporation
and is hereby given all resources and authority necessary to properly
discharge its duties and responsibilities. The Committee acts on the
Board's behalf in matters outlined below.
INDEPENDENT AUDITORS
- The Committee, as representatives of the shareholders, has the ultimate
authority to select, evaluate and, where appropriate, replace the
independent public accountants to be proposed for shareholder approval in
the proxy statement. The Committee will consider management's
recommendation of the appointment of the independent public accountants.
The committee will review with management the performance, appointment
and/or termination of the independent public accountants.
- The Committee will ensure that the independent public accountants provide
a formal written statement to the Committee setting forth all
relationships between the independent public accountants and the Company,
consistent with the Independence Standards Board Standard No. 1.
- The Committee will discuss with the independent public accountants any
disclosed relationships or services which may impact the objectivity an
independence of the independent public accountants.
- The Committee will take, or recommend that the full Board take,
appropriate action to ensure the independence of the independent public
accountants.
- The Committee will also review with management and the independent public
accountants the annual audit scope and approach, significant accounting
policies, audit conclusions regarding significant accounting
estimates/reserves, and proposed fee arrangements for ongoing and special
projects.
- The Committee will review with management and the independent public
accountants the Company's compliance with laws and regulations having to
do with accounting and financial matters.
- The Committee and the Board of Directors should consider whether the
independent public accountants should meet with the full Board to discuss
any matters relative to the financial statements and/or any potentially
relevant matters, and to answer any questions that other directors may
have.
FINANCIAL STATEMENTS
- The Committee will review with management and the independent public
accountants, the Company's interim and year-end financial statements,
including management's discussion and analysis, and audit findings
(including any significant discussion and analysis, and audit findings
(including any significant suggestions for improvements provided to
management by Internal Audit, if any, and the independent public
accountant). Such review will include a discussion of significant
adjustments recorded or adjustments passed.
- The Committee will request from financial management and the independent
public accountants, a briefing on any significant accounting and reporting
issues, including any changes in accounting standards or rules promulgated
by the FASB, SEC or other regulatory bodies, that have an effect on the
financial statements.
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- The Committee will inquire about the existence and substance of any
significant accounting accruals, reserves, or estimates made by management
that had a material impact on the financial statements.
- The Committee will inquire of management and the independent public
accountants if there were any significant financial accounting or
reporting issues discussed during the accounting period and, if so, how
they were resolved or if not resolved, inquire as to the disagreements.
PRIVATE DISCUSSIONS WITH INDEPENDENT PUBLIC ACCOUNTANTS
- The committee will meet privately with the independent public accountants
to request their opinion on various matters including the quality of the
Company's accounting principles as applied in its financial reporting, and
the quality and performance of its financial and accounting personnel and
the internal audit staff, if any.
AREAS REQUIRING SPECIAL ATTENTION
- The Committee will instruct the independent public accountants and
Internal Audit, if any, that the Committee expects to be advised if there
are any areas that require special attention.
POST-AUDIT REVIEW
- The Committee will review with management and the independent public
accountants the annual Management Letter comments and management's
responses to each.
LITIGATION
- The Committee will discuss/review with management, company counsel, and
the independent public accountants the substance of any significant issues
raised by counsel concerning litigation, contingencies, claims or
assessments. The Committee should understand how such matters are
reflected in the Company's financial statements.
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APPENDIX B
AMENDMENT TO THE 2000 INCENTIVE PLAN
OF
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
The Charles River Laboratories International, Inc. 2000 Incentive Plan (the
"Plan") be and hereby is amended by deleting the first sentence of Section 2(a)
thereof in its entirety and inserting in lieu thereof the following:
"A maximum of 3,789,000, shares of Stock may be delivered in satisfaction of
Awards under the Plan."
Adopted by the Board of Directors on March 9, 2001.
Adopted by the Stockholders on .
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
2000 INCENTIVE PLAN
1. ADMINISTRATION
Subject to the express provisions of the Plan, the Administrator has the
authority to interpret the Plan; determine eligibility for and grant Awards;
determine, modify or waive the terms and conditions of any Award; prescribe
forms, rules and procedures (which it may modify or waive); and otherwise do all
things necessary to implement the Plan. Once an Award has been communicated in
writing to a Participant, the Administrator may not, without the Participant's
consent, alter the terms of the Award so as to affect adversely the
Participant's rights under the Award, unless the Administrator has expressly
reserved the right to do so. In the case of any Award intended to be eligible
for the performance-based compensation exception under Section 162(m), the
Administrator shall exercise its discretion consistent with qualifying the Award
for such exception.
2. LIMITS ON AWARD UNDER THE PLAN
a. NUMBER OF SHARES. A maximum of 1,189,000, shares of Stock may be
delivered in satisfaction of Awards under the Plan. For purposes of the
preceding sentence, shares that have been forfeited in accordance with the terms
of the applicable Award and shares held back in satisfaction of the exercise
price or tax withholding requirements from shares that would otherwise have been
delivered pursuant to an Award shall not be considered to have been delivered
under the Plan. Also, the number of shares of Stock delivered under an Award
shall be determined net of any previously acquired Shares tendered by the
Participant in payment of the exercise price or of withholding taxes.
b. TYPE OF SHARES. Stock delivered by the Company under the Plan may be
authorized but unissued Stock or previously issued Stock acquired by the Company
and held in treasury. No fractional shares of Stock will be delivered under the
Plan.
c. CERTAIN SHARE LIMITS. The maximum number of shares of Stock for which
Stock Options may be granted to any person from and after adoption of the Plan
and prior to June 5, 2010, the maximum number of shares of Stock subject to SARs
granted to any person during such period and the aggregate maximum number of
shares of Stock subject to other Awards that may be delivered (or the value of
which may be paid) to any person during such period shall each be 2,000,000. For
purposes of the preceding sentence, the repricing of a Stock Option or SAR shall
be treated as a new grant to the extent required under Section 162(m). Subject
to these limitations, each person eligible to participate in the Plan shall be
eligible to receive Awards covering up to the full number of shares of
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Stock then available for Awards under the Plan. No Awards may be granted under
the Plan after June 5, 2010, but previously granted Awards may extend beyond
that date.
d. OTHER AWARD LIMITS. No more than $2,000,000 may be paid to any
individual with respect to any Cash Performance Award (other than an Award
expressed in terms of shares of Stock or units representing Stock, which shall
instead be subject to the limit set forth in Section 2.c. above). In applying
the dollar limitation of the preceding sentence: (A) multiple Cash Performance
Awards to the same individual that are determined by reference to performance
periods of one year or less ending with or within the same fiscal year of the
Company shall be subject in the aggregate to one limit of such amount, and
(B) multiple Cash Performance Awards to the same individual that are determined
by reference to one or more multi-year performance periods ending in the same
fiscal year of the Company shall be subject in the aggregate to a separate limit
of such amount.
3. ELIGIBILITY AND PARTICIPATION
The Administrator will select Participants from among those key Employees,
directors and other individuals or entities providing services to the Company or
its Affiliates who, in the opinion of the Administrator, are in a position to
make a significant contribution to the success of the Company and its
Affiliates. Eligibility for ISOs is further limited to those individuals whose
employment status would qualify them for the tax treatment described in Sections
421 and 422 of the Code.
4. RULES APPLICABLE TO AWARDS
a. ALL AWARDS
(1) TERMS OF AWARDS. The Administrator shall determine the terms of all
Awards subject to the limitations provided herein.
(2) PERFORMANCE CRITERIA. Where rights under an Award depend in whole or
in part on satisfaction of Performance Criteria, actions by the
Company that have an effect, however material, on such Performance
Criteria or on the likelihood that they will be satisfied will not be
deemed an amendment or alteration of the Award.
(3) ALTERNATIVE SETTLEMENT. The Company may at any time extinguish rights
under an Award in exchange for payment in cash, Stock (subject to the
limitations of Section 2) or other property on such terms as the
Administrator determines, provided the holder of the Award consents
to such exchange.
(4) TRANSFERABILITY OF AWARDS. Except as the Administrator otherwise
expressly provides, Awards may not be transferred other than by will
or by the laws of descent and distribution and during a Participant's
lifetime an Award requiring exercise may be exercised only by the
Participant (or in the event of the Participant's incapacity, the
person or persons legally appointed to act on the Participant's
behalf).
(5) VESTING, ETC. Without limiting the generality of Section 1, the
Administrator may determine the time or times at which an Award will
vest (I.E., become free of forfeiture restrictions) or become
exercisable and the terms on which an Award requiring exercise will
remain exercisable. Unless the Administrator expressly provides
otherwise:
(A) immediately upon the cessation of a Participant's employment or
other service relationship with the Company and its Affiliates,
all Awards (other than Stock Options and SARs) held by the
Participant (or by a permitted transferee under Section 4.a.(4))
immediately prior to such cessation of employment or other
service relationship will be forfeited if not then vested and,
where exercisability is relevant, will cease to be exercisable;
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(B) except as provided in (C) and (D) below, all Stock Options and
SARs held by a Participant (or by a permitted transferee under
Section 4.a.(4)) immediately prior to the cessation of the
Participant's employment or other service relationship for
reasons other than death, to the extent then exercisable, will
remain exercisable for the lesser of (i) a period of three months
or (ii) the period ending on the latest date on which such Stock
Option or SAR could have been exercised without regard to this
Section 4.a.(5), and shall thereupon terminate;
(C) all Stock Options and SARs held by a Participant (or by a
permitted transferee under Section 4.a.(4)) immediately prior to
the Participant's death, to the extent then exercisable, will
remain exercisable for the lesser of (i) the one-year period
ending with the first anniversary of the Participant's death or
(ii) the period ending on the latest date on which such Stock
Option or SAR could have been exercised without regard to this
Section 4.a.(5), and shall thereupon terminate; and
(D) all Stock Options and SARs held by a Participant (or by a
permitted transferee of the Participant under Section 4.a.(4))
whose cessation of employment or other service relationship is
determined by the Administrator in its sole discretion to result
from reasons which cast such discredit on the Participant as to
justify immediate termination of the Award shall immediately
terminate upon such cessation.
Unless the Administrator expressly provides otherwise, a Participant's
"employment or other service relationship with the Company and its Affiliates"
will be deemed to have ceased, in the case of an employee Participant, upon
termination of the Participant's employment with the Company and its Affiliates
(whether or not the Participant continues in the service of the Company or its
Affiliates in some capacity other than that of an employee of the Company or its
Affiliates), and in the case of any other Participant, when the service
relationship in respect of which the Award was granted terminates (whether or
not the Participant continues in the service of the Company or its Affiliates in
some other capacity).
(6) TAXES. The Administrator will make such provision for the withholding
of taxes as it deems necessary. The Administrator may, but need not,
hold back shares of Stock from an Award or permit a Participant to
tender previously owned shares of Stock in satisfaction of tax
withholding requirements. In no event shall Stock be tendered or held
back by the Company in excess of the minimum amount required to be
withheld for Federal, state, and local taxes.
(7) DIVIDEND EQUIVALENTS, ETC. The Administrator may provide for the
payment of amounts in lieu of cash dividends or other cash
distributions with respect to Stock subject to an Award if and in
such manner as it deems appropriate.
(8) RIGHTS LIMITED. Nothing in the Plan shall be construed as giving any
person the right to continued employment or service with the Company
or its Affiliates, or any rights as a shareholder except as to shares
of Stock actually issued under the Plan. The loss of existing or
potential profit in Awards will not constitute an element of damages
in the event of termination of employment or service for any reason,
even if the termination is in violation of an obligation of the
Company or Affiliate to the Participant.
(9) SECTION 162(m). The Administrator in its discretion may grant
Performance Awards that are intended to qualify for the
performance-based compensation exception under Section 162(m) and
Performance Awards that are not intended so to qualify. In the case
of an Award intended to be eligible for the performance-based
compensation exception under Section 162(m), the Plan and such Award
shall be construed to the maximum extent permitted by law in a manner
consistent with qualifying the Award for such
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exception. In the case of a Performance Award intended to qualify as
performance-based for the purposes of Section 162(m), except as
otherwise permitted by the regulations at Treas. Regs.
Section 1.162-27: (i) the Administrator shall preestablish in writing
one or more specific Performance Criteria no later than 90 days after
the commencement of the period of service to which the performance
relates (or at such earlier time as is required to qualify the Award
as performance-based under Section 162(m)); (ii) payment of the Award
shall be conditioned upon prior certification by the Administrator
that the Performance Criteria have been satisfied; and (iii) if the
Performance Criteria with respect to the Award are not satisfied, no
other Award shall be provided in substitution of the Performance
Award. The provisions of this Section 6.a.(9) shall be construed in a
manner that is consistent with the regulations under Section 162(m).
b. AWARDS REQUIRING EXERCISE
(1) TIME AND MANNER OF EXERCISE. Unless the Administrator expressly
provides otherwise, (a) an Award requiring exercise by the holder
will not be deemed to have been exercised until the Administrator
receives a written notice of exercise (in form acceptable to the
Administrator) signed by the appropriate person and accompanied by
any payment required under the Award; and (b) if the Award is
exercised by any person other than the Participant, the Administrator
may require satisfactory evidence that the person exercising the
Award has the right to do so.
(2) EXERCISE PRICE. The Administrator shall determine the exercise price
of each Stock Option; PROVIDED, that except as otherwise permitted by
the regulations at Treas. Regs. Section 1.162-27, each Stock Option
intended to qualify for the performance-based exception under
Section 162(m) of the Code and each ISO must have an exercise price
that is not less than the fair market value of the Stock subject to
the Stock Option, determined as of the date of grant. An ISO granted
to an Employee described in Section 422(b)(6) of the Code must have
an exercise price that is not less than 110% of such fair market
value.
(3) PAYMENT OF EXERCISE PRICE, IF ANY. Where the exercise of an Award is
to be accompanied by payment, the Administrator may determine the
required or permitted forms of payment, subject to the following:
(a) all payments will be by cash or check acceptable to the
Administrator, or, if so permitted by the Administrator (with the
consent of the optionee of an ISO if permitted after the grant),
(i) through the delivery of shares of Stock which have been
outstanding for at least six months (unless the Administrator
approves a shorter period) and which have a fair market value equal
to the exercise price, (ii) by delivery of a promissory note of the
person exercising the Award to the Company, payable on such terms as
are specified by the Administrator, (iii) if the Stock is publicly
traded, by delivery of an unconditional and irrevocable undertaking
by a broker to deliver promptly to the Company sufficient funds to
pay the exercise price, or (iv) by any combination of the foregoing
permissible forms of payment; and (b) where shares of Stock issued
under an Award are part of an original issue of shares, the Award
shall require an exercise price equal to at least the par value of
such shares.
(4) GRANT OF STOCK OPTIONS. Each Stock Option awarded under the Plan
shall be deemed to have been awarded as a non-ISO (and to have been
so designated by its terms) unless the Administrator expressly
provides for ISO treatment that the Stock Option is to be treated as
an ISO.
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c. AWARDS NOT REQUIRING EXERCISE
Awards of Restricted Stock and Unrestricted Stock may be made in return for
either (i) services determined by the Administrator to have a value not less
than the par value of the Awarded shares of Stock, or (ii) cash or other
property having a value not less than the par value of the Awarded shares of
Stock plus such additional amounts (if any) as the Administrator may determine
payable in such combination and type of cash, other property (of any kind) or
services as the Administrator may determine.
5. EFFECT OF CERTAIN TRANSACTIONS
a. MERGERS, ETC.
Immediately prior to a Covered Transaction (other than an Excluded
Transaction in which the outstanding Awards have been assumed or substituted for
as provided below), all outstanding Awards shall vest and, if relevant, become
exercisable, all Performance Criteria and other conditions to any Award shall be
deemed satisfied, and all deferrals measured by reference to or payable in
shares of Stock shall be accelerated. Upon consummation of a Covered
Transaction, all Awards then outstanding and requiring exercise or delivery
shall terminate unless assumed by an acquiring or surviving entity or its
affiliate as provided below.
In the event of a Covered Transaction, the Administrator may provide for
substitute or replacement Awards from, or the assumption of Awards by, the
acquiring or surviving entity or its affiliates on such terms as the
Administrator determines.
b. CHANGES IN AND DISTRIBUTIONS WITH RESPECT TO THE STOCK
(1) BASIC ADJUSTMENT PROVISIONS. In the event of a stock dividend, stock
split or combination of shares, recapitalization or other change in
the Company's capital structure, the Administrator will make
appropriate adjustments to the maximum number of shares that may be
delivered under the Plan under Section 2.a. and to the maximum share
limits described in Section 2.c., and will also make appropriate
adjustments to the number and kind of shares of stock or securities
subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards
affected by such change. For the avoidance of doubt, the 3,789,000
and 2,000,000 share limits expressed in Section 2 are intended to
reflect the increased number of shares resulting from the share
exchange approved on June 5, 2000; accordingly, no further adjustment
in those limits shall be made under this Section 5.b. solely to
reflect such exchange.
(2) CERTAIN OTHER ADJUSTMENTS. The Administrator may also make
adjustments of the type described in paragraph (1) above to take into
account distributions to common stockholders other than those
provided for in Section 5.a. and 5.b.(1), or any other event, if the
Administrator determines that adjustments are appropriate to avoid
distortion in the operation of the Plan and to preserve the value of
Awards made hereunder; PROVIDED, that no such adjustment shall be
made to the maximum share limits described in Section 2.c., or
otherwise to an Award intended to be eligible for the
performance-based exception under Section 162(m), except to the
extent consistent with that exception, nor shall any change be made
to ISOs except to the extent consistent with their continued
qualification under Section 422 of the Code.
(3) CONTINUING APPLICATION OF PLAN TERMS. References in the Plan to
shares of Stock shall be construed to include any stock or securities
resulting from an adjustment pursuant to Section 5.b.(1) or 5.b.(2)
above.
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6. LEGAL CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any shares of Stock pursuant to
the Plan or to remove any restriction from shares of Stock previously delivered
under the Plan until the Company's counsel has approved all legal matters in
connection with the issuance and delivery of such shares; if the outstanding
Stock is at the time of delivery listed on any stock exchange or national market
system, the shares to be delivered have been listed or authorized to be listed
on such exchange or system upon official notice of issuance; and all conditions
of the Award have been satisfied or waived. If the sale of Stock has not been
registered under the Securities Act of 1933, as amended, the Company may
require, as a condition to exercise of the Award, such representations or
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act. The Company may require that certificates evidencing
Stock issued under the Plan bear an appropriate legend reflecting any
restriction on transfer applicable to such Stock.
7. AMENDMENT AND TERMINATION
Subject to the last sentence of Section 1, the Administrator may at any time
or times amend the Plan or any outstanding Award for any purpose which may at
the time be permitted by law, or may at any time terminate the Plan as to any
further grants of Awards; PROVIDED, that (except to the extent expressly
required or permitted by the Plan) no such amendment will, without the approval
of the stockholders of the Company, effectuate a change for which stockholder
approval is required in order for the Plan to continue to qualify under
Section 422 of the Code and for Awards to be eligible for the performance-based
exception under Section 162(m).
8. NON-LIMITATION OF THE COMPANY'S RIGHTS
The existence of the Plan or the grant of any Award shall not in any way
affect the Company's right to Award a person bonuses or other compensation in
addition to Awards under the Plan.
9. GOVERNING LAW
The Plan shall be construed in accordance with the laws of The Commonwealth
of Massachusetts.
10. DEFINED TERMS.
The following terms, when used in the Plan, shall have the meanings and be
subject to the provisions set forth below:
"ADMINISTRATOR": The Board or, if one or more has been appointed, the
Committee. With respect to ministerial tasks deemed appropriate by the Board
or Committee, the term "Administrator" shall also include such persons
(including Employees) to whom the Board or Committee shall have delegated
such tasks.
"AFFILIATE": Any corporation or other entity owning, directly or indirectly,
50% or more of the outstanding Stock of the Company, or in which the Company
or any such corporation or other entity owns, directly or indirectly, 50% of
the outstanding capital stock (determined by aggregate voting rights) or
other voting interests.
"AWARD": Any or a combination of the following:
(i) Stock Options.
(ii) SARs.
(iii) Restricted Stock.
(iv) Unrestricted Stock.
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(v) Deferred Stock.
(vi) Cash Performance Awards.
(vii) Other Performance Awards.
(viii) Grants of cash, or loans, made in connection with other Awards in
order to help defray in whole or in part the economic cost
(including tax cost) of the Award to the Participant.
"BOARD": The Board of Directors of the Company.
"CASH PERFORMANCE AWARD": A Performance Award payable in cash. The right of
the Company under Section 4.a.(3) (subject to the consent of the holder of
the Award as therein provided) to extinguish an Award in exchange for cash
or the exercise by the Company of such right shall not make an Award
otherwise not payable in cash a Cash Performance Award.
"CODE": The U.S. Internal Revenue Code of 1986 as from time to time amended
and in effect, or any successor statute as from time to time in effect.
"COMMITTEE": One or more committees of the Board (including any subcommittee
thereof) appointed or authorized to make Awards and otherwise to administer
the Plan. In the case of Awards granted to officers of the Company, except
as otherwise permitted by the regulations at Treas. Regs. Section 1.162-27,
the Committee shall be comprised solely of two or more outside directors
within the meaning of Section 162(m).
"COMPANY": Charles River Laboratories International, Inc.
"COVERED TRANSACTION": Any of (i) a consolidation or merger in which the
Company is not the surviving corporation or which results in any individual,
entity or "group" (within the meaning of section 13(d) of the Securities
Exchange Act of 1934) acquiring the beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) directly or indirectly of
more than 50% of either the then outstanding shares of common stock of the
Company or the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors, (ii) a sale or transfer of all or substantially all the Company's
assets, or (iii) a dissolution or liquidation of the Company.
"DEFERRED STOCK": A promise to deliver Stock or other securities in the
future on specified terms.
"EMPLOYEE": Any person who is employed by the Company or an Affiliate.
"EXCLUDED TRANSACTION": A Covered Transaction in which
(i) the shares of common stock of the Company or the voting securities
of the Company entitled to vote generally in the election of
directors are acquired directly from the Company; or
(ii) the shares of common stock of the Company or the voting securities
of the Company entitled to vote generally in the election of
directors are acquired by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company; or
(iii) (a) the beneficial owners of the outstanding shares of common stock
of the Company, and of the securities of the Company entitled to
vote generally in the election of directors, immediately prior to
such transaction beneficially own, directly or indirectly, in
substantially the same proportions immediately following such
transaction more than 50% of the outstanding shares of common stock
and of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors
of the
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corporation (including, without limitation, a corporation which as
a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) resulting from such transaction
excluding such ownership as existed prior to the transaction and
(b) at least a majority of the members of the board of directors of
the corporation resulting from such transaction were members of the
board of directors at the time of the execution of the initial
agreement, or of the action of the Board, authorizing such
transaction.
"ISO": A Stock Option intended to be an "incentive stock option" within the
meaning of Section 422 of the Code.
"PARTICIPANT": An Employee, director or other person providing services to
the Company or its Affiliates who is granted an Award under the Plan.
"PERFORMANCE AWARD": An Award subject to Performance Criteria.
"PERFORMANCE CRITERIA": Specified criteria the satisfaction of which is a
condition for the exercisability, vesting or full enjoyment of an Award. For
purposes of Performance Awards that are intended to qualify for the
performance-based compensation exception under Section 162(m), a Performance
Criterion shall mean an objectively determinable measure of performance
relating to any of the following (determined either on a consolidated basis
or, as the context permits, on a divisional, subsidiary, line of business,
project or geographical basis or in combinations thereof): (i) sales;
revenues; assets; liabilities; costs; expenses; earnings before or after
deduction for all or any portion of interest, taxes, depreciation,
amortization or other items, whether or not on a continuing operations or an
aggregate or per share basis; return on equity, investment, capital or
assets; one or more operating ratios; borrowing levels, leverage ratios or
credit rating; market share; capital expenditures; cash flow; working
capital requirements; stock price; stockholder return; sales, contribution
or gross margin, of particular products or services; particular operating or
financial ratios; customer acquisition, expansion and retention; or any
combination of the foregoing; or (ii) acquisitions and divestitures (in
whole or in part); joint ventures and strategic alliances; spin-offs,
split-ups and the like; reorganizations; recapitalizations, restructurings,
financings (issuance of debt or equity) and refinancings; transactions that
would constitute a change of control; or any combination of the foregoing. A
Performance Criterion measure and targets with respect thereto determined by
the Administrator need not be based upon an increase, a positive or improved
result or avoidance of loss.
"PLAN": The Charles River Laboratories International, Inc. 2000 Incentive
Plan as from time to time amended and in effect.
"RESTRICTED STOCK": An Award of Stock subject to restrictions requiring that
such Stock be redelivered to the Company if specified conditions are not
satisfied.
"SECTION 162(m)": Section 162(m) of the Code.
"SARS": Rights entitling the holder upon exercise to receive cash or Stock,
as the Administrator determines, equal to a function (determined by the
Administrator using such factors as it deems appropriate) of the amount by
which the Stock has appreciated in value since the date of the Award.
"STOCK": Common Stock of the Company.
"STOCK OPTIONS": Options entitling the recipient to acquire shares of Stock
upon payment of the exercise price.
"UNRESTRICTED STOCK": An Award of Stock not subject to any restrictions
under the Plan.
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2061-PS-01
DETACH HERE
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
251 BALLARDVALE STREET
WILMINGTON, MA 01887
(978) 658-6000
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 2001
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS
OF CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
The undersigned, revoking any previous proxies relating to these shares, hereby
acknowledges receipt of the Notice and Proxy Statement in connection with the
Annual Meeting of Stockholders to be held at 10:00 a.m. on Tuesday, May 8, 2001
at the Lanam Club, 260 North Main Street, Andover, Massachusetts and hereby
appoints James C. Foster and Thomas F. Ackerman, and each of them (with full
power to act alone), the attorneys and proxies of the undersigned, with power of
substitution to each, to vote all shares of the Common Stock of Charles River
Laboratories International, Inc. registered in the name provided herein which
the undersigned is entitled to vote at the 2001 Annual Meeting of Stockholders,
and at any adjournments thereof, with all the powers the undersigned would have
if personally present. Without limiting the general authorization hereby given,
said proxies are, and each of them is, instructed to vote or act as follows on
the proposals set forth in said Proxy.
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SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
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DETACH HERE
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.
THIS PROXY WHEN EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO
DIRECTION IS MADE THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR
PROPOSALS 2 AND 3.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
FOR AGAINST ABSTAIN
1. Election of Directors (or if any nominee is not available 2. Proposal to increase by 2,600,000
for election, such substitute as the Board of Directors the aggregate number of shares that / / / / / /
may designate): may be delivered in satisfaction of
NOMINEES: (01) James C. Foster, (02) Robert Cawthorn, awards under the 2000 Incentive Plan.
(03) Stephen D. Chubb, (04) Thompson Dean,
(05) Stephen C. McCluski, (06) Reid S. Perper,
(07) Douglas E. Rogers, (08) Samuel O. Thier,
(09) William Waltrip, (10) Henry Wendt III
FOR WITHHOLD
ALL / / / / VOTE FROM ALL
NOMINEES NOMINEES FOR AGAINST ABSTAIN
3. Proposal to ratify the appointment
of PricewaterhouseCoopers LLP as the / / / / / /
Company's independent public
accountants for the fiscal year ending
December 29, 2001.
FOR ALL
NOMINEES / /
EXCEPT
------------------------------------------
To withhold authority for any nominee mark "FOR ALL
NOMINEES EXCEPT" and write the nominee's number above.
The Board of Directors recommends a vote FOR Proposals 1, 2 and 3.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
Please sign exactly as name(s) appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
Signature:___________________________ Date:______________ Signature:___________________________ Date:_____________
