Joint Venture Agreement - Ancillary Agts

EXHIBIT 10.6


JOINT VENTURE AGREEMENT


JOINT VENTURE AGREEMENT


THIS AGREEMENT, entered into this 24th day of June, 1981, between:


AJINOMOTO CO., INC., a Japanese corporation having its principal place of business at 5-8, Kyobashi 1-chome, Chuo-ku, Tokyo, Japan (hereinafter referred to as "AJI")


and


THE CHARLES RIVER BREEDING LABORATORIES, INC., a Delaware corporation having its principal place of business at 251 Ballardvale Street, Wilmington, Massachusetts, U.S.A. (hereinafter referred to as "CRBL").


W I T N E S S E T H


WHEREAS, CRBL has purchased from AJI four hundred thousand (400,000) shares of Common Stock of CHARLES RIVER JAPAN, INC. (hereinafter referred to as "CRJ") which shares represent fifty percent (50%) of the total outstanding shares of CRJ; and


WHEREAS, AJI and CRBL now each own fifty percent (50%,) of the outstanding shares of CRJ and AJI and CRBL each wish to continue to own fifty percent (50%) of such shares; and


WHEREAS, AJI and CRBL wish to outline the terms of their joint management of CRJ;


NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and premises hereinafter set forth, the parties hereto agree as follows:


ARTICLE I


The term "TERRITORY" shall mean any and all the countries listed in Schedule A attached hereto and made a part hereof.


ARTICLE II
DIRECTORS AND MANAGEMENT


(1) CRJ has a Board of Directors consisting of ten directors. The parties hereto agree that they will cast their votes as shareholders of CRJ in such manner that the Board of Directors shall consist of an equal number of persons designated by AJI and CRBL.


(2) No remuneration shall be paid to directors of CRJ except those who devote all their activities to the benefit of CRJ. Remuneration to be paid to the full-time directors shall be fixed by agreement of both parties.


(3) The parties hereto agree that they will cause their representatives on the Board of Directors of CRJ to appoint a President who shall be designated by AJI and accepted by CRBL. The President shall be a Registered Representative Director.


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(4) The parties hereto agree that, at the request of CRBL, they will cause their representatives on the Board of Directors of CRJ to appoint a Senior Managing Director who shall be designated by CRBL and accepted by AJI; that AJI and CRBL shall determine after mutual consultation the level of compensation CRJ shall accord such person; provided, however, that CRBL may accord such person an annual bonus in such amount as it shall determine from time to time; and that, in addition to the President, the Senior Managing Director shall be a Registered Representative Director. In the event CRBL does not request the appointment of such a Senior Managing Director and CRJ is therefore not required to compensate such a person, CRJ shall bear all reasonable expenses associated with CRBL sending a director from its offices in the United States to attend meetings of the Board of Directors in Japan, including without limitation travel, meals and lodging expenses.


(5) The parties hereto agree that they will vote their shares of CRJ in such manner that at all times during the effective period of this Agreement there shall be two statutory auditors (Kansayaku) of CRJ; one to be a person designated by AJI and the other to be a person designated by CRBL.


(6) The parties hereto agree that Arthur Andersen & Co. and Tetsuzo Ota Co. shall be the independent public accountants of CRJ and together shall examine and audit its


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accounting books and records annually at the end of its fiscal year and shall at the expense of CRJ prepare audit reports in English and Japanese and shall furnish them to the parties hereto. In addition, CRBL may at its own expense designate Arthur Andersen & Co., or such other independent auditor as it may from time to time designate, to audit the books and records of CRJ or perform such lesser procedure as may be required for the period ending October 31 each year in order to provide the information necessary or appropriate for the independent accountants of CRBL to express an opinion on the financial statements of CRBL, and at such time CRJ shall cooperate fully with such auditors of CRBL.


CRJ shall keep complete books of account and records in accordance with sound accounting practices employing standards, procedures and forms conforming to international practice as approved by Arthur Andersen & Co. and T. Ota & Co.
(7) Minutes of all meetings of shareholders and of all meetings of the Board of Directors shall be kept in both Japanese and English. At any meeting of shareholders or of the Board of Directors at which a non-Japanese speaking person is expected to be present, CRJ shall, at its own expense, provide an official interpreter or interpreters.


(8) In addition to such an interpreter or interpreters as set forth in Paragraph (7) above, any shareholder and director shall have the right to use its own interpreter at


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its own expense at any meeting of shareholders and of the Board of Directors.


(9) All regular and special reports relating to the financial and technical operating results of CRJ, either submitted to the Board of Directors or listed in Schedule B attached hereto and made a part hereof, shall be prepared in both Japanese and English.


ARTICLE III
ACTIONS BY THE BOARD OF DIRECTORS


(1) The Board of Directors of CRJ has responsibility for and control over the operation of CRJ as well as the establishment of the general plans of operation in accordance with the Articles of Incorporation of CRJ. One more than half of the total number of directors shall constitute a quorum for the transaction of business and the affirmative vote of one more than half of the total number of directors shall be the act of the Board of Directors at a meeting at which a quorum is present.


(2) The following matters require specific action by the Board of Directors and the actions of any individual officer or director, including a Registered Representative Director, shall not bind CRJ with respect to these matters:


--decide capital and operating budgets;


--make loans, guarantee obligations, or borrow funds in an amount in
excess of twenty million yen;


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--sell, lease, encumber or otherwise dispose of all or substantially
all assets;


--terminate a line of products or business or undertake a new line of
products or business;


--make any investment or capital expenditure, or series of related
investments or capital expenditures on any single project, for
amounts not included in the capital or operating budget in excess of
twenty million yen;


--issue or redeem stock;


--submit a proposal for distribution of dividends to the
shareholders;


--take any action that may adversely affect the financial condition
of the company;


--matters not in the ordinary course of business; and


--any other matters which the Board of Directors may determine
require action by the Board of Directors.


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ARTICLE IV
PRE-EMPTIVE RIGHTS


Upon recapitalization of CRJ or the issuance of newly authorized capital stock of CRJ in excess of the initial authorized capital or the issuance of any of the unissued authorized capital stock, AJI and CRBL shall have pre-emptive rights to acquire such number of newly issued shares as shall be consistent with their respective proportionate ownership of the capital stock of CRJ.


ARTICLE V
SALE OR TRANSFER OR SHARES


So long as both CRBL and AJI own any shares of CRJ, each shall have the right of first refusal with respect to the shares owned by the other and each shall be obligated as follows. Such right of first refusal shall be exercised in accordance with the following procedures:


(1) A shareholder desiring to sell or transfer any or all of its shares of CRJ (the Offering Shareholder) shall first give written notice to the other shareholder of its desire to sell or transfer the shares of CRJ, stating the name of the proposed transferee, the number of shares to be sold or transferred and the price, terms and conditions of the proposed sale or transfer.


(2) The other shareholder shall then have the option, to be exercised within ninety (90) days from the receipt of notice from the Offering Shareholder, to purchase all of the


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offered shares at the price and on the terms and conditions specified in the notice given by the Offering Shareholder.


(3) If the offered shares are not purchased by the other shareholder, these shares may be sold or transferred by the Offering Shareholder at any time within one hundred eighty (180) days from the date of the notice referred to in paragraph (1) above to the transferee specified in such notice at a price which is no lower, and on terms and conditions no more favorable, than the price and terms and conditions specified therein.


(4) It is understood and agreed that notwithstanding the foregoing provisions of this Article V, either CRBL or AJI may sell or transfer all of its shares of CRJ (but not in part) to a corporation in which such party holds all of the total outstanding voting shares without the consent of the other party or without taking the procedures set forth above, provided that the transferee agrees to be bound by all of the provisions of this Agreement as if it had been the original party hereto, and that the transferor shall remain responsible for the performance of any of the obligations hereunder.


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ARTICLE VI
FINANCIAL RESPONSIBILITIES


(1) Either of the parties hereto shall assume financial responsibility to CRJ in proportion to its stockholding which shall include direct loans to CRJ and guarantees in respect of CRJ borrowings, unless otherwise determined by the Board of Directors, but which shall not include reduction of royalties payable by CRJ under the License and Technical Assistance Agreement and the Tradename and Trademark License Agreement dated March 24, 1978 among CRBL, CRJ and AJI barring the case of specific agreement in writing which may otherwise be made among the parties.


(2) AJI agrees with CRBL that during and with respect to the two (2) fiscal years commencing with the 1981 fiscal year, the burden of wage cost of CRJ's employees dispatched from AJI (such wage cost is hereinafter referred to as the "Wage Cost") shall be divided between CRJ and AJI as follows:


CRJ AJI 1981 Fiscal Year (Commencing on April 1, 1981 and ending on March 31, 1982) 70% 30%


1982 Fiscal Year (Commencing on April 1, 1982 and ending on March 31, 1983) 75% 25%


AJI further agrees that with respect to 1983 and any subsequent fiscal year, it shall continue to give to CRJ


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financial assistance by means of assuming twenty-five percent (25%) of the Wage Cost, provided that if CRJ's pretax profit as determined in accordance with generally accepted accounting principles applied consistently and as reflected in audited financial statements of CRJ (calculated on the basis of CRJ's burden of the Wage Cost in that fiscal year) attains ten percent (10%) of gross sales in the 1982 fiscal year or in any subsequent fiscal year, then AJI's burden of the Wage Cost during that fiscal year which follows any fiscal year in which ten percent (10%) pretax profit is attained shall be reduced by five percent (5%) of the total Wage Cost from the percentage applied in the immediately preceding year; such financial assistance by AJI at a percentage reduced from time to time by each occurrence of attainment of ten percent (10%) pretax profit by CRJ to continue until AJI's burden of the Wage Cost becomes zero by recurrence of attainment of ten percent (10%) pretax profit by CRJ and consequential reductions of AJI's burden of the Wage Cost as provided above.


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ARTICLE VII
NONCOMPETITION


In order to foster and promote the attainment of the mutual aims and objectives of AJI and CRBL with respect to CRJ, AJI and CRBL agree that during the term of this Agreement and for a period of two (2) years after this Agreement is terminated in accordance with Article X hereof or after either party acquires all of the shares of CRJ, AJI and CRBL shall not, directly or indirectly (through a firm, joint venture, company or business owned or controlled by it or otherwise), except through CRJ, engage in the business in the TERRITORY, as defined in Schedule A attached, to produce laboratory animals and, or feed for laboratory animals which are reasonably competitive with products sold by CRJ and shall not acquire in the TERRITORY an interest in any firm, company or business organization producing, selling, promoting or dealing in, laboratory animals and/or feed for laboratory animals which are reasonably competitive with products sold by CRJ. Notwithstanding the foregoing, if this Agreement shall be terminated pursuant to Paragraph (2) of Article X, the terminating party shall not be subject to any restriction provided above after the termination.


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ARTICLE VIII
ASSIGNABILITY


Except as otherwise expressly provided in this Agreement, neither this Agreement nor any rights under this Agreement shall be assignable or transferable by AJI or CRBL without the prior written consent of the other; provided, however, that in the case of any transfer of rights or obligations under this Agreement pursuant to a merger or consolidation of AJI or CRBL, the other party shall not unreasonably withhold its consent to such transfer if the beneficial ownership and management of the proposed transferee and proposed transferor are and will be substantially the same. Any assignment or transfer under this Article shall become effective only after necessary authorization by the Government of Japan shall have been obtained.


ARTICLE IX
ARBITRATION


(1) All disputes, controversies, or differences which may arise between the parties, out of or in relation to or in connection with this Agreement, or for the breach thereof, shall be finally settled by arbitration pursuant to the Japan-American Trade Arbitration Agreement, of September 16, 1952, by which each party hereto is bound.


(2) Such arbitration shall be held in the City of Boston, Massachusetts if the demand for arbitration is


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received by CRBL and in Tokyo if the demand is received by AJI.


(3) Nothing herein contained shall be construed as preventing either party hereto from instituting legal action against the other for a temporary injunction, pending final settlement of any dispute, difference or question by arbitration.


(4) Notwithstanding Paragraph (1) of this Article, in the event that CRJ should become deadlocked in the management of the corporate affairs for any reason whatsoever, or that the managing or disposing of CRJ property should be grossly improper and the existence of CRJ should be thereby in danger, the parties hereto shall not be precluded from instituting a lawsuit for dissolution of CRJ in the competent court in Japan in accordance with Paragraph 1 of Article 406-2 of the Commercial Code of Japan.


ARTICLE X
TERMINATION


(1) Either party hereto shall have the right to terminate this Agreement forthwith by giving the other written notice to that effect upon the occurrence of any of the following events to CRJ:


(a) Termination of business by unanimous decision of the shareholders;


(b) Dissolution or liquidation;


(c) Adjudication of bankruptcy;


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(d) The appointment of any trustee, receiver or liquidator for
substantially all of the assets of the business of CRJ;


(e) The attachment, sequestration, execution or seizure of
substantially all of the assets of CRJ, which attachment,
sequestration, execution or seizure is not released within thirty
(30) days from the institution thereof.


(2) Upon default by either party in the performance of any obligation hereunder to be performed by such party, the other party may give notice in writing to the party in default specifying the thing or matter in default. Upon receipt of such notice, the receiving party may elect either to cure the default within one (1) month or sooner if practicable following the giving of such notice or may notify the other party of its intention to seek arbitration pursuant to Article IX of this Agreement with respect to the alleged default. In the event the arbitration proceedings conclude that such party is in default, that party has one month to cure the default. At the conclusion of either one-month period, if the default has not been cured, the party first giving notice may give further written notice to such other party terminating this Agreement, in which event this Agreement shall terminate on the date specified in such further notice. Such termination right shall be in addition to and not in substitution for any other remedies that may


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be available to the party serving such notice against the party in default, and any termination in the exercise of such right shall not relieve either party from any obligations accrued to the date of such termination or relieve the party in default from liability in damages to the other for breach of this Agreement. Waiver by either party of a single default or a succession of defaults shall not deprive such party of any right to terminate this Agreement, or to have recourse to arbitration, arising by reason of any subsequent default.


(3) Any delays or failure by either party hereto in the performance hereunder shall be excused if and to the extent caused by occurrences beyond such party's control, including, but not limited to, acts of God, strikes or other labor disturbances, war, sabotage, and any other cause or causes, whether similar or dissimilar to those herein specified which cannot be controlled by such party.


(4) In the event that further lawful performance of this Agreement or any part hereof shall be rendered impossible by the entry of a final judgment or final order in an antitrust or trade regulation case by any court, commission or agency having jurisdiction over either party, or a parent company of either party, whether or not the entry of such judgment shall be consented to by such party or by such parent company, the parties covenant and agree, that forthwith upon the entry of such final judgment or


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final order, they will exert their best efforts to agree on an amendment or amendments to this Agreement or on modifications of their practices hereunder in such manner as will fully comply with said final judgment or final order. In the event that either party shall receive a formal charge, indictment, or complaint which might lead to the entry of such a final judgment or final order, such party shall promptly notify the other party of such fact and afford an opportunity to such other party for consultation regarding the matter. In the event that the parties are unable, within a period of six (6) months after written notice by either party to the other of such impossibility of lawful performance, to reach such agreement, either party may terminate this Agreement by written notice to the other party effective as of the expiration of such six (6) month period. All rights or obligations of either party under this Agreement or the portion thereof adjudged invalid by such final judgment or final order shall be suspended upon the entry thereof pending negotiations between the parties as herein provided to remedy such invalidity.


(5) Upon termination of this Agreement pursuant to Paragraph (1) or (4) of this Article, CRJ shall, unless the parties hereto otherwise agree in writing, be dissolved and liquidated and the net proceeds thereof divided and distributed among its shareholders as promptly and reasonably as possible in accordance with respective stock


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interests in CRJ. Nothing herein, however, shall be deemed to require the dissolution and/or liquidation of CRJ in the event that either party should acquire all of the shares of CRJ.


(6) Upon termination of this Agreement pursuant to Paragraph (2) of this Article, the party terminating this Agreement shall have the option either


(a) to demand dissolution and liquidation of CRJ; or


(b) to purchase all of the shares of CRJ then held by the other party
at the price per share equal to the then book value per share of
CRJ.


The parties agree that upon the exercise of either option, all obligations of the parties under this Agreement, other than those arising from the ordinary course of business dealings among CRJ, AJI and CRBL, shall terminate.


ARTICLE XI
TAXES


(1) All income taxes required by the laws of Japan to be withheld from any payment to be made to CRBL pursuant to this Agreement shall be for the account of CRBL.


(2) AJI agrees to furnish or to cause CRJ to furnish to CRBL official tax receipts or other evidence issued by the Japanese tax authorities together with English translation thereof sufficient to enable CRBL to establish payment of the taxes described in Paragraph (1) above.


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ARTICLE XII
EXPENSES


Except as otherwise provided in this Agreement, each party hereto shall bear its own expenses relating to this Agreement and the performance thereof.


ARTICLE XIII
DISCLAIMER


Neither of the parties hereto, nor CRJ shall be deemed to represent the other party or to have the authority to represent the other party or its subsidiaries in any way whatsoever except as specifically agreed to by such other party in writing. This Agreement shall not constitute either of the parties hereto or CRJ to be the agent or representative of the party in any way whatsoever.


ARTICLE XIV
ARTICLE TITLES


The headings to the articles of this Agreement have been inserted only to facilitate reference and shall not be taken as being of any significance whatsoever in the construction or interpretation of this Agreement.


ARTICLE XV
SEVERABILITY


Subject to the provisions of Paragraph (4) of Article X, if any term or provision of this Agreement shall hereafter be finally determined to be not enforceable or void as


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against public policy or otherwise legally unenforceable, the same shall be severable from and eliminated from the balance of this Agreement and the balance of this Agreement shall continue in force as the Agreement of the parties notwithstanding that determination, unless such unenforceable terms or provisions shall be so significant as to materially affect the parties' expectations regarding this Agreement.


ARTICLE XVI
MULTIPLE ORIGINALS


This Agreement shall be executed in four counterparts, two being in the English language and two being in the Japanese language, each of which counterparts shall be deemed an original. In the event of any discrepancy or difference between the English and Japanese versions, the English version shall prevail in all respects.


ARTICLE XVII
NOTICES


(1) All notices, requests, demands and other communications under this Agreement or in connection herewith shall be given to or made upon the respective parties as follows:


TO: AJINOMOTO CO., INC.
President
5-8, Kyobashi, 1-chome
Chuo-ku, Tokyo
Japan


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TO: THE CHARLES RIVER BREEDING LABORATORIES, INC.
President
251 Ballardvale Street
Wilmington, Massachusetts 01887
U.S.A.


(2) All notices, requests, demands and other communications given or made in accordance with the provisions of this Agreement shall be in writing, and shall be telexed and later confirmed by registered airmail. The communication shall be deemed to be given or made when telex is received or when mail is deposited in the United States or Japanese mail, as the case may be, postage prepaid.


(3) Any party may alter its address above set forth by notice in writing to the other party hereto, and such notice shall be considered to have been given ten (10) days after the airmailing thereof.


ARTICLE XVIII
GOVERNING LAW


This Agreement shall be governed by and interpreted in accordance with the laws of Japan.


ARTICLE XIX
MODIFICATION OF AGREEMENT


No oral explanation or oral information by either party hereto shall alter the meaning or interpretation of this Agreement. No modification or amendment of the terms of this Agreement or any Exhibit attached hereto, and no waiver of any of the terms or conditions hereof or thereof shall be


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valid unless made in writing duly executed by the parties hereto or thereto, and further unless made after obtaining validation or approval of the Japanese Government if such validation or approval is required by Japanese law for such writing at the time the parties execute it.


ARTICLE XX
ENTIRE AGREEMENT


This Agreement (together with the Schedules annexed hereto which are hereby incorporated by reference) constitutes the entire agreement of the parties and supersedes any prior agreements or understandings with the exception of the License and Technical Assistance Agreement and Tradename and Trademark License Agreement among CRBL, CRJ and AJI dated March 24, 1978.


IN WITNESS WHEREOF, the par ...