UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
LIFE SCIENCES RESEARCH, INC.
- --------------------------------------------------------------------------------
(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:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
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):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
________________________________________________________________________________
[_] 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:
________________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
3) Filing Party:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
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LIFE SCIENCES RESEARCH, INC.
METTLERS ROAD, P.O. BOX 2360
EAST MILLSTONE, NJ 08875
(732) 649-9961
May 10, 2002
Dear Stockholder:
The directors and officers of Life Sciences Research, Inc. cordially invite
you to attend the Annual Meeting of Stockholders of the Company to be held on
June 11, 2002 at 10:00 a.m., local time. The meeting will be held at 53 St.,
Urbanizacion Obarrio, Panama, Republic of Panama. Notice of the Annual Meeting,
the Proxy Statement and a proxy card are enclosed.
At this year's meeting you will be asked to (i) elect directors, (ii)
approve the grant of warrants, and (iii) transact such other business as may
properly come before the meeting.
You are urged to mark, sign, date and mail the enclosed Proxy immediately.
By mailing your Proxy now you will not be precluded from attending the meeting.
Your Proxy is revocable, and in the event you find it convenient to attend the
meeting, you may, if you wish, withdraw your Proxy and vote in person.
Very truly yours,
/s/ Andrew H. Baker
Andrew H. Baker
Chairman of the Board
and Chief Executive Officer
===============================================================================
LIFE SCIENCES RESEARCH, INC.
METTLERS ROAD, P.O. BOX 2360
EAST MILLSTONE, NJ 08875
(732) 649-9961
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 11, 2002
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Life Sciences Research, Inc., a Maryland corporation (the
"Company"), will be held at 53 St., Urbanizacion Obarrio, Panama, Republic of
Panama on June 11, 2002 at 10:00 a.m., local time, for the purpose of
considering and voting on the following matters described in the attached Proxy
Statement:
1. Election of directors;
2. Approval of the issuance to Focused Healthcare Partners, LLC ("FHP") of
warrants to acquire 410,914 shares of the Company's voting common stock;
and
3. Transacting such other business as may properly come before the Meeting or
any adjournment thereof.
Holders of record of voting common stock at the close of business on May 1,
2002 (the "Record Date") shall be entitled to notice of and to vote at the
Meeting or any adjournment thereof. You are invited to attend the Meeting in
person. Whether or not you intend to attend the Meeting, please mark, sign, date
and return the enclosed Proxy to make certain that your shares are represented
at the Meeting. Stockholders who attend the Meeting may vote their shares
personally, even though they have previously returned Proxies.
Your attention is invited to the attached Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS:
/s/Richard Michaelson
Richard Michaelson
Secretary and Chief Financial Officer
Dated: May 10, 2002
===============================================================================
LIFE SCIENCES RESEARCH, INC.
METTLERS ROAD, P.O. BOX 2360
EAST MILLSTONE, NJ 08875
(732) 649-9961
PROXY STATEMENT
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement is furnished in connection with the solicitation of
proxies (the "Proxies") by and on behalf of the Board of Directors of Life
Sciences Research, Inc., a Maryland corporation ("LSR" or the "Company"), for
its Annual Meeting of Stockholders (the "Meeting") to be held at 10:00 a.m.,
local time, on June 11, 2002 at 53 St., Urbanizacion Obarrio, Panama, Republic
of Panama, or at any adjournment thereof. The Company anticipates that this
Proxy Statement and the accompanying form of Proxy will be first mailed or given
to the stockholders of the Company on or about May 10, 2002.
The cost of soliciting Proxies will be borne by the Company. Officers and
regular employees of the Company, without additional compensation, may solicit
Proxies by further mailing, telephone, telegraph, facsimile transmission or by
personal conversations. The Company will, upon request, reimburse banks,
brokerage firms, nominees, fiduciaries and other custodians for their expenses
in forwarding solicitation material to the beneficial owners of the Company's
voting common stock, par value $.01 per share (the "Common Stock").
Any Proxy that is properly submitted to the Company may be revoked by the
person giving it at any time before it has been voted. Proxies may be revoked by
(i) delivering to the Secretary of the Company at or before the Meeting a
written notice of revocation bearing a later date than the Proxy, (ii) duly
executing a subsequent Proxy relating to the same shares of LSR Common Stock and
delivering it to the Secretary of the Company at or before the Meeting or (iii)
attending the Meeting and voting in person (although attendance at the Meeting
will not in and of itself constitute revocation of a Proxy).
INFORMATION ABOUT VOTING
The persons named in the Proxies will vote the Proxies in accordance with
the instructions specified therein. Unless instructed to the contrary in a Proxy
that is returned by a stockholder of the Company, the Proxy will be voted FOR
the persons named below in the election of the Company's Board of Directors and
FOR the proposed issuance of warrants described in Proposal 2. The persons named
in the Proxy will exercise their judgment with respect to other matters which
may properly come before the Meeting. The Company is not currently aware of any
other matters to come before the Meeting.
If you participate in the Huntingdon Life Sciences Inc. Savings and
Investment Plan (the Company's "401(k) Plan"), you may vote shares of Common
Stock of the Company credited to your 401(k) account by instructing the trustee
of the 401(k) Plan, pursuant to the separate 401(k) Plan instruction card being
mailed with this proxy statement to plan participants. You should complete and
return the 401(k) Plan instruction card to Mellon Shareholder Services LLC, the
proxy tabulators, at the address set forth on that card. The trustee will vote
your shares in accordance with your duly executed instructions received by June
3, 2002. If you do not send instructions, the shares credited to your account
will be voted by the trustee in the same proportion that it votes share
equivalents for which it did receive timely instructions.
You may also revoke previously given voting instructions by June 1, 2002 by
filing with the proxy solicitor either a written notice of revocation or a
properly completed and signed voting 401(k) Plan instruction card bearing a
later date.
Holders of a majority of the shares of Common Stock of the Company entitled
to vote, present in person or represented by proxy, constitute a quorum at the
Meeting. Abstentions are counted as present for purposes of establishing the
quorum necessary for the Meeting to proceed. Likewise, if a broker indicates on
the proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter (a "broker non-vote"), such broker non-vote is
counted as present for purposes of establishing the quorum necessary for the
Meeting to proceed.
Directors will be elected by a favorable vote of a plurality of the shares
of Common Stock present and entitled to vote, in person or by proxy, at the
Meeting. Accordingly, abstentions and broker non-votes as to the election of
directors will not affect the election of the candidates receiving the plurality
of votes. All other matters to come before the Meeting require the approval of a
majority of the shares of Common Stock voted, in person or by proxy, at the
Meeting, provided a quorum is present. For purposes of the vote on such matters,
abstentions and broker non-votes will not be counted as votes cast and will have
no effect on the result of the vote, although they will count toward the
presence of a quorum.
SHARES OUTSTANDING AND VOTING RIGHTS
Holders of record of Common Stock at the close of business on May 1, 2002
(the "Record Date"), will be entitled to vote at the Meeting. The holders of the
shares of LSR Common Stock are entitled to one vote per share. Such shares may
not be voted cumulatively. As of the Record Date, there were 11,032,578 shares
of LSR Common Stock issued and outstanding and entitled to vote. Holders of the
Company's Non-Voting Common Stock, par value $.01 per share (the "Non-Voting
Stock"), will not be entitled to vote on any matters presented at the Meeting.
The presence in person or by Proxy of the holders of at least a majority of the
outstanding shares of LSR Common Stock is necessary to constitute a quorum at
the Meeting. The directors and executive officers of the Company as a group as
of the Record Date (8 persons), who as of the Record Date beneficially owned of
record in the aggregate 4,456,037 (approximately 39.2%) of the outstanding
shares of LSR Common Stock, have indicated that they intend to vote all such
shares FOR all of the proposals set forth herein, (except that Andrew Baker, The
Company's Chairman and CEO, will abstain from voting with respect to Proposal
2). See "Proposal 2 - Approval of Warrants".
PROPOSAL 1
ELECTION OF DIRECTORS
Nominees to each of the five positions on the Board of Directors of the
Company are to be elected at the Meeting. If elected, each will serve for one
year or until his successor is elected and qualified. Each such nominee is a
current director. The Company does not contemplate that any of the persons named
below will be unable or will decline to serve; however, if any such nominee is
unable or declines to serve, the persons named in the accompanying Proxy will
vote for a substitute, or substitutes, in their discretion. Two current
directors, Frank Bonner and Julian Griffiths, will not stand for re-election to
the Board.
Listed below are the names and ages of the nominees, the year in which each
first became a director and their principal occupations for at least the past
five years. All directors became directors of LSR on January 10, 2002 when LSR's
exchange offer (the "Exchange Offer") to acquire all of the outstanding equity
securities of Huntingdon Life Sciences Group plc, an English public limited
company ("Huntingdon or "HLS"") became unconditional.
Name and Age Principal Occupation
Andrew H. Baker - 54 Andrew Baker was appointed to the
Huntingdon Board as Executive Chairman in September
1998 in connection with his leadership of a rescue plan
for Huntingdon. He became Chairman and CEO of LSR on
January 10, 2002. He is a chartered accountant and has
operating experience in numerous companies involved in
the delivery of healthcare ancillary services. He spent
18 years until 1992 with Corning Incorporated
("Corning") and held the posts of President and CEO of
MetPath Inc., Corning's clinical laboratory subsidiary,
from 1985 to 1989. He became President of Corning
Laboratory Services Inc. in 1989, which at the time
controlled MetPath Inc. (now trading as Quest
Diagnostics Inc.), and Hazleton Corporation, G. H.
Besselaar Associates and SciCor Inc., (all three now
trading as Covance Inc). Since leaving Corning in 1992,
Mr. Baker has focused on investing in and developing
companies in the healthcare sector including Unilab
Corporation, a clinical laboratory services provider in
California where Mr. Baker served as CEO from 1992 to
1996. Mr. Baker also started Focused Healthcare
Partners ("FHP") in 1997 to invest in
healthcare-related entities. See "Proposal 2 - Approval
of Warrants" and "Certain Relationships and
Transactions with Related Persons".
GaborBalthazar - 60 Gabor Balthazar was appointed to the
Huntingdon Board as the Senior Independent
Non-Executive Director in March 2000. He has been
active in international marketing and management
consulting for almost 30 years. Mr. Balthazar sat on
Unilab's board from 1992 until November 1999. From 1985
to 1997 Mr. Balthazar served as a consultant to
Frankfurt Consult, the merger/acquisition subsidiary of
BHF-Bank, Frankfurt, Germany and to Unilabs Holdings
SA, a Swiss clinical laboratory testing holding
company, from 1987 to 1992. Mr. Balthazar also serves
as a director of Decora Industries, Inc. He is a
graduate of the Columbia Law School in New York City.
John Caldwell - 55 John Caldwell, B.Pharm., PhD, D.Sc.,
C.Biol., F.I.Biol., was appointed to the Huntingdon
Board as an Independent Non-Executive Director in
December 1997. He is Professor of Biochemical
Toxicology at, and Head of the Division of Biomedical
Sciences of, the Imperial College School of Medicine in
London, England. His distinguished career includes
membership of the UK Committee on Safety of Medicines,
Ministry of Agriculture fisheries and Food Steering
Group for Food Surveillance, permanent membership of
the International Scientific Committee of the
International Symposia on Chiral Discrimination,
Honorary Membership of the Royal College of Physicians,
Representative on the Court of the University of Surrey
for the British Pharmacological Society and he is a
Past President of the International Society for the
Study of Xenobiotics. He is also a member of the
Institute of Directors. Professor Caldwell has
extensive involvement as a consultant with
pharmaceutical companies in Europe, North America and
Japan.
BrianCass - 53 Brian Cass, FCMA, was appointed to the
Huntingdon Board as Managing Director/Chief Operating
Officer in September 1998 and became President and
Managing Director of LSR on January 10, 2002. Prior to
joining Huntingdon he was a Vice President of Covance
Inc. and Managing Director of Covance Laboratories Ltd
(previously Hazleton Europe Ltd) for nearly 12 years,
having joined the company in 1979 as Controller. Mr.
Cass worked at Huntingdon Research Centre between 1972
and 1974 and has previous experience with other
companies in the electronics and heavy plant
industries. He has also held directorships with North
Yorkshire Training & Enterprise Council Ltd and
Business Link North Yorkshire Ltd.
Kirby L. Cramer - 65 Kirby Cramer was appointed to the
Huntingdon Board as an Executive Director in September
1999. He served as Chief Executive Officer of Hazleton
Laboratories Corporation from 1968 and led it to become
the world's largest provider of pre-clinical testing
services when it was sold to Corning Inc. in 1987.
Following the acquisition he served as Chairman of the
Board of Directors of Hazleton from 1987 through 1991.
Hazleton Laboratories now form the pre-clinical segment
of Covance Inc. Mr. Cramer also currently serves as a
director of D. J. Orthopedics, Immunex Corp., SonoSite
Inc., Array BioPharma, Commerce Bancorporation, Landec
Corporation, Northwestern Trust Company and Corus
Pharma. Previously Mr. Cramer was a director of ATL
Ultrasound Inc., Unilab Corporation, Pharmaceutical
Product Development Inc., and Kirschner Medical.
Frank Bonner and Julian Griffiths have each served as a director of LSR
from January 10, 2002 but will not stand for reelection. Accordingly, they will
cease service as directors effective June 11, 2002. Walter Stapfer served as the
sole director and President of LSR from its formation on July 19, 2001 through
his resignation on January 10, 2002, the date on which the Exchange Offer became
unconditional and the then-current directors of Huntingdon became the full Board
of Directors of LSR.
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS AND CERTAIN BENEFICIAL OWNERS
Ownership of Management and Directors
The following table sets forth certain information known to LSR regarding
the beneficial ownership of LSR Common Stock as of the Record Date by: (i) each
of LSR's directors and Named Executive Officers (see "Executive Compensation"
for definition of Named Executive Officers) and (ii) all directors and executive
officers as a group. For purposes of this table, a person or group of persons is
deemed to have "beneficial ownership" of any shares as of a given date which
such person has the right to acquire within 60 days after such date. For
purposes of computing the percentage of outstanding shares held by each person
or group of persons named below on a given date, any security which such person
or persons have the right to acquire within 60 days after such date is deemed to
be outstanding, but is not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person. Except as noted below, each person
has full voting and investment power over the shares indicated.
Number of Shares of Percent of LSR Common
Name and Address of LSR Common Stock Stock Beneficially
Beneficial Owner Beneficially Owned Owned (1)
- ---------------- ------------------ ---------
Andrew Baker (2) 2,699,175 24.4%
Gabor Balthazar (3) 10,000 *
Frank Bonner (4) 17,855 *
John Caldwell (5) 10,000 *
Brian Cass (6) 520,000 4.7%
Kirby Cramer (7) 903,007 8.1%
Julian Griffiths (8) 80,000 *
Richard Michaelson (9) 216,000 1.9%
All Directors and Executive ____________________ ______
Officers of LSR as a Group 4,456,037 39.2%
(8 persons)
- ---------------
* less than 1%
<FN>
(1) Calculated pursuant to Rule 13d-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and based on 11,032,578
shares of LSR Common Stock outstanding as of the Record Date.
(2) Mr. Baker is Chairman and Chief Executive Officer of the Company. Includes
presently exercisable options to purchase 100,000 shares at $1.50 per share
which expire in March 2012. See "Certain Relationships and Transactions
with Related Persons".
(3) Mr. Balthazar is a director of the Company. Includes a presently
exercisable option to purchase 10,000 shares at $1.50 per share, which
expire in March 2012. See "Compensation of Directors".
(4) Dr. Bonner is a director of the Company and the Director of Science and
Technology for Huntingdon, a wholly owned subsidiary of the Company.
Includes presently exercisable options to purchase 17,500 shares at $1.50
per share, which expire in March 2012. See "Compensation of Directors" and
"Certain Relationships and Transactions with Related Persons".
(5) Prof. Caldwell is a director of the Company. Includes a presently
exercisable option to purchase 10,000 shares at $1.50 per share, which
expires in March 2012. See "Compensation of Directors."
(6) Mr. Cass is a director and President and Managing Director of the Company.
Includes presently exercisable options to purchase 100,000 shares at $1.50
per share, which expire in March 2012. See "Certain Relationships and
Transactions with Related Persons."
(7) Mr. Cramer is a director of the Company. Includes presently exercisable
options to purchase 20,000 shares at $1.50 per share, which expire in March
2012. See "Compensation of Directors."
(8) Mr. Griffiths is a director of the Company and Finance Director of
Huntingdon, a wholly owned subsidiary of the Company. Includes presently
exercisable options to purchase 30,000 shares at $1.50 per share, which
expire in March 2012. See "Certain Relationships and Transactions with
Related Persons."
(9) Mr. Michaelson is the Chief Financial Officer and Secretary of the Company.
Includes presently exercisable options to purchase 45,000 shares at $1.50
per shares. See "Certain Relationships and Transactions with Related
Persons."
</FN>
Ownership of Certain Beneficial Owners
The following table sets forth certain information, to the knowledge of
LSR, regarding the beneficial ownership of LSR Common Stock as of the Record
Date by all stockholders known by LSR (based on public filings with the
Commission, except as otherwise noted) to be the beneficial owners of more than
5% of the outstanding shares of LSR Common Stock. For purposes of this table, a
person or group of persons is deemed to have "beneficial ownership" of any
shares as of a given date which such person has the right to acquire such shares
within 60 days after such date. For purposes of computing the percentage of
outstanding shares held by each person or group of persons named above on a
given date, any security which such person or persons has the right to acquire
within 60 days after such date is deemed to be outstanding, but is not deemed to
be outstanding for the purpose of computing the percentage ownership of any
other person. Except as noted below, each person has full voting and investment
power over the shares indicated.
Name and Address Number of Shares of Common Stock Percent of Common Stock
of Beneficial Owner Beneficially Owned Beneficially Owned (1)
------------------- ------------------ ----------------------
Andrew H. Baker 2,699,175 (2) 24.4%
c/o Life Sciences Research, Inc.
Mettlers Road
East Millstone, NJ 08875
Kirby L. Cramer 903,007 (3) 8.1%
c/o Life Sciences Research, Inc.
Mettlers Road
East Millstone, NJ 08875
- ---------------
<FN>
(1) Calculated pursuant to Rule 13d-3 promulgated under the Exchange Act and
based on 11,032,578 shares of LSR Common Stock outstanding as of the Record
Date.
(2) Mr. Baker is the Chairman and Chief Executive Officer of the Company.
Includes beneficial ownership of 100,000 shares issuable upon exercise of
fully vested and presently exercisable options to purchase LSR Common
Stock. Based on Company records, a Form 4 by Mr. Baker dated April 8, 2002
and a Schedule 13D filed by Mr. Baker on April 8, 2002. Mr. Baker controls
FHP. If the FHP Warrants described in "Proposal 2 - Approval of Warrants"
are approved by stockholders at the Meeting and are granted to FHP, Mr.
Baker would also be deemed to beneficially own the 410,914 shares subject
to the FHP Warrants.
(3) Mr. Cramer is a director of the Company. Based on Company records, a Form 4
filed by Mr. Cramer dated April 8, 2002 and a Schedule 13D filed by Mr.
Cramer on April 8, 2002.
</FN>
Meetings and Committees of Board of Directors
Meetings of Board of Directors
The Company was formed on July 19, 2001 for the purpose of effecting the
Exchange Offer. Walter Stapfer served as sole director and President of LSR from
July 19, 2001 to his resignation on January 10, 2002. During that time, eight
(8) meetings of the Board of Directors of LSR were convened or held by sole
written consent. Since January 10, 2002, when the current directors took their
seats, the Board of Directors of LSR held two meetings. Each of the incumbent
directors attended both such meetings of the Board (except for Mr. Cramer, who
missed one meeting) and all members of Board Committees attended all such
meetings for the Committee on which he served.
Audit Committee
The Audit Committee of the Board of Directors of LSR is authorized to make
recommendations to the Board regarding the appointment of independent
accountants; to review and approve any major changes in accounting policy; to
review the arrangements for, scope and results of the independent audit; to
review and approve the scope of non-audit services to be performed by
independent accountants and to consider the possible effect on the independence
of the accountants; to review the effectiveness of internal auditing procedures
and personnel; to review LSR's policies and procedures for compliance with
disclosure requirements with respect to conflicts of interest and for prevention
of unethical, questionable or illegal payments; and to take such other actions
as the Board shall from time to time so authorize. Messrs. Balthazar, Caldwell
and Cramer comprise the Audit Committee. Mr. Balthazar serves as Chairman. Each
member of the Audit Committee is considered to be an independent director. The
Audit Committee of LSR held one meeting during 2002 prior to the date of this
Proxy Statement.
The Audit Committee operates under a written charter adopted by the Board
of Directors, that is included as Appendix A to this proxy statement.
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management is responsible for the Company's
financial statements and the financial reporting process, including the system
of internal controls. The independent auditors are responsible for expressing an
opinion on the conformity of those audited financial statements with accounting
principles generally accepted in the United States. In fulfilling its oversight
responsibilities, the Audit Committee has reviewed and discussed with management
and the independent auditors the Company's audited financial statements
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001, including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial statements.
Review of Financial Statements and Other Matters with Independent Accountant
The Audit Committee has discussed with the Company's independent auditors,
Deloitte & Touche, the matters required to be discussed by Statement on Auditing
Standards No. 61, Communication with Audit Committees, as amended. In addition,
the Audit Committee has discussed with the independent auditors the auditors'
independence from the Company and its management including the matters in the
written disclosures provided to the Audit Committee as required by Independence
Standards Board Standard No. 1, Independence Discussions with Audit Committees,
and considered the compatibilities of non-audit services with the auditors'
independence.
The Committee discussed with the Company's independent auditors the overall
scope and plans for their audit. The Committee meets with the internal and
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting.
Audit fees of Independent Accountant
The aggregate fees paid for professional services rendered by Deloitte &
Touche for the audit of the Company's annual financial statements for fiscal
year 2001 were $181,000.
Financial Information Systems Design and Implementation Fees
There were no fees paid for professional services rendered by Deloitte &
Touche for financial information systems design and implementation assistance
for fiscal year 2001.
All Other Fees
The aggregate fees paid for services rendered by Deloitte & Touche during
fiscal year 2001 other than for those professional services described above were
$158,000. Such services included $5,000 in tax services. The remainder of
non-audit fees primarily related to benefit and insurance plan audits,
preparation and foreign payrolls consultations and internal audit and controls
engagements.
The Audit Committee has considered whether the provision of the foregoing
services is compatible with maintaining the principal accountant's independence,
and has determined that such independence has been maintained.
Recommendation that Financial Statements be Included in Annual Report
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the last fiscal year
for filing with the Securities and Exchange Commission.
Other Matters
In accordance with the rules of the Securities and Exchange Commission, the
foregoing information, which is required by paragraphs (a) and (b) of Regulation
S-K Item 306, shall not be deemed to be "soliciting material", or to be "filed"
with the Commission or subject to the Commission's Regulation 14A, other than as
provided in that Item, or to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically requests that the information be treated as soliciting material or
specifically incorporates it by reference into a document filed under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended.
Gabor Balthazar (Chairman) March 6, 2002
John Caldwell
Kirby L. Cramer
Compensation Committee
The Compensation Committee is authorized to establish and approve
compensation policies, salary levels and bonus payments; to grant stock options,
stock appreciation rights, phantom stock rights, incentive compensation and all
other forms of compensation-related credits, guarantees, employee loans and
policies except as may be precluded by applicable law and to provide an overview
of compensation programs. The Compensation Committee is comprised of Messrs.
Balthazar and Cramer. Mr. Cramer serves as Chairman. Each is considered to be an
independent director. In addition, the Compensation Committee addresses issues
required or recommended to be addressed by independent directors, including
administration of the Company's 2001 Equity Incentive Plan. The Compensation
Committee of LSR held two meetings during 2002 prior to the date of this Proxy
Statement.
Nominating Committee
The Nominating Committee is authorized to establish procedures for
selecting, screening and nominating candidates for election as directors at the
annual or special meetings of stockholders; to make recommendations of director
nominees to fill vacancies on the Board resulting from director resignations; to
increase the number of directors for purposes of recommending the addition of a
director to the Board; to review the qualifications of director nominations made
by the Company's stockholders, directors, officers or others; and to adopt
procedures regarding the qualifications and tenure of directors. Stockholders
who wish to make nominations of directors shall submit the name and
qualifications of such nominee in writing to the attention of the Company's
Secretary at the offices of the Company. The members of the Nominating Committee
are Messrs. Baker, Caldwell and Cramer. Mr. Baker serves as Chairman. The
Nominating Committee held two meetings during 2002 prior to the date of this
Proxy Statement.
Animal Welfare and Ethics Committee
The Animal Welfare and Ethics Committee is authorized to provide oversight
and review of the Company's procedures and practices for assuring proper
treatment and welfare of animals utilized in the Company's research and testing
services; to keep the full Board apprised of such practices; and to make
recommendations for the improvement of such activities. The Animal Welfare and
Ethics Committee is comprised of Messrs. Caldwell and Cass, with Professor
Caldwell serving as Chairman. Professor Caldwell has long professional
experience with such welfare and ethics issues. The Animal Welfare and Ethics
Committee held one meeting during 2002 prior to the date of this Proxy
Statement.
Special Private Placement Committee
A Special Private Placement Committee of the Board of Directors was
established for the specific purpose of analyzing, reviewing and negotiating the
appropriateness and terms of the Company's private placement sale of 5,085,334
shares of Common Stock (the "Private Placement"), which was completed on March
28, 2002. See, "Certain Relationships and Transactions with Related Persons."
The members of the Special Private Placement Committee were Messrs. Balthazar
and Caldwell. Mr. Balthazar served as Chairman. Each is considered to be an
independent director. Moreover, Messrs. Balthazar and Caldwell did not purchase
Common Stock in the Private Placement, and thus were independent from the
potential conflicts that would be present in both participating as a purchaser
in the Private Placement and protecting the interests of the Company in the sale
of Common Stock. Certain other directors (Messrs. Baker, Cass, Cramer and
Griffiths) did purchase Common Stock in the Private Placement. See "Certain
Relationships and Transactions with Related Persons". The Special Private
Placement Committee held two meetings during 2002 prior to the date of this
Proxy Statement.
Compensation of Directors
Mr. Stapfer received no compensation for serving as a director of LSR from
July 19, 2001 to January 10, 2002. Since January 10, 2002 non-employee directors
(Messrs. Balthazar, Caldwell and Cramer) receive an annual cash payment of
$25,000 for their services as directors of LSR, payable quarterly. Messrs.
Baker, Bonner, Cass and Griffiths receive no payment for services as a director
because they are employees of the Company or its subsidiaries. Directors receive
no additional per-meeting payments or payments for service on committees of the
Board.
Non-employee directors (Messrs. Balthazar, Caldwell and Cramer) received on
March 1, 2002, a grant of ten-year options to purchase 10,000 shares of LSR
Common Stock at an exercise price of $1.50 per share, the same price at which
shares were sold in the Private Placement. Each such option vested 50% on grant
and 50% on the first anniversary of the date of grant. Mr. Cramer also received
a grant of additional options to purchase 10,000 shares of LSR Common Stock on
such date, on the same terms described above, in light of the expiration of Mr.
Cramer's 1998 "founder options" in Huntingdon.
Each director is reimbursed for all travel expenses related to each meeting
of the Board or Committee that he attends in person.
Executive Compensation
The following table sets forth the annual and long-term compensation paid
or accrued by HLS for services rendered in all capacities to HLS during the
years ended December 31, 2001, 2000 and 1999, as applicable, of those persons
who were, at December 31, 2001, (i) the Executive Chairman (the UK equivalent of
the Chief Executive Officer) (Mr. Baker) and (ii) the other officers of HLS
whose total annual salary and bonus for the year ended December 31, 2001
exceeded $100,000 (Frank Bonner, Brian Cass and Julian Griffiths) (Messrs.
Baker, Bonner, Cass and Griffiths collectively are referred to herein as the
"Named Executive Officers").
Summary Compensation Table
Long Term
Annual Compensation Compensation Awards
Other Annual Securities
Compensation Restricted Underlying
Name and Principal Position Year Salary($)(5) Bonus ($) ($)(6) Stock Award ($) Options (7)
Andrew H. Baker 2001 288,006 - 95,990 - -
Executive Chairman (1) 2000 288,000 - 95,040 - -
1999 216,000 72,000 71,280 - -
Brian Cass 2001 280,741 - 153,311 - -
Managing Director (2) 2000 288,800 - 153,936 - -
1999 216,000 72,000 130,992 - 23,150
Frank Bonner 2001 211,680 - 20,395 - 500,000
Science & Techology 2000 211,680 - 19,367 - 375,000
Director (3) 1999 201,600 14,400 26,450 - 250,000
Julian T. Griffiths 2001 120,960 - 40,229 - 500,000
Finance Director (4) 2000 120,960 - 44,070 - 375,000
1999 113,435 14,400 53,562 - 750,000
<FN>
(1) Mr. Baker has served as Executive Chairman of HLS since September 1998. He
became Chairman and Chief Executive Officer of LSR on January 10, 2002. See
"Employment Agreements - Andrew Baker".
(2) Mr. Cass has served as Managing Director of HLS since September 1998. He
became President and Managing Director of LSR on January 10, 2002. See
"Employment Agreements - Brian Cass".
(3) Dr. Bonner has served as Director of Science and Technology of HLS since
September 1998. See "Employment Agreements - Frank Bonner".
(4) Mr. Griffiths has served as Finance Director of HLS since February 1999.
See "Employment Agreements - Julian Griffiths".
(5) All payments contained in this table were made in pounds sterling. The
amounts listed were converted into US dollars on the basis of an exchange
rate of $1.44 to(pound)1.00.
(6) For Mr. Baker, represents the benefits from a contribution to a private
pension account. For Mr. Cass, represents the benefits from a contribution
to a private pension account, a car allowance, private health insurance
contributions and relocation reimbursement. For Dr. Bonner and Mr.
Griffiths represents the benefits from a contribution to a private pension
account, car allowance and private health insurance contributions.
(7) Represents options to acquire Huntingdon ordinary shares, all of which are
no longer exercisable in light of the Exchange Offer and the compulsory
acquisition of Huntingdon by LSR completed on March 26, 2002.
</FN>
Option Grants
The following table sets forth the grants of HLS stock options during the
year ended December 31, 2001, to the Named Executive Officers:
Option Grants In Last Fiscal Year
No. of
Securities % of Total Market Price Grant Date
Underlying Options Granted Exercise or of Date of Present
Options to Employees in Base Price Grant Expiration Value
Name Granted (#) Fiscal Year ($/Sh) ($/Sh) Date ($/Sh)
---- ----------- ----------- ------ ------ ---- ------
Andrew H. Baker 0 0 - - - -
Brian Cass 0 0 - - - -
Julian T. Griffiths (1) 500,000 6.5% 5p 2.25p 4/27/11 $42,191(3)
Frank Bonner (2) 500,000 6.5% 5p 2.25p 4/27/11 $42,191(3)
<FN>
(1) Under Huntingdon's Incentive Option Plan Mr. Griffiths was granted on April
27, 2001 options to purchase 500,000 ordinary shares of Huntingdon at an
exercise price of 5p, the nominal value of the ordinary shares.
(2) Under Huntingdon's Incentive Option Plan Dr. Bonner was granted on April
27, 2001 options to purchase 500,000 ordinary shares of Huntingdon at an
exercise price of 5p, the nominal value of the ordinary shares.
(3) In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was used to estimate the grant date
present value of the options set forth in this table. The Company's use of
this model should not be construed as an endorsement of its accuracy in
valuing options. All option valuation models, including Black-Scholes,
require a prediction about the future movement of the stock price. The
actual value, if any, an executive may realize will depend on the excess of
the stock price over the exercise price on the date the option is
exercised. The estimated value of each option grant is estimated on the
date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions: risk-free interest rate of 3.72
percent; expected dividend yields of 0.00 percent; expected life of 5.0
years for the Incentive Plan; expected volatility of 40.0 percent. Note,
however, that as a result of completion of LSR's compulsory acquisition of
all remaining outstanding ordinary shares of Huntingdon, effective March
26, 2002, Huntingdon is now a wholly owned subsidiary of LSR, Huntingdon's
ordinary shares no longer trade on any stock exchange, and options with
respect to Huntingdon are no longer exercisable and thus have no value.
</FN>
Other Stock Options
Under the terms of its Incentive Option Plan, on April 27, 2001, Huntingdon
granted options to purchase and an aggregate of 7,750,000 ordinary shares of
Huntingdon to a broad group of employees (approximately 50 persons). All such
options were granted at an exercise price of 5p per share, at a time when
Huntingdon's ordinary shares were trading at 2.25p per share on the London Stock
Exchange. As a result of the completion by LSR on March 26, 2002 of the
compulsory acquisition of all remaining outstanding ordinary shares of
Huntingdon, Huntingdon is now a wholly owned subsidiary of LSR; Huntingdon's
ordinary shares no longer trade on any stock exchange; and all such Huntingdon
options are no longer exercisable and thus have no value.
LSR 2001 Equity Incentive Plan (the "LSR 2001 Equity Incentive Plan")
The LSR 2001 Equity Incentive Plan was adopted effective October 4, 2001.
Adoption of the LSR 2001 Equity Incentive Plan will enable LSR to use stock
options (and other stock-based awards) as a means to attract, retain and
motivate key personnel.
Awards under the LSR 2001 Equity Incentive Plan may be granted by a
committee designated by the LSR Board pursuant to the terms of the LSR 2001
Equity Incentive Plan (which has designated the Compensation Committee for such
purpose) and may include: (i) options to purchase shares of LSR Voting Common
Stock, including incentive stock options ("ISOs"), non-qualified stock options
or both; (ii) stock appreciation rights ("SARs"), whether in conjunction with
the grant of stock options or independent of such grant, or stock appreciation
rights that are only exercisable in the event of a change in control or upon
other events; (iii) restricted stock consisting of shares that are subject to
forfeiture based on the failure to satisfy employment-related restrictions; (iv)
deferred stock, representing the right to receive shares of stock in the future;
(v) bonus stock and awards in lieu of cash compensation; (vi) dividend
equivalents, consisting of a right to receive cash, other awards, or other
property equal in value to dividends paid with respect to a specified number of
shares of LSR Voting Common Stock or other periodic payments; or (vii) other
awards not otherwise provided for, the value of which are based in whole or in
part upon the value of the LSR Voting Common Stock. Awards granted under the LSR
2001 Equity Incentive Plan are generally not assignable or transferable except
pursuant to a will and by operation of law.
The flexible terms of the LSR 2001 Equity Incentive Plan are intended to,
among other things, permit the stock option committee to impose performance
conditions with respect to any award, thereby requiring forfeiture of all or
part of any award if performance objectives are not met or linking the time of
exercisability or settlement of an award to the attainment of performance
conditions. For awards intended to qualify as "performance-based compensation"
within the meaning of Section 162 (m) of the United States Internal Revenue Code
such performance objectives shall be based solely on (i) annual return on
capital; (ii) annual earnings or earnings per share; (iii) annual cash flow
provided by operations; (iv) changes in annual revenues; (v) stock price; and/or
(vi) strategic business criteria, consisting of one or more objectives based on
meeting specified revenue, market penetration, geographic business expansion
goals, cost targets, and goals relating to acquisitions or divestitures.
LSR's Compensation Committee, which administers the 2001 LSR Equity
Incentive Plan, has the authority, among other things, to: (i) select the
directors, officers and other employees and independent contractors entitled to
receive awards under the 2001 LSR Equity Incentive Plan; (ii) determine the form
of awards, or combinations of awards, and whether such awards are to operate on
a tandem basis or in conjunction with other awards; (iii) determine the number
of shares of LSR Voting Common Stock or units or rights covered by an award; and
(iv) determine the terms and conditions of any awards granted under the 2001 LSR
Equity Incentive Plan, including any restrictions or limitations on transfer,
any vesting schedules or the acceleration of vesting schedules, any forfeiture
provision or waiver of the same and including any terms and conditions necessary
or desirable to ensure the optimal tax result for participating personnel and
the Company including by way of example to ensure that there is no tax on the
grant of the rights and that such tax only arises on the exercise of rights or
otherwise when the LSR Voting Common Stock unconditionally vests and is at the
disposal of such participating personnel. The exercise price at which shares of
LSR Voting Common Stock may be purchased pursuant to the grant of stock options
under the 2001 LSR Equity Incentive Plan is to be determined by the Compensation
Committee at the time of grant in its discretion, which discretion includes the
ability to set an exercise price that is below the fair market value of the
shares of LSR Voting Common Stock covered by such grant at the time of grant.
The number of shares of LSR Voting Common Stock that may be subject to
outstanding awards granted under the 2001 LSR Equity Incentive Plan (determined
immediately after the grant of any award), may not exceed 20 percent of the
aggregate number of shares of LSR Voting Common Stock then outstanding.
The 2001 LSR Equity Incentive Plan may be amended, altered, suspended,
discontinued, or terminated by the LSR Board without LSR Common Stockholder
approval unless such approval is required by law or regulation or under the
rules of any stock exchange or automated quotation system on which LSR Voting
Common Stock is then listed or quoted. Thus, LSR Common Stockholder approval
will not necessarily be required for amendments which might increase the cost of
the plan or broaden eligibility. LSR Common Stockholder approval will not be
deemed to be required under laws or regulations that condition favourable tax
treatment on such approval, although the LSR Board may, in its discretion, seek
LSR Common Stockholder approval in any circumstances in which it deems such
approval advisable.
No awards were granted in 2001 pursuant to the 2001 LSR Equity Incentive
Plan.
LSR made grants under the LSR 2001 Equity Incentive Plan on March 1, 2002
to certain directors and employees, including the Named Executive Officers:
Grants to Directors
-------------------
Name Number Granted
---- --------------
Gabor Balthazar 20,000
John Caldwell 20,000
Kirby Cramer 40,000
Grants to Named Executive Officers
----------------------------------
Name Number Granted
---- --------------
Andrew Baker 200,000
Brian Cass 200,000
Frank Bonner 35,000
Julian Griffiths 60,000
Richard Michaelson 90,000
All such options have ten-year terms; 50% of the shares subject to grant
are immediately exercisable with the remaining 50% exercisable one year after
the grant date; and all have an exercise price of $1.50 per share, the price at
which the Company sold shares of Common Stock in the Private Placement. Options
to purchase an aggregate of 1,142,000 shares of LSR Common Stock (including
those specified above) were granted to employees and directors on March 1, 2002,
on the terms set forth above.
Option Exercises and Fiscal Year-End Values
No options to purchase HLS ordinary shares were exercised by the Named
Executive Officers (or any other persons) during the fiscal year ended December
31, 2001. The following table lists the number and value of the unexercised
options to purchase HLS ordinary shares held by the Named Executive Officers at
December 31, 2001.
Aggregated Option Exercises In Last Fiscal Year and FY-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Acquired on Options at FY-End (#) at FY-End ($)
Name Exercise (#) Value Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------ ------------------ ------------------------- -------------------------
Andrew Baker (1) - - 5,000,000/0 $0/$0 (5)
Frank Bonner (2) - - 600,000/500,000 $0/$0 (5)
Brian Cass (3) - - 5,000,000/23,142 $0/$0 (5)
Julian Griffiths (4) - - 500,000/500,000 $0/$0 (5)
- -------------------
<FN>
(1) Mr. Baker received on September 2, 1998 options to purchase 5,000,000
ordinary shares of HLS at an exercise price of 12.5p per share, all of
which became exercisable on September 2, 2001.
(2) Dr. Bonner received the following option grants for HLS ordinary shares:
Grant Date Number Exercise Price Date First Exercisable
---------- ------ -------------- ----------------------
December 1, 1997 100,000 50p December 1, 1999
December 31, 1998 500,000 12.5p December 31, 2001
April 27, 2001 500,000 5p April 27, 2004
(3) Mr. Cass received the following option grants for HLS ordinary shares:
Grant Date Number Exercise Price Date First Exercisable
---------- ------ -------------- ----------------------
December 3, 1998 5,000,000 12.5p December 3, 2001
September 9, 1999 23,142 14p November 21, 2002
(4) Mr. Griffiths received the following option grants for HLS ordinary shares:
Grant Date Number Exercise Price Date First Exercisable
---------- ------ -------------- ----------------------
March 29, 1999 500,000 19.25p March 29, 2002
April 27, 2001 500,000 5p April 27, 2004
(5) None of such options were in the money as of March 31, 2001. As a result of
the completion on March 26, 2002 of LSR's compulsory acquisition of all
remaining outstanding ordinary shares of HLS, HLS is now a wholly owned
subsidiary of LSR, Huntingdon's ordinary shares no longer trade on any
stock exchange, and options to purchase HLS ordinary shares are no longer
exercisable and thus have no value.
</FN>
Pension Contributions
Under the terms of their respective employment agreements, Messrs. Baker
and Cass each received contributions to his private pension arrangements
equivalent to 33% of his annual base salary. See "Employment Agreements".
Employment Agreements
Andrew Baker
The services of Mr. Baker are provided for not less than 100 days per year
through a management services contract between Huntingdon and FHP. Mr. Baker
controls FHP. Under the contract, FHP agrees to provide the services of Mr.
Baker as Chairman and CEO of the Company. The management services contract will
continue until terminated on 12 months' written notice from either party.
Under the management services contract FHP is paid an annual fee of
(pound)200,000. Mr. Baker receives contributions to his private pension
arrangements, equivalent to 33 percent of this basic annual fee. The management
services contract may be terminated if either FHP or Mr. Baker is guilty of
serious misconduct or is in material breach of the terms of the contract, among
other reasons. In the event of termination without "cause" following a "change
in control", as defined, FHP would receive a payment equal to 2.99 times this
annualized fee plus an amount equal to 2.99 times all incentive compensation
earned or received by FHP or Mr. Baker during the 12 months prior to
termination.
Both FHP and Mr. Baker are bound by confidentiality restrictions and a
restriction preventing Mr. Baker from holding any interests conflicting with
those of the Company, without the Company's consent. Mr. Baker has undertaken to
the Company that, during the continuance of the management services contract, he
will not without the prior consent of the Company, be concerned or interested in
any business which competes or conflicts with the business of the Company.
Brian Cass
The services of Mr. Cass are provided through a service agreement between
Huntingdon Life Sciences Limited (a wholly owned subsidiary of Huntingdon) and
Mr. Cass, which appoints Mr. Cass as President/Managing Director of the Company.
Mr. Cass' service agreement can be terminated on two years' written notice from
either party.
Mr. Cass receives a gross salary of (pound)200,000 per annum. Under the
service agreement, Mr. Cass is also entitled to permanent health insurance, life
insurance, personal accident insurance and medical expenses insurance. Mr. Cass
receives contributions to his private pension arrangements, equivalent to 33
percent of his basic annual salary. He is also entitled to a non-pensionable car
allowance of (pound)1,000 gross per month. Mr. Cass' service agreement also
provides for payment to Mr. Cass of a bonus, at the absolute discretion of the
Company's Board. In the event of termination without "cause" following a "change
in control", as defined, Mr. Cass would receive a payment equal to 2.99 times
his annual salary plus an amount equal to 2.99 times all incentive compensation
earned or received by Mr. Cass during the 12 months prior to termination.
Mr. Cass' service agreement may be terminated if Mr. Cass is guilty of
serious misconduct or is in material breach of the terms of the service
agreement or is in breach of the model code for securities transactions by
directors of listed companies, among other reasons.
Mr. Cass is bound by confidentiality restrictions and a restriction
preventing him from being engaged, concerned or interested in any business that
conflicts with the business of the Company or any subsidiary unless either the
Company's Board otherwise consents or the interest is limited to a holding or
other interest of no more than 5 percent of the total amount of shares or
securities of any company quoted on a recognized investment exchange.
Frank Bonner
The services of Dr. Bonner are provided through a service agreement between
Huntingdon Life Sciences Limited (a wholly owned subsidiary of Huntingdon) and
Dr. Bonner, and appoints Dr. Bonner as Science and Technology Director of
Huntingdon. Dr. Bonner's service agreement can be terminated on six months'
written notice by Dr. Bonner or twelve months' notice by Huntingdon Life
Sciences Limited.
Dr. Bonner receives a salary of (pound)147,000 gross per annum and is
entitled to permanent health insurance, life insurance, personal accident
insurance and medical expenses insurance. He is entitled to a bonus at the
absolute discretion of the Company's Board. In the event of termination without
"cause" following a "change in control", as defined, Dr. Bonner would receive a
payment equal to 2.99 times his annual salary plus an amount equal to 2.99 times
all incentive compensation earned or received by Dr. Bonner during the 12 months
prior to termination.
Dr. Bonner's service agreement may be terminated if Dr. Bonner is guilty of
serious misconduct or is in material breach of the terms of the service
agreement, amongst other reasons.
Dr. Bonner is bound by confidentiality restrictions and a restriction
preventing him from being engaged, concerned or interested in any business
conflicting with the business of the company or any subsidiary, unless either
the Company otherwise consents or the interest is limited to a holding or other
interest of no more than 5 percent of the total amount of shares or securities
of any company quoted on a recognized investment exchange.
Julian Griffiths
The services of Mr. Griffiths are provided through a service agreement
between him and Huntingdon Life Sciences Limited (a wholly owned subsidiary of
Huntingdon). The service agreement appoints Mr. Griffiths as Finance Director of
Huntingdon. Mr. Griffiths' service agreement will continue until terminated by
Mr. Griffiths on six months' written notice or by Huntingdon Life Sciences
Limited on 12 months' written notice. In the event of termination without
"cause" following a "change in control", as defined, Mr. Griffiths would receive
a payment equal to 2.99 times his annual salary plus an amount equal to 2.99
times all incentive compensation earned or received by Mr. Griffiths during the
12 months prior to termination.
Mr. Griffiths receives an annual salary of(pound)125,000 gross and is
entitled to permanent health insurance, life insurance, personal accident
insurance, medical expenses insurance and pension benefits. Mr. Griffiths'
service agreement also provides for the payment of a bonus to Mr. Griffiths in
the absolute discretion of the Huntingdon Board.
In addition, Mr. Griffiths is entitled to a non-pensionable car allowance
of(pound)750 gross per month.
The agreement may be terminated if Mr. Griffiths is guilty of serious
misconduct or is in material breach of the terms of the service agreement,
amongst other reasons.
Mr. Griffiths is bound by confidentiality restrictions and a restriction
preventing him from being engaged, concerned or interested in any business
conflicting with the business of the Company or any subsidiary unless either the
Company's Board otherwise consents or the interest is limited to a holding or
other interest of no more than 5 percent of the total amount of shares or
securities of any company quoted on a recognized investment exchange.
Richard Michaelson
The services of Mr. Michaelson are provided through a service agreement
between him and Huntingdon Life Sciences Inc. (a wholly owned subsidiary of
Huntingdon). The service agreement appoints Mr. Michaelson as Chief Financial
Officer and Secretary of the Company. Mr. Michaelson's service agreement will
continue until terminated by Mr. Michaelson on thirty days' written notice or by
Huntingdon Life Sciences Inc. on 12 months' written notice. In the event of
termination without "cause" following a "change in control", as defined, Mr.
Michaelson would receive a payment equal to 2.99 times his annual salary plus an
amount equal to 2.99 times all incentive compensation earned or received by Mr.
Michaelson during the 12 months prior to termination.
Mr. Michaelson receives an annual salary of $200,000 gross and is entitled
to permanent health insurance, life insurance, personal accident insurance,
medical expenses insurance and participation in the 401(k) Plan of Huntingdon
Life Sciences Inc. Mr. Michaelson's service agreement also provides for the
payment of a bonus to Mr. Michaelson in the absolute discretion of the Company's
Board.
In addition, Mr. Michaelson is entitled to a car allowance of $1,000 gross
per month.
The agreement may be terminated if Mr. Michaelson is guilty of serious
misconduct or is in material breach of the terms of the service agreement,
amongst other reasons.
Mr. Michaelson is bound by confidentiality restrictions and a restriction
preventing him from being engaged, concerned or interested in any business
conflicting with the business of the Company or any subsidiary unless the Board
otherwise consents or the interest is limited to a holding or other interest of
no more than 5 percent of the total amount of shares or securities of any
company quoted on a recognized investment exchange.
Compensation Committee
Report on Executive Compensation
Philosophy
The Company has developed an overall compensation program and specific
compensation plans which are designed to enhance corporate performance, and thus
stockholder value, by aligning the financial interests of executives with those
of its stockholders. In pursuit of these overall objectives, the structure and
scope of the Company's compensation program are designed to attract key
executives to the Company and retain the best possible executive talent; to
reinforce and link executive and stockholder interests through equity-based
plans; and to provide a compensation package that recognizes individual
performance in conjunction with overall corporate performance.
Principal Components of Executive Compensation
The principal elements of the Company's executive compensation program
consist of both annual and long-term programs and include base salary, annual
cash and/or stock bonus if performance objectives are achieved, and, at
appropriate intervals, long-term incentive compensation in the form of stock
option grants. Such stock option grants are issued to the Company's executives
and other employees under the LSR 2001 Equity Incentive Plan. The Company also
provides medical and other fringe benefits generally available to Company
employees and, for certain of its selected senior executives, car allowances
and/or pension and insurance contributions.
Base Salaries. Base salaries for executives are determined by evaluating
the responsibilities of the position held and the experience of the individual,
with reference to the competitive marketplace for executive talent, including a
comparison to base salaries for positions having comparable responsibilities at
other companies in the contract research organization industry. In addition to
comparing base salary compensation of other companies, consideration is given to
the relative overall corporate performance of the Company in relation to its
competitors in the industry, with the objective of achieving standards and
setting base executive salaries in the Company consistent with the market rate
paid for comparable positions in the contract research organization industry.
Bonus. The Company's executive officers and other key persons may be
eligible for an annual cash and/or stock bonus under their individual employment
agreements. However, no such bonuses have been paid in the last two years.
Individual performance objectives formulated by Company management are
recommended by the Chief Executive Officer for approval by the Compensation
Committee or the Board and are awarded upon the discretionary recommendation of
the CEO. Eligible executives may receive bonus awards based upon certain
percentages of base salary at threshold and maximum levels appropriate to the
nature of their position in the Company. Whether any bonus is awarded, and, if
so, the amount thereof depends upon actual performance against predetermined
individual and corporate objectives established by the CEO or the Compensation
Committee.
Stock Options. Awards of stock options have been made periodically to
executive officers and other employees of the Company upon consultation with and
recommendation of the Chief Executive Officer and approval of the Compensation
Committee. HLS options have been granted with an exercise price equal to the
market value of HLS ordinary shares on the date of grant, or, if the market
value was below the nominal value of the ordinary shares, at such nominal value.
LSR options were granted during 2002 prior to the commencement of trading of LSR
Common Stock at an exercise price of $1.50 per share, equal to the sale price in
the Private Placement. The purpose of these awards has been to provide a
meaningful equity interest in the Company to Company employees in a format that
is designed to retain and align the financial interests of these employees with
those of stockholders. The Board and the Compensation Committee believe that
this program will be instrumental in focusing the Company's senior management on
building long-term value for stockholders. It has been the practice of the
Company to make grants of stock options with a staggered vesting schedule and
forfeiture of shares if not exercised within a specified period following
separation from the Company's employ. These restrictions on stock option awards
are designed to encourage recipients to remain in the Company's employ in order
to recognize the full value of the awards. To date, only stock options have been
granted under the 2001 Equity Incentive Plan; however, the Compensation
Committee expects that other forms of equity-based compensation permitted under
that plan may also be granted with similar restrictions.
In addition, the Company provides health care benefits and profit sharing
for senior executives and other key persons on terms generally available to all
Company employees. The Compensation Committee believes that such benefits are
comparable to those offered by other contract research companies. To the extent
that the value of perquisites to Named Executive Officers exceeded $50,000 or
10% of their total salary and bonus, such amounts are disclosed under "Other
Compensation" in the Summary Compensation Table.
Since no executive officer of the Company received compensation for
purposes of Section 162(m) of the Internal Revenue Code in excess of $1 million
during 2001, the Compensation Committee presently anticipates that all
compensation paid to executive officers will qualify for deductibility under
Section 162(m), which limits in certain circumstances the deductibility of
compensation in excess of $1 million paid to certain executive officers, except
for "performance-based compensation" which complies with requirements imposed
under Section 162(m).
Chief Executive Officer's Compensation
For 2001, Andrew H. Baker, the Executive Chairman of HLS (and currently the
Chairman and Chief Executive Officer of LSR), was paid through FHP a base
consulting fee of(pound)200,000 (equivalent to $288,006 based on an exchange
rate of $1.44 to(pound)1.00), as specified in his service agreement. The
Compensation Committee considered Mr. Baker's base compensation to be
appropriate in light of (i) Mr. Baker's compensation at his prior employers,
(ii) the compensation of other senior executives in the contract research
organization industry and (iii) the fact that the base fee was the same as Mr.
Cass'. Mr. Baker received no cash bonus in 2001. Mr. Baker received in 2001 a
pension contribution of(pound)66,000 ($95,990) as specified in his service
agreement, which brought his annual cash compensation for 2001 to $383,996. See
"Employment Agreements - Andrew Baker".
Compensation of Other Named Executive Officers and Key Management Personnel
The Company has also entered into employment or service agreements with the
Company's other Named Executive Officers and other key management personnel. See
"Employment Agreements". Each agreement provides a base salary plus potential
bonus, at the discretion of the Board, and other specified incentive
compensation.
The Compensation Committee believes that significant stock ownership,
through grants of stock options, restricted stock, loans to finance the purchase
of Common Stock and other forms of equity-based incentive compensation that
would be permitted under the LSR 2001 Equity Incentive Plan, are a major
incentive in aligning the interests of employees, including senior management,
and stockholders. The Compensation Committee therefore intends to continue to
explore various methods of assuring such commonality of interest in the
Company's long-term performance.
Kirby L. Cramer (Chairman)
Gabor Balthazar
Members of the Compensation Committee
Comparison of Cumulative Total Return
The following graph compares the cumulative total shareholder return on
Huntingdon's American Depositary Shares since December 31, 1996 through December
31, 2001, with the cumulative total return for the same period on the Nasdaq
Composite Stock Market (U.S.) Index and the Nasdaq Biotechnology Index. The
graph assumes that at the beginning of the period indicated, $100 was invested
in Huntingdon's American Depositary Shares and the stock of the companies
comprising the Nasdaq Composite Stock Market (U.S.) Index and the Nasdaq
Biotechnology Index and that all dividends were reinvested.
Huntingdon-ADS
stock Price Performance
December 31, 1996 - December 31, 2001
[GRAPH]
----------------------------------- ---------------------------- ----------------------------
Huntingdon-ADS NASDAQ Composite NASDAQ Biotechnology Index
----------------------------------- ---------------------------- ----------------------------
Closing Investment Closing Investment Closing Investment
Date Price Value Price Value Price Value
- ---------------- ----------- -------------------- ----------- ---------------- ---------- -----------------
12/31/1996 $36.2500 $100.00 1,291.03 $100.00 303.31 $100.00
12/31/1997 $18.1250 $50.00 1,570.35 $122.11 303.10 $99.93
12/31/1998 $6.2500 $17.24 2,192.69 $171.08 437.31 $144.18
12/31/1999 $4.6875 $12.93 4,069.31 $318.11 881.78 $290.72
12/31/2000 $0.1875 $0.52 2,470.52 $193.63 1,084.51 $357.56
12/31/2001 $0.5000 * $1.38 1,950.40 $153.36 908.79 $299.62
- ---------------- ----------- -------------------- ----------- ---------------- ---------- -----------------
<FN>
* During the fourth quarter of 2001 two trades were executed in Huntingdon
ADS' at a price of $0.0001. However, the Company does not believe that
these trades were effected for valid financial reasons.
</FN>
CERTAIN RELATIONSHIPS AND
TRANSACTIONS WITH RELATED PERSONS
Private Placement. On March 28, 2002 LSR completed the sale of 5,085,334
shares of Common Stock in a private placement transaction (the "Private
Placement"). All shares were sold for a purchase price of $1.50 per share.
Certain persons related to LSR purchased shares of LSR Common Stock in the
Private Placement:
Andrew Baker. Mr. Baker, Chairman and CEO of LSR, acquired 1,480,000 shares
of LSR Common Stock in the Private Placement. 1,400,000 of such shares were
acquired through conversion of $2,100,000 of the (pound)2,000,000
($2,910,000) loan made by Mr. Baker to Huntingdon in September 2002 (the
"Baker Loan") and 80,000 shares were acquired through conversion of a
portion of the $550,000 participation in the Baker Loan entered into by FHP
in March 2001 (the "FHP Participation").
Brian Cass. Mr. Cass, President and Managing Director of LSR, acquired
600,000 shares of LSR Common Stock in the Private Placement. Mr. Cass
acquired such shares through the delivery of two promissory notes. Both
such promissory notes, each in the amount of (pound)211,678.60, are due on
March 28, 2007; bear interest at the rate of 5% per annum; and are secured
by the 200,000 shares of LSR Common Stock purchased with the proceeds of
each such loan. The due date of each promissory note would be accelerated
if Mr. Cass voluntarily resigned from his employment with LSR or had his
employment terminated. Repayment of one of the promissory notes will be
made by automatic deduction of (pound)44,000 per year from the
(pound)66,000 per year pension contribution made by the Company to a
pension plan established by Mr. Cass. The other note is further
collateralized by the (pound)214,500 accrued in such pension account. In
addition, one-third of any yearly bonus received by Mr. Cass will be used
to reduce principal of the promissory notes.
Richard Michaelson. Mr. Michaelson, Chief Financial Officer and Secretary
of LSR, acquired 150,000 shares of LSR Common Stock in the Private
Placement. 100,000 of such shares were acquired for cash and 50,000 of such
shares were acquired through conversion of a portion of the FHP
Participation, representing Mr. Michaelson's former ownership interests in
FHP. Mr. Michaelson no longer has any ownership interest in FHP.
Julian Griffiths. Mr. Griffiths, a director of LSR and Finance Director of
Huntingdon, acquired 50,000 shares of LSR Common Stock in the Private
Placement. Mr. Griffiths acquired such shares through the delivery of a
promissory note in the principal amount of(pound)52,816.90, which is due on
March 28, 2007; bears interest at the rate of 5% per annum; and is secured
by the 50,000 shares of LSR Common Stock purchased with the proceeds of the
loan. Repayment of the promissory note will be made by automatic monthly
deduction of(pound)943.56 from Mr. Griffith's Huntingdon salary.
Kirby Cramer. Mr. Cramer, a director of LSR, acquired 706,667 shares of LSR
Common Stock in the Private Placement. 666,667 of such shares were acquired
for cash. 40,000 of such shares were acquired through conversion of a
portion of the FHP Participation, representing Mr. Cramer's former
ownership interest in FHP. Mr. Cramer no longer has any ownership interest
in FHP.
FHP Warrants. The FHP Warrants that are the subject of Proposal 2 below
would, if approved, be issued to FHP. FHP is controlled by Andrew Baker,
Chairman and Chief Executive Officer of LSR. Mr. Baker is currently the
beneficial owner of 2,699,175 shares of LSR Common Stock. See "Management and
Directors", "Ownership" and "Proposal 2 - Approval of Warrants".
Baker Loan. In September 2000 Mr. Baker made the Baker Loan to Huntingdon.
$1,445,400 of this amount was drawn down immediately, a further $705,400 and
$300,000 were drawn down on March 21, 2001 and May 21, 2001 respectively while
the final $450,000 was drawn down on July 18, 2001. The loan is repayable on
demand, although it is subordinate to the Company's $33 million bank loan, it is
unsecured and interest is payable monthly at a rate of 10% per annum. By
Amendment No. 2 to the Baker Loan, dated March 20, 2001, FHP became party to the
loan and $550,000 of the amount loaned was transferred to FHP. On March 28, 2002
$2,100,000 of Mr. Baker's loan was converted into 1,400,000 shares of LSR Common
Stock and $300,000 of FHP's loan was converted into 200,000 shares of LSR Common
Stock. As a result of such conversions approximately $260,000 remains payable to
Mr. Baker and $250,000 remains payable to FHP.
In view of the proposed participation in the Private Placement by certain
directors and officers of LSR and Huntingdon, a Special Committee of the LSR
Board was formed to consider, negotiate and approve the Company's decision to
sell shares in the Private Placement and the terms of that sale. The members of
the Special Committee were Messrs. Balathazar and Caldwell, both of whom are
non-employee directors considered to be independent directors and neither of
whom participated in the Private Placement. See "Meetings and Committees of the
Board of Directors".
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
No compliance with Section 16(a) was required by HLS director and officers
during 2001. Such compliance is required for 2002 for LSR.
Based upon a review of Forms 3, 4, and 5 filed with the Commission by the
Company's directors and officers in 2002 the Company believes that all such
required forms were filed on a timely basis.
PROPOSAL 2
APPROVAL OF WARRANTS
General. On October 9 2001, LSR issued to Stephens, Inc., warrants to
purchase up to 704,425 shares of LSR Common Stock at a purchase price of $1.50
per share (the "LSR Warrants"). Stephens subsequently transferred the LSR
Warrants to parties unaffiliated with Stephens or LSR. In addition, subject to
compliance with their fiduciary duties, the Huntingdon directors at that time
(who now constitute the entire LSR Board), noted their intention to ask
Huntingdon's shareholders at the next Huntingdon shareholders' meeting to
approve the issuance of an additional 410,914 warrants to FHP (the "FHP
Warrants"), a firm which is controlled by Andrew Baker, at the time the
Executive Chairman of Huntingdon and currently LSR's Chairman and CEO.
Huntingdon did not hold a shareholders' meeting prior to completion of its
acquisition by LSR. The meeting called for June 11, 2002 that is the subject of
this Proxy Statement is the first LSR annual meeting. Accordingly, LSR is now
submitting the FHP Warrants for approval by LSR shareholders. The FHP Warrants,
like the LSR Warrants, would also be exercisable at $1.50 per share, would have
a ten year term and would be substantially identical to the LSR Warrants. At the
LSR shareholders' meeting, neither FHP nor Mr. Baker will vote on this proposal.
The proposed form of FHP Warrant Agreement is attached as Appendix B to this
Proxy Statement.
Terms of the FHP Warrants. The FHP Warrants, if approved, will be
exercisable at any time on or after the date that the Company's stockholders
approve the FHP Warrants at the annual meeting and will expire on the tenth
anniversary of that date. Both the exercise price and the number of shares of
LSR Common Stock that are issuable upon the exercise of the FHP Warrants are
subject to adjustment in the case of certain events, including stock splits,
dividends or distributions, a reclassification, or the reorganization, merger or
consolidation of LSR. The FHP Warrants and the shares of Common Stock issuable
upon their exercise will be subject to certain restrictions on transfer pursuant
to US securities laws. The holders of the shares of Common Stock issuable upon
the exercise of the FHP Warrants will have the following registration rights:
o One "Form S-3 demand" registration right, which will, under certain
circumstances, enable them to request that LSR register their shares for
resale into the public trading market after LSR has qualified for
registration under the Securities Act of 1933, as amended (the "Securities
Act") on Form S-3; and
o "piggyback" registration rights, which will enable them to require LSR to
register their shares of LSR Common Stock whenever LSR files a registration
statement, subject to certain exceptions, under the Securities Act on
behalf of itself or another stockholder.
Background and Reasons for Issuing the FHP Warrants. Both the LSR Warrants
and the proposed issuance of the FHP Warrants arose out of negotiations
regarding financing that Stephens, FHP and their respective affiliates
provided to Huntingdon in late 2000 and early 2001.
Huntingdon entered into the Baker Loan with Andrew Baker on September 25
2000. Mr. Baker controls FHP. He subsequently transferred a US$550,000
participation in the loan to FHP (the "FHP Participation"). During January 2001
Stephens and its affiliates acquired $33 million principal amount of bank loans
that Royal Bank of Scotland had made to Huntingdon and amended the terms of such
loans. During the course of the negotiations, Mr. Baker and Stephens each
requested that Huntingdon issue them warrants to purchase Huntingdon ordinary
shares. In the course of those discussions, the Huntingdon directors were
advised that the issuance of warrants to Mr. Baker, Stephens and their
respective affiliates would require shareholder approval. In March 2001 the
Huntingdon directors adopted resolutions approving the issuance of warrants to
Stephens and FHP, subject to shareholder approval at Huntingdon's next annual
general meeting. Huntingdon did not enter into agreements with Stephens or FHP
to issue these warrants, and it did not submit the proposal to a shareholder
vote, since Huntingdon did not hold an annual general meeting prior to the
Exchange Offer becoming wholly unconditional on January 10, 2002.
During the discussions regarding the Exchange Offer, both Stephens and Mr.
Baker requested that in lieu of the warrants referenced in the March 2001
Huntingdon Board resolutions, LSR issue them warrants to purchase shares of LSR
Common Stock at the same price at which the original LSR investors were
purchasing their shares pursuant to their subscription agreements: $1.50 per
share. Stephens advised Huntingdon that it was not prepared to grant the waiver
necessary to enable the LSR Exchange Offer to become wholly unconditional
without a default arising under Stephens' loan agreement unless LSR issued the
requested warrants to Stephens prior to the commencement of the Exchange Offer.
After considering these matters, LSR decided to grant the LSR Warrants to
Stephens. LSR also decided that it would submit a proposal to its shareholders
regarding FHP's request at its next shareholders meeting after the Exchange
Offer became wholly unconditional.
Andrew Baker's Ownership of LSR Common Stock. Andrew Baker, the Chairman
and CEO of LSR, currently beneficially owns 2,699,175 shares of LSR Common
Stock. Mr. Baker controls FHP. Of those 2,699,175 shares, 1,835,175 are owned by
First Investments LLC, in which an entity controlled by Mr. Baker, Focused
Healthcare Partners, Ltd. (Bahamas) owns 51% of the membership interests and an
unrelated entity, Search for a Cure LLC, owns the remaining approximately 49% of
the membership interests; 684,000 are owned by Focused Healthcare Partners, Ltd.
(Bahamas), which Mr. Baker controls; and 80,000 are owned by FHP, which Mr.
Baker controls. If shareholders approve the grant of the FHP Warrants, Mr. Baker
would be deemed to have beneficial ownership of the 410,914 shares of LSR Common
Stock issuable upon exercise of the FHP Warrants, which would increase Mr.
Baker's beneficial ownership of LSR Common Stock to 3,110,089 shares,
representing approximately 26.9% of the outstanding shares (counting the shares
issuable upon exercise of the FHP Warrants as being outstanding).
Mr. Baker acquired 1,400,000 of such shares of LSR Common Stock by
conversion on March 28, 2002 of $2,100,000 principal amount of the Baker Loan
into shares of LSR Common Stock at a conversion price of $1.50 per share in
connection with the Private Placement.
Conversion of FHP Participation. Effective March 2001, Mr. Baker
transferred the FHP Participation to FHP. Effective March 28, 2002, FHP
converted $300,000 principal amount of the FHP Participation into 200,000 shares
of LSR Common Stock in connection with the Private Placement. See, "Certain
Relationships and Transactions with Related Persons - Private Placement".
120,000 of such shares were distributed to former members of FHP, and 80,000 of
such shares continue to be owned by FHP.
The Company encourages interested persons to review the complete text of
the FHP Warrants, which is attached as Appendix B to this Proxy Statement.
The Board of Directors (with Mr. Baker abstaining) recommends that shareholders
vote for the proposal to approve the FHP Warrants.
Approval of the FHP Warrants requires the affirmative vote of a majority of
shares present or represented by proxy and entitled to vote at the meeting. None
of the shares of LSR Common Stock owned by FHP or by Andrew Baker will be
counted in the vote for approval of the FHP Warrants.
AUDITORS
The Company has selected Deloitte & Touche LLP to audit the Company's
financial statements for the fiscal year ending December 31, 2002. Deloitee &
Touche audited the financial statements of HLS for the fiscal year ended
December 31, 2001.
ANNUAL REPORT AND FINANCIAL STATEMENTS
You are referred to the Annual Report on Form 10-K for the fiscal year
ended December 31, 2001, including the financial statements and the management's
discussion and analysis of the Company's financial condition and results of
operations contained therein, which has been previously or concurrently
delivered to stockholders, for your information. The Annual Report on Form 10-K
is not to be regarded as proxy soliciting material or a communication by means
of which any solicitation is to be made.
STOCKHOLDER PROPOSALS
Any proposal by a stockholder intended to be presented at the Company's
2003 Meeting of Stockholders must be received by the Company no later than
December 15, 2002 to be included in the Company's proxy statement and form of
proxy relating to such annual meeting. Any proposal should be addressed to the
offices of the Company, Mettlers Road, P. O. Box 2360, East Millstone, NJ 08875,
Attention: Secretary.
OTHER MATTERS
The Board does not know of any other matters to be brought before the
Meeting. However, if any other matters should properly come before the Meeting,
it is the intention of the persons named in the accompanying Proxy to vote such
Proxy as in their discretion they may deem advisable.
By Order of the Board of Directors
Richard Michaelson
Chief Financial Officer & Secretary
Dated: May 10, 2002
APPENDIX A
AUDIT COMMITTEE CHARTER
Role and Independence
The audit committee of the board of directors assists the board in fulfilling
its responsibility for the safeguarding of assets and oversight to the quality
and integrity of the accounting, auditing and reporting practices of the
corporation and such other duties as directed by the board. The membership of
the committee shall consist of at least three directors who are generally
knowledgeable in financial and auditing matters, including at least one member
with accounting or related financial management expertise. Each member shall be
free of any relationship that, in the opinion of the board, would interfere with
their individual exercise of independent judgment. The committee is expected to
maintain free and open communication (including private executive sessions at
least annually) with the independent accountants, the internal auditors, and
management of the corporation. In discharging this oversight role, the committee
is empowered to investigate any matter brought to its attention, with full power
to retain outside counsel or other experts for this purpose. This charter shall
be reviewed and updated annually.
Responsibilities
The audit committee's primary responsibilities include:
o Primary input into the recommendation to the board for the selection and
retention of the independent accountant who audits the financial statements
of the corporation. In so doing, the committee will discuss and consider
the auditors written affirmation that the auditor is in fact independent,
will discuss the nature and rigor of the audit process, receive and review
all reports and will provide to the independent accountant full access to
the committee (and the board) to report on any and all matters appropriate.
o Provision of guidance and oversight to the internal audit function of the
corporation including review of the organization, plans and results of such
activity.
o Review of financial statements (including quarterly reports) with
management and the independent auditor. It is anticipated that these
discussions will include quality of earnings, discussions of significant
items subject to estimate, consideration of the suitability of accounting
principles, review of highly judgmental areas, audit adjustments whether or
not recorded and such other inquiries as may be appropriate.
o Discussion with management and the auditors of the quality and adequacy of
the company's internal controls.
o Discussion with management of the status of pending litigation, taxation
matters and other areas of oversight to the legal and compliance area as
may be appropriate.
Reporting on audit committee activities to the full board and issuance annually
of a summary report (including appropriate oversight conclusions) suitable for
submission to the shareholders.
APPENDIX B
FORM OF FHP WARRANT
WARRANT TO PURCHASE VOTING COMMON STOCK
OF
LIFE SCIENCES RESEARCH, INC.
ORIGINAL ISSUANCE DATE: June 11, 2002 NO. S-7
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED,
QUALIFIED, APPROVED OR DISAPPROVED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS AND NEITHER THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY
AUTHORITY HAS PASSED ON OR ENDORSED THE MERITS OF THESE SECURITIES.
This Certifies That, for value received, FOCUSED HEALTHCARE PARTNERS LLC, a
limited liability company organized under the laws of the State of New Jersey
(together with its successors and permitted assigns, the "Holder"), is entitled,
subject to the terms and conditions of this Warrant, at any time or from time to
time after the Effective Date (as defined below), and before 5:00 p.m. New York
City time on the Expiration Date (as defined below), to purchase from Life
Sciences Research, Inc., a Maryland corporation (the "Company"), 410,914 shares
of Voting Common Stock, par value $.01 per share, of the Company (the "Voting
Common Stock") at the Exercise Price (as defined below). Both the number of
Warrant Shares (as defined below) issuable upon exercise of this Warrant and the
Exercise Price are subject to adjustment and change as provided in Section 4 of
this Warrant.
1. Certain Definitions. As used in this Warrant, the following terms have the
following meanings:
"Affiliate" means, with respect to the Holder, a Person that directly, or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with such Holder, or any trust in which such Holder owns
25% or more of the total beneficial interest or in which such Holder serves as
trustee, executor or in any similar capacity.
"Board" means the Board of Directors of the Company.
"Business Day" means a day (other than a Saturday or Sunday) on which banks
generally are open for ordinary banking business in New York City.
"Commission" means the United States Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Common Stock" means the Voting Common Stock and the Non-Voting Common
Stock.
"Company" is defined in the preamble hereof.
"Effective Date" means the Business Day following the date on which the
Company's shareholders approve the issuance of this Warrant.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
similar successor federal statute and the rules and regulations thereunder in
effect from time to time.
"Exercise Date" is defined in Section 2.1 hereof.
"Exercise Price" means $1.50 per share, subject to adjustment pursuant to
Section 4 hereof.
"Expiration Date" means the tenth anniversary of the Effective Date;
provided, however, that if the Expiration Date falls on a day other than a
Business Day, then the Expiration Date shall be the next following Business Day.
"Fair Market Value" of a share of Voting Common Stock as of a particular
date means:
(a) If the Voting Common Stock is listed or admitted for trading on a
securities exchange, the Nasdaq National Market, or the Nasdaq SmallCap Market,
the average of the last reported sales price regular way (or, in case no such
reported sales took place on such day, the average of the last reported bid and
asked prices regular way) of the Voting Common Stock on such exchange or market
each day over the five business days ending immediately prior to the applicable
date of valuation;
(b) If the Voting Common Stock is traded over-the-counter, the average of
the last reported bid and asked prices each day as reported by the OTCBB or
Other OTC Market or, if such quotation is not reported by the OTCBB or Other OTC
Market, any similar reputable quotation and reporting service, over the five
trading day period ending immediately prior to the applicable date of valuation;
and
(c) If neither (a) or (b) above are applicable, the value determined in
good faith by the Board of Directors of the Company.
"Five Per Cent Holder" or "5% Holder" means any person other than the
Holder who is or would become entitled to information about the identity of
shareholders of the Company under Maryland law, as the same may be amended from
time to time.
"Holder" is defined in the preamble hereof.
"Includable Securities" means other securities of the Company that are
entitled to be included in a registration statement filed pursuant to Section
7.3 hereof.
"Indemnified Party" and "Indemnifying Party" are defined in Section 7.5(c)
hereof.
"Loss" or "Losses" is defined in Section 7.5(a)(i) hereof.
"Notice of Exercise" is defined in Section 2.1 hereof.
"Non-Voting Common Stock" means the non-voting common stock, par value $.01
per share, of the Company.
"OTCBB" means the OTC Bulletin Board Service owned and operated by the
National Association of Security Dealers, Inc.
"Other Stockholders" is defined in Section 7.1(a) hereof.
"Person" means any individual, corporation, partnership, limited liability
company, trust or other entity or organization, including any governmental
authority or political subdivision thereof.
"Registered Holder" means any Holder in whose name this Warrant is
registered upon the books and records maintained by the Company.
"Registrable Securities" means the Warrant Shares and any shares of Voting
Common Stock issued as a dividend or other distribution with respect to or in
exchange for or in replacement of the Warrant Shares; provided, however, that
Registrable Securities shall in any event not include any shares of Voting
Common Stock that have previously been registered or that have been sold to the
public either pursuant to a registration statement or Rule 144, or that have
been sold in a private transaction in which the transferor's rights under this
Agreement are not assigned.
"Registration Expenses" means all expenses incurred in effecting any
registration pursuant to the terms hereof, including, without limitation, all
registration, qualification, and filing fees, printing expenses, escrow fees,
fees and disbursements of the Company's counsel, blue sky fees and expenses, and
expenses of any regular or special audits incident to or required by any such
registration, but shall not include Selling Expenses, fees, and disbursements of
counsel for the Holder.
"Requesting Holders" is defined in Section 7.3(a) hereof.
"Restated Certificate" means the Articles of Amendment and Restatement of
the Company, as filed with the Secretary of State of the State of Maryland.
"Restricted Securities" has the meaning given to it in Rule 144.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar successor rule.
"Securities Act" means the Securities Act of 1933, as amended, or similar
successor federal statute and the rules and regulations thereunder in effect
from time to time.
"Selling Expenses" means all underwriting discounts, selling commissions,
and stock transfer taxes applicable to the sale of Registrable Securities and
fees and disbursements of counsel for the Holder (other than the fees and
disbursements of counsel included in Registration Expenses).
"Termination Date" is defined in Section 4.5 hereof.
"Voting Common Stock" means the Voting Common Stock, par value $.01 per
share, of the Company.
"Warrant" means this Warrant and any warrant delivered in substitution or
exchange therefor as provided herein.
"Warrant Shares" means the shares of Voting Common Stock issuable upon
exercise of this Warrant.
2. Exercise Of Warrant.
2.1 Procedure for Exercise; Payment. Subject to compliance with the terms and
conditions of this Warrant, this Warrant may be exercised, in whole or in
part, at any time or from time to time, on or after the Effective Date and
on or before the Expiration Date (the "Exercise Date") by the delivery
(including, without limitation, delivery by facsimile) to the Company at
the principal executive office of the Company of (i) the form of Notice of
Exercise attached hereto as Exhibit 1 (the "Notice of Exercise"), duly
executed by the Holder, (ii) this Warrant, and (iii) payment in cash, by
certified or official bank check payable to the order of the Company, by
wire transfer of immediately available funds, or in a combination thereof,
of an amount equal to the product obtained by multiplying the number of
Warrant Shares being purchased upon such exercise by the then effective
Exercise Price. As an alternative to paying the amount required by clause
(iii) of the preceding sentence, this Warrant (or any portion hereof) may,
at the election of the Holder, be converted into the nearest whole number
of Warrant Shares equal to: (x) the product of (A) the number of Warrant
Shares subject to this Warrant (or the part of thereof to be exercised) and
(B) the excess, if any, of (1) the Fair Market Value per Warrant Share as
of the Exercise Date over (2) the Exercise Price (as adjusted on the
Exercise Date), divided by (z) the Fair Market Value per Warrant Share as
of the Exercise Date.
2.2 Stock Certificates; Fractional Shares. As soon as practicable after the
Exercise Date, the Company will issue and deliver to the Person entitled to
receive the same a certificate or certificates for the number of whole
Warrant Shares issuable upon such exercise, together with cash in lieu of
any fraction of a Warrant Share equal to such fraction of the current Fair
Market Value of one share of Voting Common Stock as of the date of exercise
of this Warrant. No fractional Warrant Shares or scrip representing
fractional Warrant Shares will be issued.
2.3. Partial Exercise; Effective Date of Exercise. In case of any partial
exercise of this Warrant, the Company will cancel this Warrant upon
surrender hereof and will execute and deliver a new Warrant of like tenor
and date for the balance of the Warrant Shares. This Warrant will be deemed
to have been exercised immediately prior to the close of business on the
Exercise Date. The Person entitled to receive the Warrant Shares will be
treated for all purposes as the holder of record of such shares as of the
close of business on the Exercise Date.
3. Valid Issuance; Taxes. The Company will pay all taxes and other
governmental charges that may be imposed in respect of the issue or
delivery thereof. The Company will not be required to pay any tax or other
charge imposed in connection with any transfer involved in the issuance of
any certificate for Warrant Shares in any name other than that of the
Registered Holder of this Warrant, and in such case the Company will not be
required to issue or deliver any stock certificate or security until such
tax or other charge has been paid, or it has been established to the
Company's reasonable satisfaction that no tax or other charge is due.
4. Adjustment Of Exercise Price And Number Of Shares. The number of Warrant
Shares issuable upon exercise of this Warrant and the Exercise Price are
subject to adjustment upon occurrence of the following events:
4.1 Adjustment for Stock Splits, Stock Subdivisions or Combinations of Shares.
The Exercise Price will be proportionally decreased and the number of
Warrant Shares issuable upon exercise of this Warrant (or any shares of
stock or other securities at the time issuable upon exercise of this
Warrant) will be proportionally increased to reflect any stock split or
subdivision of the Common Stock. The Exercise Price will be proportionally
increased and the number of Warrant Shares issuable upon exercise of this
Warrant will be proportionally decreased to reflect any combination of the
Company's Common Stock.
4.2 Adjustment for Dividends or Distributions of Stock or Other Securities or
Property. In case the Company will make or issue, or will fix a record date
for the determination of eligible holders entitled to receive, a dividend
or other distribution with respect to the Common Stock payable in: (i)
securities of the Company or (ii) assets (excluding cash dividends paid or
payable solely out of retained earnings), then, in each such case, the
Holder upon exercise hereof at any time after the consummation, effective
date or record date of such dividend or other distribution, will receive,
in addition to the Warrant Shares issuable on such exercise prior to such
date, and without the payment of additional consideration therefor, the
securities or such other assets of the Company to which such Holder would
have been entitled upon such date if such Holder had exercised this Warrant
on the date hereof and had thereafter, during the period from the date
hereof to and including the date of such exercise, retained such shares
and/or all other additional stock available by it as aforesaid during such
period giving effect to all adjustments called for by this Section 4.
4.3 Reclassification. If the Company, by reclassification of securities or
otherwise, will change any of the securities as to which purchase rights
under this Warrant exist into the same or a different number of securities
of any other class or classes, this Warrant will thereafter represent the
right to acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Warrant immediately prior to
such reclassification or other change and the Exercise Price therefor will
be appropriately adjusted, all subject to further adjustment as provided in
this Section 4. No adjustment will be made pursuant to this Section 4.3
upon any conversion or redemption of the Common Stock, which is the subject
of Section 4.5.
4.4 Adjustment for Capital Reorganization, Merger or Consolidation. In case of
any capital reorganization of the capital stock of the Company (other than
a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), or any merger or consolidation of the
Company with or into another Person, or the sale of all or substantially
all the assets of the Company then, and in each such case, as a part of
such reorganization, merger, consolidation, sale, or transfer, lawful
provision will be made so that the Holder will thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein
and upon payment of the Exercise Price then in effect, the number of shares
of stock or other securities or property of the successor Person resulting
from such reorganization, merger, consolidation, sale, or transfer that a
holder of the shares deliverable upon exercise of this Warrant would have
been entitled to receive in such reorganization, consolidation, merger,
sale, or transfer if this Warrant had been exercised immediately before
such reorganization, merger, consolidation, sale, or transfer, all subject
to further adjustment as provided in this Section 4. The foregoing
provisions of this Section 4.4 will similarly apply to successive
reorganizations, consolidations, mergers, sales, and transfers, and to the
stock or securities of any other Person that are at the time receivable
upon the exercise of this Warrant. If the per-share consideration payable
to the Holder for shares in connection with any such transaction is in a
form other than cash or marketable securities, then the value of such
consideration will be determined in good faith by the Board. In all events,
appropriate adjustment (as determined in good faith by the Board) will be
made in the application of the provisions of this Warrant with respect to
the rights and interests of the Holder after the transaction, to the end
that the provisions of this Warrant will be applicable after that event, as
near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
4.5 Conversion and Reclassification of Common Stock. In case all or any portion
of the authorized and outstanding shares of Common Stock of the Company are
redeemed or converted or reclassified into other securities or property
pursuant to the Company's Restated Certificate or otherwise, or the Common
Stock otherwise ceases to exist, then, in such case, the Holder of this
Warrant, upon exercise hereof at any time after the date on which the
Common Stock is so redeemed or converted, reclassified or ceases to exist
(the "Termination Date"), will receive, in lieu of the Warrant Shares that
would have been issuable upon such exercise immediately prior to the
Termination Date, the securities or property that would have been received
if this Warrant had been exercised in full and the Common Stock received
thereupon had been simultaneously converted immediately prior to the
Termination Date, all subject to further adjustment as provided in this
Warrant. Additionally, the Exercise Price will be immediately adjusted to
equal the quotient obtained by dividing (x) the aggregate Exercise Price of
the maximum number of Warrant Shares issuable immediately prior to the
Termination Date by (y) the number of Warrant Shares for which this Warrant
is exercisable immediately after the Termination Date, all subject to
further adjustment as provided herein. Notwithstanding the foregoing, the
conversion of Non-Voting Common Stock into shares of Voting Common Stock in
accordance with the terms of the Restated Certificate shall not give rise
to an adjustment of the Exercise Price or an adjustment of the number of
Warrant Shares issuable upon the exercise of this Warrant.
5. Certificate As To Adjustments. In each case of any adjustment in the
Exercise Price or number of Warrant Shares issuable upon exercise of this
Warrant, an officer of the Company will compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment and showing in detail the facts upon which such
adjustment is based, including a statement of the adjusted Exercise Price.
The Company will promptly send (by facsimile and by either first class
mail, postage prepaid or overnight delivery) a copy of each such
certificate to the Holder.
6. Restrictions on Transfer.
6.1 Transfer of Warrants.
(a) Restrictions on Transfer. Except with respect to transfers to an
Affiliate, the Holder will not sell or otherwise transfer this Warrant or any
part thereof without the prior written consent of the Company, which shall not
be unreasonably withheld; provided, however, that (i) if the Holder desires to
transfer all or any portion of the Warrant to a proposed transferee (other than
an Affiliate) who is, or upon exercise of the Warrant would become, a 5% Holder,
the Holder must notify the Company in writing of the proposed transfer and
furnish the Company with a detailed statement of the circumstances surrounding
the proposed disposition (including, without limitation, the identity of and
background information regarding any potential 5% Holder); and (ii) that the
consent of the Company may be withheld if, in the good faith judgment of the
Board, there is a substantial risk that a potential 5% Holder would use its
resulting position as a shareholder of the Company to inflict harm on any of the
Company, its management, employees, shareholders, bankers, advisors, service
providers, market-makers or those who trade or make a market in the Company's
securities. This Warrant may be transferred and assigned by the Holder only on
or after the Effective Date and only if the Company shall have received an
opinion of the Holder's counsel, at Holder's expense, reasonably satisfactory to
the Company to the effect that the Warrants may be transferred without
registration or qualification under the Securities Act and other applicable
state and federal laws. Any transfers not made in compliance with this Section 6
shall be null and void, and the Company shall not in any way give effect to such
transfer.
(b) Transfer And Exchange. Subject to the provisions of Section 6.1(a),
this Warrant and all rights hereunder may be transferred to any Person, in whole
or in part, on the books of the Company, by the Registered Holder hereof in
person, or by duly authorized attorney, upon delivery of this Warrant, properly
endorsed, together with the form of assignment attached hereto as Exhibit 2,
properly completed and executed by the Registered Holder, and payment of any
necessary transfer tax or other governmental charge imposed upon such transfer
to the Company. Upon any permitted partial transfer, the Company will issue and
deliver to the Registered Holder a new Warrant or Warrants with respect to the
portion of this Warrant not so transferred in substantially the same form as
this Warrant. Each taker and holder of this Warrant, by taking or holding the
same, consents and agrees that when this Warrant will have been so endorsed, the
Person in possession of this Warrant may be treated by the Company and all other
Persons dealing with this Warrant, as the absolute owner hereof for any purpose,
as the Person entitled to exercise the rights represented hereby, any notice to
the contrary notwithstanding, and as the Registered Holder; provided, however,
that until a transfer of this Warrant is duly registered on the books of the
Company, the Company may treat the Registered Holder hereof as the owner for all
purposes.
6.2 Restrictions on Transfer of Warrant Shares.
(a) Each Holder agrees not to make any disposition of all or any portion of
the Warrant Shares unless and until one of the conditions set forth in clauses
(i), (ii) and (iii) below has been satisfied. Any attempted disposition not made
in compliance with this Section 6.2 shall be null and void, and the Company
shall not in any way give effect to such disposition.
(i) A registration statement under the Securities Act covering such
proposed disposition must then be in effect and such disposition must be made in
accordance with such registration statement;
(ii) Such disposition is effected in compliance with Rule 144; provided,
however, that the Holder shall deliver an opinion of counsel, at such Holder's
expense and reasonably satisfactory to the Company, that such disposition
satisfies the requirements of Rule 144; or
(iii) (A) The Holder shall have (x) notified the Company in writing of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition and (y)
furnished the Company with an opinion of counsel, at such Holder's expense,
reasonably satisfactory to the Company, that such disposition will not require
registration of such shares under the Securities Act and (B) the transferee
shall have agreed in writing for the benefit of the Company to be bound by this
Section 6.2.
Notwithstanding the conditions contained in Section 6.2(a)(i) and Section
6.2(a)(ii), no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder that is (A) to an Affiliate; (B) to the
Holder's family members or a trust for the benefit of an individual Holder or
such Holder's family members; or (C) intended as a bona fide gift made by such
Holder; provided that in each case, (x) the Holder shall provide written notice
to the Company of such transfer or gift and (y) the transferee shall have agreed
in writing for the benefit of the Company to be bound by this Section 6.2.
(b) The Holder agrees not to make any disposition of all or any portion of
such Holder's Warrant Shares (other than in a sale of Registrable Securities in
a registered public transaction in a securities market in which the Registrable
Securities are traded) to a proposed transferee (other than an Affiliate) who
after such transfer would be a 5% Holder and who was not a 5% Holder before such
transfer, unless and until such Holder shall have (i) notified the Company in
writing of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition
(including, without limitation, the identity of and background information
regarding any 5% Holder), and (ii) received a written notice from the Company
approving such disposition; provided that the approval of the Company may be
withheld if, in the good faith judgment of the Company's Board of Directors,
there is a substantial risk that a 5% Holder would use its resulting position as
a shareholder of the Company to inflict harm on any of the Company, its
management, employees, shareholders, bankers, advisors, service providers,
market-makers or those who trade or make a market in the Company's securities.
(c) Each certificate representing Warrant Shares shall (unless otherwise
permitted by the provisions of this Agreement) be stamped or otherwise imprinted
with a legend substantially similar to the following (in addition to any legend
required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED,
SOLD, OR OTHERWISE TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE, OR OTHER
TRANSFER, PLEDGE, OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND TO A LOCK-UP PERIOD OF UP TO 180 DAYS AFTER
THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER
THE ACT, AS SET FORTH IN A WARRANT PURSUANT TO WHICH THESE SHARES WERE
ORIGINALLY ISSUED BY THE COMPANY, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE COMPANY. SUCH RESTRICTIONS AND LOCK-UP PERIOD IS
BINDING ON TRANSFEREES OF THESE SHARES.
(d) At the request of the Holder, the Company shall be obligated to
promptly re-issue certificates without the legends specified above if the Holder
shall have (i) obtained and delivered to the Company an opinion of counsel at
such Holder's expense (which counsel may be counsel to the Company) reasonably
satisfactory to the Company to the effect that the securities proposed to be
disposed of may lawfully be so disposed of without registration, qualification,
or legend and (ii) delivered such securities to the Company or its transfer
agent.
(e) Any legend endorsed on a certificate pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon the Company's receipt of an order of the
appropriate blue sky authority authorizing such removal.
7. Registration Rights.
7.1 Piggyback Registration Rights.
(a) If the Company determines to register any of the Company's securities
either for the Company's own account or the account of a security holder or
holders of Includable Securities ("Other Stockholders"), other than a
registration relating solely to employee benefit plans or a registration
relating to a corporate reorganization or other transaction on Form S-4, then
the Company will:
(i) promptly give to the Holder written notice thereof at least 20 days
before filing any such registration statement; and
(ii) use its commercially reasonable efforts to include in such
registration (and any related qualification under blue sky laws or other
compliance), except as set forth in Section 7.1(b), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made by the Holder and received by the Company within 20 days after
the written notice from the Company described in clause (i) above is delivered
by the Company. Such written request may specify all or a part of the Holder's
Registrable Securities. If the Holder decides not to include all of such
Holder's Registrable Securities in such registration statement, then such Holder
shall continue to have the right to include any Registrable Securities held by
it in any subsequent registration statement or registration statements as may be
filed by the Company with respect to offerings of the Company's securities, all
upon the terms and conditions set forth herein.
(b) If the registration for which the Company gives notice is for a
registered public offering involving an underwriting, then the Company shall so
advise the Holder as a part of the written notice given pursuant to Section
7.1(a)(i). In such event, the right of the Holder to registration pursuant to
this Section 7.1 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall (together with the
Company and the other holders of securities of the Company with registration
rights to participate therein distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 7.1, if the
underwriters' representative advises the Company in good faith and in writing
(which notice the Company, in turn, shall promptly provide to all Holders
requesting registration) that marketing factors require a limitation on the
number of shares to be underwritten, then the representative may (subject to the
limitations set forth below) exclude all Registrable Securities from, or limit
the number of Registrable Securities to be included in, the registration and
underwriting. The Company shall so advise all holders of securities requesting
registration, and the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated first to the
Company for securities being sold for the Company's own account and thereafter
as set forth in Section 7.10. If any Person does not agree to the terms of any
such underwriting, then such Person shall be excluded from the underwriting by
written notice from the Company or the underwriter. Any Registrable Securities
or other securities excluded or withdrawn from such underwriting in accordance
with the terms hereof shall be withdrawn from such registration. To facilitate
the allocation of shares in accordance with the foregoing provisions, the
Company or the underwriter(s) may round the number of shares allocated to any
Holder to the nearest 100 shares.
If shares are excluded because a Person does not agree to the terms of any
such underwriting, then the Company shall offer to all Persons who have retained
the right to include securities in the registration the right to include
additional securities in the registration in an aggregate amount equal to the
number of shares so excluded, with such shares to be allocated among the persons
requesting additional inclusion in accordance with Section 7.10.Right to
Terminate Registration. The Company shall have the right to terminate or
withdraw any registration initiated by the Company under this Section 7.1 before
the effectiveness of such registration whether or not the Holder has elected to
include Registrable Securities in such registration.
(c) Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification, or compliance pursuant to
Section 7.1 shall be borne by the Company and all Registration Expenses incurred
in connection with any registration on Form S-3 pursuant to Section 7.3 shall be
borne by the Holders requesting registration. All Selling Expenses relating to
securities so registered shall be borne by the Holders of such securities pro
rata on the basis of the number of shares of securities so registered on their
behalf, as shall any other expenses in connection with the registration required
to be borne by the Holders of such securities.
7.3 Registration on Form S-3.
(a) The Company shall use its commercially reasonable efforts to qualify
for registration on Form S-3 or any comparable or successor form or forms. After
the Company has qualified for the use of Form S-3, in addition to the rights
contained in the foregoing provisions of this Section 7, the Company shall
effect one registration on Form S-3 if requested by the Holders of at least a
majority of the Registrable Securities (the "Requesting Holders") (such requests
shall be in writing and shall state the number of shares to be disposed of and
the intended methods of disposition of such Includable Securities by the holder
thereof); provided, however, that the Company shall not be obligated to effect
any such registration (i) if the Holders, together with the Other Stockholders,
if any, propose to sell Registrable Securities and such Includable Securities,
if any, on Form S-3 at an aggregate price to the public of less than $500,000;
(ii) in any particular jurisdiction in which the Company would be required to
execute a general consent to service of process in effecting such registration,
unless the Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act; or (iii) during the period starting
with the date 60 days before the Company's good faith estimate of the date of
filing of, and ending on a date 180 days after the effective date of, a
Company-initiated registration; provided that the Company is actively employing
in good faith all reasonable efforts to cause such registration statement to
become effective. The Company shall use commercially reasonable efforts to keep
the Form S-3 registration statement filed pursuant to this Section 7.3(a) for up
to 180 days if requested by the Requesting Holders (excepting blackout periods
required by law or the Company's inside trading policy.)
(b) If a request complying with the requirements of Section 7.3(a) is
delivered to the Company, then the Company will,
(i) promptly give written notice of the proposed registration to all other
holders of Includable Securities; and
(ii) use its commercially reasonable efforts to effect such registration as
soon as practicable (including, without limitation, by filing post-effective
amendments, appropriate qualifications under applicable blue sky or other state
securities laws, and appropriate compliance with the Securities Act) and as
would permit or facilitate the sale and distribution of all or such portion of
such Registrable Securities as are specified in such request, together with all
or such portion of any Includable Securities of any Person joining in such
request as are specified in a written request received by the Company within 20
days after such written notice from the Company is delivered. Notwithstanding
anything to the contrary contained in this Agreement, if the registration
requested is to be an underwritten offering and if the underwriters have not
limited the number of Registrable Securities to be underwritten, then the
Company shall be entitled, at the Company's election, to join in any such
registration with respect to securities to be offered by the Company or by any
other party.
(c) If the registration is for an underwritten offering, then the Company
shall so advise the Holders as a part of the written notice given pursuant to
Section 7.3(b)(i). In such event, the right of any Holder, any Other Stockholder
or the Company to registration pursuant to this Section 7.3 shall be conditioned
upon such Person's participation in such underwriting and the inclusion of such
Person's securities in the underwriting to the extent provided herein. All
Holders, Other Stockholders and the Company proposing to distribute their
securities through such underwriting shall enter into an underwriting agreement
in customary form with the representative of the underwriter or underwriters
selected by the Requesting Holders.
Notwithstanding any other provision of this Section 7.3, if the
underwriters' representative advises the Requesting Holders in good faith and in
writing (which notice the Requesting Holders, in turn, shall promptly provide to
the Company requesting registration) that marketing factors require a limitation
on the number of shares to be underwritten, then the representative may (subject
to the limitations set forth below) exclude all securities from, or limit the
number of securities to be included in, the registration and underwriting. The
Company shall so advise all holders of securities requesting registration, and
the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated first, to the Requesting
Holders, second, to the Company for securities being sold for the Company's own
account and thereafter, as set forth in Section 7.10. If any Person does not
agree to the terms of any such underwriting, then such Person shall be excluded
from the underwriting by written notice from the Company or the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting in accordance with the terms hereof shall be withdrawn from such
registration. To facilitate the allocation of shares in accordance with the
foregoing provisions, the Company or the underwriter(s) may round the number of
shares allocated to any Holder or Other Stockholder to the nearest 100 shares.
If shares are excluded because a Person does not agree to the terms of any
such underwriting, then the Company shall offer to all Persons who have retained
the right to include securities in the registration the right to include
additional securities in the registration in an aggregate amount equal to the
number of shares so excluded, with such shares to be allocated among the Persons
requesting additional inclusion in accordance with Section 7.10.
(d) The Requesting Holders shall have the right to terminate or withdraw
any registration initiated by them under this Section 7.3 before the
effectiveness of such registration whether or not the Company or any Other
Stockholder has elected to include securities in such registration; provided
that if the Requesting Holders shall pay for all Registration Expenses in
connection with such terminated or withdrawn registration, such registration
shall not count for purposes of this Section 7.3.
7.4 Registration Procedures. In the case of each registration effected by the
Company pursuant to this Section 7, the Company will keep the Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At the Company's expense, the Company will use its
commercially reasonable efforts to:
(a) keep such registration effective for a period of 60 days (or, in the
case of a registration on Form S-3, up to 180 days, if so requested by the
Requesting Holders pursuant to Section 7.3(a)) or until the Holder has completed
the distribution described in the registration statement relating thereto,
whichever occurs first;
(b) prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement;
(c) furnish such number of prospectuses, including preliminary
prospectuses, and other documents incident thereto, including any amendment or
supplement to the prospectus, as a Holder from time to time may reasonably
request;
(d) cause all such Registrable Securities registered pursuant under this
Agreement to be listed on each securities exchange on which similar securities
issued by the Company are then listed or eligible for quotation on the OTCBB or
Other OTC Market, as the case may be;
(e) use commercially reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities
laws or blue sky laws of such jurisdictions as shall be reasonably requested by
the Holder; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions; and
(f) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the occurrence of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
7.5 Indemnification.
(a) The Company will indemnify each Holder, each of its officers,
directors, partners, members, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to any registration, qualification, or compliance that has been
effected pursuant to this Section 7, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses (including any legal or other expenses
reasonably incurred in connection with investigating and defending or settling
any such claim, loss, damage, liability, or action), claims, losses, damages,
and liabilities (or actions, proceedings, or settlements in respect thereof) (a
"Loss" or the "Losses") arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus (including any preliminary prospectus), offering circular,
or other document incident to any such registration, qualification, or
compliance pursuant to this Section 7, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance; provided
that the Company will not be liable in any such case to the extent that any such
Loss arises out of or is based on any untrue statement or omission based upon
written information furnished to the Company by such Holder or underwriter and
stated to be specifically for use therein. The indemnity agreement contained in
this Section 7.5(a) shall not apply to amounts paid in settlement of any such
Loss if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld).
(b) Each Holder will, severally and not jointly, if Registrable Securities
held by such Holder are included in the securities as to which registration,
qualification, or compliance is being effected pursuant to this Section 7,
indemnify the Company, each of its directors, officers, partners, members, legal
counsel, and accountants and each underwriter, if any, of the Company's
securities covered by such registration statement, each person who controls the
Company or such underwriter within the meaning of Section 15 of the Securities
Act, each other Holder and Other Stockholders, and each of their respective
officers, directors, partners, members, legal counsel and accountants and each
person controlling such Holder or Other Stockholder, against all Losses arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus (including any
preliminary prospectus), offering circular, or other document incident to any
such registration, qualification or compliance pursuant to this Section 7, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus (including any preliminary
prospectus), offering circular, or other document incident to any such
registration, qualification or compliance in reliance upon and in conformity
with written information furnished to the Company by such Holder and stated to
be specifically for use therein. The indemnity agreement contained in this
Section 7.5(b) shall not apply to amounts paid in settlement of any such Loss if
such settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld) and in no event shall any indemnity under
this Section 7.5(b) exceed the gross proceeds from the offering received by such
Holder.
(c) Each Party entitled to indemnification under this Section 7.5 (the
"Indemnified Party") shall give notice to the Party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at the Indemnified Party's own expense; and provided, further, that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 3, to the
extent such failure is not materially prejudicial. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect of such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 7.5 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any Loss referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such Loss in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand, and of the Indemnified Party on the other, in connection
with the statements or omissions that resulted in such Loss as well as any other
relevant equitable considerations. The relative fault of the Indemnifying Party
and of the Indemnified Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the Parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with an underwritten public offering are in conflict with the
provisions of this Section 7.5, the provisions in the underwriting agreement
shall control.
7.6 Information by Holder. Each Holder of Registrable Securities shall furnish
to the Company such information regarding such Holder and the distribution
proposed by such Holder as the Company may reasonably request in writing
and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 7.
7.7 Rule 144 Reporting. With a view to making available the benefits of certain
rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public without registration, the Company
agrees to use its commercially reasonable efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after the effective date of the
first registration filed by the Company for an offering of the Company's
securities to the general public;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
at any time after the Company has become subject to such reporting requirements;
and
(c) so long as a Holder owns any Restricted Securities, furnish to the
Holder promptly upon written request (i) a written statement by the Company as
to the Company's compliance with the reporting requirements of Rule 144 (at any
time from and after 90 days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public) and of the Securities Act and the Exchange Act (at any time
after the Company has become subject to such reporting requirements); (ii) a
copy of the most recent annual or quarterly report of the Company; and (iii)
such other reports and documents so filed as a Holder may reasonably request in
availing itself of any rule or regulation of the Securities Act allowing such
Holder to sell any such securities without registration.
7.8 Transfer or Assignment of Rights. The rights to cause the Company to
register securities granted to a Holder by the Company under this Section 7
may be transferred or assigned by a Holder only to a transferee or assignee
who, after such transfer, holds at least 100,000 shares of Registrable
Securities (as presently constituted and subject to subsequent adjustments
for stock splits, stock dividends, reverse stock splits, and similar
reclassifications affecting the Company's equity securities); provided that
such Holder gives the Company written notice at least 15 days prior to such
transfer or assignment, stating the name and address of the transferee or
assignee and identifying the securities with respect to which such
registration rights are being transferred or assigned, and the Company
provides such Holder with written notice of its approval of such transfer
or assignment within 10 days of its receipt of such notice; and, provided,
further, that the transferee or assignee of such rights assumes in writing
the obligations of such Holder under this Section 7.
7.9 Lock-Up Agreement. If requested by the Company and an underwriter of
securities of the Company in connection with an offering in which the
Holder participates as a selling stockholder, the Holder shall not sell or
otherwise transfer or dispose of any securities of the Company held by the
Holder (other than those included in the registration or in a transfer made
pursuant to Section 6.2 hereof) during the 180-day period after the
effective date of a registration statement filed by the Company under the
Securities Act for such offering; provided that such restrictions are
imposed on all other persons holding securities of the Company that were
acquired from the Company in transactions not involving public offerings
and in which such persons received registration rights. The obligations
described in this Section 7.9 shall not apply to a registration relating
solely to employee benefit plans or a registration relating solely to a
corporate reorganization or other transaction on Form S-4 or similar forms
that may be promulgated in the future. The Company may impose stop-transfer
instructions and may stamp each such certificate with the second legend set
forth in Section 6.2(b) with respect to the shares of securities subject to
the foregoing restriction until the end of such 180-day period. The Holder
agrees to execute a market standoff agreement with such underwriters in
customary form consistent with the provisions of this Section 7.9. This
Section 7.9 shall expire on the second anniversary of the Company's first
registered public offering.
7.10 Allocation of Registration Opportunities. Except as otherwise provided
herein, if Holders exercise registration rights under this Section 7 and
all of the Registrable Securities and Includable Securities requested to be
included in a registration on behalf of the Holders or Other Stockholders
cannot be so included as a result of limitations on the aggregate number of
shares of Registrable Securities and Includable Securities that may be so
included, then the number of shares of Registrable Securities that may be
so included shall be allocated among the Holders and Other Stockholders pro
rata on the basis of the number of shares of Registrable Securities and
Includable Securities held by such Holders and Other Stockholders;
provided, however, that if any Holder or Other Stockholder does not request
inclusion of at least the number of shares of Registrable Securities
allocated to such Holder or Other Stockholder pursuant to the foregoing
procedure, then the remaining portion of such Holder's or Other
Stockholder's allocation shall be reallocated among the Requesting Holders
or Other Stockholders whose allocations did not satisfy their requests pro
rata on the basis of the number of shares of Registrable Securities and
Includable Securities held by such Holders and Other Stockholders, and this
procedure shall be repeated until all of the shares of Registrable
Securities that may be included in the registration on behalf of the
Holders and Other Stockholders have been so allocated. The Company shall
not limit the number of Registrable Securities to be included in a
registration pursuant to this Agreement in order to include Other Shares or
shares held by stockholders with no registration rights or to include
shares of stock held by other employees, officers, directors, or
consultants pursuant to any Company stock option plan or otherwise.
7.11 Delay of Registration. No Holder shall have any right to take any action to
restrain, enjoin, or otherwise delay any registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 7.
7.12 Termination of Registration Rights. The right of any Holder to request
registration or inclusion in any registration pursuant to Section 7.1 shall
terminate one year after the Expiration Date.
8. Loss Or Mutilation. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation
of this Warrant, and of indemnity reasonably satisfactory to it, and (in
the case of mutilation) upon surrender and cancellation of this Warrant,
the Company will execute and deliver in lieu thereof a new Warrant of like
tenor as the lost, stolen, destroyed or mutilated Warrant.
9. Reservation Of Voting Common Stock. The Company hereby covenants that at
all times there will be reserved for issuance and delivery upon exercise of
this Warrant such number of shares of Voting Common Stock or other shares
of capital stock of the Company as are from time to time issuable upon
exercise of this Warrant and, from time to time, will take all steps
necessary to amend the Restated Certificate to provide sufficient reserves
of shares of Voting Common Stock issuable upon exercise of this Warrant.
All such shares will be duly authorized, and when issued upon such
exercise, will be validly issued, fully paid and non-assessable, free and
clear of all liens, security interests, charges and other encumbrances or
restrictions on sale and free and clear of all preemptive rights, except
encumbrances or restrictions arising hereunder or under federal or state
securities laws. Issuance of this Warrant will constitute full authority to
the Company's officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the
Warrant Shares.
10. Representations, Warranties and Covenants of the Holder. The Holder
represents, warrants and covenants as follows:
(a) Accredited Investor; Purchase for Own Account. The Holder is an
"accredited investor", as such term is defined in Section 501(a) of Regulation D
of the Rules and Regulations promulgated under the Securities Act. The Holder is
purchasing this Warrant solely for its own account and not for the interest of
any other or for resale or distribution to others.
(b) Private Offering. The Holder understands that (i) this Warrant and the
Warrant Shares have not been registered under the Securities Act, or the
securities laws of any state or other jurisdiction in reliance upon exemptions
from such registration requirements for non-public offerings and (ii) this
Warrant and the Warrant Shares may not be sold, pledged or otherwise transferred
unless they have been first registered under the Securities Act and all
applicable state securities laws, or unless exemptions from such registration
provisions are available with respect to said resale or transfer.
(c) Transfer Restrictions. The Holder will not attempt to sell, pledge or
otherwise transfer this Warrant and the Warrant Shares except in accordance with
the terms hereof.
(d) Investor Status. The Holder was not organized or reorganized for the
purpose of purchasing this Warrant or the Warrant Shares and is authorized,
empowered and qualified to execute this Warrant and to make the commitment as
herein contemplated. The Holder represents that it has made an investment
decision with respect to this Warrant and the Warrant Shares independent of any
investment decision made by any other person or entity purchasing shares of
Preferred Stock or Common Stock of the Company.
(e) Availability of Information and Opportunity to Ask Questions. The
Holder acknowledges that all documents, records and books pertaining to the
investment in the Company and requested by the Holder have been made available
or delivered to the Holder. The Holder has had an opportunity to ask questions
of and receive answers from the Company, or a person or persons acting on behalf
of the Company, concerning the terms and conditions of the offering and the
business (both current and proposed) of the Company. The Holder acknowledges
that all such questions, if any, have been answered to the full satisfaction of
the Holder.
(f) Certain Risks. The Holder is aware of and acknowledges the following:
(i) that the purchase of this Warrant and the Warrant Shares is a speculative
investment that involves a high degree of risk of loss by the Holder of its
entire investment in the Company; (ii) that there are substantial restrictions
on the transferability of this Warrant and the Warrant Shares, there will be no
public market for this Warrant or the Warrant Shares (until registered under the
Securities Act in accordance with the terms hereof) and the Holder may be
required to bear the financial risks of this investment for an indefinite period
of time; (iii) that no federal or state agency has made any finding or
determination regarding the fairness of this offering for investment, or any
recommendation or endorsement of this Warrant and the Warrant Shares; and (iv)
that neither the officers, directors, agents, affiliates or employees of the
Company, nor any other person, has expressly or by implication, made any
representation or warranty concerning the Company.
11. No Rights Or Liabilities As Stockholders. This Warrant will not entitle the
Holder to any voting rights or other rights as a stockholder of the
Company. In the absence of affirmative action by such Holder to purchase
the Voting Common Stock by exercise of this Warrant, no provisions of this
Warrant, and no enumeration herein of the rights or privileges of the
Holder hereof will cause such Holder hereof to be a stockholder of the
Company for any purpose.
12. Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, sent by facsimile, or otherwise delivered
by hand or by messenger addressed:
(a) if to the Holder, then to such Holder's address or facsimile number, as
set forth on the signature page hereof or as shown in the Company's records, as
may be updated in accordance with the provisions hereof;
(b) if to any other holder of any Warrant Shares, then to such address or
facsimile number, as shown in the Company's records, or, until any such holder
so furnishes an address or facsimile number to the Company, then to and at the
address of the last holder of such Warrant Shares for which the Company has
contact information in its records; or
(c) if to the Company, then one copy to the Company's address or facsimile
number set forth on the signature page hereof and addressed to the attention of
the Chief Financial Officer, or at such other address or facsimile number as the
Company shall have furnished to the Holder, with a copy (which shall not
constitute notice) to such counsel as the Company may designate by written
notice to the Holder in accordance with the provisions of this Section 12.
With respect to any notice given by the Company under any provision of the
Maryland General Corporation Law or the Restated Certificate or By-laws of the
Company, the Holder agrees that such notice may be given by facsimile.
Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or 72
hours after such communication has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
set forth above or, if sent by facsimile, upon confirmation of facsimile
transfer.
13. Headings. The headings in this Warrant are for purposes of convenience in
reference only, and will not be deemed to constitute a part hereof.
14. Law Governing. This Warrant will be construed and enforced in accordance
with, and governed by, the internal laws of the State of New York, without
regard to its conflict of laws rules.
15. No Impairment. The Company will not, by amendment of the Restated
Certificate or its By-laws, or through reorganization, consolidation,
merger, dissolution, issue or sale of securities, sale of assets or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking
of all such action as may be necessary or appropriate in order to protect
the rights of the Registered Holder of this Warrant against impairment.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of the Warrant Shares above the amount payable
herefore upon such exercise, and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and non-assessable shares of Voting Common Stock upon
exercise of this Warrant.
16. Notices Of Record Date. In case:
(a) the Company will take a record of the holders of its Common Stock (or
other stock or securities at the time receivable upon the exercise of this
Warrant), for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or
(b) of any consolidation or merger of the Company with or into another
Person, any capital reorganization of the Company, any reclassification of the
capital stock of the Company, or any conveyance of all or substantially all of
the assets of the Company to another Person in which holders of the Company's
stock are to receive stock, securities or property of another Person;
(c) of any voluntary dissolution, liquidation or winding-up of the Company;
or
(d) of any redemption or conversion of all outstanding Common Stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution, or right or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption, or conversion is to take place and the time, if any is
to be fixed, as of which the holders of record of Common Stock or (such stock or
securities as at the time are receivable upon the exercise of this Warrant),
will be entitled to exchange their shares of Common Stock (or such other stock
or securities), for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation, or winding-up. Such notice will be delivered at least
fifteen (15) days prior to the date therein specified.
17. Severability. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement will remain in full force and effect and
will in no way be affected, impaired, or invalidated.
18. Counterparts. For the convenience of the parties, any number of
counterparts of this Warrant may be executed by facsimile by the parties
hereto and each such executed counterpart will be, and will be deemed to
be, an original instrument.
19. No Inconsistent Agreements. The Company will not on or after the date of
this Warrant enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders of this Warrant or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent
with the rights granted to holders of the Company's securities under any
other agreements, except rights that have been waived.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date herein above first written.
THE COMPANY:
LIFE SCIENCES RESEARCH, INC.
By:
---------------------------------------
Title: Chief Financial Officer
Address for Notices:
Mettlers Road
East Millstone, NJ 08875
HOLDER:
FOCUSED HEALTHCARE PARTNERS LLC
By:
------------------------------
Title: Member
Address for Notices:
c/o Life Sciences Research, Inc.
Mettlers Road
East Millstone, NJ 08875
[SIGNATURE PAGE TO WARRANT]
EXHIBIT 1
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
LIFE SCIENCES RESEARCH, INC. WARRANT NO. S-7
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of Life Sciences Research, Inc., as provided for therein, and
(check the applicable box):
_
|_| Tenders herewith payment of the exercise price in full in the form of cash,
certified or official bank check, wire transfer of immediately available
funds, or in a combination thereof, in the amount of $____________ for
_________ shares of Voting Common Stock.
_
|_| Elects the cashless exercise option pursuant to Section 2.1 of the Warrant,
and accordingly requests delivery of a net of ______________ shares Voting
Common Stock, according to the following calculation:
X = Y (A-B) ( )= (____)[(_____)-(_____)]
------- -----------------------
A (_____)
Where X = the number of Warrant Shares to be issued to Holder.
Y = the number of Warrant Shares subject to this Warrant (or the part of
thereof to be exercised).
A = the Fair Market Value per Warrant Share on the Exercise Date.
B = Exercise Price (as adjusted on the Exercise Date).
Please issue a certificate or certificates for such securities in the name of,
and pay any cash for any fractional shares to (please print name, address and
social security number):
Name:
-----------------------------------------------------
Address:
-----------------------------------------------------
Signature:
-----------------------------------------------------
Note: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
If said number of shares will not be all the shares purchasable under the within
Warrant Certificate, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the shares purchasable thereunder
rounded up to the next higher whole number of shares.
EXHIBIT 2
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate) WARRANT NO. S-7 For
value received, hereby sells, assigns and transfers unto
________________________ the within Warrant Certificate, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ____________________________ attorney, to transfer said Warrant
Certificate on the books of the within-named Company with respect to the number
of Warrants set forth below, with full power of substitution in the premises:
------------------------------------------------------------------------------
|Name(s) of Assignee(s) | Address | # of Warrants |
|-------------------------|----------------------|-----------------------------|
| | | |
|-------------------------|----------------------|-----------------------------|
| | | |
|-------------------------|----------------------|-----------------------------|
| | | |
|-------------------------+----------------------|-----------------------------|
And if said number of Warrants will not be all the Warrants represented by the
Warrant Certificate, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the Warrants registered by said
Warrant Certificate.
Dated: _______________________
Signature: _______________________
Notice: The signature to the foregoing Assignment must correspond to the name as
written upon the face of this security in every particular, without alteration
or any change whatsoever; signature(s) must be guaranteed by an eligible
guarantor institution (banks, stock brokers, savings and loan associations and
credit unions with membership in an approved signature guarantee medallion
program) pursuant to Securities and Exchange Commission Rule 17Ad-15.
LIFE SCIENCES RESEARCH, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 11, 2002
VOTING COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Andrew Baker and Richard Michaelson, and
either of them, attorneys and proxies, with full power of substitution and
revocation to each, to vote, as designated below, all shares of Voting Common
Stock which the undersigned is entitled to vote, with all powers which the
undersigned would possess if personally present at the Annual Meeting (including
all adjournments thereof) of Stockholders of Life Sciences Research, Inc. to be
held on June 11, 2002 at 10:00 A.M., local time, at 53 St., Urbanicazion
Obarrio, Panama, Republic of Panama. The Board of Directors (with Mr. Baker
abstaining on Proposal 2) recommends a vote FOR all proposals.
1. Election of Directors.
____ FOR all nominees ____ WITHHOLD AUTHORITY
listed below to vote for all nominees
listed below.
Andrew Baker, Gabor Balthazar, John Caldwell, Kirby Cramer, Brian Cass.
Stockholders may withhold authority to vote for any nominee by lining
through or otherwise striking out the name of any nominee named above.
2. Approval of FHP Warrants
____ FOR ____ AGAINST ____ ABSTAIN
3. The Proxy is authorized to transact such other business as may properly
come before the meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is given, this proxy
will be voted FOR the election of each director named herein, FOR approval
of FHP Warrants and in the discretion of said Proxy on any other matter
which may come before the meeting or any adjournments thereof, except that
broker non-votes will not be entitled to vote, and will have no effect on
the vote with respect to the matter being considered.
Dated: ___________, 2002
--------------------------
--------------------------
Signature(s)
NOTE:When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, custodian, guardian or
corporate officer, please give your full title as such. If a corporation,
please sign full corporate name by President or other authorized officer.
If a partnership, please sign in partnership name by authorized person.
================================================================================
LIFE SCIENCES RESEARCH, INC.
VOTING INSTRUCTION FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 11, 2002
VOTING COMMON STOCK
Solicited on Behalf of the Administrator of the Huntingdon Life Sciences, Inc.
Savings and Investment Plan (the "401(k) Plan").
The undersigned participant hereby provides voting instructions to the
401(k) Plan Administrator to direct the Trustee of the 401(k) Plan (the
"Trustee") to vote, as designated below, all shares of Life Sciences Research,
Inc. Voting Common Stock which the undersigned owns through units as
participants in the 401(k) Plan, with all powers which the undersigned would
possess if personally present at the Annual Meeting (including all adjournments
thereof) of Stockholders of Life Sciences Research, Inc. to be held on June 11,
2002 at 10:00 A.M., local time, at 53 St., Urbanicazion Obarrio, Panama,
Republic of Panama. The Board of Directors (with Mr. Baker abstaining on
Proposal 2) recommends a vote FOR all proposals.
1. Election of Directors.
____ FOR all nominees ____ WITHHOLD AUTHORITY
listed below to vote for all nominees listed below.
Andrew Baker, Gabor Balthazar, John Caldwell, Kirby Cramer, Brian Cass.
Participants may withhold authority to vote for any nominee by lining
through or otherwise striking out the name of any nominee named above.
2. Approval of FHP Warrants
____ FOR ____ AGAINST ____ ABSTAIN
3. The Trustee is authorized to transact such other business as may properly
come before the meeting.
The undersigned hereby instructs the 401(k) Plan Administrator to direct
the Trustee to vote in accordance with the voting instructions indicated
above. If no direction is given, this proxy will be voted FOR the election
of each director named herein, FOR approval of FHP Warrants and in the
discretion of said Trustee on any other matter which may come before the
meeting or any adjournments thereof in the same percentages as indicated
with respect to 401(k) Plan shares for which Voting Instructions were
received.
Dated: ___________, 2002
--------------------------
--------------------------
Signature(s)
NOTE:When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, custodian, guardian or
corporate officer, please give your full title as such. If a corporation,
please sign full corporate name by President or other authorized officer.
If a partnership, please sign in partnership name by authorized person.