LIFE SCIENCES RESEARCH, INC.
METTLERS ROAD, P.O. BOX 2360
EAST MILLSTONE, NJ 08875
(732) 649-9961
November 4, 2004
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
December 2, 2004, 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 and (ii)
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 DECEMBER 2, 2004
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Life Sciences Research, Inc., a Maryland corporation (the
"Company" or "LSR"), will be held at 53 St., Urbanizacion Obarrio, Panama,
Republic of Panama on December 2, 2004 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. 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
November 1, 2004 (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.
PLEASE NOTE THAT YOU WILL NEED PROOF THAT YOU OWN LSR STOCK TO BE ADMITTED
TO THE MEETING.
The Meeting may be adjourned from time to time without notice other than
announcement at the Meeting and any business for which notice of the Meeting is
hereby given may be transacted at a reconvened meeting following such
adjournment.
Your attention is invited to the attached Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS:
Richard Michaelson
Secretary and Chief Financial Officer
Dated: November 4, 2004
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 December 2, 2004 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 November 4, 2004.
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 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. 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 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 November 24, 2004. 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 November 24,
2004 by filing with the proxy tabulators 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, if any, 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 November 1,
2004 (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
12,283,881 shares of LSR Common Stock issued and outstanding and entitled to
vote. The presence in person or by Proxy of the holders of at least a majority
of the outstanding shares of 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 (6 persons), who as of the Record Date beneficially owned of
record in the aggregate 3,271,450 (approximately 24.8%) of the outstanding
shares of Common Stock, have indicated that they intend to vote all such shares
FOR all of the proposals set forth herein.
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.
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.
Name and Age Principal Occupation
Andrew Baker-55 Andrew Baker was appointed to the Huntingdon Life
Sciences Group plc ("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 "Certain
Relationships and Transactions with Related Persons".
Gabor Balthazar-63 Gabor Balthazar was appointed to the Huntingdon Board as
the Senior Independent Non-Executive Director in March 2000. He became
a director of LSR on January 10, 2002. 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.
Brian Cass-57 Brian Cass, FCMA, CBE, 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. In June 2002, in recognition of his
contribution to science and professional achievement, Mr. Cass was
appointed by the Queen of England as a Commander in the Most Excellent
Order of the British Empire.
Afonso Junqueiras-48 Afonso Junqueiras became a director of LSR on January
15, 2003. He is a civil engineer and has been President and director
of a South American private civil engineering firm since 1997.
Richard Michaelson-52 Richard Michaelson became Chief Financial Officer and
Secretary of LSR effective January 10, 2002. Mr. Michaelson was
director of Strategic Finance of Huntingdon from September 1998 to
December 2001. He served as Senior Vice President of Unilab from
September 1997 to December 1997, Senior Vice President-Finance,
Treasurer and Chief Financial Officer of Unilab from February 1994 to
September 1997, and Vice President-Finance, Treasurer and Chief
Financial Officer of Unilab from November 1993 to February 1994. Mr.
Michaelson also served as Vice President of Unilab beginning in
October 1990. Mr. Michaelson joined MetPath, Inc., the clinical
laboratory subsidiary of Corning Incorporated, in 1980 and served as
Vice President of MetPath from 1983 and Treasurer of Corning Lab
Services, Inc. from 1990 through, in each case, September 1992.
Yaya Sesay-62 Yaya Sesay became a director of LSR on January 10, 2003. He
served as a senior government official of an African nation for
approximately 25 years, culminating in his service as Financial
Secretary of the Ministry of Finance for three years. For the past
five years, Mr. Sesay has been an international businessman with an
interest in the development of pharmaceutical products.
The Articles of Amendment and Restatement of LSR provide that the directors
shall be not less than one in number and there shall be no maximum number of
directors. Any director appointed by the Board of Directors holds office only
until the next following annual meeting, at which time he shall be eligible for
re-election by the stockholders. Directors may be removed from office only for
cause.
No director or executive officer has a family relationship with any other
director or executive officer.
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 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 LSR Percent of LSR
Name and Address of Common Stock Common Stock
Beneficial Owner Beneficially Owned Beneficially Owned
Mr. A. Baker 2,311,060 (1) 17.9%
Mr. G. Balthazar 20,000 (2) *
Mr. B. Cass 620,000 (3) 5.0%
Mr. A. Junqueiras -- --
Mr. R. Michaelson 320,390 (4) 2.6%
Mr. Y. Sesay -- --
All Directors and Executive 3,271,450 24.8%
Officers as a Group
* Signifies less than 1%. All percentages calculated on the basis of
12,283,881 outstanding shares of Common Stock. Shares subject to issuance
upon presently exercisable options or warrants are included in the number
of outstanding shares for purposes of calculating that holder's percentage
interest, as well as the aggregate percentage interest of all directors and
executive officers as a group.
(1) Includes presently exercisable options to purchase 200,000 shares and
presently exercisable warrants to purchase 410,914 shares. As of the Record
Date, 1,604,001 of such shares are beneficially owned by Focused Healthcare
Partners Ltd, a Bahamas corporation that is controlled by Mr. Baker. As of
the Record Date, 490,914 of such shares (including the 410,914 shares
subject to presently exercisable warrants noted above) are beneficially
owned by Focused Healthcare Partners LLC, a New Jersey limited liability
company that is controlled by Mr. Baker.
(2) Includes presently exercisable options to purchase 20,000 shares.
(3) Includes presently exercisable options to purchase 200,000 shares.
(4) Includes presently exercisable options to purchase 90,000 shares.
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 when 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 Baker 2,311,060 (2) 17.9%
c/o Life Sciences Research, Inc.
Mettlers Road
East Millstone, NJ 08875
Brian Cass 620,000 (3) 5.0%
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 12,283,881 shares of Common Stock outstanding as of the Record
Date.
(2) Mr. Baker is the Chairman and Chief Executive Officer of the Company.
Includes presently exercisable options to purchase 200,000 shares and
presently exercisable warrants to purchase 410,914 shares. As of the Record
Date, 1,604,001 of such shares are beneficially owned by Focused Healthcare
Partners Ltd, a Bahamas corporation that is controlled by Mr. Baker. As of
the Record Date, 490,914 of such shares (including the 410,914 shares
subject to presently exercisable warrants noted above) are beneficially
owned by Focused Healthcare Partners LLC, a New Jersey limited liability
company that is controlled by Mr. Baker. Based on Company records and a
Schedule 13D amendment filed by Mr. Baker on July 13, 2004.
(3) Mr. Cass is a director and President of the Company. Based on Company
records, a Form 4 filed by Mr. Cass on March 3, 2003 and a Schedule 13D
filed by Mr. Cass on March 3, 2003.
</FN>
Meetings and Committees of Board of Directors
Meetings of Board of Directors
During 2003 five (5) meetings of the Board of Directors of LSR were
convened. From January 1, 2004 to the date of this Proxy Statement, the Board of
Directors of LSR held an additional five (5) meetings. Each of the directors
attended all such meetings of the Board 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
retain and evaluate the Company's 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, Junqueiras and Sesay 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
four (4) meetings during 2003 and five (5) meetings during 2004 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, 2003 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 discussed with the Company's independent auditors for
the fiscal year ended December 31, 2003 Hugh Scott, the matters required to be
discussed by Statement on Auditing Standards No. 61, Communication with Audit
Committees, as amended. In addition, the Audit Committee discussed with Hugh
Scott 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 Hugh Scott the overall scope and plans for
their 2003 audit. The Committee met 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.
The Committee has selected Hugh Scott to conduct the Company's 2004 audit.
Representatives of Hugh Scott are not expected to attend the Annual Meeting.
Audit Fees of Independent Accountant
The aggregate fees billed for professional services rendered by Hugh Scott
for the audit of the Company's annual financial statements for fiscal year 2003
and for review of financial statements included in Form 10-Q filings were
$107,147.
Financial Information Systems Design and Implementation Fees
There were no fees billed for professional services rendered by Hugh Scott
for financial information systems design and implementation assistance for
fiscal year 2003.
Audit Related Fees
There were no fees billed for assurance and related services by Hugh Scott
in fiscal year 2003.
Tax Fees
Fees billed for tax compliance, tax advice and tax planning by Hugh Scott
in fiscal year 2003 were $10,155.
All Other Fees
There were no fees billed for services other than those reported above by
Hugh Scott in fiscal year 2003.
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.
Hugh Scott audited the Company's financial statements for the fiscal year
ended December 31, 2003 and has been retained to audit its financial statements
for the year ended December 31, 2003.
Determination of Prior Auditor Not to Stand for Reelection
Deloitte & Touche audited the Company's financial statements for the fiscal
year ended December 31, 2002. Deloitte & Touche declined to stand for
re-appointment as the Company's auditors following completion of the 2002 audit
because of harassment it received from animal rights extremists.
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)
Afonso Junqueiras
Yaya Sesay
Nominating Committee
The Company originally established a Nominating Committee in January 2002.
However, when the membership of the Board changed, the Board determined in March
2003 to discontinue the Nominating Committee, given the small size of the Board
(five members). There were therefore no meetings of the Nominating Committee in
2003. That determination was reconsidered and reversed in June 2004, when the
Nominating Committee was re-established.
The members of the Nominating Committee are Messrs. Sesay (Chairman),
Balthazar and Junqueiras.
The Committee makes recommendations to the Board on all matters relating to
the composition and membership of the Board, including development and
implementation of policies on composition, participation and size of the Board
and changes in the organization and procedures of the Board. The Committee
considers director nominees, including those submitted by shareholders. A copy
of the Nominating Committee Charter is attached as Annex B to this proxy
statement.
The Committee uses a variety of methods to identify and evaluate nominees
for director. The Committee regularly assesses the appropriate size of the
Board, and whether any vacancies on the Board are expected due to retirement or
otherwise. In the event that vacancies are anticipated, or otherwise arise, the
Committee considers various potential candidates for director. Candidates may
come to the attention of the Committee through current Board members,
professional search firms, shareholders or other persons. All candidates must
submit information regarding the nominee's background, board experience,
industry experience, independence, financial expertise, and other relevant
information and are interviewed by the Chairman of the Board and at least one
member of the Committee. These candidates are evaluated at regular or special
meetings of the Committee, and may be considered at any point during the year.
As described below, the Committee considers properly submitted shareholder
nominations for candidates for the Board. If any materials are provided by a
shareholder in connection with the nomination of a director candidate, such
materials are forwarded to the Committee. The Committee also reviews materials
provided by professional search firms or other parties in connection with a
nominee who is not proposed by a shareholder. In evaluating nominations, the
Committee seeks to recommend to shareholders a group that can best perpetuate
the success of the Company and represent shareholder interests through the
exercise of sound judgment using its diversity of experience in various areas.
The criteria for director nominees include: the candidate's professional
experience and personal accomplishments; the candidate's independence from the
Company and management; the ability of the candidate to attend Board and
committee meetings regularly and devote an appropriate amount of effort in
preparation for those meetings; the candidate's ability to function as a member
of a diverse group; and an understanding of the Company's business and industry.
The Committee will consider director candidates recommended by
shareholders. Recommendations for consideration for nominees at the annual
meeting of shareholders must be received not less than 120 days before the first
anniversary of the date of the Company's proxy statement released to
shareholders in conjunction with the previous year's meeting.
Code of Ethics
We maintain a code of ethics governing the conduct of our business and
behavior by all personnel including our Chief Executive Officer, President and
Chief Financial Officer. A copy of this code may be obtained by sending a
written request to P. O. Box 2360, Mettlers Road, East Millstone, NJ 08875,
Attention: Secretary.
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, Junqueiras and Sesay. Mr. Balthazar 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 one (1) meeting during
2003 and held two (2) meetings from January 1, 2004 through the date of this
Proxy Statement.
Compensation of Directors
Non-employee directors (Messrs. Balthazar, Junqueiras and Sesay) received
during 2003 an annual cash payment of $20,000 for their services as directors of
LSR, payable quarterly. Effective October 1, 2004, that annual payment was
increased to $25,000. In addition, the Chairman of each of the Compensation and
Nominating Committees receives an additional annual payment of $2,500. The
Chairman of the Audit Committee received during 2003 an annual payment of
$2,500, which was increased to $15,000, effective October 1, 2004, in view of
the increased responsibility and time commitment of such position. Messrs. Baker
and Cass receive no payment for services as a director because they are
employees of the Company. Directors receive no additional per-meeting payments.
Mr. Balthazar, as well as the other non-employee directors at the time
(none of whom is a current director), received on March 1, 2002, a grant of
ten-year options to purchase 20,000 shares of LSR Common Stock at an exercise
price of $1.50 per share. Each such option vested 50% on grant and 50% on the
first anniversary of the date of grant.
Each director is reimbursed for all travel expenses related to each meeting
of the Board or Committee that he attends in person.
Executive Compensation
In the 12 months ended December 31, 2003 the aggregate compensation of the
Executive Officers as a group, paid or accrued, was $1,194,388.
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 was paid during 2003 an annual
fee of (pound)200,000. That fee was increased to (pound)300,000 per year
effective September 1, 2004. Mr. Baker receives health and medical insurance
benefits from the Company. He is also entitled to a non-pensionable car
allowance of up to (pound)1,000 per month. 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 the Company) 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 received during 2003 a gross salary of (pound)200,000 per annum.
That salary was increased to (pound)300,000 per year effective September 1,
2004. Under the service agreement, Mr. Cass is also entitled to 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 and (pound)2,000
per month as relocation allowance. 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.
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 the
Company). 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 received during 2003 an annual salary of $250,000 gross,
increased to $300,000 per year effective September 1, 2004, and is entitled to
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.
Discretionary bonus plan
The Company operates a discretionary bonus plan for executive officers and
key managers based upon improvements to operating income and achievement of
pre-defined targets. No bonus awards were made in respect of 2001, 2002 or 2003.
The Compensation Committee approved as of June 1, 2004 a performance based
cash bonus award for executives. This award, issued under the Long Term
Incentive Plan (LTIP), will award cash compensation to select individuals if
certain performance goals relating to operations are reached by December 31,
2006. The amount of the award varies based upon the level of performance, with a
complete default of the award if minimum operating levels are not achieved.
The following table shows the remuneration of Executive Officers in any
given year in the 12 Months ended December 31, 2003, 2002, and 2001:
Summary Compensation Table Long Term Compensation
Awards
Name And Principal Year Salary (6) Bonus Other Annual Number Of Shares
Position Compensation (7) Underlying Options
Mr. A H Baker (1) 2003 $327,050 - 108,918 -
Chairman and Chief 2002 300,780 - 100,160 200,000
Executive Officer 2001 288,006 - 95,990 -
Mr. B Cass (2) 2003 327,080 - 175,843 -
Managing Director and 2002 300,780 - 160,327 200,000
President
2001 280,741 - 153,311 -
Mr. J T Griffiths (3) 2003 204,425 - 44,692 -
Finance Director of 2002 187,988 - 54,547 60,000
Huntingdon 2001 120,960 - 40,229 10,000
Mr. Richard A. Michaelson (4) 2003 222,108 - 18,633 -
CFO and Secretary 2002 196,923 - 11,917 90,000
Dr F W Bonner (5) 2003 141,945 - 13,817 -
Director of Science & 2002 221,073 - 20,053 30,000
Technology of Huntingdon 2001 211,680 - 20,395 10,000
<FN>
(1) Mr. Baker served as Executive Chairman of Huntingdon 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 Huntingdon since September
1998. He became President and Managing Director of LSR on January 10, 2002.
See "Employment Agreements - Brian Cass".
(3) Mr. Griffiths has served as Finance Director of Huntingdon since February
1999 and served as a Director of LSR from January 10, 2002 until June 11,
2002.
(4) Mr. Michaelson has served as Chief Financial Officer and Secretary of the
Company since January 10, 2002.
(5) Dr. Bonner served as Director of Science and Technology of Huntingdon from
September 1998 to March 2003 and as a Director of LSR from January 10, 2002
until June 11, 2002.
(6) All payments contained in this table were made in pounds sterling except
for payments made to Mr. Michaelson, which were in U.S. dollars. The
amounts listed were converted into U.S. dollars on the basis of an exchange
rate of $1.6354 to (pound)1.00 for 2003, $1.5039 for 2002 and $1.4403 for
2001.
(7) For Mr. Baker, represents the benefits from a contribution to a private
pension account and for 2003, a car allowance. 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. For Mr. Michaelson, represents the benefits from a car
allowance.
</FN>
Dr. Bonner and Mr. Griffiths served as directors of the Company from
January 10, 2002 but did not stand for re-election as directors of LSR at the
June 11, 2002 Annual Meeting of stockholders and accordingly ceased being
directors of LSR as of that date.
One officer (Mr. Griffiths).is a member of the Group Personal Pension Plan.
The other Directors' pension contributions are privately invested.
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 enables LSR to use 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 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 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 Compensation 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 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 Common Stock unconditionally vests and is at the disposal of
such participating personnel. The exercise price at which shares of 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 Common Stock
covered by such grant at the time of grant.
The number of shares of 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 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 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 favorable 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 key employees at the time:
Grants to Directors
-------------------
Name Number Granted
- ---- --------------
Gabor Balthazar 20,000
John Caldwell 20,000
Kirby Cramer 40,000
Grants to 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 March 2002 private
placement. Options to purchase an aggregate of 1,177,000 shares of LSR Common
Stock (including those specified above) were granted to employees and directors,
on the terms set forth above, are listed as follows:
Date of Grant Numbers Granted Exercise Price
- ------------- --------------- --------------
March 1, 2002 1,142,000 $1.50
September 3, 2002 20,000 $2.40
October 21, 2002 15,000 $2.03
In 2003, options to purchase an aggregate of 11,000 shares of LSR Common
Stock were issued, all at an exercise price of $1.80, the market price at the
date of grant:
Date of Grant Numbers Granted Exercise Price
- ------------- --------------- --------------
February 14, 2003 11,000 1.80
Securities Authorized for Issuance under 2001 Equity Plan
Number of securities
remaining available for
Shares Wtd Avg. Ex future issuance at
(000) Price December 31, 2003
----- ----- -----------------
<s> <c> <c> <c>
Outstanding at start of period 1,177 $1.52
Granted 11 $1.80
- ------------------------------------ -------------- ------------------- ----------------------------
December 31, 2003 1,188 $1.52 912,000
- ------------------------------------ -------------- ------------------- ----------------------------
Exercisable at end of year 1,188 $1.52
- ------------------------------------
Weighted average fair value of
options granted (000) $922
Huntingdon Life Sciences Group plc Stock Option Plan
Huntingdon Life Sciences Group plc issued options prior to December 31,
1997 pursuant to several stock option plans. However, the ability to exercise
options under all such Huntingdon plans lapsed on March 26, 2002 in connection
with LSR's acquisition of Huntingdon, except for those granted under the
Unapproved Stock Option Plan (the "Unapproved Plan"). Under the Unapproved Plan,
some options technically remain outstanding. However, such options are
exercisable only for shares of Huntingdon, a 100% wholly owned subsidiary of
LSR, and are considered to have no value.
Option Exercises and Fiscal Year-End Values
No options to purchase LSR ordinary shares were exercised by any persons
during the fiscal year ended December 31, 2003. The following table lists the
number and value of the unexercised options to purchase LSR shares held by the
Named Officers at December 31, 2003.
Number of Securities Value of Unexercised
Underlying Options In-the-Money Options
At Fiscal Year-End (#) At Fiscal Year-End ($) (1)
Shares Value
Acquired Value Exercisable Unexercisable Exercisable Unexercisable
Name on Exercise Realized ($)
Andrew Baker 0 0 200,000 0 196,000 0
Brian Cass 0 0 200,000 0 196,000 0
Frank Bonner 0 0 35,000 0 34,300 0
Julian Griffiths 0 0 60,000 0 58,800 0
Richard Michaelson 0 0 90,000 0 88,200 0
<FN>
(1) Represents the fair market value as of December 31, 2003 ($2.48 per share
closing stock price) of the option shares less the exercise price of the
options ($1.50 per share).
</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".
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 three 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. 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 Company's sale of approximately five million shares of
Common Stock in a private placement transaction in March 2002. Stock options
granted in 2002, 2003 and 2004 after the commencement of trading were granted at
closing market price on the date of grant. 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. 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.
Other Benefits. 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 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 2003, Andrew H. Baker, the Chairman and Chief Executive Officer of LSR,
was paid through FHP a base consulting fee of (pound)200,000 (equivalent to
$327,050 based on an exchange rate of $1.6354 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, (iii) the fact that the base fee was
the same as Mr. Cass' and (iv) the fact that Mr. Baker's base fee has been at
the same level since 1998. Mr. Baker received no cash bonus in 2003. Mr. Baker
received in 2003 a pension contribution of (pound)66,000 ($108,918) as specified
in his service agreement, which brought his annual cash compensation for 2003 to
$435,968. See "Employment Agreements - Andrew Baker".
The Compensation Committee increased Mr. Baker's base fee to (pound)300,000
per annum effective September 1, 2004. The Committee did so in view of Mr.
Baker's contributions to the Company's significantly improved performance and in
recognition of that fact that Mr. Baker had received no increase in base
compensation in more than five years.
Compensation of Other Executive Officers and Key Management Personnel
The Company has also entered into employment or service agreements with the
Company's other 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.
Gabor Balthazar (Chairman)
Afonso Junqueiras
Yaya Sesay
Members of the Compensation Committee
Comparison of Cumulative Total Return
The following graphs compare (i) the cumulative total shareholder return on
Huntingdon's American Depositary Shares from December 31, 1998 through January
10, 2002, with the cumulative total return for the same period on the Nasdaq
Composite Stock Market (U.S.) Index and the Nasdaq Biotechnology Index and (ii)
LSR's common stock from April 9, 2002 to December 31, 2003 with the cumulative
total return for the same period of the Nasdaq Composite Stock Market (U.S.)
Index, the Nasdaq Biotechnology Index and the RDG Microcap Biotechnology Index.
The graphs assume that at the beginning of the period indicated, $100 was
invested in LSR's Common Stock or Huntingdon's American Depositary Shares, as
applicable, and the stock of the companies comprising the Nasdaq Composite Stock
Market (U.S.) Index, the Nasdaq Biotechnology Index, and the RDG Microcap
Biotechnology Index that all dividends were reinvested.
COMPARISON OF 4 YEAR CUMULATIVE TOTAL RETURN
AMONG HUNTINGDON LIFE SCIENCES, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ BIOTECHNOLOGY INDEX
[OBJECT OMITTED]
COMPARISON OF 21 MONTH CUMULATIVE TOTAL RETURN
AMONG LIFE SCIENCES RESEARCH, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX,
THE NASDAQ BIOTECHNOLOGY INDEX AND THE RDG MICROCAP BIOTECHNOLOGY INDEX
[OBJECT OMITTED]
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
400,000 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 yearly 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. The total amount of such loan outstanding as of
December 31, 2003 was (pound)370,082 ($660,855 at year-end foreign exchange
rates).
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, former director of LSR and current
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)52,817
($94,315), which was 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. This loan was fully repaid during
2003.
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. Balthazar and Caldwell, both of whom were
non-employee directors at the time and considered to be independent directors
and neither of whom participated in the Private Placement.
FHP Warrants. Warrants to acquire 410,914 shares of Common Stock at an
exercise price of $1.50 were issued to FHP on June 12, 2002 following approval
of such issuance by LSR's stockholders at the 2002 Annual Meeting of
Stockholders. FHP is controlled by Andrew Baker, Chairman and Chief Executive
Officer of LSR. Mr. Baker is currently the beneficial owner of 2,311,060 shares
of LSR Common Stock, including such warrants. See "Management and Directors" and
"Ownership".
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 was repayable on
demand, although it was subordinate to the Company's $33 million bank loan, was
unsecured and interest was 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 remained payable
to Mr. Baker and $250,000 remained payable to FHP. On March 24, 2003 $128,000
was repaid to Mr. Baker. On April 5, 2003, the remaining $132,000 was repaid to
Mr. Baker and the remaining $250,000 was repaid to FHP.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review of Forms 3, 4, and 5 filed with the Commission by the
Company's directors and officers in 2003 the Company believes that all such
required forms were filed on a timely basis, except that Richard Michaelson, the
Company's Chief Financial Officer and Secretary, filed an amendment to Form 4 on
June 25, 2003, amending and correcting prior Form 4 filings.
ANNUAL REPORT AND FINANCIAL STATEMENTS
You are referred to the Annual Report on Form 10-K for the fiscal year
ended December 31, 2003, 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
2005 Meeting of Stockholders must be received by the Company no later than
September 4, 2005 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.
HOUSEHOLDING OF PROXY MATERIALS
Only one copy of this Proxy Statement has been sent to multiple
stockholders who share the same address and last name, unless we have received
contrary instructions from one or more of those stockholders. This procedure is
referred to as "householding". We have been notified that certain intermediaries
(brokers or banks) also will household proxy materials. We will deliver
promptly, upon oral or written request, separate copies of the Proxy Statement
to any stockholder at the same address. If you wish to receive separate copies
of one or both of these documents, you may write to Life Sciences Research,
Inc., P. O. Box 2360, Mettlers Road, East Millstone, NJ 08875, Attention:
Secretary. You may contact your broker or bank to make a similar request.
Stockholders sharing an address who now receive multiple copies of our Proxy
Statement may request delivery of a single copy of each document by writing or
calling us at the above address or by contacting their broker or bank (provided
the broker or bank has determined to household proxy materials).
AVAILABLE INFORMATION
Our Internet website is located at http://www.lsrinc.net. The reference to
our Internet website does not constitute incorporation by reference of the
information contained on or hyperlinked from our Internet website and should not
be considered part of this document.
The public may read and copy any materials we file with the Securities and
Exchange Commission ("SEC") at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Rooms by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet website that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the SEC. The SEC's Internet website is located at
http://www.sec.gov.
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
/s/ Richard Michaelson
Richard Michaelson
Chief Financial Officer & Secretary
Dated: November 4, 2004