LIFE SCIENCES RESEARCH, INC.
METTLERS ROAD, P.O. BOX 2360
EAST MILLSTONE, NJ 08875
(732) 649-9961
April 17, 2006
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
May 22, 2006, 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 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 MAY 22, 2006
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 May 22, 2006 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 April
13, 2006 (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:
/s/ Mark Bibi
Mark L. Bibi
Secretary and General Counsel
Dated: April 17, 2006
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 May 22, 2006 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 April 17, 2006.
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 May 15, 2006. 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 May 15, 2006 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 April 13,
2006 (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
12,658,477 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 (8 persons), who as of the Record Date beneficially owned of
record in the aggregate 3,611,048 (approximately 26.3%) 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 - 57 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 a Director and 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 ("Unilab"), a clinical laboratory services provider in
California where Mr. Baker served as CEO from 1992 to 1996, and
Medical Diagnostics Management, a U.S. based provider of radiology and
clinical laboratory services to health care payers. In 1997 he formed
Focused Healthcare Partners ("FHP"), an investment partnership that
acts as general partner for healthcare startup and development
companies. See "Certain Relationships and Transactions with Related
Persons".
Gabor Balthazar - 64 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. He is a graduate of the
Columbia Law School and the Columbia Business School in New York City.
Brian Cass - 58 Brian Cass, FCMA, CBE, was appointed to the Huntingdon
Board as Managing Director/Chief Operating Officer in September 1998
and became a Director and 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 - 49 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.
Yaya Sesay - 63 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 DIRECTORS AND EXECUTIVE OFFICERS
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
Andrew Baker 2,326,116 (1) 17.5%
Gabor Balthazar 20,000 (2) *
Mark Bibi 156,561 (3) 1.2%
Brian Cass 655,893 (4) 5.1%
Julian Griffiths 113,936 (5) *
Afonso Junqueiras -- --
Richard Michaelson 338,542 (6) 2.7%
Yaya Sesay -- --
All Directors and Executive Officers 3,611,048 26.3%
as a Group
<FN>
* Signifies less than 1%. All percentages calculated on the basis of
12,658,477 outstanding shares of Common Stock as of the Record Date. 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, 1,874,477 of such shares 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 executable options to purchase 50,000 shares.
(4) Includes presently exercisable options to purchase 200,000 shares.
(5) Includes presently exercisable options to purchase 60,000 shares.
(6) Includes presently exercisable options to purchase 90,000 shares.
</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 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 2,326,116 (2) 17.5%
c/o Life Sciences Research, Inc.
Mettlers Road
East Millstone, NJ 08875
Brian Cass 655,893 (3) 5.1%
c/o Huntingdon Life Sciences
Woolley Road
Alconbury, Huntingdon
Cambridgeshire PE28 4HS
England
- ---------------
<FN>
(1) Calculated pursuant to Rule 13d-3 promulgated under the Exchange Act and
based on 12,658,477 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, 1,874,477 of such shares 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 Form 4 filed by Mr. Baker on
April 10, 2006.
(3) Mr. Cass is President and Managing Director of the Company. Includes
presently exercisable options to purchase 200,000 shares. Based on Company
records and a Form 4 filed by Mr. Cass on April 10, 2006.
</FN>
The Board of Directors and its Committees
The Company's Board of Directors provides oversight and guidance to the
Company's senior management in its operation of the Company. The Board reviews
significant developments affecting the Company and acts on matters requiring its
approval. During summer 2005, in anticipation of obtaining a listing of the
Company's Common Stock on the New York Stock Exchange ("NYSE"), the Board
conducted a comprehensive review of the Company's corporate governance policies
and practices, with a goal of assuring that such practices met all the NYSE's
listing standards, as well as all regulations adopted and implemented by the
Securities and Exchange Commission (the "SEC"), as well as those under the
Sarbanes-Oxley Act of 2002. As a result of that comprehensive review, the
Company adopted amended corporate governance procedures; amended its corporate
governance charters for its various Board Committees (Audit; Compensation;
Nominating and Corporate Governance); and posted such charters on the Company's
web site at www.lsrinc.net. Although the Company's listing on the NYSE was
approved by the NYSE and trading of the Common Stock was expected to commence on
the NYSE on September 7, 2005, the NYSE postponed such commencement of trading
on the morning of September 7, 2005. That postponement remains in effect as of
the Record Date and the Common Stock trades on the Pink Sheets.
LSR has also adopted a Code of Business Conduct and Ethics which is
applicable to LSR's senior management and certain other financial professionals.
The Board has also adopted a Presiding Director policy. These codes and policies
are also posted on LSR's web site.
The Board has affirmatively determined that three of the five Directors are
independent, under the New York Stock Exchange Listing Standards and LSR's own
independence standards. The Directors who have been determined to be independent
are: Gabor Balthazar, Afonso Junqueiras and Yaya Sesay.
The non-management members of the Board of Directors meet at regularly
scheduled executive sessions without the presence of any members of the
Company's management.
Meetings of Board of Directors
During 2005 six (6) meetings of the Board of Directors of LSR were convened
and during 2006 through the Record Date three (3) meetings of the Board of
Directors were convened. Each of the directors attended all such meetings of the
Board (except that Mr. Baker and Mr. Sesay each missed one Board meeting) and
all members of Board Committees attended all such meetings for the Committee on
which he served (except that Mr. Balthazar missed one Audit Committee meeting).
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. The Board of Directors has
determined that Mr. Balthazar meets the definition of "audit committee financial
expert" as such term is defined under SEC rules. Each member of the Audit
Committee is considered to be an independent director. The Audit Committee of
LSR held eight (8) meetings during 2005 and two (2) meetings during 2006 through
the Record Date.
The Audit Committee operates under a written charter adopted by the Board
of Director that is posted on LSR's web site.
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, 2005 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, 2005, 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 2005 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
concluded that Hugh Scott's provision of audit and non-audit services to LSR is
compatible with Hugh Scott's independence.
The Committee has selected Hugh Scott to conduct the Company's 2006 audit.
Representatives of Hugh Scott are expected to attend the Annual Meeting.
Audit Fees
Fees for audit services totaled approximately $366,000 in 2005 and $377,000
in 2004, including fees associated with the annual audit and the audit of
internal control over financial reporting and the reviews of the Company's
quarterly reports on Form 10-Q.
Audit Related Fees
Fees for audit-related services totaled approximately $92,000 in 2005 and
zero in 2004. Audit-related services principally include consultation on tax and
accounting issues related to a sale leaseback transaction, consultation on other
accounting and internal control matters, including Sarbanes-Oxley requirements
and other attest services.
Tax Fees
Fees for tax services, including tax compliance, tax advice and tax
planning, totaled approximately $25,000 in 2005 and $27,000 in 2004.
All Other Fees
Hugh Scott, P.C. did not provide any services not described above in 2005
and 2004.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors
The Audit Committee pre-approves all audit and permissible non-audit
services provided by the independent auditors. These services may include audit
services, audit-related services, tax services and other services. The Audit
Committee has adopted a policy for the pre-approval of services provided by the
independent auditors.
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 SEC rules, 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.
Audit Committee
Gabor Balthazar (Chairman)
Afonso Junqueiras
Yaya Sesay
Nominating and Corporate Governance 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. In July 2005, as part of the
comprehensive corporate governance review undertaken by the Board, the
Nominating Committee's charter and responsibilities were expanded under the
newly renamed Nominating and Corporate Governance Committee.
The members of the Nominating and Corporate Governance Committee are
Messrs. Sesay, Balthazar and Junqueiras. Mr. Sesay serves as Chairman. This
Committee has met one time since its July 2005 expansion of responsibilities.
The Committee has established as its mission statement:
a. To evaluate and select qualified individuals as nominees for the Board
of Directors.
b. To oversee and supervise the nominating process and ensure appropriate
procedures are in place for the selection and presentation of
qualified candidates.
c. To review, develop, evaluate and recommend to the Board appropriate
corporate governance guidelines for the Company.
d. To guide the Board in its annual evaluation of the Board's
performance.
e. To engage in such other matters as may from time to time be
specifically delegated to this Committee by the Board.
A copy of the Nominating Committee and Corporate Governance Charter is
posted on LSR's website.
The Nominating and Corporate Governance 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 to be 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 is posted on LSR's website.
Independent Committee to Assess Sale/Leaseback Transaction
During the latter part of 2004 the Company entered into negotiations with
the Company's Chairman and CEO, Andrew Baker, about a possible sale/leaseback
transaction in which the Company's three laboratory facilities (two in England,
one in the US) would be sold to and leased back from a new entity, Alconbury
Estates, created and controlled by Mr. Baker. The Board determined to establish
an Independent Committee to review and consider the sale/leaseback transaction.
That Committee was comprised of Messrs. Balthazar, Junqueiras and Sesay. It met
once in 2004 and three (3) times in 2005, leading up to the June 14, 2005
consummation of the sale/leaseback transaction.
Compensation Committee
In consultation with senior management, the Compensation Committee
establishes the Company's general compensation philosophy, and oversees the
development and implementation of executive compensation programs and policies
with respect to the engagement of individuals as independent contractors of the
Company. The Committee reviews on a periodic basis the Company's executive
compensation programs and make any modifications that the Committee may deem
necessary or advisable, in its sole discretion.
The Committee annually reviews and approves the Company's goals and
objectives relevant to the compensation of the Chief Executive Officer and
evaluates the performance of the Chief Executive Officer in light of those goals
and objectives. Based on such evaluation, the Committee has the sole authority
to set the compensation (including base salary, incentive compensation and
equity-based awards) of the Chief Executive Officer. In determining incentive
compensation, the Committee considers, among other factors it deems appropriate
from time to time, the Company's performance and relative shareholder return,
the value of similar incentive awards to chief executive officers at comparable
companies, and the awards given to management in prior years.
The Committee also reviews and approves the compensation (including base
salary, incentive compensation and equity-based awards) of executive officers of
the Company. The Committee reviews the terms of the Company's incentive
compensation plans, equity-based plans, retirement plans, deferred compensation
plans and welfare benefit plans. Unless otherwise delegated, the Committee
administers such plans, including determining any incentive or equity-based
awards to be granted to members of senior management under any such plan.
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 four (4) meetings during 2005 and held one (1) meeting
from January 1, 2006 through the date of this Proxy Statement.
There were no Compensation Committee interlocks during 2005.
Compensation of Directors
Non-employee directors (Messrs. Balthazar, Junqueiras and Sesay) received
during 2005 an annual cash payment of $25,000 for their services as directors of
LSR, payable quarterly. 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 receives an annual payment of $15,000, 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, 2005 the aggregate compensation of the
Executive Officers and key employees as a group, paid or accrued, was
$3,442,958.
The following table shows the remuneration of Executive Officers in any
given year in the 12 Months ended December 31, 2005, 2004, and 2003:
Annual Compensation Long Term Compensation
Awards
Name And Principal Year Salary (1) Bonus Other Annual Number Of Shares
Position Compensation (2) Underlying Options
Andrew Baker 2005 564,045 300,218 224,345 -
Chairman and Chief 2004 427,489 576,000 141,805 55,500
Executive Officer 2003 327,050 - 108,918 -
Brian Cass 2005 564,045 300,218 263,375 -
President 2004 427,489 576,000 218,691 55,500
2003 327,080 - 175,843 -
Richard Michaelson 2005 300,000 82,500 30,008 -
Chief Financial Officer and 2004 287,952 150,000 42,108 30,303
Secretary 2003 222,108 - 18,633 -
Julian Griffiths 2005 282,023 75,054 77,784 -
Vice President of Operations 2004 266,667 137,408 70,638 27,750
2003 204,425 - 44,692 -
Mark Bibi 2005 283,333 75,000 21,010 -
General Counsel and
Secretary
Frank Bonner 2005 - - - -
Former Director of Science & 2004 - - - -
Technology of Huntingdon 2003 141,945 - 13,817 -
<FN>
Note - the bonuses were paid in March 2006
(1) Messrs. Baker, Bonner, Cass and Griffiths are paid in UK pounds sterling.
The amounts have been converted at the rate of 2005: $1.8195, 2004:
$1.8321, and 2003: $1.6354, to (pound)1.00 for the purposes of the above
table.
(2) For Mr. Baker, represents the benefits from a contribution to a private
pension account, a car allowance and a relocation allowance. For Mr. Cass,
represents the benefits from a contribution to a private pension account, a
car allowance, private health insurance contributions and a relocation
allowance. Fr. 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 and Mr. Bibi, represents the
benefits from a car allowance and the Company's matching contributions
under a 401(k) Plan.
</FN>
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 2005 an annual fee of
(pound)330,000. Mr. Baker receives health and medical insurance benefits from
the Company. Mr. Baker receives contributions to his private pension
arrangements, equivalent to 33 percent of this basic annual fee. He is also
entitled to a non-pensionable car allowance of up to (pound)1,000 per month and
(pound)2,000 per month as a relocation allowance. 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.
Mark Bibi
The services of Mr. Bibi are provided through a service agreement between him
and Huntingdon Life Sciences Inc. (a wholly owned subsidiary of the Company).
The service agreement appointed Mr. Bibi as General Counsel and Secretary of
Huntingdon Life Sciences Inc. and he now also serves as the Company's General
Counsel and Secretary. Mr. Bibi's service agreement will continue until
terminated by Mr. Bibi 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. Bibi 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. Bibi during the 12 months
prior to termination.
Mr. Bibi receives an annual salary of $300,000 gross 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. Bibi's service agreement also provides for the payment of a bonus to Mr.
Bibi in the absolute discretion of the Company's Board.
In addition, Mr. Bibi is entitled to a car allowance of $1,000 gross per month.
The agreement may be terminated if Mr. Bibi is guilty of serious misconduct or
is in material breach of the terms of the service agreement, amongst other
reasons.
Mr. Bibi 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.
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 2005 a gross salary of (pound)330,000 per annum. 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, in 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.
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 appointed Mr. Griffiths as Finance Director
of Huntingdon and he now holds the position of Vice President of Operations. 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 is 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 received during 2005 an annual salary of (pound)165,000 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 the
Company). The service agreement appoints Mr. Michaelson as Chief Financial
Officer 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 2005 an annual salary of $300,000 gross, 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.
In accordance with the Company performance provisions established in June 2004
by the Compensation Committee, aggregate bonus awards of $1,910,000 were paid to
31 senior employees of the Company in respect of 2004. Bonus awards of
$1,245,497 were paid to 32 senior employees of the Company in March 2006 as a
result of the Company's achievement of specified fiscal year 2005 performance
goals established by the Compensation Committee.
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.
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
Mark Bibi 50,000
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 (meaning all such options fully vested as of March 1, 2003); 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 1,188,000 shares of LSR Common Stock (including those specified
above) were granted in the two years 2002 and 2003 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
February 14, 2003 11,000 $1.80
In 2004, in addition to the options granted under the 2004 LTIP referred to
below, options to purchase an aggregate of 67,100 shares of LSR Common Stock
were issued, all at exercise prices equal to the market price at the date of
grant, on the terms set forth in the previous paragraph, are listed below.
Date of Grant Numbers Granted Exercise Price
- ------------- --------------- --------------
April 12, 2004 37,100 $1.85
October 28, 2004 17,400 $7.70
December 15, 2004 12,600 $9.52
In 2005, options to purchase an aggregate of 23,600 shares of LSR Common Stock
were issued, all at exercise prices equal to the market price at the date of
grant, or the terms set forth above, are listed below:
Date of Grant Numbers Granted Exercise Price
- ------------- --------------- --------------
May 23, 2005 3,600 $12.00
June 27, 2005 20,000 $11.00
2004 Long Term Incentive Plan
Effective June 1, 2004 the Company adopted the 2004 Long Term Incentive Plan
("2004 LTIP"), pursuant to the terms of the 2001 Equity Incentive Plan. The 2004
LTIP has two components: a grant of stock options, with a vesting date of March
31, 2007, and a cash bonus to be awarded in 2007 based on 2006 Company financial
performance.
Options to purchase an aggregate of 362,663 shares of common stock were granted
to 32 key employees of the Company as of June 1, 2004 under the 2004 LTIP;
55,500 of such options were granted to Andrew Baker, the Company's Chairman and
CEO, 55,500 of such options were granted to Brian Cass, the Company's Managing
Director and President, 30,303 of such options were granted to Richard
Michaelson, the Company's CFO, 27,750 of such options were granted to Julian
Griffiths, the Company's Vice President of Operations and 20,545 were granted to
Mark Bibi, the Company's General Counsel and Secretary. The exercise price of
all such granted options is $3.30, the market price of LSR common stock on June
1, 2004. All such options have ten-year terms and are exercisable in full on
March 31, 2007. At December 31, 2005, 356,419 shares under the 2004 LTIP option
plan were outstanding and none were exercisable.
The following table summarizes stock option activity under the Company's option
plans
Shares Wtd Avg. Ex Price Number of securities remaining
(000) available for future issuance
Outstanding - December 31, 2004
1,386 $2.13
Granted 24 $11.15
Lapsed (14) $1.64
Exercised (112) $1.61
----------- ------------------ ----------------------------------
Outstanding - December 31, 2005 1,284 $2.35 1,791,000
----------- ------------------ ----------------------------------
Exercisable at end of year 916
Weighted average fair value per
option granted in 2005 was
$7.74
Huntingdon Life Sciences Group plc Stock Option Plan
Huntingdon Life Sciences Group plc issued options prior to December 31, 1997
pursuant to several stock option plans. However, the ability to exercise options
under all such Huntingdon plans lapsed on March 26, 2002 in connection with
LSR's acquisition of Huntingdon, except for those granted under the Unapproved
Stock Option Plan (the "Unapproved Plan"). Under the Unapproved Plan, some
options technically remain outstanding. However, such options are exercisable
only for shares of Huntingdon, a 100% wholly owned subsidiary of LSR, and are
considered to have no value.
Option Exercises and Fiscal Year-End Values
No options to purchase LSR ordinary shares were exercised by any executive
officer or key management during the fiscal year ended December 31, 2005. The
following table lists the number and value of the unexercised options to
purchase LSR shares held by the executive officers at December 31, 2005.
Number of Securities Value of Unexercised
Underlying Options In-the-Money Options
At Fiscal Year-End (#) At Fiscal Year-End ($) (1)
Name Shares
Acquired Value
on Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
Andrew Baker 0 0 200,000 55,500 1,840,000 410,700
Brian Cass 0 0 200,000 55,500 1,840,000 410,700
Mark Bibi 0 0 50,000 20,545 460,000 152,033
Julian Griffiths 0 0 60,000 27,750 552,000 205,350
Richard Michaelson 0 0 90,000 30,303 828,000 224,242
<FN>
(1) Represents the fair market value as of December 30, 2005, the last trading
day of 2005 ($10.70 per share closing stock price) of the option shares
less the exercise price of the options ($1.50 per share for exercisable
options, $3.30 per share for unexercisable options).
</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 Compensation Committee 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. 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 years subsequent to 2002 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.
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 Annual Compensation" in the Summary Compensation Table.
Chief Executive Officer's Compensation
For 2005, Andrew H. Baker, the Chairman and Chief Executive Officer of LSR,
was paid through FHP a base consulting fee of (pound)330,000, 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 a cash bonus in 2005 of
(pound)165,000. Mr. Baker received in 2005 a pension contribution of
(pound)110,000 as specified in his service agreement, as well as a monthly car
allowance of (pound)1,000 and a monthly relocation allowance of (pound)2,000
which brought his annual cash compensation for 2005 to (pound)641,000. See
"Employment Agreements - Andrew Baker".
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
STOCK PERFORMANCE GRAPHS
Comparison of Cumulative Total Return
The following graphs compare (i) the cumulative total shareholder return on
Huntingdon's American Depositary Shares from December 31, 2000 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 8, 2002 to December 31, 2005 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 and that all dividends were reinvested.
[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 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, 2005
was (pound)120,000 ($205,000 at year-end foreign exchange rates).
Richard Michaelson. Mr. Michaelson, Chief Financial Officer 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
Director of Operations of LSR, 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.
Mark Bibi. Mr. Bibi, General Counsel and Secretary of LSR, acquired
50,000 shares of Common Stock in the Private Placement for cash.
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 "Security Ownership of
Directors and Executive Officers".
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.
Sale/Leaseback. On June 14, 2005, the Company entered into and consummated
purchase and sale agreements with Alconbury Estates Inc. and subsidiaries
(collectively "Alconbury") for the sale and leaseback of the Company's three
operating facilities in Huntingdon and Eye, England and East Millstone, New
Jersey (the "Sale/Leaseback Transaction"). Alconbury is a newly formed company
controlled by LSR's Chairman and CEO, Andrew Baker. The total consideration paid
by Alconbury for the three properties was $40 million, consisting of $30 million
in cash and a five year, $10 million variable rate subordinated promissory note,
which Alconbury agreed to make a best effort to repay within twelve months. A
special committee of the independent directors, comprised of Messrs. Balthazar,
Junqueiras and Sesay, was formed to consider the Sale/Leaseback Transaction.
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 2005 the Company believes that all such
required forms were filed on a timely basis.
ANNUAL REPORT AND FINANCIAL STATEMENTS
You are referred to the Annual Report on Form 10-K for the fiscal year
ended December 31, 2005, 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. 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
2007 Meeting of Stockholders must be received by the Company no later than
January 22, 2007 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 100 F Street,
N.E., 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
Mark L. Bibi
Secretary and General Counsel
Dated: April 17, 2006