Filed by
a Party other than the Registrant
No
o
Check the
appropriate box:
Yes
o
Preliminary
Proxy Statement
Yes
o
Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Yes
x
Definitive
Proxy Statement
Yes
o
Definitive
Additional Materials
Yes
o
Soliciting
Material Pursuant to §240.14a-12
LIFE
SCIENCES RESEARCH, INC.
______________________________________________________________________________________________________________________
(Name of
Registrant as Specified in its Charter)
______________________________________________________________________________________________________________________
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
Yes
x
No fee
required.
Yes
o
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1)
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Title
of each class of securities to which transaction
applies:
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(2)
|
Aggregate
number of securities to which transaction applies:
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|
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(3)
|
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined);
|
|
|
(4)
|
Proposed
maximum aggregate value of transaction:
|
|
|
(5)
|
Total
fee paid:
|
o
Check box if any part of the
fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously.
Identify the
previous filing by registration statement number, or the Form or Schedule and
the date of its filing.
(1)
|
Amount
Previously Paid:
|
|
|
(2)
|
Form,
Schedule or Registration Statement No.:
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(3)
|
Filing
Party:
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(4)
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Date
Filed:
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Persons
who are to respond to the collection of information contained in this form
are not required to respond unless the form displays a currently valid OMB
control number.
|
LIFE
SCIENCES RESEARCH, INC.
METTLERS
ROAD, P.O. BOX 2360
EAST MILLSTONE,
NJ 08875
(732)
649-9961
April 10,
2009
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 21,
2009, at 10:00 a.m., local time. The meeting will be held at 53 Street,
Urbanizacion Obarrio, Panama, Republic of Panama. Notice of the
Annual Meeting, the Proxy Statement and a proxy card are attached.
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. As always, we
appreciate your interest in our Company.
|
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 21, 2009
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 Street, Urbanizacion Obarrio, Panama, Republic of Panama on May
21, 2009 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.
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Our Board
recommends that you vote FOR all directors nominated for election in Item
1. Holders of record of voting common stock at the close of business
on March 23, 2009 (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. Stockholders who attend the Meeting may vote
their shares personally, even though they have previously returned
Proxies.
PLEASE
NOTE THAT YOU WILL NEED GOVERNMENT ISSUED PHOTO ID AND PROOF THAT YOU OWN LSR
STOCK TO BE ADMITTED TO THE MEETING. IF WE CANNOT VERIFY THAT YOU OWN
LSR SHARES, YOU MAY NOT BE ADMITTED TO THE MEETING.
This year
LSR will be using the “Notice and Access” method of providing proxy materials to
you via the internet. In accordance with the rules and regulations of
the Securities and Exchange Commission, or SEC, instead of mailing a printed
copy of our proxy materials to each stockholder of record, we are furnishing
proxy materials to our stockholders via the internet. If you received
a Notice of Internet Availability by mail, you will not receive a printed copy
of the proxy materials unless you specifically request a printed
copy. Instead, the Notice of Internet Availability will instruct you
how to access the Internet to review all of the important information contained
in the proxy materials. The Notice of Internet Availability also
instructs you how to submit your proxy on the Internet. If you would
like to receive a printed copy of our proxy materials, you should follow the
instructions for requesting such materials included in the Notice of Internet
Availability.
The
Notice of Internet Availability is first being sent to stockholders on or about
April 10, 2009. Also on April 10, 2009, the proxy statement and the
form of proxy relating to the 2009 annual meeting, as well as our Annual Report
on Form 10-K for the year ended December 31, 2008, are first being made
available to stockholders (although the 2008 Annual Report on Form 10-K has been
posted on LSR’s website,
www.lsrinc.net
, since
March 16, 2009).
YOUR VOTE IS VERY IMPORTANT.
Whether or not you plan to attend the Annual Meeting, we urge you to vote
and submit your proxy by the Internet, telephone or mail in order to ensure the
presence of a quorum.
Registered
shareholders may vote:
·
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By
Internet at
www.proxyvote.com
. This
will require your 12-digit control
number.
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·
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By
telephone by calling the number shown on the proxy
card.
|
·
|
By
mail by requesting completing, signing, dating and returning the proxy
card, as outlined in the Notice of Internet
Availability.
|
Beneficial
holders:
If your shares are held in the name of a bank, broker
or other holder of record, follow the instructions you receive from the holder
of record to vote your shares.
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:
|
|
Mark
L. Bibi
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Secretary
and General Counsel
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Dated: April
10, 2009
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|
Questions
and Answers About the 2009 LSR Annual Meeting of Stockholders
Why
Did You Make This Proxy Statement Available?
We made this proxy statement and the
proxy cards available to you because our Board of Directors is soliciting your
proxy to vote at the 2009 Annual Meeting of Stockholders. This proxy
statement summarizes information concerning the matters to be presented at the
meeting and related information that will help you make an informed vote at the
meeting. The proxy statement and accompanying proxy card are first
being made available to shareholders on or about April 10, 2009.
When
Is The Annual Meeting?
The annual meeting will be held on May
21, 2009, at 10:00 a.m., local time, at 53 Street Urbanizacion Obarrio, Panama,
Republic of Panama.
What
Am I Voting On?
At the annual meeting, you will be
voting:
·
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To
elect five directors, for a one-year
term;
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·
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Any
other matter, if any may properly come before the meeting and any
adjournment or postponement of the annual
meeting.
|
How
Do You Recommend That I Vote On These Items?
The Board of Directors recommends that
you vote
FOR
each of the
director nominees.
Who
Is Entitled To Vote?
You may vote if you owned our common
shares as of the close of business on March 23, 2009, the record date for the
annual meeting.
How
Many Votes Do I have?
You are entitled to one vote for each
common share you own. As of the close of business on March 23, 2009,
we had 13,347,295 common shares outstanding.
How
Do I Vote By Proxy Before The Meeting?
Before the meeting,
registered
shareholders may vote shares in one of the following three ways:
·
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By
Internet at
www.proxyvote.com
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·
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By
phone at the telephone number shown on the proxy card;
and
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·
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By
mail by requesting a hard copy of the proxy card (which may be done by
accessing
http://materials.proxyvote.com/65338C
and requesting a hard copy of proxy materials) and then completing,
signing, dating and returning the proxy card in the postage paid envelope
provided (see instructions on proxy
card).
|
Please refer to the proxy card for
further instructions on voting by Internet or telephone. Please use
only one of the above-mentioned three ways to vote.
Please follow the directions on your
proxy card carefully. If you hold shares in the name of a broker,
your ability to vote those shares by Internet and telephone depends on the
voting procedures used by your broker, as explained below under
“How Do I Vote If My Broker Holds My
Shares in “Street Name”?”
May
I Vote My Shares In Person At The Meeting?
Yes. You may vote your
shares at the meeting if you attend in person, even if you previously submitted
a proxy card or voted by Internet or telephone. Whether or not you
plan to attend the meeting, however, we encourage you to vote your shares by
proxy before the meeting.
May
I Change My Mind After I Vote?
Yes. You may change your
vote or revoke your proxy at any time before the polls close at the
meeting. You may change your vote by:
·
|
Signing
another proxy card with a later date and returning it to Life Sciences
Research, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, prior to
the meeting;
|
·
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Voting
again by Internet or telephone prior to the meeting;
or
|
·
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Voting
again at the meeting.
|
You also may revoke your proxy prior to
the meeting without submitting any new vote by sending a written notice that you
are withdrawing your vote to our Corporate Secretary at Life Sciences Research,
Inc., P.O. Box 2360, Mettlers Road, East Millstone, NJ 08875.
What
Shares Are Included On My Proxy Card?
Your proxy card includes shares held in
your own name. If you participate in the Huntingdon Life Sciences
401(k) Savings and Investment Plan (the “401(k)”), you will receive a separate
proxy card for your 401(k) shares. You may vote these shares by
Internet, telephone or mail, all as described on the applicable proxy
card. The proxy card does not include any shares held in a brokerage
account in the name of your bank or broker (such shares are said to be held in
“street name”).
How
Do I Vote If I Participate In The 401(k) Plan?
If you hold shares in the 401(k) Plan,
these shares are represented by a separate proxy card. Your completed
proxy card serves as voting instructions to the trustee of the
plan. You may direct the trustee how to vote your plan shares by
submitting your proxy vote for those shares by Internet, telephone or mail, all
as described on the enclosed proxy card. If you do not instruct the
trustee how to vote, your plan shares will be voted by the trustee in the same
proportion that it votes shares in other plan accounts for which it did receive
timely voting instructions.
How
Do I Vote If My Broker Holds My Shares In “Street Name”?
If your shares are held in a brokerage
account in the name of your bank or broker (this is called “street name”), those
shares are not included in the total number of shares listed as owned by you on
your proxy card. Instead, your bank or broker will send you
directions on how to vote those shares.
What
If I Return My Proxy Card Or Vote By Internet Or Telephone But Do Not Specify
How I Want To Vote?
If you sign and return your proxy card
or complete the Internet or telephone voting procedures, but do not specify how
you want to vote your shares, we will vote them as follows:
·
|
FOR
the election of each of the director
nominees.
|
If you participate in the 401(k) Plan
and do not submit timely voting instructions, the trustee of the plan will vote
the shares in your plan account in the same proportion that it votes shares in
other plan accounts for which it did receive timely voting instructions, as
explained above under the question
“How Do I Vote If I Participate In
The 401(k) Plan?”
Who
May Attend The Meeting?
The annual meeting is open to all
holders of our common shares. To attend the meeting, you will need to
register upon arrival. We may check for your name on our
shareholders’ list and ask you to produce valid government issued
identification. If your shares are held in street name by your broker
or bank, you should bring your most recent brokerage account statement or other
evidence of your share ownership. If we cannot verify that you own
our common shares, you may not be admitted to the meeting.
How
Many Shares Must Be Present To Hold The Meeting?
In order for us to conduct our meeting,
a majority of our outstanding common shares as of March 23, 2009, the record
date for the meeting, must be present in person or by proxy at the
meeting. This is called a quorum. Your shares are counted
as present at the meeting if you attend the meeting and vote in person or if you
properly return a proxy by Internet, telephone or mail.
How
Many Votes Are Needed To Elect Directors?
The director nominees receiving the
highest number of “FOR” votes will be elected as directors. This
number is called a plurality. Consequently, shares that are not
voted, because you marked your proxy card to withhold authority for all or some
nominees, or because you did not complete and return your proxy card, will have
no impact on the election of directors.
What
Is A “Broker Non-Vote”?
If you own shares through a bank or
broker in street name, you may instruct your bank or broker how to vote your
shares. A “broker non-vote” occurs when you fail to provide your bank
or broker with voting instructions and the bank or broker does not have the
discretionary authority to vote your shares on a particular proposal because the
proposal is not a routine matter under the New York Stock Exchange
rules. Proposal 1 (election of directors) is considered a routine
matter under the current New York Stock Exchange rules, so your bank or broker
will have discretionary authority to vote your shares held in street name on
that item. Abstentions and broker non-votes count for quorum
purposes, but not for the voting of these proposals. A broker
non-vote may also occur if your broker fails to vote your shares for any
reason.
How
Will Broker Non-Votes Be Treated?
Broker non-votes will be treated as
shares present for quorum purposes.
How
Will Abstentions Be Treated?
Abstentions will be treated as shares
present for quorum purposes and entitled to vote, so they will have the effect
as votes against a proposal.
How
Will Voting On “Any Other Business” Be Conducted?
We have
not received proper notice of, and are not aware of, any business to be
transacted at the meeting other than as indicated in this proxy
statement. If any other item or proposal properly comes before the
meeting, the proxies received will be voted on those matters in accordance with
the discretion of the proxy holders.
Who
Pays For The Solicitation Of Proxies?
Our Board of Directors is making this
solicitation of proxies on our behalf. We will pay the costs of the
solicitation, including the costs for preparing, printing and mailing this proxy
statement. We also will reimburse brokers, nominees and fiduciaries
for their costs in sending proxies and proxy materials to our shareholders so
that you may vote your shares. Our directors, officers and regular
employees may undertake proxy solicitation efforts by contacting you by
telephone or electronic communication or in person. We will not pay
directors, officers or other regular employees any additional compensation for
their proxy solicitation efforts.
How
Can I Find The Voting Results Of The Meeting?
We will include the voting results in
our Form 10-Q for the quarter ending June 30, 2009, which we expect to file with
the Securities and Exchange Commission (the “SEC”) on or before August 10,
2009.
How
Do I Submit A Shareholder Proposal For, Or Nominate A Director For Election At
Next Year’s Annual Meeting?
If you wish to submit a proposal to be
included in our proxy statement for our 2010 Annual Meeting of Shareholders, we
must receive it at our principal office on or before January 21
2010. Please address your proposal to: Corporate
Secretary, Life Sciences Research, Inc., P.O. Box 2360, Mettlers Road, East
Millstone, NJ 08875.
We will not be required to include in
our proxy statement a shareholder proposal that is received after that date or
that otherwise does not meet the requirements for shareholder proposals
established by the SEC or as set forth in our By-laws. For a more
detailed description of further requirements for stockholder proposals, please
see the section of the proxy statement captioned “Stockholder
Proposals”.
Are
You “Householding” For Shareholders Sharing The Same Address?
Yes. The SEC’s rules
regarding the delivery to shareholders of proxy statements, annual reports,
prospectuses and information statements permit us to deliver a single copy of
these documents to an address shared by two or more of our
shareholders. This method of delivery is referred to as
“householding,” and can significantly reduce our printing and mailing
costs. It also reduces the volume of mail you
receive. This year, we are delivering only one proxy statement and
2008 Annual Report on Form 10-K to multiple registered shareholders sharing an
address who request a hard copy of those materials, unless we receive
instructions to the contrary from one or more of the shareholders. We
will still be required, however, to send you and each other shareholder at your
address upon request an individual proxy voting card. If you
nevertheless would like to receive more than one copy of this proxy statement
and our 2008 Annual Report on Form 10-K, we will promptly send you additional
copies upon written or oral request directed to the Company. You may
also notify us that you wish to receive a separate annual report or proxy
statement in the future, or to request delivery of a single copy of an annual
report or proxy statement if you are receiving multiple copies.
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 21, 2009 at 53 Street, 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 10, 2009.
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 14, 2009. 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 14, 2009 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.
If you hold shares through a broker,
follow the voting instructions you receive from your broker. If you
want to vote in person at the Meeting, you must obtain a legal proxy from your
broker and present it at the Meeting. If you do not submit voting
instructions to your broker, your broker may still be permitted to vote your
shares.
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. Under Maryland law, an
abstention is not a vote cast. However, 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 March 23, 2009 (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 13,347,295 shares of
LSR Common Stock issued and outstanding and entitled to vote held by 1,863
shareholders of record. 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 (8 persons), who as of the Record Date
beneficially owned of record in the aggregate 4,099,396 (approximately 29.0%) 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.
Your Board recommends a vote FOR the
election to the Board of each of the nominees.
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 - 60
|
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. In 2005 he formed Alconbury Estates for the purpose
of entering into a sale-leaseback transaction with the
Company. See “Certain Relationships and Transactions with
Related Persons”.
|
Gabor
Balthazar - 67
|
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. Mr.
Balthazar serves on the Audit Committee (Chairman), Compensation Committee
(Chairman) and Nominating and Corporate Governance
Committee.
|
Brian
Cass – 61
|
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. See, “Certain
Relationships and Transactions with Related
Persons”.
|
Afonso
Junqueiras – 52
|
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. Mr. Junqueiras
serves on the Audit Committee, Compensation Committee and Nominating and
Corporate Governance Committee.
|
Yaya
Sesay – 66
|
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. Mr. Sesay serves on the Audit
Committee, Compensation Committee and Nominating and Corporate Governance
Committee (Chairman).
|
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.
Name
of Beneficial Owner
|
Amount
of Beneficial Ownership
|
|
Nature
of Beneficial Ownership
|
Percentage
of Class
|
|
|
|
|
|
Andrew
Baker
|
2,326,116
|
|
Direct
|
17.4%
|
Chairman
and Chief Executive Officer
|
105,500
|
|
Vested
Options
|
*
|
|
2,431,616
|
(1)
|
|
18.1%
|
|
|
|
|
|
Gabor
Balthazar
|
5,500
|
|
Direct
|
*
|
Director
|
22,500
|
|
Vested
Options
|
*
|
|
28,000
|
|
|
*
|
|
|
|
|
|
Mark
Bibi
|
156,561
|
|
Direct
|
1.2%
|
General
Counsel and Secretary
|
120,455
|
|
Vested
Options
|
*
|
|
277,016
|
|
|
2.1%
|
|
|
|
|
|
Brian
Cass
|
455,893
|
|
Direct
|
3.4%
|
President
and Managing Director
|
305,500
|
|
Vested
Options
|
2.2%
|
|
761,393
|
|
|
5.6%
|
|
|
|
|
|
Julian
Griffiths
|
54,076
|
|
Direct
|
*
|
Vice
President of Operations
|
112,750
|
|
Vested
Options
|
*
|
|
166,826
|
|
|
1.2%
|
|
|
|
|
|
Afonso
Junqueiras
|
5,500
|
|
Direct
|
*
|
Director
|
2,500
|
|
Vested
Options
|
*
|
|
8,000
|
|
|
*
|
|
|
|
|
|
Richard
Michaelson
|
298,242
|
|
Direct
|
2.2%
|
Chief
Financial Officer
|
120,303
|
|
Vested
Options
|
*
|
|
418,545
|
|
|
3.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yaya
Sesay
|
5,500
|
|
Direct
|
*
|
Director
|
2,500
|
|
Vested
Options
|
*
|
|
8,000
|
|
|
*
|
|
|
|
|
|
All
Directors and Executive Officers as a group (8 persons)
|
4,099,396
|
|
|
29.0%
|
|
|
|
|
|
*Signifies
less than 1%. All percentages calculated on the basis of
13,347,295 shares of Common Stock outstanding at 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)
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.
|
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
of Beneficial Owner
|
Number
of Shares of Common Stock
Beneficially Owned
|
Percent
of Common Stock
Beneficially Owned
(1)
|
|
|
|
Andrew
Baker
|
2,431,616
(2)
|
18.1%
|
c/o
Life Sciences Research, Inc.
|
|
|
Mettlers
Road
|
|
|
East
Millstone, NJ 08875
|
|
|
|
|
|
Brian
Cass
|
761,393
(3)
|
5.6%
|
c/o
Huntingdon Life Sciences
|
|
|
Woolley
Road
|
|
|
Alconbury,
Huntingdon
|
|
|
Cambridgeshire
PE28 4HS
|
|
|
England
|
|
|
_______________
(1)
|
Calculated
pursuant to Rule 13d-3 promulgated under the Exchange Act and based on
13,347,295 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 105,500 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. Share ownership numbers reported
herein are based on Company records and Form 4’s and Schedules 13D filed
by Mr. Baker.
|
(3)
|
Mr.
Cass is President and Managing Director of the
Company. Includes presently exercisable options to purchase
305,500 shares. Share ownership numbers reported herein are
based on Company records and Form 4’s and Schedules 13D filed by Mr.
Cass.
|
CORPORATE
GOVERNANCE AND BOARD MATTERS
The
Board of Directors and its Committees
The Company’s Board of Directors (the
“Board”) 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
. Prior
to the Company’s listing on NYSE Arca in December 2006, the Board and its
Committees again conducted a comprehensive review of its corporate governance
procedures and charters, and amended these procedures and charters as necessary
to assure compliance with NYSE Arca rules and regulations. The
current versions of all the Company’s corporate governance charters are posted
on the Company’s website, and were most recently reviewed and updated in March
2009.
LSR has also adopted a Code of Business
Conduct and Ethics which is applicable to LSR’s employees. The Board
has also adopted a Presiding Director policy. These codes and
policies are posted on LSR’s web site and were most recently reviewed and
updated in March 2009.
The Board has affirmatively determined
that three of the five Directors are independent, under the NYSE Arca 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 in executive sessions without the presence of any members of
the Company’s management.
Meetings
of Board of Directors
During
2008 four (4) meetings of the Board of Directors of LSR were
convened. 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, except that Mr. Sesay missed one meeting of the
Compensation Committee and one meeting of the Audit Committee.
Director
Compensation
During the period of January 1, 2008
through June 30, 2008, each non-employee director received a cash fee of $25,000
per year for service as a director. During that period the Chairman
of the Nominating and Corporate Governance Committee (Mr. Sesay) received an
additional annual fee of $2,500, the Chairman of the Compensation Committee (Mr.
Balthazar) received an additional annual fee of $2,500 and the Chairman of the
Audit Committee (Mr. Balthazar) received an additional annual fee of
$15,000. Effective July 1, 2008 through December 31, 2008 each
non-employee director’s annual fee was increased to $35,000. Also
effective July 1, 2008, each non-chairman member of a Board Committee receives
an annual fee of $2,500 for that membership. In addition, effective
July 1, 2008, the Chairman of the Nominating and Corporate Governance Committee
(Mr. Sesay) receives an additional annual fee of $5,000 per year; the Chairman
of the Compensation Committee (Mr. Balthazar) receives an additional annual fee
of $10,000 per year; and the Chairman of the Audit Committee (Mr. Balthazar)
receives an additional annual fee of $10,000 per year.
Each
non-employee director received two grants of restricted stock during
2008: a grant of 1,500 shares on July 1, 2008 (with such shares to
vest one half on July 1, 2009 and one half on July 1, 2010) and a grant of 1,500
shares on December 22, 2008 (with such shares to vest one half on December 22,
2009 and one half on December 22, 2010). Non-employee directors are
reimbursed for their travel and related expenses in connection with their
services as directors. Directors who are employees of the company
(Messrs. Baker and Cass) receive no compensation for serving as a
director.
Audit
Committee
The Audit
Committee of the Board of Directors of LSR is, among other things, 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 and
discuss earnings press releases; to discuss policies with respect to risk
assessment and risk management; to discuss with management the status of pending
litigation, taxation matters and other areas of oversight to the legal and
compliance area as may be appropriate; to establish confidential, anonymous
“whistleblower” complaint procedures; 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 under SEC and NYSE Arca standards. The Audit
Committee of LSR held eight (8) meetings during 2008.
The Audit Committee operates under a
written charter adopted by the Board of Directors that is posted on LSR’s web
site. That charter was last reviewed and amended in March
2009.
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, 2008 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, 2008, 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 2008 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 2009 audit. Representatives of Hugh Scott
will be invited to attend the Annual Meeting.
Audit
Fees
Fees for audit services totaled
approximately $738,000 in 2008 and $895,000 in 2007, 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 $139,000 in 2008 and $175,000 in 2007. Audit-related
services principally include consultation on tax and accounting issues,
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 $116,000 in 2008
and $134,000 in 2007.
All
Other Fees
Hugh Scott, P.C. did not provide any
services not described above in 2008 and 2007.
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 members of the Nominating and
Corporate Governance Committee are Messrs. Sesay, Balthazar and
Junqueiras. Mr. Sesay serves as Chairman. This Committee
met one (1) time during 2008.
The Committee operates pursuant to a
Nominating and Corporate Governance Committee Charter, which was last reviewed
and updated in June 2008 and is scheduled to next be reviewed in June
2009. 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.
|
The Nominating and Corporate Governance
Committee 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 enable 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; the
candidate’s recognition of and willingness to confront the special challenges of
being an LSR director in view of the animal rights extremist campaign against
the Company; 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 Business Conduct and Ethics
We
maintain a code of business conduct and ethics governing the conduct of our
business and behavior by all personnel including our Chief Executive Officer,
President and Chief Financial Officer. The code was last reviewed and
amended in March 2009. A copy of the code is posted on LSR’s
website.
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 independent contractors of the Company. The
Committee reviews on a periodic basis the Company’s executive compensation
programs and makes 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, including assessing the Company’s success in addressing the
complexities and challenges that have been faced during that
period. 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, pension 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. Gabor Balthazar, Afonso
Junqueiras and Yaya 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 three (3) meetings during 2008.
There
were no Compensation Committee interlocks during 2008.
The
Committee operates pursuant to a charter, which is available on the Company's
website at www.lsrinc.net under the “Corporate Governance” icon. That
charter was most recently reviewed and amended in March 2009. Under
its charter, the stated purposes of the Compensation Committee are:
·
|
To
establish the Company’s general compensation philosophy and oversee the
development and implementation of executive compensation programs and
policies;
|
·
|
To
annually review and approve the Company’s goals and objectives relative to
CEO compensation and to set the CEO compensation based on those goals and
objectives;
|
·
|
To
review and approve the compensation of other executive
officers;
|
·
|
To
review the terms of incentive compensation plans, equity-based plans,
retirement plans and welfare benefit
plans;
|
·
|
To
review policies with respect to post-service arrangements and
perquisites;
|
·
|
To
produce with the assistance of management an annual report on executive
compensation and a compensation discussion and analysis for inclusion in
the Company’s annual report on Form 10-K or annual proxy
statement;
|
·
|
To
evaluate its own performance on an annual
basis;
|
·
|
To
retain consultants and professional advisors as it deems appropriate;
and
|
·
|
To
carry out such other duties as may be delegated to it by the Board from
time to time.
|
COMPENSATION
DISCUSSION AND ANALYSIS
General
Compensation Philosophy and Objectives
LSR's
executive compensation programs are designed to attract, motivate and retain
executives critical to the Company's long-term success and the creation of
stockholder value. The Company's fundamental compensation philosophy
is to closely link executive officers' total compensation with the achievement
of annual and long-term performance goals. Management and the
Compensation Committee believe that compensation decisions are complex and best
made after a careful review of individual and Company performance; Contract
Research Organization (“CRO”) industry “peer group” compensation levels,
including consideration of the relative size and complexity of each of these
peer companies; and salary and total compensation levels of executives in other
health care companies, high growth companies, and comparably sized
companies. The Committee awards compensation to the Company’s
executive officers that is based upon Company and individual performance and
that is designed to motivate them to achieve strategic objectives and to
continue to perform at the highest levels in the future.
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 encouragement of significant equity holdings in
the Company; and to provide a compensation package that recognizes individual
performance in conjunction with overall Company performance.
Based on
the objectives described above, LSR strives to set a total compensation
opportunity within range of the median of the total direct compensation paid to
similarly situated executives at comparable companies against whom the Company
competes in the CRO industry marketplace, and in the broader health care market
for executive talent. Actual compensation may be above or below the
median based on the actual performance of LSR and the
individual. This approach is intended to ensure that a significant
portion of executive compensation is based on LSR’s financial and strategic
performance.
2008 Compensation
Philosophy, Objectives and Actions
For 2008
the Compensation Committee, with the agreement and support of the full Board of
Directors and of senior management, determined that the key performance goal for
the Company remained the same as it was in 2007: to improve financial
performance to more closely approximate the financial performance of its key
competitors in the CRO industry, behind whom it has lagged
historically. The Compensation Committee decided that the best
barometer of such financial performance again would be operating margin
percentage and established a 16% operating margin goal for 2008, the same goal
previously established under the 2007 Long Term Incentive Plan (the “2007
LTIP”). The Compensation Committee continues to encourage a
significant equity interest in the Company for its senior executives, and has
historically encouraged their personal commitment to equity ownership, and
rewarded operating performance, with the issuance of stock and stock options in
order to further align their rewards with that of shareholders. The Compensation
Committee believes that shareholder value is best maximized by improving
operating margin percentage. Accordingly, the Compensation Committee determined
that it would focus its incremental compensation on this measurement through
incentive bonus plans rather than increases in base salaries and
based all incentive compensation for senior management for 2008 on improving the
Company’s operating margin percentage. The Compensation Committee expressed its
high level of satisfaction with the performance of the Company over the prior
two years, noting the significantly improving financial performance of the
Company during that period, and agreed with management to continue to focus
senior management’s efforts on continuing to improve operating margin percentage
during 2008. The Compensation Committee believed that to the extent
that the annual and long term incentive compensation of the named executive
officers was tied directly to achieving specific performance levels of operating
margin percentage, that the overall compensation of the named executive officers
for 2008 would be an accurate reflection of Company financial performance,
notwithstanding the initial absence of increases in base
salaries. The Compensation Committee made this determination
cognizant that it was possible that the senior officers of the Company’s chief
CRO industry competitors would receive raises in base salary and recognizing
that the disparity between the two approaches had the possibility of causing
dissatisfaction among the Named Executive Officers. The Committee
therefore determined to revisit base salaries of senior management later in the
year during 2008. The Compensation Committee did in fact revisit base
salaries of senior management during the latter part of 2008, noting that base
salaries for this group had not been increased since September
2005. Accordingly, they approved increases in September 2008 for the
five members of senior management (Messrs. Baker, Bibi, Cass, Griffiths and
Michaelson) to be effective as of September 1, 2008.
At its
December 2007 meeting, the Compensation Committee, upon the recommendation of
the CEO, Andrew Baker, had determined not to adopt an annual bonus plan for
2008, so that full attention of senior management will be directed at achieving
the performance goals established in the 2007 LTIP. Consistent with
this approach, they also decided at that December 2007 meeting not to issue any
additional stock options or other stock-based compensation to the Named
Executive Officers for 2008. Again, this was not meant to reflect any
dissatisfaction with the performance of senior management during 2007, but
rather to simply focus their efforts on the single over-riding goal of improving
operating margin percentage.
Roles
and Responsibilities
Both the
Compensation Committee and senior management are involved in the development,
review and evaluation, and approval of the Company’s executive compensation
programs. In general, the roles are discussed below; additional
details regarding the roles of each are addressed in the discussion of the
“Annual Review of Executive Compensation.”
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 independent contractors of the Company. The
Committee reviews on a periodic basis the Company’s executive compensation
programs and makes 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, including assessing the Company’s success in addressing the
complexities and challenges that have been faced during that
period. 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. During 2008, the Compensation Committee’s primary focus in
establishing the compensation of the Chief Executive Officer was to tie his
incentive compensation to an improvement in operating margin percentage and to
ensure that his base salary was appropriate in light of peer companies and the
competitive environment.
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, pension 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. Gabor Balthazar, Afonso
Junqueiras and Yaya 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 three (3)
meetings during 2008.
There
were no Compensation Committee interlocks during 2008.
The
Committee operates pursuant to a charter, which is available on the Company's
website at
www.lsrinc.net
under
the “Corporate Governance” icon. That charter was most recently
reviewed and amended in March 2008. Under its charter, the stated
purposes of the Compensation Committee are:
·
|
To
establish the Company’s general compensation philosophy and oversee the
development and implementation of executive compensation programs and
policies;
|
·
|
To
annually review and approve the Company’s goals and objectives relative to
CEO compensation and to set the CEO compensation based on those goals and
objectives;
|
·
|
To
review and approve the compensation of other executive
officers;
|
·
|
To
review the terms of incentive compensation plans, equity-based plans,
retirement plans and welfare benefit
plans;
|
·
|
To
review policies with respect to post-service arrangements and
perquisites;
|
·
|
To
produce with the assistance of management an annual report on executive
compensation and a compensation discussion and analysis for inclusion in
the Company’s annual report on Form 10-K or annual proxy
statement;
|
·
|
To
evaluate its own performance on an annual
basis;
|
·
|
To
retain consultants and professional advisors as it deems appropriate;
and
|
·
|
To
carry out such other duties as may be delegated to it by the Board from
time to time.
|
Senior
Management
The
Company’s senior management, under the leadership and direction of the Chief
Executive Officer, sets the strategic direction for the Company and strives to
design and develop compensation programs that motivate executives’ behaviors
consistent with strategic objectives. In collaboration with the
Compensation Committee, senior management coordinates the annual review of the
compensation programs for the executive officers. This includes an
evaluation of individual and Company performance, factors that have influenced
the Company during the year, competitive practices and trends, and various
compensation issues. Based on the outcomes of this review, the CEO
makes recommendations to the Compensation Committee regarding the compensation
of each of the executive officers (other than the Chief Executive Officer, whose
compensation is determined by the Compensation Committee).
Annual
Review of Executive Compensation
LSR
senior management and the Compensation Committee strive to maintain an executive
compensation program that is structured to provide executive officers with a
total compensation package that, at expected levels of performance, is
competitive with those provided to other executives holding comparable positions
or having similar qualifications in other similarly situated organizations in
the CRO and healthcare industries. This is achieved by the
preparation of an annual review of executive officer compensation.
In the
preparation of the annual review, management, under the direction of the CFO,
reviews proxy statements filed by LSR’s CRO industry peer companies to obtain
data about the compensation of the named executive
officers. (Additional information regarding this peer group of
companies is provided below). Based on competitive market data
gathered from peer company proxy statements, management prepares a report to the
Compensation Committee. The report may also include similar
compensation information for selected small cap healthcare companies outside the
CRO industry. This report also provides LSR executive officers’ total
compensation and equity holdings. Based on this report, discussion of
compensation levels and packages offered to executives in other healthcare
companies, and assessment of individual executive officer performance over the
prior year, the CEO makes recommendations regarding the appropriate compensation
for each of the executive officers (other than the Chief Executive
Officer). After reviewing these materials, the Compensation Committee
evaluates the executive’s performance through reports from other senior
management and, in some cases, personal observation. The Compensation
Committee takes into account this evaluation and other appropriate
considerations to arrive at individual compensation decisions.
In making
its decisions on each executive officer’s compensation, the Compensation
Committee considers the nature and scope of all elements of the executive’s
total compensation package, the executive’s responsibilities, factors pertaining
to the executive’s home country, and his or her effectiveness in supporting
LSR’s key strategic, operational and financial goals. The
Compensation Committee also considers recommendations from the Chief Executive
Officer regarding total compensation for those executive officers.
Although
the Compensation Committee receives information and recommendations regarding
the design and level of compensation of the Company’s executive officers from
Company management, the Compensation Committee makes the final decisions as to
the plan design and compensation levels for these executives.
Compensation
Peer Group
In
determining the appropriate amount for each element of the total direct
compensation (base salary, annual incentives, and long-term incentives), the
Compensation Committee considers, among other things, the compensation paid for
similar positions at other corporations within a peer group of companies prior
to determining the executive officers’ compensation. The peer group
is comprised of companies against which LSR competes in the CRO
industry. There have historically been only two other publicly traded
companies that have conducted substantial amounts of pre-clinical CRO safety
testing, which is the Company’s primary business: Charles River
Laboratories, Inc. and Covance, Inc. Thus, these two companies
comprise the compensation peer group.
Management
and the Compensation Committee acknowledge that both Charles River and Covance
are substantially larger than the Company in terms of revenues and profits and
take that fact into consideration when making compensation
decisions. The total compensation of the Company’s executive officers
historically has been, and remains, below that of the total compensation paid at
these peer companies. In addition to size differences, the
Compensation Committee also takes into account differences in complexity and
challenges faced by each of the Company and its peer group (some of which are
unique to LSR) in determining the proper range of executive officer
compensation.
Mix
of Compensation
LSR’s
executive compensation program is composed of three key elements – base salary,
an annual incentive bonus, and long term compensation – which represent an
executive officer’s total direct compensation (excluding benefits and
perquisites). The Compensation Committee strives to align the
relative proportion of each element of total direct compensation with the
competitive market and LSR’s objectives, as well as preserve the flexibility to
respond to the challenges (some of which are unique to LSR) which the Company
faces. The Compensation Committee’s historical goal has been to
strike the appropriate balance between annual and long-term incentives, and it
may adjust the allocation of pay to best support the Company’s
objectives. Historically, the majority of pay at LSR has been in the
form of base salary. Annual bonuses have been paid only when Company
financial performance has in the opinion of the Compensation Committee and
Senior Management merited it. The Compensation Committee did not
adopt a 2008 bonus plan for senior management, determining instead to focus all
2008 incentive compensation on the 2007 LTIP. For 2008, the mix
of these three elements for each of the named executive officers is illustrated
in the following chart:
Percent
of 2008 Total Direct Compensation
Officer
|
Base
Salary
|
Annual
Incentive
Award
(1)
|
Long-Term
Incentive
Awards
(
2
)
|
Andrew
Baker
|
100%
|
0%
|
0%
|
Richard
Michaelson
|
100%
|
0%
|
0%
|
Brian
Cass
|
100%
|
0%
|
0%
|
Julian
Griffiths
|
100%
|
0%
|
0%
|
Mark
Bibi
|
100%
|
0%
|
0%
|
(1)
|
No
annual bonuses were paid in 2008 for 2008 performance. Annual
bonuseswere paid in March 2008 resulting from 2007 performance under the
2007annual bonus plan; those amounts were included in the 2008 proxy
statement.
|
(2)
|
The
mixture of pay elements noted above represents the belief that
executiveofficers should have elements of their compensation tied to both
short and longterm objectives. This pay mixture is the result
of historical Company paypractices, management recommendations, and
Compensation Committee determinations. The fact
that no payments were made in 2008 under the 2007 LTIP is, the Committee
believes, a reflection of the aggressive financial performance goals
established under that plan.
|
Elements
of Executive Compensation
The key
elements of direct compensation for the executive officers are base salary, an
annual incentive bonus, and equity-based compensation, typically delivered
through stock options and stock grants. The Compensation Committee
determines the mix among each of these elements in any given year, and there is
no certainty that any given element will be awarded in any specific year (other
than base salary, but even in that element there is no guarantee that an
increase in base salary will be awarded). Executive officers also are
eligible for other elements of indirect compensation, comprised of health and
welfare benefits, pension, insurance, savings plans, and certain
perquisites. The Compensation Committee considers each of these
elements when evaluating the overall compensation program design and may include
all elements, or only some of the elements, in any given year.
Annual
Base Salary
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 CRO 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 (or at least relatively comparable to) the market rate
paid for comparable positions in the CRO industry, taking into account both size
and complexity differences.
An
executive officer’s base salary generally reflects the officer’s
responsibilities, tenure, job performance, and direct competition for the
executive’s services. The Compensation Committee reviews the base
salaries of each executive officer, including the Chief Executive Officer, on an
annual basis. In addition to these annual reviews, the Committee may
at any time review the salary of an executive who has received a significant
promotion, whose responsibilities have been increased significantly, who has
achieved exceptional performance, or who is the object of competitive
pressure. Any adjustments are based on the results of the annual
review of market salary data, job performance of the executive officer over
time, and the expansion of duties and responsibilities, if any. No
pre-determined weight or emphasis is placed on any one of these
factors.
In
general, the Committee targets the base salary levels of the Chief Executive
Officer and other executive officers under the range of the 50th percentile of
base salaries for comparable executive positions at key
competitors. Adjustment of an individual executive officer's actual
base salary above the range of the 50th percentile of this reference group would
generally be based upon:
·
|
Achieving
or exceeding key business
objectives;
|
·
|
Highly
developed individual skills critical to the
Company;
|
·
|
Demonstrating
an ability to positively impact stockholder
value;
|
·
|
Consistently
superior levels of performance;
|
·
|
Experience
and level of responsibility; and
|
·
|
Availability
of skills in the market place
|
Consistent
with its focus on improving operating margin percentage (and the incentive
compensation benefits executives would realize from achievement of goals under
the 2007 LTIP), the Compensation Committee did not approve any increases to the
base salaries of the named executive officers in either 2006 or
2007. This was not a reflection of any dissatisfaction with senior
management performance, but rather of a desire to focus management efforts and
the payment of incentive compensation on achieving operating performance
targets. In September 2008 the Committee determined to raise the base
salary of three members of senior management (Messrs. Bibi, Griffiths and
Michaelson) and in December 2008 raised the base salaries of the remaining two
members of senior management (Messrs. Baker and Cass).
Annual
Incentive Awards
The
Company’s executive officers and other key persons are considered for an annual
cash and/or stock bonus. 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.
The
potential payments available under the annual incentive program for the named
executive officers depend on the attainment of performance goals recommended by
management and approved by the Compensation Committee at the beginning of each
year. In addition to these awards, the Compensation Committee may
approve additional bonuses following a subjective evaluation of an executive
officer’s performance and success in areas deemed to be significant to
LSR. Individual awards reflect both group performance and individual
contributions to the Company’s success.
In March
2008, the Named Executive Officers received annual bonus awards based on the
Company meeting predetermined financial goals established for fiscal year 2007
by the Compensation Committee. Specifically, the Compensation
Committee had established for fiscal year 2007 three threshold levels of
operating margin percentage on which to base the awarding of annual
bonuses. The Company’s 2007 financial performance met the middle
performance threshold. However, the Compensation Committee, upon the
recommendation of the Company’s CEO, Andrew Baker, determined not to establish a
2008 annual bonus plan for senior management, deciding instead to focus all 2008
incentive compensation for senior management on the 2007 LTIP.
2007
LTIP
At its
meeting on December 6, 2006, the Committee determined amounts that may be paid
to executive officers and certain senior management members of the Company in
respect of LTIP awards for the four-year 2007-2010 performance
period. This plan is referred to as the 2007 LTIP. The
Committee established 16% as the specified average level of operating margin
percentage to be achieved over any four consecutive quarters during such
performance period that would trigger the payment of the awards. This
threshold level of operating margin percentage was higher than the maximum level
of operating margin percentage under the 2007 Annual Bonus Plan
(14.5%). Consistent with historical practice, the Committee
determined to establish an aggressive target, but a target that they believed
would be achievable within the 2007-2010 time period. The
awards would be paid in cash following confirmation by the Company’s independent
auditor that the threshold performance level had been achieved, taking into
account the payment of such bonuses. The Compensation Committee
selected the 16% operating margin target because they believed it accurately
reflected the company’s goal of achieving operating performance that was
comparable to the “mid- to high-teens” fully burdened operating margin
performance enjoyed by its CRO peer company competitors, Covance and Charles
River. The Committee believed that the Company’s stock price would
likely reflect its operating performance, and therefore determined that an
appreciable improvement in stock price would likely accompany an improvement in
operating margin performance from the 10.4% achieved by the company in 2006 to
the 16% established as a target under the 2007 LTIP. The committee
recognized that 16% was an aggressive goal that might not be achieved, but
believed it was in the best interests of the Company and its stockholders to
focus senior management’s attention on a target that would represent a high
level of achievement.
The
Compensation Committee believed that the payout for achieving an aggressive
target should be considerable and commensurate with the effort necessary to
achieve this goal. Accordingly, it determined that the payout upon
achievement of the target would be equal to four times a specified percentage of
then-current base salary assigned to each participant in the 2007
LTIP. The specified percentage for Messrs. Baker and Cass was 50%;
for Messrs. Michaelson and Griffiths was 40%, and for Mr. Bibi was
30%. Thus, if the 16% target was achieved, Messrs. Baker and Cass
would receive a payment equal to 200% of their base salary; Messrs. Michaelson
and Griffiths would receive a payment equal to 160% of their base salary; and
Mr. Bibi would receive a payment equal to 120% of his base salary.
The
aggregate amount payable to all participants (which includes the five Named
Executive Officers and other key members of management who are included in the
2007 LTIP) under the 2007 LTIP if the specified performance level is achieved is
slightly in excess of $5 million. The potential payments under this
plan for each of the Named Executive Officers is as follows:
Andrew
Baker, Chairman and CEO*
|
$1,222,816
|
Richard
Michaelson, CFO
|
480,000
|
Brian
Cass, President and Managing Director*
|
1,222,816
|
Julian
Griffiths, Director of Operations*
|
489,126
|
Mark
Bibi, Secretary and General Counsel
|
360,000
|
|
|
*
|
Payments
to Messrs. Baker, Cass and Griffiths are made in UK pounds
sterling. For purposes of estimating these payments in US
dollars, the 2008 average exchange rate of £1.00 = $1.8528 has been
used. The base annual salaries in place for each executive at
the time of adoption of the LTIP were: Andrew Baker: £330,000;
Richard Michaelson: $300,000; Brian Cass: £330,000; Julian Griffiths:
£165,000; Mark Bibi:
$300,000.
|
The
threshold level of operating margin percentage under the 2007 LTIP was not
achieved during any of the four quarters of 2008. Accordingly, no
payments were made during 2008 under the 2007 LTIP. The Committee
determined that the 2007 LTIP would be the sole form of incentive compensation
for senior management during 2008. No 2008 Annual Bonus Plan was
adopted for the Named Executive Officers.
Long-Term
Equity Compensation
LSR
provides executives with long-term equity compensation through the LSR 2001
Equity Incentive Plan (the “EIP”), which was approved by the Company’s
shareholders in 2001. The EIP is intended to encourage employees,
consultants, and directors to acquire or increase their equity interest in the
Company and to provide a means whereby they may develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company. The EIP also encourages this group to remain with and
devote their best efforts to the business of the Company, thereby advancing the
interests of the Company and its stockholders. The EIP also enhances
the Company’s and its subsidiaries’ ability to attract and retain the services
of individuals who are essential for the growth and profitability of the
Company, and the enhancement of shareholder value.
The
Compensation Committee determined not to grant any stock options or other form
of equity-based compensation to senior management for 2008. The
Committee did reserve 30,000 options for small grants during 2008 to operating
management at a level below senior management (subsequently increased to a
reserve of 75,000 options at the March 2008 meeting).
Health
and Welfare Benefits
The
Company provides its executive officers with benefits that are intended to be a
part of a competitive total compensation package that provides health and
welfare and retirement programs comparable to those provided to employees and
executives at other companies in the CRO industry. Except as
specifically noted below, executive officers participate in the Company's
health, life insurance and welfare programs on the same relative basis as other
LSR employees.
Pension,
Insurance and Savings Plans
The
benefit plan descriptions below and accompanying tables provided in the “Summary
Compensation Table”, and “Pension Benefits Table” provides an explanation of the
major features of the Company’s employee benefit plans.
Pension Plans –
Andrew Baker
and Brian Cass each receives pursuant to his employment agreement an annual
contribution to his private pension arrangements equivalent to 33% of his base
annual salary. Julian Griffiths receives an annual contribution to
his private pension arrangements equivalent to 20% of this base annual
salary. LSR does not offer any pension plans to US employees, so
neither Richard Michaelson nor Mark Bibi has any pension plan.
Insurance Plans –
The
Company pays for Richard Michaelson pursuant to his employment agreement the
premiums for $1 million of term life insurance, and supplemental long term care
insurance coverage. Andrew Baker receives pursuant to his employment
agreement reimbursement for his life insurance premiums. The Company
pays the premiums for supplemental long term care insurance coverage for Andrew
Baker and Mark Bibi.
Medical Plans
– Andrew Baker
receives pursuant to his employment agreement reimbursement for his private
medical insurance. Messrs. Cass, Griffiths, Michaelson and Bibi
participate in the health insurance plans offered generally to the Company’s
employees and are provided supplemental health benefits described below under
“Employment Agreements”.
Savings Plans –
The Company
provides executive officers in the U.S. the opportunity to participate along
with all other U.S. employees in the Huntingdon Life Sciences Savings and
Investment (the “401(k) Plan”) a tax-qualified broad-based employee savings
plan. Employee contributions up to 15% of pre-tax annual compensation
are permitted up to dollar limits established annually by the Internal Revenue
Service (“IRS”). The Company contributes 75% of employee
contributions up to a maximum of 6%. (The Company suspended its
matching contribution under the 401(k) Plan effective April 1,
2009.) Messrs. Michaelson and Bibi participate in the 401(k)
Plan.
Perquisites
Relocation Allowance
–
The Company provides Andrew
Baker and Brian Cass each a relocation allowance of £2,000 per
month.
Car
Allowance –
The Company
provides executive officers with the following car allowances: £1,000
($1,853) per month to Messrs. Baker and Cass, £750 ($1,390) per month to Mr.
Griffiths, and $1,000 per month to Messrs. Michaelson and Bibi.
Tax Preparation Fees –
The
Company paid tax preparation fees in 2008 for Messrs. Michaelson and Bibi in the
amount of $2,700 for Mr. Michaelson and $2,500 for Mr. Bibi.
Club Fees –
The Company paid
$1,485 for membership fees for a luncheon club that provides Manhattan meeting
space for the use of Richard Michaelson.
Gasoline expenses
– The
Company paid the gasoline expenses for Messrs. Cass and Griffiths in the amount
of $9,120 for Mr. Cass and $6,426 for Mr. Griffiths.
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 Focused Healthcare Partners
(“FHP”), an investment firm controlled by Mr. Baker. 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 2008 an annual fee of £330,000,
the same as in 2007, during the period January 1, 2008 through August 31,
2008. That annual fee was increased by the Compensation Committee to
£370,000 at its September 2008 meeting, such increase to be effective as of
September 1, 2008. In addition, Mr. Baker voluntarily accepted a 6%
reduction in the base annual fee paid to FHP effective April 1, 2009 in
connection with a company-wide 6% salary reduction. Mr. Baker
receives health and medical and life insurance benefits from the
Company. Mr. Baker receives contributions to his private pension
arrangements, equivalent to 33 percent of this basic annual
fee. Effective April 1, 2009 Mr. Baker voluntarily accepted a
reduction in such pension contribution from 33% to 28% in connection with a
company wide reduction in pension benefits. He is also entitled to a
non-pensionable car allowance of £1,000 per month and £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.
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 2008 an annual salary of $300,000 gross, the same as
he received in 2007, during the period January 1, 2008 through August 31,
2008. That annual salary was increased by the Compensation Committee
to $350,000 at its September 2008 meeting, such increase to be effective as of
September 1, 2008. Mr. Michaelson voluntarily accepted a 6% reduction
in base annual salary effective April 1, 2009 in connection with a company-wide
6% salary reduction. Mr. Michaelson is entitled to health insurance,
life insurance, personal accident insurance, medical expenses insurance, long
term care 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, among 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.
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 2008 a gross salary of £330,000 per annum, the same as he
received in 2007, during the period January 1, 2008 through August 31,
2008. That annual salary was increased by the Compensation Committee
to £370,000 at its September 2008 meeting, such increase to be effective as of
September 1, 2008. In addition, Mr. Cass voluntarily accepted a 6% reduction in
base annual salary effective April 1, 2009 in connection with a company-wide 6%
salary reduction. 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. Effective April 1, 2009 Mr. Cass voluntarily accepted a reduction in
pension contributions from 33% to 28% in connection with a company-wide
reduction in pension benefits. He is also entitled to a
non-pensionable car allowance of £1,000 gross per month and £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 the
Company). The service agreement appointed Mr. Griffiths as Finance
Director of Huntingdon and he now holds the position of Vice President of
Operations of the Company. Mr. Griffiths’ service agreement will
continue until terminated by Mr. Griffiths on six months’ written notice or by
Huntingdon Life Sciences Limited on 12 months’ written notice. In the
event of termination without “cause” following a “change in control”, as
defined, Mr. Griffiths would receive a payment equal to 2.99 times his annual
salary plus an amount equal to 2.99 times all incentive compensation earned or
received by Mr. Griffiths during the 12 months prior to
termination.
Mr.
Griffiths received during 2008 an annual salary of £165,000 gross, the same as
he received in 2007, during the period January 1, 2008 through August 31,
2008. That annual salary was increased by the Compensation Committee
to £200,000 at its September 2008 meeting, such increase to be effective as of
September 1, 2008. Mr. Griffiths voluntarily accepted a 6% reduction
in base annual salary effective April 1, 2009 in connection with a company-wide
6% salary reduction. He is entitled to permanent health insurance,
life insurance, personal accident insurance, medical expenses insurance and
pension benefits. Mr. Griffiths receives contributions to his private
pension arrangements, equivalent to 20 percent of his base annual
salary. Effective April 1, 2009 Mr. Griffiths voluntarily accepted a
reduction in such pension contributions from 20% to 15% in connection with a
company-wide reduction in pension benefits. Mr. Griffiths’ service
agreement also provides for the payment of a bonus to Mr. Griffiths in the
absolute discretion of the Company’s Board.
In
addition, Mr. Griffiths is entitled to a non-pensionable car allowance of £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.
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
received an annual salary in 2008 of $300,000 gross, the same as he received in
2007, during the period January 1, 2008 through August 31, 2008. That
annual salary was increased by the Compensation Committee to $350,000 at its
September 2008 meeting, such increase to be effective as of September 1,
2008. Mr. Bibi voluntarily accepted a 6% reduction in base annual
salary effective April 1, 2009 in connection with a company-wide 6% salary
reduction. He is entitled to health insurance, life insurance,
personal accident insurance, long-term care 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, among 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.
Compensation
of the Chief Executive Officer
In
connection with the review of the Chief Executive Officer’s annual salary for
2008, the Compensation Committee reviewed, and compared, among other things, Mr.
Baker’s total compensation to that of peer company CEOs. The
Committee also considered certain key goals for 2008, primarily an improvement
in the Company’s operating margin percentage and certain unique challenges faced
by the Company (most notably the animal rights extremist campaign against the
Company) that makes Mr. Baker’s successful performance all the more
notable.
For 2008,
Mr. Baker’s base salary (payable as a fee to FHP) was £330,000 ($611,408 at the
2008 average exchange rate of £1.00 = $1.8528), the same as in 2007, during the
period January 1, 2008 through August 31, 2008. The Compensation
Committee determined at its September 2008 meeting to increase that base annual
salary to £370,000 ($685,536) effective as of September 1, 2008. Mr.
Baker received no cash incentive compensation during 2008 as a result of 2008
performance; however in March 2008 he received a cash bonus under the 2007
Annual Bonus Plan of £330,000 ($611,408) for achievement of 2007 financial
goals. When viewed in combination, his 2008 base salary plus actual
annual incentive compensation earned during 2008 was £343,324
($636,111).
Accounting
and Tax Treatments of the Elements of Compensation
The
Company accounts for stock-based awards, including stock options and stock
awards, as provided in FAS123(R).
The
Compensation Committee considers the potential impact of IRC Section 162(m) on
compensation decisions. Section 162(m) disallows a tax deduction by
the Company for individual executive compensation exceeding $1 million in any
taxable year for the Chief Executive Officer and the other four highest
compensated senior executive officers, other than compensation that is
performance-based under a plan that is approved by the stockholders of the
Company and that meets certain other technical requirements. The
Committee's approach with respect to qualifying compensation paid to executive
officers for tax deductibility purposes is that executive compensation plans
will generally be designed considering a number of factors, including tax
deductibility. However, non-deductible compensation may still be paid
to executive officers when necessary for competitive reasons, to attract or
retain a key executive, to enable the company to retain flexibility in
maximizing its pay for performance philosophy, or where achieving maximum tax
deductibility would not be in the best interest of the Company.
Post-Employment
Compensation
Each of
the Company’s named executive officers is party to an employment agreement that
specifies the payment of certain post-employment compensation. In the
event their employment terminates other than for cause (and not in connection
with a change of control of the Company), Messrs. Baker, Michaelson, Griffiths
and Bibi would continue to receive their base compensation for a period of 12
months, and Mr. Cass for a period of 24 months. If their employment
is terminated without cause following a change in control, each of Messrs.
Baker, Cass, Michaelson, Griffiths and Bibi would receive a payment equal to
2.99 times base compensation plus an amount equal to 2.99 times all incentive
compensation earned during the 12 months prior to termination.
Set forth
below are the total amounts payable in the event of termination by the Company
without a change in control and with a change in control, based on compensation
earned by the Named Executive Officers in 2008:
|
Without
a change in control
|
With
a change in control
|
|
Base
compensation
($)
|
Incentive
compensation
($)
|
Total
($)
|
Base
compensation
($)
|
Incentive
compensation
($)
|
Total
($)
|
|
|
|
|
|
|
|
Andrew
Baker
|
685,518
|
-
|
685,518
|
2,049,699
|
-
|
2,049,699
|
Richard
Michaelson
|
350,000
|
-
|
350,000
|
1,046,500
|
-
|
1,046,500
|
Brian
Cass
|
1,371,036
|
-
|
1,371,036
|
2,049,699
|
-
|
2,049,699
|
Julian
Griffiths
|
370,550
|
-
|
370,550
|
1,107,945
|
-
|
1,107,945
|
Mark
Bibi
|
350,000
|
-
|
350,000
|
1,046,500
|
-
|
1,046,500
|
Total
for All Named Executive Officers
|
3,127,105
|
|
3,127,105
|
7,300,343
|
-
|
7,300,343
|
The above
table values are calculated using the 2008 base compensation, converted at the
2008 average exchange rate of $1.8528 for Messrs. Baker, Cass and Griffiths, who
are paid in UK Pounds Sterling.
Compensation
tables follow on the subsequent pages.
|
|
|
|
|
|
|
|
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive Plan Compensation
|
Change
in Pension Value and Non-qualified Deferred Compensation
Earnings
|
All
Other Compensation
|
Total
|
|
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew
Baker
|
2008
|
$636,111
|
$0
|
$0
|
$0
|
$0
|
$0
|
$330,269
|
$966,380
|
Chairman
and Chief
|
2007
|
$660,363
|
$660,363
|
$0
|
$0
|
$0
|
$0
|
$339,461
|
$1,660,187
|
Executive
Officer
|
2006
|
$608,256
|
$152,064
|
$0
|
$831,970
|
$0
|
$0
|
$296,173
|
$1,888,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Michaelson
|
2008
|
$316,667
|
$0
|
$0
|
$0
|
$0
|
$0
|
$64,630
|
$381,297
|
Chief
Financial Officer
|
2007
|
$300,000
|
$150,000
|
$0
|
$0
|
$0
|
$0
|
$64,612
|
$514,612
|
and
Secretary
|
2006
|
$300,000
|
$37,500
|
$460,000
|
$0
|
$0
|
$0
|
$45,082
|
$842,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
Cass
|
2008
|
$636,111
|
$0
|
$0
|
$0
|
$0
|
$0
|
$293,816
|
$929,987
|
President
|
2007
|
$660,363
|
$660,363
|
$0
|
$0
|
$0
|
$0
|
$312,654
|
$1,633,380
|
|
2006
|
$608,256
|
$152,064
|
$0
|
$831,970
|
$0
|
$0
|
$287,506
|
$1,879,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Julian
Griffiths
|
2008
|
$327,319
|
$0
|
$0
|
$0
|
$0
|
$0
|
$93,198
|
$420,517
|
Vice
President of
|
2007
|
$330,182
|
$165,091
|
$0
|
$0
|
$0
|
$0
|
$96,456
|
$591,728
|
Operations
|
2006
|
$304,128
|
$38,016
|
$0
|
$415,985
|
$0
|
$0
|
$85,059
|
$843,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
Bibi
|
2008
|
$316,667
|
$0
|
$0
|
$0
|
$0
|
$0
|
$51,488
|
$368,155
|
General
Counsel and
|
2007
|
$300,000
|
$150,000
|
$0
|
$0
|
$0
|
$0
|
$35,975
|
$485,975
|
Secretary
|
2006
|
$300,000
|
$37,500
|
$460,000
|
$831,970
|
$0
|
$0
|
$23,076
|
$1,652,546
|
|
|
|
|
|
|
|
|
|
|
Salary and other payments:
Messrs. Baker, Cass and Griffiths are paid in UK pounds sterling. These amounts
have been converted for 2008 figures at the average 2008 exchange rate of £1.00
= $1.8528, for 2007 figures at the average 2007 exchange rate of £1.00 = $2.0011
and for 2006 figures at the average 2006 exchange rate of £1.00 =
$1,8432.
Stock awards
: The
value of stock awards represents the number of shares multiplied by the closing
price on the date of the award.
Options price
: The
options issued on December 6, 2006 had an exercise price of $9.95 per share, the
average daily high price for the five trading days ending on December 6,
2006.
Options – fair
value
: the fair value of the options were estimated using a
Black-Scholes option pricing model, with the assumptions; expected dividend
yield of stock at 0%; expected volatility of stock 161.50%; risk-free interest
rate 4.48% and the weighted average expected term on the options of 6.28
years.
All
other compensation:
Andrew Baker
: Included within
‘All Other Compensation’ were pension contributions of $209,917 (2008), $217,920
(2007) and $200,724 (2006), medical insurance of $18,530 (2008), $14,378 (2007)
and $16,284 (2006), life insurance of $35,123 (2008), $35,124 (2007) and $12,810
(2006), a car allowance of $22,233 (2008), $24,013 (2007) and $22,118 (2006) and
a relocation allowance of $44,466 (2008), $48,026 (2007) and $44,237
(2006).
Richard Michaelson
: Included
within ‘All Other Compensation’ were insurance of $38,305 (2008), $38,280 (2007)
and $26,810 (2006), car allowance of $12,000 (2008), $12,000 (2007) and $12,000
(2006) and 401(k) contributions of $11,625 (2008), $11,625 (2007) and $4,772
(2006).
Brian Cass
: Included within
‘All Other Compensation’ were pension contributions of $209,917 (2008), $217,920
(2007) and $200,724 (2006), a car allowance of $22,233 (2008), $24,013 (2007)
and $22,118 (2006), a relocation allowance of $44,466 (2008), $48,026 (2007) and
$44,237 (2006) and gasoline expenses of $9,120 (2008), $11,003 (2007) and $9,111
(2006).
Julian Griffiths
: Included
within ‘All Other Compensation’ were pension contributions of $65,464 (2008),
$66,036 (2007) and $60,826 (2006) and a car allowance of $16,675 (2008), $18,010
(2007) and $16,589 (2006) and gasoline expenses of $6,426 (2008), $5,203 (2007)
and $3,287 (2006).
Mark
Bibi
: Included within ‘All Other Compensation’ were insurance of $26,983
(2008), $11,740 (2007) and nil (2006), a $12,000 car allowance (2008, 2007 and
2006) and a 401(k) contribution of $10,005 (2008), $10,005 (2007) and $9,720
(2006).
Grants
of Plan-Based Awards in 2008
There
were no grants of plan-based equity or non-equity awards to any of the Executive
Officers during 2008.