LIFE MEDICAL SCIENCES INC, DEF 14A, 1997-04-29

LIFE MEDICAL SCIENCES INC
DEF 14A, 1997-04-29
ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

Life Medical Sciences, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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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):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:

<PAGE>

LIFE MEDICAL SCIENCES, INC.
379 Thornall Street
Edison, New Jersey 08837

NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON TUESDAY, JUNE 3,
1997

Notice is hereby given that the annual meeting of stockholders of LIFE
MEDICAL SCIENCES, INC., a Delaware corporation (the "Company"), will be held
at the Woodbridge Hilton, 120 Wood Avenue South, Iselin, New Jersey 08830 on
June 3, 1997 at 10:00 a.m., local time, for the following purposes:

1. To consider and vote upon the election of seven directors;

2. To approve an amendment to the Company's Amended and Restated 1992
Stock Option Plan;

3. To ratify the appointment of Richard A. Eisner & Company, LLP, as
the independent auditors of the Company; and

4. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.

The close of business on April 24, 1997 has been fixed as the record date
for the determination of stockholders entitled to notice of, and to vote at,
the meeting. A complete list of those stockholders will be open to examination
of any stockholder, for any purpose germane to the meeting, during ordinary
business hours at the Company's executive offices at 379 Thornall Street,
Edison, New Jersey 08837 for a period of 10 days prior to the meeting. The
stock transfer books of the Company will not be closed.

All stockholders are cordially invited to attend the meeting. Whether or
not you expect to attend, you are respectfully requested by the Board of
Directors to sign, date and return the enclosed proxy promptly. Stockholders
who execute proxies retain the right to revoke them at any time prior to the
voting thereof. A return envelope which requires no postage if mailed in the
United States is enclosed for your convenience.

By the order of the Board of
Directors,

Dr. Herbert Moskowitz
Chairman

Edison, New Jersey
Dated: April 28, 1997
<PAGE>

LIFE MEDICAL SCIENCES, INC.
379 Thornall Street
Edison, New Jersey 08837

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Life Medical Sciences,
Inc., a Delaware corporation (the "Company"), for the Annual Meeting of
Stockholders to be held at the Woodbridge Hilton, 120 Wood Avenue South,
Iselin, New Jersey 08830 on June 3, 1997 at 10:00 a.m., local time, and for
any adjournment or adjournments thereof (the "Meeting"), for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders. Any
stockholder giving such a proxy has the power to revoke it at any time before
it is voted. Written notice of such revocation should be forwarded directly to
the Secretary of the Company, at the above stated address. Attendance at the
Meeting will not have the effect of revoking the proxy unless such written
notice is given.

If the enclosed proxy is properly executed and returned, the shares
represented thereby will be voted in accordance with the directions thereon
and otherwise in accordance with the judgment of the persons designated as
proxies. Any proxy on which no direction is specified will be voted in favor
of the actions described in this Proxy Statement, for the election of the
nominees set forth under the caption "Election of Directors", for the approval
of the amendment to the Company's Amended and Restated 1992 Stock Option Plan
(the "Plan") and for the ratification of the appointment of Richard A. Eisner
& Company, LLP, as the independent auditors of the Company.

The approximate date on which this Proxy Statement and the accompanying
form of proxy will first be mailed or given to holders of the Company's Common
Stock, par value $.001 per share (the "Common Stock"), is April 28, 1997.

The cost of solicitation of proxies will be borne by the Company. In
addition to the use of mail, employees of the Company may solicit proxies by
telephone or telegraph. Upon request, the Company will reimburse brokers,
dealers, bankers and trustees, or their nominees, for reasonable expenses
incurred by them in forwarding proxy materials to the beneficial owners.

YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO SIGN AND RETURN THE
ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
<PAGE>

VOTING

Only holders of shares of Common Stock of record as at the close of
business on April 24, 1997 (the "Record Date") are entitled to vote at the
Meeting. On the Record Date there were issued and outstanding 7,914,820 shares
of Common Stock. Each outstanding share of Common Stock is entitled to one
vote upon all matters to be acted upon at the Meeting. A majority in interest
of the outstanding shares of Common Stock represented at the Meeting in person
or by proxy shall constitute a quorum. The affirmative vote of a plurality of
the shares of Common Stock so represented is necessary to elect the nominees
as directors and the affirmative vote of the majority of the shares of Common
Stock so represented is necessary to approve the amendment to the Plan and to
ratify the appointment of Richard A. Eisner & Company, LLP, as the independent
auditors of the Company. The stockholders vote at the Meeting by casting
ballots (in person or by proxy) which are tabulated by a person appointed by
the Board before the Meeting to serve as the inspector of election at the
Meeting and who has executed and verified an oath of office. Abstentions and
broker non-votes are included in the determination of the number of shares of
Common Stock present at the Meeting for quorum purposes but broker non-votes
are not counted in the tabulation of the votes cast on proposals presented to
stockholders. THUS, AN ABSTENTION FROM VOTING ON ANY MATTER HAS THE SAME LEGAL
EFFECT AS A VOTE "AGAINST" THE MATTER, EVEN THOUGH THE STOCKHOLDER MAY
INTERPRET SUCH ACTION DIFFERENTLY.

ELECTION OF DIRECTORS

INFORMATION CONCERNING NOMINEES

At the Meeting, seven directors will be elected by the stockholders to
serve until the next Annual Meeting of Stockholders or until their successors
are elected and shall qualify. Each of the nominees is currently a director of
the Company. MANAGEMENT RECOMMENDS THAT THE PERSONS NAMED BELOW BE ELECTED AS
DIRECTORS OF THE COMPANY and it is intended that the accompanying proxy will
be voted for their election as directors, unless the proxy contains contrary
instructions. The Company has no reason to believe that any of the nominees
will not be a candidate or will be unable to serve. However, in the event that
any of the nominees should become unable or unwilling to serve as a director,
the persons named in the proxy have advised that they will vote for the
election of such person or persons as shall be designated by management.

The following table sets forth the names of the nominees and certain
information with regard to each nominee:

<TABLE>
<CAPTION>
HELD POSITION WITH
NAME OF NOMINEE AGE OFFICE SINCE COMPANY
--------------- --- ------------- ---------------------
<S> <C> <C> <C>
Dr. Herbert Moskowitz................... 56 August 1990 Chairman of the Board
Edward A. Celano........................ 58 November 1996 Director
Coy Eklund.............................. 81 March 1994 Director
Joel L. Gold............................ 55 November 1991 Director
Robert P. Hickey........................ 51 May 1996 President and Chief
Executive Officer;
July 1996 Director
Walter R. Maupay........................ 57 July 1996 Director
Irwin M. Rosenthal...................... 68 August 1990 Director
</TABLE>

NOMINEES FOR ELECTION AT THE MEETING

Dr. Herbert Moskowitz is a co-founder and has served as the Chairman of
the Board of the Company since the Company's inception in 1990. Dr. Moskowitz
has also served as President and Chief Executive Officer of the Company during
various periods. Dr. Moskowitz is also president, director and a principal
stockholder of Magar Inc., a private

2
<PAGE>

investment firm. Magar Inc. is a principal stockholder of the Company. Dr.
Moskowitz is a co-founder of Advanced Tissue Sciences, Inc., a publicly traded
medical technology company, and at various periods from 1986 to 1989 served as
director, chairman of the board, president and chief executive officer of such
company. Dr. Moskowitz is a director and principal stockholder of Magna-Lab
Inc., a publicly traded medical technology company, and a director of
EchoCath, Inc. a publicly traded medical technology company. Dr. Moskowitz, a
former practicing dentist, has been active in the healthcare field since 1958.

Edward A. Celano has served as a director of the Company since November
1996. Since May 1996, Mr. Celano has been an executive vice president of
Atlantic Bank of New York, a commercial bank. From November 1984 to May 1996,
Mr. Celano was a senior vice president of NatWest Bank, a commercial bank. Mr.
Celano is currently a director of the following publicly traded companies:
Artra Group, Inc. and Asta Funding, Inc.

Coy Eklund has served as a director of the Company since March 1994.
Since August 1987, Mr. Eklund has served as the chairman and chief executive
officer of Trivest Financial Services, a company engaged in the television
business. From 1938 to 1983, Mr. Eklund served in various capacities at The
Equitable Life Assurance Society of the United States and from 1975 to 1983
was its chief executive officer. Mr. Eklund is also a director of Skysat
Communications Network Corporation, a publicly traded company.

Joel L. Gold has served as a director of the Company since November 1991.
Since April 1996, Mr. Gold has been an executive vice president of L. T.
Lawrence & Co., Inc., an investment banking firm. From April 1995 through
April 1996, Mr. Gold was a managing director of Fechtor, Detwiler & Co., Inc.,
an investment banking firm. From January 1992 to March 1995, Mr. Gold was a
managing director of Furman Selz Incorporated, an investment banking firm.
From April 1990 to January 1992, Mr. Gold was a managing director of Bear
Stearns & Co., Inc., a publicly traded investment banking firm. For
approximately twenty years before he became affiliated with Bear Stearns &
Co., Inc., he held various positions with Drexel Burnham Lambert,
Incorporated, an investment banking firm. Mr. Gold is currently a director of
the following publicly traded companies: Concord Camera Corp.; BCAM
International Corporation; and Sterling Vision, Inc.

Robert P. Hickey has served as President and Chief Executive Officer of
the Company since May 1996 and as a director since July 1996. From May 1994
until joining the Company, Mr. Hickey was founder and president of Roberts
Healthcare Resources, Inc., a company engaged in project consulting to Fortune
500 and leading edge companies in the healthcare industry. From 1975 to 1994
Mr. Hickey served in various positions at Johnson & Johnson. From 1992 to
1994, Mr. Hickey was vice president, marketing and director of Ethicon, Inc.,
a unit of Johnson & Johnson.

Walter R. Maupay, Jr. has served as a director of the Company since July
1996. At his retirement in 1995, Mr. Maupay was a group executive with
Bristol-Myers Squibb and president of Calgon Vestal Laboratories. From May
1988 to January 1995, Mr. Maupay had been president of Calgon Vestal
Laboratories, a division of Merck & Co. From 1984 to 1988, Mr. Maupay served
as vice president of Calgon Vestal Laboratories. Mr. Maupay is currently a
director of Kinsey Nash Corporation, a publicly traded healthcare company.

Irwin M. Rosenthal is a co-founder of the Company and has served as
Secretary and Treasurer at various periods and a director of the Company since
its inception in 1990. Mr. Rosenthal is an attorney specializing in securities
law and has been a senior partner at Rubin Baum Levin Constant & Friedman
since December 1991. From December 1989 to December 1991, Mr. Rosenthal was a
senior partner at Baer Marks and Upham and from January 1983 to December 1989
a senior partner at Botein Hays & Sklar. Mr. Rosenthal serves as secretary and
as a director of Magar Inc., of which he is a principal stockholder. Magar
Inc. is a principal stockholder of the Company. Mr. Rosenthal is also a
director of Magna-Lab Inc., a publicly traded medical technology company,
Symbollon Corporation, a publicly traded chemical and medical technology
company and a director and officer of EchoCath, Inc., a publicly traded
medical technology company. Mr. Rosenthal is a general partner of Alliance
Partners, a private investment partnership. Mr. Rosenthal is the co-founder
and involved in the organization and development of four national health
oriented non-profit foundations.

3
<PAGE>

GENERAL INFORMATION CONCERNING THE BOARD AND ITS COMMITTEES

The Board met three times in the fiscal year ended December 31, 1996. The
Delaware General Corporation Law provides that the Board, by resolution
adopted by a majority of the entire Board, may designate one or more
committees, each of which shall consist of one or more directors. The Board
annually elects from its members the Executive Committee, Audit Committee and
the Compensation Committee. The Company does not have a Nominating Committee.
During the last fiscal year each of the directors then serving, except Messrs.
Gold and Eklund who were absent from one meeting, attended at least 75% of the
aggregate of (1) the total number of meetings of the Board and (2) the total
number of meetings held by all committees of the Board on which he served.

Executive Committee. The Executive Committee exercises all the powers and
authority of the Board in the management and affairs of the Company between
meetings of the Board, to the extent permitted by law. The members of the
Executive Committee are Dr. Moskowitz and Mr. Hickey. During fiscal 1996, the
Executive Committee met twelve times.

Audit Committee. The Audit Committee reviews the engagement of the
independent accountants and reviews the independence of the accounting firm.
The Audit Committee also reviews the audit and non-audit fees of the
independent accountants and the adequacy of the Company's internal control
procedures. The Audit Committee is composed of three non-employee directors,
Messrs. Gold, Maupay and Celano. During fiscal 1996, the Audit Committee did
not meet separately from the Board but performed its duties in the context of
Board meetings.

Compensation Committee. The Compensation Committee reviews and recommends
to the Board remuneration arrangements, compensation plans and option grants
for the Company's officers, key employees, directors and others. The
Compensation Committee is composed of Messrs. Eklund and Rosenthal. During
fiscal 1996, the Compensation Committee did not meet separately from the Board
but performed its duties in the content of Board meetings.

4
<PAGE>

PRINCIPAL STOCKHOLDERS

Set forth below is information concerning the stock ownership of all
persons known by the Company to own beneficially 5% or more of the outstanding
shares of Common Stock, all directors (including nominees), the Named
Executive Officers (as defined in "Executive Compensation--Summary
Compensation Table") and all directors and executive officers of the Company
as a group, as of April 24, 1997. For the purpose of this Proxy Statement,
beneficial ownership is defined in accordance with the rules of the Securities
and Exchange Commission (the "Commission") and generally means the power to
vote and/or to dispose of the securities regardless of any economic interest
therein.

5
<PAGE>

<TABLE>
<CAPTION>
SHARES OF PERCENT OF
NAME AND ADDRESS OF COMMON STOCK OUTSTANDING SHARES
BENEFICIAL OWNER OR NUMBER IN GROUP BENEFICIALLY OWNED(1) BENEFICIALLY OWNED
----------------------------------- --------------------- ------------------
<S> <C> <C>
Coy Eklund........................... 50,000(10) *
c/o Life Medical Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
Edward A. Celano..................... 38,889(11) *
c/o Life Medical Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
Walter R. Maupay..................... 22,667(12) *
c/o Life Medical Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
Donald W. Fallon..................... 20,000(13) *
c/o Life Medical Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
All executive officers and directors
as a group ( 9 persons)............. 1,580,395(14) 18.4%
</TABLE>
- -------------------
* Denotes less than 1%
(1) All shares outstanding are Common Stock and are beneficially owned, and
sole voting and investment power is held by the persons named, except as
otherwise noted.
(2) Dr. Moskowitz and Messrs. Rosenthal and Fife are each officers, directors
and principal stockholders of Magar Inc. and own approximately 47%, 16.5%
and 30%, respectively, of the outstanding stock of such corporation. As
such, these individuals may be considered to beneficially own, and to
have shared investment and voting power with respect to, all shares of
Common Stock owned by Magar Inc. Information relating to shares owned by
each of these individuals assumes that each beneficially owns all shares
owned of record by Magar Inc.
(3) Includes 270,000 shares of Common Stock pledged to a bank as security for
a loan to Magar Inc. Magar Inc. has the sole right to vote such shares,
unless there is an event of default under the loan. In the event of a
default by Magar Inc., the bank would have the right to dispose of the
shares.
(4) Includes shares of Common Stock issuable upon exercise of 46,110 Class A
Warrants and 46,110 Class B Warrants, and 46,110 Class B Warrants
issuable upon exercise of the Class A Warrants which may be exercised at
any time up to September 22, 1998, into an additional 148,217 shares of
Common Stock. Also includes 150,000 shares of Common Stock issuable upon
exercise of an option which is currently exercisable.
(5) Includes 50,000 shares of Common Stock issuable upon exercise of an
option which is currently exercisable. Does not include approximately
25,850 shares of Common Stock and 8,400 Class A Warrants and 8,400 Class
B Warrants, and 8,400 Class B Warrants issuable upon exercise of the
Class A Warrants which are exercisable at any time into an additional
27,001 shares of Common Stock held by attorneys associated with Rubin
Baum Levin Constant & Friedman, of which Mr. Rosenthal is a partner, as
to which shares of Common Stock Mr. Rosenthal disclaims beneficial
ownership.
(6) Magar Inc. is a private investment firm which from September 1992 to
December 1994 provided management consulting services to the Company.
(7) Includes 100,000 shares of Common Stock issuable upon exercise of options
which are currently exercisable, but excludes 150,000 shares of Common
Stock issuable upon exercise of an option which is not exercisable within
the next 60 days.
(8) Represents shares of Common Stock issuable upon exercise of options which
are currently exercisable, but excludes 25,000 shares of Common Stock
issuable upon exercise of an option which is not exercisable within the
next 60 days.
(9) Represents shares of Common Stock issuable upon exercise of options which
are currently exercisable, but excludes 109,919 shares of Common Stock
held by Mr. Gold's wife, as to which shares of Common Stock Mr. Gold
disclaims beneficial ownership.
(10) Represents shares of Common Stock issuable upon exercise of options which
are currently exercisable.
(11) Includes 16,667 shares of Common Stock issuable upon exercise of options
which are currently exercisable, but excludes 33,333 shares of Common
Stock issuable upon exercise of an option which is not exercisable within
the next 60 days, and includes 22,222 shares of Common Stock owned by
Walworth Financial Services, Inc. Defined Benefit Trust, controlled by
Mr. Celano.

6
<PAGE>

(12) Includes 16,667 shares of Common Stock issuable upon exercise of options
which are currently exercisable, but excludes 33,333 shares of Common
Stock issuable upon exercise of an option which is not exercisable within
the next 60 days.
(13) Represents shares of Common Stock issuable upon exercise of options which
are currently exercisable, but excludes 30,000 shares of Common Stock
issuable upon exercise of an option which is not exercisable within the
next 60 days.
(14) Includes 686,551 shares of Common Stock issuable upon exercise of
warrants and options which are currently exercisable. Excludes 271,666
shares of Common Stock underlying options that are not exercisable within
the next 60 days.

7
<PAGE>

EXECUTIVE COMPENSATION

The following summary compensation table sets forth the aggregate
compensation paid or accrued by the Company during the fiscal years ended
December 31, 1996, 1995 and 1994 to the executive officers whose annual
compensation exceeded $100,000 in fiscal 1996 (the "Named Executive
Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------- ------------
OTHER ALL
NAME AND PRINCIPAL ANNUAL SECURITIES OTHER
CAPACITIES IN WHICH COMPEN- UNDERLYING COMPEN-
SERVED YEAR SALARY BONUS SATION(1) OPTIONS SATION(2)
------------------- ---- -------- ------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Dr. Herbert Moskowitz.. 1996 $190,275 $ 8,571 $3,060
Chairman of the Board, 1995 $185,000 $14,231 150,000 $ 816
President and Chief
Executive Officer(3) 1994 $100,000(4)
Robert P. Hickey(5).... 1996 $133,846 250,000 $1,210
President and Chief
Executive Officer
Eli Pines, Ph. D.(6)... 1996 $151,415 $20,000 $1,382
Vice President and
Chief 1995 $ 80,739 110,000 $ 302
Scientific Officer
Donald W. Fallon(7).... 1996 $100,500 $10,000 20,000 $ 326
Vice President, Chief
Financial 1995 $ 43,542 30,000
Officer and Treasurer
</TABLE>
- -------------------
(1) Represents accrued vacation payout for the Named Executive Officers.
(2) Represents premium payments for term life insurance for the benefit of the
Named Executive Officers.
(3) Dr. Moskowitz resigned as President and Chief Executive Officer upon the
hiring of Mr. Hickey in May 1996.
(4) The amount shown for Dr. Moskowitz represents payments to Magar Inc. See
"Employment and Related Agreements".
(5) Mr. Hickey's employment with the Company commenced on May 29, 1996. If Mr.
Hickey had been employed by the Company for the full fiscal year of 1996
his annual salary would have been $225,000.
(6) Dr. Pines' employment with the Company commenced on June 12, 1995. If Dr.
Pines had been employed by the Company for the full fiscal year of 1995,
his annual salary would have been $145,000.
(7) Mr. Fallon's employment with the Company commenced on July 17, 1995. If
Mr. Fallon had been employed by the Company for the full fiscal year of
1995, his annual salary would have been $95,000.

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<PAGE>

The following table sets forth certain information with respect to stock
option grants during the year ended December 31, 1996 to the Named Executive
Officers.

OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS(1) FOR OPTION TERM(2)
--------------------------------------------------------------------- -------------------
NUMBER OF SECURITIES % OF TOTAL OPTIONS
UNDERLYING GRANTED TO EMPLOYEES EXERCISE OR BASE EXPIRATION
NAME OPTIONS GRANTED(#) IN FISCAL YEAR PRICE($/SH)(1) DATE 5% 10%
---- -------------------- -------------------- ---------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Hickey........ 50,000 18.5% $8.13 05/29/01 518,489 654,270
50,000 18.5% $8.13 05/29/02 544,414 719,697
50,000 18.5% $8.13 05/29/03 571,635 791,666
50,000 18.5% $8.13 05/29/04 600,216 870,833
50,000 18.5% $8.13 05/29/05 630,227 957,916
Donald W. Fallon........ 10,000 3.7% $7.00 07/17/02 93,807 124,009
10,000 3.7% $7.00 07/17/03 98,497 136,410
</TABLE>

- -------------------
(1) All options were granted with an exercise price equal to or above the fair
market value of the Common Stock at the date of grant.
(2) In accordance with the rules of the Commission, the amounts shown on this
table reflect hypothetical gains that could be achieved for the respective
options if exercised at the end of the option term. These gains are based
on assumed rates of stock appreciation of 5% and 10%, compounded annually
from the date the respective options were granted to their expiration
date. The gains shown are net of the option exercise price, but do not
include deductions for taxes or other expenses associated with the
exercise. Actual gains, if any, on stock option exercises will depend on
the future performance of the Common Stock and the date on which the
options are exercised.

The following table sets forth certain information with respect to
stock option exercises by the Named Executive Officers during the year ended
December 31, 1996 and the value of unexercised options at December 31, 1996.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END(#) AT FISCAL YEAR END($)(1)
ACQUIRED ON VALUE -------------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- -------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Herbert Moskowitz... 150,000 $594,750
Robert P. Hickey........ 50,000 200,000
Eli Pines, Ph. D. ...... 65,000 45,000
Donald W. Fallon........ 20,000 30,000
</TABLE>
- -------------------
(1) Based upon the closing price of $6 5/8 per share of Common Stock on
December 31, 1996, less the option exercise price.

9
<PAGE>

EMPLOYMENT AND RELATED AGREEMENTS

As of April 1, 1992, the Company entered into a three-year agreement with
Magar Inc. and Dr. Herbert Moskowitz pursuant to which Dr. Moskowitz agreed to
serve as the Chairman of the Board and Chief Executive Officer of the Company.
The agreement required Dr. Moskowitz to devote such time and attention to the
business of the Company as he deemed necessary to fulfill his duties and
responsibilities under the agreement. In consideration for the services
rendered by Dr. Moskowitz under the agreement, the Company was required to pay
Magar Inc. $100,000 per annum and to reimburse each of Dr. Moskowitz and Magar
Inc. for all ordinary and necessary business expenses incurred on behalf of
the Company. Dr. Moskowitz is a director, officer and principal stockholder of
Magar Inc.

The Company entered into an agreement with Dr. Moskowitz, effective as of
January 1, 1995, pursuant to which the agreement with the Company, Magar Inc.
and Dr. Herbert Moskowitz was terminated and a new employment agreement was
entered into. This agreement was for a term of one year and was subject to
annual renewal for successive one year periods unless earlier terminated.
Pursuant to the agreement, Dr. Moskowitz agreed to serve as the Chairman of
the Board, Chief Executive Officer and President of the Company. The agreement
required Dr. Moskowitz to devote such time and attention to the business of
the Company as he deemed necessary to fulfill his duties and responsibilities
under the agreement. Pursuant to the agreement, Dr. Moskowitz received a
salary of $185,000 per annum subject to annual adjustment for cost-of-living
increases and other increases as approved by the Board. The agreement was
renewed for 1996.

Effective May 30, 1996, the Company entered into an agreement with Dr.
Moskowitz pursuant to which Dr. Moskowitz agreed to serve as Chairman of the
Board. The agreement is for a term of five years and is subject to annual
renewal for successive one year periods unless earlier terminated. The
agreement requires Dr. Moskowitz to devote such time and attention to the
business of the Company as he deems necessary to fulfill his duties and
responsibilities under the agreement. Pursuant to the agreement, Dr. Moskowitz
will receive a salary of $191,000 per annum subject to annual adjustment for
cost-of-living increases and other increases as approved by the Board.

If Dr. Moskowitz dies or is unable to perform his duties on account of
illness or other incapacity and the agreement is terminated, he or his legal
representative shall receive from the Company the base salary which would
otherwise be due to the end of the month during which the termination of
employment occurred plus six additional months. The agreement further provides
that if the Company terminates Dr. Moskowitz's employment for cause, Dr.
Moskowitz shall receive his salary through the end of the month in which the
termination occurred plus three additional months. If Dr. Moskowitz's
employment is terminated by the Company during the term of the agreement or if
the Company does not renew Dr. Moskowitz's employment agreement, Dr. Moskowitz
shall receive from the Company the base salary which would otherwise be due to
the end of the month during which the termination of employment occurred plus
six additional months. The agreement with Dr. Moskowitz contains
confidentiality and post-termination non-competition provisions.

In March 1995, the Company granted an option to Dr. Moskowitz to acquire
up to 150,000 shares of Common Stock at an exercise price of $2.66 per share.
The options are exercisable until March 20, 2000.

The Company maintains key-person life insurance coverage in the face
amount of $1,000,000 on Dr. Moskowitz, naming the Company as beneficiary.

As of May 29, 1996, the Company entered into an employment agreement with
Robert P. Hickey, pursuant to which Mr. Hickey serves as President and Chief
Executive Officer of the Company. The term of such agreement is for a period
of five years. Pursuant to such agreement, Mr. Hickey receives an annual base
salary of $225,000 subject to adjustments for cost-of-living increases and
other increases as determined by the Board, and received an option under the
Plan to purchase an aggregate of 250,000 shares of Common Stock. Up to twenty
percent of such option commenced vesting immediately and an additional twenty
percent vest on each of the first, second, third and fourth anniversaries of
the effective date of Mr.

10
<PAGE>

Hickey's employment. Such options are exercisable five years from the date of
vesting and have an exercise price of $8 1/8. The options will terminate upon
certain conditions in connection with termination of employment.

If Mr. Hickey dies, is terminated for cause, voluntarily resigns or is
unable to perform his duties on account of illness or other incapacity and the
agreement is terminated, he or his legal representative shall receive from the
Company the base salary which would otherwise be due to the date which
termination of employment occurred. If Mr. Hickey's employment is terminated
for any other reason by the Company during the term of the agreement, Mr.
Hickey will receive from the Company the base salary which would otherwise be
due to the date which termination of employment occurred plus severance pay
equal to six months of salary. The agreement with Mr. Hickey contains
confidentiality and post-termination non-competitive provisions.

The Company maintains key-person life insurance coverage in the face
amount of $1,000,000 on Mr. Hickey, naming the Company as beneficiary.

The Company entered into an employment agreement dated June 12, 1995,
with Eli Pines, Ph.D., pursuant to which Dr. Pines serves as Vice President
and Chief Scientific Officer of the Company. The term of such agreement
commenced on June 12, 1995 and is for a period of three years from such date,
subject to automatic annual renewal unless earlier terminated. Pursuant to
such agreement Dr. Pines currently receives an annual base salary of $157,500,
subject to cost-of-living adjustments and bonuses, and received an option
under the Plan to purchase an aggregate of 60,000 shares of Common Stock. Up
to one-third of such options commenced vesting immediately and one-third vest
on each of the first and second anniversaries of the effective date of Dr.
Pines' employment. Such options are exercisable five years from the date of
vesting and have an exercise price equal to $7.00 per share. The options will
terminate upon certain conditions in connection with termination of
employment. The agreement also allows for termination at any time with or
without cause without any significant payments by the Company and contains
confidentiality and non-competition provisions.

If Dr. Pines dies or is unable to perform his duties on account of
illness or other incapacity and the agreement is terminated, he or his legal
representative shall receive from the Company the base salary which would
otherwise be due to the end of the month during which the termination of
employment occurred. In the event that termination results from an incapacity,
then Dr. Pines or his legal representation shall also receive from the Company
a one month pro-rata portion of his base salary. The agreement further
provides that if the Company terminates Dr. Pines' employment for cause or if
Dr. Pines voluntarily leaves the employment of the Company, Dr. Pines shall
receive his salary through the end of the month in which the termination
occurred. If Dr. Pines' employment is terminated by the Company without cause
during the second or third year of the agreement, Dr. Pines shall receive from
the Company the base salary which would otherwise be due to the end of the
month during which the termination of employment occurred plus two additional
months. The agreement with Dr. Pines contains confidentiality and post-
termination non-competition provisions.

In December 1995, the Company granted an option to Dr. Pines to acquire
up to 50,000 shares of Common Stock at an exercise price of $9.00 per share.
One-half of the options vested immediately and the remaining vest upon
successful completion of a certain clinical development program, if completed
by December 31, 1997. The options are exercisable for five years from the date
of vesting.

The Company maintains key-person life insurance coverage in the face
amount of $1,000,000 on Dr. Pines, naming the Company as beneficiary.

The Company entered into an employment agreement dated June 12, 1995,
with Donald W. Fallon, pursuant to which Mr. Fallon serves as Vice President
and Chief Financial Officer of the Company. The term of such agreement
commenced on July 17, 1995 and is for a period of three years from such date,
subject to automatic annual renewal unless earlier terminated. Pursuant to
such agreement Mr. Fallon currently receives an annual base salary of
$107,000, subject to

11
<PAGE>

cost-of-living adjustments and bonuses, and received an option under the Plan
to purchase an aggregate of 30,000 shares of Common Stock. Up to one-third of
such options commenced vesting immediately and one-third vest on each of the
first and second anniversaries of the effective date of Mr. Fallon's
employment. Such options are exercisable five years from the date of vesting
and have an exercise price equal to $6.88. The options will terminate upon
certain conditions in connection with termination of employment. The agreement
also allows for termination at any time with or without cause without any
significant payments by the Company and contains confidentiality and non-
competition provisions.

If Mr. Fallon dies or is unable to perform his duties on account of
illness or other incapacity and the agreement is terminated, he or his legal
representative shall receive from the Company the base salary which would
otherwise be due to the end of the month during which the termination of
employment occurred. In the event that termination results from an incapacity,
then Mr. Fallon or his legal representation shall also receive from the
Company a one month pro-rata portion of his base salary. The agreement further
provides that if the Company terminates Mr. Fallon's employment for cause or
if Mr. Fallon voluntarily leaves the employment of the Company, Mr. Fallon
shall receive his salary through the end of the month in which the termination
occurred. If Mr. Fallon's employment is terminated by the Company without
cause during the second or third year of the agreement, Mr. Fallon shall
receive from the Company the base salary which would otherwise be due to the
end of the month during which the termination of employment occurred plus two
additional months. The agreement with Mr. Fallon contains confidentiality and
post-termination non-competition provisions.

In July 1996, the Company granted an option to Mr. Fallon to acquire up
to 20,000 shares of Common Stock at an exercise price of $7.00 per share. One-
half of the options vest on the first anniversary of the date of grant and the
remaining options vest on the second anniversary of the date of grant. The
options are exercisable for five years from the date of vesting.

Under the foregoing employment agreements the Company is required to
obtain life insurance coverage on the life and for the benefit of each of the
executives in an amount equal to twice the amount of their base salary then in
effect. Each of the executives will also have the right to participate in all
group insurance, hospital, dental, major medical and disability benefits,
stock option plans and other similar benefits afforded to executives.

DIRECTOR COMPENSATION

All directors of the Company are reimbursed for reasonable expenses
incurred by them in acting as a director or as a member of any committee of
the Board. All outside directors are entitled to receive $500 for each Board
or committee meeting attended.

In the fiscal year ended December 31, 1996, the Company granted Mr.
Maupay, an option under the Plan to acquire up to 50,000 shares of Common
Stock at $7 7/8 per share. Up to one-third of such options commenced vesting
immediately and one-third vest on each of the first and second anniversaries
of the grant date. Such options are exercisable five years from the date of
vesting.

CERTAIN TRANSACTIONS

Mr. Rosenthal is a partner at Rubin Baum Levin Constant & Friedman, which
firm serves as counsel to the Company. The Company paid or accrued
approximately $392,000, $92,000 and $402,000 in the years ended December 31,
1994, 1995 and 1996, respectively, for legal services rendered by Rubin Baum
Levin Constant & Friedman.

In February 1997, the Company entered into a one-year consulting
agreement with L. T. Lawrence & Co., Inc., an investment banking firm to
provide certain advisory services to the Company. In addition to an annual
consulting fee of $54,000, the Company has granted to L. T. Lawrence & Co.,
Inc. an option to purchase up to 150,000 shares of Common Stock at $6.00 per
share. Joel Gold, a director of the Company, is an executive vice president of
L. T. Lawrence & Co., Inc.

12
<PAGE>

APPROVAL OF AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED 1992 STOCK OPTION
PLAN

In August 1992, the directors of the Company adopted and the stockholders
of the Company approved the Plan. The purpose of the Plan is to enable the
Company to attract and retain competent employees, to make service on the
Board of the Company more attractive to present and prospective non-employee
directors of the Company and to provide a means to encourage stock ownership
and proprietary interest in the Company by officers, non-employee directors
and valued employees and other individuals upon whose judgment, initiative and
efforts the financial success and growth of the Company largely depend.

The Plan initially provided that the total number of shares of Common
Stock with respect to which options and stock appreciation rights ("SARs") may
be granted thereunder was 207,500. At the May 1993 Annual Meeting of
Stockholders, the stockholders approved an amendment to the Plan increasing
such number to 407,500. At the May 1994 Annual Meeting of Stockholders, the
stockholders approved an amendment to the Plan increasing such number to
907,500. The Board has adopted a further amendment to the Plan, subject to the
approval of stockholders pursuant to Section 22 of the Plan, to increase the
total number of shares with respect to which options and SARs may be granted
thereunder to 1,407,500 shares (the "Proposed Amendment"). The Proposed
Amendment will enable the Plan to continue to achieve its purpose as described
in the immediately preceding paragraph. At April 24, 1997, without the
Proposed Amendment, no shares would be available for grant under the Plan.

The complete text of the Plan, as proposed to be amended by the Proposed
Amendment (which is reflected in Section 2(a) thereof) will be furnished
without charge to each person whose proxy is being solicited, upon the written
request of such person directed to the Company, Attention: Investor Relations.
The complete text of the Plan as amended at the 1993 Annual Meeting of
Stockholders was set forth in Exhibit A to the proxy statement for that
meeting. The following summary of material features of the Plan as proposed to
be amended by the Proposed Amendment does not purport to be complete and is
qualified in its entirety by reference to the complete text of the Plan.

The Plan may be administered by either the Board or a committee of the
Board composed solely of two or more "Non-Employee" directors (the
"Compensation Committee"). Members of the Compensation Committee must be "Non-
Employee Directors" within the meaning of paragraph (b)(3) of Rule 16b-3
promulgated under the Securities Exchange Act of 1934. The Board or the
Compensation Committee, as the case may be, shall determine, among other
things, the recipients of grants, whether a grant will consist of incentive
stock options ("ISOs"), nonqualified stock options or SARs (in tandem with an
option or free-standing) or a combination thereof, and the number of shares to
be subject to such options. In the event that a duly constituted Compensation
Committee is not in existence at any time, the Board will administer the Plan.

Options designated as ISOs may be granted only to officers and key
employees of the Company. Directors who are not otherwise employees of the
Company shall not be eligible to be granted ISOs pursuant to the Plan. SARs
and options designated as non-qualified options may be granted to officers and
key employees of the Company, or agents, medical and scientific advisors and
directors of and consultants to the Company, whether or not otherwise
employees of the Company. The Company currently has four executive officers
and five non-employee directors.

In determining the eligibility of an individual to be granted an option
or SAR, as well as in determining the number of shares to be optioned to any
individual, the Board or the Compensation Committee shall take into account
the position and responsibilities of the individual being considered, the
nature and value to the Company of his or her services and accomplishments,
his or her present and potential contribution to the success of the Company
and such other factors as the Board or the Compensation Committee may deem
relevant.

13
<PAGE>

The Plan provides for the granting of ISOs to purchase the Company's
Common Stock at not less than the fair market value on the date of the option
grant and the granting of nonqualified options and SARs with any lawful
exercise price. SARs granted in tandem with an option have the same exercise
price as the related option. The Plan contains certain limitations applicable
only to ISO's granted thereunder. To the extent that the aggregate fair market
value, as of the date of grant, of the shares of Common Stock to which ISOs
become exercisable for the first time by an optionee during the calendar year
exceeds $100,000, the portion of such option which is in excess of such
$100,000 limitation will be treated as a nonqualified stock option. In
addition, if an optionee owns more than 10% of the total voting power of all
classes of the Company's stock at the time the individual is granted an ISO,
the option price per share of Common Stock cannot be less than 110% of the
fair market value per share of Common Stock and the term of the ISO cannot
exceed five years from the date of grant. No option or SAR may be granted
after ten years from the effective date of the Plan and no option or SAR may
be outstanding for more than ten years after its grant.

Upon the exercise of an option, the holder must make payment of the full
exercise price. Such payment may be made in cash, check or, under certain
circumstances, in shares of the Company's Common Stock, or in any combination
thereof. The Plan permits the Company to lend to the holder of an option funds
sufficient to pay the exercise price. SARs which give the holder the privilege
of surrending such rights for the appreciation in the Common Stock between the
time of the grant and the surrender may be settled in the discretion of the
Board or the Compensation Committee, as the case may be, in cash, Common
Stock, or in any combination thereof. The exercise of an SAR granted in tandem
with an option cancels the option to which it relates with respect to the same
number of shares of Common Stock as to which the SAR was exercised. The
exercise of an option cancels any related SAR with respect to the same number
of shares of Common Stock as to which the option was exercised. Generally,
options and SARs may be exercised while the recipient is performing services
for the Company and within three months after termination of such services
provided the term has not expired. In the event that the employment of an
option holder terminates due to death or disability, the option or SAR may
generally be exercised by the holder or the holder's beneficiary until twelve
months after termination of employment provided that the term of the option or
SAR at such time has not expired. In the event an option holder is terminated
for cause or for breach of an employment agreement, the option or SAR will
terminate on the date the holder ceases to perform services for the Company.

The Plan may be terminated at any time by the Board, which may also amend
the Plan, except that it may not increase the number of shares subject to the
Plan or change the class of persons eligible to receive options and SAR's
under the Plan without stockholder approval.

Plan Benefits

The Company has granted options to purchase an aggregate of 958,667
shares of Common stock under the Plan to officers, consultants, directors and
advisors to the Company, of which the grants of options for 51,167 shares are
subject to stockholder approval of the Proposed Amendment. Of the options
granted under the Plan, 126,667 have been exercised with exercise prices
ranging from $2.50 to $9.12 per share and 832,000 are outstanding with
exercise prices ranging from $2.00 to $9.00 per share.

14
<PAGE>

The specific future benefits or amounts to be received by executive
officers and employees under the Plan as proposed to be amended by the
Proposed Amendment is not determinable. The benefits and amounts received
during 1996 and 1997 are:

NEW PLAN BENEFITS

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES EXERCISE
YEAR OF UNDERLYING PRICE
NAME AND POSITION GRANT OPTIONS GRANTED PER SHARE
---------------------- ------- --------------- ---------
<S> <C> <C> <C>
Robert P. Hickey 1997
President & Chief
Executive Officer 1996 250,000 $8.13
Donald W. Fallon 1997
Vice President, Chief 1996 20,000 $7.00
Financial Officer
& Treasurer
Walter R. Maupay 1997
Director 1996 50,000 $7.88
Edward A. Celano 1997 50,000(1) $4.44
Director 1996
Mark Citron 1997
Employee 1996 30,000 $8.13
Irene Ives 1997 5,000(2) $6.63
Employee 1996
Kathleen Keegan 1997 2,000 $4.88
Employee 1996
Executive Group 1997 0
1996 270,000
Non-Executive Director
Group 1997 50,000
1996 50,000
Non-Executive Officer
Employee Group 1997 7,000
1996 30,000
</TABLE>
- -------------------
(1) Granted subject to stockholder approval of the Proposed Amendment.
(2) 1,167 granted subject to stockholder approval of the Proposed Amendment.

The last sale price of the Company's Common Stock on April 21, 1997 as
reported by the Nasdaq National Market was $5 1/8.

Federal Income Tax Consequences

Neither the receipt nor the exercise of an ISO is a taxable event, and if
the optionee does not dispose of stock acquired under an ISO prior to the
expiration of the requisite holding periods, any gain resulting from the sale
of the stock is long term capital gain. In such case the Company is not
entitled to any tax deduction with respect to the grant or the exercise

15
<PAGE>

of the option. However, the amount by which the fair market value of shares at
the time of exercise of the option exceeds the option price will constitute an
item of tax preference for purposes of the alternative minimum tax. The
statutory holding period is at least two years from the date the ISO is
granted and one year from the date the optionee receives his shares of Common
Stock pursuant to the exercise. If the stock is disposed of before the end of
the statutory holding period, the lesser of the difference between the
exercise price and the fair market value of the stock on the date of exercise
or the total amount of gain realized on the sale must be reported by the
optionee as ordinary income and the Company is entitled to a tax deduction for
that amount. The remaining gain, if any, is taxed to the optionee as long or
short term capital gain.

The receipt of a nonqualified stock option issued under the Plan will not
result in any taxable income to the optionee or a tax deduction to the Company
at the time the option is granted. Generally, the optionee will recognize
ordinary income at the time the nonqualified stock option is exercised in an
amount equal to the excess of the fair market value on the date of exercise of
the shares received over the exercise price, and the Company will be entitled
to a tax deduction of an equal amount in the year the optionee recognizes such
income. The optionee will have a tax basis for his shares equal to their fair
market value at the time the optionee recognizes ordinary income and any
additional gain or loss recognized by the optionee on disposition of the
shares will generally be a short or long term capital gain or loss and will
not result in any additional tax deduction to the Company.

The holder of an SAR will not realize any taxable income upon the grant
of such right. The holders will realize ordinary income in the tax year in
which payment is realized in an amount equal to the amount of cash and/or the
then fair market value of the shares of Common Stock received upon exercise,
and the Company will normally be entitled to a tax deduction for an equal
amount for the same year.

Further Information

To become effective, the Proposed Amendment requires the affirmative vote
of a majority of the outstanding shares of Common Stock of the Company.

THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PROPOSAL TO
APPROVE THE PROPOSED AMENDMENT.

Other Options

The Company has granted options outside of the Plan to purchase an
aggregate of 1,158,851 shares of Common Stock to officers, key employees of
the Company, agents, medical and scientific advisors and directors of and
consultants to the Company, whether or not otherwise employees of the Company.
Of the options granted outside the Plan, 255,000 have been exercised with
exercise prices ranging from $2.75 to $7.00 per share and 903,851 are
outstanding with exercise prices ranging from $2.75 to $9.25.

16
<PAGE>

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

MANAGEMENT OF THE COMPANY RECOMMENDS A VOTE FOR THE RATIFICATION OF
RICHARD A. EISNER & COMPANY, LLP, AS THE INDEPENDENT AUDITORS FOR THE COMPANY.

Richard A. Eisner & Company, LLP, has served as the Company's independent
accountants. The Company has requested that a representative of Richard A.
Eisner & Company, LLP, attend the Meeting. Such representative will have an
opportunity to make a statement, if he or she desires, and will be available
to respond to appropriate questions of stockholders.

OTHER MATTERS

The Board is not aware of any matters not set forth herein that may come
before the Meeting. If, however, further business properly comes before the
Meeting, the persons named in the proxies will vote the shares represented
thereby in accordance with their judgment.

STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING

Stockholders may submit proposals on matters appropriate for stockholder
action at annual meetings in accordance with regulations adopted by the
Commission. To be considered for inclusion in the proxy statement and form of
proxy relating to the 1998 Annual Meeting of Stockholders, such proposals must
be received by the Company not later than December 29, 1997. Proposals should
be directed to the attention of the Secretary of the Company.

ANNUAL REPORT ON FORM 10-K

The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, accompanies this Proxy Statement. This Annual Report on
Form 10-K does not constitute a part of the proxy soliciting material.

By order of the Board of
Directors,

Dr. Herbert MoskowitzChairman

Dated: April 28, 1997

17
<PAGE>

LIFE MEDICAL SCIENCES, INC.
379 THORNALL STREET
EDISON, NEW JERSEY 08837

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1997
This Proxy is solicited on Behalf of the Board of Directors
The undersigned hereby appoints Donald W. Fallon and Irwin M. Rosenthal, and
each of them (with full power to act without the other), as proxies with full
power of substitution, to represent the undersigned at the Annual Meeting of
Stockholders to be held at the Woodbridge Hilton, 120 Wood Avenue South,
Iselin, New Jersey 08830 on June 3, 1997 at 10:00 a.m. and at any adjournment
thereof, and to vote the shares of Common Stock the undersigned would be
entitled to vote if personally present, as indicated below.

1. Election of Directors

[_] FOR all nominees listed below (except as marked to the contrary
below)
[_] WITHHOLD AUTHORITY
to vote for all
nominees listed
below
Dr. Herbert Moskowitz, Edward A. Celano, Coy Eklund, Joel L. Gold
Robert P. Hickey, Walter R. Maupay and Irwin M. Rosenthal
(INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name on the line provided below.)
- -------------------------------------------------------------------------------
2. To approve an amendment to the Company's Amended and Restated 1992 Stock
Option Plan
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued, and to be signed on reverse side)
<PAGE>

3. To ratify the appointment of Richard A. Eisner & Company, LLP as the
independent auditors of the Company.
[_] FOR [_] AGAINST [_] ABSTAIN

4. In their discretion, the proxies are authorized to vote upon such
business as may properly come before the meeting.

The Shares represented by this proxy will be voted as directed. If no
contrary instruction is given, the Shares will be voted FOR the election of
the nominees and FOR Proposals 2 and 3. On any other matters that may come
before the meeting the proxy will be voted in the discretion of the above-
named persons.

DATED: _______________________, 1997

Signature: _________________________
------------------------------------
Signature if held jointly.
(Please date, sign as name appears
at the left, and return promptly.
If the Shares are registered in the
names of two or more persons, each
should sign. When signing as
Corporate Officer, Partner,
Executor, Administrator, Trustee or
Guardian, please give full title.
Please note any changes in your
address alongside the address as it
appears in the proxy.)