<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 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:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
LIFE MEDICAL SCIENCES, INC.
379 Thornall Street
Edison, New Jersey 08837
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 27, 1999
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 May
27, 1999 at 10:00 a.m., local time, (the "Meeting") for the following purposes:
1. To consider and vote upon the election of six directors;
2. To ratify the appointment of Richard A. Eisner & Company, LLP, as the
independent auditors of the Company; and
3. To transact such other business as may properly come before the Meeting
or any adjournments thereof.
The close of business on April 21, 1999 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 30, 1999
<PAGE> 3
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 May 27, 1999 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" 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 30, 1999.
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 by other electronic means. 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> 4
VOTING
Only holders of shares of Common Stock of record as at the close of
business on April 21, 1999 (the "Record Date") are entitled to vote at the
Meeting. On the Record Date there were issued and outstanding 7,922,559 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 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 will be
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 IS THE SAME LEGALLY AS A VOTE "AGAINST" THE MATTER, EVEN THOUGH THE
STOCKHOLDER MAY (MISTAKENLY) BELIEVE THAT AN ABSTENTION IS NEITHER A VOTE FOR OR
A VOTE AGAINST A PROPOSAL.
ELECTION OF DIRECTORS
INFORMATION CONCERNING NOMINEES
At the Meeting, six 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>
Edward A. Celano .................... 60 November 1996 Director
Coy Eklund .......................... 83 November 1994 Director
Joel L. Gold ........................ 57 November 1991 Director
Robert P. Hickey .................... 53 May 1996 President and
Chief Exec. Officer
July 1996 Director
Walter R. Maupay .................... 60 July 1996 Director
Irwin M. Rosenthal .................. 70 August 1990 Director
</TABLE>
2
<PAGE> 5
NOMINEES FOR ELECTION AT THE MEETING
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.
Joel L. Gold has served as a director of the Company since November
1991. Mr. Gold has been the managing director of ISG Capital Markets since
1998. Prior to then, Mr. Gold had been senior managing director of Interbank
Capital Group, an investment banking firm. From April 1996 through September
1997, Mr. Gold was 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. For approximately
twenty years before he became affiliated with Furman Selz Incorporated, he
held various positions with Bear Stearns & Co., Inc. and Drexel Burnham
Lambert, Incorporated, investment banking firms. Mr. Gold is currently a
director of the following publicly trade 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., Inc. 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 Graham & James LLP since June
1998. Prior to joining Graham & James LLP, Mr. Rosenthal was a senior
partner at Rubin Baum Levin Constant & Friedman from December 1991 to June
1998. 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 and
a director of EchoCath, Inc., a publicly traded medical technology company.
Mr. Rosenthal is the co-founder and involved in the organization and
development of four national health oriented non-profit foundations.
3
<PAGE> 6
GENERAL INFORMATION CONCERNING THE BOARD AND ITS COMMITTEES
The Board met eight times in the fiscal year ended December 31, 1998. 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 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, Mr. Hickey and Mr. Rosenthal.
During fiscal 1998, the Executive Committee met 12 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 1998, 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 1998, the Compensation Committee met separately two
times from the Board as well as performing its duties in the context of Board
meetings.
4
<PAGE> 7
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
21, 1999. 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.
PRINCIPAL STOCKHOLDERS TABLE
<TABLE>
<CAPTION>
SHARES OF COMMON PERCENT OF OUT-
NAME AND ADDRESS OF BENEFICIAL STOCK BENEFICIALLY STANDING SHARES
OWNER OR NUMBER IN GROUP OWNED(1) BENEFICIALLY OWNED
------------------------ -------- ------------------
<S> <C> <C>
Dr. Herbert Moskowitz 1,142,414 (2)(3)(4) 11.5%
616 Washington Court
Guilderland, NY 12084
Irwin M. Rosenthal 607,225 (2)(3)(5) 6.1%
c/o Graham & James LLP
885 Third Avenue
New York, NY 10022
Robert P. Hickey 486,299(6) 4.9%
c/o Life Medical Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
Walter R. Maupay 290,500(7) 2.9%
c/o Life Medical Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
Eli Pines, Ph.D. 200,580(8) 2.0%
c/o Life Medical Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
Edward A. Celano 180,000(11) 1.8%
c/o Life Medical Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
</TABLE>
5
<PAGE> 8
PRINCIPAL STOCKHOLDERS TABLE
<TABLE>
<CAPTION>
SHARES OF COMMON PERCENT OF OUT-
NAME AND ADDRESS OF BENEFICIAL STOCK BENEFICIALLY STANDING SHARES
OWNER OR NUMBER IN GROUP OWNED(1) BENEFICIALLY OWNED
------------------------ -------- ------------------
<S> <C> <C>
Joel Gold 133,334(9) 1.3%
c/o Life Medical Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
Coy Eklund 125,000(10) 1.3%
c/o Life Medical Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
Drew Karazin 101,800(12) 1.0%
c/o Life Medical Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
Robert G. Conway 25,000(13) *
c/o Life Medical Sciences, Inc.
379 Thornall St.
Edison, NJ 08837
All executive officers and directors
as a group (10 persons) 2,888,152(14) 29.2%
</TABLE>
6
<PAGE> 9
* 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, 1999 into an additional 148,217 shares of Common
Stock. Also includes 300,000 shares of Common Stock issuable upon exercise
of options which are currently exercisable.
(5) Includes 200,000 shares of Common Stock issuable upon exercise of options
which are currently exercisable. Does not include shares of Common Stock
beneficially held by attorneys associated with Graham & James LLP, of
which Mr. Rosenthal is a partner, as to which shares of Common Stock Mr.
Rosenthal disclaims beneficial ownership. Such shares of Common Stock do
not exceed one percent of the total outstanding shares of Common Stock of
the Company.
(6) Includes 464,299 shares of Common Stock issuable upon exercise of options
which are currently exercisable, but excludes 50,001 shares of Common
Stock issuable upon exercise of options which are not exercisable within
the next 60 days.
(7) Includes 150,000 shares of Common Stock issuable upon exercise of options
which are currently exercisable.
(8) Includes 196,580 shares of Common Stock issuable upon exercise of options
which are current exercisable.
(9) Represents shares of Common Stock issuable upon exercise of options which
are currently exercisable, but 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 150,000 shares of Common Stock issuable upon exercise of options
which are currently exercisable., but excludes 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.
(12) Includes 79,300 shares of Common Stock issuable upon exercise of options
which are currently exercisable, but excludes 50,000 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 50,000 shares of Common Stock
issuable upon exercise of an option which is not exercisable within the
next 60 days.
(14) Includes 1,798,513 shares of Common Stock issuable upon exercise of
warrants and options which are currently exercisable. Excludes 150,001
shares of Common Stock underlying options that are not exercisable within
the next 60 days.
7
<PAGE> 10
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, 1998, 1997 and 1996 to the executive officers whose annual
compensation exceeded $100,000 in fiscal 1998 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------- --------------
OTHER ALL
ANNUAL SECURITIES OTHER
NAME AND PRINCIPAL CAPACITIES COMPEN- UNDERLYING COMPEN-
IN WHICH SERVED YEAR SALARY BONUS SATION (1) OPTIONS SATION (2)
- ------------------------------ ---- -------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Dr. Herbert Moskowitz (3) 1998 $135,411 300,000(4)
Chairman of the Board 1997 $193,387 $13,468 50,000 $2,353
1996 $190,275 $8,571 $3,060
Robert P. Hickey (5) 1998 $229,229 420,000(7) $1,804
President and 1997 $228,325 $25,000 300,000(6) $1,788
Chief Executive Officer 1996 $133,846 250,000 $1,210
Eli Pines, Ph. D. (8) 1998 $169,943 170,000(10) $1,252
Vice President and 1997 $162,994 $20,000 80,000(9) $1,444
Chief Scientific Officer 1996 $151,415 $20,000 $1,382
Drew Karazin (11) 1998 $61,458 95,000 $ 999
Vice President and
Chief Financial Officer
Robert G. Conway (12) 1998 $72,500 75,000 $ 237
Vice President Operations
</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 a salaried employee as of September 8, 1998.
(4) Of the 300,000 options granted during 1998, 200,000 were granted to
replace previously granted options which were cancelled.
(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) Of the 300,000 options granted during 1997, 250,000 were granted to
replace previously granted options which were cancelled.
(7) Of the 420,000 options granted during 1998, 300,000 were granted to
replace previously granted options which were cancelled.
(8) 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.
(9) Of the 80,000 options granted during 1997, 50,000 were granted to replace
previously granted options which were cancelled.
(10) Of the 170,000 options granted during 1998, 140,000 were granted to
replace previously granted options which were cancelled.
(11) Mr. Karazin's employment with the Company commenced on July 20, 1998. If
Mr. Karazin had been employed for the full fiscal year of 1998, his annual
salary would have been $145,000.
(12) Mr. Conway's employment with the Company commenced on July 1, 1998. If Mr.
Conway had been employed for the full fiscal year of 1998, his annual
salary would have been $145,000.
8
<PAGE> 11
The following table sets forth certain information with respect to stock
option grants during the year ended December 31, 1998 to the Named Executive
Officers.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Individual Grants (1)
---------------------------------------------------------------------------------------------
Number of Securities % of Total Options
Underlying Granted to Employees Exercise or Base Expiration
Name Options Granted (#) in Fiscal Year Price ($/Sh) (1) Date
---- ------------------- -------------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Dr. Herbert Moskowitz 100,000 8.9% $2.00 05/28/05
150,000 13.3% $2.00 03/21/00
47,864 4.2% $2.00 06/18/02
2,136 0.2% $4.75 06/18/02
Robert P. Hickey 26,937 2.4% $4.00 05/29/01
26,937 2.4% $4.00 05/29/02
26,937 2.4% $4.00 05/29/03
26,938 2.4% $4.00 05/29/04
26,938 2.4% $4.00 05/29/05
23,062 2.0% $2.00 05/29/01
23,062 2.0% $2.00 05/29/02
23,063 2.0% $2.00 05/29/03
23,063 2.0% $2.00 05/29/04
23,063 2.0% $2.00 05/29/05
50,000 4.4% $2.00 05/28/05
50,000 4.4% $1.31 05/28/05
50,000 4.4% $1.31 05/28/06
20,000 1.8% $0.09 03/31/06
Eli Pines, Ph.D. 20,000 1.8% $2.00 06/12/00
20,000 1.8% $2.00 06/12/01
20,000 1.8% $2.00 06/12/02
15,000 1.3% $2.00 06/17/02
15,000 1.3% $2.00 06/17/03
15,000 1.3% $1.31 05/28/05
15,000 1.3% $1.31 05/28/06
23,062 2.0% $2.00 06/17/02
23,063 2.0% $2.00 06/17/03
1,937 0.2% $7.00 06/17/02
1,937 0.2% $7.00 06/17/03
Drew Karazin 25,000 2.2% $1.37 07/20/05
25,000 2.2% $1.37 07/20/06
25,000 2.2% $1.37 07/20/07
20,000 1.8% $0.09 03/31/06
Robert G. Conway 25,000 2.2% $1.40 07/01/05
25,000 2.2% $1.40 07/01/06
25,000 2.2% $1.40 07/01/07
</TABLE>
- -------------------
(1) All options were granted with an exercise price equal to or above the fair
market value of the Common Stock at the date of grant except those granted in
lieu of compensation.
9
<PAGE> 12
The following table sets forth certain information with respect to stock
option exercises by the Named Executive Officers during the year ended December
31, 1998 and the value of unexercised options at December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END (#) AT FISCAL YEAR END ($) (1)
------------------------------------- ----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Dr. Herbert Moskowitz 300,000
Robert P. Hickey 300,000 170,000 $ 4,450
Eli Pines, Ph. D. 155,000 15,000
Drew Karazin 25,000 70,000 $ 4,450
Robert G. Conway 25,000 50,000
</TABLE>
- -----------------
(1) Based upon the closing price of $5/16 per share of Common Stock on
December 31, 1998, less the option exercise price.
10
<PAGE> 13
REPORT ON REPRICING OF OPTIONS
In May 1998, the Board of Directors of the Company determined that the
purposes of option grants and the 1992 Amended and Restated Stock Option Plan
were not being adequately achieved with respect to those directors, employees
and consultants holding options that were exercisable above current market value
and that it was essential to the best interests of the Company and the Company's
shareholders that the Company retain and motivate such individuals. The Board
concluded that such retention was particularly important given the Company's
financial situation at that time and that a cost-effective approach to
motivation was required. The Board further determined that it would be in the
best interests of the Company and the Company's shareholders to provide such
optionees the opportunity to exchange their above market value options for
options exercisable at a price closer to but above the current market value. On
May 28, 1998, upon approval of the Board of Directors of the Company, the
Company offered certain holders of outstanding options with exercise prices
above $2.00 per share the opportunity to exchange such options for new stock
options at an exercise price of $2.00 per share. The price for the Class A
Common stock on Nasdaq on that date was $1.31. Any holder accepting this offer
was required to give up existing options.
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. In May 1998, the Company
cancelled this option and issued a new option on identical terms except for an
exercise price of $2.00 per share. In May 1998, the Company issued an option to
Dr. Moskowitz to purchase 100,000 shares of Common Stock at an exercise price of
$2.00 per share and expiration date of May 28, 2005. In May 1998, the Company
cancelled 47,864 shares of an option to purchase 50,000 shares of Common Stock
at $4.75 and expiring on June 18, 2002 and issued an option for a comparable
number of shares under the same terms except for an exercise price of $2.00 per
share.
The Company granted an option to acquire an aggregate of 250,000 shares
of Common Stock at an exercise price of $8-1/8 per share to Mr. Hickey upon his
employment by the Company on May 29,1996. The options will terminate upon
certain conditions in connection with termination of employment. In June 1997,
the Company canceled these options and granted an option to purchase up to
250,000 shares of Common Stock with such option having identical terms as the
canceled option except for the exercise price of $4.00 per share, which was fair
market value on the date of grant. In May 1998, the Company cancelled 115,315
shares covered under this option and issued a new option under identical terms
as the cancelled option except for the exercise price of $2.00 per share. In May
1998, the Company granted an option to purchase 100,000 shares of Common Stock
at an the exercise price of $1.31 per share, which was the fair market value on
the date of the grant. 50% of said option vested immediately and the remainder
vests on the first anniversary. These options expire seven years from the
vesting date.
In June 1997, the Company granted an option to Mr. Hickey to acquire up to
50,000 shares of Common Stock at an exercise price of $4.00 per share. Up to
one-half of such options commenced vesting immediately and the balance vest on
the first anniversary of the date of grant. Such options are exercisable for
five years from the date of vesting.
In May 1998, the Company granted an option to Mr. Hickey to purchase
50,000 shares of Common Stock at an exercise price of $2.00 and expiration date
of May 28, 2005. In December 1998, the Company granted an option to purchase
20,000 shares of Common Stock in lieu of compensation at an exercise price of
$.09 per share. Such options vested on March 31, 1999 and are exercisable for
seven years from the vesting date.
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<PAGE> 14
The Company granted an option to acquire an aggregate of 60,000 shares of
Common Stock at an exercise price of $7.00 per share to Dr. Pines upon his
employment by the Company on June 12, 1995. In May 1998, the Company cancelled
this option and issued an option under the same terms except for an exercise
price of $2.00 per share.
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 options vested upon
successful completion of a certain clinical development program in December
1997. The options are exercisable for five years from date of vesting. In June
1997, the Company canceled these options and granted an option to purchase up to
50,000 shares of Common Stock with such option having identical terms as the
canceled option except for the exercise price of $4.00 per share, which was fair
market value on the date of grant. In May 1998, the Company cancelled 46,125
shares under this option and issued an option for a like number of shares under
the same terms except for an exercise price of $2.00 per share.
In June 1997, the Company granted an option to Dr. Pines to acquire up to
30,000 shares of Common Stock at an exercise price of $4.00 per share. Up to
one-half of such options commenced vesting immediately and the balance vest on
the first anniversary of the date of grant. Such options are exercisable for
five years from the date of vesting. In May 1998, the Company cancelled this
option and issued an option under the same terms except for an exercise price of
$2.00 per share.
EMPLOYMENT AND RELATED AGREEMENTS
The Company entered into an agreement with Dr. Moskowitz, effective as of
January 1, 1995, 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 has 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 received a salary of
$195,775 per annum subject to annual adjustment for cost-of-living increases and
other increases as approved by the Board. The agreement with Dr. Moskowitz
contains confidentiality and post-termination non-competition provisions. As of
September 8, 1998, Dr. Moskowitz resigned as a salaried employee while retaining
the role of Chairman of the Board.
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 currently receives an annual
base salary of $230,625 subject to adjustments for cost-of-living increases and
other increases as determined by the Board and received an option 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
12
<PAGE> 15
the effective date of Mr. Hickey's employment. Such options are exercisable for
five years from the date of vesting and have an exercise price of $8-1/8. Those
options were repriced as per the section above.
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-competition provisions.
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 $167,500, 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 for five years from the date of vesting and have an exercise price
equal to $7.00 per share. These options were repriced as per the section above.
In May 1998, the Company granted an option to Dr. Pines to acquire up to
30,000 shares of Common Stock at an exercise price of $1.31 per share, which was
the fair market value on the date of the grant. One half of the options vested
immediately and the remaining options vest on the first anniversary of the grant
date. These options are exercisable for seven years from the vesting date.
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.
The Company entered into an employment agreement dated July 20, 1998 with
Drew Karazin, pursuant to which Mr. Karazin serves as Vice President and Chief
Financial Officer of the Company. The term of such agreement commenced on July
20, 1998 and is for a period of three years from such date, subject to automatic
annual renewal unless earlier terminated. Pursuant to such agreement, Mr.
Karazin currently receives an annual base salary of $145,000, subject to
cost-of-living adjustments and bonuses, and received an option to purchase an
aggregate of 75,000 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. Karazin's employment. Such options
are exercisable
13
<PAGE> 16
for seven years from the date of vesting and have an exercise price equal to
$1.37, which was the fair market value on the date of the grant.
In December 1998, the Company granted an option to Mr. Karazin to purchase
20,000 shares of Common Stock in lieu of compensation at an exercise price of
$.09 per share. Such options vested on March 31, 1999 and are exercisable for
seven years from the vesting date.
In the event that Mr. Karazin's employment is terminated (i) by the
Company for cause, (ii) by reason of disability, death or retirement or (iii) by
reason of voluntary resignation, then the Company shall pay, within thirty (30)
days of the date of such termination, only the base salary through such date of
termination. In the event that Mr. Karazin's employment is terminated by the
Company without cause, then the Company shall pay severance pay equal to the
base salary that Mr. Karazin would have otherwise received during the period of
six months from the date of termination. The Agreement with Mr. Karazin contains
confidentiality and post-termination non-competitive provisions.
In July 1998, the Company entered into an employment agreement with Mr.
Robert G. Conway pursuant to which Mr. Conway serves as Vice President
Operations of the Company. The term of such agreement commenced on July 1, 1998
and is for a period of three years from such date, subject to automatic annual
renewal unless earlier terminated. Pursuant to such agreement, Mr. Conway
currently receives an annual salary of $145,000 subject to cost-of-living
adjustments and bonuses, and received an option to purchase an aggregate of
75,000 shares of Common Stock. Up to one-third of such options vested
immediately and one-third vest on each of the first and second anniversaries of
the effective date of Mr. Conway's employment. Such options are exercisable for
seven years from the date of vesting and have an exercise price equal to $1.40
per share, which was the fair market value on the date of the grant.
In the event that Mr. Conway's employment is terminated (i) by the Company
for cause, (ii) by reason of disability, death or retirement or (iii) by reason
of voluntary resignation, then the Company shall pay, within thirty (30) days of
the date of such termination, only the base salary through such date of
termination. In the event that Mr. Conway's employment is terminated by the
Company without cause, then the Company shall pay severance pay equal to the
base salary that Mr. Conway would have otherwise received during the period of
six months from the date of termination. The agreement with Mr. Conway contains
confidentiality and post-termination non-competition provisions.
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.
14
<PAGE> 17
In May 1998, the Company granted to Messrs. Celano, Maupay and Rosenthal,
an option for each to acquire up to 100,000 shares and to Messrs. Eklund and
Gold, an option for each to acquire up to 50,000 shares of Common Stock at $2.00
per share. Such options vested immediately and are exercisable for seven years
from the date of grant.
CERTAIN TRANSACTIONS
Mr. Rosenthal is a partner at Graham & James LLP (and previously at Rubin
Baum Levin Constant & Friedman), which firm serves as counsel to the Company.
The Company paid or accrued approximately $189,000 and $103,000 in the years
ended December 31, 1997 and 1998, respectively, for legal services rendered.
In February 1997, the Company entered into a one-year consulting agreement
with an investment-banking firm to provide certain advisory services to the
Company. Prior to terminating this agreement, the Company paid a consulting fee
of $27,000. Joel Gold, a director of the Company, was an executive vice
president of that investment-banking firm on the date of execution of this
agreement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during 1998 all reports for the Company's
executive officers and directors that were required to be filed under Section
16(a) of the Securities Exchange Act of 1934 were timely filed, except that one
Form 5 and one Form 4 were inadvertently filed late with respect to the grant of
stock options for Mr. Conway (one grant), Mr. Celano, Mr. Karazin and Mr. Maupay
(two grants), Mr. Eklund, Mr. Gold, Dr. Moskowitz and Mr. Rosenthal (three
grants), Dr. Pines (four grants) and Mr. Hickey (five grants).
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
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. Management of the Company
recommends a vote for the ratification of Richard A. Eisner & Company, LLP, as
the independent auditors for the Company.
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.
15
<PAGE> 18
STOCKHOLDER PROPOSALS FOR 2000 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 2000 Annual Meeting of Stockholders, such proposals must
be received by the Company not later than December 31, 1999. Proposals submitted
outside of SEC regulations should be submitted by March 18, 2000. 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, 1998, accompanies this Proxy Statement. The 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 Moskowitz
Chairman
Dated: April 30, 1999
16
<PAGE> 19
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
LIFE MEDICAL SCIENCES, INC.
MAY 27, 1999
[down arrow] Please Detach and Mail in the Envelope Provided [down arrow]
PLEASE MARK YOUR
/X/ VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD AUTHORITY
listed at right (except to vote for all nominees
as marked to the listed at right
1. Election of contrary below)
Directors. / / / /
NOMINEES: Edward A. Celano
Coy Eklund
Joel L. Gold
Robert P. Hickey
Walter R. Maupay
Irwin M. Rosenthal
(INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name on the line provided below.)
- -----------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. To ratify the appointment of Richard A. Elaner & / / / / / /
Company, as the independent auditors of the
Company.
3. 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
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.
Signature
--------------------------------------------------------------------
DATED , 1999
- --------------------------------------------- --------------------
SIGNATURE, IF HELD JOINTLY
Note: (Please date, sign as name appears above 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.)
<PAGE> 20
LIFE MEDICAL SCIENCES, INC.
379 THORNALL STREET
EDISON, NEW JERSEY 08837
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 27, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Drew Karazin 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 May 27, 1999 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 on the reverse side:
(CONTINUED, AND TO BE SIGNED ON REVERSE SIDE)
