SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 |_|
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| | 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 ss.240.14a-11(c) or ss.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):
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|_| Check box if any part of the fee is offset as provided by Exchange Act
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<PAGE>
LIFE MEDICAL SCIENCES, INC.
379 Thornall Street
Edison, New Jersey 08837
Notice of 2000 Annual Meeting of Stockholders
to be held on Tuesday, June 13, 2000
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 Company's executive offices, 379 Thornall Street, Edison New Jersey 08837 on
June 13, 2000 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 approve an amendment to the Company's Restated Certificate of
Incorporation increasing the number of authorized shares of Common Stock
from 23,750,000 to 43,750,000 (the "Charter Amendment Proposal");
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 Meeting or
any adjournments thereof.
The close of business on April 21, 2000 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,
Robert P. Hickey
Chairman
Edison, New Jersey
Dated: May 10, 2000
<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 Company's executive offices, 379 Thornall Street, Edison New
Jersey 08837 on June 13, 2000 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 Charter
Amendment Proposal 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 May 10, 2000.
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>
VOTING
Only holders of shares of Common Stock of record as at the close of
business on April 21, 2000 (the "Record Date") are entitled to vote at the
Meeting. On the Record Date there were issued and outstanding 10,249,756 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 Charter Amendment Proposal 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 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:
Held Position with
Name of Nominee Age Office Since Company
--------------- --- ------------ -------
Edward A. Celano ............. 61 November 1996 Director
Coy Eklund ................... 84 November 1994 Director
Joel L. Gold ................. 58 November 1991 Director
Robert P. Hickey ............. 54 May 1996 Chairman, President
and CEO
Walter R. Maupay ............. 61 July 1996 Director
Irwin M. Rosenthal ........... 71 August 1990 Director
2
<PAGE>
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:
Sterling Vision, Inc., Entrade, Inc. and Asta Funding, Inc.
Coy Eklund has served as a director of the Company since March 1994. 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. From August 1987 through March 1996, Mr. Eklund has served as
the chairman and chief executive officer of Trivest Financial Services, a
company engaged in the television business.
Joel L. Gold has served as a director of the Company since November 1991.
Mr. Gold has been an executive vice president with Berry Shino Securities, an
investment banking firm, since January 2000. From September 1999 through January
2000, Mr. Gold had been executive vice president of J.W. Barclay, an investment
banking firm. From January 1999 through September 1999, Mr. Gold had been
managing director of ISG Capital Markets, an investment banking firm. From
September 1997 through January 1999, 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., PMCC;
and Sterling Vision, Inc.
Robert P. Hickey has served as Chairman of the Company's Board of
Directors since May 1999, Acting Chief Financial Officer since December 1999,
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
the following publicly traded companies: Kinsey Nash Corporation and Cubist
Pharmaceuticals.
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 the following publicly traded companies:
Magna-Lab Inc. and EchoCath, Inc. 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 ten times in the fiscal year ended December 31, 1999. 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.
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 Mr. Hickey, Mr. Maupay and Mr. Rosenthal. During fiscal
1999, the Executive Committee met three 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. Celano,
Eklund and Rosenthal. During fiscal 1999, 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 approves option
grants for the Company's officers, key employees, directors and others. The
Compensation Committee is composed of Messrs. Celano, Gold and Maupay. During
fiscal 1999, the Compensation Committee did not meet separately from the Board
but performed its duties in the context of Board meetings.
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, 2000. 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
Name and Address of Shares of Common Percent of Out-
Beneficial Stock Beneficially standing Shares
Owner or Number in Group Owned(1) Beneficially Owned
- ------------------------ -------- ------------------
Marilyn Moskowitz 1,433,026(2) 10.9%
616 Washington Court
Guilderland, NY 12084
Dr. Herbert Moskowitz 1,256,870(3)(4)(5) 9.6%
616 Washington Court
Guilderland, NY 12084
Robert P. Hickey 802,032(7) 6.1%
c/o Life Medical Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
4
<PAGE>
Principal Stockholders Table
Name and Address of Shares of Common Percent of Out-
Beneficial Stock Beneficially standing Shares
Owner or Number in Group Owned(1) Beneficially Owned
- ------------------------ -------- ------------------
Irwin M. Rosenthal 612,644(3)(4)(6) 4.7%
c/o Graham & James LLP
885 Third Avenue
New York, NY 10022
Walter R. Maupay 436,542(8) 3.3%
c/o Life Medical
Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
Eli Pines, Ph.D. 300,580(9) 2.3%
C/o Life Medical Sciences
379 Thornall Street
Edison, NJ 08837
Edward A. Celano 276,039(12) 2.1%
c/o Life Medical
Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
Joel Gold 188,789(10) 1.4%
c/o Life Medical
Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
Coy Eklund 178,552(11) 1.4%
c/o Life Medical
Sciences, Inc.
379 Thornall Street
Edison, NJ 08837
All executive officers and
directors
as a group (10 persons) 3,645,865(13) 27.9%
(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) Excludes 43,687 shares of Common Stock, 148,217 shares of Common Stock
issuable upon exercise of Class A Warrants and Class B Warrants and
658,262 shares of Common Stock issuable upon exercise of options which are
currently exercisable, all of which are held by Mrs. Moskowitz's husband,
as to which shares of Common Stock Mrs. Moskowitz disclaims beneficial
ownership.
(3) Dr. Moskowitz and Mr. Rosenthal are each officers, directors and principal
stockholders of Magar Inc. and own approximately 47% and 16.5%,
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.
5
<PAGE>
(4) Includes 406,704 shares of Common Stock of which 270,000 shares are
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.
(5) 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 21, 2000 into an additional 148,217 shares of Common
Stock. Also includes 658,262 shares of Common Stock issuable upon exercise
of options which are currently exercisable, but excludes 1,433,026 shares
of Common Stock held by Dr. Moskowitz's wife, as to which shares of Common
Stock Dr. Moskowitz disclaims beneficial ownership.
(6) Includes 205,940 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.
(7) Includes 739,448 shares of Common Stock issuable upon exercise of options
which are currently exercisable.
(8) Includes 214,874 shares of Common Stock issuable upon exercise of options
which are currently exercisable.
(9) Includes 296,580 shares of Common Stock issuable upon exercise of options
which are currently exercisable.
(10) 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.
(11) Represents shares of Common Stock issuable upon exercise of options which
are currently exercisable.
(12) Includes 205,455 shares of Common Stock issuable upon exercise of options
which are currently exercisable and 22,222 shares of Common Stock owned by
Walworth Financial Services, Inc., Defined Benefit Trust, controlled by
Mr. Celano.
(13) Includes 2,836,117 shares of Common Stock issuable upon exercise of
warrants and options which are currently exercisable.
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, 1999, 1998 and 1997 to the executive officers whose annual
compensation exceeded $100,000 in fiscal 1999 (the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------------ ------------
Securities Other
Name and Principal Capacities Underlying Compen-
in Which Served Year Salary Bonus Options sation (1)
- ------------------------------ ------- ---------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Robert P. Hickey 1999 $219,663 169,448 $1,921
Chairman, President and 1998 $229,229 420,000 (3) $1,804
Chief Executive Officer 1997 $228,325 $25,000 300,000 (2) $1,788
Eli Pines, Ph. D. 1999 $167,388 76,580 $1,330
Vice President and 1998 $169,943 170,000 (5) $1,252
Chief Scientific Officer 1997 $162,994 $20,000 80,000 (4) $1,444
</TABLE>
(1) Represents premium payments for term life insurance for the benefit of the
Named Executive Officers.
(2) Of the 300,000 options granted during 1997, 250,000 were granted to
replace previously granted options which were cancelled.
(3) Of the 420,000 options granted during 1998, 300,000 were granted to
replace previously granted options which were cancelled.
(4) Of the 80,000 options granted during 1997, 50,000 were granted to replace
previously granted options which were cancelled.
(5) Of the 170,000 options granted during 1998, 140,000 were granted to
replace previously granted options which were cancelled.
6
<PAGE>
The following table sets forth certain information with respect to stock option
grants during the year ended December 31, 1999 to the Named Executive Officers.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants (1)
---------------------------------------------------------------------------------------------------
Number of Securities % of Total Options
Underlying Granted to Employees Exercise or Base Expiration
Name Options Granted (#) in Fiscal Year Price ($/Sh) (1) Date
- -------------------- ------------------------------ ------------------------ -------------------------- -------------
<S> <C> <C> <C> <C>
Robert P. Hickey 34,300 12.1% $0.050(2) 03/31/06
10,000 3.5% $0.188(2) 03/31/06
100,000 35.5% $0.562 05/05/06
25,148 8.9% $0.140(2) 05/31/06
Eli Pines, Ph.D. 20,580 7.3% $0.050(2) 03/31/06
6,000 2.1% $0.188(2) 03/31/06
50,000 17.7% $0.562 05/05/06
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All options were granted with an exercise price equal to or above the fair
market value of the Common Stock at the date of grant except those granted in
lieu of compensation.
(2) Options granted in lieu of compensation.
The following table sets forth certain information with respect to stock option
exercises by the Named Executive Officers during the year ended December 31,
1999 and the value of unexercised options at December 31, 1999.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Fiscal Year End (#) at Fiscal Year End ($) (1)
Acquired on Value ------------------------------------ --------------------------------------
Name Exercised(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ------------- ------------ ----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Hickey 589,447 50,001 $ 24,628
Eli Pines, Ph. D. 246,580 $ 7,811
</TABLE>
(1) Based upon the closing price of $3/8 per share of Common Stock on December
31, 1999, less the option exercise price.
7
<PAGE>
Employment and Related Agreements
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. In May 1999, Mr. Hickey was elected Chairman
of the Board of Directors and, in December 1999, was appointed Acting Chief
Financial Officer. The term of Mr. Hickey's employment agreement is for a period
of five years. Pursuant to such agreement, Mr. Hickey currently receives an
annual base salary of $240,648 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
vests on each of the first, second, third and fourth anniversaries of 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 $8.125. 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 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 option vested immediately and the balance vested 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 purchase 100,000 shares of
Common Stock at 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 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 and an expiration date of March 31, 2006.
In January, March and May 1999, the Company granted the following options
to purchase Common Stock to Mr. Hickey in lieu of compensation: 34,300 shares at
$.05 per share and expiring on March 31, 2006; 10,000 shares at $.188 per share
and expiring on March 31, 2006; and 25,148 shares at $.14 per share and expiring
on May 31, 2006, respectively.
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 $174,768, 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 option
commenced vesting immediately and one-third vest on each of the first and second
anniversaries of the effective date of Dr. Pines' employment. Such option is
exercisable for five years from the date of vesting and has an exercise price
equal to $7.00 per share. 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 option vested immediately and the remainder vested upon
successful completion of a certain clinical development program in December
1997. The option is exercisable for five years from date of
8
<PAGE>
vesting. In June 1997, the Company canceled this option 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 option vested immediately and the balance vests on the first
anniversary of the date of grant. Such option is 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.
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 option vested
immediately and the remainder vested on the first anniversary of the grant date.
This option is exercisable for seven years from the vesting date.
In January and March 1999, the Company granted the following options to
purchase Common Stock to Dr. Pines in lieu of compensation: 20,580 shares at
$.05 per share and expiring on March 31, 2006 and 6,000 shares at $.188 per
share and expiring on March 31, 2006, respectively.
In May 1999, the Company granted an option to Dr. Pines to purchase 50,000
shares of Common Stock at an exercise price of $.562 per share and an expiration
date of May 5, 2006.
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.
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 May 1999, the Company granted to Messrs. Celano, Eklund, Gold, Maupay
and Rosenthal, an option for each to acquire up to 50,000 shares of Common Stock
at $1.00 per share. Such options vested immediately and are exercisable for
seven years from the date of grant.
In June 1999, the Company granted options to purchase Common Stock in lieu
of Board fees and certain travel expenses to the following directors: Mr. Celano
received an option for 4,455 shares; Mr. Gold received an option for 4,455
shares; Mr. Maupay received an option for 12,352 shares; and Mr. Rosenthal
received an option for 5,940 shares. These options have an exercise price of
$.25 per share and an expiration date of June 15, 2006.
9
<PAGE>
CERTAIN TRANSACTIONS
Mr. Rosenthal is a partner at Graham & James LLP, which firm serves as
counsel to the Company. The Company paid or accrued approximately $103,000 and
$67,000 in the years ended December 31, 1998 and 1999, respectively, for legal
services rendered by that firm.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that during 1999 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 4 was inadvertently filed late with respect to option grants for Mr.
Hickey(two grants), Mr. Maupay(one grant) and Dr. Pines(three grants).
CHARTER AMENDMENT PROPOSAL
General
The Board of Directors has unanimously adopted a resolution to submit to
stockholders a proposal to amend the first paragraph of Article Fourth of the
Company's Restated Certificate of Incorporation to increase the number of shares
of Common Stock which the Company is authorized to issue from 23,750,000 to
43,750,000. The Board determined that such an amendment is necessary to ensure a
continued adequate supply of authorized Common Stock for future issuance.
The full text of Paragraph I of Article Fourth of the Company's Restated
Certificate of Incorporation, if amended as proposed, would read as follows:
FOURTH: I. The aggregate number of shares which the Corporation shall have
authority to issue is Forty Eight Million Seven Hundred Fifty Thousand
(48,750,000) shares, consisting of (i) Forty Three Million Seven Hundred
Fifty Thousand (43,750,000) shares of Common Stock, par value $.001 per
share ("Common Stock"), and (ii) Five Million (5,000,000) shares of
Preferred Stock, par value $.01 per share ("Preferred Stock").
The terms of the additional shares of Common Stock will be identical to
those of the currently outstanding Common Stock. However, because stockholders
have no preemptive rights to purchase any additional shares of Common Stock
which may be issued, the issuance of additional shares would likely reduce the
percentage interest of current stockholders in the total outstanding shares. The
Charter Amendment Proposal will not increase the number of shares of Preferred
Stock authorized. The relative rights and limitations of the Common Stock and
Preferred Stock would remain unchanged under the Charter Amendment Proposal.
Purposes and Effects of Increasing the Number of Authorized Shares of
Common Stock
If approved by the Company's stockholders, the Charter Amendment Proposal
would increase the number of shares of Common Stock which the Company is
authorized to issue from 23,750,000 to 43,750,000. The additional 20,000,000
shares, if and when issued, would have the same rights and privileges as the
outstanding shares of Common Stock. The Company would be able to issue these
shares for any valid corporate purpose that the Board of Directors deems
advisable.
As of April 21, 2000, the Company had 10,249,756 shares of Common Stock
outstanding, 8,563,704 shares issuable upon exercise of outstanding options and
warrants and 1,629,262 shares reserved for options not yet granted under
existing stock option plans leaving 3,307,278 unreserved shares of Common Stock
authorized for future issuance.
10
<PAGE>
The Company is currently negotiating a financing pursuant to which the
Company would receive approximately $3.0 to $4.0 million in exchange for the
issuance of convertible debentures and warrants to purchase approximately 1.0
million shares of Common Stock. The debentures would bear interest at prevailing
rates and would be convertible into Common Stock at a discount to market. Based
on a recent price range for the Company's Common stock to $0.375 to $0.50, the
full conversion of the proposed debentures and the associated warrants could
result in the issuance of additional shares of Common Stock in excess of 10.0
million shares. The Company currently has an insufficient number of unreserved
authorized shares to cover this amount.
The Company intends to use the proceeds of the convertible debt financing
for the US pivotal clinical trial of REPEL-CV(TM) adhesion barrier film in
open-heart surgery as well as for general operating expenses.
The Board of Directors recommends the proposed increase in the authorized
number of shares of common stock to ensure an adequate supply of authorized and
unissued shares for the raising of additional capital for the operations of the
Company, such as through the planned convertible debt financing, as well as for
other valid corporate purposes. Except as described above, there are currently
no plans or arrangements relating to the issuance of any of the additional
shares of common stock proposed to be authorized and such shares would be
available for issuance without further action by stockholders, unless required
by the Company's Certificate of Incorporation, its By-laws or applicable law.
Although the Company's Board of Directors will authorize the issuance of
additional Common Stock based on its judgment as to the Company's best interests
and that of it's stockholders, future issuance of common stock could have a
dilutive effect on existing stockholders. Common stockholders are not now, and
will not be entitled to preemptive rights to purchase shares of any authorized
Common Stock if additional shares are issued later. In addition, the issuance of
additional shares of Common Stock could have the effect of making it more
difficult for a third party to acquire a majority of the Company's outstanding
voting stock.
Vote Required; Effective Date of Proposed Amendment; Recommendation of the
Board of Directors
If the Charter Amendment Proposal is approved by the holders of a majority
of the outstanding shares of Common Stock, it will become effective upon the
filing by the Company of a Certificate of Amendment to the Company's Restated
Certificate of Incorporation with the Delaware Secretary of State, which is
expected to be done as soon as practicable after stockholder approval is
obtained. The Board of Directors has unanimously recommended that stockholders
vote FOR the Charter Amendment Proposal. The directors and executive officers of
the Company intend to vote their shares in favor of this Proposal.
The Board of Directors recommends that stockholders vote "FOR" the Charter
Amendment Proposal.
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.
11
<PAGE>
STOCKHOLDER PROPOSALS FOR 2001 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 2001 Annual Meeting of Stockholders, such proposals must
be received by the Company not later than December 31, 2000. Proposals submitted
outside of SEC regulations should be submitted by March 18, 2001. 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, 1999, 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,
Robert P. Hickey
Chairman
Dated: May 10, 2000
12
<PAGE>
LIFE MEDICAL SCIENCES, INC.
379 Thornall Street
Edison, New Jersey 08837
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
to be held on June 13, 2000
This Proxy is solicited on Behalf of the Board of Directors
The undersigned hereby appoints Eli Pines 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 Company's Executive Offices, 379 Thornall Street,
Edison, NJ 08837 on June 13, 2000 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)
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
LIFE MEDICAL SCIENCES, INC.
JUNE 13, 2000
[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 NOMINEES: Edward A. Celano
Listed at right to vote for all Coy Eklund
(except as nominees listed Joel L.Gold
marked to the at right Robert P. Hickey
contrary below) Walter R. Maupay
Irwin M. Rosenthal
1. Election of
Directors.
|_| |_|
(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 approve an amendment to the |_| |_| |_|
Company's Restated
Certificate of Incorporation
increasing the number of
authorized shares of Common
Stock from 23,750,000 to
43,750,000 (the "Charter
Amendment Proposal");
3. To ratify the appointment of |_| |_| |_|
Richard A. Eisner &
Company, as the independent
auditors of the Company.
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.
SIGNATURE_________________________ __________________________ DATED_______, 2000
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.)
