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. )
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|_| Preliminary Proxy Statement
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|X| Definitive Proxy Statement
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|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
LIFE MEDICAL SCIENCES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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LIFE MEDICAL SCIENCES, INC.
PO Box 219
Little Silver, NJ 07739
Notice of 2005 Annual Meeting of Stockholders
to be held on Friday April 22, 2005
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 offices of Eisner LLP, 750 Third Avenue, New York, NY 10117 on Friday April
22, 2005, at 9:00 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 changing the Company's name to SyntheMed, Inc.;
3. To ratify the appointment of Eisner LLP as the Independent Registered
Public Accounting Firm 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 February 25, 2005, 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 offices 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,
Richard L. Franklin, MD
Chairman
Little Silver, New Jersey
Dated: March 1, 2005
LIFE MEDICAL SCIENCES, INC.
PO Box 219
Little Silver, NJ 07739
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 offices of Eisner LLP, 750 Third Avenue, New York, NY 10117 on
Friday, April 22, 2005 at 9:00 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
proposed change of the Company's name to SyntheMed, Inc. (the "Name Change") and
for the ratification of the appointment of Eisner 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 March 4, 2005.
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.
VOTING
Only holders of shares of Common Stock of record as at the close of
business on the Record Date are entitled to vote at the Meeting. The Record Date
for the Meeting is February 25, 2005. On the Record Date there were issued and
outstanding 59,962,447 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.
The presence in person or by proxy of the holders of a majority of the Common
Stock outstanding on the Record Date shall constitute a quorum for the purposes
of the Meeting. 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. Abstentions are counted in the
tabulation of the votes cast on proposals presented to stockholders, whereas
broker non-votes are not counted in the tabulation of votes cast on such
proposals.
Required Votes
The affirmative vote of a plurality of the shares of Common Stock present
in person or by proxy at the Meeting is necessary to elect the nominees as
directors. Stockholders may vote "FOR" any or all nominees or may "Withhold
Authority" to vote for the nominees.
The affirmative vote of a majority of the shares of Common Stock
outstanding on the Record Date is necessary to approve the Name Change. The
affirmative vote of a majority of the shares of Common Stock present in person
or by proxy at the Meeting is necessary to ratify the appointment of Eisner LLP
as the independent auditors of the Company. Stockholders may vote "FOR",
"AGAINST" or "ABSTAIN" with respect to each of these proposals. Abstentions and
broker non-votes will have the same effect as a vote "AGAINST" each of these
proposals.
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
--------------- --- ------------ -------
David G. P. Allan ................ 63 June 2003 Director
Edward A. Celano ................. 66 November 1996 Director
Barry R. Frankel ................. 54 June 2003 Director
Richard L. Franklin, MD. ......... 59 December 2000 Chairman
Robert P. Hickey ................. 59 May 1996 President, CEO
and CFO
Walter R. Maupay, Jr. ............ 65 July 1996 Director
2
Nominees for Election at the Meeting
David G. P. Allan has served as a director of the Company since June 2003.
Since February 1998, Mr. Allan has been Chairman & CEO of YM BioSciences, Inc.,
a publicly traded, Toronto-based life sciences company focused on cancer
therapy. From March 1992 to January 1998, Mr. Allan served as Executive Director
of Yorkton Securities Inc., an investment banking firm. From February 1987 to
February 1992, Mr. Allan served as a Director of Loewen, Ondatjee McCutcheon,
Inc., an investment banking firm.
Edward A. Celano has served as a director of the Company since November
1996. Since January 2004, Mr. Celano has served as Senior Managing Director of
Walter & Samuels Capital Corporation, Inc., a real estate investment firm. From
February 2001 to December 2003, Mr. Celano served as Managing Director of the
Corporate Finance Group of M. R. Weiser & Co., LLP, an investment banking firm.
From May 1996 to January 2001, Mr. Celano served as 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:
Entrade, Inc. and Asta Funding, Inc.
Barry R. Frankel has served as a director of the Company since June 2003.
Since March 1993, Mr. Frankel has served as Managing Partner of The Frankel
Group, a life sciences management consulting firm. From October 1982 to February
1993, Mr. Frankel served as President of SJ Weinstein Associates, a healthcare
marketing and communications firm. From June 1974 to September 1993, Mr. Frankel
served in senior marketing and strategy positions at Pfizer.
Richard L. Franklin, MD, has served as Chairman of the Board of Directors
of the Company since June 2003 and as a director of the Company since December
2000. Since September 2002, Dr. Franklin has been Chairman of DMS Data Systems,
an internet-based information services company. From May 1996 to September 2002,
Dr. Franklin had been Chief Executive of Phairson, Ltd., a medical product
development company. From January 1991 to May 1996, Dr. Franklin was founder and
principal of Richard Franklin & Associates and from January 1988 to December
1990, Dr. Franklin was with Boston Capital Group, both of which are consulting
firms to the healthcare industry. From July 1986 to December 1987, Dr. Franklin
was head of Healthcare Corporate Finance at Tucker Anthony, an investment
banking firm.
Robert P. Hickey has served as Chief Financial Officer of the Company
since March 2000, President and Chief Executive Officer of the Company since May
1996 and as a director of the Company since July 1996. From May 1999 to June
2003, Mr. Hickey served as Chairman of the Board of Directors of the Company.
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, Polymedica,
Inc. and Cubist Pharmaceuticals.
Each director shall hold office until the Company's next meeting of its
shareholders and until such director's successor is duly elected and qualified
or until such director's earlier resignation or removal.
3
General Information Concerning the Board and its Committees
The Board met four times in the fiscal year ended December 31, 2004. It is
the Company's policy that directors who are up for election at the Annual
Meeting attend the Annual Meeting. All of the nominees up for election at the
2004 Annual Meeting of Stockholders attended the 2004 Annual Meeting of
Stockholders.
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 Nominating and Corporate Governance
Committee, Audit Committee and the Compensation Committee. During the last
fiscal year each of the directors then serving, except Mr. Allan, attended at
least 75% of the aggregate of (1) the total number of meetings of the Board
(held during the period for which he served as a director) and (2) the total
number of meetings held by all committees of the Board on which he served
(during the period for which he served as a director).
Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee is responsible for the establishment and
supervision of guidelines and policies in support of the Board relating to Board
composition, corporate governance and performance evaluation of the Board and
management. The committee, all of whose members are independent within the
meaning of the rules of the Nasdaq Stock Market, is composed of Mr. Maupay as
Chairman and Messrs. Allan and Frankel. During fiscal 2004, the Nominating and
Corporate Governance Committee did not meet separately from the Board but
performed its duties in the context of Board meetings. A copy of the committee's
charter is included as Appendix A to the Proxy Statement. The charter is not
included on the Company's website.
Audit Committee. The Audit Committee is composed of three directors, all
of whom are independent within the meaning of the rules of the Nasdaq Stock
Market. The Audit Committee reviews the Company's auditing, accounting,
financial reporting and internal control functions and selects the independent
auditors. In addition, the committee monitors the non-audit services of the
independent auditors. During fiscal 2004, the Audit Committee met two times. In
addition, during 2004, the Chairman met with the independent auditors to review
each of the Company's Form 10-QSB filings. The members of the Audit Committee
are Mr. Celano as Chairman and Messrs. Allan and Maupay. While each of the
members of the Audit Committee is financially literate and has accounting and
finance experience, none of such individuals is deemed a "financial expert"
within the meaning of Securities and Exchange Commission regulations. Given the
limited resources of the Company, and the qualifications of the existing
committee members, the Board of Directors has determined not to devote resources
at this time to locating a suitable "financial expert" to serve on the Audit
Committee. For additional information relating to the Audit Committee, see the
Report of Audit Committee on page 9 of this proxy statement.
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 Mr. Maupay as Chairman and Messrs. Celano
and Frankel. During fiscal 2004, the Compensation Committee met two times.
Director Nomination Process. The Nominating and Corporate Governance
Committee is responsible for recommending to the Board those individuals it
believes should be nominated for election or reelection as members of the Board.
The Company's directors play an important role in guiding the Company's
strategic direction and overseeing the management of the Company. Board
candidates are considered based upon various criteria, such as their business
and professional skills and experiences, including particular experience in
areas relevant to the Company's business activities, concern for the long-term
interests of the stockholders, and personal integrity and judgment. In addition,
directors must have time available to devote to Board activities. Accordingly,
we seek to attract and retain highly qualified directors who have sufficient
time to attend to their duties and responsibilities to the Company. In
determining individuals to recommend for nomination, the Committee will consider
candidates recommended by stockholders, in addition to Committee-identified
candidates. Stockholders wishing to recommend nominees for election at the 2006
Annual Meeting should provide all relevant background material for the
candidate, including curriculum vitae, to the Chairman of the Committee, at the
address of the Company, in advance of the date set forth herein for receipt of
stockholder proposals for the 2006 Annual Meeting.
4
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
any class of voting securities of the Company, 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 February 25, 2005.
Name and Address Shares of Common
of Beneficial Owner Stock Beneficially Percent
or Number in Group Owned (1) of Class
------------------ --------- --------
Phairson, Ltd. 6,895,561 (2) 11.4%
250 City Rd.
London EC1V 2QQ
United Kingdom
Richard L. Franklin, MD 3,000,000 (3) 4.8%
c/o Life Medical Sciences, Inc.
PO Box 219
Little Silver, NJ 0739
Robert P. Hickey 2,732,034 (4) 4.4%
c/o Life Medical Sciences, Inc.
PO Box 219
Little Silver, NJ 07739
Eli Pines, Ph.D. 1,196,581 (5) 2.0%
c/o Life Medical Sciences, Inc.
PO Box 219
Little Silver, NJ 0739
Walter R. Maupay 823,441 (6) 1.4%
c/o Life Medical Sciences, Inc.
PO Box 219
Little Silver, NJ 07739
Edward A. Celano 558,016 (7) 0.9%
c/o Life Medical Sciences, Inc.
PO Box 219
Little Silver, NJ 07739
David G. P. Allan 445,000 (8) 0.7%
c/o Life Medical Sciences, Inc.
PO Box 219
Little Silver, NJ 07739
5
Barry R. Frankel 145,000 (9) 0.2%
c/o Life Medical Sciences, Inc.
PO Box 219
Little Silver, NJ 07739
All executive officers and
directors 8,900,072 (10) 13.0%
as a group (7persons)
(1) Beneficial ownership is defined in accordance with the rules of the
Securities and Exchange Commission and generally means the power to vote
and/or dispose of the securities regardless of any economic interest
therein. In accordance with such rules, shares beneficially owned includes
shares that the named person has the right to acquire upon exercise of
options and warrants, or upon conversion of convertible securities, within
60 days from February 25, 2005. All shares listed are beneficially owned,
and sole voting and investment power is held by the persons named, except
as otherwise noted.
(2) Represents shares held of record by wholly-owned subsidiaries of Phairson,
Ltd.
(3) Represents shares of Common Stock issuable upon exercise of options that
are currently exercisable.
(4) Includes 2,664,450 shares of Common Stock issuable upon exercise of
options that are currently exercisable.
(5) Represents shares of Common Stock issuable upon exercise of options which
are currently exercisable.
(6) Includes 526,773 shares of Common Stock issuable upon exercise of options
which are currently exercisable.
(7) Includes 495,210 shares of Common Stock issuable upon exercise of options
which are currently exercisable.
(8) Represents 145,000 shares of Common Stock issuable upon exercise of
options which are currently exercisable and 150,000 shares of Common Stock
underlying warrants currently exercisable which are held by TCMC Corp., a
company controlled by Mr. Allan.
(9) Represents shares of Common Stock issuable upon exercise of options which
are currently exercisable.
(10) Includes 8,173,014 shares of Common Stock issuable upon exercise of
options which are currently exercisable and 150,000 shares of Common Stock
underlying warrants 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, 2004, 2003 and 2002 to the Company's officers whose annual
compensation exceeded $100,000 in fiscal 2004 (the "Named Executive Officers").
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
-------------------------------------------------------
All
Securities Other
Name and Principal Capacities Underlying Compen-
in Which Served Year Salary Bonus Options sation (1)
- ----------------------------------------------------------------------------------------------------------------
Robert P. Hickey 2004 $249,000 850,000 $2,614
President, CEO & CFO 2003 $225,000 $2,434
2002 $200,000 1,500,000 $2,299
Eli Pines, Ph. D. 2004 $187,000 700,000
Vice President and 2003 $150,000 (2)
Chief Scientific Officer 2002 700,000 (3)
(1) Represents premium payments for term life insurance for the benefit of the
Named Executive Officer.
6
(2) Dr. Pines employment with the Company commenced on March 1, 2003. If Dr.
Pines had been employed for the full fiscal year of 2003, his salary Would
have been $180,000.
(3) Dr. Pines received the option grant while working as a consultant to the
Company.
The following table sets forth certain information with respect to stock option
grants during the year ended December 31, 2004 to the Named Executive Officers.
Option/SAR Grants in Last Fiscal Year
Individual Grants
---------------------------------------------------------------------------------------------------
Number of Securities % of Total Options
Underlying Granted to Employees Exercise or Base Expiration
Name Options Granted (#) in Fiscal Year Price ($/Sh) (1) Date
- ------------------------ ------------------------------ ------------------------ -------------------------- -------------
Robert P. Hickey 250,000 16.1% $0.43 4/23/11
200,000 12.9% $0.45 5/24/11
200,000 12.9% $0.55 5/24/12
200,000 12.9% $0.65 5/24/13
Eli Pines 100,000 6.5% $0.43 4/23/11
200,000 12.9% $0.45 5/24/11
200,000 12.9% $0.55 5/24/12
200,000 12.9% $0.65 5/24/13
(1) All options were granted with an exercise price equal to or above the fair
market value of the Common Stock at the date of grant.
The following table sets forth certain information with respect to stock
option exercises by the Named Executive Officers during the year ended December
31, 2004 and the value of unexercised options at December 31, 2004.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year End Option/SAR Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Fiscal Year End (#) at Fiscal Year End ($) (1)
Acquired on Value -------------------------------------- --------------------------------------
Name Exercised(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- --------------- --------------- ------------------- ----------------- -------------------- -----------------
Robert P. Hickey N/A N/A 2,664,450 400,000 $ 362,365 N/A
Eli Pines N/A N/A 1,196,581 400,000 74,188 N/A
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Based upon the closing price of $0.41 per share of Common Stock on
December 31, 2004, less the option exercise price.
Employment and Related Agreements
Pursuant to an employment agreement entered into in May 2001 and amended
in May 2003, Robert P. Hickey is currently entitled to an annual base salary of
$255,000 subject to adjustments for cost-of-living increases and other increases
as determined by the Board. Mr. Hickey serves as President, CEO and CFO of the
Company. As amended, the term of the agreement is scheduled to expire in May
2006, subject to automatic annual renewals absent six months' prior notice. In
May 2004, the Board issued to Mr. Hickey a non-qualified stock option to
purchase an aggregate of 600,000 shares of Common Stock under the Company's 2001
Non-Qualified Stock Option Plan. The option vests in three equal annual
installments commencing on the issuance date and is exercisable at progressive
per share prices per installment of $0.45, $0.55, and $0.65, respectively. The
vesting schedule accelerates upon a change in control of the Company. The option
expires as to each installment seven years from vesting. In April 2004, the
Board issued to Mr. Hickey a non-qualified stock option to purchase an aggregate
of 250,000 shares of Common Stock under the Company's 2001 Non-Qualified Stock
Option Plan. The option is
7
exercisable at $0.43 per share, vests in full on the issuance date and expires
seven years from the vesting date. In March 2002, the Board issued to Mr. Hickey
a non-qualified stock option to purchase an aggregate of 1,500,000 shares of
Common Stock under the Company's 2001 Non-Qualified Stock Option Plan. The
option is exercisable at $0.12 per share and vests in three equal annual
installments commencing on the issuance date. The vesting schedule accelerates
upon a change in control of the Company. The option expires as to each
installment seven years from vesting.
If Mr. Hickey dies, is terminated for cause, voluntarily resigns other
than for Good Reason, as such term is defined in the agreement, or is unable to
perform his duties on account of death or disability 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 or if Mr. Hickey resigns for Good Reason 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 twelve months of salary. The amount of the severance pay
was increased from six months to twelve months in May 2003. The agreement with
Mr. Hickey contains confidentiality and non-competition provisions.
Under the foregoing employment agreement, the Company is required to
obtain life insurance coverage on the life and for the benefit of Mr. Hickey in
an amount equal to twice the amount of his base salary then in effect. Mr.
Hickey 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.
In April 2001, the Company entered into a consulting agreement with
Richard L. Franklin, MD, pursuant to which Dr. Franklin agreed to render
advisory and consulting services to the Company in the areas of strategic
planning, business management, fund raising, investor relations and other areas
consistent with Dr. Franklin's experience and expertise. The initial term of
this agreement was one year, subject to an annual renewal absent three months
written notice prior to the termination date. For his services under the
agreement, the Company agreed to pay Dr. Franklin a fee of $10,000 per month. In
May 2003, the agreement was amended to set a fixed expiration date of December
31, 2004 and to reduce Dr. Franklin's compensation to $5,000 per month from
April 1, 2004 through the remainder of the term. In March 2002, the Board issued
to Dr. Franklin a non-qualified stock option to purchase an aggregate of
3,000,000 shares of Common Stock under the Company's 2001 Non-Qualified Stock
Option Plan. The option is exercisable at $0.12 per share, and vests in three
equal installments commencing upon the issuance date. The vesting schedule
accelerates upon a change in control of the Company. The option expires as to
each installment seven years from vesting.
In March 2003, the Company entered into an employment agreement with Eli
Pines, Ph.D., pursuant to which Dr. Pines currently receives an annual base
salary of $189,000 subject to adjustments for cost-of-living increases and other
increases as determined by the Board. Dr. Pines serves as Vice President of
Research and Chief Scientific Officer of the Company. The term of Dr. Pines'
employment agreement is for a period of three years and is automatically renewed
on an annual basis absent three months prior written notice.
If Dr. Pines dies, is terminated for cause, voluntarily resigns other than
for Good Reason, as such term is defined in the agreement, or is unable to
perform his duties on account of death or disability 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 Dr. Pines' employment is terminated for any other reason
by the Company or if Dr. Pines resigns for Good Reason during the term of the
agreement, Dr. Pines 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 Dr. Pines
contains confidentiality and non-competition provisions. Dr. Pines will 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.
Dr. Pines had previously been providing consulting services to the Company
at the rate of $4,000 per month when the consulting arrangement began in August
2001 and at the rate of $8,000 per month from January 2002 to February 2003. In
May 2004, the Board issued to Dr. Pines a non-qualified stock option to purchase
an aggregate of 600,000 shares of Common
8
Stock under the Company's 2001 Non-Qualified Stock Option Plan. The option vests
in three equal annual installments commencing on the issuance date and is
exercisable at progressive per share prices per installment of $0.45, $0.55, and
$0.65, respectively. The vesting schedule accelerates upon a change in control
of the Company. The option expires as to each installment seven years from
vesting. In April 2004, the Board issued to Dr. Pines a non-qualified stock
option to purchase an aggregate of 100,000 shares of Common Stock under the
Company's 2001 Non-Qualified Stock Option Plan. The option is exercisable at
$0.43 per share, vests in full on the issuance date and expires seven years from
the vesting date. In March 2002, the Board issued to Dr. Pines a non-qualified
stock option to purchase up to 700,000 shares of the Company's Common Stock
under the Company's 2001 Non-Qualified Stock Option Plan. The option is
exercisable at $0.12 per share, and vests in three equal installments commencing
upon issuance date. The vesting schedule accelerates upon a change in control of
the Company. The option expires as to each installment seven years from vesting.
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 $1,000 for attendance in
person at each meeting of the Board and $500 for participation in each
teleconference meeting of the Board. All existing outside directors, with the
exception of Dr. Franklin, are entitled to receive, on the occasion of the
Company's Annual Meeting of Stockholders, a grant of 50,000 shares for Board
membership, a grant of 25,000 shares for chairing a Board committee and a grant
of 10,000 shares for membership on a Board committee. Each new outside director
is entitled to receive an initial grant of 50,000 shares on the occasion of
his/her election to the Board. Each of the foregoing option grants is to be made
with an exercise price equal to fair market value of the underlying Common Stock
on the date of grant.
In April 2004, the Board issued to Messrs. Allan and Frankel non-qualified
stock options to purchase an aggregate of 95,000 shares of Common Stock under
the Company's 2001 Non-Qualified Stock Option Plan. In April 2004, the Board
issued to Mr. Celano and Mr. Maupay non-qualified stock options to purchase an
aggregate of 110,000 and 135,000 shares, respectively, of Common Stock under the
Company's 2001 Non-Qualified Stock Option Plan. All options are exercisable at
$0.43 per share, vest in full on the issuance date and expire seven years from
the vesting date.
Securities Authorized For Issuance Under Equity Compensation Plans
The following table summarizes certain information concerning equity
compensation plans for employees and directors of and consultants to the
Company:
Plan Category Number of securities to be Weighted average exercise Number of securities
issued upon exercise of price of outstanding options, remaining available for
outstanding options, warrants and rights warrants and rights future issuance
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
----------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders 0 N/A 0
Equity compensation plans not
approved by security holders 11,179,000 $0.46 1,921,000
----------------------------------------------------------------------------------------------------
Total 11,179,000 $0.46 1,921,000
====================================================================================================
677,000 fully vested options have been granted to eight individuals
pursuant to the Company's 2000 Non-Qualified Stock Option Plan at exercise
prices ranging from $0.023 to $1.4375 per share and with termination dates
ranging from
9
December 27, 2006 to October 12, 2007. Of these, the Company granted options to
directors and officers as follows: 151,000 shares to Mr. Hickey, 72,000 shares
to Mr. Celano and 87,000 shares to Mr. Maupay.
8,292,000 options have been granted to twelve individuals pursuant to the
Company's 2001 Non-Qualified Stock Option Plan at exercise prices ranging from
$0.12 to $0.65 per share and with termination dates ranging from June 6, 2008 to
May 24, 2013. Of the total options issued, 7,492,000 are vested, 400,000 vest on
May 24, 2005 and 400,000 vest on May 24, 2006. Of these, the Company granted
options to directors and officers as follows: 2,350,000 shares to Mr. Hickey,
1,400,000 shares to Dr. Pines, 145,000 shares to Mr. Allan, 235,000 shares to
Mr. Celano, 145,000 shares to Mr. Frankel, 3,000,000 shares to Dr. Franklin and
260,000 shares to Mr. Maupay.
2,210,000 fully vested options have been granted to fifteen individuals
pursuant to other agreements at exercise prices ranging from $0.05 to $7.88 and
with termination dates ranging from March 5, 2005 to March 9, 2007. Of these,
the Company granted options to directors and officers as follows: 593,000 shares
to Mr. Hickey, 196,000 shares to Dr. Pines, 188,000 shares to Mr. Celano and
179,000 shares to Mr. Maupay.
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The Audit Committee is comprised of three directors, all of whom are
independent within the meaning of the rules of the Nasdaq Stock Market, and it
operates under a written charter adopted by the Board of Directors. In January
2004, the Board of Directors adopted revisions to the charter to reflect, among
other things, an increased role of the Audit Committee in respect of certain
corporate governance matters and in administering and supervising the
relationship with the independent auditors. The Audit Committee reviews and
reassesses the adequacy of its charter on an annual basis. A copy of the Audit
Committee charter was included as an appendix to the Company's proxy statement
for the annual meeting held in 2004.
The primary focus of the Audit Committee is to assist the Board of
Directors in its general oversight of the Company's financial reporting,
internal control and audit functions. Management is responsible for the
preparation, presentation and integrity of the Company's financial statements,
accounting and financial reporting principles, internal controls and procedures
designed to assure compliance with accounting standards, applicable laws and
regulations. The Company's independent auditing firm is responsible for
performing an independent audit of the consolidated financial statements in
accordance with auditing standards generally accepted in the United States of
America.
The Committee serves an oversight role to the Board of Directors in which
it provides advice, counsel and direction to management and the auditors on the
basis of the information it receives, discussions with management and the
auditors, and the experience of the Committee's members in business, financial
and accounting matters. The Committee members are not professional auditors and
their functions are not intended to duplicate or to certify the activities of
management and the independent auditors nor can the Committee certify that the
independent auditors are "independent" under applicable laws.
In this context, the Audit Committee has reviewed and discussed with
management the audited financial statements of the Company for the fiscal year
ended December 31, 2004. Management represented to the Audit Committee that said
financial statements were prepared in accordance with generally accepted
accounting principles which was affirmed by the Company's independent auditors,
Eisner LLP. The Audit Committee has discussed with Eisner LLP matters required
to be discussed by Statement on Auditing Standards No. 61, "Communication with
Audit Committee."
The Audit Committee has received and reviewed the written disclosures and
the letter from Eisner LLP required by Independence Standards Board Standard No.
1, "Independence Discussions with Audit Committees," and the Audit Committee
discussed with Eisner LLP the firm's independence.
10
Based on the aforementioned actions, the Audit Committee recommended that
the Board of Directors include the audited financial statements in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2004, as filed with
the Securities and Exchange Commission.
Submitted by the Audit Committee of the Company's Board of Directors:
Edward A. Celano, Chairman
David G. P. Allan
Walter R. Maupay, Jr.
Audit and Other Fees
The following table summarizes fees billed to the Company by Eisner LLP
for 2004 and 2003:
2004 2003
---- ----
Audit Fees $35,500 $33,200
Audit-related Fees 0 0
Tax Fees 0 0
Other Fees 0 0
Audit fees include fees for the annual audit and review of financial
statements included in that year's Form 10-QSB filings, as well as fees for any
other services normally provided by the principal accountant in connection with
statutory or regulatory filings, including SEC filings, or engagements.
CERTAIN TRANSACTIONS
In March 2003, the Company completed the purchase of the polymer
technology assets of a private medical technology company based in the United
Kingdom, Phairson Medical Limited (and an affiliated entity; collectively,
"Phairson"), in exchange for the issuance of 6,895,561 shares of restricted
Common Stock of the Company. The assets comprise a series of United States and
foreign patent applications as well as scientific and clinical documentation.
The Company also assumed Phairson's rights and obligations under a development
agreement with the Swiss Federal Institute of Technology and the University of
Zurich, as well as with the principal investigator of the technology development
project, Professor JA Hubbell. Under these agreements, the Company is required
to pay royalties of no more than 1.1% of net sales of products incorporating the
technology. If the Company fails to pursue development efforts involving the
technology for an extended period of time, the Company is obligated to negotiate
a return of the technology to the university. Certain stockholders of Phairson
have participated in financings of the Company, and Richard Franklin, a Chairman
of the Board of Directors of the Company, is a stockholder and served as CEO of
Phairson. In connection with the acquisition, the Company granted an option,
exercisable for seven years, to purchase up to 100,000 shares of Common Stock at
$.09 per share to Dr. Gere S. diZerega, who has served as a medical consultant
to both companies and who assisted in identifying the acquisition opportunity.
Dr. diZerega had previously served as a director of the Company.
For a description of certain compensation arrangements with management and
other directors of the Company, including amendments, in May 2003, to the
employment agreement with Mr. Hickey, the consulting agreement with Dr.
Franklin, as well as the employment agreement entered into with Dr. Pines in
March 2003, see "Executive Compensation."
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that all reports required to be filed during 2004 by
the Company's executive officers, directors and beneficial owners of 10% or more
of the Company's Common Stock, pursuant to Section 16(a) of the Securities
Exchange Act of 1934, as amended, and the rules promulgated thereunder, were
timely filed.
11
NAME CHANGE
The Board of Directors has determined that it is advisable and recommends
that the stockholders approve an amendment to the Company's Restated Certificate
of Incorporation to change the name of the Company to "SyntheMed, Inc."
The Board of Directors believes the proposed new name more accurately
reflects the Company's business focus on synthetic polymers for medical product
applications. As the Company begins to prepare for commercialization of its
REPEL-CV(TM) product, which is currently undergoing a multi-center pivotal
clinical trial, the Board of Directors believes that now would be an appropriate
time to effect the name change.
The change of the Company's name will not affect, in any way, the validity
of currently outstanding stock certificates, nor will it be necessary for the
Company's stockholders to surrender or exchange any stock certificates that they
currently hold as a result of the name change. If the name change is approved at
the Meeting, the Company intends to promptly file an amendment to its Restated
Certificate of Incorporation effecting the name change. In connection with the
name change, the Company will seek to change the trading symbol for its common
stock on the NASD Over-The-Counter Bulletin Board.
Stockholders will not be entitled to rights of appraisal or similar rights
of dissenters in connection with the proposed name change.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has recommended, and the Board of Directors has
approved, the reappointment of Eisner LLP as the independent registered public
accounting firm to audit the financial statements of the Company for the current
fiscal year. The Company has requested that a representative of Eisner 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 Eisner 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.
STOCKHOLDER PROPOSALS AND COMMUNICATIONS
Proposals for the 2006 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 2006 Annual Meeting of Stockholders, such proposals must
be received by the Company not later than November 1, 2005. Proposals should be
directed to the attention of the Secretary of the Company.
Communications with the Board of Directors
The Board of Directors provides a process for stockholders to send
communications to the Board or any of the directors. Stockholders may send
written communications to the Board or any of the directors c/o Secretary, Life
Medical Sciences, Inc., PO Box 219, Little Silver New Jersey 07739. All
communications will be collected and submitted to the Board or the individual
directors on a periodic basis.
12
ANNUAL REPORT
The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2004 accompanies this Proxy Statement. The Annual Report on Form
10-KSB does not constitute a part of the proxy soliciting material.
ETHICS CODE
The Company has adopted a Code of Business Conduct applicable to its
employees, officers and directors. The Code is intended to comply with
requirements of the Securities and Exchange Commission's rules. Copies of the
Code may be obtained by stockholders, free of charge, by mailing a request to
the Company's Secretary.
ELECTRONIC ACCESS TO PROXY MATERIALS AND ANNUAL REPORTS
Most shareholders can elect to view future proxy statements and annual
reports over the Internet instead of receiving paper copies in the mail.
Choosing this option will save the Company the cost of producing and mailing
these materials. If you hold your shares through a bank, broker or other
nominee, please refer to the information provided by the institution that holds
your shares and follow that institution's instructions on how to elect to view
future proxy statements and annual reports over the Internet. If you choose to
view future proxy statements and annual reports over the Internet, next year you
will receive an e-mail with instructions on how to view those materials and
vote. Your election will remain in effect until you revoke it. Due to technical
constraints at the Company's transfer agent, record shareholders are not yet
able to elect this option.
By order of the Board of Directors,
Richard L. Franklin, MD
Chairman
Dated: March 1, 2005
13
EXHIBIT A
LIFE MEDICAL SCIENCES, INC.
CHARTER OF THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS
1. General Purpose. The general purpose of the Committee is to discharge the
responsibilities described below relating to (i) board composition, (ii)
corporate governance and (iii) performance evaluation of the board and
management.
2. Responsibilities Relating to Board Composition
2.1. The Committee's responsibilities shall be to:
o develop criteria for evaluating prospective candidates to the board;
o identify individuals qualified to become board members; and
o recommend to the board those individuals that should be nominees for
election or re-election to the board or otherwise appointed to the
board (with authority for final approval remaining with the board).
2.2. The Committee shall have sole authority to (i) retain and terminate any
search firm to be used to identify director candidates and (ii) approve the
search firm's fees and other retention terms.
2.3. The recommendation of the Committee shall not be required for directors
that are elected by holders of the Company's preferred stock, if any, voting as
a separate class, and nothing in this Charter shall limit any rights that
holders of any class of preferred stock may have to designate or elect directors
voting as a separate class.
3. Responsibilities Relating to Corporate Governance
3.1. The Committee shall be responsible for taking a leadership role in shaping
the corporate governance of the Company. As part of this responsibility, the
Committee shall develop, and recommend to the board, corporate governance
guidelines for the Company.
3.2. The corporate governance guidelines should cover such areas as the
Committee deems appropriate including, by way of example, (i) director
qualification standards, (ii) director responsibilities, (iii) director access
to management and, as necessary and appropriate, independent advisors, (iv)
director compensation, (v) director orientation and continuing education, (vi)
management succession, (vii) annual self evaluation of the board, (viii)
evaluation of management and (ix) such other matters as may be required by the
rules of any stock exchange or association on which the Company's securities may
be traded or quoted .
4. Responsibilities Relating to Board and Management Evaluation. The Committee
shall oversee the evaluation processes for the board and management that are
required by the Company's corporate governance guidelines.
5. Other Responsibilities. In addition to the authority and responsibilities
described herein, the Committee shall have such other authority and
responsibility as the board from time to time may delegate to it by resolution.
A-1
6. Composition and Operation of the Committee
6.1. The Committee shall be comprised of two or more directors appointed by the
board. Each member of the Committee must be "independent" within the meaning of
the rules of The NASDAQ Stock Market or any other association or exchange on
which the Company's securities are quoted or listed for trading. The board may
appoint one member of the Committee to serve as Chairman of the Committee.
6.2. Any member of the Committee may be removed by the board, with or without
cause, at any time.
6.3. At all meetings of the Committee, a majority of the entire Committee shall
be necessary and sufficient to constitute a quorum for the transaction of
business.
6.4. The vote of a majority of the Committee members present at a meeting at
which a quorum is present shall be the act of the Committee. The Committee may
also act by unanimous written consent as provided in the Company's by-laws.
6.5. Regular meetings of the Committee may be held without notice at such time
and at such place as may from time to time be determined by the Committee.
Special meetings of the Committee may be called by any member of the Committee.
Notice for Committee meetings, when required, shall be given in the same manner
as notice for a board meeting.
6.6. Meetings of the Committee shall be presided over by the Chairman of the
Committee, if any, or in the absence of a Chairman by a chairman chosen at the
meeting.
6.7. The Committee shall record minutes of each of its meetings.
6.8. The Committee shall make regular reports to the board on its activities.
These reports may be made orally or in writing or by providing copies of
relevant minutes.
6.9.The Committee may form, and delegate any of its responsibilities to, a
subcommittee so long as such subcommittee is solely comprised of members of the
Committee. The requirements for action by a subcommittee shall, except as
otherwise provided by act of the Committee, be the same as applicable to the
Committee.
A-2
LIFE MEDICAL SCIENCES, INC.
PO Box 219
Little Silver, NJ 07739
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
to be held on April 22, 2005
This Proxy is solicited on Behalf of the Board of Directors
The undersigned hereby appoints Robert Hickey and Eli Pines, PhD, 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 offices of Eisner LLP, 750 Third Ave., New York,
NY 10017 on April 22, 2005 at 9:00 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)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
LIFE MEDICAL SCIENCES, INC.
APRIL 22, 2005
[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: David G.P. Allan
Listed at right (except to vote for all nominees Edward A. Celano
as marked to the listed at right Barry R. Frankel
contrary below) Richard L. Franklin, MD
Robert P. Hickey
Walter R. Maupay, Jr.
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 changing the Company's
name to SyntheMed, Inc.;
3 To ratify the appointment of Eisner LLP as the Independent / / / / / /
Registered Public Accounting Firm 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________, 2005
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.)