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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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Check the appropriate box:
[ ] Preliminary Proxy Statement
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DUSA PHARMACEUTICALS, INC.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11:
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5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
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number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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DUSA PHARMACEUTICALS, INC.
181 University Avenue
Suite 1208
Toronto, Ontario M5H 3M7 CANADA
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 5, 1997
TO THE SHAREHOLDERS OF
DUSA PHARMACEUTICALS, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of DUSA
Pharmaceuticals, Inc. (the "Company") will be held on Thursday, June 5, 1997, at
11:00 a.m., at the Hotel Inter-Continental, South Parlor, Second Floor, located
at 111 East 48th Street, New York, New York to consider and act upon the
following matters:
(1) Election of five (5) directors of the Company;
(2) Ratification of the selection of Deloitte & Touche LLP as
auditors for the Company for fiscal year 1997;
(3) Ratification of the amendments to the 1996 Omnibus Plan;
(4) Such other business as may properly come before said meeting or
any adjournments thereof.
Only shareholders of record at the close of business on April 15, 1997, are
entitled to notice of, and to vote at the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE FILL IN, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IT DOES NOT
REQUIRE ANY POSTAGE IF MAILED IN THE UNITED STATES OR CANADA.
By Order of the Board of Directors
Nanette W. Mantell, Esq.,
Secretary
Dated: April 28, 1997
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DUSA PHARMACEUTICALS, INC.
PROXY STATEMENT
The accompanying proxy is solicited on behalf of the Board of Directors of
DUSA Pharmaceuticals, Inc. (the "Company"). If properly signed and returned, and
not revoked, the proxy will be voted in accordance with the instructions it
contains. The persons named in the accompanying proxy will vote the proxy for
the Board of Directors' slate of directors and for the other matters listed on
the proxy as recommended by the Board of Directors unless contrary instructions
are given. At any time before it is voted, each proxy granted may be revoked by
the shareholder by a later dated proxy, by written revocation addressed to the
Secretary of the Company at the address below or by voting by ballot at the
Annual Meeting.
The Company, a New Jersey corporation, maintains principal executive
offices at 181 University Avenue, Suite 1208, Toronto M5H 3M7 Canada. This proxy
statement and the accompanying proxy are being sent to shareholders on or about
April 28, 1997.
VOTING SECURITIES
Only shareholders of record at the close of business on April 15, 1997, are
entitled to notice and to vote at the Annual Meeting or any adjournment thereof.
As of that date, there were 9,355,950 shares of Common Stock outstanding and
entitled to vote. These shares were the only outstanding shares of the Company.
Every holder of outstanding shares of Common Stock entitled to be voted at this
meeting is entitled to one vote for each share held. Abstentions and broker
non-votes are not voted "for" or "against" a director or proposals (2), (3) and
(4), but are counted in the determination of a quorum. The Company's management
currently owns less than one percent of the Company's outstanding Common Stock.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Five (5) directors will be elected to hold office until the next Annual
Meeting of Shareholders and until their successors have been elected and have
qualified. The persons named on the accompanying proxy will vote all shares for
which they have received proxies for the election of the nominees named below
unless contrary instructions are given. In the event that any nominee should
become unavailable, shares will be voted for a substitute nominee unless the
number of directors constituting a full board is reduced. Directors are elected
by plurality vote.
NOMINEES
The name, age and position with the Company of each director of the Company
is listed below, followed by summaries of their background and principal
occupations. Except for Mr. Haft who was appointed to the Board of Directors in
September 1996 to fill a vacancy, all of the nominees were elected to the Board
of Directors at the last Annual Meeting and all are currently serving as
directors of the Company.
All directors hold office until the Annual Meeting of Shareholders of the
Company and until their successors have been elected and qualified. Executive
officers are elected annually, and serve at the discretion of the Board of
Directors.
DATE
NAME AGE TITLE ELECTED
---- --- ----- -------
D. Geoffrey Shulman, MD, FRCPC .............. 42 Chairman of the Board, President, 9/05/91
Chief Executive Officer, Chief
Financial Officer, and Director
John H. Abeles, MD .......................... 52 Director 8/02/94
James P. Doherty, BSc(1)(2) ................. 69 Director 9/26/91
Jay M. Haft, Esq.(1) ........................ 61 Director 9/16/96
Richard C. Lufkin, SB, MBA(2) ............... 50 Director 1/27/92
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(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
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Set forth below is certain information, including principal occupations
within the five (5) preceding years, with respect to the directors of the
Company.
D. GEOFFREY SHULMAN, MD, FRCPC, is the Company's founder. Dr. Shulman
was the President and a director of Draxis Health Inc. from its founding in
October 1987 until May 1990, was Co-Chairman from October 1990 to April 1993,
and Chairman of the Board of Draxis Health Inc. from April 1993 until March
1996. He also maintains a part-time private medical practice, specializing in
dermatology.
JOHN H. ABELES, MD, is the President and founder of MedVest, Inc.
which, since 1980, has provided consulting services to health care and high
technology companies. Dr. Abeles is a member of the Board of Directors of
AccuMed International, Inc., I-Flow Corporation, Oryx Technology, Inc.,
PharmaPrint Corp. and Encore Medical Corporation.
JAMES P. DOHERTY, BSc, has been a director of Draxis Health Inc. since
June 1990 and its Vice-Chairman since June 1992. Mr. Doherty joined Draxis
Health Inc. in May 1990 as its President and Chief Operating Officer, a position
he held until May 1992. Mr. Doherty was Vice President of Corporate Development
of the Company from May 1993 to May 1995 when he retired from that position.
JAY M. HAFT, ESQ., was a senior corporate partner of the law firm of
Parker, Duryee, Rosoff & Haft from 1989 to 1994, and is currently of counsel to
that firm. Mr. Haft is a member of the Boards of Directors of Robotic Vision
Systems, Inc., Noise Cancellation Technologies, Inc., Extech Inc., Encore
Medical Corporation, Viragen, Inc., PC Service Source, Inc., Oryx Technology,
Inc. and Jenna Lane, Inc. He is also a Managing General Partner of Venture
Capital Associates, Ltd. and of Gen Am "1" Venture Fund.
RICHARD C. LUFKIN, SB, MBA is the principal and founder of Enterprise
Development Associates, a proprietorship formed in 1985 which provides
consulting and venture support services to early stage technology-based
companies.
DIRECTOR COMPENSATION
Directors who are employees of the Company receive no cash compensation
for their services as directors or as members of committees. As compensation for
their services, outside directors receive $10,000 as an annual retainer for
participation at four (4) quarterly meetings, plus $1,000 for attendance at
additional meetings in person, or $250 for telephone conference meetings.
Outside directors serving on standing committees receive $1,000 for attendance
at committee meetings in person, or $250 for telephone conference meetings.
Directors are paid out-of-pocket expenses related to their attendance. Directors
receive options for shares of the Common Stock of the Company under the 1996
Omnibus Plan as described below.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The name, age and position with the Company of each executive officer
who is not a director of the Company is listed below, followed by summaries of
their background and principal occupations. Executive officers are elected
annually, and serve at the discretion of the Board of Directors.
DATE
NAME AGE TITLE ELECTED
---- --- ----- -------
Stuart L. Marcus, MD, PhD .............................. 50 Vice President of Scientific Affairs 10/11/93
Anthony Schincariol, MBA, PhD .......................... 55 Vice President of Corporate 6/01/95
Development
Nanette W. Mantell, Esq ................................ 45 Secretary 2/19/92
STUART L. MARCUS, MD, PhD, is employed by the Company. Prior to joining
the Company in October 1993, Dr. Marcus was Director of the Hematology/Oncology
Department of Daiichi Pharmaceuticals Inc. in Fort Lee, New Jersey. From April
1987 until October 1992, he was employed by the Medical Research Division of the
American Cyanamid Company in Pearl River, New York. During those years, Dr.
Marcus directed photodynamic therapy clinical development, among other
assignments. He is also a voluntary assistant attending physician in the
Department of Oncology at Montefiore Medical Center, Bronx, New York, a position
he has held since 1987.
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ANTHONY SCHINCARIOL, MBA, PhD, became employed by the Company in July
1995. Prior to joining the Company as a consultant in November 1994, Dr.
Schincariol was General Manager of Synergen Canada Inc., a biotechnology
company, from March 1993 to August 1994. From January 1986 to March 1993, he was
Marketing and New Products Director at Genentech Canada Inc., a biotechnology
company.
NANETTE W. MANTELL, ESQ. is Secretary to the Company. She is a
shareholder with the law firm of Lane and Mantell, a professional corporation,
Somerville, New Jersey. Ms. Mantell has held this position since February 1,
1989.
MEETINGS AND COMMITTEES OF THE BOARD
During the year ended December 31, 1996, there were fourteen (14)
meetings of the Board of Directors. Except for Mr. Haft, each incumbent director
attended at least 75% of the meetings of the Board. Mr. Haft, who was appointed
to the Board of Directors in September, 1996, attended at least 75%of the Board
meetings held during the period for which he was a director. The Board has
established an Audit Committee, a Nominating Committee, and a Compensation
Committee.
The Audit Committee currently consists of two directors: Mr. Doherty
and Mr. Lufkin. The Audit Committee, at its discretion, acts as liaison between
the Board of Directors and the independent auditors. The Committee reviews with
the independent auditors the unaudited quarterly financial statements, the
planning and scope of the audits of the financial statements, the results of
those audits and the adequacy of internal accounting controls, and monitors
other corporate and financial policies. The Audit Committee met four (4) times
during 1996.
The Nominating Committee consists of the entire Board acting as a
Committee of the Whole. The Nominating Committee reviews all matters concerning
the selection of candidates as nominees for election as directors. The
Nominating Committee met one time during 1996. Shareholders who wish to suggest
qualified candidates should write to: Administrator, Nominating Committee, DUSA
Pharmaceuticals, Inc., 181 University Avenue, Suite 1208, Toronto, Ontario M5H
3M7 Canada, stating in detail the qualifications of such persons for
consideration by the Nominating Committee.
The Compensation Committee currently consists of Mr. Doherty and Mr.
Haft. The Compensation Committee met one time during 1996. The Compensation
Committee considers executive compensation of the Company's three key officers
and compensation of directors. The Committee considers employee benefits which
may be appropriate as the Company grows, and develops policies and procedures.
PROPOSAL NO. 2 - RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP as the
independent auditors for the Company for the fiscal year 1997. Shareholder
ratification of the appointment is not required under the laws of the State of
New Jersey, but the Board has decided to ascertain the position of the
shareholders on the appointment. The Board of Directors will reconsider the
appointment if it is not ratified. The affirmative vote of a majority of the
shares voted at the meeting is required for ratification. A representative of
Deloitte & Touche LLP will be present at the meeting to answer questions from
shareholders and will have the opportunity to make a statement on behalf of the
firm, if he so desires.
PROPOSAL NO. 3 - AMENDMENT OF THE 1996 OMNIBUS PLAN
The Company's 1996 Omnibus Plan (the "Plan"), was ratified by the
Company's shareholders at the 1996 Annual Meeting of Shareholders. The Plan
provides for the granting of awards to purchase up to a maximum of 10% of the
number of shares of the Company's outstanding Common Stock. The Plan authorizes
the granting of nonqualified stock options ("NQSOs"), incentive stock options
("ISOs"), and stock appreciation rights (the right to receive, upon surrender of
the right, but without payment, an amount payable in cash)("SARs"), restricted
stock or other securities to directors, officers, employees and consultants of
the Company. The 1996 Omnibus Plan is administered by either the Board of
Directors or a committee of not less than two (2) members of the Board of
Directors (collectively known as the "Committee"). Grants may be made to key
employees and consultants of the Company solely at the discretion of the Board
of Directors or the Committee. Directors of the Company are eligible to receive
automatic grants of NQSOs under the Plan. Each individual who is appointed a
director shall receive 15,000 options to purchase shares of Common Stock of the
Company. Thereafter, on the day after the Annual Meeting of Shareholders, each
individual who is a continuing director will automatically receive 10,000
options to purchase shares of Common Stock of the Company. Directors of the
Company are entitled to receive options to purchase stock only pursuant to these
formula awards. The Plan currently provides that each NQSO or ISO shall vest
over four (4) years at a rate of twenty-five percent (25%) per year subject to
certain conditions involving continuous periods of service or engagement. The
exercise price of options shall be not less than the fair market value of the
Company's Common Stock on the date of the grant. Employees and Consultants of
the Company may pay the exercise price by surrender of the Company's Common
Stock or cash or a combination of stock and cash. Directors may exercise their
options solely upon the payment of cash. The options shall expire ten (10) years
from the date of the grant.
As of April 16, 1997, there have been 400,000 NQSOs and 131,000 ISOs
granted pursuant to the Plan. On the day after the 1997 Annual Meeting of
Shareholders, an additional 50,000 NQSOs will be granted to the members of the
Board of Directors.
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On March 13, 1997, the Board of Directors approved the following
amendments to the 1996 Omnibus Plan, subject to shareholder approval at the 1997
Annual Meeting of Shareholders:
1. Providing for appointment of a Committee of Non-Employee Directors
to administer the Plan;
2. Permitting the Board of Directors to amend the Plan, or outstanding
option grants, without shareholder approval, subject to consent of
the holders of awards and all regulatory requirements;
3. Providing for a cashless exercise of awards by directors; and
4. Providing for the elimination of the four-year vesting provision of
awards to directors.
The full text of the proposed amended 1996 Omnibus Plan is attached to
this Proxy Statement as Exhibit A and reference is made to such Exhibit for a
complete statement of the amendments to the Plan.
New SEC Rules.
In 1996, the Securities and Exchange Commission (the "SEC") issued new
rules regarding transactions between issuers and its officers and directors. In
response to these new rules, the Board of Directors determined that the 1996
Omnibus Plan should be amended to provide for administration of the Plan by the
Board as a whole, or a committee consisting of two or more "Non-Employee
Directors" (collectively, the "Committee"), as that term is defined by new SEC
Rule 16b-3(b)(3)(i). So long as a committee of non-employee directors, or the
Board of Directors as a whole, approves option grants to officers and directors,
the grants will be exempt from Section 16(b) of the Securities and Exchange Act
of 1934, as amended (known as the short-swing profit rules).
In order to take further advantage of these new SEC rules, the Board
has recommended that the Plan be amended to allow the Committee, or the Board,
to amend the terms of the Plan, or the terms of outstanding option grants, so
long as the amendment is consistent with regulatory requirements. As currently
adopted, the Plan requires shareholder approval of amendments to the Plan or
outstanding awards which would: (i) increase the aggregate number of shares of
Common Stock with respect to which awards may be granted; (ii) reduce the
minimum option price at which awards may be granted; (iii) extend the maximum
period during which awards may be exercised; or (iv) change the class of
employees, consultants, or directors eligible to receive awards under the Plan.
The current SEC regulations would no longer require shareholder approval of
amendments relating to these issues. If the shareholders approve this amendment
to the Plan at the 1997 Annual Meeting, shareholder approval of amendments
regarding these issues would no longer be necessary, unless required by
regulatory authorities. The Board believes that certain amendments to the Plan
or individual options, should be undertaken without the delay, necessity and
expense of shareholder approval. The proposed amendments are designed to allow
the Board greater discretion to respond to changes in the relationships between
the Company and its directors, employees and consultants. As such, the amendment
is designed to give the Board flexibility to amend the Plan or outstanding
options as may be warranted from time to time, so long as the change meets
current regulatory requirements, and if applicable, is consented to by the
option holder.
Cashless Exercises.
The Board of Directors has resolved that the 1996 Omnibus Plan also
should be amended to permit the directors of the Company to pay the exercise
price of NQSOs by the tender of Common Stock of the Company, or a combination of
Common Stock and cash or through such other measures the Committee determines
are consistent with the Plan's purpose and applicable law. Currently, directors
can exercise their options only by the payment of cash. Employees and
consultants, however, may, at the discretion of the Compensation Committee,
exercise by the payment of cash, the tender of Common Stock, or through a
combination of Common Stock and cash, or through such other means as determined
by the Committee. This amendment is intended to allow directors to exercise
their options without the necessity of raising large amounts of cash and would
give directors the same flexibility as other participants in the Plan.
Elimination of Vesting Requirements for Options Granted to Directors.
The Board has further determined that the 1996 Omnibus Plan should be
amended to eliminate the requirement that options granted to directors vest over
a four (4) year time period. Should this amendment be approved by the
shareholders, automatic option grants to directors made after the date of
shareholder approval would be immediately exercisable. Options previously
granted will continue to vest over a four year period from the date of the
grant. This amendment is proposed in response to concerns that directors were
not receiving adequate compensation upon the election to the Board, while
assuming the risks and obligations associated with that position. Should the
shareholders approve the amendments to the 1996 Omnibus Plan, as proposed,
dilution of the Common Stock could occur at a faster rate than may have occurred
if the directors' options vested over four (4) years. Typically, options are
exercised at a time when the Common Stock is trading at prices above the
exercise price of the options, causing dilution of shareholders interests. The
Board of Directors believes that an immediate vesting of options is a more cost
effective method of compensating directors than increasing the cash portion of
their compensation.
The Board of Directors recommends a vote FOR approval of the foregoing
amendments to the 1996 Omnibus Plan.
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EXECUTIVE COMPENSATION
As of December 31, 1996, the only persons to receive cash compensation
in excess of $100,000 were the Company's President and Chief Executive Officer,
and its two vice presidents.
SUMMARY COMPENSATION TABLE
Long Term Compensation
---------------------------------------------
Actual Compensation Awards Payouts
--------------------------- ---------------------- -------
Other
Annual Restricted
Compen- Stock LTIP All Other
Name and Principal Salary Bonus sation Award(s) Option Payouts Compen-
Position Year ($) ($) ($)(1) ($) ($) ($) sation ($)
- -----------------------------------------------------------------------------------------------------------------
D. Geoffrey Shulman, MD, 1996 250,000 82,500 -- -- 260,000(2) -- --
FRCPC, Chairman of the 1995 200,000 90,000 -- -- -- -- --
Board, President, Chief 1994 200,000 50,000 -- -- 35,000(2) -- --
Executive Officer and Chief --
Financial Officer
Stuart L. Marcus, MD, 1996 166,900 27,817 -- -- 100,000(3) -- --
PhD, Vice President of 1995 155,250 25,850 -- -- -- -- --
Scientific Affairs
Anthony Schincariol, MBA, 1996 92,000 15,142 -- -- 75,000(4) -- --
PhD, Vice President of
Corporate Development
(1) Neither Dr. Shulman, Dr. Marcus nor Dr. Schincariol had perquisites in
excess of $50,000 or 10% of salary and bonus reported for 1996, 1995, and
1994.
(2) On February 17, 1994, Dr. Shulman received options for 10,000 shares at an
exercise price of CDN. $6.50, the closing price of the Company's Common
Stock on The Toronto Stock Exchange on February 16, 1994 to replace certain
options previously relinquished. On August 2, 1994, Dr. Shulman received
options for 25,000 shares at an exercise price of CDN. $4.69, the Canadian
dollar equivalent of the closing price of the Company's Common Stock on
NASDAQ/NMS on August 1, 1994. On February 16, 1996, Dr. Shulman was awarded
options to purchase 250,000 shares of the Company's Common Stock pursuant
to the 1996 Omnibus Plan. These options have an exercise price of U.S.
$7.75, the closing price of the Company's Common Stock on NASDAQ/NMS on
February 16, 1996. On February 16, 1996 the Board of Directors unanimously
passed a resolution extending the expiration date by five (5) years of all
options granted by the Company prior to the establishment of the Company's
1994 Restricted Stock Option Plan. Accordingly, the expiration date of
10,000 options, granted February 17, 1994 was extended from February 17,
1999 to February 17, 2004 as a result of the board action. The extension
was approved by the shareholders at the 1996 Annual Meeting of
Shareholders. On June 7, 1996, Dr. Shulman received an automatic grant of
non-qualified stock options to purchase 10,000 shares of the Company's
Common Stock at an exercise price of $9.875, the closing price of the
Company's stock on June 6, 1996.
(3) On February 16, 1996, Dr. Marcus was awarded options to purchase 100,000
shares of the Company's Common Stock pursuant to the 1996 Omnibus Plan.
These options have an exercise price of U.S. $7.75, the closing price of
the Company's Common Stock on NASDAQ/NMS on February 16, 1996.
(4) Dr. Anthony Schincariol became Vice President of Corporate Development on
August 3, 1995. As of December 31, 1995, he received annual cash
compensation in the form of consulting fees, salary, and bonus equal to
$96,599. Dr. Schincariol was granted options to purchase 15,000 shares of
the Company's Common Stock, at an exercise price of CDN.$6.51 on June 1,
1995. On February 16, 1996, Dr. Schincariol was awarded options to purchase
75,000 shares of the Company's Common Stock pursuant to the 1996 Omnibus
Plan. These options have an exercise price of U.S. $7.75, the closing price
of the Company's Common Stock on NASDAQ/NMS on February 16, 1996.
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BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed of two (2) non-employee directors. The Committee is responsible for
setting and administering the policies which govern annual executive salaries
and cash bonus awards, and recommends participants and amounts of stock option
awards to the Company's Board of Directors. The Committee evaluates, on a yearly
basis, the performance, and determines the compensation of, the executive
officers of the Company. The Committee evaluates compensation based upon the
achievement by the individual of corporate goals, and the performance of
individual responsibilities. The Company's President and Chief Executive
Officer, Dr. D. Geoffrey Shulman, is not a member of the Committee, however, the
Committee sought input from Dr. Shulman regarding the performance of the
Company's two vice presidents. Dr. Shulman was present, at the invitation of the
Committee, at the sole meeting of the Compensation Committee in 1996, but not
during the discussion of his compensation.
The Company's executive compensation programs consist of base salary, cash
bonus incentives, and stock option awards. The goals of the Company's executive
officer compensation policies are to attract, retain, and reward executive
officers who contribute to the Company's success, to align executive officer
compensation with the Company's performance and to motivate executive officers
to achieve the Company's business objectives. The executive officers were
evaluated by the Committee against established goals for 1996 within each
executive officer's area of responsibility, including strategic plan
implementation, clinical trial progress, achievement of additional financing,
and management of a smooth transition following administrative separation from
the former controlling shareholder.
With regard to base salary, the Committee believes that the Company's
officers should be compensated at levels comparable to the base salary of
executive officers at similar development stage or small public biotechnology or
pharmaceutical companies. The Committee considered survey data of companies in
these groups in setting the salaries for the Company's top three executive
officers.
In determining appropriate levels of cash bonus awards for 1996, the
Committee considered the specific corporate goals of the Company and personal
goals set by each of the executive officers. Specific bonus levels were
calculated in a range related to a percentage of base salary. The Company's two
vice-presidents were eligible to receive up to 25% of their base salary as a
cash bonus award. The Committee concluded that the Company's overall performance
in 1996 justified favorable consideration of the Company's executive officers
with regard to bonus awards. Thus, for 1996, the Company's two vice-presidents
received cash bonus awards of two-thirds of their opportunity range. These cash
awards were paid in 1997.
In keeping with the long-term focus of the pharmaceutical business, and to
emphasize the importance of aligning executive management with long-term
shareholder interests, the Committee granted a high proportion of executive
officer compensation for 1996 in the form of stock options. Individual stock
option awards are based upon the level of position within the Company and the
achievement of individual goals. The Committee believes that a strong stock
ownership program is essential to the long-term growth of the Company. The
Company's long-term performance ultimately determines compensation from stock
options, since gains from stock option exercises are entirely dependant on the
long-term growth of the Company's stock price. Options granted to the executive
officers this past year demonstrate the Committee's philosophy that executive
compensation should be directly related to the overall success of the Company.
Compensation of the President and Chief Executive Officer.
Dr. Shulman's base salary and cash bonus award for 1996 were determined
with reference to the same measures used for all executive officers of the
Company, but with particular emphasis on the maintenance of the financial
strength of the Company. Based in significant part upon the completion of a
successful public offering of the Company's common stock in December, 1995, Dr.
Shulman's base salary was increased from $200,000 (which he began receiving in
1994) to $250,000 in February 1996. The Committee has determined that Dr.
Shulman's 1997 base salary will remain unchanged. With regard to a cash bonus
award, Dr. Shulman is eligible to receive up to 50% of base salary, or $125,000.
For 1996, Dr. Shulman's bonus award was two-thirds of his opportunity range, or
$82,500. Dr. Shulman's 1996 cash bonus award was paid to him in 1997. In
addition, Dr. Shulman received a grant of 250,000 stock options February, 1996.
The Compensation Committee exercised its subjective judgment and discretion in
determining the amounts of Dr. Shulman's base salary, bonus award, stock option
award for 1996.
James P. Doherty
Jay M. Haft
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PERFORMANCE GRAPH
The graph below compares cumulative total shareholder return on the Common
Stock of DUSA for the five year period ended December 31, 1996, with the
cumulative total return on the NASDAQ Market Index and the Media General Drug
Financial Services Drug Manufacturer Index over the same period.(1)
COMPARISON OF FIVE YEAR CUMULATIVE SHAREHOLDER TOTAL RETURN
EDGAR Representation of Data Points Used in Printed Graphic
FISCAL YEAR ENDING
------------------
1992(1) 1992 1993 1994 1995 1996
------- ---- ---- ---- ---- ----
DUSA Pharmaceuticals, Inc. $100 $64.00 $46.67 $52.00 $70.67 $74.67
Media General Financial Services Drug
Manufacturers Index $100 $86.08 $78.06 $83.98 $133.98 $163.28
NASDAQ Market Index $100 $99.19 $118.98 $124.92 $162.03 $201.35
- ----------
(1) The graph assumes $100 were invested on January 29, 1992, in the Common
Stock of the Company, and each of the indices, and that dividends were
reinvested. The performance graph is based on the closing asked price of the
Company's common stock of $9.75 on January 29, 1992, the date of the Company's
initial public offering. The shares were initially offered to the public at a
price of $6.00 per share. The comparisons in the graph are required by the
Securities and Exchange Commission and are not intended to forecast or be
indicative of possible future performance of the Company's Common Stock. The
identity of those corporations included in the Media General Financial Services
Drug Manufacturer Index may be obtained by contacting the Company, Shari Lovell,
DUSA Pharmaceuticals, Inc., 181 University Avenue, Suite 1208, Toronto, Ontario
M5H 3M7 Canada.
OPTION GRANTS IN 1996
The following grants of stock options were made to the named executive
officers during fiscal year 1996.
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE OF ASSUMED
ANNUAL RATES OF STOCK PRICE
APPRECIATION FOR OPTION TERM(3)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees Base Price
Name Granted (1) in Fiscal Year ($/Share)(2) Expiration Date 5%($) 10%($)
- ---- ----------- -------------- ------------ --------------- ----- ------
Dr. D. Geoffrey Shulman 250,000 57.5% $ 7.75 2/16/06 1,217,500 3,087,500
10,000 2.3% $ 9.875 6/7/06 62,100 157,380
Dr. Stuart L. Marcus 100,000 22.9% $ 7.75 2/16/06 487,000 1,235,000
Dr. Anthony Schincariol 75,000 17.3% $ 7.75 2/16/06 365,250 926,250
Notes:
(1) All options in this table have been granted pursuant to the 1996 Omibus
Plan. The options have exercise prices equal to the fair market value on
the date of the grant. All options vest at a rate of 25% per year over four
(4) years, subject to satisfaction of certain conditions involving
continuous periods of service or engagement. Each option expires ten (10)
years from the date of the grant.
(2) With regard to the option grants to Dr. Marcus and Dr. Schincariol, and the
grant of 250,000 options to Dr. Shulman, the exercise price may be paid in
cash, or, at the discretion of the Compensation Committee, by a tender of
Common Stock and cash or through such other means as the Committee
determines are consistent with the 1996 Omnibus Plan and applicable law.
The exercise price for the grant of 10,000 options to Dr. Shulman may be
paid in cash only.
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(3) The potential realizable value is calculated based on the fair market value
of the Company's Common Stock on the date of the grant. These amounts only
represent certain assumed rates of appreciation established by the SEC.
There can be no assurance that the amounts reflected in this table or the
associated rates of appreciation will be achieved.
AGGREGATE OPTION EXERCISES IN 1996 AND OPTION VALUES AT DECEMBER 31, 1996
The following table provides certain information as to certain stock
options exercisable by the named executive officers for the fiscal year 1996,
and the value of such options held by them at December 31, 1996, measured in
terms of the closing price of the Company's Common Stock on the National
Association of Securities Dealers Automated Quotation System on December 31,
1996, which was $7.00 per share.
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END STOCK OPTION VALUES
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
December 31, 1996 December 31, 1996
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------------ ------------- -------------
Dr. D. Geoffrey Shulman -- -- 82,500/ $158,550.00/
277,500 $ 56,050.00
Dr. Stuart L. Marcus -- -- 30,000/ $ 18,750.00/
110,000 $ 6,250.00
Dr. Anthony Schincariol -- -- 3,750/ $ 8,437.50/
86,250 $ 25,312.50
OTHER COMPENSATION
An employment agreement dated as of March 20, 1997 (the "Shulman
Agreement") between the Company and D. Geoffrey Shulman, MD, FRCPC which renewed
his original employment agreement dated October 1, 1991 (the "October
Agreement") sets out the remuneration, benefits, and incentive bonuses which Dr.
Shulman is to receive in his capacity as Chairman of the Board, President, Chief
Executive Officer and Chief Operating Officer of the Company. In the October
Agreement, Dr. Shulman was granted an option to purchase 50,000 shares of Common
Stock of the Company at CDN. $6.79 per share (equal to U.S. $6.00 as of
September 30, 1991), on certain terms and conditions. Upon completion of the
Company's Initial Public Offering on January 17, 1992, the Company issued to Dr.
Shulman Class B Warrants to purchase 350,000 shares of Common Stock, exercisable
at the Canadian dollar equivalent to U.S. $6.00 on January 17, 1992. On
September 18, 1996, the expiration date of these warrants was extended by the
Board of Directors from January 17, 1997 to January 17, 2002. On March 16, 1993,
the Board of Directors granted Dr. Shulman additional options to purchase 25,000
shares of the Company's Common Stock at CDN. $10.75 per share, on certain terms
and conditions. Subsequently, Dr. Shulman relinquished 10,000 of such options
due to a ceiling imposed by a policy of The Toronto Stock Exchange which would
have prevented the grant of a further 40,000 options to Dr. Marcus, a new
employee. On February 17, 1994, Dr. Shulman was granted an additional 10,000
options at CDN. $6.50 under certain terms and conditions to replace those
options previously relinquished. An additional 25,000 options at CDN. $4.69 were
granted to Dr. Shulman on August 2, 1994. On February 16, 1996, Dr. Shulman was
awarded options to purchase 250,000 shares of the Company's Common Stock
pursuant to the 1996 Omnibus Plan. These options have an exercise price of U.S.
$7.75, the closing price of the Company's Common Stock on NASDAQ/NMS on February
16, 1996. On February 16, 1996 the Board of Directors unanimously passed a
resolution extending the expiration date by five (5) years of all options
granted by the Company prior to the establishment of the Company's 1994
Restricted Stock Option Plan. Accordingly, the expiration date of 50,000
options, granted September 30, 1991 was extended from September 30, 1996 to
September 30, 2001 as a result of the board action. Similarly, the expiration
date of 15,000 options granted March 16, 1993, was extended from March 16, 1998
to March 16, 2003 and the expiration date of 10,000 options granted February 17,
1994 was extended from February 17, 1999 to February 17, 2004 . All such
extensions were approved by the shareholders at the 1996 Annual Meeting of
Shareholders. 10,000 options were granted to Dr. Shulman on June 7, 1996, the
day following the 1996 Annual Meeting of Shareholders at an exercise price of
U.S. $7.75. Dr. Shulman's employment is terminable in accordance with the terms
of the Shulman Agreement. The Company may terminate the Shulman Agreement at any
time, for cause, without notice. If Dr. Shulman's employment is terminated
without cause, the Company shall pay Dr. Shulman a severance allowance
equivalent to one year of his then current base salary, payable in a lump sum,
within sixty (60) days following the date of termination. Dr. Shulman shall also
have the right to exercise, for a period of one year from the date of
termination, all stock options granted to him pursuant to the
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terms of this agreement or otherwise, or any stock option plan in effect prior
to his termination as to all or any part of the shares covered by such options,
including shares with respect to which such options would not otherwise be
exercisable, subject to restrictions under U.S. or Canadian law. These payments
referred to above shall not be subject to set-off or deduction as a result of
Dr. Shulman obtaining alternate employment following such termination or
otherwise mitigating any damages arising from such termination. In the event
that Dr. Shulman is terminated upon a "change of control", as defined in Dr.
Shulman's employment agreement, the Company shall pay to Dr. Shulman a lump sum
payment equal to three (3) times his base salary for the last fiscal year within
five (5) days after such termination. In the event Dr. Shulman should die, his
heirs or beneficiaries will be entitled to any company paid death benefits in
force at the time of such death and will also be entitled to exercise any vested
but unexercised stock options which were held by him at the time of his death,
within a period of one (1) year from the date of death.
Effective October 11, 1993, the Company entered into an employment
agreement with Dr. Stuart L. Marcus, its Vice President of Scientific Affairs
(the "Marcus Agreement"). In connection with the agreement, the Company granted
an option, pursuant to the Company's Incentive Stock Option Plan, to purchase
40,000 shares of Common Stock at $6.375, being the closing stock market price on
NASDAQ on the date of employment. These options will become exercisable at the
rate of 25% per year over four years and have a term of ten years. On February
16, 1996, Dr. Marcus was awarded options to purchase 100,000 shares of the
Company's Common Stock pursuant to the 1996 Omnibus Plan. These options have an
exercise price of U.S. $7.75 the closing price of the Company's Common Stock on
NASDAQ/NMS on February 16, 1996. Dr. Marcus's employment is terminable in
accordance with the terms of the Marcus Agreement. The Company may terminate the
Marcus Agreement at any time, for cause, without notice. If Dr. Marcus's
employment is terminated without cause, the Company shall pay Dr. Marcus a
severance allowance equivalent to one week's current base salary for each year
of service (but not less than four (4) weeks of such salary), payable in a lump
sum, within sixty (60) days following the date of termination. In the event Dr.
Marcus should die, his heirs or beneficiaries will be entitled to any company
paid death benefits in force at the time of such death and will also be entitled
to exercise any vested but unexercised stock options which were held by him at
the time of his death, subject to the terms and conditions of such options.
The Company has granted options to purchase shares of Common Stock to its
directors, officers, certain consultants and employees of the Company and
others.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of April 10, 1997 by: (i)
each director of the Company; (ii) the named executive officers; and (iii) all
beneficial owners of greater than 5% of the Company's outstanding Common Stock;
(iv) all directors and officers of the Company as a group (unless otherwise
indicated, all of such shares of Common Stock are held beneficially and of
record). To the Company's knowledge, Bulldog Capital Management Limited
Partnership and Dr. D. Geoffrey Shulman are the only beneficial owners of more
than five percent (5%) of the Company's outstanding Common Stock:
NUMBER OF SHARES PERCENTAGE OF
NAME BENEFICIALLY OWNED OUTSTANDING SHARES(1)
- ---- ------------------ ---------------------
D. Geoffrey Shulman, MD, FRCPC ............ 509,949(2) 5.4%
Stuart L. Marcus, MD, PhD ................. 55,000(3) *%
Anthony Schincariol, MBA, PhD ............. 22,500(4) *%
John H. Abeles, MD ........................ 7,500(5) *%
James P. Doherty, BSc ..................... 45,050(6) *%
Jay M. Haft, Esq .......................... 0 *%
Richard C. Lufkin ......................... 17,500(7) *%
All directors and officers as a group
(consisting of 8 persons) ................ 683,499(8) 7.3%
Bulldog Capital Management Ltd. Partnership 581,500(9) 6.2%
*Less than 1%.
Notes:
(1) The percentage of ownership as calculated above includes in the number of
shares outstanding for each individual listed, those shares that are
beneficially, yet not directly, owned.
(2) 350,000 of the shares indicated represent shares with respect to which Dr.
Shulman has the right to acquire beneficial ownership through the exercise
of his Class B Warrants which have an exercise price of CDN. $6.79 per
Warrant, and 147,500 of such shares represent shares with respect to which
Dr. Shulman has the right to acquire beneficial ownership
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through the exercise of options. Dr. Shulman's address is 181 University
Avenue, Suite 1208, Toronto, ON, M5H 3M7 CANADA.
(3) All of the shares indicated represent shares with respect to which Dr.
Marcus has the right to acquire beneficial ownership through the exercise
of options.
(4) All of the shares indicated represent shares with respect to which Dr.
Schincariol has the right to acquire beneficial ownership through the
exercise of options.
(5) All of the shares indicated represent shares with respect to which Dr.
Abeles has the right to acquire beneficial ownership through the exercise
of options.
(6) 42,500 of the shares indicated represent shares with respect to which Mr.
Doherty has the right to acquire beneficial ownership through the exercise
of options.
(7) All of the shares indicated represent shares with respect to which Mr.
Lufkin has the right to acquire beneficial ownership through the exercise
of options.
(8) All of the shares indicated, Class B Warrants and options, as the case may
be, as discussed in footnotes (2) through (7) above are included, as well
as 26,000 shares beneficially owned by an officer of the Company, 25,000
shares of which the officer has the right to acquire beneficial ownership
through the exercise of options.
(9) The number of shares beneficially owned, and the percentage of outstanding
shares reported here are based on information disclosed by Bulldog Capital
Management Limited Partnership on Schedule 13D filed on September 16, 1996
with the SEC. Bulldog Capital Management has informed the Company that as
of April 16, 1997, it was not a 5% owner of the Company's outstanding
Common Stock.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the Company's proxy statement
for the 1998 Annual Meeting of Shareholders, a shareholder proposal must be
received by the Company on or before December 29, 1997. Proposals should be
directed to the attention of Ms. Shari Lovell at the principal executive offices
of the Company, 181 University Avenue, Suite 1208, Toronto, Ontario M5H 3M7
Canada, or to the attention of the Secretary, Ms. Nanette W. Mantell, c/o Lane
and Mantell, a professional corporation, 991 Route 22 West, Suite 102, PO Box
8539, Somerville, New Jersey 08876.
CERTAIN TRANSACTIONS
LOAN TO DIRECTOR
During the first quarter of 1993, a director of the Company exercised
options to purchase 12,500 shares of the Company's Common Stock at an exercise
price of CDN. $6.79 per share. In order to enable him to purchase such shares,
the Company made a loan to such director in the amount of CDN. $84,875 (U.S.
$68,047), which was secured by the shares. The loan, which matured on March 18,
1994, and was extended twice, was paid in full by the director on March 13,
1996. The loan was payable upon demand and bore interest at the rate of 6.25%
per annum.
LANE AND MANTELL
Lane and Mantell, a professional corporation, which serves as legal counsel
in the United States for the Company, and in which Ms. Mantell is a principal,
received approximately $263,000 for legal fees and costs during the last fiscal
year, a significant portion of which was related to services provided in
connection with the Company's public offering of shares of Common Stock in May,
1996.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the securities laws of the United States, the Company's directors,
its executive officers and any person holding more than 10% of the Company's
Common Stock are required to report their ownership of the Company's Common
Stock and any changes in that ownership to the Securities and Exchange
Commission on Forms 3, 4 and 5. Based on its review of the copies of such forms
it has received, the Company believes that all of its officers, directors and
greater than 10% beneficial owners complied with all filing requirements
applicable to them with respect to transactions during fiscal 1996. In making
these statements, the Company has relied on the written representations of its
directors, officers and holders of more than ten percent (10%) of the Company's
Common Stock, and copies of the reports that they have filed with the SEC.
OTHER MATTERS
Management knows of no matters other than those described above that are to
be brought before the meeting. However, if any other matter properly comes
before the meeting, the persons named in the enclosed proxy will vote the proxy
in accordance with their best judgment on the matter.
The cost of preparing and mailing the enclosed material will be borne by
the Company. The Company may use the services of its officers and employees (who
will receive no additional compensation) to solicit proxies. The Company intends
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to request banks and brokers holding shares of DUSA Pharmaceuticals, Inc. Common
Stock to forward copies of the proxy materials to those persons for whom they
hold shares and to request authority for the execution of proxies. The Company
will reimburse banks and brokers for their out-of-pocket expenses. The Company
has retained its transfer agent, American Stock Transfer & Trust Company, to aid
in the solicitation, at an estimated cost of under $10,000.
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EXHIBIT A
DUSA PHARMACEUTICALS, INC.
1996 OMNIBUS PLAN
(AS AMENDED)
ARTICLE I - PURPOSE
This omnibus plan (the "Plan") is intended to promote the growth and
general prosperity of DUSA Pharmaceuticals, Inc. (the "Company") and its
shareholders by offering incentives to its key directors, employees and
consultants of the Company who are primarily responsible for the growth of
the Company and to attract and retain qualified directors, employees and
consultants of the Company and thereby benefit its shareholders based on the
growth of the Company.
ARTICLE II - DEFINITIONS
Unless the context indicates otherwise, the following terms, when used in
this Plan, shall have the meanings set forth in this Section:
(a)"Award" shall mean grants under this Plan that provide the participants
with the right to purchase Common Stock or that are valued by reference to the
Fair Market Value of the Common Stock.
(b)"Board" shall mean the Board of Directors of the Company.
(c)"Cause" shall mean deliberate, willful or gross misconduct.
(d)A "Change of Control" shall be deemed to have taken place upon (i) the
acquisition by a third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, of shares of the
Company having 50% or more of the total number of votes that may be cast for the
election of Directors of the Company; (ii) shareholder approval of a transaction
for the acquisition of the Company, or substantially all of its assets by
another entity or for a merger, reorganization, consolidation or other business
combination to which the Company is a part; or (iii) the election during any
period of 24 months or less of 50% or more of the Directors of the Company where
such Directors were not in office immediately prior to such period provided,
however, that no "Change of Control" shall be deemed to have taken place if the
Directors of the Company in office on the date of adoption of the Plan, or their
successors in office nominated by such Directors, affirmatively approve a
resolution to such effect.
(e)"Code" shall mean the Internal Revenue Code of 1986 as it may be amended
from time to time.
(f)"Committee" shall mean, collectively, the Board, or any Committee of two
or more Non-Employee Directors, that may be designated by the Board to
administer the Plan.
(g)"Common Stock" shall mean all classes of stock, without par value,
including convertible preferred, stock purchase warrants and all common stock
equivalents.
(h)"Consultant" shall mean any person who (i) is engaged to perform services
for the Company or its Subsidiaries, other than as an Employee or Director, or
(ii) has agreed to become a consultant within the meaning of clause (i).
(i)"Director" shall mean any member of the Board.
(j)"Disability" shall mean inability to perform the services required
hereunder due to mental or physical disability which continues for either (i) a
total of 180 working days during any 12- month period or (ii) 150 consecutive
working days.
(k)"Employee" shall mean (i) any full-time employee of the Company or its
Subsidiaries (including Directors who are otherwise employed on a full-time
basis by the Company or its Subsidiaries), or (ii) any person who has agreed to
become an employee within the meaning of clause (i).
(l)"Exchange Act" shall mean the Securities Exchange Act of 1934 as it may
be amended from time to time.
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(m)"Fair Market Value" of the Common Stock on a given date shall be based
upon, the last sales price or, if unavailable, the average of the closing bid
and asked prices per share of the Common Stock on such date (or, if there was no
trading or quotation in the Common Stock on such date, on the next preceding
date on which there was trading or quotation).
(n)"Grantee" shall mean a person granted an Award under the Plan.
(o)"ISO" shall mean an Option granted pursuant to the Plan to purchase
shares of the Common Stock and intended to qualify as an incentive stock option
under Section 422 of the Code, as now or hereafter constituted.
(p)"1933 Act" shall mean the Securities Act of 1933; as amended.
(q) "Non-Employee Director" shall mean a non-employee director as defined in
Exchange Act Rule 16b-3(b)(3)(i).
(r)"NQSO" shall mean an Option granted pursuant to the Plan to purchase
shares of the Common Stock that is not an ISO.
(s)"Options" shall refer collectively to NQSOs and ISOs issued under and
subject to the Plan. Each option is exercisable into one share of Common Stock
of the Company.
(t)"Parent" shall mean any parent corporation as defined in Section 424 of
the Code.
(u)"Performance Awards" shall mean grants under the Plan, payable in cash,
Common Stock, other securities or other awards and shall confer on the holder
there of the right to receive payments, upon the achievement of such performance
goals during such performance periods as the Committee shall establish.
(v)"Restricted Stock" shall mean common stock subject to restrictions on
transfer and/or such other restrictions on incidents of ownership as the
Committee may determine.
(w)"SAR" shall mean a right to receive, upon surrender of the right, but
without payment, an amount payable in cash.
(x)"Subsidiary" shall mean (i) any corporation with respect to which the
Company owns, directly or indirectly, 50% or more of the total combined voting
power of all classes of stock of such Company, or (ii) any entity which the
Committee reasonably expects to become a subsidiary within the meaning of clause
(i).
ARTICLE III - ADMINISTRATION
The Plan shall be administered by the Committee. Subject to the provisions
of the Plan, the Committee shall have full discretion and the exclusive power
(i) to select the Employees, Consultants and Directors who will participate in
the Plan and to make Awards to such Employees, Consultants, and Directors, (ii)
to determine the time at which such Awards shall be granted and any terms and
conditions with respect to such Awards as shall not be inconsistent with the
provisions of the Plan, and (iii) to resolve all questions relating to the
administration of the Plan. The interpretation of and application by the
Committee of any provision of the Plan shall be final and conclusive. The
Committee may in its discretion establish such rules and guidelines relating to
the Plan as it may deem desirable. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Awards granted hereunder. The Committee may
employ such legal counsel, consultants and agents as it may deem desirable for
the administration of the Plan and may rely upon any opinion received from any
such counsel or consultant and any computation received from any such consultant
or agent. The Committee shall keep minutes of its actions under the Plan.
ARTICLE IV - SHARES OF COMMON STOCK SUBJECT TO THE PLAN
Subject to the provisions of Article XV, the maximum number of shares with
respect to which the Awards may be granted under the Plan shall not exceed ten
percent (10%) of the number of shares of Common Stock outstanding. Any shares
subject to an Award under the Plan, which Award for any reason expires or is
terminated unexercised as to such shares, shall again be available for the grant
of other Awards under the Plan provided, however, that forfeited Common Stock or
other securities shall not be available for further Awards if the participant
has realized any benefits of ownership from such Common Stock. Shares delivered
upon exercise of the Awards, at the election of the Board of Directors of the
Company, may be stock that is authorized but previously unissued or stock
reacquired by the Company or both.
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ARTICLE V - ELIGIBILITY
The individuals who shall be eligible to participate in the Plan shall be
Employees, Consultants and Directors of the Company. An Employee, Consultant or
Director who has been granted an Award in one year shall not necessarily be
entitled to be granted Awards in subsequent years.
ARTICLE VI - GRANTS OF STOCK OPTIONS TO EMPLOYEES AND CONSULTANTS
The Committee may grant Options, as follows, which may be designated as (i)
NQSOs or (ii) ISOs intended to qualify under Code Section 422:
(a)NONQUALIFIED STOCK OPTIONS. A NQSO is a right to purchase a specified
number of shares of Common Stock during such specified time as the Committee may
determine, not to exceed ten (10) years, at a price determined by the Committee
that, unless deemed otherwise by the Committee, is not less than the Fair Market
Value of the Common Stock on the date the option is granted. NQSOs granted to
Employees and Consultants shall vest at the rate of one quarter of the total
granted on each of the first, second, third and fourth anniversaries of the day
of the grant, subject to satisfaction of certain conditions involving continuous
periods of service or engagement.
(i) The purchase price of the Common Stock subject to the NQSO may be
paid in cash. At the discretion of the Committee, the purchase price may also be
paid by the tender of Common Stock or through a combination of Common Stock and
cash or through such other means as the Committee determines are consistent with
the Plan's purpose and applicable law. No fractional shares of Common Stock will
be issued or accepted.
(ii) Without limiting the foregoing, to the extent permitted by law
(including relevant state law), (A) the Committee may agree to accept, as full
or partial payment of the purchase price of Common Stock issued upon the
exercise of the NQSO, a promissory note of the person exercising the NQSO
evidencing the person's obligation to make future cash payments to the Company,
which promissory note shall be payable as determined by the Company (but in no
event later than five (5) years after the date thereof), shall be secured by a
pledge of the shares of Common Stock purchased and shall bear interest at a rate
established by the Committee and (B) the Committee may also permit the person
exercising the NQSO, either on a selective or aggregate basis, to simultaneously
exercise the NQSO and sell the shares of Common Stock acquired, pursuant to a
brokerage or similar arrangement approved in advance by the Committee, and use
the proceeds from sale as payment of the purchase price of such Common Stock.
(b)INCENTIVE STOCK OPTIONS. An ISO is an Award in the form of an Option to
purchase Common Stock that complies with the requirements of Code Section 422 or
any successor section.
(i) The aggregate Fair Market Value (determined at the time of the grant
of the Award) of the shares of Common Stock subject to ISOs which are
exercisable by one person for the first time during a particular calendar year
shall not exceed $100,000. To the extent that ISOs granted to an employee exceed
the limitation set forth in the preceding sentence, ISOs granted last shall be
treated as NQSOs.
(ii) No ISO may be granted under this Plan on or after the tenth
anniversary of the date this Plan is adopted or the date this Plan is approved
by shareholders, whichever is earlier.
(iii) No ISO may be exercisable more than:
(A) in the case of an Employee who is not a Ten Percent
Shareholder, within the meaning of Code Section 422, on the date the ISO is
granted; ten (10) years after the date the ISO is granted; and
(B) in the case of an Employee who is a Ten Percent Shareholder,
within the meaning of Code Section 422, on the date the ISO is granted, five (5)
years after the date the ISO is granted.
(iv) The exercise price of any ISO shall be determined by the Committee
and shall be no less than:
(A) in the case of an Employee who is not a Ten Percent
Shareholder, on the date the ISO is granted, the Fair Market Value of the Common
Stock subject to the ISO on such date; and
(B) in the case of an Employee who is a Ten Percent Shareholder, on
the date the ISO is granted, not less than 110 percent of the Fair Market Value
of the Common Stock subject to the ISO on such date.
(v) The Committee may provide that the option price under an ISO may be
paid by one or more of the methods available for paying the option price of an
NQSO.
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(vi) ISOs shall vest at the rate of one quarter of the total granted on
each of the first, second, third and fourth anniversaries of the day of the
grant, subject to satisfaction of certain conditions involving continuous
periods of service or engagement.
ARTICLE VII - GRANTS OF STOCK APPRECIATION RIGHTS TO EMPLOYEES AND CONSULTANTS
An SAR is a right to receive, upon surrender of the right, but without
payment, an amount payable in cash.
(i) The amount payable with respect to each SAR shall be equal in value to
the applicable percentage of the excess, if any, of the Fair Market Value of a
share of Common Stock on the exercise date over the exercise price of the SAR.
The exercise price of the SAR shall be determined by the Committee and shall not
be less than the Fair Market Value of a share of Common Stock on the date the
SAR is granted.
(ii) In the case of an SAR granted in tandem with an ISO to an Employee or
Consultant who is a Ten Percent Shareholder on the date of such grant, the
amount payable with respect to each SAR shall be equal in value to the
applicable percentage of the excess, if any, of the Fair Market Value of a share
of Common Stock on the exercise date over the exercise price of the SAR, which
exercise price shall not be less than 110% of the Fair Market Value of a share
of Common Stock on the date the SAR is granted.
(iii) The applicable percentage and exercise price shall be established by
the Committee at the time the SAR is granted.
(iv) SARs shall vest at the rate of one quarter of the total granted on each
of the first, second, third and fourth anniversaries of the day of the grant,
subject to satisfaction of certain conditions involving continuous periods of
service or engagement.
ARTICLE VIII - GRANTS OF RESTRICTED STOCK TO EMPLOYEES AND CONSULTANTS
Restricted Stock is Common Stock of the Company that is issued to a
participant at a price determined by the Committee, which price may be zero, and
is subject to restrictions on transfer and/or such other restrictions on
incidents of ownership as the Committee may determine.
ARTICLE IX - GRANTS OF PERFORMANCE AWARDS TO EMPLOYEES AND CONSULTANTS
A Performance Award granted under the Plan (i) may be denominated or payable
in cash, Common Stock (including without limitation, Restricted Stock), other
securities or other Awards and (ii) shall confer on the holder thereof the right
to receive payments, in whole or in part, upon the achievement of such
performance goals during such performance periods as the Committee shall
establish. Subject to the terms of the Plan and any applicable Award agreement,
the performance goals to be achieved during any performance period, the length
of any performance period, the amount of any Performance Award granted and the
amount of any payment or transfer to be made pursuant to any Performance Award
shall be determined by the Committee.
ARTICLE X - GRANTS OF OTHER STOCK-BASED INCENTIVE AWARDS TO EMPLOYEES AND
CONSULTANTS
The Committee may from time to time grant Awards under this Plan that
provide the participant with the right to purchase Common Stock or that are
valued by reference to the Fair Market Value of the Common Stock (including, but
not limited to, phantom securities or dividend equivalents). Such Awards shall
be in a form determined by the Committee (and may include terms contingent upon
a change of control of the Company), provided that such Awards shall not be
inconsistent with the terms and purposes of the Plan. The Committee will
determine the price of any Award and may accept any lawful consideration.
ARTICLE XI - GRANTS OF STOCK OPTIONS TO DIRECTORS
(a)Directors of the Company shall be eligible to receive NQSOs under the
Plan only pursuant to the provisions of this Article XI. Each individual who
agrees to become a Director shall receive, without the exercise of the
discretion of any person, a NQSO under the Plan relating to the purchase of
15,000 shares of Common Stock at an exercise price equal to the Fair Market
Value. Thereafter, on the day after the annual meeting of shareholders, each
person who is a continuing Director on any such date shall receive, without the
exercise of the discretion of any person, a NQSO under the Plan relating to the
purchase of 10,000 shares of Common Stock.
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(b)The exercise price of each share of Common Stock subject to a NQSO
granted to a Director shall equal the Fair Market Value of a share of Common
Stock on the date such NQSO is granted. The option price of a NQSO granted to a
Director may be paid in accordance with Article VI (a) (i) and (ii) of the Plan.
(c)Each NQSO granted to a Director shall vest in full on the date of the
grant. The NQSOs to directors shall have a term not to exceed ten (10) years
from the date of grant, or, if later, the date the Grantee becomes a Director.
Notwithstanding the exercise period of any NQSO granted to a Director, all such
NQSOs shall immediately become exercisable upon (i) the death of a Director
while serving as such, or (ii) a Change of Control.
ARTICLE XII - EXERCISE OF OPTIONS
Options granted under the Plan may be exercised by a Grantee only while the
Employee, Consultant or Director is and, continuously since the date the Option
was granted, has been an Employee, Consultant or Director of the Company or one
of its subsidiaries, except that:
(i) if the Grantee's termination of employment is other than for Cause, any
Options held by the Grantee may be exercised, to the extent then exercisable,
for a period of three months after the date of such termination of employment;
(ii) if such termination of employment is by reason of retirement or
disability, any Options held by the Grantee at the time of death or disability
will be exercisable for a period of 12 months after the date of such termination
of employment;
(iii) in the event of death after termination of employment pursuant to (i)
or (ii) above, the person or persons to whom the Grantee's rights are
transferred by will or the laws of descent and distribution shall have a period
of three years from the date of termination of the Grantee's employment to
exercise any Options which the Grantee could have exercised during such period;
and
(iv) in the event of the death of an Grantee while employed, any Options
then held by the Grantee shall become fully and immediately exercisable and may
be exercised by the person or persons to whom the Grantee's rights are
transferred by will or the laws of descent and distribution for a period of
three years after the Grantee's death. In no event, however, shall any Option be
exercisable after the date specified in Article VI, as applicable.
An Option granted hereunder shall be exercisable, in whole or in part,
only by written notice delivered in person or by mail to the Secretary of the
Company at its principal office, specifying the number of shares of Common Stock
to be purchased and accompanied by payment thereof and otherwise in accordance
with the option agreement pursuant to which the Option was granted.
In the event of a Change of Control affecting the Company, then,
notwithstanding any provision of the Plan or of any provisions of any Award
agreements entered into between the Company and any participant to the contrary,
all Awards that have not expired and which are then held by any participant (or
the person or persons to whom any deceased participant's rights have been
transferred) shall, as of such Change of Control, become fully and immediately
vested and exercisable and may be exercised for the remaining term of such
Awards.
ARTICLE XIII - AWARD AGREEMENTS
Each Award granted under the Plan shall be evidenced by an Award agreement
between the Grantee and the Company, setting forth the number of shares of
Common Stock, SARs, or units subject to the Award and such other terms and
conditions applicable to the Award not inconsistent with the Plan as the
Committee may deem appropriate.
ARTICLE XIV - TAX WITHHOLDING
The Committee may establish such rules and procedures as it considers
desirable in order to satisfy any obligation of the Company or any subsidiary to
withhold federal income taxes or other taxes with respect to any Award made
under the Plan. Such rules and procedures may provide (i) in the case of Awards
paid in shares of Common Stock, that the person receiving the Award may satisfy
the withholding obligation by instructing the Company to withhold shares of
Common Stock otherwise issuable upon exercise of such Award in order to satisfy
such withholding obligation and (ii) in the case of an Award paid in cash, that
the withholding obligation shall be satisfied by withholding the applicable
amount and paying the net amount in cash to the participant.
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ARTICLE XV - DILUTION OR OTHER ADJUSTMENT
If the Company is a party to any merger or consolidation, or undergoes any
separation, reorganization or liquidation, the Board of Directors of the Company
shall have the power to make arrangements, which shall be binding upon the
holders of unexpired Awards, for the substitution of new Awards for, or the
assumption by another corporation of, any unexpired Awards then outstanding
hereunder. In the case of any ISO, such action shall be taken only in the manner
and to the extent permitted by Sections 422 and 424 of the Code. In addition, in
the event of a reclassification, stock split, combination of shares, separation
(including a spin-off), dividend on shares of the Common Stock payable in stock,
or other similar change in capitalization or in the corporate structure of
shares of the Common Stock of the Company, the Committee shall conclusively
determine the appropriate adjustment in the option prices of outstanding
Options, in the number and kind of shares or other securities as to which
outstanding Awards shall be exercisable, and in the aggregate number of shares
with respect to which Awards may be granted. In the case of any ISO, any such
adjustment in the shares or other securities subject to the ISO (including any
adjustment in the Option price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code and only
to the extent permitted by Sections 422 and 424 of the Code.
ARTICLE XVI - ASSIGNABILITY
No Award granted under this Plan shall be sold, pledged, assigned or
transferred other than by will or the laws of descent and distribution, and
Awards shall be exercisable during the Grantee's lifetime only by the Grantee.
ARTICLE XVII - AMENDMENT OR TERMINATION
The Board of Directors of the Company may at any time amend, suspend or
terminate the Plan subject to the regulatory requirements of the United States
Securities and Exchange Commission and the National Association of Securities
Dealers or other applicable federal or state regulatory authority, provided,
however, that no change in any Awards previously granted may be made without the
consent of the holder thereof.
ARTICLE XVIII - GENERAL PROVISIONS
(a) Common Stock acquired pursuant to the exercise of an Option under the
Plan shall be subject to applicable transfer restrictions under applicable
Canadian or United States federal securities laws, under the requirements of any
national securities exchange or market upon which such common stock are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such common stock. If the instrument evidencing the Option so provides,
Common Stock issued on exercise of an Option granted under the Plan may upon
issuance be subject to additional restrictions.
(b) At the discretion of the Board of Directors, the Options and the
shares of Common Stock received upon exercise of an Option shall be registered
with the United States Securities and Exchange Commission and any applicable
state securities law commission. In the absence of such registration, both the
Options and the shares of Common Stock underlying the Options: 1) will be issued
only pursuant to an exemption from registration; 2) cannot be sold, pledged,
traded or otherwise disposed of in the absence of an effective registration
statement or an opinion of counsel satisfactory to the Company that such
registration is not required; 3) will bear an appropriate restrictive legend to
that effect. Individuals receiving Options may be required to sign an investment
letter satisfactory to the Board of Directors at the time the Options are
exercised, and may be required to comply with any other requirements for an
exemption under the Securities Act of 1933 and any applicable state securities
law exemption.
(c) The proceeds received by the Company from the sale of Common Stock,
pursuant to the exercise of Options granted under the Plan, shall be added to
the Company's general funds and used for general corporate purposes.
(d) No Awards may be exercised by the holder thereof if such exercise, and
the receipt of cash or stock thereunder, would be, in the opinion of counsel
selected by the Company, contrary to law or the regulations of any duly
constituted authority having jurisdiction over the Plan.
(e) No Award recipient shall have any rights as a shareholder with respect
to any shares subject to Awards granted to him or her under the Plan prior to
the date as of which he or she is actually recorded as the holder of such shares
upon the stock records of the Company.
(f) Nothing contained in the Plan or in Awards granted thereunder shall
confer upon any Employee, Consultant or Director any right to continue in the
employ of the Company or any of its subsidiaries or interfere in any way with
the right of the Company or any of its subsidiaries to terminate his or her
employment at any time.
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ARTICLE XIX - EFFECTIVE DATE
The Plan shall become effective on the date of its adoption by the Board
of Directors of the Company subject to approval of the Plan by the holders of a
majority of the outstanding voting shares of the Company within 12 months after
the date of the Plan's adoption by said Board of Directors. In the event of the
failure to obtain such shareholder approval, the Plan shall be null and void and
the Company shall have no liability thereunder. No Award granted under the Plan
shall be exercisable until such shareholder approval has been obtained.
ARTICLE XX - TERMINATION
No Award may be granted under the Plan on or after the date which is ten
years following the effective date specified in Article XIX, but Awards
previously granted may be exercised in accordance with their terms.
Adopted this 11th day of April, 1996
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DUSA PHARMACEUTICALS, INC.
PROXY FOR 1997 ANNUAL MEETING
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints D. Geoffrey Shulman, MD, FRCPC and James P.
Doherty, BSc or any one of them, each with power of substitution, proxies to
vote all shares of Common Stock which the undersigned would possess if
personally present at the Annual Meeting of Shareholders (including all
adjournments thereof) of DUSA Pharmaceuticals, Inc. (the "Company") to be held
on Thursday, June 5, 1997, at 11:00 a.m. at the Hotel Inter-Continental, South
Parlor, Second Floor, located at 111 East 48th Street, New York, New York.
SHAREHOLDERS ARE REQUESTED TO SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES OR
CANADA.
The Board of Directors recommends a vote FOR each of the items listed below.
Unless otherwise specified, the vote represented by this Proxy will be cast FOR
Items 1, 2, 3 and 4.
1. Election of Directors
Nominees: D. Geoffrey Shulman, MD, FRCPC; John H. Abeles, MD; James P.
Doherty, BSc; Jay M. Haft, Esq.; and Richard C. Lufkin, SB, MBA.
(Mark Only One Box)
/ / FOR all nominees listed above
/ / WITHHOLD Authority to vote for all nominees listed above
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided.
- --------------------------------------------------------
2. Ratification of the selection of Deloitte & Touche LLP as auditors for the
Company for fiscal year 1997.
/ / For / / Against / / Abstain
- --------------------------------------------------------------------------------
[REVERSE SIDE OF CARD]
3. Ratification of the amendments to the 1996 Omnibus Plan.
/ / For / / Against / / Abstain
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
PLEASE SIGN HERE as your name appears in this Proxy. When shares are held by
joint tenants, each joint tenant should sign. When signing as attorney,
executor, administrator, trustee, guardian or other fiduciary, please give full
title as such. If the signer is a corporation, please sign in full corporate
name by a duly authorized officer; if a partnership, please sign in the
partnership name by an authorized person.
______________________________________
Date
______________________________________
Signature of Shareholder
______________________________________
Signature if held jointly