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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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DUSA Pharmaceuticals, Inc.
(Name of Registrant as Specified in its Charter)
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to Exchange Act Rule 0-11:
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[ ] Check box if any part of the fee is offset as provided by Exchange
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statement 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 10, 1999
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 10, 1999,
at 11:00 a.m., at the Hotel Inter-Continental, Madison Room 1, Third 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 1999;
(3) 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, 1999, 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
/s/ Nanette W. Mantell, Esq.
Nanette W. Mantell, Esq.,
Secretary
Dated: April 19, 1999
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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 form of proxy are being mailed to shareholders on
or about April 28, 1999. The Company's Annual Report for 1998, including
financial statements for the year ended December 31, 1998, is being mailed to
shareholders at the same time.
VOTING SECURITIES
Only shareholders of record at the close of business on April 15, 1999, are
entitled to notice and to vote at the Annual Meeting or any adjournment thereof.
As of that date, there were 11,001,385 shares of common stock without par value
("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 included in determining the
number of votes cast "for" or "against" a director or proposals (2) and (3), 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. 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............ 44 Chairman of the Board, President,
Chief Executive Officer, Chief
Financial Officer, and Director............... 9/05/91
John H. Abeles, MD ....................... 54 Director...................................... 8/02/94
James P. Doherty, BSc (1)(2).............. 71 Director...................................... 9/26/91
Jay M. Haft, Esq.(1)...................... 63 Director...................................... 9/16/96
Richard C. Lufkin, SB, MBA (2)............ 52 Director...................................... 1/27/92
(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,
a dermatologist, 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 participates, on a limited basis, in a private
dermatology practice.
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 I-Flow
Corporation, Oryx Technology, Inc., PharmaPrint Corp. and Encore Medical
Corporation.
JAMES P. DOHERTY, BSc, joined Draxis Health Inc. in May 1990 as its
President & COO following an extensive career in the pharmaceutical industry. He
remains a director of Draxis Health Inc. and was appointed Vice Chairman after
relinquishing his duties as President in 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., is a strategic and financial consultant. He 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 Group, Inc., DCAP Group, Inc., Encore Medical Corporation, PC
Service Source, Inc., Oryx Technology, Inc. and Thrift Management, Inc.
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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE.
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
are awarded options to purchase 15,000 shares of Common Stock upon their initial
election to the Board of Directors and options for 10,000 shares of Common Stock
for each year of reelection.
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
---- --- ----- -------
Ronald L. Carroll................ 50 Executive Vice President, Chief
Operating Officer 5/14/98
Stuart L. Marcus, MD, PhD........ 52 Senior Vice President of Scientific
Affairs 10/11/93
Nanette W. Mantell, Esq.......... 47 Secretary 2/19/92
RONALD L. CARROLL is employed by the Company. In 1994 Mr. Carroll
co-founded and became President of Lumenetics, Inc., a privately-owned medical
device development company, which, prior to May 1998, provided the Company with
consulting services in the light device technology area. Prior to forming
Lumenetics, Inc., Mr. Carroll had extensive experience as a new product
development executive in the pharmaceutical industry with positions in
manufacturing, regulatory affairs and marketing.
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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.
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, 1998, there were seven (7) meetings
of the Board of Directors. Each incumbent director attended at least 75% of the
meetings of the Board. 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 1998.
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 did not meet during 1998. 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 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. The Compensation Committee normally meets
annually. However, since it met twice during 1997, including a December meeting,
the Committee did not meet during 1998. It met in February, 1999 to establish
compensation for this year.
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 1999. 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
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EXECUTIVE COMPENSATION
The following table shows, for the fiscal years ended December 31,
1998, 1997 and 1996, certain compensation paid by the Company to its executive
officers. As of December 31, 1998, the only persons to receive cash compensation
in excess of $100,000 were the Company's President, its Executive Vice President
and Senior Vice President of Scientific Affairs. All prices are stated in United
States dollars unless otherwise indicated.
SUMMARY COMPENSATION TABLE
Long Term Compensation
---------------------------------------------
Actual Compensation Awards Payouts
---------------------------- ---------------------- -------
Other
Annual Restricted
Compen- Stock LTIP All Other
Name and Principal Bonus sation Award(s) Options Payouts Compen-
Position Year Salary ($) ($) ($)(1) ($) (#) ($) sation ($)
- ---------------------------------------------------------------------------------------------------------------
D. Geoffrey Shulman, 1998 275,000 68,750 -- -- 10,000(2) -- --
MD, FRCPC, Chairman 1997 250,000 125,000 -- -- 10,000(2) -- --
of the Board, President, 1996 250,000 82,500 -- -- 260,000(2) -- --
Chief Executive Officer
and Chief Financial
Officer
Ronald L. Carroll 1998(3) 95,000 40,625 -- -- 60,000(3) -- --
Executive Vice President, -- -- -- -- -- -- -- --
Chief Operating Officer -- -- -- -- -- -- -- --
Stuart L. Marcus, MD, 1998 200,000 50,000 -- -- -- -- --
PhD, Senior Vice 1997 180,000 45,000 -- -- -- -- --
President of Scientific 1996 166,900 27,817 -- -- 100,000(4) -- --
Affairs
Anthony Schincariol, 1998(5) 90,000 -- -- -- -- -- --
MBA, PhD, Vice 1997 110,000 27,500 -- -- -- -- --
President of Corporate 1996 92,000 15,142 -- -- 75,000(5) -- --
Development
(1) Neither Dr. Shulman, Mr. Carroll nor Dr. Marcus had perquisites in
excess of $50,000 or 10% of salary and bonus reported for 1998, 1997,
and 1996.
(2) 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 $7.75 per share,
the closing price of the Company's Common Stock on The Nasdaq Stock
Market on February 16, 1996. 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 per
share, the closing price of the Company's Common Stock on June 6, 1996.
He received automatic grants in the same amount on June 6, 1997 and
June 11, 1998, at exercise prices of $6.25 and $6.9375, respectively,
being the closing price on the date of the grants.
(3) Mr. Carroll became Executive Vice President and Chief Operating Officer
effective May 14, 1998. Mr. Carroll is the President and a principal
shareholder of Lumenetics, Inc. ("Lumenetics"), former light device
consultants to the Company. During the last fiscal year, the Company
paid a total of $235,116.81 to Lumenetics, in the form of consulting
fees totaling $207,087.63 and reimbursement for office space and
related expenses totaling $28,029.18. On May 7, 1998, Mr. Carroll was
awarded options to purchase 60,000 shares of the Company's Common Stock
pursuant to the 1996 Omnibus Plan, as amended. These options have an
exercise price of $11.50 per share, the closing price of the Company's
Common Stock on The Nasdaq Stock Market on May 7, 1998, the date of the
grant. Mr. Carroll also has a beneficial interest in options which have
been granted to Lumenetics. On April 14, 1994, Lumenetics was awarded
options to purchase 20,000 shares of the Company's Common Stock at an
exercise price of $3.625, the closing price of the Company's Common
Stock on The Nasdaq Stock Market on April 13, 1994. On March 13, 1997,
Lumenetics 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 $6.125 per share, the closing price of the
Company's Common Stock on The Nasdaq Stock Market on the date of the
grant.
(4) 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 $7.75 per share,
the closing price of the Company's Common Stock on The Nasdaq Stock
Market on February 16, 1996.
(5) Dr. Anthony Schincariol terminated his employment as Vice President of
Corporate Development on August 28, 1998. As of that date, he had
received annual cash compensation in the form of salary equal to
$90,000. On February 16, 1996, Dr. Schincariol was awarded options to
purchase 75,000 shares of the Company's Common Stock at an exercise
price of $7.75 per share pursuant to the 1996 Omnibus Plan. These
options have lapsed as a result of Mr. Schincariol's termination of his
employment with the Company.
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OPTION GRANTS IN 1998
The following grants of stock options were made to the named executive
officers during fiscal year 1998.
POTENTIAL REALIZABLE
VALUE OF ASSUMED
ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANT APPRECIATION FOR OPTION TERM(4)
------------------------------------------------------------------ -------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees Base Price
Name Granted (1) in Fiscal Year ($/Share) Expiration Date 5%($) 10%($)
- ----------------------- ------------ -------------- ----------- --------------- -------- ----------
Dr. D. Geoffrey Shulman 10,000(2) 6.2% $6.9375(3) 6/11/08 $ 43,629 $ 110,566
Ronald L. Carroll (5) 60,000 37.0% $ 11.50 5/6/08 $433,920 $1,099,680
Dr. Stuart L. Marcus -- -- -- -- -- --
Dr. Anthony Schincariol -- -- -- -- -- --
NOTES:
(1) All options in this table have been granted pursuant to the 1996
Omnibus Plan as amended. The options have exercise prices equal to the
fair market value on the date of the grant.
(2) Dr. Shulman's options were granted automatically and were immediately
vested upon his reelection to the Board of Directors on June 11, 1998.
The option expires ten (10) years from the date of the grant.
(3) Under the 1996 Omnibus Plan, as amended by the shareholders on June 5,
1997, the exercise price of options granted to directors, which include
the 10,000 options granted to Dr. Shulman, may be paid in cash, or at
the discretion of the Compensation Committee, by tender of Common Stock
and cash or through other such means as the Committee determines are
consistent with the 1996 Omnibus Plan, as amended.
(4) 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.
(5) Mr. Carroll's options were granted as an incentive for his acceptance
of employment with the Company and will vest at the rate of 25% each
year on the first, second, third and fourth anniversaries of the day
immediately preceding the date of the grant. The options expire ten
(10) years from the date of grant.
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END STOCK OPTION VALUES
The following table provides certain information as to certain stock options
exercisable by the named executive officers for the fiscal year 1998, and the
value of such options held by them at December 31, 1998, measured in terms of
the closing price of the Company's Common Stock on The Nasdaq Stock Market on
December 31, 1998, which was $7.375 per share.
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
December 31, 1998 December 31, 1998
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------
Dr. D. Geoffrey Shulman -- -- 250,000/ $207,770/
130,000 $0
Ronald L. Carroll(1) -- -- 0/ $0/
60,000 $0
Dr. Stuart L. Marcus - -- 90,000/ $ 40,000/
50,000 $0
Dr. Anthony Schincariol -- -- */ */
NOTES:
(1) Mr. Carroll is the President and principal shareholder of Lumenetics,
Inc. ("Lumenetics"), the former light device consultants, to the
Company. As of December 31, 1998, Lumenetics held a total of 120,000
options, 45,000 of which were exercisable, 75,000 which where
unexercisable. The value of the in-the-money exercisable options as of
December 31, 1998 was $106,250. The value of the in-the-money
unexercisable options as of December 31, 1998 was $93,750.
* Mr. Schincariol terminated his employment with the Company effective
August 28, 1998. All options lapsed 90 days following his last day of
employment.
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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 Financial 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 $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 $6.00 per share 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 per share under certain terms and conditions to replace those options
previously relinquished. An additional 25,000 options at CDN. $4.69 per share
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 $7.75
per share, the closing price of the Company's Common Stock on The Nasdaq Stock
Market 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. Automatically under the 1996 Omnibus Plan, options for 10,000
shares were granted to Dr. Shulman, as a director, on June 7, 1996, the day
following the 1996 Annual Meeting of Shareholders at an exercise price of $7.75
per share. After the 1997 Annual Meeting, he received options for 10,000 shares
at an exercise price of $6.25 per share and following the 1998 Annual Meeting
Dr. Shulman received options for 10,000 shares at an exercise price of $6.9375
per share. 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 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 the
Shulman 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 Senior Vice President of Scientific
Affairs (the "Marcus Agreement"). In connection with the Marcus Agreement, the
Company granted an option to Dr. Marcus, pursuant to the Company's Incentive
Stock Option Plan, to purchase 40,000 shares of Common Stock at $6.375 per
share, being the closing stock market price on The Nasdaq Stock Market on the
date of employment. These options became 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 $7.75
per share, the closing price of the Company's Common Stock on The Nasdaq Stock
Market 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.
Effective May 14, 1998, the Company entered into an employment
agreement with Ronald L. Carroll, its Executive Vice President and Chief
Operating Officer (the "Carroll Agreement"). In connection with the Carroll
Agreement, the Company granted to Mr. Carroll options to purchase 60,000 shares
of Common Stock pursuant to the 1996 Omnibus Plan, as amended. These options
have an exercise price of $11.50 per share, the closing price of the Company's
Common Stock on The Nasdaq Stock Market on May 7, 1998, the date of the grant.
Mr. Carroll's employment is terminable in accordance with the terms of the
Carroll Agreement. The Company may terminate the Carroll Agreement at any time,
for cause, without notice. If Mr. Carroll's employment is terminated without
cause, the Company shall pay Mr. Carroll a severance allowance equivalent to
twelve (12) months of his then current base salary, payable in a lump sum,
within sixty (60) days following the date of termination. In the event that Mr.
Carroll is terminated upon a "change of control," as defined in the Carroll
Agreement, the Company shall pay to Mr. Carroll a lump sum payment equal to
three (3) times his base salary for the last fiscal year within
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five (5) days after such termination. In the event Mr. Carroll 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.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)
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 as well as his recommendations for their
compensation. Dr. Shulman was present, at the invitation of the Committee, at
its meetings.
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 1998 within each
executive officer's area of responsibility, including the filing of the
Company's first New Drug Application with the Food and Drug Administration,
coordinating marketing, manufacturing and technology development operations for
anticipated launch of products, and securing additional financial resources for
the Company through a dermatology strategic alliance partner or other means.
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 prepared by Deloitte & Touche, LLP compensation benefits group.
In determining appropriate levels of cash bonus awards for 1998, the
Committee considered the specific corporate goals of the Company and personal
goals set for each of the executive officers. The Company's two Vice Presidents
were eligible to receive up to 30% of their base salary as a cash bonus award.
The Committee concluded that the Company's operational performance, particularly
the filing with the FDA of the Company's first new drug application in 1998,
justified favorable consideration of the Company's executive officers with
regard to bonus awards. The Committee also considered that the Company's stock
performance was weak during 1998. Accordingly, the Company's two Vice Presidents
received 25% of base salary as cash bonus awards with Mr. Carroll's bonus
calculated as if he had been employed for the entire year. These cash awards
were paid in 1999.
The Committee also is using the survey data from Deloitte & Touche, LLP
to monitor and evaluate the long-term incentive compensation levels of its
officers and directors. The Committee believes that a strong stock ownership
program is essential to the long-term growth of the Company. In 1996, the
Company's three key executive officers received awards of stock options to
emphasize the long-term focus required for success in the pharmaceutical
industry. No additional grants were made to the officers in 1998.
COMPENSATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dr. Shulman's base salary and cash bonus award for 1998 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 and the preparation for transition from a
development-stage company to an operating company subsequent to approval by the
Food and Drug Administration of its first product. Dr. Shulman's base salary for
1998 was $275,000. With regard to a cash bonus award, Dr. Shulman is eligible to
receive up to 50% of base salary. For 1998, Dr. Shulman's bonus award was 25% of
base salary. Dr. Shulman's 1998 cash bonus award was paid to him in 1999. The
Committee has determined that Dr. Shulman's 1999 base salary will remain at its
1998 level. The Compensation Committee exercised its subjective judgment and
discretion in determining the amounts of Dr. Shulman's base salary, bonus award,
and stock option award for 1998.
James P. Doherty
Jay M. Haft
- ------------
(1) The material in this report and under the caption "Performance Graph" are
not "soliciting material," are not deemed filed with the SEC and are not to be
incorporated by reference in any filing of the Company under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether
made before or after the date of this Proxy Statement and irrespective of any
general incorporation language therein.
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PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE SHAREHOLDER TOTAL RETURN
EDGAR Representation of Data Points Used in Printed Graphic
FISCAL YEAR ENDING
---------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
---------------------------------------------------------------------
DUSA Pharmaceuticals, Inc. $100 $111.43 $151.43 $160.00 $262.86 $168.57
Drug Manufacturers/Other $100 $ 80.82 $118.03 $131.57 $142.96 $149.93
NASDAQ Market Index $100 $104.99 $136.18 $169.23 $207.00 $291.96
The graph above compares cumulative total shareholder return on the Common
Stock of the Company for the six-year period ended December 31, 1998, with the
cumulative total return on the Nasdaq Market Index and the Media General Drug
Manufacturer Index over the same period. The identity of those corporations
included in the Media General Financial Services Drug Manufacturer Index may be
obtained by contacting the Company, Ms. Shari Lovell, DUSA Pharmaceuticals,
Inc., 181 University Avenue, Suite 1208, Toronto, Ontario M5H 3M7 Canada.
The graph assumes $100 was invested on January 1, 1993, in the Common
Stock of the Company, and each of the indices, and that dividends were
reinvested. 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.
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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 1, 1999 by: (i)
each director of the Company; (ii) the named executive officers; (iii) all
beneficial owners of greater than 5% of the Company's outstanding Common Stock;
and (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, Mr. Nathan Low 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 ............ 674,999(2) 5.8%
Ronald L. Carroll ......................... 70,490(3) *
Stuart L. Marcus, MD, PhD ................. 115,000(4) 1.0%
Anthony Schincariol, MBA, PhD ............. 0(5) 0
John H. Abeles, MD ........................ 40,000(6) *%
James P. Doherty, BSc ..................... 80,050(7) *%
Jay M. Haft, Esq .......................... 27,500(8) *%
Richard C. Lufkin, SB, .................... 47,600(9) *%
All directors and officers as a group
(consisting of 8 persons) ................ 1,091,639(10) 9.2%
Bulldog Capital Management Ltd. Partnership 881,200(11) 8.0%
Mr. Nathan Low ............................ 593,437(12) 5.2%
*Less than 1%.
Notes:
(1) The percentage of ownership as calculated above includes in the number
of shares outstanding for each individual listed, as well as 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 through the exercise of his Class
B Warrants which have an exercise price of CDN. $6.79 per Warrant, and
312,500 of such shares represent shares with respect to which Dr.
Shulman has the right to acquire through the exercise of options. Dr.
Shulman's address is 181 University Avenue, Suite 1208, Toronto, ON,
M5H 3M7 CANADA.
(3) 70,000 of the shares indicated represent shares indirectly owned by Mr.
Carroll as a principal shareholder of Lumenetics, Inc., which has the
right to acquire these shares through the exercise of options.
(4) All of the shares indicated represent shares with respect to which Dr.
Marcus has the right to acquire through the exercise of options.
(5) Mr. Schincariol terminated his employment with the Company effective
August 28, 1998. All options lapsed 90 days following his last day of
employment.
(6) All of the shares indicated represent shares with respect to which Dr.
Abeles has the right to acquire through the exercise of options.
(7) 77,500 of the shares indicated represent shares with respect to which
Mr. Doherty has the right to acquire through the exercise of options.
(8) All of the shares indicated represent shares with respect to which Mr.
Haft has the right to acquire through the exercise of options.
(9) 47,500 of the shares indicated represent shares with respect to which
Mr. Lufkin has the right to acquire through the exercise of options.
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(10) All of the shares indicated, Class B Warrants and options, as the case
may be, as discussed in footnotes (2) through (9) above are included,
as well as 36,000 shares beneficially owned by an officer of the
Company, 35,000 shares of which the officer has the right to acquire
through the exercise of options.
(11) The number of shares beneficially owned, and the percentage of
outstanding shares reported are based upon information disclosed by
Bulldog Capital Management Limited Partnership on a Selling Shareholder
Questionnaire to the Company in connection with the filing by the
Company of a registration statement on Form S-3 filed with the SEC on
February 26, 1999. Bulldog Capital Management Ltd. Partnership's
address is 33 North Garden Avenue, #750, Clearwater, Florida 33755.
(12) The number of shares beneficially owned, and the percentage of
outstanding shares reported are based upon information disclosed by Mr.
Nathan Low on a Selling Shareholder Questionnaire to the Company in
connection with the filing by the Company of a registration statement
on Form S-3 filed with the SEC on February 26, 1999. Under Rule 13d-3
of the Securities and Exchange Act of 1934, Nathan Low may be deemed to
be the beneficial owner of 141,000 shares that are held by Lisa Low as
custodian for three (3) children and 50,000 shares that may be issued
upon the exercise of a warrant held by Sunrise Financial Group. Mr. Low
disclaims beneficial ownership of (i) 141,000 shares held by Lisa Low
as custodian; (ii) 25,000 of the shares underlying the Sunrise
Financial Group warrant which have been committed to Mr. Derek
Caldwell; and (iii) 1,000 shares that may be issued upon the exercise
of underwriter's options which options are currently in Mr. Low's name
and are committed to other employees of Sunrise Financial Group and
Sunrise Securities Corp. Mr. Low's address is Sunrise Financial Group,
Inc., 135 East 57th Street, 11th Floor, New York, New York 10022.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the Company's proxy
statement for the 2000 Annual Meeting of Shareholders and the form of proxy card
relating to that meeting, notice of a shareholder proposal must be received by
the Company on or before December 31, 1999. 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.
DISCRETIONARY VOTING OF PROXIES
If a shareholder wishes to present a proposal at the Company's 2000
Annual Meeting which is not intended to be included in the Company's proxy
statement for that meeting, the Company must receive written notice of the
shareholder proposal by March 14, 2000. If the Company does not receive timely
notice of such a shareholder proposal, the Company will retain its discretionary
authority to vote proxies on such proposals even if it is not specifically
reflected on the proxy card and shareholders have not had an opportunity to vote
on the proposal by proxy.
CERTAIN TRANSACTIONS
LANE AND MANTELL
Lane and Mantell, a professional corporation, which serves as legal
counsel for the Company, and in which Ms. Mantell is a principal, received
approximately $183,550.00 for legal fees and costs during the last fiscal year.
LUMENETICS, INC.
Mr. Ronald L. Carroll, the Company's Executive Vice President and Chief
Operating Officer, is the President and a principal shareholder of Lumenetics,
Inc. ("Lumenetics"), the former light device consultants to the Company. During
the last fiscal year, the Company paid a total of $235,116.81 cash compensation
to Lumenetics, in the form of consulting fees totaling $207,087.63 and
reimbursement for office space and related expenses totaling $28,029.18. In May,
1998, all three employees of Lumenetics, including Mr. Carroll, became employees
of the Company. In February, 1999, the Company entered an equipment lease with
Lumenetics for an initial term of twelve (12) months at an annual rental of
$48,000.00. The equipment lease also provides the Company with an option to
acquire the equipment being leased at a purchase price of $100,000.00 with all
lease payments to be applied to the purchase price.
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 ten percent
(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 and
directors complied with all filing requirements applicable to them with respect
to transactions during fiscal 1998. The Company is not aware of any person who
holds greater than 10% beneficial ownership. In making these statements, the
Company has relied on the written representations of its directors and officers
and copies of the reports that they have filed with the SEC.
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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
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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DUSA PHARMACEUTICALS, INC.
PROXY FOR 1999 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 either 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 10, 1999, at 11:00 a.m. at the Hotel Inter-Continental,
Madison Room 1, Third 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.
[REVERSE SIDE OF CARD]
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 and 2.
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 1999.
[ ] For [ ] Against [ ] Abstain
________________________________________________________________________________
3. 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