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Exhibit 99.5
NONQUALIFIED STOCK OPTION AGREEMENT
AGREEMENT made and entered into as of the 26TH day of SEPTEMBER, 1997,
by and between DUSA Pharmaceuticals, Inc., a corporation incorporated under the
laws of the State of New Jersey (the "Company"), and MID-OCEAN INVESTMENTS
LIMITED, a corporation incorporated under the laws of Bermuda (the "Grantee").
WHEREAS, the Company has determined that its interests will be advanced
by providing an incentive to the Grantee to acquire a proprietary interest in
the Company and, as a shareholder, to share in its success, with added incentive
to work effectively for and in the Company's interest;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereby agree as follows:
SECTION 1
GRANT
1.1 The Company hereby grants to the Grantee, as partial
consideration for services to be rendered under a certain
Consulting Agreement, subject to the execution thereof by both
parties, (the "Consulting Agreement"), the right and option
(the "Option") to purchase, in accordance with the vesting
rights outlined in Section 3.1 hereof, up to 30,000 shares of
authorized but unissued Common Stock, without par value
("Common Stock"), of the Company on the terms and conditions
herein set forth in this Agreement.
SECTION 2
PRICE
2.1 The purchase price of the shares of Common Stock subject to
this Option shall be the fair market value of the shares of
Common Stock on the date of the grant ($7.4375 per share)(the
"Exercise Price").
SECTION 3
WHEN EXERCISABLE
3.1 The aggregate number of shares of Common Stock of the Company
optioned by this Agreement (the "Optioned Shares") shall vest
in the Grantee as follows:
(a) 25% of the Option on the first anniversary of the day
of the grant, being September 26, 1998;
(b) 25% of the Option on the second anniversary of the
day of grant, being September 26, 1999;
(c) 25% of the Option on the third anniversary of the day
of the grant, being September 26, 2000;
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(d) 25% of the Option on the fourth anniversary of the
day of the grant, being September 26, 2001; and
and, except as provided by Sections 3.6 and 6.3 hereof, the Grantee
shall only be entitled to exercise this Option, in whole or in part, in
the amounts set out above and from and after the dates so specified.
3.2 Subject to Sections 3.1 and 3.6 hereof, the Grantee shall have
the right, at any time prior to 5:00 p.m. (Eastern Standard
Time) on the date prior to the tenth anniversary date of the
grant, being September 25, 2007, provided that if such day is
not a day on which the Company is open for business then on
the first following day on which the Company is open for
business, to exercise this Option for any number of the
Optioned Shares up to the maximum number of shares specified
in Section 1.1 above.
3.3 No less than one thousand (1,000) shares may be purchased upon
any one exercise of the Option granted hereby unless the
number of shares purchased at such time is the total number of
shares in respect of which the Option hereby granted is then
exercisable.
3.4 In no event shall any Option granted hereby be exercisable for
a fractional share.
3.5 From time to time, in its discretion, the Company's Stock
Option Committee (the "Committee") may offer the Grantee the
right to cancel any Option granted hereunder in exchange for
such consideration as the Committee shall determine.
3.6 The Board of Directors shall be entitled to determine if and
when service to the Company has ceased with respect to the
Grantee.
SECTION 4
HOW EXERCISABLE
4.1 Subject to such administrative regulations as the Committee
may from time to time adopt, the Grantee or beneficiary shall,
in order to exercise this Option give to the Company at its
principal office notice in writing in the form of Schedule A
hereto setting out the number of Optioned Shares with respect
to which the Option is being exercised. The notice must be
accompanied by payment of a certified check, official bank
cashier's check or money order in an amount equal to the
Exercise Price multiplied by the number of shares requested
and a duly executed copy of this Agreement. At the discretion
of the Committee, the Grantee may pay all or a portion of the
purchase price by tender of Common Stock or a combination of
stock and cash or other means determined by the Committee.
4.2 Any notice under this Section shall include an undertaking to
furnish or execute such documents as the Committee in its
discretion shall deem necessary (i) to evidence such exercise,
in whole or in part, of the Option evidenced by this
Agreement, (ii) to determine whether registration is then
required under the Securities Act of 1933, or any other law,
as then in effect, and (iii) to comply with
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or satisfy the requirements of the Securities Act of 1933, or
any other law, as then in effect.
4.3 The Grantee agrees that all shares purchased by it under the
Option will be acquired for investment, not distribution, and
that any notice of exercise of the Option must be accompanied
by a written representation to that effect, signed by the
Grantee.
SECTION 5
TERMINATION OF OPTION
5.1 The Option granted hereby shall terminate and be of no force
or effect upon the expiration of ten years from the date of
the Grant unless terminated prior to such time as provided
below.
5.2 Subject to Section 3.6 hereof, if the Grantee's service to the
Company is terminated pursuant to the Consulting Agreement,
the Option may be exercised, to the extent exercisable, for a
period of three months after the date of such termination of
service or such later date as the Board of Directors may
approve.
5.3 Any determination made by the Committee with respect to any
matter referred to in this Section 5 shall be final and
conclusive on all persons affected thereby. Service to the
Company shall be deemed to include service to any subsidiary
of the Company by the Grantee.
SECTION 6
ADJUSTMENTS TO OPTION
6.1 Subject to any required action by the Committee and
shareholders, the number of shares provided for in the Option,
and the price per share thereof shall be proportionately
adjusted for any increase or decrease in the number of issued
shares of the Company resulting from the payment of a share
dividend, a share split or any transaction which is a
"corporate transaction" (as defined in the Treasury
regulations promulgated under Section 424 of the Code.
6.2 Subject to any required action by the Committee and
shareholders, if the Company shall be the surviving entity in
any merger or consolidation, or after a consolidation of the
Company and one or more entities in which the resulting entity
is an independent entity, the Option shall pertain to and
apply to the securities of the surviving entity in an amount
that the board of directors of the surviving entity, at its
sole discretion, determines to be equivalent, as nearly as
practicable, to the nearest whole number and class of shares
that were subject to the Option. These shares of stock or
other securities shall, after such merger or consolidation, be
deemed to be shares for all purposes hereof. The aforesaid
adjustments, when applicable, shall be made by the Committee,
and the Committee's determination shall be final, binding and
conclusive.
6.3 In the event of a Change of Control (as defined below), any
and all outstanding Options not fully vested shall
automatically vest in full and shall be immediately
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exercisable. The date on which such accelerated vesting and
immediate exercisability shall occur shall be the date of the
occurrence of the Change of Control.
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.
Except as provided with respect to a Grantee in its stock
option agreement or other controlling agreement between it and
the Company, to the extent that the acceleration,
exercisability or parachute payment attributable to the Option
following a Change of Control would result in "excess
parachute payments"1 when the former are aggregated with other
payments or benefits to the Grantee, such parachute payments
or benefits provided to a Grantee under this Agreement shall
be reduced to the extent necessary so that no portion thereof
shall be subject to the excise tax imposed by Section 4999 of
the Code. This reduction will only be made if it will cause
the Grantee's net after-tax benefit to exceed the net
after-tax benefit that would have existed if such reduction
were not made. "Net after-tax benefit" shall be the sum of (i)
all payments and benefits which a Grantee receives or is
entitled to receive that would constitute a "parachute
payment" under Section 280G of the Code, less (ii) the amount
of federal income taxes payable with respect to the payments
and benefits described in (i) above, calculated at the maximum
marginal income tax rate2 for the year in which such payments
and benefits shall be paid to the Grantee, less (iii) the
amount of excise taxes imposed with respect to the payments
and benefits described in (i) above by Section 4999 of the
Code.
6.4 In the event of a change in the Company's shares which is
limited to a change of all of its authorized shares with par
value into the same number of shares with a different par
value or without par value, the shares resulting from any such
change shall be deemed to be shares within the meaning of this
Agreement.
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1"Excess parachute payments" are defined in Section 280G of the Code
and are determined by tax counsel of the Company.
2"This rate is based on the rate for the year set forth in the Code at
the time of the first payment to the participant.
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6.5 Except as herein before expressly provided in Paragraphs 6.1,
6.2, 6.3 and 6.4 of this Section 6, the Grantee shall have no
rights by reason of any subdivision or consolidation of shares
of any class or payment of any share dividend or any other
increase or decrease in the number of shares of any class or
by reason of any dissolution, liquidation, merger,
consolidation or spin-off of assets or stock of another
corporation and any issuance by the Company of shares of any
class, or securities convertible into shares of any class,
shall not affect the Option, and no adjustment by reason
thereof shall be made with respect to the number or price of
the Company's shares subject to the Option. The grant of the
Option shall not affect in any way the right or power of the
Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve, liquidate, sell
or transfer all or any part of its business or assets.
SECTION 7
TRANSFER
7.1 This Option shall not be transferable by the Grantee in any
way. During the existence of the Grantee, the Option shall be
exercisable only by it. Any other attempted assignment,
transfer, pledge, hypothecation or other disposition of the
Option shall be void and have no effect unless in accordance
with the terms set forth herein.
SECTION 8
WITHHOLDING TAXES
8.1 The Company shall have the right to retain and withhold from
any payment, under the Option granted, any amount that is to
be withheld or otherwise deducted and paid with respect to
such payment. At its discretion, the Company may require the
Grantee, if it receives shares under a nonqualified stock
option grant, to reimburse the Company for any taxes that are
required to be withheld by the Company, and may withhold any
distribution in whole or in part until the Company is so
reimbursed. In lieu thereof, the Company shall have the right
to withhold from any other cash amounts due (or to become due)
to the Grantee an amount equal to such taxes required to be
withheld by the Company to reimburse the Company for any such
taxes, or the Company may retain and withhold a number of
shares of Common Stock having a market value not less than the
amount of such taxes and cancel (in whole or in part) any
shares of Common Stock so withheld in order to reimburse the
Company for any such taxes.
SECTION 9
IMPACT ON OTHER BENEFITS
9.1 The value of the Option (either on the date of grant of the
Option or at the time the shares are vested) shall not be
includable as compensation or earnings for purposes of any
other benefit plan offered by the Company.
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SECTION 10
ADMINISTRATION
10.1 The Committee shall have full authority and discretion to
decide all matters relating to the administration and
interpretation of this Agreement. All such Committee
determinations shall be final, conclusive and binding upon the
Company, the Grantee and any and all interested parties.
SECTION 11
AGREEMENT TO CONTINUE IN EMPLOYMENT
OR SERVICE AS A CONSULTANT
11.1 Nothing in this Agreement shall confer on a Grantee any right
to continue in the employ of the Company or in the service of
the Company as a consultant or interfere in any way with the
right of the Company to terminate such consulting relationship
at any time.
SECTION 12
AMENDMENT(S)
12.1 This Agreement may not in any way be amended or terminated
without the Grantee's written consent.
SECTION 13
FORCE AND EFFECT
13.1 The various provisions of this Agreement are severable in
their entirety. Any determination of invalidity or
unenforceability of any one provision shall have no effect on
the continuing force and effect of the remaining provisions.
SECTION 14
NOTICE OF DISPOSITION OF SHARES
14.1 The Grantee agrees that if it should dispose of any shares of
Common Stock acquired on the exercise of the Option, including
a disposition by sale, exchange, gift or transfer of legal
title within twelve (12) months of the date such shares are
transferred to the Grantee, the Grantee will notify the
Company promptly of such disposition.
SECTION 15
NOTICES
15.1 All notices which may be or are required to be given by one
party to the other party pursuant to this Agreement shall be
in writing and shall be mailed by first class or certified
mail, return receipt requested, postage prepaid, or
transmitted by hand delivery as follows:
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If to the Company: DUSA Pharmaceuticals, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX X0X 0X0
XXXXXX
Attention: Dr. D. Xxxxxxxx Xxxxxxx
If to the Grantee: Mid-Ocean Investments Limited
00 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxx
xx such other address as to which either party may from time
to time notify the other as aforesaid.
SECTION 16
RESTRICTIONS ON TRANSFER
16.1 The Grantee understands and acknowledges that it is subject to
certain restrictions on transfer under the Securities Act of
1933 of the United States, as amended, (the "1933 Act") of the
shares issued pursuant to the exercise of the Option; such
restrictions provide that the shares may not be sold without
registration or exemption from registration under the 1933
Act.
SECTION 17
REPORTING REQUIREMENTS
17.1 The Grantee understands and acknowledges that it may be
subject to certain reporting requirements upon its receipt and
exercise of the Option, and in connection therewith, upon the
receipt and exercise of the Option, the Grantee agrees to
timely file with the Securities and Exchange Commission, the
National Association of Securities Dealers, Inc., and any
appropriate Canadian securities regulatory authorities, the
appropriate documentation regarding his ownership of the
Company's securities.
SECTION 18
GOVERNING LAW
18.1 This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of New Jersey.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto.
Attest: DUSA PHARMACEUTICALS, INC.,
a New Jersey corporation
/s/ Xxxxxxx X. Xxxxxxx By: /s/ D. Xxxxxxxx Xxxxxxx
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Xxxxxxx X. Xxxxxxx, Secretary Dr. D. Xxxxxxxx Xxxxxxx,
President
GRANTEE
MID-OCEAN INVESTMENTS LIMITED
By: /s/ Tor Boswick
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Tor Boswick
President
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SCHEDULE A
SUBSCRIPTION FORM
To: The Secretary of DUSA Pharmaceuticals, Inc.
Pursuant to the terms and subject to the conditions set forth in the
Nonqualified Stock Option Agreement (the "Agreement") dated , between DUSA
Pharmaceuticals, Inc. and the undersigned, and the Option granted to the
undersigned by such Agreement, I hereby elect to purchase shares of Common Stock
of DUSA Pharmaceuticals, Inc. which were the subject of such Option. I
understand that such purchase is subject to all the terms and conditions of the
Agreement. I request that the certificates for such shares of Common Stock shall
be issued in the name of:
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(please print or type name and address)
and be delivered to:
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(please print or type name and address)
The undersigned hereby represents and warrants to, and agrees with the
Company as follows:
(a) The shares are being purchased for the undersigned's own account,
for investment purposes only, and not for the account of any other person, and
not with a view to distribution, assignment, or resale to others, or to
fractionalization in whole or in part and that the offering and sale of the
shares is intended to be exempt from registration under the Securities Act of
1933 (the "Act"). In furtherance thereof, the undersigned represents, warrants
and agrees as follows: (i) no other person has or will have a direct or indirect
beneficial interest in such shares and the undersigned will not sell,
hypothecate, or otherwise transfer his shares except in accordance with the Act
and applicable state securities laws or unless in the opinion of counsel for the
Company, an exemption from the registration requirements of the Act and such
laws is available; and (ii) the Company is under no obligation to register the
shares on behalf of the undersigned or to assist the undersigned in complying
with any exemption from registration.
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(b) The undersigned has such knowledge and experience in financial and
business matters that the undersigned is capable of evaluating the merits and
risks of investment in the Company and of making an informed investment
decision.
In full payment of the purchase price with respect to the Option
exercised, the undersigned hereby tenders payment of $___________ by certified
check or official bank cashier's check or money order payable in Canadian or
United States currency to the order of DUSA Pharmaceuticals, Inc.
Dated: X
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(Signature)
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Name (Please Print)
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(Address)
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Taxpayer Identification Number
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