This Agreement
(“Agreement”) made effective as of this 1st day of
December, 2008 (the “Effective Date”), between DUSA
Pharmaceuticals, Inc., a New Jersey corporation
(“DUSA”) and D. Geoffrey Shulman, MD, FRCPC
(“Dr. Shulman”).
WHEREAS, pursuant
to the terms of an Employment Agreement dated March 20, 1997,
(the “Employment Agreement”) Dr. Shulman currently
serves as the Chief Strategic Officer and the Chairman of the Board
of Directors of DUSA (the “Board”).
WHEREAS, in light
of Dr. Shulman’s current health issues and other
circumstances, DUSA desires to terminate the Employment Agreement
and DUSA and Dr. Shulman desire to enter into this Agreement
to set forth and describe the terms and conditions under which
Dr. Shulman will accept the severance payment under his
Employment Agreement and continue providing services to DUSA as a
part-time consultant, and the parties intend that this Agreement
supersede any and all other existing agreements between DUSA and
Dr. Shulman unless specifically provided for in this
Agreement.
NOW THEREFORE, in
consideration of the mutual covenants and promises, the parties
agree as follows:
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1.
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Services : DUSA and Dr. Shulman agree
that, as of the Effective Date, Dr. Shulman shall provide
consulting services to DUSA and shall resign from management
activities and, in particular, from his position as the Chief
Strategic Officer of DUSA. Dr. Shulman agrees to devote his
best efforts to perform services (health permitting) for up to
thirty-three (33) hours per month to further the goals of DUSA, to
consult on matters as requested by the Chief Executive Officer of
DUSA from time to time, to monitor the dermatology community with
respect to photodynamic therapy and photodetection technologies and
products and other issues of interest to DUSA, to participate in
science-related company meetings and attend medical conferences as
requested by DUSA with reasonable advance notice, and take on such
other responsibilities as the Board of Directors or Chief Executive
Officer of DUSA may reasonably request from time to time.
Dr. Shulman shall report his activities on a monthly basis, in
writing, to DUSA’s Chief Executive Officer.
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2.
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Board of Directors
: Dr. Shulman
hereby resigns from the DUSA Board of Directors and from the
position of the Chairman of the Board.
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3.
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Term : The term of this Agreement shall
commence on the Effective Date and shall expire on the second (2nd)
anniversary of the Effective Date. The term of this Agreement may
be extended on the mutual agreement of the parties on terms to be
discussed.
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4.
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Severance Payment/Consulting
Fees :
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(a)
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Dr. Shulman shall be paid
twelve (12) months severance under the terms of the Employment
Agreement in the amount of Three Hundred Seventy-Nine Thousand
Eighty Dollars ($379,080.00) upon termination of the Employment
Agreement which shall be effective on the Effective Date, except as
expressly provided for herein.
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(b)
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As
of the Effective Date, DUSA shall pay to Dr. Shulman
consulting fees equal to U.S. $175,000 per annum. If
Dr. Shulman’s services are requested for time in excess
of the time stated in Paragraph 1 and Dr. Shulman wishes
to provide such additional time to DUSA, DUSA shall pay Dr. Shulman
at the rate of $250.00 per hour. DUSA shall pay the consulting fees
due to Dr. Shulman monthly. Dr. Shulman will complete
appropriate forms as provided by DUSA, which will be completed on
or prior to execution of this Agreement.
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(c)
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Dr. Shulman will be responsible
for the payment of taxes on his entire compensation under this
Agreement, including without limitation, income taxes, social
security taxes (or the Canadian equivalent) and other or similar
taxes required by application of law. DUSA shall not withhold any
taxes in connection with the compensation paid to Dr. Shulman
hereunder. Such payments shall be the sole responsibility of
Dr. Shulman, and Dr. Shulman agrees to file all required
forms and make all required payments appropriate to his tax status
when and as they become due. Dr. Shulman agrees to indemnify
DUSA, and each of its officers, directors and employees from and
against all payments, losses, costs, liability, expenses, damages,
fines, penalties or judgments (including without limitation actual
attorneys fees and expenses) as a result of a failure by
Dr. Shulman: (a) to pay all the taxes due in connection
with the compensation paid to Dr. Shulman under this
Agreement, (b) to respond to any administrative inquiry
concerning Dr. Shulman’s payment of such taxes, or
(c) to defend against any administrative or judicial
proceeding with respect to Dr. Shulman’s payment of such
taxes. In addition, DUSA may reduce any payments described in this
Agreement by any amount that Dr. Shulman owes DUSA. All
monetary references made herein shall refer to U.S.
dollars.
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(a)
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Bonus/Equity Compensation
. Dr. Shulman shall
be considered for bonuses and equity compensation by the
Compensation Committee or the Board of Directors pursuant to
company policy which Dr. Shulman understands are decisions
made in the sole discretion of the Committee and/or Board of
Directors and is, therefore, not a commitment for any such bonus or
equity compensation. Dr. Shulman is an independent contractor
and shall not be deemed an employee of DUSA for any purpose. He
shall not be entitled to receive from DUSA any medical, pension or
profit sharing plan, or other fringe benefits which may be made
available to the employees of DUSA from time to time, unless
expressly provided for in this Agreement.
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(b)
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Offset for Other Benefit
Claims . To
the extent Dr. Shulman makes a successful claim for severance
and/or benefits under any other plan or arrangement which must be
paid by DUSA or its affiliates (other than for items that are
expressly provided for herein in this Agreement), the amount of
such severance payments shall be deducted, on a dollar for dollar
basis, from any benefits payable to Dr. Shulman.
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6.
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Expenses : DUSA agrees that it will reimburse
Dr. Shulman for all reasonable and authorized traveling and
other out-of-pocket expenses actually and properly incurred by Dr.
Shulman in connection with his consulting duties upon provision of
appropriate statements, vouchers, bills and invoices as and when
required by DUSA. Travel and out-of-pocket expenses shall be
invoiced monthly and payments shall be payable within thirty
(30) days of receipt of the invoice from Dr. Shulman.
DUSA shall reimburse Dr. Shulman, up to Canadian $30,000, for
any fees for professional services (including legal, accounting,
disability/tax planning and/or insurance consulting fees) he incurs
prior to the Effective Date in connection with the negotiation,
terms and drafting of this Agreement.
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7.
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Extension of Exercise Period;
Post-Termination Vesting :
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(a)
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Dr. Shulman’s ownership
interest with respect to his restricted stock award shall be
accelerated and vest in its entirety on the Effective
Date.
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(b)
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Dr. Shulman shall have the
right to exercise for a period of one (1) year from the
Effective Date all Options granted to him prior to the Effective
Date 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, as applicable.
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8.
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Healthcare Related
Reimbursement. For the period commencing on
March 1, 2008 and ending on February 28, 2013, DUSA shall
reimburse Dr. Shulman up to $50,000 per year for any direct
medical-related expenses and prescription drug expenses he incurs
in connection with a bona fide medical condition, to the extent
that such expenses are not covered by any health plan in which he
participates. Dr. Shulman shall not be reimbursed for the cost
of any medical insurance premiums.
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9.
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Confidential Information;
Noncompetition :
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(a)
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Dr. Shulman shall not, during
the term of this Agreement: (i) and for a period of two
(2) years following the termination of this Agreement,
disclose to any person, other than in the necessary course of
business, any private, confidential or secret information that
belongs to DUSA (“DUSA Confidential Information”); or
(ii) except to the extent such activities are authorized, in
writing, by DUSA, which authorization shall not be unreasonably
withheld and which shall be deemed granted in the event DUSA does
not respond, in writing, within 20 business days following
DUSA’s receipt of Dr. Shulman’s written request for
such authorization, engage in any business activity in direct
competition with (by way of example without limitation, for the
same indication) the “Business of DUSA” conducted or
proposed during the term of this Agreement in any part of the world
in which DUSA is doing business or actively pursuing business;
provided, however, that (A) Dr. Shulman’s
participation in the private practice of dermatology and
(B) ownership of less than 5% of an equity interest in a
business entity in which Dr. Shulman does not consult, advise
or otherwise provide services, shall not be considered a business
in competition with the Business of DUSA. The “Business of
DUSA” means: (1) the business of research,
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development
and/or marketing of Photodynamic Therapy (PDT) or
Photodetection (PD) technology or on the treatment of actinic
keratoses ; (2) the development and/or marketing of
ClindaReach ® , Nicomide ® , Nicomide-T ® , Meted ® , Levulan ® , Kerastick ® , BLU-U ® , endoscopic sheath device or products directly
competitive (i.e., medically or therapeutically) with such
products, and other complementary dermatology products currently
being marketed or developed by DUSA or that become actively
marketed or under development during Dr. Shulman’s
employment or consultancy with DUSA and (3) products or business
opportunities that are being evaluated by DUSA or that become under
consideration for license, acquisition, marketing or development
during Dr. Shulman’s prior employment or this consultancy
with DUSA, unless DUSA finally rejects such opportunities during
Dr. Shulman’s consultancy with DUSA. For greater
certainty, Dr. Shulman will not be in breach of his
non-competition obligations where, for example, he is involved in
the marketing or development of a product that is not directly
competitive with DUSA’s products and employs chemical
entities, processes or mechanisms that are substantively different
than the chemical entities, processes or mechanisms employed by
products that were marketed or under development by DUSA during
Dr. Shulman’s employment or consultancy with
DUSA.
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Without
limiting the generality of the foregoing, Dr. Shulman shall
not disclose, among other things, any information about:
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(i)
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newly developed products of
DUSA;
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(ii)
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manufacturing processes and
technologies;
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(iii)
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research in progress and any
unpublished formula, findings, manuals, or know-how;
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(iv)
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regulatory filings;
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(v)
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identity of and relationships to
licensees of DUSA;
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(vi)
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finances, financial information and
financial management systems of DUSA and any other research,
information or documents which he knows or reasonably ought to know
that DUSA regards as proprietary or confidential to any person
other than for DUSA’s purposes and shall not use for his
purposes or for any purposes of DUSA any such information or
secrets which he may acquire in relation to the business of
DUSA.
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(b)
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Notwithstanding any of the foregoing
in this section, information, whether confidential or proprietary
or not, shall be exempt from the above confidentiality provisions
if said information:
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(i)
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was
in the public domain prior to the date of DUSA’s
incorporation;
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(ii)
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which has subsequently become public
or which becomes public at any time through no fault of
Dr. Shulman; or
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(iii)
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is
or in the future becomes readily available from third parties who
have no confidentiality obligations to DUSA.
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(c)
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Dr. Shulman agrees that DUSA is
and remains the exclusive owner of all DUSA Confidential
Information, including without limitation, all patent, copyright,
trade secret, trademark and other intellectual property rights
therein. No license or any other right, including any right of
ownership, is granted to Dr. Shulman by this Agreement or by
any disclosure under this Agreement. Title to all inventions,
whether or not patentable, conceived or reduced to practice or
derived from, or relying on the DUSA Confidential Information
hereunder, including but not limited to inventions involving DUSA
Confidential Information (“Inventions”), shall be owned
by DUSA.
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(d) (i)
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Dr. Shulman agrees that all
copyrights, patents, trade secrets, or other intellectual property
rights associated with any ideas, concepts, techniques, inventions,
processes, or works of authorship developed or created by
Dr. Shulman during the course of performing the services under
this Agreement (collectively, the “Work Product”) shall
belong exclusively to DUSA and shall, to the extent possible, be
considered a “work made for hire” for DUSA. To the
extent such work is determined not to constitute “works made
for hire” as a matter of law, Dr. Shulman hereby
irrevocably assigns and transfers to DUSA, as of the time of
creation of the Work Product, any and all right, title, or interest
he may have in such Work Product. Upon request of DUSA and at
DUSA’s expense, Dr. Shulman shall take such further
actions, including execution and delivery of instruments of
conveyance necessary to obtain legal protection in the United
States and foreign countries for such Work Product and for the
purpose of vesting title thereto in DUSA, or its nominee, as may be
appropriate to give full and proper effect to such assignment and
to vest in DUSA complete title and ownership to such Work
Product.
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(ii)
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Notwithstanding anything to the
contrary herein, Dr. Shulman shall be free to use and employ
his general skills, know-how, and expertise, and to use, disclose,
and employ any generalized ideas, concepts, know-how, methods,
techniques, or skills gained or learned during the course of any
assignment, so long as Dr. Shulman acquires and applies such
information without disclosure of any DUSA Confidential
Information, without any unauthorized use or disclosure of Work
Product and without breach of the non-competition obligations set
forth in this Agreement.
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10.
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Change of Control
. In the event of a
“Change of Control” (as defined below) arising only out
of a transaction between DUSA and Stiefel Laboratories, Inc. or any
affiliate thereof during the term of his employment or consultancy,
Dr. Shulman shall be entitled, within five (5) days of
the closing date of such event, to receive a lump sum payment equal
to three (3) times his annual consulting fees hereunder (i.e.,
$175,000). For purposes of this Agreement, a “Change of
Control” shall mean a change of control of a nature that
would be required to be reported in response to Item 5 of
Schedule 14D promulgated pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the “1934
Act”), whether or not DUSA is then subject to such reporting
requirements;
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