EX-4.2



 





EXHIBIT (4.2)



NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.




COMMON STOCK PURCHASE WARRANT




DUSA PHARMACEUTICALS, INC.




	 	 	 
	Warrant Shares: [                    ]

	 	Initial Exercise Date: April 30, 2008
	 

	 	Issue Date: October 29, 2007






          THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received,
                     (the “Holder”) is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after the Initial Exercise
Date and on or prior to the close of business on the five (5) year anniversary of the Initial
Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase
from DUSA Pharmaceuticals, Inc., a New Jersey corporation (the “Company”), up to                    
shares (the “Warrant Shares”) of common stock , no par value per share, of the Company (the
“Common Stock”). The purchase price of one share of Common Stock under this Warrant shall
be equal to the Exercise Price, as defined in Section 2(b).




     Section 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase Agreement (the
“Purchase Agreement”), dated October 29, 2007, among the Company and the purchasers
signatory thereto.



     Section 2. Exercise.




     a) Exercise of Warrant. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on or after the Initial
Exercise Date and on or before the Termination Date by delivery to the Company of a duly
executed facsimile copy of the Notice of Exercise Form annexed hereto (or such other office
or agency of the Company as it may designate by notice in writing to the registered Holder
at the address of the Holder appearing on the books of the Company);



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and, within 3 Trading Days of the date said Notice of Exercise is delivered to the
Company, the Company shall have received payment of the aggregate Exercise Price of the
Warrant Shares thereby purchased by wire transfer or cashier’s check drawn on a United
States bank. Notwithstanding anything herein to the contrary, the Holder shall not be
required to physically surrender this Warrant to the Company until the Holder has purchased
all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in
which case, the Holder shall surrender this Warrant to the Company for cancellation within 3
Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial
exercises of this Warrant resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the outstanding number of
Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant
Shares purchased. The Holder and the Company shall maintain records showing the number of
Warrant Shares purchased and the date of such purchases. The Company shall deliver any
objection to any Notice of Exercise Form within two (2) Business Days of receipt of such
notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree
that, by reason of the provisions of this paragraph, following the purchase of a portion of
the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder
at any given time may be less than the amount stated on the face hereof.




     b) Exercise Price. The exercise price per share of the Common Stock under this
Warrant shall be $2.85, subject to adjustment hereunder (the “Exercise Price”).




     c) Cashless Exercise. If at any time after the earlier of (i) the one year
anniversary of the date of the Purchase Agreement and (ii) the completion of the
then-applicable holding period required by Rule 144, or any successor provision then in
effect, which would allow “tacking” of the holding period of this Warrant and the Warrant
Shares pursuant to the SEC Manual of Publicly Available Telephone Interpretations or other
Commission rule or guidance, there is no effective Registration Statement registering, or no
current prospectus available for, the resale of the Warrant Shares by the Holder at a time
when such Registration Statement is required to be effective pursuant to the Registration
Rights Agreement, then this Warrant may also be exercised at such time by means of a
“cashless exercise” in which the Holder shall be entitled to receive a certificate for the
number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:




	 	(A)	 	= the VWAP on the Trading Day immediately preceding the date
of such election;
	 
	 	(B)	 	= the Exercise Price of this Warrant, as adjusted; and
	 
	 	(X)	 	= the number of Warrant Shares issuable upon exercise of all of
this Warrant or, if only a portion of this Warrant is
   being exercised, the
portion of this Warrant being exercised, in accordance with the terms of this
Warrant by 
   means of a cash exercise rather than a cashless exercise.







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     d) Exercise Limitations.



The Company shall not effect any exercise of this Warrant, and a Holder shall
not have the right to exercise any portion of this Warrant, pursuant to
Section 2 or otherwise, to the extent that after giving effect to such
issuance after exercise as set forth on the applicable Notice of Exercise, the
Holder (together with the Holder’s Affiliates, and any other person or entity
acting as a group together with the Holder or any of the Holder’s Affiliates),
would beneficially own in excess of the Beneficial Ownership Limitation (as
defined below).  For purposes of the foregoing sentence, the number of shares
of Common Stock beneficially owned by the Holder and its Affiliates shall
include the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which such determination is being made, but shall
exclude the number of shares of Common Stock which would be issuable upon (A)
exercise of the remaining, nonexercised portion of this Warrant beneficially
owned by the Holder or any of its Affiliates and (B) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Common Stock Equivalents) subject
to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its affiliates. 
Except as set forth in the preceding sentence, for purposes of this Section
2(d), beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Holder that the Company is not
representing to the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for any
schedules required to be filed in accordance therewith and any forms required
to be filed in accordance with Section 16 of the Exchange Act. To the extent
that the limitation contained in this Section 2(d) applies, the determination
of whether this Warrant is exercisable (in relation to other securities owned
by the Holder together with any Affiliates) and of which portion of this
Warrant is exercisable shall be in the reasonable discretion of the Holder,
and the submission of a Notice of Exercise shall be deemed to be the Holder’s
determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates) and of which
portion of this Warrant is exercisable, in each case subject to the Beneficial
Ownership Limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a determination as
to any group status as contemplated above shall be determined in accordance
with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. For purposes of this Section 2(d), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (x) the Company’s most
recent periodic or annual report, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company’s Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of a Holder,



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the Company shall within two Trading Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding.  In any case,
the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates since the date as of
which such number of outstanding shares of Common Stock was reported. The
“Beneficial Ownership Limitation” shall be 4.99% of the number of shares
of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon exercise of this Warrant.
The limitations contained in this Section 2(d) shall apply to any successor
holder of this Warrant. The Holder, upon not less than 61 days’ prior notice
to the Company, may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(d), provided that the Beneficial Ownership
Limitation in no event exceeds 9.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of shares of
Common Stock upon exercise of this Warrant held by the Holder and the
provisions of this Section 2(d) shall continue to apply. Upon such a change
by a Holder of the Beneficial Ownership Limitation from such 4.99% limitation
to such 9.99% limitation, the Beneficial Ownership Limitation may not be
further waived by such Holder. Any such increase or decrease will not be
effective until the 61st day after such notice is delivered to the
Company. The provisions of this paragraph shall be construed and implemented
in a manner otherwise than in strict conformity with the terms of this Section
2(d) to correct this paragraph (or any portion hereof) which may be defective
or inconsistent with the intended Beneficial Ownership Limitation herein
contained or to make changes or supplements necessary or desirable to properly
give effect to such limitation. The limitations contained in this paragraph
shall apply to a successor holder of this Warrant.




e) Mechanics of Exercise.




     i. Delivery of Certificates Upon Exercise. Certificates for shares
purchased hereunder shall be transmitted by the transfer agent of the
Company to the Holder by crediting the account of the Holder’s prime broker
with the Depository Trust Company through its Deposit Withdrawal Agent
Commission (“DWAC”) system if the Company is a participant in such
system and there is an effective Registration Statement permitting the
resale of the Warrant Shares by the Holder, and otherwise by physical
delivery to the address specified by the Holder in the Notice of Exercise
within 3 Trading Days from the delivery to the Company of the Notice of
Exercise Form, surrender of this Warrant (if required) and payment of the
aggregate Exercise Price as set forth above (“Warrant Share Delivery
Date”). This Warrant shall be deemed to have been exercised on the date
the Exercise Price is received by the Company. The Warrant Shares shall be
deemed to have been issued, and the Holder or any other person so designated
to be named therein shall be deemed to



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have become a holder of record of such shares for all purposes, as of
the date the Warrant has been exercised by payment to the Company of the
Exercise Price (or by cashless exercise, if permitted) and all taxes
required to be paid by the Holder, if any, pursuant to Section 2(e)(vi)
prior to the issuance of such shares, have been paid.




     ii. Delivery of New Warrants Upon Partial Exercise. If this
Warrant shall have been exercised in part, the Company shall, and at the
request of a Holder and upon surrender of this Warrant certificate, at the
time of delivery of the certificate or certificates representing Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights of the
Holder to purchase the unpurchased Warrant Shares called for by this
Warrant, which new Warrant shall in all other respects be identical with
this Warrant.




     iii. Rescission Rights. If the Company fails to cause its
transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to this Section 2(e)(i) by the
Warrant Share Delivery Date, then the Holder will have the right to rescind
such exercise.




     iv. Compensation for Buy-In on Failure to Timely Deliver
Certificates Upon Exercise. In addition to any other rights available
to the Holder, if the Company fails to cause its transfer agent to transmit
to the Holder a certificate or certificates representing the Warrant Shares
pursuant to an exercise on or before the second (2nd) Trading Day
after the Warrant Share Delivery Date, and if after such date the Holder is
required by its broker to purchase (in an open market transaction or
otherwise) or the Holder’s brokerage firm otherwise purchases, shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the
Warrant Shares which the Holder anticipated receiving upon such exercise (a
“Buy-In”), then the Company shall (1) pay in cash to the Holder the
amount by which (x) the Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased exceeds (y)
the amount obtained by multiplying (A) the number of Warrant Shares that the
Company was required to deliver to the Holder in connection with the
exercise at issue times (B) the price at which the sell order giving rise to
such purchase obligation was executed, and (2) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number of Warrant
Shares for which such exercise was not honored or deliver to the Holder the
number of shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations hereunder. For
example, if the Holder purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted exercise of shares
of Common Stock with an aggregate sale price giving rise to such purchase
obligation of $10,000, under clause (1) of the immediately preceding
sentence the Company shall be required to pay the Holder $1,000. The Holder
shall



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provide the Company written notice indicating the amounts payable to
the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss. Nothing herein shall limit a Holder’s
right to pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company’s failure to timely
deliver certificates representing shares of Common Stock upon exercise of
the Warrant as required pursuant to the terms hereof.




     v. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of
this Warrant. As to any fraction of a share which the Holder would
otherwise be entitled to purchase upon such exercise, the Company shall at
its election, either pay a cash adjustment in respect of such final fraction
in an amount equal to such fraction multiplied by the Exercise Price or
round up to the next whole share.




     vi. Charges, Taxes and Expenses. Issuance of certificates for
Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company,
and such certificates shall be issued in the name of the Holder or in such
name or names as may be directed by the Holder; provided,
however, that in the event certificates for Warrant Shares are to be
issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form
attached hereto duly executed by the Holder; and the Company may require, as
a condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto.




     vii. Closing of Books. The Company will not close its
stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.



     Section 3. Certain Adjustments.




     a) Stock Dividends and Splits. If the Company, at any time while this Warrant
is outstanding: (A) pays a stock dividend or otherwise make a distribution or distributions
on shares of its Common Stock or any other equity or equity equivalent securities payable in shares
of Common Stock (which, for avoidance of doubt, shall not include any shares of Common
Stock issued by the Company upon exercise of this Warrant), (B) subdivides
outstanding shares of Common Stock into a larger number of shares, (C) combines (including
by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares,
or (D) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company, then in each case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding



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immediately before such event and of which the denominator shall be the number of shares
of Common Stock outstanding immediately after such event and the number of shares
issuable upon exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made
pursuant to this Section 3(a) shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or distribution and
shall become effective immediately after the effective date in the case of a subdivision,
combination or re-classification.




     b) [Intentionally Omitted].




     c) Subsequent Rights Offerings. If the Company, at any time while the Warrant
is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and
not to Holders) entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the VWAP at the record date mentioned below, then the Exercise
Price shall be multiplied by a fraction, of which the denominator shall be the number of shares
of the Common Stock outstanding on the date of issuance of such rights or warrants
plus the number of additional shares of Common Stock offered for subscription or purchase,
and of which the numerator shall be the number of shares of the Common Stock outstanding on
the date of issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered (assuming receipt by the
Company in full of all consideration payable upon exercise of such rights, options or
warrants) would purchase at such VWAP. Such adjustment shall be made whenever such rights
or warrants are issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or warrants.




     d) Pro Rata Distributions. If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to the Holders of the
Warrants) evidences of its indebtedness or assets (including cash and cash dividends) or
rights or warrants to subscribe for or purchase any security other than the Common Stock
(which shall be subject to Section 3(b)), then in each such case the Exercise Price shall be
adjusted by multiplying the Exercise Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by a fraction
of which the denominator shall be the VWAP determined as of the record date mentioned above,
and of which the numerator shall be such VWAP on such record date less the then per share
fair market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the adjustments shall be
described in a statement provided to the Holder of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.




	 	e)	 	Fundamental Transaction. If, at any time while this
Warrant is outstanding, (A) the Company effects any merger or consolidation of
the Company with or




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	 	 	 	into another Person, (B) the Company effects any sale of all or substantially
all of its assets in one or a series of related transactions, (C) any tender
offer or exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, or (D) the Company effects
any reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or exchanged
for other securities, cash or property (each “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the
right to receive, for each Warrant Share that would have been issuable upon such
exercise immediately prior to the occurrence of such Fundamental Transaction,
the number of shares of Common Stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”) receivable as a result of
such merger, consolidation or disposition of assets by a Holder of the number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to such event. For purposes of any such exercise, the determination of the
Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions,
any successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions
and evidencing the Holder’s right to exercise such warrant into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 3(e) and insuring
that this Warrant (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.
Notwithstanding anything to the contrary, in the event of a Fundamental
Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction”
as defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended,
or (3) a Fundamental Transaction involving a person or entity not traded on a
national securities exchange, the Nasdaq Global Select Market, the Nasdaq Global
Market, or the Nasdaq Capital Market, the Company or any successor entity shall
pay at the Holder’s option, exercisable at any time concurrently with or within
30 days after the consummation of the Fundamental Transaction, an amount of cash
equal to the value of this




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	 	 	 	Warrant as determined in accordance with the intrinsic value of the Fundamental
Transaction using (i) a price per share of Common Stock equal to the VWAP of the
Common Stock for the Trading Day immediately preceding the date of consummation
of the applicable Fundamental Transaction, (ii) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining term
of this Warrant as of the date of consummation of the applicable Fundamental
Transaction and (iii) an expected volatility equal to the 100 day volatility
obtained from the “HVT” function on Bloomberg L.P. determined as of the Trading
Day immediately following the public announcement of the applicable Fundamental
Transaction.






     f) Calculations. All calculations under this Section 3 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this
Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding treasury
shares, if any) issued and outstanding.




     g) Notice to the Holder.




     i. Adjustment to Exercise Price. Whenever the Exercise Price is
adjusted pursuant to any provision of this Section 3, the Company shall
promptly mail to the Holder a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment.




     ii. Notice to Allow Exercise by the Holder. If (A) the Company
shall declare a dividend (or any other distribution in whatever form) on the
Common Stock; (B) the Company shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants
to subscribe for or purchase any shares of capital stock of any class or of
any rights; (D) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be mailed to the
Holder at its last address as it shall appear upon the Warrant Register of
the Company, at least 20 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date
as of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or



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warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to mail such
notice or any defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such notice.
The Holder is entitled to exercise this Warrant during the period commencing
on the date of such notice and ending on the date prior to the effective
date of the event triggering such notice.



     Section 4. Transfer of Warrant.




     a) Transferability. Subject to compliance with any applicable securities laws
and the conditions set forth in Section 4(d) hereof and to the provisions of Section 4.1 of
the Purchase Agreement, this Warrant and all rights hereunder (including, without
limitation, any registration rights) are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company or its designated agent, together
with a written assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination or denominations specified in such instrument
of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned, may be exercised by a new holder for the purchase of Warrant Shares
without having a new Warrant issued.




     b) New Warrants. This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new warrants are to be issued, signed
by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any
transfer which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice. All Warrants issued on transfers or exchanges
shall be dated the original Issue Date and shall be identical with this Warrant except as to
the number of Warrant Shares issuable pursuant thereto.




     c) Warrant Register. The Company shall register this Warrant, upon records to
be maintained by the Company for that purpose (the “Warrant Register”), in the name
of the record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes, absent actual
notice to the contrary.



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     d) Transfer Restrictions. If, at the time of the surrender of this Warrant in
connection with any transfer of this Warrant, the transfer of this Warrant shall not be
registered pursuant to an effective registration statement under the Securities Act and
under applicable state securities or blue sky laws (it being understood by the Holder that
the Company is not obligated to so register this Warrant and does not, presently, intend to
do so), the Company may require, as a condition of allowing such transfer, that the Holder
or transferee of this Warrant, as the case may be, furnish to the Company a written opinion
of counsel (which opinion shall be in form, substance and scope customary for opinions of
counsel in comparable transactions and reasonably satisfactory to the Company) to the effect
that such transfer may be made without registration under the Securities Act and under
applicable state securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and substance acceptable to the Company
and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a)(1),
(a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities Act or a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities Act.



Section 5. Representation of the Holder.




          a) Acquisition of Warrant for Personal Account. The Holder represents and warrants
that it is acquiring this Warrant and the Warrant Shares solely for its own account and not with a
present view toward the public sale or public distribution of said Warrant or Warrant Shares or any
part thereof and has no intention of selling or distributing said Warrant or Warrant Shares or any
arrangement or understanding with any other persons regarding the sale or distribution of said
Warrant or the Warrant Shares, expect as would not result in a violation of the Securities Act.




          b) Securities Are Not Registered.




               (i) The Holder understands that the offer and sale of neither the Warrant nor the Warrant
Shares has been registered under the Securities Act.



               (ii) The Holder recognizes that the Warrant and the Warrant Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption from such
registration is available. The Holder recognizes that the Company has no obligation to register
the Warrant or, except as provided in the Registration Rights Agreement of even date herewith by
and amount the parties to the Purchase Agreement, the Warrant Shares, or to comply with any
exemption from such registration.



               (iii) The Holder is aware that neither the Warrant nor the Warrant Shares may be sold pursuant
to Rule 144 adopted under the Securities Act unless certain conditions are met, including, among
other things, the availability of certain current public information about the Company and the
expiration of the required holding period under Rule 144.




11









 




     Section 6. Miscellaneous.




     a) No Rights as Shareholder Until Exercise. This Warrant does not entitle the
Holder to any voting rights or other rights as a shareholder of the Company prior to the
exercise hereof as set forth in Section 2(e)(i).




     b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock certificate relating to the
Warrant Shares, and in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it (which, in the case of the Warrant, shall not include the
posting of any bond), and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.




     c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein shall not be
a Business Day, then such action may be taken or such right may be exercised on the next
succeeding Business Day.




     d) Authorized Shares.




	 	i.	 	The Company covenants that during
the period the Warrant is outstanding, it will reserve from its
authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon
the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant
shall constitute full authority to its officers who are charged
with the duty of executing stock certificates to execute and
issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to
assure that such Warrant Shares may be issued as provided herein
without violation of any applicable law or regulation, or of any
requirements of the Trading Market upon which the Common Stock
may be listed. The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights
represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant, be duly authorized, validly
issued, fully paid and nonassessable and free from all taxes,
liens and charges created by the Company in respect of the issue
thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
	 
	 	ii.	 	Except and to the extent as
waived or consented to by the Holder, the Company shall not by
any action, including, without limitation, amending its
certificate of incorporation or through




12









 






	 	 	 	any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of the Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares
above the amount payable therefor upon such exercise immediately
prior to such increase in par value, (b) take all such action as
may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable Warrant
Shares upon the exercise of this Warrant, and (c) use commercially
reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.
	 
	 	iii.	 	Before taking any action which
would result in an adjustment in the number of Warrant Shares
for which this Warrant is exercisable or in the Exercise Price,
the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any
public regulatory body or bodies having jurisdiction thereof.






     e) Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance with the
provisions of the Purchase Agreement.




     f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon
the exercise of this Warrant, if not registered, will have restrictions upon resale imposed
by state and federal securities laws.




     g) Nonwaiver and Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding the
fact that all rights hereunder terminate on the Termination Date. If the Company willfully
and knowingly fails to comply with any provision of this Warrant, which results in any
material damages to the Holder, the Company shall pay to the Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to, reasonable
attorneys’ fees, including those of appellate proceedings, incurred by the Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.



13









 






     h) Notices. Any notice, request or other document required or permitted to be
given or delivered to the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.




     i) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall give rise to any
liability of the Holder for the purchase price of any Common Stock or as a stockholder of
the Company, whether such liability is asserted by the Company or by creditors of the
Company.




     j) Remedies. The Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to seek specific performance
of its rights under this Warrant. The Company agrees that monetary damages may not be
adequate compensation for any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the defense in any action for
specific performance that a remedy at law would be adequate.




     k) Successors and Assigns. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the benefit of and be binding
upon the successors of the Company and the successors and permitted assigns of the Holder.
The provisions of this Warrant are intended to be for the benefit of all Holders from time
to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.




     l) Amendment. This Warrant may be modified or amended or the provisions hereof
waived with the written consent of the Company and the Holder.




     m) Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of this Warrant.




     n) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.



********************




14









 








          IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer
thereunto duly authorized as of the Issue Date.




	 	 	 	 	 
	 	DUSA PHARMACEUTICALS, INC.

 	 
	 	By:  	/s/  Richard Christopher	 
	 	 	Name:  Richard Christopher	 	 
	 	 	Title:    VP Finance
& CFO	 	 
	 




15












 





NOTICE OF EXERCISE




TO: DUSA PHARMACEUTICALS, INC.




               (1) The undersigned hereby elects to purchase                      Warrant Shares of the Company pursuant
to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of
the exercise price in full, together with all applicable transfer taxes, if any.



               (2) Payment shall take the form of (check applicable box):




[ ] in lawful money of the United States; or




[ ] [if permitted] the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise procedure set forth in
subsection 2(c).



               (3) Please issue a certificate or certificates representing said Warrant Shares in the name of
the undersigned or in such other name as is specified below:




                                                            


The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery
of a certificate to:





                                                            




                                                            




                                                            



               (4) Accredited Investor. The undersigned is an “accredited investor” as defined in
Regulation D promulgated under the Securities Act of 1933, as amended.



[SIGNATURE OF HOLDER]




	 	 	 
	Name of Investing Entity:
	 	 
	 

	 	 






			
	Signature of Authorized Signatory of Investing Entity:
	 	 
	 

	 	 





			
	Name of Authorized Signatory:
	 	 
	 

	 	 





			
	Title of Authorized Signatory:
	 	 
	 

	 	 





			
	Date: 
	 	 
	 

	 	 





 









 





ASSIGNMENT FORM




(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)




               FOR VALUE RECEIVED, [     ] all of or [                    ] shares of the foregoing Warrant and all rights
evidenced thereby are hereby assigned to



	 	 	 	 	 
	 


	 	whose address is	 	 
	 
	 	 	 	 
	 	 	.
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 





	 	 	 	 	 	 	 	 	 
	 

	 	Dated:	 	 	 	 	 	 
	 

	 	 	 	 

	,	 

	 	 






	 	 	 	 	 	 	 
	 

	 	Holder’s Signature:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Holder’s Address:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 






	 	 	 	 	 
	Signature Guaranteed:
	 	 	 	 
	 

	 	 

	 	 





NOTE: The signature to this Assignment Form must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign the foregoing
Warrant.