Document:

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.EX-4.3

 

EXHIBIT(4.3)

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) is made and entered into as of
October 29, 2007, between DUSA Pharmaceuticals, Inc., a New Jersey corporation (the
“Company”) and each of the several purchasers signatory hereto (each such purchaser, a
“Purchaser” and, collectively, the “Purchasers”).

          This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date
hereof, between the Company and each Purchaser (the “Purchase Agreement”).

          The Company and each Purchaser hereby agrees as follows:

     1. Definitions

          Capitalized terms used and not otherwise defined herein that are defined in the Purchase
Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:

     “Advice” shall have the meaning set forth in Section 6(d).

     “Effectiveness Date” means, with respect to the Initial Registration Statement
required to be filed hereunder, the 60th calendar day following the Filing Date
hereof (or, in the event of a “full review” by the Commission, no later than the
90th calendar day following the Filing Date) and with respect to any additional
Registration Statements which may be required pursuant to Section 3(c), the 90th
calendar day following the date on which an additional Registration Statement is required to
be filed hereunder; provided, however, that in the event the Company is
notified by the Commission that one or more of the above Registration Statements will not be
reviewed or is no longer subject to further review and comments, the Effectiveness Date as
to such Registration Statement shall be the fifth Trading Day following the date on which
the Company is so notified if such date precedes the dates otherwise required above.

     “Effectiveness Period” shall have the meaning set forth in Section 2(a).

     “Event” shall have the meaning set forth in Section 2(b).

     “Event Date” shall have the meaning set forth in Section 2(b).

     “Filing Date” means, with respect to the Initial Registration Statement
required hereunder, the 30th calendar day following the date hereof and, with
respect to any additional Registration Statements which may be required pursuant to Section
3(c), the earliest practical date on which the Company is permitted by SEC Guidance to file
such additional Registration Statement related to the Registrable Securities.

1

 

     “Holder” or “Holders” means the holder or holders, as the case may be,
from time to time of Registrable Securities.

     “Indemnified Party” shall have the meaning set forth in Section 5(c).

     “Indemnifying Party” shall have the meaning set forth in Section 5(c).

     “Initial Registration Statement” means the initial Registration Statement filed
pursuant to this Agreement.

     “Initial Shares” means a number of Registrable Securities equal to the lesser
of (i) the total number of Registrable Securities and (ii) one-third of the number of issued
and outstanding shares of Common Stock that are held by non-affiliates of the Company on the
day immediately prior to the filing date of the Initial Registration Statement.

     “Losses” shall have the meaning set forth in Section 5(a).

     “Plan of Distribution” shall have the meaning set forth in Section 2(a).

     “Prospectus” means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.

     “Registrable Securities” means (i) all Shares, (ii) all Warrant Shares
(assuming on the date of determination the Warrants are exercised in full without regard to
any exercise limitations therein), and (iii) any securities issued or issuable upon any
stock split, dividend or other distribution, recapitalization or similar event with respect
to the foregoing; provided, however, a security shall cease to be a
Registrable Security upon (A) sale pursuant to a registration statement or Rule 144 under
the Securities Act (or successor rule), or (B) such security becoming eligible for sale
pursuant to Rule 144(k) under the Securities Act (or successor rule).

     “Registration Statement” means the registration statement required to be filed
hereunder and any additional registration statements contemplated by Section 3(c), including
(in each case) the Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in such
registration statement.

2

 

     “Rule 415” means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.

     “Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.

     “Selling Shareholder Questionnaire” shall have the meaning set forth in Section
3(a).

     “SEC Guidance” means (i) any publicly-available written or oral guidance,
comments, requirements or requests of the Commission staff and (ii) the Securities Act.

     2. Shelf Registration

     (a) On or prior to each Filing Date, the Company shall prepare and file with the
Commission a Registration Statement covering the resale of all or such maximum portion of
the Registrable Securities as permitted by SEC Guidance (provided that the Company shall use
diligent efforts to advocate with the Commission for the registration of all of the
Registrable Securities in accordance with the SEC Guidance, including without limitation,
the Manual of Publicly Available Telephone Interpretations D.29) that are not then
registered on an effective Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the
Company is not then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in accordance herewith)
and shall contain (unless otherwise directed by at least an 85% majority in interest of the
Holders) substantially the “Plan of Distribution” attached hereto as Annex
A. Subject to the terms of this Agreement, the Company shall use its reasonable efforts
to cause a Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the applicable
Effectiveness Date, and shall use its reasonable efforts to keep such Registration Statement
continuously effective under the Securities Act until all Registrable Securities covered by
such Registration Statement have been sold, or may be sold without volume restrictions
pursuant to Rule 144(k), as determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Transfer Agent and the
affected Holders (the “Effectiveness Period”). The Company shall request
effectiveness of a Registration Statement following the close of the Trading Market New York
City time on a Trading Day. The Company shall promptly notify the Holders via facsimile or
by e-mail of the effectiveness of a Registration Statement on the same Trading Day that the
Company telephonically confirms effectiveness with the Commission. The Company shall
promptly after the effective date of such Registration Statement, file a final Prospectus
with the Commission as required by Rule 424. Failure to notify the Holder within 2 Trading
Days of such

3

 

notification of effectiveness or failure to file a final Prospectus as foresaid within
2 Trading Days shall be deemed an Event under Section 2(b). Notwithstanding any other
provision of this Agreement and subject to the payment of liquidated damages pursuant to
Section 2(b), if any SEC Guidance sets forth a limitation on the number of Registrable
Securities permitted to be registered on a particular Registration Statement (and
notwithstanding that the Company used diligent efforts to advocate with the Commission for
the registration of all or a greater portion of Registrable Securities), unless otherwise
directed in writing by a Holder as to its Registrable Securities, the number of Registrable
Securities to be registered on such Registration Statement will first be reduced by
Registrable Securities represented by Warrant Shares (applied, in the case that some Warrant
Shares may be registered, to the Holders on a pro rata basis based on the total number of
unregistered Warrant Shares held by such Holders), and second by Registrable Securities
represented by Shares (applied, in the case that some Shares may be registered, to the
Holders on a pro rata basis based on the total number of unregistered Conversion Shares held
by such Holders); provided, however, that, prior to any reduction in the
number of Registrable Securities included in a Registration Statement as set forth in this
sentence, the number of shares of Common Stock set forth on Schedule 6(b) hereto which shall
have been included on such Registration Statement shall be reduced by up to 100%.

     (b) If: (i) the Initial Registration Statement is not filed on or prior to its Filing
Date (if the Company files the Initial Registration Statement without affording the Holders
the opportunity to review and comment on the same as required by Section 3(a) herein, the
Company shall be deemed to have not satisfied this clause (i)), or (ii) the Company fails to
file with the Commission a request for acceleration of a Registration Statement in
accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act,
within five Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that such Registration Statement will not be
“reviewed” or will not be subject to further review, or (iii) prior to the effective date of
a Registration Statement, the Company fails to file a pre-effective amendment and otherwise
respond in writing to comments made by the Commission in respect of such Registration
Statement within 15 calendar days after the receipt of comments by or notice from the
Commission that such amendment is required in order for such Registration Statement to be
declared effective, or (iv) as to, in the aggregate among all Holders on a pro-rata basis
based on their purchase of the Securities pursuant to the Purchase Agreement, a Registration
Statement registering for resale all of the Initial Shares is not declared effective by the
Commission by the Effectiveness Date of the Initial Registration Statement, or (v) all of
the Registrable Securities are not registered for resale pursuant to one or more effective
Registration Statements on or before April 30, 2008, or (vi) after the effective date of a
Registration Statement, such Registration Statement ceases for any reason to remain
continuously effective as to all Registrable Securities included in such Registration
Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to
resell such Registrable Securities, for more than 15 consecutive calendar days or more than
an aggregate of 25 calendar days (which need not be consecutive calendar days) during any
12-month period (any such failure or breach being referred to as an “Event”, and for
purposes of clause (i), (iv) and (v) the date on which such Event occurs, and for purpose of
clause (ii) the date on which such five

4

 

Trading Day period is exceeded, and for purpose of clause (iii) the date which such 15
calendar day period is exceeded, and for purpose of clause (vi) the date on which such 15 or
25 calendar day period, as applicable, is exceeded being referred to as “Event
Date”), then, in addition to any other rights the Holders may have hereunder or under
applicable law, on each such Event Date and on each monthly anniversary of each such Event
Date (if the applicable Event shall not have been cured by such date) until the applicable
Event is cured, the Company shall pay to each Holder an amount in cash, as partial
liquidated damages and not as a penalty, equal to one percent (1.0%) of the aggregate
purchase price paid by such Holder pursuant to the Purchase Agreement for any unregistered
Registrable Securities then held by such Holder. The parties agree that (1) the Company
shall not be liable for liquidated damages under this Agreement with respect to any Warrants
or Warrant Shares and (2) the maximum aggregate liquidated damages payable to a Holder under
this Agreement shall be 12% of the aggregate Subscription Amount paid by such Holder
pursuant to the Purchase Agreement. If the Company fails to pay any partial liquidated
damages pursuant to this Section in full within 15 calendar days after the date payable, the
Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount
that is permitted to be paid by applicable law) to the Holder, accruing daily from the date
such partial liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on
a daily pro rata basis for any portion of a month prior to the cure of an Event.

3. Registration Procedures.

          In connection with the Company’s registration obligations hereunder, the Company shall:

     (a) Not less than 5 Trading Days prior to the filing of each Registration Statement and
not less than one Trading Day prior to the filing of any related Prospectus or any amendment
or supplement thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish to each Holder copies of
all such documents proposed to be filed, which documents (other than those incorporated or
deemed to be incorporated by reference) will be subject to the review of such Holders and
(ii) cause its officers and directors, counsel and independent certified public accountants
to respond to such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to each Holder, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file a Registration Statement or any such Prospectus
or any amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities shall reasonably object in good faith, provided that the Company is
notified of such objection in writing no later than 5 Trading Days after the Holders have
been so furnished copies of a Registration Statement or 1 Trading Day after the Holders have
been so furnished copies of any related Prospectus or amendments or supplements thereto.
Each Holder agrees to furnish to the Company a completed questionnaire in the form attached
to this Agreement as Annex B (a “Selling Shareholder Questionnaire”) not
less than the earlier of two (2) Trading Days prior to the Filing Date or by the end of the
fourth (4th) Trading Day

5

 

following the date on which such Holder receives draft materials in accordance with
this Section.

     (b) (i) Prepare and file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in connection therewith as
may be necessary to keep a Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and file with the
Commission such additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement (subject to the terms of this
Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible to any comments received from the Commission with
respect to a Registration Statement or any amendment thereto and provide as promptly as
reasonably possible to the Holders true and complete copies of all correspondence from and
to the Commission relating to a Registration Statement (provided that the Company may excise
any information contained therein which would constitute material non-public information as
to any Holder which has not executed a confidentiality agreement with the Company); and (iv)
comply in all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by a Registration
Statement during the applicable period in accordance (subject to the terms of this
Agreement) with the intended methods of disposition by the Holders thereof set forth in such
Registration Statement as so amended or in such Prospectus as so supplemented.

     (c) If during the Effectiveness Period, the number of Registrable Securities at any
time exceeds 100% of the number of shares of Common Stock then registered in a Registration
Statement, then the Company shall file as soon as reasonably practicable, but in any case
prior to the applicable Filing Date, an additional Registration Statement covering the
resale by the Holders of not less than the number of such Registrable Securities.

     (d) Notify the Holders of Registrable Securities to be sold (which notice shall,
pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend
the use of the Prospectus until the requisite changes have been made) as promptly as
reasonably possible and (if requested by any such Person) confirm such notice in writing
promptly following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to a Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a “review” of such Registration
Statement and whenever the Commission comments in writing on such Registration Statement;
and (C) with respect to a Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other federal or
state governmental authority for amendments or supplements to a Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the Commission or any
other federal or state governmental authority of any stop order suspending the effectiveness
of a Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv)

6

 

of the receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable Securities for sale
in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose;
(v) of the occurrence of any event or passage of time that makes the financial statements
included in a Registration Statement ineligible for inclusion therein or any statement made
in a Registration Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that requires any
revisions to a Registration Statement, Prospectus or other documents so that, in the case of
a Registration Statement or the Prospectus, as the case may be, it will not contain any
untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and (vi) of the occurrence or existence of any pending
corporate development with respect to the Company that the Company believes may be material
and that, in the determination of the Company, makes it not in the best interest of the
Company to allow continued availability of a Registration Statement or Prospectus, provided
that any and all of such information shall remain confidential to each Holder until such
information otherwise becomes public, unless disclosure by a Holder is required by law;
provided, further, that notwithstanding each Holder’s agreement to keep such
information confidential, each such Holder makes no acknowledgement that any such
information is material, non-public information.

     (e) Use its reasonable efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order stopping or suspending the effectiveness of a Registration
Statement, or (ii) any suspension of the qualification (or exemption from qualification) of
any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable
moment.

     (f) Furnish to each Holder, without charge, at least one conformed copy of each such
Registration Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by reference to
the extent requested by such Person, and all exhibits to the extent requested by such Person
(including those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission; provided, that any such item which is
available on the EDGAR system need not be furnished in physical form.

     (g) Subject to the terms of this Agreement, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto, except after the giving of any notice
pursuant to Section 3(d).

     (h) The Company shall cooperate with any broker-dealer through which a Holder proposes
to resell its Registrable Securities in effecting a filing with the FINRA Corporate
Financing Department pursuant to NASD Rule 2710, as requested by any such

7

 

Holder, and the Company shall pay the filing fee required by such filing within 2
Business Days of request therefor.

     (i) Prior to any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders in
connection with the registration or qualification (or exemption from the Registration or
qualification) of such Registrable Securities for the resale by the Holder under the
securities or Blue Sky laws of such jurisdictions within the United States as any Holder
reasonably requests in writing, to keep each registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other acts or
things reasonably necessary to enable the disposition in such jurisdictions of the
Registrable Securities covered by each Registration Statement; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction where it is
not then so qualified, subject the Company to any material tax in any such jurisdiction
where it is not then so subject or file a general consent to service of process in any such
jurisdiction.

     (j) If requested by a Holder, cooperate with such Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration Statement, which certificates shall be free, to
the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such names as any
such Holder may request.

     (k) Upon the occurrence of any event contemplated by Section 3(d), as promptly as
reasonably possible under the circumstances taking into account the Company’s good faith
assessment of any adverse consequences to the Company and its stockholders of the premature
disclosure of such event, prepare a supplement or amendment, including a post-effective
amendment, to a Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, and file any other
required document so that, as thereafter delivered, neither a Registration Statement nor
such Prospectus will contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. If the Company
notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to
suspend the use of any Prospectus until the requisite changes to such Prospectus have been
made, then the Holders shall suspend use of such Prospectus. The Company will use its
reasonable efforts to ensure that the use of the Prospectus may be resumed as promptly as is
practicable. The Company shall be entitled to exercise its right under this Section 3(k) to
suspend the availability of a Registration Statement and Prospectus, subject to the payment
of partial liquidated damages otherwise required pursuant to Section 2(b), for a period not
to exceed 60 calendar days (which need not be consecutive days) in any 12 month period.

     (l) Comply with all applicable rules and regulations of the Commission.

8

 

     (m) The Company may require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned by such Holder and,
if required by the Commission, the natural persons thereof that have voting and dispositive
control over the shares. During any periods that the Company is unable to meet its
obligations hereunder with respect to the registration of the Registrable Securities solely
because any Holder fails to furnish such information within 3 Trading Days of the Company’s
request, any liquidated damages that are accruing at such time as to such Holder only shall
be tolled and any Event that may otherwise occur solely because of such delay shall be
suspended until such information is delivered to the Company.

     4. Registration Expenses. All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses of the Company’s counsel and
auditors) (A) with respect to filings made by the Company with the Commission, (B) with respect to
filings required to be made by the Company with any Trading Market on which the Common Stock is
then listed for trading, (C) in compliance with applicable state securities or Blue Sky laws
reasonably agreed to by the Company in writing (including, without limitation, fees and
disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions
of the Registrable Securities) and (D) if not previously paid by the Company in connection with an
Issuer Filing, with respect to any filing that may be required to be made by any broker through
which a Holder intends to make sales of Registrable Securities with the FINRA pursuant to NASD Rule
2710, so long as the broker is receiving no more than a customary brokerage commission in
connection with such sale, (ii) printing expenses of the Company (including, without limitation,
expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and
delivery expenses of the Company, (iv) fees and disbursements of counsel for the Company, (v)
Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and
expenses of all other Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement (except to the extent otherwise determined by the
Company and such other Person(s)). In addition, the Company shall be responsible for all of its
internal expenses incurred in connection with the consummation of the transactions contemplated by
this Agreement (including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual audit and the fees and
expenses incurred in connection with the listing of the Registrable Securities on any securities
exchange as required hereunder. In no event shall the Company be responsible for any broker or
similar commissions (including any discounts, fees of underwriters, selling brokers, dealer
managers or similar securities professional fees or expenses) of any Holder or, except to the
extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

9

 

     5. Indemnification.

     (a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the officers,
directors, members, partners, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees (and any other Persons
with a functionally equivalent role of a Person holding such titles, notwithstanding a lack
of such title or any other title) of each of them, each Person who controls any such Holder
(within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, members, shareholders, partners, agents and employees (and any
other Persons with a functionally equivalent role of a Person holding such titles,
notwithstanding a lack of such title or any other title) of each such controlling Person, to
the fullest extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and
expenses (collectively, “Losses”), as incurred, arising out of or relating to (1)
any untrue or alleged untrue statement of a material fact contained in a Registration
Statement, any Prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading or (2) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act or any state securities
law, or any rule or regulation thereunder, in connection with the performance of its
obligations under this Agreement, except to the extent, but only to the extent, that (i)
such untrue statements or omissions are based upon information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein, or to the
extent that such information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved in writing by
such Holder expressly for use in a Registration Statement, such Prospectus or in any
amendment or supplement thereto (it being understood that the Holder has approved Annex A
hereto for this purpose), (ii) in the case of an occurrence of an event of the type
specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice contemplated in
Section 6(d) or (iii) willful misconduct on the part of such Holder. The Company shall
notify the Holders promptly of the institution, threat or assertion of any Proceeding
arising from or in connection with the transactions contemplated by this Agreement of which
the Company is aware.

     (b) Indemnification by Holders. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and employees (and
any other Persons with a functionally equivalent role of a Person holding such titles,
notwithstanding a lack of such title or any other title), each Person who controls the
Company (within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such controlling

10

 

Persons, to the fullest extent permitted by applicable law, from and against all
Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s
failure to comply with the prospectus delivery requirements of the Securities Act or (y) any
untrue or alleged untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein not
misleading (i) to the extent, but only to the extent, that such untrue statement or omission
is contained in any information so furnished in writing by such Holder to the Company
specifically for inclusion in such Registration Statement or such Prospectus or (ii) to the
extent that such information relates to such Holder’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in a Registration Statement (it being understood that the Holder has
approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement
thereto or (ii) in the case of an occurrence of an event of the type specified in Section
3(d)(iii)-(vi), the use by such Holder of an outdated or defective Prospectus after the
Company has notified such Holder in writing that the Prospectus is outdated or defective and
prior to the receipt by such Holder of the Advice contemplated in Section 6(d). In no event
shall the liability of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.

     (c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have
the right to assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that such failure shall have
prejudiced the Indemnifying Party.

       An Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the
Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the
named parties to any such Proceeding (including any impleaded parties) include both such
Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall
reasonably believe that a material conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party
shall not have the right to assume the defense

11

 

thereof and the reasonable fees and expenses of no more than one separate counsel shall be
at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for
any settlement of any such Proceeding effected without its written consent, which consent
shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such settlement
includes an unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.

       Subject to the terms of this Agreement, all reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within
15 Trading Days of written notice thereof to the Indemnifying Party; provided, that the
Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such
fees and expenses applicable to such actions for which such Indemnified Party is judicially
determined not to be entitled to indemnification hereunder.

     (d) Contribution. If the indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless
for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable
by such Indemnified Party, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access
to information and opportunity to correct or prevent such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other
reasonable fees or expenses incurred by such party in connection with any Proceeding to the
extent such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in accordance with
its terms.

          The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by any other method
of allocation that does not take into account the equitable considerations referred to in
the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the net proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.

12

 

          The indemnity and contribution agreements contained in this Section are in addition to
any liability that the Indemnifying Parties may have to the Indemnified Parties.

     6. Miscellaneous.

     (a) Remedies. In the event of a breach by the Company or by a Holder of any of their
respective obligations under this Agreement, each Holder or the Company, as the case may be, in
addition to being entitled to exercise all rights granted by law and under this Agreement,
including recovery of damages, shall be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for specific performance in
respect of such breach, it shall not assert or shall waive the defense that a remedy at law would
be adequate.

     (b) No Piggyback on Registrations; Prohibition on Filing Other Registration
Statements. Except as set forth on Schedule 6(b) attached hereto, neither the Company
nor any of its security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in any Registration Statements other than the Registrable
Securities.

     (c) Compliance. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to a Registration Statement.

     (d) Discontinued Disposition. By its acquisition of Registrable Securities, each
Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(d)(iii) through (vi), such Holder will forthwith discontinue
disposition of such Registrable Securities under a Registration Statement until it is advised in
writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may
have been supplemented or amended) may be resumed. The Company will use reasonable efforts to
ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company
agrees and acknowledges that any periods during which the Holder is required to discontinue the
disposition of the Registrable Securities hereunder shall be subject to the provisions of Section
2(b).

     (e) Piggy-Back Registrations. If, at any time during the Effectiveness Period, there
is not an effective Registration Statement covering all of the Registrable Securities and the
Company shall determine to prepare and file with the Commission a registration statement relating
to an offering for its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in connection with the
Company’s stock option or other employee benefit plans, then the Company shall deliver to each
Holder a written notice of such determination and, if within fifteen days

13

 

after the date of the delivery of such notice, any such Holder shall so request in writing,
the Company shall include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant to this Section 6(e)
that are eligible for resale pursuant to Rule 144(k) promulgated by the Commission pursuant to the
Securities Act or that are the subject of a then effective Registration Statement.

     (f) Amendments and Waivers. The provisions of this Agreement, including the provisions
of this sentence, may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the same shall be in writing and
signed by the Company and the Holders of a majority of the then outstanding Registrable Securities
(including, for this purpose any Registrable Securities issuable upon exercise or conversion of any
Security). If a Registration Statement does not register all of the Registrable Securities
pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of
Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders
and each Holder shall have the right to designate which of its Registrable Securities shall be
omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates exclusively to the rights
of a Holder or some Holders and that does not directly or indirectly affect the rights of other
Holders may be given by such Holder or Holders of all of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this sentence
may not be amended, modified, or supplemented except in accordance with the provisions of the first
sentence of this Section 6(f).

     (g) Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.

     (h) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and shall inure to the
benefit of each Holder. The Company may not assign (except by merger) its rights or obligations
hereunder without the prior written consent of all of the Holders of the then outstanding
Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and
to the Persons as permitted under the Purchase Agreement.

     (i) No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has
entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the
date of this Agreement, enter into any agreement with respect to its securities, that would have
the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. Except as set forth on Schedule 6(i), neither the Company nor
any of its Subsidiaries has previously entered into any agreement granting any registration rights
with respect to any of its securities to any Person that have not been satisfied in full.

     (j) Execution and Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and delivered to the other
party, it being understood that both parties need not sign the same counterpart. In the

14

 

event that any signature is delivered by facsimile transmission or by e-mail delivery of a
“.pdf” format data file, such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.

     (k) Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be determined in accordance with the provisions of the
Purchase Agreement.

     (l) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive
of any other remedies provided by law.

     (m) Severability. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties
that they would have executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

     (n) Headings. The headings in this Agreement are for convenience only, do not
constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

     (o) Independent Nature of Holders’ Obligations and Rights. The obligations of each
Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and
no Holder shall be responsible in any way for the performance of the obligations of any other
Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to
constitute the Holders as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Holders are in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled
to protect and enforce its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Holder to be joined as an additional party
in any proceeding for such purpose.

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

15

 

          IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.

	 	 	 	 	 	 	 
	 	 	DUSA PHARMACEUTICALS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 /s/ Richard Christopher	 	 
	 

	 	 	 	 

Name:  Richard Christopher
	 	 
	 

	 	 	 	Title:    VP
Finance & CFO
	 	 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

16

 

[SIGNATURE PAGE OF HOLDERS TO DUSA RRA]

Name of Holder:                                                             

Signature of Authorized Signatory of Holder:                                                             

Name of Authorized Signatory:                                                             

Title of Authorized Signatory:                                                             

[SIGNATURE PAGES CONTINUE]

17

 

Annex A

Plan of Distribution

     Each Selling Stockholder (the “Selling Stockholders”) of the common stock and any of
their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on the [principal Trading Market] or any other stock exchange, market
or trading facility on which the shares are traded or in private transactions. These sales may be
at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following
methods when selling shares:

	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
	 
	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to facilitate the
transaction;
	 
	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;
	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable
exchange;
	 
	 	•	 	privately negotiated transactions;
	 
	 	•	 	settlement of short sales entered into after the effective date of the
registration statement of which this prospectus is a part;
	 
	 	•	 	broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
	 
	 	•	 	through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
	 
	 	•	 	a combination of any such methods of sale; or
	 
	 	•	 	any other method permitted pursuant to applicable law.

     The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933,
as amended (the “Securities Act”), if available, rather than under this prospectus.

     Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the Selling
Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this
Prospectus, in the case of an agency transaction not in excess of a customary brokerage

18

 

commission in compliance with FINRA NASD Rule 2440; and in the case of a principal transaction
a markup or markdown in compliance with NASD IM-2440.

     In connection with the sale of the common stock or interests therein, the Selling Stockholders
may enter into hedging transactions with broker-dealers or other financial institutions, which may
in turn engage in short sales of the common stock in the course of hedging the positions they
assume. The Selling Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common stock to broker-dealers
that in turn may sell these securities. The Selling Stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions or the creation of one or
more derivative securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction).

     The Selling Stockholders and any broker-dealers or agents that are involved in selling the
shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it
does not have any written or oral agreement or understanding, directly or indirectly, with any
person to distribute the Common Stock. In no event shall any broker-dealer receive fees,
commissions and markups which, in the aggregate, would exceed eight percent (8%).

     The Company is required to pay certain fees and expenses incurred by the Company incident to
the registration of the shares. The Company has agreed to indemnify the Selling Stockholders
against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act.

     Because Selling Stockholders may be deemed to be “underwriters” within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act
including Rule 172 thereunder. In addition, any securities covered by this prospectus which
qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather
than under this prospectus. There is no underwriter or coordinating broker acting in connection
with the proposed sale of the resale shares by the Selling Stockholders.

     We agreed to keep this prospectus effective until the earlier of (i) the date on which the
shares may be resold by the Selling Stockholders without registration and without regard to any
volume limitations by reason of Rule 144(k) under the Securities Act or any other rule of similar
effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state securities laws. In
addition, in certain states, the resale shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

19

 

     Under applicable rules and regulations under the Exchange Act, any person engaged in the
distribution of the resale shares may not simultaneously engage in market making activities with
respect to the common stock for the applicable restricted period, as defined in Regulation M, prior
to the commencement of the distribution. In addition, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations thereunder, including
Regulation M, which may limit the timing of purchases and sales of shares of the common stock by
the Selling Stockholders or any other person. We will make copies of this prospectus available to
the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to
each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the
Securities Act).

20

 

Annex B

DUSA PHARMACEUTICALS, INC.

Selling Securityholder Notice and Questionnaire

     The undersigned beneficial owner of common stock (the “Registrable Securities”) of
DUSA Pharmaceuticals, Inc., a New Jersey corporation (the “Company”), understands that the
Company has filed or intends to file with the Securities and Exchange Commission (the
“Commission”) a registration statement (the “Registration Statement”) for the
registration and resale under Rule 415 of the Securities Act of 1933, as amended (the
“Securities Act”), of the Registrable Securities, in accordance with the terms of the
Registration Rights Agreement (the “Registration Rights Agreement”) to which this document
is annexed. A copy of the Registration Rights Agreement is available from the Company upon request
at the address set forth below. All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Registration Rights Agreement.

     Certain legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own securities law counsel regarding the
consequences of being named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.

NOTICE

     The undersigned beneficial owner (the “Selling Securityholder”) of Registrable
Securities hereby elects to include the Registrable Securities owned by it in the Registration
Statement.

21

 

The undersigned hereby provides the following information to the Company and represents and
warrants that such information is accurate:

QUESTIONNAIRE

	 	 	 	 	 	 	 
	1.

	 	Name.	 	 	 	 
	 
	 

	 	(a)
	 	Full Legal Name of Selling Securityholder	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	(b)
	 	Full Legal Name of Registered Holder (if not the same as (a) above) through
which Registrable Securities are held:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	(c)
	 	Full Legal Name of Natural Control Person (which means a natural person who
directly or indirectly alone or with others has power to vote or dispose of the
securities covered by this Questionnaire):	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 

2. Address for Notices to Selling Securityholder:

	 	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	Telephone:	 	 	 	 
	Fax:
	 	 
	 	 

	 	 
	 	 	 	 	 
	Contact Person:	 	 	 	 
	 

	 	 	 	 

	 	 

3. Broker-Dealer Status:

	 	 	 	 	 	 	 
	 

	 	(a)
	 	Are you a broker-dealer?
	 	 

Yes o                      No o

	 	 	 	 	 	 	 
	 

	 	(b)
	 	If “yes” to Section 3(a), did you receive your Registrable Securities as
compensation for investment banking services to the Company?
	 	 

Yes o                      No o

	 	 	 	 	 	 	 
	 

	 	Note:
	 	If “no” to Section 3(b), the Commission’s staff has indicated that
you should be identified as an underwriter in the Registration
Statement.
	 	 

22

 

	 	 	 	 	 	 	 
	 

	 	(c)
	 	Are you an affiliate of a broker-dealer?
	 	 

Yes o                      No o

	 	 	 	 	 	 	 
	 

	 	(d)
	 	If you are an affiliate of a broker-dealer, do you certify that you purchased
the Registrable Securities in the ordinary course of business, and at the time of the
purchase of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the Registrable
Securities?
	 	 

Yes o                      No o

	 	 	 	 	 	 	 
	 

	 	Note:
	 	If “no” to Section 3(d), the Commission’s staff has indicated that
you should be identified as an underwriter in the Registration
Statement.
	 	 

4. Beneficial Ownership of Securities of the Company Owned by the Selling Securityholder.

Except as set forth below in this Item 4, the undersigned is not the beneficial or registered
owner of any securities of the Company other than the securities issuable
pursuant to the Purchase Agreement.

	 	 	 	 	 	 	 
	 

	 	(a)
	 	Type and Amount of other securities beneficially owned by the Selling
Securityholder:
	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 

23

 

5. Relationships with the Company:

Except as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three
years.

	 	 	 	 	 
	 

	 	State any exceptions here:
	 	 
	 
	 	 
	 	 
	 
	 	 
	 	 

     The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the
information provided herein that may occur subsequent to the date hereof at any time while the
Registration Statement remains effective.

     By signing below, the undersigned consents to the disclosure of the information contained
herein in its answers to Items 1 through 5 and the inclusion of such information in the
Registration Statement and the related prospectus and any amendments or supplements thereto. The
undersigned understands that such information will be relied upon by the Company in connection with
the preparation or amendment of the Registration Statement and the related prospectus.

     IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and
Questionnaire to be executed and delivered either in person or by its duly authorized agent.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Date:	 	 	 	 	 	Beneficial Owner:	 	 	 	 
	 
	 	 
	 	 	 	 	 	 
	 	 
	 	 
	 

	 	 	 	 	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	Title:	 	 	 	 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL
BY OVERNIGHT MAIL, TO:

24

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