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As filed with the Securities and Exchange Commission on February , 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DUSA PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-3103129
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
181 University Avenue, Suite 1208
Toronto, Ontario M5H 3M7 CANADA
(416) 363-5059
(Address, including ZIP code, and telephone number,
including area code, of registrant's principal executive offices)
Nanette W. Mantell, Esq.
Lane and Mantell
991 Route 22 West, PO Box 8539
Somerville, New Jersey 08876
(908) 253-9333
(Name, address, including ZIP code, and telephone
number, including area code, of agent for service)
Copies to:
Dr. D. Geoffrey Shulman, President
DUSA Pharmaceuticals, Inc.
181 University Avenue, Suite 1208
Toronto, Ontario M5H 3M7 CANADA
(416) 363-5059
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================================
Amount Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Securities to be Offering Price Per Aggregate Offering Registration
to be Registered Registered Share Price Fee
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<S> <C> <C> <C> <C>
Shares of Common Stock without par value(2) 1,500,000 $6.09375(1) $ 9,140,625.00 $ 2,541.09
- -------------------------------------------------------------------------------------------------------------------------
Shares of Common Stock without par value(3) 130,435 $6.09375(1) $ 794,838.28 $ 220.96
- -------------------------------------------------------------------------------------------------------------------------
Placement Agent Warrants (4) 163,043 $6.09375(5) $ 993,543.28 $ 276.21
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Shares of Common Stock without par value (6) 163,043 -- $ 0.00 $ 0.00
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Shares of Common Stock without par value (7) 50,000 $6.09375(1) $ 304,687.50 $ 84.70
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Underwriter's Options (8) 300,000 $7.70 (11) $ 2,310,000.00 $ 642.18
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Shares of Common Stock without par value (9) 300,000 -- $ 0.00 $ 0.00
- -------------------------------------------------------------------------------------------------------------------------
Underwriter's Options (10) 37,500 $7.92 (11) $ 297,000.00 $ 82.57
- -------------------------------------------------------------------------------------------------------------------------
Shares of Common Stock without par value (12) 37,500 -- $ 0.00 $ 0.00
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TOTAL REGISTRATION FEE.........................................................................................$ 3,847.71
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, as amended, based upon
the average of the high and low price as reported on the NASDAQ National Market
on February 23, 1999.
(2) Represents shares issued to certain Selling Shareholders in a private
placement completed January 15, 1999 under Rule 506 of Regulation D of the
Securities Act of 1933, as amended, pursuant to subscription agreements.
(3) Represents shares issued to designees of the placement agent, a registered
broker-dealer, as commissions and non-accountable expense allowance in
connection with the private placement.
(4) Represents warrants issued to designees of the placement agent in connection
with the private placement as additional compensation.
(5) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(g)(3) of the Securities Act of 1933, as amended, based upon
the average of the high and low price as reported on the NASDAQ National Market
on February 23, 1999.
(6) Represents shares issuable upon exercise of the Placement Agent Warrants
issued in connection with the private placement transaction.
(7) Represents shares issuable upon exercise of a warrant issued to a consultant
in connection with services rendered pursuant to an investor relations agreement
dated October 14, 1993.
(8) Represents options to purchase shares issued to principals of the
underwriter in connection with the issuance and sale of Common Stock pursuant to
an underwriting agreement dated December 11, 1995.
(9) Represents shares issuable upon exercise of underwriter's options to
purchase shares issued in connection with an underwriting agreement dated
December 11, 1995.
(10) Represents options to purchase shares issued to principals of the
underwriter in connection with the issuance and sale of Common Stock pursuant to
an underwriting agreement dated April 15, 1996.
(11) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(g)(1) of the Securities Act of 1933, as amended, based upon
the price at which the options may be exercised.
(12) Represents shares issuable upon exercise of underwriter's options to
purchase shares issued in connection with an underwriting agreement dated April
15, 1996.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
PROSPECTUS Subject to Completion, Dated February __, 1999
DUSA PHARMACEUTICALS, INC.
2,180,978 shares of Common Stock
------------------------------------------------------------------------
This Prospectus relates to 2,180,978 shares of Common Stock comprised
of 1,630,435 outstanding shares of Common Stock, without par value and 500,543
shares which may be issued upon the exercise of outstanding warrants and
underwriter's options as follows:
o 1,500,000 shares were issued to purchasers in a private placement
transaction governed by Rule 506 Regulation D of the Securities Act of 1933,
pursuant to a subscription agreement.
o 130,435 shares were issued to the placement agent, or its designees as
commissions and non-accountable expense allowance for services related to the
private placement.
o 50,000 shares which may be purchased by a current warrant holder who
received the warrant for consulting services under an investor relations
services agreement.
o 163,043 placement agent warrants issued to the placement agent or its
designees as additional compensation in the Regulation D offering previously
referred to,
o 300,000 underwriter's options issued in connection with an underwriting
agreement dated December 11, 1995;
o 37,500 Underwriters Options issued in connection with an underwriting
agreement dated April 15, 1996;
The shares of Common Stock may be offered for sale for the account of
certain shareholders of the Company named under the heading "Selling
Shareholders." The Selling Shareholders have advised us that sales of the shares
offered by them or by their respective pledgees, donees, transferees or other
successors-in-interest, may be made from time to time on the NASDAQ National
Market, in the over-the-counter market, in ordinary brokerage transactions, in
negotiated transactions, or otherwise, at market prices prevailing at the time
of the sale or at negotiated prices. See "Selling Shareholders" and "Plan of
Distribution."
The Company will not receive any part of the proceeds of any sales of
shares by the Selling Shareholders. In the Subscription Agreement we agreed to
file a registration statement for the resale of the shares they own and to pay
all the expenses of registering the shares, except for selling expenses incurred
by the Selling Shareholders in connection with this offering. Any fees and
commissions payable to broker-dealers or other persons will be borne by the
Selling Shareholders. See "Plan of Distribution."
The amounts of the proceeds we receive upon the exercise of placement
agent warrants or the underwriter's options will depend upon the exercise price
of the warrants and the options and the extent to which they are exercised.
Currently, the placement agent warrants have an exercise price of $5.00 per
share; the consultant's warrant has an exercise price of $6.00 per share; the
underwriter's options issued in December, 1995 have an exercise price of $7.70
per share, and the underwriter's options issued in May, 1996 have an exercise
price of $7.92 per share. We have agreed to pay all expenses to register these
securities. See "Securities To Be Offered."
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INVESTING IN THESE SHARES INVOLVES SIGNIFICANT RISKS. SEE RISK FACTORS BEGINNING
ON PAGE 4.
Our Common Stock is traded on the NASDAQ National Market
under the symbol "DUSA."
The last reported sale price of our Common Stock on NASDAQ on
February 23, 1999 was $ 6.15625 per share.
The information in this Prospectus is not complete and may be changed. We
are not allowed to sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This Prospectus is not
an offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Neither the Securities and Exchange Commission nor any state securities
commission, has approved or disapproved of these securities or determined that
this Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is February o, 1999
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC") in
Washington, D.C. You may read and copy any document we file at the SEC's public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street, NW,
Washington, D.C., 20549. The SEC has prescribed rates for copying. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room.
Our SEC filings are also available to the public at the SEC's website at
http://www.sec.gov.
Our reports and other information can also be inspected at the offices of
the National Association of Securities Dealers at 1735 K Street, NW, Washington,
DC 20006-1506.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate" into this Prospectus information we
file with the SEC in other documents. The information incorporated may include
documents filed after the date of this Prospectus which will update and
supercede the information you read in this Prospectus. We incorporate by
reference the documents listed below, except to the extent information contained
in those documents is different from the information contained in this
Prospectus.
<TABLE>
<CAPTION>
SEC Filing Period Covered/Filing Date
<S> <C>
(a) Annual Report on Form 10-K Year ended December 31, 1998
(b) Current Reports on Form 8-K, including Dated January 7, 1999, filed January 11, 1999;
exhibits Dated January 14, 1999, filed January 14, 1999
(c) The description of the Company's Common Form 8-A filed January 3, 1992, amended
Stock contained in its Registration Statement October 24, 1997; Form 10-Q
on Form 8-A, as amended, and the Company's filed November 12, 1997
report on Form 10-Q
(d) All other documents which we file in the future
with the SEC under Sections 13(a), 13(c), 14 and
15(d) of the Securities Exchange Act of 1934, as
amended, prior to the termination of this offering
</TABLE>
You may request a copy of these filings, at no cost, by writing or
telephoning us at:
181 University Avenue, Suite 1208
Toronto, Ontario M5H 3M7 CANADA
Attention: Ms. Shari Lovell
(416) 363-5059
E-mail to: [email protected]
This Prospectus is part of a registration statement on Form S-3 that we
filed with the SEC. You should rely only on the information and representations
provided in this Prospectus or on the information incorporated by reference in
this Prospectus. Neither we nor the Selling Shareholders have authorized anyone
to provide you with different information. Neither we nor the Selling
Shareholders are making an offer of these securities in any state where the
offer is not permitted. You should not assume that the information in this
Prospectus is accurate as of any date other that the date on the front of this
document.
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THE COMPANY
We are a development stage pharmaceutical company engaged primarily in the
development of photodynamic therapy ("PDT") and photodetection ("PD"), utilizing
Levulan(R), our brand of 5-aminolevulinic acid ("ALA"), for various medical
indications. We are the developer and exclusive worldwide licensee of certain
technology relating to Levulan(R) PDT and PD. We also own or license certain
patents relating to methods for using pharmaceutical formulations containing
specified active ingredients, including Levulan(R) for PDT and PD, and related
processes and improvements.
In general, PDT is a two-step medical treatment. First, a drug (termed a
photosensitizer) that collects in certain targeted tissue is applied. Second, a
controlled light is applied to the photosensitized tissue. Energy from the light
activates the photosensitizer, which in PDT destroys or alters the sensitized
cells and in PD makes the sensitized cells fluoresce, or "glow". The appropriate
combination of drug and light can affect the targeted tissue with relatively
minimal damage to surrounding tissue.
Levulan(R) is unique among PDT/PD agents since it is a naturally occurring
substance found in virtually all human cells. Levulan(R) is also unique in that
it is not itself a photosensitizer. After delivery of Levulan(R) to target
tissue, it is converted through a cell-based process into the photosensitizer
protoporphyrin IX ("PpIX"). PpIX is also found in normal cells. Normally, this
process is self-regulating, so that the production of PpIX is limited and no
photosensitivity is developed. However, when additional Levulan(R) is supplied
either topically or systemically, the self-regulatory step is bypassed and PpIX
accumulates. This effect is more pronounced in rapidly growing diseased tissues
(such as pre-cancerous and cancerous lesions). It also occurs in conditions
characterized by rapidly proliferating inflammatory cells (such as acne) and in
certain normally fast-growing tissues (such as hair follicles and the lining of
the uterus). Topically applied, Levulan(R) also penetrates skin affected by
certain diseases, such as actinic keratoses (pre-cancerous skin lesions)
("AKs"), acne and psoriasis, more than it penetrates the surrounding normal
skin. These properties enable Levulan(R) PDT to preferentially react with
targeted cells as compared to surrounding cells.
In July, 1998, we filed a New Drug Application ("NDA") with the United
States Food and Drug Administration ("FDA") for Levulan(R) PDT for AKs. We are
also continuing to advance our clinical program utilizing Levulan(R) PDT and PD
for several indications, including bladder cancer, acne, hair removal,
endometrial ablation and cervical cancer/dysplasia.
We were incorporated under the laws of the State of New Jersey on February
21, 1991 under the name Deprenyl USA, Inc. In May 1993, we changed our name to
DUSA Pharmaceuticals, Inc. Our principal executive offices are located at 181
University Avenue, Suite 1208, Toronto, Ontario M5H 3M7 CANADA and our telephone
number is (416) 363-5059.
This offering consists of up to 2,180,978 shares of Common Stock including
1,630,435 shares currently outstanding and 550,543 shares which may be issued
upon the exercise of outstanding warrants and/or underwriter's options.
The shares may be sold from time to time in public or private transactions
at prevailing market prices or at prices privately negotiated. We will not
receive any proceeds from the sale of the 1,630,435 shares already issued. We
will receive proceeds from the exercise price for the shares which underlie the
warrants and/or underwriter's options. The amount of the proceeds we receive
will depend on the exercise price of the warrants and/or underwriter's options
and the number of warrants or underwriter's options that their holders choose to
convert to shares.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We have made "forward-looking statements," as defined in Section 27A of
the Securities Act of 1993, in this Prospectus and the documents incorporated by
reference. Forward-looking statements are statements that include information
based upon beliefs of our management, as well as assumptions made by and
information available to our management. The words "believes," "expects,"
"anticipates," "intends" or similar terms are intended to identify
forward-looking statements. These forward-looking statements have been compiled
by our management based upon assumptions they consider reasonable. Such
statements reflect our current views with respect to future events. The
statements include, without limitation, anticipated future operating losses,
sufficiency of funding to support the research and development programs,
third-party lack of compliance with FDA regulations, potential FDA requests, the
timing of foreign regulatory approvals, the effect of reimbursement from
third-party payors on the market for our products, the safety procedures for
handling certain materials, the effect of competition, the potential for
fluctuation in our stock prices, and the potential effects and future costs
related to Year 2000 compliance. These statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
contemplated in the forward-looking statements. Many of these risks are
discussed under the "Risk Factors" Section of this Prospectus immediately
following and in the documents incorporated by reference, including documents
which may be filed in the future. You are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date of this
Prospectus. We are not undertaking any obligation to publicly release any
revisions to these forward-looking statements to reflect events or circumstances
after the date of this Prospectus or to reflect the occurrence of unanticipated
events.
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RISK FACTORS
An investment in our Common Stock is very speculative and involves a high
degree of risk. The risk factors described below may cause actual results,
events or performance to differ materially from those predicted in any
forward-looking statements we make in this Prospectus. You should consider
carefully these risk factors, in addition to the other information included or
incorporated by reference in this Prospectus before you make an investment
decision.
Early Stage of Development; Absence of Products. We are at an early stage
of development. To date, we have had no revenues from sales of any product.
Except for Levulan(R) PDT for AKs, most of our potential products are in the
early phases of research and development. In connection with Levulan(R) PDT for
AKs, our first anticipated product, we have not received FDA approval.
Levulan(R) Photodynamic Therapy is a novel product based on new technology. To
the best of our knowledge, only two similar PDT applications have received
marketing approval from the FDA. We cannot guarantee that the FDA will approve
Levulan(R) PDT for AKs, that any of our other potential products will be found
to be safe and effective in clinical trials or that we will ultimately develop
commercially successful products. There is no way to predict the timing or
amount of revenues from the marketing of any of our potential products or
whether any revenues will be realized.
You must evaluate us in light of the uncertainties, delays, difficulties
and expenses commonly experienced by companies in an early stage of development,
which generally include unanticipated problems and additional costs relating to:
o the development and testing of products,
o product approval or clearance,
o regulatory compliance,
o commencement of production,
o product introduction and
o marketing and competition.
Many of these factors may be beyond our control, including but not limited
to, unanticipated results of clinical tests, market acceptance of our products
and development of competing products by others. In addition, our future
performance will also be subject to other factors beyond our control, including
general economic conditions and conditions in healthcare industry or targeted
commercial markets.
History of Losses; Accumulated Deficit. We have experienced significant
operating losses since our inception. As of December 31, 1998, our accumulated
deficit was approximately $30,417,967. We expect to continue to have operating
losses until such time, if ever, as we may have significant revenues from the
sale of our products to offset our continuing research and development
activities. Our ability to operate profitably depends, in part, upon our
ability, alone or with others, to develop a market for our first potential
product, Levulan(R) PDT for AKs, and to complete development of our other
potential products. We cannot give you any assurance that we will be able to
obtain FDA approval to market Levulan(R) for AKs in the United States or that
any of our potential products will achieve market acceptance in the United
States, Europe and other foreign markets to generate sufficient revenues to
become profitable.
Uncertain Availability of Capital. To date, our operations have consumed
substantial amounts of cash. We will require the ongoing commitment of
substantial funds to develop our potential products and to manufacture, market
and sell our products. Although we believe that we have sufficient capital to
finance our operations through 2000, we cannot give you any assurance that
additional financing will not be needed at an earlier date particularly if we do
not complete a suitable marketing alliance for Levulan(R) PDT for AKs. Our
future capital requirements will depend upon our ability to obtain approval from
the FDA for our first product, Levulan(R) PDT for AKs and our ability to
generate sufficient sales, along with the timing of required expenditures. In
the event that we do not receive timely regulatory approvals or if our
objectives with respect to product sales are not fulfilled, we may need to seek
additional capital through public or private financing, including equity
financing, and/or through collaborative arrangements. We cannot give you any
assurance that if we need additional financing in the future, such financing
will be available on acceptable terms, if at all.
If additional funds are raised by issuing equity securities, dilution to
existing shareholders may result. If funding is insufficient, we may have to
delay, reduce in scope or eliminate some or all of our research and development
programs or license rights to third-parties to commercialize products or
technologies that we would otherwise have attempted to develop and commercialize
ourself. Our future cash requirements will be effected by many factors, the
importance of which cannot be currently predicted, including:
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<PAGE> 7
o the results of research and development;
o progress of pre-clinical and clinical trials;
o acquisitions of products or technology, if any;
o relationships with collaborators, if any;
o the direction of our research and development programs;
o competing technological and market developments;
o the time and costs involved in obtaining regulatory approvals and
in obtaining, maintaining and enforcing patents; and
o the costs of manufacturing scale-up and marketing activities.
Regulatory Marketing Approvals. Our products are subject to continued and
pervasive regulation by the FDA and a variety of state and foreign regulations.
These laws require, among other things, (i) approval of manufacturing
facilities, including adherence to "good manufacturing and laboratory practices"
during production and storage; (ii) controlled research and testing of products;
and (iii) control of marketing activities, including advertising and labelling.
All of our potential products will require the approval of the FDA before they
can be marketed in the United States. In addition, approvals are also required
from health authorities in most foreign countries before our products can be
marketed in such countries. Before an NDA (an application to the FDA seeking
approval to market a new drug) can be filed with the FDA a product must undergo,
among other things, extensive animal testing and human clinical trials. The
process of obtaining FDA approvals can be costly and time-consuming. In July,
1998 we filed our first NDA, for Levulan(R) PDT for AKs. We have not filed NDAs
for any of our other potential products. Following the acceptance of an NDA, the
time required for regulatory approval can vary and is usually one to three years
or more. The FDA may require additional animal studies and/or human clinical
trials before granting approval.
We cannot give you any assurance that any of our products will obtain
required FDA approvals on a timely basis, or at all or that problems will not
arise that could delay or prevent the commercialization of our first product.
Data obtained from preclinical testing and clinical trials can be susceptible to
varying interpretations which could delay, limit or prevent regulatory
approvals. In addition, delays or disapprovals may be encountered based upon
additional governmental regulation resulting from future legislation or
administrative action or changes in FDA policy. Furthermore, any approvals that
may be granted will be subject to continual review. The product, its
manufacturer and the manufacturing facilities are subject to periodic
inspections. We have recently been informed that the facility of our bulk ALA
supplier does not yet meet FDA's "good manufacturing practices" (GMP)
regulations. We are in regular communication with our supplier on these issues.
We believe that the supplier is actively working to resolve the deficiencies
in order to be GMP compliant upon re-inspection by the FDA. Discovery of
problems with a product, manufacturer or facility can result in delay of
approval, product labeling restrictions or withdrawal of the product from the
market. These consequences could adversely affect our financial condition and
operations.
Foreign Regulatory Approvals. We expect to seek foreign regulatory
approvals at some time in the future. The introduction of our products in
foreign markets will subject us to foreign regulatory clearances, which may be
unpredictable and uncertain, and which may impose substantial additional costs
and burdens. At present, foreign marketing authorizations are applied for at a
national level, although certain registration procedures are available within
the European Union (the "EU") to companies wishing to market a product in more
than one EU member country. A regulatory authority must be satisfied that
adequate evidence of safety, quality, and efficacy of the product has been
presented before marketing authorization is granted. The foreign regulatory
approval process includes all of the risks associated with obtaining FDA
marketing approval set forth above. Approval by the FDA does not ensure approval
by other countries. We cannot give you any assurances that any of our products
will receive approvals on a timely basis, or at all, or that problems will not
arise that could delay or prevent the commercialization of our products in
foreign countries.
Dependence Upon Management and Others. We are highly dependent on certain
key employees, including: D. Geoffrey Shulman, MD, FRCPC, Chairman of the Board,
President, Chief Executive Officer and Chief Financial Officer of the Company;
Ronald L. Carroll, Executive Vice President and Chief Operating Officer; and
Stuart L. Marcus, MD, PhD, Senior Vice President, Scientific Affairs. Our growth
and future success will depend, in large part, on the continued contributions of
these key individuals and other key senior management personnel, as well as our
ability generally to attract, motivate and retain highly qualified personnel.
The loss of Dr. Shulman, Mr. Carroll, Dr. Marcus or other key senior management
personnel, or the inability to hire or retain qualified personnel, could have a
material adverse effect on our business, financial condition and results of
operations.
Dependence Upon Third Parties for Regulatory Affairs. Our clinical
development program is being implemented by our senior management, with the
assistance of consultants, primarily Guidelines, Inc., a Florida-based company,
specializing in drug development and regulatory affairs ("Guidelines"). The loss
of Guidelines could force us to seek alternative arrangements or we
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<PAGE> 8
might have to develop our regulatory affairs capacity. These alternatives may
prove to be costly and time-consuming which could delay any FDA approval and
cause a material adverse effect on our business, financial condition and results
of operations.
Dependence Upon Third Parties for Manufacturing and Marketing. We do not
currently have the capacity to manufacture, market or sell our Levulan(R) PDT
products on our own. We have entered into a supply agreement for bulk supply of
ALA, the base drug used in the formulation of Levulan(R), with a single source.
Our bulk supplier has been notified that its facilities are not GMP compliant at
this time but it is actively working to resolve the deficiencies. Any
disruption in the future supply of ALA or failure of the manufacturer to meet
and maintain regulatory requirements could delay approval of our first product
and/or have a material adverse effect on our business, financial condition and
results of operation. See "Risk Factors -- Regulatory Marketing Approvals."
We currently subcontract the manufacturing and packaging of our clinical
Levulan(R) formulations. In preparation for FDA approval, we are working with
the same subcontractor to scale-up commercial quantities of Kerasticks(TM), the
applicators filled with Levulan(R) for AKs. We have appointed another
subcontractor as exclusive manufacturer of the light source to meet all of our
requirements for clinical and/or commercial distribution for use in the
Levulan(R) PDT for AKs market. Manufacturers often encounter difficulties in
scaling-up manufacturing of new products, including problems involving product
yields, quality control, component and service availability, adequacy of control
procedures and policies, compliance with FDA regulations and the need for
further FDA approval of new manufacturing processes and facilities. We cannot
give you any assurance that production yields, costs or quality will not be
adversely effected as our appointed manufacturers seek to increase production.
Any such adverse effect could delay or prevent commercialization of our products
which would have a material adverse effect on our business, financial condition
and results of operations.
At this time we are developing various plans for marketing our first
product upon receipt of regulatory marketing approval. We are negotiating
potential collaborative licensing arrangements with pharmaceutical companies
with manufacturing and/or sales and distribution capability to market our
products. We are also developing plans to market the products through
distribution or co-promotion arrangements. Accordingly, the commercial success
of our products may depend upon the efforts of third parties. We cannot give you
any assurance that any of our products will be successfully manufactured or
marketed in the United States or elsewhere.
Patents and Proprietary Information. Our ability to compete successfully
depends, in part, on our ability to defend patents that have issued, obtain new
patents, protect trade secrets and operate without infringing the proprietary
rights of others. We have the rights to certain patents and patent applications
that relate to unique physical forms of ALA and to methods of using ALA and the
unique physical forms of ALA and to compositions and apparatus for use in such
methods. The principal patents have expiration dates ranging from 2009 to 2014.
The remaining patents have expiration dates ranging, variously, from 2009 to
twenty years from their respective filing dates. We actively seek, when
appropriate, protection for our products and proprietary information by means of
United States and foreign patents, trademarks and contractual arrangements. In
addition, we rely on trade secrets and contractual arrangements to protect
certain of our proprietary information and products.
We entered into a license agreement effective August 27, 1991 with PARTEQ
Research & Development Innovations ("PARTEQ"), the licensing arm of Queen's
University at Kingston, Ontario, and Draxis Health, Inc. We hold an exclusive
worldwide license to certain patent rights from Queen's University in the United
States and a limited number of foreign countries. PARTEQ's basic Japanese patent
on the method of using ALA, which issued in 1998, has recently become the
subject of an opposition proceeding resulting in a Notice of Reasons for
Cancellation. The Notice states the reasons why the Japanese Board of Appeals
initially agreed with the opposer of the patent. We intend to contest this
action. We cannot at this time give you any assurance of the likelihood of
success of such a contest or any assurance that we will decide to spend the
funds required to complete the contest.
All United States patents and patent applications licensed from PARTEQ
relating to ALA are method of treatment patents. Method of treatment patents
limit direct infringement to users of the methods of treatment covered by the
patents. We currently have patents and/or pending patent applications in the
United States and in a number of foreign countries covering unique physical
forms of ALA, compositions containing ALA, as well as ALA applicators, light
sources for use with ALA, and other technology. We cannot give you any assurance
that any pending patent applications will mature into issued patents.
Even with the issuance of additional patents, other parties are free to
develop other uses of ALA, including medical uses, and to market ALA for such
uses, assuming that they have obtained appropriate regulatory marketing
approval. Certain forms of ALA are commercially available chemical products.
ALA, as a chemical product, in the form commercially supplied for decades is not
itself subject to patent protection. Subject to any other protection that may be
available to us regarding our proprietary technology, any third-party is free to
use ALA in the form now commercially available for any indication not covered by
our patents, assuming that such third-party has obtained appropriate approval.
In fact, there are reports of several third-parties conducting
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<PAGE> 9
clinical studies with ALA for the treatment of certain conditions in countries
outside the United States of America where PARTEQ may not have patent
protection. Additionally, it may not be practicable or economically viable for
us to enforce a given patent.
We cannot give you any assurance that a third-party or parties will not
claim (with or without merit) that we have infringed or misappropriated their
proprietary rights. A considerable world-wide interest is being generated in
uses of ALA based on the work of the PARTEQ and our inventors. A number of
entities are attempting to obtain patent protection for various uses of ALA. We
cannot give you any assurance as to whether any patents that may issue to
third-parties may affect the uses on which we are working. In addition, we
cannot give you any assurance that such patents could be avoided or invalidated.
If such patents cannot be invalidated or avoided we cannot give you any
assurance that we would be able to obtain a license. If any third-party were to
assert a claim for infringement, we cannot give you any assurance that we would
be successful in the litigation or that such litigation would not have a
material adverse effect on our business, financial condition and results of
operation. Furthermore, we may not be able to afford the expense of defending
ourselves against such a claim.
Except for one instance, we are not aware of any challenges to the
validity of PARTEQ's or our patents. However, we cannot give you any assurance
that any other challenges or claims will not be asserted in the future. The
PARTEQ Japanese patent on the basic method of use of ALA has recently been
opposed and, as a result, the Japanese Patent Office Board of Appeals has issued
a "Notice of Reasons for Cancellation." However, we are entitled to and intend
to contest the bases for the Board's notice. In addition, we cannot give you any
assurance that our patents, whether owned or licensed, or any future patents
that may issue, will prevent other companies from developing similar or
functionally equivalent products. Further, we cannot give you any assurance that
we will continue to develop our own patentable technologies or that our products
or methods will not infringe upon the patents of third-parties. In addition, we
cannot give you any assurance that any of the patents that may be issued to us
will effectively protect our technology or provide a competitive advantage for
our products or will not be challenged, invalidated, or circumvented in the
future.
We also attempt to protect our proprietary information as trade secrets.
Generally agreements with each employee, licensing partner, consultant,
university, pharmaceutical company and agent contain provisions designed to
protect the confidentiality of our proprietary information. However, we cannot
give you any assurance that these agreements will provide effective protection
for our proprietary information in the event of unauthorized use or disclosure
of such information. Furthermore, we cannot give you any assurance that our
competitors will not independently develop substantially equivalent proprietary
information or otherwise gain access to our proprietary information, or that we
can meaningfully protect our rights in unpatentable proprietary information.
Substantial Competition; Technology Obsolescence. The pharmaceutical
industry is subject to rapid, unpredictable and significant technological
change. Competition is intense. Many companies, including well known
pharmaceutical, biotechnology and chemical companies, are marketing
well-established therapies, and/or seeking to develop new products and
technologies, for the treatment of various dermatological conditions including
AKs. In addition, several companies are developing photodynamic therapies and
photodiagnostic products, including products for markets that we intend to
pursue. There are companies capable of developing and marketing products
substantially similar to ours. Many of these companies have substantially
greater financial, technical, manufacturing, marketing and distribution
resources than we have. We expect that our principal methods of competition with
other PDT companies will be based upon such factors as:
o the ease of administration of our photodynamic therapy,
o the degree of generalized skin photosensitivity,
o the number of required doses,
o the selectivity of the photosensitizer for the target lesion or
tissue of interest, and
o the type and cost of our light systems.
We cannot give you any assurance that new drugs or future developments in
PDT or in other drug technologies will not have a material adverse effect on our
business. Increased competition could result in price reductions, lower levels
of third-party reimbursements, failure to achieve market acceptance and/or loss
of market share, any of which could have an adverse effect on our business.
Further, we cannot give you any assurance that developments by our competitors
or future competitors will not render our technology obsolete.
Uncertainty of Pharmaceutical Pricing and Related Matters; Need for
Reimbursement. We expect that our ability to successfully commercialize our
products will depend significantly on the availability of reimbursement for our
products from third-party payors such as governmental programs, private
insurance and private health plans. Even with FDA approval, third-party payors
may deny reimbursement if the payor determines that a particular therapy, drug
or device is unnecessary, inappropriate, not cost effective or experimental.
There have been, and we expect there will continue to be, a number of United
States federal and state
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<PAGE> 10
regulations regarding the health care industry. It is uncertain what form future
health care reform legislation may take or what actions the federal, state, and
private payors may take in response to such reforms. We cannot give you any
assurance that levels of reimbursement, if any, will be sufficient. The
reimbursement status of newly-approved health care products is highly uncertain.
We cannot give you any assurance that third-party coverage will be available or,
if available, such third-party coverage will enable us to maintain sufficient
price levels to be profitable. Further, we cannot give you any assurance that
levels of reimbursement, if any, will not be decreased in the future or that
future legislation, regulation or reimbursement policies of third-party payors
will not otherwise adversely effect the demand for our products or our ability
to sell our products on a profitable basis.
Royalty Obligations. Under certain license agreements, we are obligated to
pay royalties based upon the commercial use of our products. These royalties
include payments to PARTEQ under the License Agreement which could aggregate up
to six percent of our net sales in certain countries, including the United
States. Our royalty obligations may adversely effect our financial condition and
results of operations if, and when, we commercialize our products.
Risk of Product Liability and Insurance. The development, manufacture and
sale of medical products exposes us to the risk of significant damages from
product liability claims. We maintain product liability insurance for coverage
of our clinical trial activities. We intend to obtain coverage for commercial
supplies when products are expected to enter the marketplace. We cannot give you
any assurance that such insurance will continue to be available at acceptable
costs. Further, while we have not experienced any product liability claims to
date, a successful claim in excess of our insurance coverage could have a
materially adverse effect on our business, financial condition and results of
operations.
Hazardous Materials; Environmental Matters. Our research and development
activities involve the controlled use of certain hazardous materials, such as
mercury in fluorescent tubes. Even though we do not currently manufacture any
products, we are subject to federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of hazardous
materials and certain waste products. Although we believe that we are in
compliance in all material respects with applicable environmental laws and
regulations and we do not expect to make material capital expenditures for
environmental control facilities in the near-term, we cannot give you any
assurance that we will not be required to incur significant costs to comply with
environmental laws and regulations in the future. Further, we cannot give you
any assurance that our operations, business or assets will not be materially
adversely effected by current or future environmental laws or regulations. In
addition, although we believe that our safety procedures for the handling and
disposal of such materials comply with the standards prescribed by current
environmental laws and regulations, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, we could be held liable for any damages that result, and any
such liability could exceed our resources.
Potential Dilution from Outstanding Options and Warrants. As of February
23, 1999 there were outstanding options and warrants to purchase 1,830,300
shares of Common Stock, with exercise prices ranging from U.S. $3.25 to $13.375
per share, respectively, and ranging from CDN. $4.69 to CDN. $12.875 per share,
respectively. In addition, there are 480,000 outstanding Underwriter's Purchase
Options and 163,043 outstanding Placement Agent Warrants. For the life of such
securities the holders are given the opportunity to profit if the market price
for the Common Stock exceeds the exercise price of their respective securities,
without assuming the risk of ownership. If the market price of the Common Stock
does not rise above the exercise price of these securities, then they will
expire without exercise. The exercise of the securities is likely to be
undertaken at a time when we would, in all probability, obtain any needed
capital from the public on terms more favorable than those provided in such
securities. The exercise of a significant number of these securities at any one
time could have an adverse effect on the market price of the Common Stock, and
will have a dilutive impact on other shareholders.
Volatility of Share Price; Lack of Liquidity. From time to time and in
particular during the last several months, the stock market generally and the
securities of biotechnology and pharmaceutical companies, in particular, have
experienced a high level of price and volume volatility. Market prices for the
securities of many companies have experienced wide price fluctuations not
necessarily related to the operating performance of such companies. We believe
that factors such as announcements of technological or product developments
related to our business or announcements of technological innovations or new
products by us or our competitors, governmental regulation, or patent or
proprietary rights developments, could cause the price of the Common Stock to
fluctuate substantially. Our operating results and various factors effecting the
industry generally may also significantly impact the market price of the Common
Stock.
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<PAGE> 11
No Dividends. Since inception, we have not paid any dividends on the
Common Stock and do not contemplate or anticipate paying such dividends in the
foreseeable future. Accordingly, if you are seeking income you should not
purchase our securities.
Year 2000 Compliance. The Year 2000 issue is the result of computer
programs having been written using two digits, rather than four, to define the
applicable year. Any of our computers, computer programs, and administrative
equipment that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. If any of our systems that have
date-sensitive software use only two digits, system failures or miscalculations
may result causing disruptions to operations, including among other things, a
temporary inability to process transactions or send and receive electronic data
with third parties or engage in similar normal business activities. Our
relatively new management information systems, which were supplied and are
maintained by third-parties, have been certified as Year 2000 compliant.
However, because most computer systems are, by their very nature,
interdependent, it is possible that non-compliant third-party computers could
have an adverse effect on our computer systems. We cannot give you any assurance
that such third-party systems do not contain undetected errors or defects
associated with the year 2000 date functions that may have a material adverse
effect on our business, results of operation or financial condition.
We are in the process of contacting our key unrelated third-parties to
certify their Year 2000 compliance. We expect to complete the process of
obtaining certifications from unrelated third-parties by June, 1999. In the
event such certifications are not available, we are developing plans to evaluate
the potential impact on our operations if such third-parties are unable to
perform their obligations. To the extent that such third-parties are materially
adversely effected by the Year 2000 issue, we could have disruptions in our
operations.
To date, we have not incurred any material costs related to the Year 2000
issue. We believe that future costs incurred in addressing Year 2000 compliance
will not be material. We further believe that we are devoting the necessary
resources to identify and resolve significant Year 2000 issues in a timely
manner.
Effects of Certain Charter and Bylaw Provisions; Shareholder Rights Plan.
Our Certificate of Incorporation authorizes the Board of Directors to issue up
to 100,000,000 shares of stock, 40 million of which are Common Stock. The Board
of Directors has the authority to determine the price, rights, preferences and
privileges, including voting rights, of the remaining 60 million shares without
any further vote or action by the shareholders. The rights of the holders of our
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any preferred stock that may be issued in the future. We also
have a Shareholder Rights Plan. Under the Plan, if a person or group acquires
15% or more of the Company's Common Stock, all holders of rights (other than the
acquiring shareholder) may, upon payment of the purchase price then in effect,
purchase shares of the Company's Common Stock having a value of twice the
purchase price. In the event that the Company is involved in a merger or other
similar transaction where it is not the surviving corporation, all holders of
rights (other than the acquiring shareholder) shall be entitled, upon payment of
the then in effect purchase price, to purchase Common Stock of the surviving
corporation having a value of twice the purchase price. The rights will expire
on September 26, 2007, unless previously redeemed. The Rights Plan may have the
effect of delaying, deterring, or preventing changes in control or management of
the Company, which may discourage potential acquirors who otherwise might wish
to acquire the Company without the consent of the Board of Directors.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
Common Stock by the Selling Shareholders. We will receive the exercise price for
the shares of Common Stock that underlie the placement agent warrants and/or
underwriter's options if those securities are converted into shares by their
holders. Any proceeds that we may receive upon any exercise of placement agent
warrants and/or underwriter's options will be used for working capital,
primarily to advance research and product development activities including
conducting pre-clinical studies and clinical trials. If sufficient funds are
available, the Company may also use its resources to acquire by license,
purchase or other arrangements, businesses, technologies, or products that
enhance or expand the Company's business.
SELLING SHAREHOLDERS
The following table sets forth the names of the Selling Shareholders, the
number of shares of Common Stock beneficially owned by each Selling Shareholder
as of February 23, 1999, the number of shares of Common Stock that each may
offer from time to time and the number of shares of Common Stock beneficially
owned by each Selling Shareholder upon completion of the Offering, assuming all
of the shares offered are sold. The number of shares sold by each Selling
Shareholder may depend on a number of factors, including, among other things,
the market price of the Common Stock.
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<PAGE> 12
<TABLE>
<CAPTION>
DUSA Shares DUSA Shares
Beneficially Owned Number of Beneficially Owned
Prior to Offering Shares After Offering
Name Shares (1) Percent (1) Offered (1) Shares Percent
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amy Newmark ..................... 30,000 * 30,000(2) 0 0
Robert L. Swisher, Jr.................. 100,000 * 100,000(2) 0 0
Rainbow Trading
Venture Partners, L.P............... 20,000 * 20,000(2) 0 0
David Kalatsky ..................... 3,000 * 3,000(2) 0 0
Jeff Kone and Cezanne Kone............. 10,000 * 10,000(2) 0 0
Larry Miller ..................... 20,000 * 20,000(2) 0 0
Balmore Funds S.A...................... 25,000 * 25,000(2) 0 0
Austost Anstalt Schaan................. 25,000 * 25,000(2) 0 0
Ohr Somayach International............. 8,000 * 8,000(2) 0 0
Lighthouse Genesis
Partners USA, LP.................... 15,000 * 15,000(2) 0 0
Pharos Genesis Fund Limited............ 135,000 1.22 135,000(2) 0 0
Bulldog Capital Partners LP............ 881,200 8.0 100,000(2) 781,200 7.1
Jack Lief ..................... 5,000 * 5,000(2) 0 0
Lisa Low,
Custodian for Gabriel S. Low........ 47,000(13) * 47,000(2) 0 0
Lisa Low,
Custodian for Chantal A. Low........ 47,000(13) * 47,000(2) 0 0
Lisa Low,
Custodian for Daniel A. Low......... 47,000(13) * 47,000(2) 0 0
Craddock Asset Management.............. 20,000 * 20,000(2) 0 0
EDJ Limited ..................... 41,322 * 40,000(2) 1,322 *
Matador Microcap Fund, LP.............. 475,000 4.31 25,000(2) 450,000 4.09
Porter Partners, LP.................... 158,048 1.43 40,000(2) 118,048 1.07
Special Situations..................... 180,000 1.63 180,000(2) 0 0
Riveria Enid Limited Partnership....... 41,600 * 18,000(2) 23,600 *
Talkot Crossover Fund.................. 71,500 * 60,000(2) 11,500 *
Valor Capital Management LP............ 261,100 2.37 160,000(2) 101,100 *
Prism Partners I ..................... 115,100 1.04 10,800(2) 104,300 *
Prism Partners II Offshore Fund........ 32,800 * 32,800(2) 0 0
Prism Partners Offshore Fund........... 16,400 * 16,400(2) 0 0
JIBS Equities ..................... 100,000 * 100,000(2) 0 0
Michael G. Jesselson................... 100,000 * 100,000(2) 0 0
State Capital Partners................. 20,000 * 20,000(2) 0 0
Mid Ocean Investments.................. 70,000 * 20,000(2) 50,000 *
Yad Avraham Institute.................. 20,000 * 20,000(2) 0 0
Derek L. Caldwell**.................... 35,905(14) * 35,905(3) 0 0
John Gallagher** ...................... 7,500 * 5,500(4) 2,000 *
Alan Swerdloff**....................... 3,130 * 3,130(5) 0 0
Nathan Low** ..................... 402,437(15) 3.53 402,437(6) 0 0
Dwight Miller** ....................... 10,892 * 10,892(7) 0 0
Paul Scharfer** ..................... 116,248 1.04 116,248(8) 0 0
Marc Seelenfreund** ................... 5,731 * 5,731(9) 0 0
Richard B. Stone**..................... 44,531 * 44,513(10) 0 0
Sunrise Financial Group................ 50,000 * 50,000(11) 0 0
Preston Tsao** ..................... 6,622 * 6,622(12) 0 0
</TABLE>
* Less than 1%
** Designee of Sunrise Securities Corp, a registered broker-dealer. Sunrise
Securities Corp. acted as Underwriter in December, 1995, March 1996 and May 1996
and acted as Placement Agent in connection with a recent private placement under
Rule 506 of Regulation D. Sunrise Securities Corp. is affiliated with Sunrise
Financial Group (see footnote 11, below).
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<PAGE> 13
(1) This table is based upon information obtained from the Selling Shareholders
with respect to the number of shares owned as well as information in our
possession regarding the issuance and sale of securities offered hereby and the
registration rights granted to such Selling Shareholders.
(2) Represents shares issued to these Selling Shareholders in a private
placement under Rule 506 of Regulation D pursuant to a subscription agreement.
(3) Represents 21,174 shares of Common Stock and 8,182 shares that may be issued
upon the conversion of underwriter's options at an exercise price of $7.70 per
share and 6,549 shares that may be issued upon the conversion of placement agent
warrants with an exercise price of $5.00 per share.
(4) Represents 2,000 shares of Common Stock and 4,500 shares that may be issued
upon the conversion of underwriter's options at an exercise price of $7.70 per
share and 1,000 shares that may be issued upon the conversion of underwriter's
options with an exercise price of $7.92 per share.
(5) Represents 1,500 shares of Common Stock and 1,630 shares that may be issued
upon the conversion of placement agent warrants with an exercise price of $5.00
per share.
(6) Represents 66,282 shares of Common Stock and 217,773 shares that may be
issued upon the conversion of underwriter's options at an exercise price of
$7.70 per share, 25,500 shares that may be issued upon the conversion of
underwriter's options with an exercise price of $7.92 per share and 92,882
shares owned indirectly in a Roth IRA account that may be issued upon the
conversion of placement agent warrants with an exercise price of $5.00 per
share.
(7) Represents 4,696 shares of Common Stock and 6,196 shares that may be issued
upon the conversion of placement agent warrants with an exercise price of $5.00
per share.
(8) Represents 45,000 shares that may be issued upon the conversion of
underwriter's options at an exercise price of $7.70 per share and 10,900 shares
that may be issued upon the conversion of underwriter's options with an exercise
price of $7.92 per share.
(9) Represents 5,731 shares that may be issued upon the conversion of placement
agent warrants with an exercise price of $5.00 per share.
(10) Represents 8,627 shares of Common Stock and 24,545 shares that may be
issued upon the conversion of underwriter's options at an exercise price of
$7.70 per share and 11,359 shares that may be issued upon the conversion of
placement agent warrants with an exercise price of $5.00 per share.
(11) Sunrise Financial Group, has provided investor relation services since 1993
through the present. Represents 50,000 shares that may be issued upon the
conversion of warrants at an exercise price of $6.00 per share. The warrants
expire October 14, 2001. Sunrise Financial Group is affiliated with Sunrise
Securities Corp.
(12) Represents 100 shares that may be issued upon the conversion of
underwriter's options at an exercise price of $7.92 per share and 6,522 shares
that may be issued upon the conversion of placement agent warrants with an
exercise price of $5.00 per share.
(13) In addition to the 47,000 shares being offered by the Selling Shareholder,
under Rule 13d-3 of the Securities and Exchange Act of 1934, as amended, Lisa
Low may also be deemed to be the beneficial owner of an additional 94,000
shares, for a total of 141,000 shares being held in three (3) custodial accounts
as well as a total of 452,437 of the securities which may be deemed to be
beneficially owned by her spouse, Nathan Low. (See footnote 15, below).
(14) In addition to the 35,905 shares being offered by the Selling Shareholder,
as set forth in footnote 3, above, under Rule 13d-3 of the Securities and
Exchange Act of 1934, as amended, Derek Caldwell may also be deemed to be the
beneficial owner of an additional 25,000 shares that may be issued upon the
exercise of a warrant held by Sunrise Financial Group. (See footnote 15, below).
(15) In addition to the 402,437 securities being offered by the Selling
Shareholder as set forth in footnote 6, above, under Rule 13d-3 of the
Securities and Exchange Act of 1934, as amended, Nathan Low may also be deemed
to be the beneficial owner of (i) 141,000 shares that are held by Lisa Low as
custodian for three children and (ii) 50,000 shares that may be issued upon the
exercise of a warrant held by Sunrise Financial Group. Mr. Low disclaims the
beneficial ownership of (x) the 141,000 shares held by Lisa Low as custodian,
(y) 25,000 of the shares underlying the warrant stated in (ii) above, committed
to Mr. Derek Caldwell and (z) 1,000 shares that may be issued upon the exercise
of underwriter's options which options are currently in Mr. Low's name and are
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<PAGE> 14
committed to other employees of Sunrise Financial Group and Sunrise Securities
Corp. If Mr. Low is deemed to beneficially own all of the disclaimed shares, his
beneficial ownership interest would total 5.21% of DUSA's outstanding shares of
Common Stock. Mr. Low's beneficial ownership interest, excluding the 26,000
shares described in (y) and (z) would total 4.99%.
We are registering 1,630,435 shares of Common Stock for resale by the
Selling Shareholders in accordance with registration rights granted to the
Selling Shareholders. We have agreed to file with the SEC, under the Securities
Act of 1933, as amended, a Registration Statement of which this Prospectus
forms a part with respect to the resale of:
o 1,500,000 shares which were issued in connection with a
private placement completed on January 15, 1999 under Rule 506 of
Regulation D and are being registered in accordance with
registration rights granted in the Subscription Agreement; and
o 130,435 shares which were issued to the Placement Agent or its
designees as commissions and non-accountable expense allowance for
services rendered in connection with the private placement and are
being registered pursuant to registration rights set forth in the
commitment letter, dated December 17, 1998, as amended January 8,
1999.
The remaining 550,543 shares of Common Stock being registered may be
issued upon the exercise of warrants and/or underwriter's options as follows:
o 163,043 of the shares may be issued upon the exercise of Placement
Agent Warrants issued as additional compensation to the placement
agent and its designees in connection with the Regulation D private
placement and are being registered in accordance with registration
rights contained in the warrants.
o 300,000 of the shares may be issued upon the exercise of
underwriter's options issued in connection with an Underwriting
Agreement dated December 11, 1995 and being registered pursuant to
registration rights set forth in the Option to Purchase Shares.
o 50,000 of the shares may be issued upon the exercise of a warrant
issued in connection with an investor relations retainer agreement
and are being registered in accordance with registration rights set
forth in the Investor Relations Retainer Agreement dated October 14,
1993.
o 37,500 of the shares may be issued upon the exercise of
underwriter's options issued in connection with an Underwriting
Agreement dated April 15, 1996 and are being registered in
accordance with registration rights set forth in the Option to
Purchase Shares.
PLAN OF DISTRIBUTION
The Common Stock being offered by the Selling Shareholders or their
respective pledgees, donees, transferees or other successors-in-interest
(hereinafter collectively known as the "Selling Shareholders") may be sold from
time to time in public transactions, on or off the NASDAQ National Market, or in
private transactions, at prevailing market prices or at privately negotiated
prices or through a combination of such methods of sale, at fixed prices which
may be changed, at prices related to prevailing market prices or at negotiated
prices. The Common Stock may also be sold pursuant to Rule 144 provided the
Selling Shareholder meets the criteria and conforms to the requirements of such
Rule. The Selling Shareholders shall have the sole and absolute discretion not
to accept any purchase offer or make any sale of Common Stock if they deem the
purchase price to be unsatisfactory at any particular time.
The Selling Shareholders may effect such transactions by selling the
shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Shareholders and/or the purchaser of the shares for whom such
broker-dealer may act as agent, or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). In addition, the Selling Shareholders may enter into
hedging transactions with broker-dealers who may engage in short sales of Common
Stock in the course of hedging the positions they assume with a Selling
Shareholder. There can be no assurance that all or any of the Common Stock
offered hereby will be issued to, or sold by, the Selling Shareholders. The
Selling Shareholders and any brokers, dealers or agents, upon effecting the sale
of any of the Common Stock offered hereby, may be deemed "underwriters" as that
term is defined under the Securities Act or the Exchange Act, or the rules and
regulations thereunder and any commissions received by them and any profits on
the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under such acts. As of the date of this
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<PAGE> 15
Prospectus, the Selling Shareholders have advised us that there are no special
selling arrangements between any broker-dealer or other person and any of the
Selling Shareholders.
Under applicable rules and regulations of the Securities Exchange Act of
1934, any person engaged in the distribution of the shares may not
simultaneously engage in market-making activities with respect to the Common
Stock of the Company. In the event of a "distribution" of its shares, the
Selling Shareholder, any selling broker or dealer and any "affiliated
purchasers" may be subject to Regulation M under the Exchange Act, which
prohibits, with certain exceptions, any such person from bidding for or
purchasing any security which is the subject of such distribution until such
person's participation in that distribution is completed. In addition,
Regulation M also prohibits any "stabilizing bid" or "stabilizing purchase" for
the purpose of pegging, fixing or stabilizing the price of the common stock in
connection with this offering.
At the time a particular offer of shares is made, to the extent required,
a Supplemental Prospectus will be distributed which will set forth the number of
shares being offered and the terms of the offering, including the name or names
of any underwriters, dealers or agents, the purchase price paid by any
underwriter for the shares purchased from the Selling Shareholders, any
discounts, commissions or other items constituting compensation from the Selling
Shareholders in any discount, commission or concession allowed or reallowed or
paid to dealers.
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
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 complied with.
The Selling Shareholders may be entitled under agreements entered into
with us to indemnification from us against liabilities under the Securities Act.
SECURITIES TO BE OFFERED
A total of 1,630,435 of the 2,180,978 securities being offered in this
Prospectus are shares of Common Stock, no par value. 1,500,000 of these shares
are being offered by the participants of a private placement under Rule 506 of
Regulation D and 130,435 of these shares are being offered by the Placement
Agent, and/or its designees, which shares were issued as commissions and
non-accountable expense allowance in connection with the private placement.
The remaining 550,543 securities being offered in this Prospectus are
offered pursuant to warrants and/or options to purchase shares of Common Stock
as follows:
o 163,043 of the securities are offered pursuant to Placement Agent
Warrants which were issued and remain outstanding in connection with
a private placement transaction that closed on January 15, 1999. The
Placement Agent Warrants can be exercised for a period of five (5)
years, until 5:00 p.m. New York time on January 14, 2004 at an
exercise price of $5.00 per share. The Placement Agent Warrants
contain no provisions regarding changes or adjustments in the
exercise price, but do contain provisions for the issuance of an
additional number of shares in the event of a stock split, stock
dividend or similar transaction involving the underlying Common
Stock.
o 50,000 of the securities are offered pursuant to a Warrant which was
issued and remains outstanding in connection with an investor
relations agreement. The Warrant had an original expiration date of
October 14, 1998 which was extended for three (3) years until 5:00
p.m. New York time on October 14, 2001. The exercise price of the
Warrant is $6.00 per share. The Warrant contains no provisions
regarding changes or adjustments in the exercise price but does
contain provisions for the issuance of an additional number of
shares in the event of a stock split, stock dividend or similar
transaction involving the underlying Common Stock.
o 300,000 of the securities are offered pursuant to Underwriter's
Options which were issued and remain outstanding in connection with
an underwriting agreement dated December 11, 1995. The Underwriter's
Options have a five (5) year term and can be exercised until 5:00
p.m. New York time on December 7, 2000 at an exercise price of $7.70
per share. The Underwriter's Options contain no provisions regarding
changes or adjustments in the exercise price, but do contain
provisions for the issuance of an additional number of shares in the
event of a stock split, stock dividend or similar transaction
involving the underlying Common Stock.
o 37,500 of the securities are offered pursuant to Underwriter's
Options which were issued and remain outstanding in connection with
an underwriting agreement dated April 15, 1996. The Underwriter's
Options have a five (5) year term and can be exercised until 5:00
p.m. New York time on April 14, 2001 at an exercise price of $7.92
per
13
<PAGE> 16
share. The Underwriter's Options contain no provisions regarding
changes or adjustments in the exercise price, but do contain
provisions for the issuance of an additional number of shares in the
event of a stock split, stock dividend or similar transaction
involving the underlying Common Stock.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon by Lane
and Mantell, a professional corporation, Somerville, New Jersey. As of February
23, 1999, shareholders and associates of Lane and Mantell beneficially own,
directly or indirectly, less than 1% of the Common Stock of the Company.
EXPERTS
The financial statements and related financial statement schedules
incorporated in this Prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 have been audited by Deloitte &
Touche, LLP independent auditors, as stated in their report (which contains an
emphasis paragraph indicating that the Company is in the development stage),
which is incorporated herein by reference, and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, the Registrant
has been informed that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities Act
of 1933, as amended, and is, therefore, unenforceable.
14
<PAGE> 17
Until __________ all dealers that effect transactions in these securities
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as an underwriter and with respect to their unsold
allotments or subscriptions.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Where You Can Find More Information............................................2
Incorporation of Certain Documents
by Reference...............................................................2
The Company....................................................................3
Cautionary Statement Regarding
Forward-Looking Statements..................................................3
Risk Factors...................................................................4
Use of Proceeds................................................................9
Selling Shareholders...........................................................9
Plan of Distribution..........................................................12
Securities to be Offered......................................................13
Legal Matters.................................................................14
Experts.......................................................................14
Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities.............................................14
</TABLE>
DUSA
PHARMACEUTICALS, INC.
2,180,978 Shares of Common Stock
------------------------------------
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the expenses in connection with the offering
described in the Registration Statement, all of which will be borne by the
Company.
<TABLE>
<S> <C>
SEC Registration Fee $ 3,847.71
NASD Filing Fee** 17,500.00
Printing and Engraving* 5,000.00
Accounting Fees and Expenses* 50,000.00
Legal Fees and Expenses* 40,000.00
Miscellaneous Expenses* 1,500.00
-----------
TOTAL $117,903.71
===========
</TABLE>
*Estimated.
**Previously paid.
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 5 of the Company's Certificate of Incorporation, as amended, and
New Jersey Business Corporation Act, N.J.S.A. 14A:2-7 provide as follows:
Any director and officer of the Corporation shall not be personally liable
to the Corporation or its shareholders for damages for breach of any duty
owed to the Corporation or its shareholders, except that this provision
shall not relieve a director or officer from liability for any breach of
duty based upon an act or omission (a) in breach of such person's duty of
loyalty to the Corporation or its shareholders; (b) not in good faith or
involving a knowing violation of law; or (c) resulting in receipt by such
person of an improper personal benefit.
The Company's By-laws, as amended, pursuant to the New Jersey Business
Corporation Act, N.J.S.A. 14A:3-5, provide as follows:
ARTICLE IV
INDEMNIFICATION
Section 1. Actions by Others. The Corporation (1) shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a director,
officer or trustee of the Corporation or of any constituent corporation absorbed
by the Corporation in a consolidation or merger and (2) except as otherwise
required by Section 3 of this Article, may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he (a) is or was an employee or agent or the legal
representative of a director, officer, trustee, employee or agent of the
Corporation or of any absorbed constituent corporation, or (b) is or was serving
at the request of the Corporation or of any absorbed constituent corporation as
a director, officer, employee, agent of or participant in another corporation,
partnership, joint venture, trust or other enterprise, or the legal
representative of such a person against expenses, costs, disbursements
(including attorneys' fees), judgments, fines and amounts actually and
reasonably incurred by him in good faith and in connection with such action,
suit or proceeding if he acted in a manner he reasonably believed to be in or
not opposed to the best interests of the Corporation, and with respect to any
criminal action or proceeding, he had no reasonable cause to believe that his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a pleas of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not meet the applicable standard of conduct.
Section 2. Actions by or in the Right of the Corporation. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the
II-1
<PAGE> 19
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, trustee, employee or agent of the Corporation or of
any constituent corporation absorbed by the Corporation by consolidation or
merger, or the legal representative of any such person, or is or was serving at
the request of the Corporation or of any absorbed constituent corporation, as a
director, officer, trustee, employee, agent of or participant, or the legal
representative of any such person in another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the New Jersey
Superior Court or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the New Jersey Superior Court or
such other court shall deem proper.
Section 3. Successful Defense. To the extent that a person who is or was a
director, officer, trustee, employee or agent of the Corporation or of any
constituent corporation absorbed by the Corporation by consolidation or merger,
or the legal representative of any such person, has been successful on the
merits or otherwise in defense of any action, suit proceeding referred to in
Section 1 or Section 2 of this Article, or in defense of any claim, issue, or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
Section 4. Specific Authorization. Any indemnification under Section 1 or
Section 2 of this Article (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, trustee, employee, agent, or the legal
representative thereof, is proper in the circumstances because he has met the
applicable standard of conduct set forth in said Sections 1 and 2. Such
determination shall be made (1) by the Board of Directors by a majority vote of
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, a quorum of disinterested
directors so directs, by independent legal counsel for a written opinion, (3) by
the shareholders.
Section 5. Advance of Expenses. Expenses incurred by any person who may
have a right of indemnification under this Article in defending civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final distribution of such action, suit or proceeding as authorized by the
board of directors upon receipt of an undertaking by or on behalf of the
director, officer, trustee, employee, or the legal representative thereof, to
repay such amount unless it shall ultimately be determined that he is entitled
to be indemnified by the Corporation pursuant to this Article.
Section 6. Right of Indemnity not Exclusive. The indemnification and
advancement of expenses provided by this Article shall not exclude any other
rights to which those seeking indemnification may be entitled under the
certificate of incorporation of the Corporation or any By-Law agreement, vote of
shareholders or otherwise; provided that no indemnification shall be made to or
on behalf of a Director, officer, trustee, employee, agent, or legal
representative if a judgment or other final adjudication adverse to such persons
establishes that his acts or omissions (a) were in breach of his duty of loyalty
to the corporation or its shareholders, (b) were not in good faith or involved a
knowing violation of law or (c) resulted in receipt by such person of an
improper personal benefit.
Section 7. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, trustee, employee or
agent of the Corporation or of any constituent corporation absorbed by the
Corporation by consolidation or merger of the legal representative of such
person or is or was serving at the request of the Corporation or of any absorbed
constituent corporation as a director, officer, trustee, employee or agent of or
participant in another corporation, partnership, joint venture, trust or other
enterprise, or the legal representative of any such person against any liability
asserted against him and incurred by him in any such capacity, arising out of
his status as such or by reason of his being or having been such, whether or not
the Corporation would have the power to indemnify him against such liability
under the provisions of this Article, the New Jersey Business Corporation Act,
or otherwise.
Section 8. Invalidity of any Provision of this Article. The invalidity or
unenforceability of any provision of this Article shall not affect the validity
or enforceability of the remaining provisions of this Article.
II-2
<PAGE> 20
Item 16. EXHIBITS
(a) Exhibits:
(1) None
(2) None
(3) Inapplicable
(4) Instruments defining the rights of security holders, including
indentures
(4.1) Common Stock specimen, filed as Exhibit 4.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1997 filed November 12, 1997, and
is incorporated herein by reference.
(4.2) Form of Placement Agent Warrant, dated January 15, 1999
(4.3) Form of Underwriter's Option, dated December 21, 1995
(4.4) Form of Underwriter's Option, dated May 1, 1996
(4.5) Sunrise Financial Corp. Warrant, dated October 14, 1993
(4.6) Extension of Warrant Certificate for Purchase of Common Stock,
dated July 30, 1998
(5) Opinion re: legality
(5.1) Opinion of Lane and Mantell, a professional corporation*
(6) Inapplicable
(7) Inapplicable
(8) None
(9) Inapplicable
(10) Inapplicable
(11) Inapplicable
(12) None
(13) Inapplicable
(14) Inapplicable
(15) None
(16) Inapplicable
(17) Inapplicable
(18) Inapplicable
(19) Inapplicable
(20) Inapplicable
(21) Inapplicable
(22) Inapplicable
(23) Consents of experts and counsel
(23.1) Consent of Deloitte & Touche LLP
(23.2) Consent of Lane and Mantell, a professional corporation
(24) Powers of Attorney
(24.1) Power of Attorney appointing D. Geoffrey Shulman, MD, FRCPC
on signature page
(25) None
(26) None
(27) None
(28) None
(99.1) Form of Subscription Agreement
(99.2) Underwriting Agreement, dated December 11, 1995, filed as Exhibit
1.1 to Registrant's Registration Statement on Form S-2, No.
33-98030, and is incorporated herein by reference.
(99.3) Underwriting Agreement, dated February 28, 1996, filed as Exhibit
1.1 to Registrant's Registration Statement on Form S-3, No.
33-31362, and is incorporated herein by reference.
(99.4) Underwriting Agreement, dated April 15, 1996, filed as Exhibit 1.1
to Registrant's Registration Statement on Form S-2, No. 33-32376,
and is incorporated herein by reference.
(99.5) Investor Relations Retainer Agreement, dated October 14, 1993
*To be filed by amendment.
II-3
<PAGE> 21
Item 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Toronto, Province of Ontario, Canada, on February 25,
1999.
DUSA Pharmaceuticals, Inc.
--------------------------
(Registrant)
By: s/ D. Geoffrey Shulman
----------------------
D. Geoffrey Shulman,
President and
Chief Executive Officer
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints D. Geoffrey Shulman as his/her true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him/her and in his/her name, place and stead, in any and all capacities, to
sign any or all amendments (including post-effective amendments) to this
registration statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection with the above premises, as fully to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
<PAGE> 22
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
s/ D. Geoffrey Shulman Director, Chairman of the February 25, 1999
- ---------------------------- Board, President, Chief -----------------
D. Geoffrey Shulman, MD, FRCPC Executive Officer and Chief Date
Financial Officer
s/ Ronald L. Carroll Executive Vice President, February 25, 1999
- ---------------------------- Chief Operating Officer -----------------
Ronald L. Carroll Date
s/ Stuart L. Marcus Senior Vice President February 25, 1999
- ---------------------------- Scientific Affairs -----------------
Stuart L. Marcus, MD, PhD Date
s/ Nanette W. Mantell Secretary February 25, 1999
- ---------------------------- -----------------
Nanette W. Mantell, Esq. Date
s/ John H. Abeles Director February 25, 1999
- ---------------------------- -----------------
John H. Abeles, MD Date
s/ James P. Doherty Director February 25, 1999
- ---------------------------- -----------------
James P. Doherty, BSc Date
s/ Jay M. Haft Director February 25, 1999
- ---------------------------- -----------------
Jay M. Haft, Esq. Date
s/ Richard C. Lufkin Director February 25, 1999
- ---------------------------- -----------------
Richard C. Lufkin Date
<PAGE> 23
INDEX TO EXHIBITS
(1) None
(2) None
(3) Inapplicable
(4) Instruments defining the rights of security holders, including
indentures
(4.1) Common Stock specimen, filed as Exhibit 4.1 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1997 filed November 12, 1997, and
is incorporated herein by reference.
(4.2) Form of Placement Agent Warrant, dated January 15, 1999
(4.3) Form of Underwriter's Option, dated December 21, 1995
(4.4) Form of Underwriter's Option, dated May 1, 1996
(4.5) Sunrise Financial Corp. Warrant, dated October 14, 1993
(4.6) Extension of Warrant Certificate for Purchase of Common Stock,
dated July 30, 1998
(5) Opinion re: legality
(5.1) Opinion of Lane and Mantell, a professional corporation*
(6) Inapplicable
(7) Inapplicable
(8) None
(9) Inapplicable
(10) Inapplicable
(11) Inapplicable
(12) None
(13) Inapplicable
(14) Inapplicable
(15) None
(16) Inapplicable
(17) Inapplicable
(18) Inapplicable
(19) Inapplicable
(20) Inapplicable
(21) Inapplicable
(22) Inapplicable
(23) Consents of experts and counsel
(23.1) Consent of Deloitte & Touche LLP
(23.2) Consent of Lane and Mantell, a professional corporation
(24) Powers of Attorney
(24.1) Power of Attorney appointing D. Geoffrey Shulman, MD, FRCPC
on signature page
(25) None
(26) None
(27) None
(28) None
(99.1) Form of Subscription Agreement
(99.2) Underwriting Agreement, dated December 11, 1995, filed as Exhibit
1.1 to Registrant's Registration Statement on Form S-2, No.
33-98030, and is incorporated herein by reference.
(99.3) Underwriting Agreement, dated February 28, 1996, filed as Exhibit
1.1 to Registrant's Registration Statement on Form S-3, No.
33-31362, and is incorporated herein by reference.
(99.4) Underwriting Agreement, dated April 15, 1996, filed as Exhibit 1.1
to Registrant's Registration Statement on Form S-2, No. 33-32376,
and is incorporated herein by reference.
(99.5) Investor Relations Retainer Agreement, dated October 14, 1993
*To be filed by amendment.
<PAGE> 1
Warrant No. DP-1
Warrant to Purchase [ ] Shares
SHARE PURCHASE WARRANT
To Purchase Shares of Common Stock (no par value)
of
DUSA PHARMACEUTICALS, INC.
(a New Jersey corporation)
Expires [ ], 2004
<PAGE> 2
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE
TRANSFERRED EXCEPT IN A TRANSACTION REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR WHICH IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THAT ACT.
VOID AFTER 5:00 P.M. NEW YORK TIME, ON [ ], 2004
DUSA PHARMACEUTICALS, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
[ ] Shares of Common Stock
THIS CERTIFIES that, for good and valuable consideration received,
[ ] (the "Holder"), is entitled to subscribe for and purchase from DUSA
Pharmaceuticals, Inc., a New Jersey corporation (the "Company"), upon the terms
and conditions set forth herein, at any time or from time to time until 5:00
P.M. New York City time on [ ], 2004 (the "Expiration Date"), all or any
portion of [ ] shares of common stock of the Company, no par value per
share, subject to adjustment as provided herein (the "Warrant Shares"), at a
price of $5.00 per share, subject to adjustment as provided herein (as so
adjusted, the "Exercise Price"). This Warrant shall not be redeemable by the
Company. The term "Shares" as used herein shall mean the Company's Common Stock,
no par value per share. This Warrant is the Warrant or one of the Warrants
(collectively, including any Warrant issued upon the exercise or transfer of any
such Warrant, in whole or in part, the "Warrants") issued pursuant to the
Commitment Letter, dated December 17, 1998, as amended January 8, 1999 (the
"Commitment Letter"), between the Company and Sunrise Securities Corp. As used
herein, the term "this Warrant" shall mean and include this Warrant and any
Warrant or Warrants hereafter issued as a consequence of the exercise or
transfer of this Warrant in whole or in part. This Warrant may be assigned, in
whole or in part, to (i) one or more officers or partners of the Holder (or the
officers or partners of any such partner); (ii) a successor to the Holder, or
the officers or partners of such successor; (iii) a purchaser of substantially
all of the assets of the Holder; or (iv) by operation of law; and the term the
"Holder" as used herein shall include any transferee to whom this Warrant has
been transferred in accordance with the above. No such sale, transfer,
assignment or hypothecation of this Warrant, or of the Warrant Shares, will be
permitted unless (a) a registration statement under the Securities Act of 1933,
as amended (the "Act"), with respect thereto has become effective and
appropriate qualification or other action has been taken under state securities
laws, or (b) there is presented to the Company notice of the proposed transfer
and a legal opinion reasonably satisfactory to the Company that such
registration and qualification or other action is not required.
1. Method of Exercise. This Warrant may be exercised at any time
prior to the Expiration Date, as to the whole or any lesser number of Warrant
Shares, by the surrender of this Warrant accompanied by a duly completed and
executed Notice of Exercise (in the form attached hereto) to the Company at its
office at 181 University Avenue, Suite 1208, Toronto, Ontario M5H 3M7, Canada or
at such other place as may be designated in writing by the Company, together
with a certified or bank cashier's check payable to the order of the Company in
an amount equal to the Exercise Price multiplied by the number of Warrant Shares
for which this Warrant is being exercised. In lieu of the payment of the
Exercise Price, the Holder shall have the right (but not the obligation), during
the Exercise Period, to require the Company to convert this Warrant, in whole or
in part, into Warrant Shares as provided for in this Section 1 (the "Conversion
Right"). Upon exercise of the Conversion Right, the Company shall deliver to the
Holder (without payment by the Holder of the Exercise Price) that number of
Shares equal to the product of (i) the number of Warrant Shares issuable upon
exercise of the portion of the Warrant being converted, multiplied by (ii) the
quotient obtained by dividing (x) the value of the Warrant (on a per Warrant
Share basis immediately prior to the
-1-
<PAGE> 3
exercise of the Conversion Right) at the time the Conversion Right is exercised
(determined by subtracting the Exercise Price from the "Conversion Market Price"
(as defined below)) by (y) the Conversion Market Price of one Share immediately
prior to the exercise of the Conversion Right. The Conversion Rights provided
under this Section 1 may be exercised in whole or in part and at any time and
from time to time while any Warrants remain outstanding. In order to exercise
the Conversion Right, the Holder shall surrender to the Company, at its offices,
this Warrant accompanied by a duly completed and executed Conversion Notice (in
the form attached hereto). The presentation and surrender shall be deemed a
waiver of the Holder's obligation to pay all or any portion of the aggregate
purchase price payable for the Warrant Shares being issued upon such exercise of
this Warrant. This Warrant (or so much thereof as shall have been surrendered
for exercise or conversion) shall be deemed to have been exercised or converted,
as the case may be, immediately prior to the close of business on the day of
surrender of this Warrant for exercise or conversion in accordance with the
foregoing provisions. As promptly as practicable on or after the exercise or
conversion date, as the case may be, the Company shall issue and shall deliver
to the Holder (i) a certificate or certificates representing the largest number
of whole Warrant Shares which the Holder shall be entitled as a result of the
exercise or conversion, and (ii) if such Warrant is being exercised or converted
in part only, a new Warrant exercisable for the number of Warrant Shares equal
to the unconverted portion of the Warrant. Upon any exercise or conversion of
this Warrant, in lieu of any fractional Warrant Shares to which the Holder shall
be entitled, the Company shall pay to the Holder cash in accordance with the
provisions of Section 5(e) hereof. For purposes hereof, the term "Conversion
Market Price" shall be the per share closing price of the Shares on the last
trading day immediately prior to the date on which the Conversion Right is
exercised, determined in accordance with the procedures set forth in Section
5(f) for determining the "Current Market Price."
2. Issuance of Certificates. Upon each exercise of the Holder's
rights to purchase Warrant Shares, the Holder shall be deemed to be the holder
of record of the Warrant Shares issuable upon such exercise, notwithstanding
that the transfer books of the Company shall then be closed or certificates
representing such Warrant Shares shall not then have been actually delivered to
the Holder. As soon as practicable after each such exercise of this Warrant, the
Company shall issue and deliver to the Holder a certificate or certificates for
the Warrant Shares issuable upon such exercise, registered in the name of the
Holder or its designee. If this Warrant shall be exercised in part only, upon
surrender of this Warrant for cancellation, the Company shall execute and
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the Warrant Shares subject to purchase hereunder.
3. Recording of Transfer. Any Warrants issued upon the transfer or
exercise in part of this Warrant shall be numbered and shall be registered in a
Warrant Register as they are issued. The Company shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Warrant shall be transferable only on the books of the Company upon
delivery thereof duly endorsed by the Holder or by the Holder's duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an attorney,
executor, administrator, guardian or other legal representative, duly
authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Warrant or Warrants to
the person entitled thereto. This Warrant may be exchanged, at the option of the
Holder hereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares, upon surrender to the Company or its
duly authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause this Warrant to be transferred on its books to any person
if, in the written opinion of counsel to the Company, such transfer does not
comply with the provisions of the Act and the rules and regulations thereunder.
4. Reservation of Shares. The Company shall at all times reserve and
keep available out of its authorized and unissued Shares, solely for the purpose
of providing for the exercise of this Warrant, such number
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of shares of Shares as shall, from time to time, be sufficient therefor. The
Company covenants that all Shares issuable upon exercise of this Warrant, upon
receipt by the Company of the full payment therefor, shall be validly issued,
fully paid, nonassessable and free of preemptive rights.
5. Exercise Price and Number of Warrant Shares Adjustments. Subject
to the provisions of this Section 5, the Exercise Price in effect from time to
time and the number of Warrant Shares purchasable upon the exercise of this
Warrant shall be subject to adjustment, as follows:
(a) In case the Company shall at any time after the date
hereof (i) declare a dividend or make a distribution on the outstanding Shares
payable in shares of its capital stock or securities convertible into or
exchangeable for capital stock, (ii) subdivide the outstanding Shares, (iii)
combine the outstanding Shares into a smaller number of shares, or (iv) issue
any shares by reclassification of the Shares (other than a change in par value,
or from par value to no par value, or from no par value to par value, but
including any such reclassification in connection with the consolidation or
merger of the Company with or into another corporation (other than a merger in
which the Company is the continuing corporation and which does not result in any
reclassification or change of the then outstanding Shares or other shares
issuable upon exercise of the Warrants)), then, in each case, the Exercise Price
in effect, and the number of Shares issuable upon exercise of the Warrants
outstanding, at the time of the record date for such dividend or at the
effective date of such subdivision, combination or reclassification, shall be
proportionately adjusted so that the holders of the Warrants after such time
shall be entitled to receive the aggregate number and kind of Shares which, if
such Warrants had been exercised immediately prior to such time, such holders
would have owned upon such exercise and immediately thereafter been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) In case the Company shall distribute to all holders of
Shares (including any such distribution made to the shareholders of the Company
in connection with a consolidation or merger in which the Company is the
surviving or continuing corporation) evidences of its indebtedness, cash or
assets (other than distributions and dividends payable in Shares), or rights,
options or warrants to subscribe for or purchase Shares or securities
convertible into or exchangeable for Shares, then, in each case, the Exercise
Price shall be adjusted by multiplying the Exercise Price in effect immediately
prior to the record date for the determination of shareholders entitled to
receive such distribution by a fraction, the numerator of which shall be the
Current Market Price per Share (as determined pursuant to Section 5(f) hereof)
on such record date, less the fair market value (as determined pursuant in good
faith by the Board of Directors of the Company, whose determination shall be
conclusive absent manifest error) of the portion of the evidences of
indebtedness or assets so to be distributed, or of such rights, options or
warrants or convertible or exchangeable securities, or the amount of such cash,
applicable to one Share, and the denominator of which shall be such Current
Market Price per Share. Such adjustment shall become effective at the close of
business on such record date.
(c) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall within 15 days thereafter cause written notice
thereof to be sent by registered mail, postage prepaid, to the Holder, at its
address as it shall appear in the Warrant Register, which notice shall be
accompanied by an officer's certificate setting forth the adjusted number of
Warrant Shares issuable hereunder and the exercise price thereof after such
adjustment and setting fort a brief statement of the facts requiring such
adjustment and the computation thereof, which officer's certificate shall be
conclusive evidence of the correctness of any such adjustment absent manifest
error.
(d) The Company shall not be required to issue fractions of
Shares or other shares of the Company upon the exercise of this Warrant. If any
fraction of a share would be issuable upon the exercise of this Warrant (or
specified portions thereof), the Company may issue a whole share in lieu of such
fraction or the Company may purchase such fraction for an amount in cash equal
to the same fraction of the Current Market Price of such Shares on the date of
exercise of this Warrant.
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<PAGE> 5
(e) The "Current Market Price" per Share on any date shall be
deemed to be the average of the daily closing prices for the Shares for the
twenty (20) consecutive trading days immediately preceding the date in question.
The closing price for each day shall be the last reported sales price regular
way or, in case no such reported sale takes place on such day, the average of
the closing bid and asked prices regular way, in either case on the principal
national securities exchange on which the Shares are listed or admitted to
trading or, if the Shares are not listed or admitted to trading on any national
securities exchange, the highest reported bid price for the Shares as furnished
by the National Association of Securities Dealers, Inc. through NASDAQ or a
similar organization if NASDAQ is no longer reporting such information. If on
any such date the Shares are not listed or admitted to trading on any national
securities exchange and are not quoted by NASDAQ or any similar organization,
the Current Market Price per Share shall be the fair value of a Share on such
date, as determined in good faith by the Board of Directors of the Company,
whose determination shall be conclusive absent manifest error.
(f) No adjustment in the Exercise Price shall be required if
such adjustment is less than $0.05; provided, however, that any adjustments
which by reason of this Section 5(f) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 5 shall be made to the nearest cent or to the
nearest thousandth of a share, as the case may be.
(g) Upon each adjustment of the Exercise Price as a result of
the calculations made in this Section 5, the Warrants shall thereafter evidence
the right to purchase, at the adjusted Exercise Price, that number of Shares
(calculated to the nearest hundredth) obtained by dividing (i) the product
obtained by multiplying the number of Shares purchasable upon exercise of the
Warrants prior to adjustment of the number of Shares by the Exercise Price in
effect prior to adjustment of the Exercise Price by (ii) the Exercise Price in
effect after such adjustment of the Exercise Price.
(h) The Company agrees that in the event the Resale
Registration Statement has not become effective on or prior to the Effectiveness
Deadline (as defined in Section 8 below), the number of Warrant Shares
represented by this Warrant will be automatically increased by 1.0% of the
original number of Warrant Shares represented by this Warrant for each 30 days
beyond the Effectiveness Deadline up to 60 days after the Effectiveness
Deadline, and will be further automatically increased by an additional 2% of the
original number of Warrant Shares represented by this Warrant for each 30 days
thereafter, until the Resale Registration Statement has become effective;
provided, however, that the number of Warrant Shares shall not be so increased
if such failure to become effective has been caused by (a) the failure of the
subscribers in the private placement to provide information in connection with
the Resale Registration Statement or (b) the occurrence of a material event not
in the ordinary course which may delay the effectiveness of the Resale
Registration Statement pending public disclosure, which disclosure shall be
promptly made; and provided further that no such increased Warrant Shares shall
be issued to the extent that such issuance would result in a total number of
shares of Common Stock being issued in the private placement that would require
the consent of shareholders under the rules of the Nasdaq Stock Market.
6. Consolidations and Mergers. (a) In case of any consolidation with
or merger of the Company with or into another corporation (other than a merger
or consolidation in which the Company is the surviving or continuing corporation
and which does not result in any reclassification of the outstanding Shares or
the conversion of such outstanding Shares into shares of other stock or other
securities or property), or in case of any sale, lease or conveyance to another
corporation of the property and assets of any nature of the Company as an
entirety or substantially as an entirety (such actions being hereinafter
collectively referred to as "Reorganizations"), there shall thereafter be
deliverable upon exercise of this Warrant (in lieu of the number of Shares
theretofore deliverable) the kind and amount of shares of stock or other
securities, cash or other property which would otherwise have been deliverable,
upon such Reorganization, to a holder of the number of Shares upon the exercise
of this Warrant if this Warrant had been exercised in full immediately prior to
such Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of Directors of the Company, shall be made
in the application of the provisions herein set forth with respect to the rights
and interests of the Holder so that the provisions set forth herein shall
thereafter be applicable, as nearly as possible, in relation to any shares or
other property thereafter deliverable
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<PAGE> 6
upon exercise of this Warrant. Notwithstanding the foregoing, the Company shall
not effect any such Reorganization unless upon or prior to the consummation
thereof the successor corporation, or, if the Company shall be the surviving
corporation in any such Reorganization and is not the issuer of the shares of
stock or other securities or property to be delivered to holders of Shares
outstanding at the effective time thereof, then such issuer, shall assume by
written instrument the obligation to deliver to the Holder such shares of stock,
securities, cash or other property as the Holder shall be entitled to purchase
in accordance with the foregoing provisions.
(b) In case of any reclassification or change of the Shares
issuable upon exercise of this Warrant (other than a change in par value or from
no par value to a specified par value, or as a result of a subdivision or
combination, but including any change in the Shares into two or more classes or
series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the continuing corporation
and in which there is a reclassification or change (including a change to the
right to receive cash or other property) of the Shares (other than a change in
par value, or from no par value to a specified par value, or as a result of a
subdivision or combination, but including any change in the Shares into two or
more classes or series of shares), the Holder shall have the right thereafter to
receive upon exercise of this Warrant solely the kind and amount of shares of
stock and other securities, property, cash or any combination thereof receivable
upon such reclassification, change, consolidation or merger by a holder of the
number of Shares for which this Warrant might have been exercised immediately
prior to such reclassification, change, consolidation or merger. Thereafter,
appropriate provision shall be made for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly
apply to successive Reorganizations, reclassifications and changes of Shares and
to successive consolidations, mergers, sales, leases, or conveyances.
7. Notice of Certain Events. In case at any time any of the
following occur:
(a) The Company shall take a record of the holders of its
Shares for the purpose of entitling them to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend or distribution payable
otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) The Company shall offer to all the holders of its Shares
any additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
(c) The Company shall take any action to effect any
Reorganization, reclassification or change of outstanding Shares or any
consolidation, merger, sale, lease or conveyance of property, in each case as
described in Section 6; or
(d) The Company shall take any action to effect any
liquidation, dissolution or winding-up of the Company or a sale of all or
substantially all of its property, assets and business;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least ten
(10) days prior to (i) the date as of which the holders of record of Shares to
be entitled to receive any such dividend, distribution, rights, warrants or
other securities are to be determined, (ii) the date on which any such offer to
holders of Shares is made, or (iii) the date on which any such Reorganization,
reclassification, change of outstanding Shares, consolidation, merger, sale,
lease, conveyance of property, liquidation, dissolution or winding-up is
expected to become effective and the date as of which it is expected that
holders of record of Shares shall be entitled to exchange their shares for
securities or other property, if any, deliverable upon such reclassification,
change of outstanding shares, consolidation, merger, sale, lease, conveyance of
property, liquidation, dissolution or winding-up.
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<PAGE> 7
8. Registration Rights. (a) By its acceptance hereof, the Company
agrees that it shall, at its expense, (i) not later than 30 business days after
the completion of the Offering (the "Filing Deadline") file a registration
statement or amend an existing effective registration statement (in either case,
the "Resale Registration Statement") with the Securities and Exchange Commission
(the "Commission") to register under the Act the resale by the undersigned of
the Warrant Shares, (ii) use its reasonable best efforts to cause the Resale
Registration Statement to become effective under the Act as promptly as
practicable but in no event later than 90 days after the Filing Deadline (the
"Effectiveness Deadline"), (iii) after the Resale Registration Statement is
declared effective under the Act, furnish the undersigned with such number of
copies of the final prospectus included in the Resale Registration Statement
(the "Prospectus") as the undersigned may reasonably request to facilitate the
resale of Warrant Shares, and (iv) use its reasonable best efforts to cause such
Resale Registration Statement to remain effective until such time as the
undersigned becomes eligible to resell the Warrant Shares pursuant to Rule 144
under the Act.
(b) The Company will prepare and file with the Commission such
amendments and Prospectus supplements, including post-effective amendments to
the Resale Registration Statement, as the Company determines may be necessary or
appropriate, and use its reasonable best efforts to have such post-effective
amendments declared effective as promptly as practicable; cause the Prospectus
to be supplemented by any Prospectus supplement, and as so supplemented, to be
filed with the Commission; and promptly notify the undersigned when a
Prospectus, and any Prospectus supplement or post-effective amendment must be
filed or has been filed and, with respect to any post-effective amendment, when
the same has become effective.
(c) In connection with the Resale Registration Statement, the
undersigned shall furnish the Company such information as the Company shall
reasonably request.
(d) In connection with the Resale Registration Statement
pursuant to the provisions of this Section 8, the Company shall use its best
efforts to cause the Warrant Shares so registered to be registered or qualified
for sale under the securities or blue sky laws of such jurisdictions as the
holders of at least a majority of all Shares underlying all Warrants issued
pursuant to the Commitment Letter (the "Majority Holders") may reasonably
request; provided, however, that the Company shall not be required to qualify to
do business in any state by reason of this Section 8(d) in which it is not
otherwise required to qualify to do business or otherwise subject itself to
general service of process in any such state.
(e) In connection with the Resale Registration Statement
pursuant to the provisions of this Section 8, the Company shall furnish the
Holder with an opinion of its counsel (reasonably acceptable to the Majority
Holders) to the effect that (i) the Resale Registration Statement has become
effective under the Act and no order suspending the effectiveness of the Resale
Registration Statement, preventing or suspending the use of the Resale
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement thereto has been issued, nor has the Commission or any
securities or blue sky authority of any jurisdiction instituted or threatened to
institute any proceedings with respect to such an order, (ii) the Resale
Registration Statement and each prospectus forming a part thereof (including
each preliminary prospectus and the Prospectus), and any amendment or supplement
thereto, complies as to form with the Act and the rules and regulations
thereunder, and (iii) such counsel has no knowledge of any material misstatement
or omission in such Resale Registration Statement or the Prospectus, as amended
or supplemented.
(f) The Company will not, without the written consent of the
Majority Holders, grant to any persons the right to request the Company to
register any securities of the Company, provided that the Company may grant such
registration rights to other persons so long as such rights do not conflict with
the rights of the Holder.
9. Indemnification. (a) Subject to the conditions set forth below,
the Company agrees to indemnify and hold harmless the Holder, its officers,
directors, partners, employees, agents and counsel, and each person, if any, who
controls any such person within the meaning of Section 15 of the Act or Section
20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
from and against any and all loss, liability, charge,
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<PAGE> 8
claim, damage and expense whatsoever (which shall include, for all purposes of
this Section 9, without limitation, reasonable attorneys' fees and any and all
expense whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), as and when incurred,
arising out of, based upon, or in connection with (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in the Resale
Registration Statement, preliminary prospectus or the Prospectus (as from time
to time amended and supplemented), or any amendment or supplement thereto,
relating to the sale of any of the Warrant Shares, or (B) in any application or
other document or communication (in this Section 9 collectively called an
"application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to register or qualify any of the Warrants and/or the Warrant Shares
under the securities or blue sky laws thereof or filed with the Commission or
any securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company with respect to
the Holder by or on behalf of such person expressly for inclusion in the Resale
Registration Statement, preliminary prospectus or the Prospectus, or any
amendment or supplement thereto, or in any application, as the case may be, or
(ii) any breach of any representation, warranty, covenant or agreement of the
Company contained in this Warrant. The foregoing agreement to indemnify shall be
in addition to any liability the Company may otherwise have, including
liabilities arising under this Warrant.
If any action is brought against the Holder or any of its officers,
directors, partners, employees, agents or counsel, or any controlling persons of
such person (an "indemnified party") in respect of which indemnity may be sought
against the Company pursuant to the foregoing paragraph, such indemnified party
or parties shall promptly notify the Company in writing of the institution of
such action (but the failure so to notify shall not relieve the Company from any
liability pursuant to this Section 9(a) except to the extent the Company has
been prejudiced in any material respect by such failure) and the Company shall
promptly assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such indemnified party or parties) and payment of
expenses. Such indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless the
employment of such counsel shall have been authorized in writing by the Company
in connection with the defense of such action or the Company shall not have
promptly employed counsel reasonably satisfactory to such indemnified party or
parties to have charge of the defense of such action or such indemnified party
or parties shall have reasonably concluded that there may be one or more legal
defenses available to it or them or to other indemnified parties which are
different from or additional to those available to the Company, in any of which
events such fees and expenses shall be borne by the Company, and the Company
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties. Anything in this Section 9 to the contrary
notwithstanding, the Company shall not be liable for any settlement of any such
claim or action effected without its written consent, which shall not be
unreasonably withheld. The Company shall not, without the prior written consent
(which shall not be unreasonably withheld) of each indemnified party that is not
released as described in this sentence, settle or compromise any action, or
permit a default or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, in respect of which indemnity may be
sought hereunder (whether or not any indemnified party is a party thereto),
unless such settlement, compromise, consent or termination includes an
unconditional release of each indemnified party from all liability in respect of
such action. The Company agrees promptly to notify the Holder of the
commencement of any litigation or proceedings against the Company or any of its
officers or directors in connection with the sale of any Warrant Shares or any
preliminary prospectus, prospectus, registration statement or amendment or
supplement thereto, or any application relating to any sale of any Warrant
Shares.
(b) The Holder agrees to indemnify and hold harmless the
Company, each director of the Company, each officer of the Company who shall
have signed any registration statement covering Warrant Shares held by the
Holder and any Eligible Holder, each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, and its or their respective counsel, to the same extent as the
foregoing indemnity from the Company to the Holder in Section 9(a), but only
with respect to statements or omissions, if any, made in the Resale Registration
Statement or the Prospectus, or any amendment or supplement
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<PAGE> 9
thereto, or in any application, in reliance upon and in conformity with written
information furnished to the Company with respect to the Holder by or on behalf
of the Holder expressly for inclusion in the Resale Registration Statement or
the Prospectus, or any amendment or supplement thereto, or in any application,
as the case may be; provided, however, that the Holder shall be liable only for
written information furnished to the Company by it or on its own behalf for
inclusion in the Resale Registration Statement; and provided, further, that no
Holder shall be liable in an amount greater than the net proceeds received by
the Holder in connection with the sale of the Holder's Warrant Shares. If any
action shall be brought against the Company or any other person so indemnified
based on the Resale Registration Statement or the Prospectus, or any amendment
or supplement thereto, or in any application, and in respect of which indemnity
may be sought against the Holder pursuant to this Section 9(b), the Holder shall
have the rights and duties given to the Company, and the Company and each other
person so indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of Section 9(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 9(a) or
9(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Warrant expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed the Resale
Registration Statement, any controlling person of the Company, and its or their
respective counsel), as one entity, and the holders of all Shares included in
the Resale Registration Statement in the aggregate (including for this purpose
any contribution made by or on behalf of an indemnified party), as a second
entity, shall contribute to the losses, liabilities, claims, damages and
expenses whatsoever to which any of them may be subject, on the basis of
relevant equitable considerations such as the relative fault of the Company and
such holders in connection with the facts which resulted in such losses,
liabilities, claims, damages and expenses. The relative fault, in the case of an
untrue statement, alleged untrue statement, omission or alleged omission, shall
be determined by, among other things, whether such statement, alleged statement,
omission or alleged omission relates to information supplied by the Company or
by such holders, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement, alleged
statement, omission or alleged omission. The Company and the Holder agree that
it would be unjust and inequitable if the respective obligations of the Company
and the holders of the Shares included in the Resale Registration Statement for
contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages and expenses (even if the Holder
and the other holders were treated as one entity for such purpose) or by any
other method of allocation that does not reflect the equitable considerations
referred to in this Section 9(c). In no case shall any holder of the Shares
included in the Resale Registration Statement be responsible for a portion of
the contribution obligation imposed on all holders of the Shares included in the
Resale Registration Statement in excess of its pro rata share based on the
number of Shares owned (or which would be owned upon exercise of all Warrants)
by it and included in such registration as compared to the number of Shares
owned (or which would be owned upon exercise of all Warrants) by all such
holders and included in such registration, nor shall any holder of the Shares
included in the Resale Registration Statement be responsible for an amount
greater than the net proceeds received by such holder in connection with the
applicable registration. No person guilty of a fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 9(c), each person, if any, who
controls any holder of the Shares included in the Resale Registration Statement
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
and each officer, director, partner, employee, agent and counsel of each such
holder or control person shall have the same rights to contribution as such
holder or control person, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, each officer of the Company who shall have signed the Resale Registration
Statement, each director of the Company and its or their respective counsel
shall have the same rights to contribution as the Company, subject in each case
to the provisions of this Section 9(c). Anything in this Section 9(c) to the
contrary notwithstanding, no party shall be liable for contribution with respect
to the settlement of each claim or action effected without its written consent.
This Section 9(c) is intended to supersede any right to contribution under the
Act, the Exchange Act or otherwise.
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<PAGE> 10
(d) Notwithstanding anything to the contrary contained in this
Section 9 or elsewhere herein, to the extent the Commission requires that, in
order to register the Warrant Shares in any registration statement contemplated
hereunder without the Holder having previously exercised the Warrants, this
Warrant be included in the Resale Registration Statement or if the Majority
Holders otherwise request, then the Company shall so include this Warrant in the
Resale Registration Statement and, in any such case, the terms of this Section 9
shall be deemed to apply to this Warrant to the same extent as to the Warrant
Shares.
10. Taxes. The issuance of any Warrant Shares or other securities
upon the exercise of this Warrant and the delivery of certificates or other
instruments representing such Warrant Shares or other securities shall be made
without charge to the Holder for any tax or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder (except for any tax that is
payable in respect of any such transfer and any related exercise of this Warrant
and that would be payable pursuant to the first sentence of this Section 10 were
such certificate to be issued in the name of the Holder) and the Company shall
not be required to issue or deliver any such certificate unless and until the
person or persons requesting the issue thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
11. Legend. The certificate or certificates evidencing the Warrant
Shares shall bear the following legend (until such time as the applicable
Warrant Shares are sold under an effective registration statement or pursuant to
Rule 144 under the Act):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
STATE SECURITIES LAWS, BUT HAVE BEEN ISSUED OR TRANSFERRED
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE ACT. SUCH SHARES MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) A REGISTRATION STATEMENT UNDER SUCH ACT, OR
(ii) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT."
12. Replacement of Warrants. Upon receipt of evidence satisfactory
to the Company of the loss, theft, destruction or mutilation of any Warrant (and
upon surrender of any Warrant if mutilated), and upon reimbursement of the
Company's reasonable incidental expenses, the Company shall execute and deliver
to the Holder thereof a new Warrant of like date, tenor and denomination.
13. No Rights as Stockholder. The Holder of any Warrant shall not
have, solely on account of such status, any rights of a stockholder of the
Company, either at law or in equity, or to any notice of meetings of
stockholders or of any other proceedings of the Company, except as provided in
this Warrant.
14. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the registered Holder of this Warrant, to the
address of such Holder as shown on the Warrant Register; or
(b) If to the Company, to the address set forth on the first
page of this Warrant or to such other address as the Company may designate by
notice to the Holder.
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15. Successors. All the covenants, agreements, representations and
warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
16. Headings. The Article and Section headings in this Warrant are
inserted for purposes of convenience only and shall have no substantive effect.
17. Governing Law. This Warrant shall be construed in accordance
with the laws of the State of New York applicable to contracts made and
performed within such State, without regard to principles of conflicts of law.
18. Modification of Agreement. This Warrant shall not otherwise be
modified, supplemented or amended in any respect unless such modification,
supplement or amendment is in writing and signed by the Company and the Holder
of this Warrant and Holders of any portion of the Warrant subsequently assigned
or transferred in accordance with the terms of this Warrant.
19. Consent to Jurisdiction. The Company and the Holder irrevocably
consent to the jurisdiction of the courts of the State of New York and of any
federal court located in such State in connection with any action or proceeding
arising out of or relating to this Warrant, any document or instrument delivered
pursuant to, in connection with or simultaneously with this Warrant, or a breach
of this Warrant or any such document or instrument. In any such action or
proceeding, the Company waives personal service of any summons, complaint or
other process and agrees that service thereof may be made in accordance with
Section 14 hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument as
of the date set forth below.
Dated: January , 1999 DUSA PHARMACEUTICALS, INC.
By:____________________________________
Name:__________________________________
Title:_________________________________
-10-
<PAGE> 12
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant)
FOR VALUE RECEIVED, ___________________________________________
hereby sells, assigns, and transfers unto ________________, having an address at
________________________________________, the attached Warrant to the extent of
the right to purchase shares of Common Stock, no par value per share, of DUSA
Pharmaceuticals, Inc. (the "Company"), together with all right, title, and
interest therein, and does hereby irrevocably constitute and appoint as attorney
to transfer such Warrant on the books of the Company, with full power of
substitution.
Dated:______________________, _____
______________________________________
Print name of holder of Warrant
By:_______________________________
Name:
Title:
NOTICE
The signature on the foregoing Assignment must correspond to the
name as written upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatsoever.
-11-
<PAGE> 13
NOTICE OF EXERCISE
The undersigned hereby exercises its rights to purchase
____________________ Warrant Shares covered by the within Warrant and tenders
payment herewith in the amount of $____________________________ in accordance
with the terms thereof, and requests that certificates for such securities be
issued in the name of, and delivered to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:_____________________________ Name: _________________________________
(Print)
________________________________
(Signature)
(Signature must conform to the
name of the warrant Holder
specified on the face of the
Warrant)
Address:
-12-
<PAGE> 14
CONVERSION NOTICE
The undersigned hereby exercises its Conversion Rights to
receive ____________________ Warrant Shares covered by the within Warrant. Based
upon a Conversion Market Price of $___________ per Share, the undersigned hereby
requests that a certificate for such Warrant Shares be issued in the name of,
and delivered to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated:_____________________________ Name: _________________________________
(Print)
________________________________
(Signature)
(Signature must conform to the
name of the warrant Holder
specified on the face of the
Warrant)
Address:
-13-
<PAGE> 1
COMMON STOCK PURCHASE OPTION AGREEMENT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, PURSUANT TO A REGISTRATION STATEMENT FILED WITH
SUCH SECURITIES AND EXCHANGE COMMISSION. HOWEVER, NEITHER SUCH SECURITIES,
SUCH COMMON STOCK, NOR ANY INTEREST THEREIN MAY BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION STATEMENT,
(ii) A SEPARATE REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
THE TRANSFER OF THIS OPTION IS
RESTRICTED AS DESCRIBED HEREIN.
VOID AFTER 5:00 P.M., NEW YORK TIME, DECEMBER 7, 2000
DUSA PHARMACEUTICALS, INC.
Option for the Purchase
of
______ Shares of Common Stock
No. __
THIS CERTIFIES that, subject to the terms hereof, including without
limitation Section 4 hereof, for receipt in hand of $_____ and other value
received, _________________ with an address c/o Sunrise Securities Corp., 919
Third Avenue, New York, New York 10022 (the "Holder"), is entitled to subscribe
for and purchase from DUSA Pharmaceuticals, Inc., a New Jersey corporation (the
"Company"), upon the terms and conditions set forth herein, at any time or from
time to time after December 8, 1996, and before 5:00 P.M. on December 7, 2000,
New York time (the "Exercise Period"), Twenty Four Thousand Five Hundred Forty
Five (24,545) shares of the Company's Common Stock, without par value, subject
to adjustment as provided herein (the "Option Shares"), at a price of $ 7.70 per
share, subject to adjustment as provided herein (the "Exercise Price"). This
Purchase Option shall not be redeemable by the Holder. This Purchase Option is
the Purchase Option or one of the Purchase Options (collectively, including any
Purchase Option issued upon the exercise or transfer of any such Purchase
Options, in whole or in part, the "Options") issued pursuant to the Underwriting
Agreement, dated December 11, 1995, between the Company and Sunrise Securities
Corp. (the "Underwriting Agreement"). As used herein, the term "this Option"
shall mean and include this Option and any Option or Options hereafter issued as
a consequence of the exercise or transfer of this Option in whole or in part.
This Option may not be sold, transferred, assigned or hypothecated until
December 8, 1996, except that it may be assigned, in whole or in part, to (i)
one or more officers or partners of the Holder (or the officers or partners of
any such partner); (ii) a successor to the Holder, or the officers or partners
of such successor; (iii) a purchaser of substantially all of the assets of the
Holder; or (iv) by operation of law; and the term the "Holder" as used herein
shall include any transferee to whom this Option has been transferred in
accordance with the above. No such sale, transfer, assignment or hypothecation
of this Option, or of the Option Shares, will be permitted unless (a) a
registration statement under the Securities Act of 1933, as amended (the "Act"),
with respect thereto has become effective and appropriate qualification or other
action has been taken under state securities laws or (b) there is presented to
the Company notice of the proposed transfer and a legal opinion reasonably
satisfactory to the Company that such registration and qualification or other
action is not required.
1. This Option may be exercised during the Exercise Period, as to the
whole or any lesser number of whole Option Shares, by the surrender of this
Option (with the election at the end hereof duly executed) to the Company at its
office at 6870 Goreway Drive, Mississauga, Ontario L4V 1P1, or at such other
place as may be designated in writing by the Company, together with a certified
or bank cashier's check payable to the order of the Company in an amount equal
to the Exercise Price multiplied by the number of Option Shares for which this
Option is being exercised. In lieu of the payment of the Exercise Price, the
Holder shall have the right (but not the obligation), during the Exercise
Period, to require the Company to convert this Option, in whole or in part, into
the Option Shares as provided for in this Section (the "Conversion Right"). Upon
exercise of the Conversion Right, the Company shall deliver to the Holder
(without payment by the Holder of the Exercise Price) that number of shares of
Common Stock equal to (i) the number of Option Shares issuable upon exercise of
the portion of the Option being converted, multiplied by (ii) the quotient
obtained by dividing (x) the value of the Option (on a per Option Share basis)
at the time the Conversion Right is exercised (determined by subtracting the
Exercise Price in effect immediately prior to the exercise of the Conversion
Right from the Current Market Price (as determined pursuant to Section 5(f)
below), for the shares of Common Stock issuable upon exercise of the Option
immediately prior to the exercise of the Conversion Right) by (y) the Current
Market Price of one share of Common Stock immediately prior to the exercise of
the Conversion Right. The Conversion Rights provided under this Section may be
exercised in whole or in part and at any time and from time to time while any
Options remain outstanding. In order to exercise the Conversion Right, the
Holder shall surrender to the Company, at its offices, this Option accompanied
by the form of Subscription Agreement duly filled in and signed and a duly
completed Conversion Notice in the form attached hereto. The presentation
<PAGE> 2
and surrender shall be deemed a waiver of the Holder's obligation to pay all or
any portion of the aggregate purchase price payable for the Option Shares being
issued upon such exercise of this Option. This Option (or so much thereof as
shall have been surrendered for conversion) shall be deemed to have been
converted immediately prior to the close of business on the day of surrender of
this Option for conversion in accordance with the foregoing provisions. As
promptly as practicable on or after the conversion date, the Company shall issue
and shall deliver to the Holder (i) a certificate or certificates representing
the largest number of whole Option Shares which the Holder shall be entitled as
a result of the conversion, and (ii) if such Option is being converted in part
only, a new Option exercisable for the number of Option Shares equal to the
unconverted portion of the Option. Upon any exercise (which term, as used
herein, shall include any exercise of the Conversion Right) of this Option, in
lieu of any fractional Option Shares to which the Holder shall be entitled, the
Company shall pay to the Holder cash in accordance with the provisions of
Section 5(c) hereof.
2. Upon each exercise of the Holder's rights to exercise this Option, the
Holder shall be deemed to be the holder of record of the Option Shares issuable
upon such exercise, notwithstanding that the transfer books of the Company shall
then be closed or certificates representing such Option Shares shall not then
have been actually delivered to the Holder. As promptly as practicable after
each such exercise of this Option, the Company shall issue and deliver to the
Holder a certificate or certificates for the Option Shares issuable upon such
exercise, registered in the name of the Holder or its designee. If this Option
should be exercised in part only, the Company shall, upon surrender of this
Option for cancellation, execute and deliver a new Option evidencing the right
of the Holder to purchase the balance of the Option Shares (or portions thereof)
subject to purchase hereunder.
3. Any Options issued upon the transfer or exercise in part of this Option
shall be numbered and shall be registered in an option register (the "Option
Register") as they are issued. The Company shall be entitled to treat the
registered holder of any Option on the Option Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Option on the part of any other person, and
shall not be liable for any registration or transfer of Options which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Option shall be transferable only on the books of the Company upon
delivery thereof duly endorsed by the Holder or by his or its duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment, or authority to transfer. In all cases of transfer by an attorney,
executor, administrator, guardian or other legal representative, duly
authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Option or Options to
the person entitled thereto. This Option may be exchanged, at the option of the
Holder thereof, for another Option, or other Options of different denominations,
of like tenor and representing in the aggregate the right to purchase a like
number of Option Shares (or portions thereof), upon surrender of this Option to
the Company or its duly authorized agent. Notwithstanding the foregoing, the
Company shall have no obligation to cause this Option to be transferred on its
books to any person if, in the opinion of counsel to the Company, such transfer
does not comply with the provisions of the Act and the rules and regulations
thereunder.
4. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the issuance of the Option Shares upon the exercise of the Options, such number
of shares of Common Stock as shall, from time to time, be sufficient therefor.
The Company covenants that all shares of Common Stock issuable upon exercise of
this Option, upon receipt by the Company of the full payment therefor, shall be
validly issued, fully paid, nonassessable, and free of preemptive rights.
5. Subject to the provisions of this Section 5, the Exercise Price in
effect from time to time shall be subject to adjustment, as follows:
(a) In case the Company shall at any time after the date the Options
were first issued (i) declare a dividend on the outstanding Common Stock payable
in shares of its capital stock, (ii) subdivide the outstanding Common Stock,
(iii) combine the outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock by reclassification of the Common
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the surviving or continuing corporation), then,
in each case, the Exercise Price in effect, and the number of shares of Common
Stock issuable upon exercise of the Options outstanding, at the time of the
record date for such dividend or of the effective date of such subdivision,
combination, or reclassification, shall be proportionately adjusted so that the
holders of the Options after such time shall be entitled to receive the
aggregate number and kind of shares which, if such Options had been exercised
immediately prior to such time, such holders would have owned upon such exercise
and been entitled to receive by virtue of such dividend, subdivision,
combination, or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall distribute to all holders of Common
Stock (including any such distribution made to the stockholders of the Company
in connection with a consolidation or merger in which the Company is the
surviving or continuing corporation) evidences of its indebtedness, cash, or
assets (other than distributions and dividends payable in shares of Common
Stock), or rights, options, or warrants to subscribe for or purchase Common
Stock, or securities convertible into or exchangeable for shares of Common
Stock, then, in each case, the Exercise Price shall be adjusted by multiplying
the Exercise Price in effect
-2-
<PAGE> 3
immediately prior to the record date for the determination of stockholders
entitled to receive such distribution by a fraction, the numerator of which
shall be the Current Market Price (as determined pursuant to Section 5(f)
hereof) per share of Common Stock on such record date, less the fair market
value (as determined in good faith by the board of directors of the Company,
whose determination shall be conclusive absent manifest error) of the portion of
the evidences of indebtedness or assets so to be distributed, or of such rights,
options, or warrants or convertible or exchangeable securities, or the amount of
such cash, applicable to one share, and the denominator of which shall be such
Current Market Price per share of Common Stock. Such adjustment shall become
effective at the close of business on such record date.
(c) All calculations under this Section 5 shall be made to the
nearest cent or to the nearest one-thousandth of a share, as the case may be;
provided, however that, no adjustment in the Exercise Price shall be required if
such adjustment is less than $.05; and provided, further, that any adjustments
which by reason of this Section 5 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. The Company shall
not be required to issue fractions of shares of Common Stock or other capital
stock of the Company upon the exercise of this Option. If any fraction of a
share would be issuable on the exercise of this Option (or specified portions
thereof), the Company shall purchase such fraction for an amount in cash equal
to the same fraction of the Current Market Price (as hereinafter defined) of
such share of Common Stock on the date of exercise of this Option.
(d) In any case in which this Section 5 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event (an "Event"), the Company may elect to defer, until the
occurrence of such Event, issuing to the Holder, if the Holder exercised this
Option after such record date, the shares of Common Stock, if any, issuable upon
such exercise over and above the number of Option Shares, if any, issuable upon
such exercise on the basis of the Exercise Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to the Holder a
due bill or other appropriate instrument evidencing the Holder's right to
receive such additional shares upon the occurrence of the Event requiring such
adjustment.
(e) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall within 15 days thereafter cause written notice
thereof to be sent by certified or registered mail, postage prepaid, or by
recognized overnight courier service to the Holder, at its address as it shall
appear in the Option Register, which notice shall be accompanied by an officer's
certificate setting forth (i) the number of Option Shares issuable hereunder and
the Exercise Price, each both before and after such adjustment; and (ii) a brief
statement of the facts requiring such adjustment and the computation thereof,
which officer's certificate shall be conclusive evidence of the correctness of
any such adjustment absent manifest error.
(f) The Current Market Price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for the 30
consecutive trading days immediately preceding the date in question. The closing
price for each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the closing bid price
regular way, in either case on the principal United States national securities
exchange (including, for purposes hereof, the Nasdaq National Market (the
"Nasdaq")) on which the Common Stock is listed or admitted to trading or, if the
Common Stock is not listed or admitted to trading on any United States national
securities exchange, the highest reported bid price for the Common Stock as
furnished by the National Association of Securities Dealers, Inc. through Nasdaq
or a similar organization if Nasdaq is no longer reporting such information. If
on any such date the Common Stock is not listed or admitted to trading on any
United States national securities exchange and is not quoted by Nasdaq or any
similar organization, the fair value of a share of Common Stock on such date, as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error, shall be used.
(g) Upon each adjustment of the Exercise Price as a result of the
calculations made in Section 5(b) hereof, the Options shall thereafter evidence
the right to purchase, at the adjusted Exercise Price, that number of shares
(calculated to the nearest thousandth) obtained by dividing (A) the product
obtained by multiplying the number of shares purchasable upon exercise of the
Options prior to adjustment of the number of shares by the Exercise Price in
effect prior to adjustment of the Exercise Price by (B) the Exercise Price in
effect after such adjustment of the Exercise Price.
6. (a) In case of any consolidation with or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety (such
actions being hereinafter collectively referred to as "Reorganizations"), there
shall thereafter be deliverable upon exercise of this Option (in lieu of the
number of shares of Common Stock theretofore deliverable) the kind and amount of
shares of stock or other securities or property receivable upon such
Reorganization by a holder of the number of shares of Common Stock, for which
this Option might have been exercised immediately prior to such Reorganization.
In case of any Reorganization, appropriate adjustment, as determined in good
faith by the Board of Directors of the Company, shall be made in the application
of the provisions herein set forth with respect to the rights and interests of
the Holder so that the provisions set forth herein shall thereafter be
applicable, as nearly as possible, in relation to any shares or other property
thereafter deliverable upon exercise of this Option. Any such adjustment shall
be made by and set forth in a supplemental agreement between the Company, or any
successor thereto, and the Holder and shall for all purposes hereof conclusively
-3-
<PAGE> 4
be deemed to be an appropriate adjustment. The Company shall not effect any such
Reorganization unless upon or prior to the consummation thereof the successor
corporation, or if the Company shall be the surviving corporation in any such
Reorganization and is not the issuer of the shares of stock or other securities
or property to be delivered to holders of shares of the Common Stock outstanding
at the effective time thereof, then such issuer, shall assume by written
instrument the obligation to deliver to the Holder such shares of stock,
securities, cash or other property as the Holder shall be entitled to purchase
in accordance with the foregoing provisions.
(b) In case of any reclassification or change of the shares of
Common Stock issuable upon exercise of this Option (other than a change in par
value or from no par value to a specified par value, or as a result of a
subdivision or combination of the outstanding shares of Common Stock, but
including any change of the shares of Common Stock into two or more classes or
series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the surviving or continuing
corporation and in which there is a reclassification or change (including a
change in the right to receive cash or other property) of the shares of Common
Stock (other than a change in par value, or from no par value to a specified par
value, or as a result of a subdivision or combination of the outstanding shares
of Common Stock, but including any change of the shares into two or more classes
or series of shares), the Holder shall have the right thereafter to receive upon
exercise of this Option solely the kind and amount of shares of stock and other
securities, property, cash, or any combination thereof receivable upon such
reclassification, change, consolidation, or merger by a holder of the number of
shares of Common Stock for which this Option might have been exercised
immediately prior to such reclassification, change, consolidation, or merger.
Thereafter, appropriate provision shall be made for adjustments which shall be
as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per share
than the most recent such cash dividend) to all holders of Common Stock; or
(b) to issue any rights, warrants or other securities to all holders
of Common Stock entitling them to purchase any additional shares of Common Stock
or any other rights, warrants or other securities; or
(c) to effect any reclassification or change of outstanding shares
of Common Stock, or any consolidation, merger, sale, lease, or conveyance of
property, described in Section 6; or
(d) to effect any liquidation, dissolution or winding-up of the
Company;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Option Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined or (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up.
8. The issuance of any shares or other securities upon the exercise of
this Option and the delivery of certificates or other instruments representing
such shares or other securities shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder (except for any tax that is payable in respect of any
such transfer and any related exercise of this Option and that would be payable
pursuant to the first sentence of this Section 8 were such certificate to be
issued in the name of Holder) and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
9. (a) If, at any time during the seven-year period commencing on December
8, 1995 the Company shall file a registration statement (other than on Form S-4,
Form S-8, or any successor form) with the Securities and Exchange Commission
(the "Commission") while any Options or Option Shares are outstanding, the
Company shall give all of the then holders of any Options (the "Eligible
Holders") at least 45 days' prior written notice of the filing of such
registration statement. If requested by any Eligible Holder in writing within 30
days after receipt of any such notice, the Company shall, at the Company's sole
expense (other than
-4-
<PAGE> 5
the fees and disbursements of counsel for the Eligible Holders and the
underwriting discounts, if any, payable in respect of the Option Shares sold by
any Eligible Holder), register or qualify all or, at each Eligible Holder's
option, any portion of the Option Shares and/or, at any time during the
five-year period commencing on December 8, 1995, of the Options of any Eligible
Holders who shall have made such request, concurrently with the registration of
such other securities, all to the extent requisite to permit the public offering
and sale of the Option Shares and/or the Options through the facilities of all
appropriate securities exchanges and the over-the-counter market, and will use
its best efforts through its officers, directors, auditors, and counsel to cause
such registration statement to become effective as promptly as practicable.
Notwithstanding the foregoing, if the managing underwriter of any such offering
shall advise the Company in writing that, in its opinion, the distribution of
all or a portion of the Option Shares and/or the Options requested to be
included in the registration concurrently with the securities being registered
by the Company would materially adversely affect the distribution of such
securities by the Company for its own account, then any Eligible Holder who
shall have requested registration of his or its Option Shares and/or the Options
shall delay the offering and sale of such securities (or the portions thereof so
designated by such managing underwriter) for such period, not to exceed 90 days,
as the managing underwriter shall request (the "Delay Period"); provided that if
any securities of the Company are included in such registration statement and
are eligible for sale during the Delay Period for the account of any person
other than the Company, a pro rata portion of the securities which were
requested to be included and eligible for sale during the Delay Period shall
also be included in such registration statement and shall be eligible for sale
during the Delay Period.
(b) If, on any two occasions during the seven-year period commencing
on December 8, 1995, the Company shall receive a written request from Eligible
Holders who in the aggregate own (or upon exercise of all Options then
outstanding would own) a majority of the total number of shares of Common Stock
then included (or upon such exercises would be included) in the Option Shares
(the "Majority Holders"), to register the sale of all or part of the Option
Shares and/or, at any time during the five-year period ending December 7, 2000,
of the Options, the Company shall, as promptly as practicable, prepare and file
with the Commission a registration statement sufficient to permit the public
offering and sale of the Option Shares and the Options (whether covered by such
request from the Majority Holders or by any other written request from any
Eligible Holder received within 30 days after such Eligible Holder's receipt of
the Company's notice, as described in the last sentence of this Section 9(b))
through the facilities of all appropriate securities exchanges and the
over-the-counter market, and will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
effective as promptly as practicable; provided, that the Company shall only be
obligated to file one such registration statement for which all expenses
incurred in connection with such registration (other than the fees and
disbursements of counsel for the Eligible Holders and underwriting discounts, if
any, payable in respect of the Option Shares and the Options sold by the
Eligible Holders) shall be borne by the Company. Within three business days
after receiving any request contemplated by this Section 9(b), the Company shall
give written notice to all the other Eligible Holders, advising each of them
that the Company is proceeding with such registration and offering to include
therein all or any portion of any such other Eligible Holder's Option Shares
and/or, at any time during the five-year period commencing on December 8, 1995,
the Options, provided that the Company receives a written request to do so from
such Eligible Holder within 30 days after receipt by him or it of the Company's
notice.
(c) In the event of a registration pursuant to the provisions of
this Section 9, the Company shall use its best efforts to cause the Options
and/or the Option Shares so registered to be registered or qualified for sale
under the securities or blue sky laws of such jurisdictions as the Holder or
such holders may reasonably request; provided, however, that the Company shall
not be required to qualify to do business in any state by reason of this Section
9(c) in which it is not otherwise required to qualify to do business or
otherwise subject itself to general service of process in any such state.
(d) The Company shall keep effective any registration or
qualification contemplated by this Section 9 and shall from time to time amend
or supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document and communication for such period of
time as shall be required to permit the Eligible Holders to complete the offer
and sale of the Options and/or the Option Shares covered thereby. The Company
shall in no event be required to keep any such registration or qualification in
effect for a period in excess of nine months from the date on which the Eligible
Holders are first free to sell such Options and/or Option Shares; provided,
however, that, if the Company is required to keep any such registration or
qualification in effect with respect to securities other than the Options and/or
the Option Shares beyond such period, the Company shall keep such registration
or qualification in effect as it relates to the Options and/or the Option Shares
for so long as such registration or qualification remains or is required to
remain in effect in respect of such other securities.
(e) In the event of a registration pursuant to the provisions of
this Section 9, the Company shall furnish to each Eligible Holder such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of copies
of each prospectus contained in such registration statement and each supplement
or amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Act and the rules and regulations thereunder,
and such other documents, as any Eligible Holder may reasonably request to
facilitate the disposition of the Options and/or the Option Shares included in
such registration.
(f) In the event of a registration pursuant to the provisions of
this Section 9, the Company shall furnish each Eligible Holder of any Options
and/or Option Shares so registered with an opinion
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<PAGE> 6
of its counsel (reasonably acceptable to the Eligible Holders) to the effect
that (i) the registration statement has become effective under the Act and no
order suspending the effectiveness of the registration statement, preventing or
suspending the use of the registration statement, any preliminary prospectus,
any final prospectus or any amendment or supplement thereto has been issued, nor
has the Commission or any securities or blue sky authority of any jurisdiction
instituted or threatened to institute any proceedings with respect to such an
order, (ii) the registration statement and each prospectus forming a part
thereof (including each preliminary prospectus), and any amendment or supplement
thereto, complies as to form with the Act and the rules and regulations
thereunder, and (iii) such counsel has no knowledge of any material misstatement
or omission in such registration statement or any prospectus, as amended or
supplemented.
(g) In the event of a registration pursuant to the provision of this
Section 9, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses and customary closing
conditions, including, without limitation, opinions of counsel and accountants'
cold comfort letters, with any underwriter who acquires any Options and/or
Option Shares.
(h) The Company agrees that until all the Options and/or the Option
Shares have been sold under a registration statement or pursuant to Rule 144
under the Act, it shall, so long as it is so required by applicable law, timely
file all reports, statements and other materials required to be filed with the
Commission to permit holders of the Options and/or the Option Shares to sell
such securities under Rule 144.
(i) The Company will not, without the written consent of the
Majority Holders, grant to any persons the right to request the Company to
register any securities of the Company, provided that the Company may grant such
registration rights to other persons so long as such rights do not conflict with
the rights of the Eligible Holders.
10. (a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, employees, agents and counsel, and each person, if any, who controls
any such person within the meaning of Section 15 of the Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all loss, liability, charge, claim, damage and expense
whatsoever (which shall include, for all purposes of this Section 10, without
limitation, reasonable attorneys' fees and any and all expense whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), as and when incurred, arising out of,
based upon, or in connection with (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any registration statement,
preliminary prospectus or final prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, relating to the sale of
any of the Options and/or the Option Shares, or (B) in any application or other
document or communication (in this Section 10 collectively called an
"application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to register or qualify any of the Options and/or the Option Shares
under the securities or blue sky laws thereof or filed with the Commission or
any securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company with respect to
such Eligible Holder by or on behalf of such person expressly for inclusion in
any registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be, or
(ii) any breach of any representation, warranty, covenant or agreement of the
Company contained in this Option. The foregoing agreement to indemnify shall be
in addition to any liability the Company may otherwise have, including
liabilities arising under this Option.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability other than pursuant to this Section 10(a) and shall
not relieve the Company from any liability pursuant to this Section 10(a) except
to the extent the Company has been prejudiced in any material respect by such
failure) and the Company shall promptly assume the defense of such action,
including the employment of counsel (reasonably satisfactory to such indemnified
party or parties) and payment of expenses. Such indemnified party or parties
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless the employment of such counsel shall have
been authorized in writing by the Company in connection with the defense of such
action or the Company shall not have promptly employed counsel reasonably
satisfactory to such indemnified party or parties to have charge of the defense
of such action or such indemnified party or parties shall have reasonably
concluded that there may be one or more legal defenses available to it or them
or to other indemnified parties which are different from or additional to those
available to the Company, in any of which events such fees and expenses shall be
borne by the Company, and the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties. Anything
in this Section 10 to the contrary notwithstanding, the Company shall not be
liable for any settlement of any such claim or action effected without its
written consent, which shall not be unreasonably withheld. The Company shall
not, without the prior written consent (which shall
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<PAGE> 7
not be unreasonably withheld) of each indemnified party that is not released as
described in this sentence, settle or compromise any action, or permit a default
or consent to the entry of judgment in or otherwise seek to terminate any
pending or threatened action, in respect of which indemnity may be sought
hereunder (whether or not any indemnified party is a party thereto), unless such
settlement, compromise, consent or termination includes an unconditional release
of each indemnified party from all liability in respect of such action. The
Company agrees promptly to notify the Eligible Holders of the commencement of
any litigation or proceedings against the Company or any of its officers or
directors in connection with the sale of any Options and/or Option Shares or any
preliminary prospectus, prospectus, registration statement or amendment or
supplement thereto, or any application relating to any sale of any Options
and/or Option Shares.
(b) Each of the Holder and any Eligible Holder agrees to indemnify
and hold harmless the Company, each director of the Company, each officer of the
Company who shall have signed any registration statement covering Options and/or
Option Shares held by the Holder and any Eligible Holder, each other person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, and its or their respective counsel, to the
same extent as the foregoing indemnity from the Company to the Holder in Section
10(a), but only with respect to statements or omissions, if any, made in any
registration statement or final prospectus, or any amendment or supplement
thereto, or in any application, in reliance upon and in conformity with written
information furnished to the Company with respect to the Holder by or on behalf
of the Holder or with respect to any Eligible Holder or by or on behalf of such
Eligible Holder expressly for inclusion in any such registration statement or
final prospectus, or any amendment or supplement thereto, or in any application,
as the case may be; provided, however, that the Holder and each Eligible Holder
shall be liable only for written information furnished to the Company by it or
on its own behalf for inclusion in a registration statement. If any action shall
be brought against the Company or any other person so indemnified based on any
such registration statement or final prospectus, or any amendment or supplement
thereto, or in any application, and in respect of which indemnity may be sought
against the Holder pursuant to this Section 10(b), the Holder and each Eligible
Holder, as the case may be, shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of Section
10(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 10(a) or
10(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company, and its or their
respective counsel), as one entity, and the Eligible Holders of the Option
Shares included in such registration in the aggregate (including for this
purpose any contribution made by or on behalf of an indemnified party), as a
second entity, shall contribute to the losses, liabilities, claims, damages and
expenses whatsoever to which any of them may be subject, on the basis of
relevant equitable considerations such as the relative fault of the Company and
such Eligible Holders in connection with the facts which resulted in such
losses, liabilities, claims, damages and expenses. The relative fault, in the
case of an untrue statement, alleged untrue statement, omission or alleged
omission, shall be determined by, among other things, whether such statement,
alleged statement, omission or alleged omission relates to information supplied
by the Company or by such Eligible Holders, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, alleged statement, omission or alleged omission. The Company and the
Holder agree that it would be unjust and inequitable if the respective
obligations of the Company and the Eligible Holders for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses (even if the Holder and the other
indemnified parties were treated as one entity for such purpose) or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section 10(c). In no case shall any Eligible Holder be responsible
for a portion of the contribution obligation imposed on all Eligible Holders in
excess of its pro rata share based on the number of shares of Common Stock owned
(or which would be owned upon exercise of all Options) by it and included in
such registration as compared to the number of shares of Common Stock owned (or
which would be owned upon exercise of all Options) by all Eligible Holders and
included in such registration. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 10(c), each person, if any, who
controls any Eligible Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, partner, employee,
agent and counsel of each such Eligible Holder or control person shall have the
same rights to contribution as such Eligible Holder or control person and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, each officer of the Company who shall
have signed any such registration statement, each director of the Company and
its or their respective counsel shall have the same rights to contribution as
the Company, subject in each case to the provisions of this Section 10(c).
Anything in this Section 10(c) to the contrary notwithstanding, no party shall
be liable for contribution with respect to the settlement of any claim or action
effected without its written consent. This Section 10(c) is intended to
supersede any right to contribution under the Act, the Exchange Act or
otherwise.
11. Unless registered pursuant to the provisions of Section 9 hereof, the
Option Shares issued upon exercise of the Option shall be subject to a stop
transfer order and the certificate or certificates evidencing such Option
Shares, shall bear the following legend:
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<PAGE> 8
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO
A REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. HOWEVER, SUCH SHARES MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION
STATEMENT, (ii) A SEPARATE REGISTRATION STATEMENT UNDER SUCH ACT, OR
(iii) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT."
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Option (and upon surrender of any Option
if mutilated), and upon reimbursement of the Company's reasonable incidental
expenses, the Company shall execute and deliver to the Holder thereof a new
Option of like date, tenor and denomination.
13. The Holder of any Option shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Option.
14. This Option shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
15. The Company irrevocably consents to the jurisdiction of the courts of
the State of New York and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Option, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Option, or a breach of this Option or any such document
or instrument. In any such action or proceeding, the Company waives personal
service of any summons, complaint or other process and agrees that service
thereof may be made in accordance with Section 11 of the Underwriting Agreement.
Dated: December 21, 1995
DUSA PHARMACEUTICALS, INC.
By: _____________________________
D. Geoffrey Shulman, M.D.
[Seal] President and Chief Executive
Officer
____________________
Secretary
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<PAGE> 9
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Option.)
FOR VALUE RECEIVED, ___________________________________ hereby sells,
assigns, and transfers unto _________________ an Option to purchase __________
shares of Common Stock, without par value, of DUSA Pharmaceuticals, Inc. (the
"Company"), together with all right, title, and interest therein, and does
hereby irrevocably constitute and appoint _____________________ attorney to
transfer such Option on the books of the Company, with full power of
substitution.
Dated: _____________________
Signature_______________________
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Option in every particular, without alteration or
enlargement or any change whatsoever.
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<PAGE> 10
ELECTION TO EXERCISE
To: DUSA Pharmaceuticals, Inc.
6870 Goreway Drive
Mississauga, Ontario L4V 1P1
The undersigned hereby exercises his or its rights to purchase
_______ Option Shares covered by the within Option and tenders payment herewith
in the amount of $_________ in accordance with the terms thereof, and requests
that certificates for such securities be issued in the name of, and delivered
to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Option Shares shall not be all the Option Shares covered
by the within Option, that a new Option for the balance of the Option Shares
covered by the within Option be registered in the name of, and delivered to, the
undersigned at the address stated below.
Dated: __________________ Name________________________
(Print)
Address:
(Signature)
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<PAGE> 11
CONVERSION RIGHT EXERCISE FORM
(To be executed upon exercise of the Conversion Right provisions contained in
Section 1 of this Option)
The undersigned hereby irrevocably elects to surrender ___ percent
of its Option for such Option Shares pursuant to the Conversion Right provisions
of the within Option, as provided for in Section 1 of such Option.
Please issue a certificate or certificates for such Option Shares in
the name of the undersigned, pay cash for any fractional share pursuant to
Section 5(c) of the Option (if applicable) and issue a new Option for the
unexercised portion thereof (if applicable).
Name _________________________________
(Please Print Name, Address and Social Security
No.)
Address_____________________________
_____________________________________
______________________________________
Social _______________________________
Security No.
Signature ____________________________
NOTE: The above signature should
correspond exactly with the name
on the first page of this Option or
with the name of the assignee
appearing in the
assignment form below
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<PAGE> 1
COMMON STOCK PURCHASE OPTION AGREEMENT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, PURSUANT TO A REGISTRATION STATEMENT FILED WITH
SUCH SECURITIES AND EXCHANGE COMMISSION. HOWEVER, NEITHER SUCH SECURITIES,
SUCH COMMON STOCK, NOR ANY INTEREST THEREIN MAY BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION STATEMENT,
(ii) A SEPARATE REGISTRATION STATEMENT UNDER SUCH ACT, OR (iii) AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
THE TRANSFER OF THIS OPTION IS
RESTRICTED AS DESCRIBED HEREIN.
VOID AFTER 5:00 P.M., NEW YORK TIME, DECEMBER 7, 2001
DUSA PHARMACEUTICALS, INC.
Option for the Purchase
of
______ Shares of Common Stock
No. __
THIS CERTIFIES that, subject to the terms hereof, including without
limitation Section 4 hereof, for receipt in hand of $_____ and other value
received, _________________ with an address c/o Sunrise Securities Corp., 919
Third Avenue, New York, New York 10022 (the "Holder"), is entitled to subscribe
for and purchase from DUSA Pharmaceuticals, Inc., a New Jersey corporation (the
"Company"), upon the terms and conditions set forth herein, at any time or from
time to time after April 15, 1997, and before 5:00 P.M. on April 14, 2001, New
York time (the "Exercise Period"), One Thousand (1,000) shares of the Company's
Common Stock, without par value, subject to adjustment as provided herein (the
"Option Shares"), at a price of $ 7.92 per share, subject to adjustment as
provided herein (the "Exercise Price"). This Purchase Option shall not be
redeemable by the Holder. This Purchase Option is the Purchase Option or one of
the Purchase Options (collectively, including any Purchase Option issued upon
the exercise or transfer of any such Purchase Options, in whole or in part, the
"Options") issued pursuant to the Underwriting Agreement, dated April 15, 1996,
between the Company and Sunrise Securities Corp. (the "Underwriting Agreement").
As used herein, the term "this Option" shall mean and include this Option and
any Option or Options hereafter issued as a consequence of the exercise or
transfer of this Option in whole or in part. This Option may not be sold,
transferred, assigned or hypothecated until April 15, 1997, except that it may
be assigned, in whole or in part, to (i) one or more officers or partners of the
Holder (or the officers or partners of any such partner); (ii) a successor to
the Holder, or the officers or partners of such successor; (iii) a purchaser of
substantially all of the assets of the Holder; or (iv) by operation of law; and
the term the "Holder" as used herein shall include any transferee to whom this
Option has been transferred in accordance with the above. No such sale,
transfer, assignment or hypothecation of this Option, or of the Option Shares,
will be permitted unless (a) a registration statement under the Securities Act
of 1933, as amended (the "Act"), with respect thereto has become effective and
appropriate qualification or other action has been taken under state securities
laws or (b) there is presented to the Company notice of the proposed transfer
and a legal opinion reasonably satisfactory to the Company that such
registration and qualification or other action is not required.
1. This Option may be exercised during the Exercise Period, as to the
whole or any lesser number of whole Option Shares, by the surrender of this
Option (with the election at the end hereof duly executed) to the Company at its
office at 6870 Goreway Drive, Mississauga, Ontario L4V 1P1, or at such other
place as may be designated in writing by the Company, together with a certified
or bank cashier's check payable to the order of the Company in an amount equal
to the Exercise Price multiplied by the number of Option Shares for which this
Option is being exercised. In lieu of the payment of the Exercise Price, the
Holder shall have the right (but not the obligation), during the Exercise
Period, to require the Company to convert this Option, in whole or in part, into
the Option Shares as provided for in this Section (the "Conversion Right"). Upon
exercise of the Conversion Right, the Company shall deliver to the Holder
(without payment by the Holder of the Exercise Price) that number of shares of
Common Stock equal to (i) the number of Option Shares issuable upon exercise of
the portion of the Option being converted, multiplied by (ii) the quotient
obtained by dividing (x) the value of the Option (on a per Option Share basis)
at the time the Conversion Right is exercised (determined by subtracting the
Exercise Price in effect immediately prior to the exercise of the Conversion
Right from the Current Market Price (as determined pursuant to Section 5(f)
below), for the shares of Common Stock issuable upon exercise of the Option
immediately prior to the exercise of the Conversion Right) by (y) the Current
Market Price of one share of Common Stock immediately prior to the exercise of
the Conversion Right. The Conversion Rights provided under this Section may be
exercised in whole or in part and at any time and from time to time while any
Options remain outstanding. In order to exercise the Conversion Right, the
Holder shall surrender to the Company, at its offices, this Option accompanied
by the form of Subscription Agreement duly filled in and signed and a duly
completed Conversion Notice in the form attached hereto. The presentation and
surrender shall be deemed a waiver of the Holder's obligation to pay all or any
portion of the aggregate
<PAGE> 2
purchase price payable for the Option Shares being issued upon such exercise of
this Option. This Option (or so much thereof as shall have been surrendered for
conversion) shall be deemed to have been converted immediately prior to the
close of business on the day of surrender of this Option for conversion in
accordance with the foregoing provisions. As promptly as practicable on or after
the conversion date, the Company shall issue and shall deliver to the Holder (i)
a certificate or certificates representing the largest number of whole Option
Shares which the Holder shall be entitled as a result of the conversion, and
(ii) if such Option is being converted in part only, a new Option exercisable
for the number of Option Shares equal to the unconverted portion of the Option.
Upon any exercise (which term, as used herein, shall include any exercise of the
Conversion Right) of this Option, in lieu of any fractional Option Shares to
which the Holder shall be entitled, the Company shall pay to the Holder cash in
accordance with the provisions of Section 5(c) hereof.
2. Upon each exercise of the Holder's rights to exercise this Option, the
Holder shall be deemed to be the holder of record of the Option Shares issuable
upon such exercise, notwithstanding that the transfer books of the Company shall
then be closed or certificates representing such Option Shares shall not then
have been actually delivered to the Holder. As promptly as practicable after
each such exercise of this Option, the Company shall issue and deliver to the
Holder a certificate or certificates for the Option Shares issuable upon such
exercise, registered in the name of the Holder or its designee. If this Option
should be exercised in part only, the Company shall, upon surrender of this
Option for cancellation, execute and deliver a new Option evidencing the right
of the Holder to purchase the balance of the Option Shares (or portions thereof)
subject to purchase hereunder.
3. Any Options issued upon the transfer or exercise in part of this Option
shall be numbered and shall be registered in an option register (the "Option
Register") as they are issued. The Company shall be entitled to treat the
registered holder of any Option on the Option Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Option on the part of any other person, and
shall not be liable for any registration or transfer of Options which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Option shall be transferable only on the books of the Company upon
delivery thereof duly endorsed by the Holder or by his or its duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment, or authority to transfer. In all cases of transfer by an attorney,
executor, administrator, guardian or other legal representative, duly
authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Option or Options to
the person entitled thereto. This Option may be exchanged, at the option of the
Holder thereof, for another Option, or other Options of different denominations,
of like tenor and representing in the aggregate the right to purchase a like
number of Option Shares (or portions thereof), upon surrender of this Option to
the Company or its duly authorized agent. Notwithstanding the foregoing, the
Company shall have no obligation to cause this Option to be transferred on its
books to any person if, in the opinion of counsel to the Company, such transfer
does not comply with the provisions of the Act and the rules and regulations
thereunder.
4. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the issuance of the Option Shares upon the exercise of the Options, such number
of shares of Common Stock as shall, from time to time, be sufficient therefor.
The Company covenants that all shares of Common Stock issuable upon exercise of
this Option, upon receipt by the Company of the full payment therefor, shall be
validly issued, fully paid, nonassessable, and free of preemptive rights.
5. Subject to the provisions of this Section 5, the Exercise Price in
effect from time to time shall be subject to adjustment, as follows:
(a) In case the Company shall at any time after the date the Options
were first issued (i) declare a dividend on the outstanding Common Stock payable
in shares of its capital stock, (ii) subdivide the outstanding Common Stock,
(iii) combine the outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock by reclassification of the Common
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the surviving or continuing corporation), then,
in each case, the Exercise Price in effect, and the number of shares of Common
Stock issuable upon exercise of the Options outstanding, at the time of the
record date for such dividend or of the effective date of such subdivision,
combination, or reclassification, shall be proportionately adjusted so that the
holders of the Options after such time shall be entitled to receive the
aggregate number and kind of shares which, if such Options had been exercised
immediately prior to such time, such holders would have owned upon such exercise
and been entitled to receive by virtue of such dividend, subdivision,
combination, or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
(b) In case the Company shall distribute to all holders of Common
Stock (including any such distribution made to the stockholders of the Company
in connection with a consolidation or merger in which the Company is the
surviving or continuing corporation) evidences of its indebtedness, cash, or
assets (other than distributions and dividends payable in shares of Common
Stock), or rights, options, or warrants to subscribe for or purchase Common
Stock, or securities convertible into or exchangeable for shares of Common
Stock, then, in each case, the Exercise Price shall be adjusted by multiplying
the Exercise Price in effect immediately prior to the record date for the
determination of stockholders entitled to receive such
-2-
<PAGE> 3
distribution by a fraction, the numerator of which shall be the Current Market
Price (as determined pursuant to Section 5(f) hereof) per share of Common Stock
on such record date, less the fair market value (as determined in good faith by
the board of directors of the Company, whose determination shall be conclusive
absent manifest error) of the portion of the evidences of indebtedness or assets
so to be distributed, or of such rights, options, or warrants or convertible or
exchangeable securities, or the amount of such cash, applicable to one share,
and the denominator of which shall be such Current Market Price per share of
Common Stock. Such adjustment shall become effective at the close of business on
such record date.
(c) All calculations under this Section 5 shall be made to the
nearest cent or to the nearest one-thousandth of a share, as the case may be;
provided, however that, no adjustment in the Exercise Price shall be required if
such adjustment is less than $.05; and provided, further, that any adjustments
which by reason of this Section 5 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. The Company shall
not be required to issue fractions of shares of Common Stock or other capital
stock of the Company upon the exercise of this Option. If any fraction of a
share would be issuable on the exercise of this Option (or specified portions
thereof), the Company shall purchase such fraction for an amount in cash equal
to the same fraction of the Current Market Price (as hereinafter defined) of
such share of Common Stock on the date of exercise of this Option.
(d) In any case in which this Section 5 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event (an "Event"), the Company may elect to defer, until the
occurrence of such Event, issuing to the Holder, if the Holder exercised this
Option after such record date, the shares of Common Stock, if any, issuable upon
such exercise over and above the number of Option Shares, if any, issuable upon
such exercise on the basis of the Exercise Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to the Holder a
due bill or other appropriate instrument evidencing the Holder's right to
receive such additional shares upon the occurrence of the Event requiring such
adjustment.
(e) Whenever there shall be an adjustment as provided in this
Section 5, the Company shall within 15 days thereafter cause written notice
thereof to be sent by certified or registered mail, postage prepaid, or by
recognized overnight courier service to the Holder, at its address as it shall
appear in the Option Register, which notice shall be accompanied by an officer's
certificate setting forth (i) the number of Option Shares issuable hereunder and
the Exercise Price, each both before and after such adjustment; and (ii) a brief
statement of the facts requiring such adjustment and the computation thereof,
which officer's certificate shall be conclusive evidence of the correctness of
any such adjustment absent manifest error.
(f) The Current Market Price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for the 30
consecutive trading days immediately preceding the date in question. The closing
price for each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the closing bid price
regular way, in either case on the principal United States national securities
exchange (including, for purposes hereof, the Nasdaq National Market (the
"Nasdaq")) on which the Common Stock is listed or admitted to trading or, if the
Common Stock is not listed or admitted to trading on any United States national
securities exchange, the highest reported bid price for the Common Stock as
furnished by the National Association of Securities Dealers, Inc. through Nasdaq
or a similar organization if Nasdaq is no longer reporting such information. If
on any such date the Common Stock is not listed or admitted to trading on any
United States national securities exchange and is not quoted by Nasdaq or any
similar organization, the fair value of a share of Common Stock on such date, as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error, shall be used.
(g) Upon each adjustment of the Exercise Price as a result of the
calculations made in Section 5(b) hereof, the Options shall thereafter evidence
the right to purchase, at the adjusted Exercise Price, that number of shares
(calculated to the nearest thousandth) obtained by dividing (A) the product
obtained by multiplying the number of shares purchasable upon exercise of the
Options prior to adjustment of the number of shares by the Exercise Price in
effect prior to adjustment of the Exercise Price by (B) the Exercise Price in
effect after such adjustment of the Exercise Price.
6. (a) In case of any consolidation with or merger of the Company with or
into another corporation (other than a merger or consolidation in which the
Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety (such
actions being hereinafter collectively referred to as "Reorganizations"), there
shall thereafter be deliverable upon exercise of this Option (in lieu of the
number of shares of Common Stock theretofore deliverable) the kind and amount of
shares of stock or other securities or property receivable upon such
Reorganization by a holder of the number of shares of Common Stock, for which
this Option might have been exercised immediately prior to such Reorganization.
In case of any Reorganization, appropriate adjustment, as determined in good
faith by the Board of Directors of the Company, shall be made in the application
of the provisions herein set forth with respect to the rights and interests of
the Holder so that the provisions set forth herein shall thereafter be
applicable, as nearly as possible, in relation to any shares or other property
thereafter deliverable upon exercise of this Option. Any such adjustment shall
be made by and set forth in a supplemental agreement between the Company, or any
successor thereto, and the Holder and shall for all purposes hereof conclusively
be deemed to be an appropriate adjustment. The Company shall not effect any such
Reorganization unless upon
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<PAGE> 4
or prior to the consummation thereof the successor corporation, or if the
Company shall be the surviving corporation in any such Reorganization and is not
the issuer of the shares of stock or other securities or property to be
delivered to holders of shares of the Common Stock outstanding at the effective
time thereof, then such issuer, shall assume by written instrument the
obligation to deliver to the Holder such shares of stock, securities, cash or
other property as the Holder shall be entitled to purchase in accordance with
the foregoing provisions.
(b) In case of any reclassification or change of the shares of
Common Stock issuable upon exercise of this Option (other than a change in par
value or from no par value to a specified par value, or as a result of a
subdivision or combination of the outstanding shares of Common Stock, but
including any change of the shares of Common Stock into two or more classes or
series of shares), or in case of any consolidation or merger of another
corporation into the Company in which the Company is the surviving or continuing
corporation and in which there is a reclassification or change (including a
change in the right to receive cash or other property) of the shares of Common
Stock (other than a change in par value, or from no par value to a specified par
value, or as a result of a subdivision or combination of the outstanding shares
of Common Stock, but including any change of the shares into two or more classes
or series of shares), the Holder shall have the right thereafter to receive upon
exercise of this Option solely the kind and amount of shares of stock and other
securities, property, cash, or any combination thereof receivable upon such
reclassification, change, consolidation, or merger by a holder of the number of
shares of Common Stock for which this Option might have been exercised
immediately prior to such reclassification, change, consolidation, or merger.
Thereafter, appropriate provision shall be made for adjustments which shall be
as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on shares of Common
Stock in shares of Common Stock or make any other distribution (other than
regularly scheduled cash dividends which are not in a greater amount per share
than the most recent such cash dividend) to all holders of Common Stock; or
(b) to issue any rights, warrants or other securities to all holders
of Common Stock entitling them to purchase any additional shares of Common Stock
or any other rights, warrants or other securities; or
(c) to effect any reclassification or change of outstanding shares
of Common Stock, or any consolidation, merger, sale, lease, or conveyance of
property, described in Section 6; or
(d) to effect any liquidation, dissolution or winding-up of the
Company;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Option Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined or (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up.
8. The issuance of any shares or other securities upon the exercise of
this Option and the delivery of certificates or other instruments representing
such shares or other securities shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder (except for any tax that is payable in respect of any
such transfer and any related exercise of this Option and that would be payable
pursuant to the first sentence of this Section 8 were such certificate to be
issued in the name of Holder) and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
9. (a) If, at any time during the seven-year period commencing on December
8, 1995 the Company shall file a registration statement (other than on Form S-4,
Form S-8, or any successor form) with the Securities and Exchange Commission
(the "Commission") while any Options or Option Shares are outstanding, the
Company shall give all of the then holders of any Options (the "Eligible
Holders") at least 45 days' prior written notice of the filing of such
registration statement. If requested by any Eligible Holder in writing within 30
days after receipt of any such notice, the Company shall, at the Company's sole
expense (other than the fees and disbursements of counsel for the Eligible
Holders and the underwriting discounts, if any, payable
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<PAGE> 5
in respect of the Option Shares sold by any Eligible Holder), register or
qualify all or, at each Eligible Holder's option, any portion of the Option
Shares and/or, at any time during the five-year period commencing on December 8,
1995, of the Options of any Eligible Holders who shall have made such request,
concurrently with the registration of such other securities, all to the extent
requisite to permit the public offering and sale of the Option Shares and/or the
Options through the facilities of all appropriate securities exchanges and the
over-the-counter market, and will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
effective as promptly as practicable. Notwithstanding the foregoing, if the
managing underwriter of any such offering shall advise the Company in writing
that, in its opinion, the distribution of all or a portion of the Option Shares
and/or the Options requested to be included in the registration concurrently
with the securities being registered by the Company would materially adversely
affect the distribution of such securities by the Company for its own account,
then any Eligible Holder who shall have requested registration of his or its
Option Shares and/or the Options shall delay the offering and sale of such
securities (or the portions thereof so designated by such managing underwriter)
for such period, not to exceed 90 days, as the managing underwriter shall
request (the "Delay Period"); provided that if any securities of the Company are
included in such registration statement and are eligible for sale during the
Delay Period for the account of any person other than the Company, a pro rata
portion of the securities which were requested to be included and eligible for
sale during the Delay Period shall also be included in such registration
statement and shall be eligible for sale during the Delay Period.
(b) If, on any two occasions during the seven-year period commencing
on December 8, 1995, the Company shall receive a written request from Eligible
Holders who in the aggregate own (or upon exercise of all Options then
outstanding would own) a majority of the total number of shares of Common Stock
then included (or upon such exercises would be included) in the Option Shares
(the "Majority Holders"), to register the sale of all or part of the Option
Shares and/or, at any time during the five-year period ending December 7, 2000,
of the Options, the Company shall, as promptly as practicable, prepare and file
with the Commission a registration statement sufficient to permit the public
offering and sale of the Option Shares and the Options (whether covered by such
request from the Majority Holders or by any other written request from any
Eligible Holder received within 30 days after such Eligible Holder's receipt of
the Company's notice, as described in the last sentence of this Section 9(b))
through the facilities of all appropriate securities exchanges and the
over-the-counter market, and will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
effective as promptly as practicable; provided, that the Company shall only be
obligated to file one such registration statement for which all expenses
incurred in connection with such registration (other than the fees and
disbursements of counsel for the Eligible Holders and underwriting discounts, if
any, payable in respect of the Option Shares and the Options sold by the
Eligible Holders) shall be borne by the Company. Within three business days
after receiving any request contemplated by this Section 9(b), the Company shall
give written notice to all the other Eligible Holders, advising each of them
that the Company is proceeding with such registration and offering to include
therein all or any portion of any such other Eligible Holder's Option Shares
and/or, at any time during the five-year period commencing on December 8, 1995,
the Options, provided that the Company receives a written request to do so from
such Eligible Holder within 30 days after receipt by him or it of the Company's
notice.
(c) In the event of a registration pursuant to the provisions of
this Section 9, the Company shall use its best efforts to cause the Options
and/or the Option Shares so registered to be registered or qualified for sale
under the securities or blue sky laws of such jurisdictions as the Holder or
such holders may reasonably request; provided, however, that the Company shall
not be required to qualify to do business in any state by reason of this Section
9(c) in which it is not otherwise required to qualify to do business or
otherwise subject itself to general service of process in any such state.
(d) The Company shall keep effective any registration or
qualification contemplated by this Section 9 and shall from time to time amend
or supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document and communication for such period of
time as shall be required to permit the Eligible Holders to complete the offer
and sale of the Options and/or the Option Shares covered thereby. The Company
shall in no event be required to keep any such registration or qualification in
effect for a period in excess of nine months from the date on which the Eligible
Holders are first free to sell such Options and/or Option Shares; provided,
however, that, if the Company is required to keep any such registration or
qualification in effect with respect to securities other than the Options and/or
the Option Shares beyond such period, the Company shall keep such registration
or qualification in effect as it relates to the Options and/or the Option Shares
for so long as such registration or qualification remains or is required to
remain in effect in respect of such other securities.
(e) In the event of a registration pursuant to the provisions of
this Section 9, the Company shall furnish to each Eligible Holder such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of copies
of each prospectus contained in such registration statement and each supplement
or amendment thereto (including each preliminary prospectus), all of which shall
conform to the requirements of the Act and the rules and regulations thereunder,
and such other documents, as any Eligible Holder may reasonably request to
facilitate the disposition of the Options and/or the Option Shares included in
such registration.
(f) In the event of a registration pursuant to the provisions of
this Section 9, the Company shall furnish each Eligible Holder of any Options
and/or Option Shares so registered with an opinion of its counsel (reasonably
acceptable to the Eligible Holders) to the effect that (i) the registration
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<PAGE> 6
statement has become effective under the Act and no order suspending the
effectiveness of the registration statement, preventing or suspending the use of
the registration statement, any preliminary prospectus, any final prospectus or
any amendment or supplement thereto has been issued, nor has the Commission or
any securities or blue sky authority of any jurisdiction instituted or
threatened to institute any proceedings with respect to such an order, (ii) the
registration statement and each prospectus forming a part thereof (including
each preliminary prospectus), and any amendment or supplement thereto, complies
as to form with the Act and the rules and regulations thereunder, and (iii) such
counsel has no knowledge of any material misstatement or omission in such
registration statement or any prospectus, as amended or supplemented.
(g) In the event of a registration pursuant to the provision of this
Section 9, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses and customary closing
conditions, including, without limitation, opinions of counsel and accountants'
cold comfort letters, with any underwriter who acquires any Options and/or
Option Shares.
(h) The Company agrees that until all the Options and/or the Option
Shares have been sold under a registration statement or pursuant to Rule 144
under the Act, it shall, so long as it is so required by applicable law, timely
file all reports, statements and other materials required to be filed with the
Commission to permit holders of the Options and/or the Option Shares to sell
such securities under Rule 144.
(i) The Company will not, without the written consent of the
Majority Holders, grant to any persons the right to request the Company to
register any securities of the Company, provided that the Company may grant such
registration rights to other persons so long as such rights do not conflict with
the rights of the Eligible Holders.
10. (a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, employees, agents and counsel, and each person, if any, who controls
any such person within the meaning of Section 15 of the Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all loss, liability, charge, claim, damage and expense
whatsoever (which shall include, for all purposes of this Section 10, without
limitation, reasonable attorneys' fees and any and all expense whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), as and when incurred, arising out of,
based upon, or in connection with (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any registration statement,
preliminary prospectus or final prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, relating to the sale of
any of the Options and/or the Option Shares, or (B) in any application or other
document or communication (in this Section 10 collectively called an
"application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to register or qualify any of the Options and/or the Option Shares
under the securities or blue sky laws thereof or filed with the Commission or
any securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company with respect to
such Eligible Holder by or on behalf of such person expressly for inclusion in
any registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be, or
(ii) any breach of any representation, warranty, covenant or agreement of the
Company contained in this Option. The foregoing agreement to indemnify shall be
in addition to any liability the Company may otherwise have, including
liabilities arising under this Option.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability other than pursuant to this Section 10(a) and shall
not relieve the Company from any liability pursuant to this Section 10(a) except
to the extent the Company has been prejudiced in any material respect by such
failure) and the Company shall promptly assume the defense of such action,
including the employment of counsel (reasonably satisfactory to such indemnified
party or parties) and payment of expenses. Such indemnified party or parties
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless the employment of such counsel shall have
been authorized in writing by the Company in connection with the defense of such
action or the Company shall not have promptly employed counsel reasonably
satisfactory to such indemnified party or parties to have charge of the defense
of such action or such indemnified party or parties shall have reasonably
concluded that there may be one or more legal defenses available to it or them
or to other indemnified parties which are different from or additional to those
available to the Company, in any of which events such fees and expenses shall be
borne by the Company, and the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties. Anything
in this Section 10 to the contrary notwithstanding, the Company shall not be
liable for any settlement of any such claim or action effected without its
written consent, which shall not be unreasonably withheld. The Company shall
not, without the prior written consent (which shall not be unreasonably
withheld) of each indemnified party that is not released as described in this
sentence,
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<PAGE> 7
settle or compromise any action, or permit a default or consent to the entry of
judgment in or otherwise seek to terminate any pending or threatened action, in
respect of which indemnity may be sought hereunder (whether or not any
indemnified party is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of each indemnified
party from all liability in respect of such action. The Company agrees promptly
to notify the Eligible Holders of the commencement of any litigation or
proceedings against the Company or any of its officers or directors in
connection with the sale of any Options and/or Option Shares or any preliminary
prospectus, prospectus, registration statement or amendment or supplement
thereto, or any application relating to any sale of any Options and/or Option
Shares.
(b) Each of the Holder and any Eligible Holder agrees to indemnify
and hold harmless the Company, each director of the Company, each officer of the
Company who shall have signed any registration statement covering Options and/or
Option Shares held by the Holder and any Eligible Holder, each other person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, and its or their respective counsel, to the
same extent as the foregoing indemnity from the Company to the Holder in Section
10(a), but only with respect to statements or omissions, if any, made in any
registration statement or final prospectus, or any amendment or supplement
thereto, or in any application, in reliance upon and in conformity with written
information furnished to the Company with respect to the Holder by or on behalf
of the Holder or with respect to any Eligible Holder or by or on behalf of such
Eligible Holder expressly for inclusion in any such registration statement or
final prospectus, or any amendment or supplement thereto, or in any application,
as the case may be; provided, however, that the Holder and each Eligible Holder
shall be liable only for written information furnished to the Company by it or
on its own behalf for inclusion in a registration statement. If any action shall
be brought against the Company or any other person so indemnified based on any
such registration statement or final prospectus, or any amendment or supplement
thereto, or in any application, and in respect of which indemnity may be sought
against the Holder pursuant to this Section 10(b), the Holder and each Eligible
Holder, as the case may be, shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of Section
10(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 10(a) or
10(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company, and its or their
respective counsel), as one entity, and the Eligible Holders of the Option
Shares included in such registration in the aggregate (including for this
purpose any contribution made by or on behalf of an indemnified party), as a
second entity, shall contribute to the losses, liabilities, claims, damages and
expenses whatsoever to which any of them may be subject, on the basis of
relevant equitable considerations such as the relative fault of the Company and
such Eligible Holders in connection with the facts which resulted in such
losses, liabilities, claims, damages and expenses. The relative fault, in the
case of an untrue statement, alleged untrue statement, omission or alleged
omission, shall be determined by, among other things, whether such statement,
alleged statement, omission or alleged omission relates to information supplied
by the Company or by such Eligible Holders, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement, alleged statement, omission or alleged omission. The Company and the
Holder agree that it would be unjust and inequitable if the respective
obligations of the Company and the Eligible Holders for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages and expenses (even if the Holder and the other
indemnified parties were treated as one entity for such purpose) or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section 10(c). In no case shall any Eligible Holder be responsible
for a portion of the contribution obligation imposed on all Eligible Holders in
excess of its pro rata share based on the number of shares of Common Stock owned
(or which would be owned upon exercise of all Options) by it and included in
such registration as compared to the number of shares of Common Stock owned (or
which would be owned upon exercise of all Options) by all Eligible Holders and
included in such registration. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 10(c), each person, if any, who
controls any Eligible Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, partner, employee,
agent and counsel of each such Eligible Holder or control person shall have the
same rights to contribution as such Eligible Holder or control person and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, each officer of the Company who shall
have signed any such registration statement, each director of the Company and
its or their respective counsel shall have the same rights to contribution as
the Company, subject in each case to the provisions of this Section 10(c).
Anything in this Section 10(c) to the contrary notwithstanding, no party shall
be liable for contribution with respect to the settlement of any claim or action
effected without its written consent. This Section 10(c) is intended to
supersede any right to contribution under the Act, the Exchange Act or
otherwise.
11. Unless registered pursuant to the provisions of Section 9 hereof, the
Option Shares issued upon exercise of the Option shall be subject to a stop
transfer order and the certificate or certificates evidencing such Option
Shares, shall bear the following legend:
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<PAGE> 8
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO
A REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. HOWEVER, SUCH SHARES MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION
STATEMENT, (ii) A SEPARATE REGISTRATION STATEMENT UNDER SUCH ACT, OR
(iii) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT."
12. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Option (and upon surrender of any Option
if mutilated), and upon reimbursement of the Company's reasonable incidental
expenses, the Company shall execute and deliver to the Holder thereof a new
Option of like date, tenor and denomination.
13. The Holder of any Option shall not have, solely on account of such
status, any rights of a stockholder of the Company, either at law or in equity,
or to any notice of meetings of stockholders or of any other proceedings of the
Company, except as provided in this Option.
14. This Option shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
15. The Company irrevocably consents to the jurisdiction of the courts of
the State of New York and of any federal court located in such State in
connection with any action or proceeding arising out of or relating to this
Option, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Option, or a breach of this Option or any such document
or instrument. In any such action or proceeding, the Company waives personal
service of any summons, complaint or other process and agrees that service
thereof may be made in accordance with Section 11 of the Underwriting Agreement.
Dated: May 1, 1996
DUSA PHARMACEUTICALS, INC.
By: _____________________________
D. Geoffrey Shulman, M.D.
[Seal] President and Chief Executive
Officer
____________________
Secretary
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<PAGE> 9
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Option.)
FOR VALUE RECEIVED, ___________________________________ hereby sells,
assigns, and transfers unto _________________ an Option to purchase __________
shares of Common Stock, without par value, of DUSA Pharmaceuticals, Inc. (the
"Company"), together with all right, title, and interest therein, and does
hereby irrevocably constitute and appoint _____________________ attorney to
transfer such Option on the books of the Company, with full power of
substitution.
Dated: _____________________
Signature_______________________
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Option in every particular, without alteration or
enlargement or any change whatsoever.
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<PAGE> 10
ELECTION TO EXERCISE
To: DUSA Pharmaceuticals, Inc.
6870 Goreway Drive
Mississauga, Ontario L4V 1P1
The undersigned hereby exercises his or its rights to purchase
_______ Option Shares covered by the within Option and tenders payment herewith
in the amount of $_________ in accordance with the terms thereof, and requests
that certificates for such securities be issued in the name of, and delivered
to:
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Option Shares shall not be all the Option Shares covered
by the within Option, that a new Option for the balance of the Option Shares
covered by the within Option be registered in the name of, and delivered to, the
undersigned at the address stated below.
Dated: __________________ Name________________________
(Print)
Address:
(Signature)
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<PAGE> 11
CONVERSION RIGHT EXERCISE FORM
(To be executed upon exercise of the Conversion Right provisions contained in
Section 1 of this Option)
The undersigned hereby irrevocably elects to surrender ___ percent
of its Option for such Option Shares pursuant to the Conversion Right provisions
of the within Option, as provided for in Section 1 of such Option.
Please issue a certificate or certificates for such Option Shares in
the name of the undersigned, pay cash for any fractional share pursuant to
Section 5(c) of the Option (if applicable) and issue a new Option for the
unexercised portion thereof (if applicable).
Name _________________________________
(Please Print Name, Address and Social Security
No.)
Address_____________________________
_____________________________________
______________________________________
Social _______________________________
Security No.
Signature ____________________________
NOTE: The above signature should
correspond exactly with the name
on the first page of this Option or
with the name of the assignee
appearing in the
assignment form below
-11-
<PAGE> 1
DUSA PHARMACEUTICALS, INC.
a New Jersey corporation
WARRANT CERTIFICATE
FOR PURCHASE OF COMMON STOCK
THIS CERTIFIES THAT,
SUNRISE FINANCIAL GROUP, INC.
(the "Registered Holder") is the owner of a Warrant (the "Sunrise Warrant"). The
Sunrise Warrant entitles the Registered Holder to purchase, subject to the terms
and conditions set forth in this certificate and the Investor Relations Retainer
Agreement (as hereinafter defined), up to 50,000 fully paid and non-assessable
shares of Common Stock, no par value (the "Shares"), of DUSA Pharmaceuticals,
Inc., a New Jersey corporation (the "Company"), at any time prior to the
Expiration Date (as hereinafter defined) upon the presentation and surrender of
the Warrant Certificate with the Subscription Form attached hereto, duly
executed, accompanied by payment of U.S. $6.00 per Share if the Sunrise Warrant
is exercised on or before 5:00 p.m. (New York time) October 14, 1998, (the
"Purchase Price") in lawful money of the United States of America in cash or by
official bank or certified check made payable to the Company.
The Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of the Sunrise Warrant represented hereby are subject
to modification or adjustment in connection with any stock split, subdivision,
business combination or the like.
The Sunrise Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued in
the case of the exercise of less than the Sunrise Warrant represented hereby.
The Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificate of
like tenor for the balance of such Warrant.
The Registered Holder understands that it is subject to certain
restrictions on transfer under the Securities Act of 1933 of the United States,
as amended, (the "1933 Act") of the Shares issued pursuant to any exercise of
the Sunrise Warrant; such restrictions provide that the Shares may not be sold
without registration or exemption from registration under the 1933 Act; and, for
purposes of the Securities Act (Ontario) (the "Ontario Act"), such Shares may
not be sold in Ontario or Canada without an exemption from prospectus and
registration requirements. The Shares issued upon exercise of any and all of the
Sunrise Warrant shall bear the following legend:
<PAGE> 2
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE
SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION
OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT".
The term "Expiration Date" shall mean 5:00 p.m. (New York time) on October
14, 1998, or such earlier date as the Sunrise Warrants shall expire. If such
date shall in the State of New York be a holiday or a day on which the banks are
authorized to close, then the Expiration Date shall mean 5:00 p.m. (New York
time) the next following day which, in the State of New York, is not a holiday
or a day on which the banks are authorized to close. The Company may at its
election extend the expiration date. This Warrant shall not be exercisable by
the Registered Holder in any state where such exercise would be unlawful.
Prior to the exercise of the Sunrise Warrant represented hereby, the
Registered Holder shall not be entitled to any rights as a shareholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions and shall not be entitled to receive any notice
of any proceedings of the Company.
Prior to due presentment for registration hereof, pursuant to the Investor
Relations Retainer Agreement, the Company may deem and treat the Registered
Holder as the absolute owner hereof and of the warrant represented hereby,
(notwithstanding any notations of ownership or writing thereon made by anyone
other than a duly authorized officer of the Company) for all purposes and shall
not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New Jersey.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed.
DUSA Pharmaceuticals, Inc.
By:___________________________________
D. Geoffrey Shulman, MD FRCPC
President and CEO
<PAGE> 3
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to exercise
the Warrant represented by this Warrant Certificate and to purchase the
securities issuable upon the exercise of such Warrant, and requests that
certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
________________________________________________________________________________
________________________________________________________________________________
(please print or type name and address)
and be delivered to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(please print or type name and address)
and if such number shall not be all shares to which this Warrant relates, as
evidenced by this Warrant Certificate, then a new Warrant Certificate for the
issuance of such remaining shares shall be registered in the name of, and
delivered to, the Registered Holder at the address stated below.
Dated:____________________ X___________________________________________
___________________________________________
___________________________________________
Address
___________________________________________
Taxpayer Identification Number
___________________________________________
Signature Guaranteed
<PAGE> 1
EXTENSION OF
WARRANT CERTIFICATE FOR
PURCHASE OF COMMON STOCK
This Extension of the Warrant Certificate for Purchase of Common Stock
(this "Extension") is made as of the 30th day of July, 1998, by and between DUSA
Pharmaceuticals, Inc. (the "Company"), and Sunrise Financial Group, Inc.
("Sunrise").
WITNESSETH
WHEREAS, Sunrise is the owner of a Warrant Certificate for Purchase of
Common Stock ("Warrant Certificate"), pursuant to which Sunrise is entitled to
purchase up to 50,000 fully paid and non-assessable shares of the Company's
Common Stock at an exercise price of Six ($6.00) Dollars per share; and
WHEREAS, the Warrant Certificate has an Expiration Date defined as 5:00
P.M. New York time on October 14, 1998; and
WHEREAS, the parties hereto desire to amend the terms of the Warrant
Certificate in order to extend the term of the Warrant Certificate until 5:00
P.M. New York time on October 14, 2001;
NOW, THEREFORE, in consideration of the premises and mutual promises and
agreements contained herein, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Amendment to the Warrant Certificate. The parties hereby amend the
Warrant Certificate as follows:
(a) Amendment of the first paragraph of the Warrant. The first
paragraph of the Warrant Certificate is hereby amended by replacing the
reference to "October 14, 1998," in the first paragraph with "October 14, 2001."
(b) Amendment of Paragraph 5 of the Warrant Certificate. Paragraph 5
of the Warrant Certificate is hereby amended by deleting the first sentence of
such paragraph and replacing it with the following sentence:
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
October 14, 2001, or such earlier date as the Sunrise Warrants shall
expire.
2. Conditions to Effectiveness: This Extension shall become effective as
of the date hereof when a counterpart of this Extension shall have been executed
by each party hereto and delivered to Sunrise.
<PAGE> 2
3. Reference to and the Effect on the Warrant Certificate. Except as
expressly provided in this Extension, the Warrant Certificate shall remain
unmodified and in full force and effect and is hereby ratified and affirmed. The
execution, delivery, and effectiveness of this Extension shall not, except as
expressly provided herein, operate as a waiver of any right, power, or remedy of
Sunrise or the Company under the Warrant Certificate.
4. Authorization of Extension. The Company represents and warrants that
the execution, delivery, and performance of this Extension by the Company have
been duly approved and authorized by the Company's Board of Directors.
5. Headings. Section headings in this Extension are included herein for
convenience of reference only and shall not constitute a part of this Extension
for any other purpose.
6. Execution in Counterparts. This Extension may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Extension to the
Warrant Certificate to be executed as of the date first above written.
DUSA PHARMACEUTICALS, INC.
By:_________________________________
Title:______________________________
SUNRISE FINANCIAL GROUP, INC.
By:_________________________________
Title:______________________________
-2-
<PAGE> 1
DELOITTE & TOUCHE LLP
BCE Place
181 Bay Street
Suite 1400
Toronto, Ontario M5J2V1
CANADA
Independent Auditors' Consent
We consent to the incorporation by reference in this Registration Statement of
Dusa Pharmaceuticals, Inc. on Form S-3 of our report dated February 4, 1999
(which expresses an unqualified opinion and includes an emphasis paragraph
indicating that the Company is in the development stage), appearing in the
Annual Report on Form 10-K of Dusa Pharmaceuticals, Inc. for the year ended
December 31, 1998 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
Chartered Accountants
Toronto, Ontario
February 24, 1999
<PAGE> 1
LANE AND MANTELL
ATTORNEYS AT LAW
991 Route 22 West, Post Office Box 8539, Suite 102
Somerville, New Jersey 08876
Nanette Weitman Mantell Telephone (908) 253-9333
Steven R. Lane Facsimile (908) 253-9339
- ----------
Rosemary Farr Howard Freeman
Of Counsel
February 25, 1999
Securities and Exchange Commission
Division of Corporate Finance
450 Fifth Street, NW
Washington, DC 20549
Re: DUSA Pharmaceuticals, Inc.
Registration Statement on Form S-3
Dear Sir or Madam:
We consent to the use of our firm's name under the heading "Legal Matters"
in the Registration Statement on Form S-3 and any amendments thereto filed by
the Registrant with the Securities and Exchange Commission in connection with
the above-referenced matter.
Very truly yours,
/s/ Lane and Mantell
LANE and MANTELL
a professional corporation
NWM:rdl
<PAGE> 1
DUSA PHARMACEUTICALS, INC.
SUBSCRIPTION AGREEMENT
A Minimum of 800,000 Shares ("Minimum Offering") and
A Maximum of 1,500,000 Shares ("Maximum Offering") of Common Stock
To: DUSA Pharmaceuticals, Inc.
181 University Avenue
Suite 1208
Toronto, Ontario M5H 3M7
Canada
Attn.: President
Ladies and Gentlemen:
1. Subscription. The undersigned is hereby purchasing from DUSA
Pharmaceuticals, Inc., a New Jersey corporation (the "Company"),
________________ shares (the "Shares") of the Company's common stock, no par
value (the "Common Stock"), for a purchase price of $5.00 per share and an
aggregate purchase price of $___________ (the "Purchase Price"). This
Subscription is being made in connection with the Company's private placement of
Shares solely to "Accredited Investors" (the "Offering"). The Terms of the
Offering are more specifically described on Annex A hereto.
2. Closing. On the date hereof (the "Closing"), payment of the Purchase
Price is being made by electronic wire transfer in accordance with the following
instructions:
Bank Name: Chase, NYC
ABA #: 021000021
Credit: United States Trust Company of New York
Account #: 920-1-073195
Further Credit: Sunrise/DUSA Pharmaceuticals, Inc.
Account #: 09035200
Attention: James Logan
or by delivery of a bank check or certified check made payable to "DUSA
Pharmaceuticals, Inc. Escrow Account," in either case against delivery to the
undersigned of a certificate representing the Shares. All checks should be
delivered, together with an executed copy of this Subscription Agreement, to the
Placement Agent for this Offering as follows:
Subagmt
January 5, 1999
<PAGE> 2
Sunrise Securities Corp.
135 East 57th Street
11th floor
New York, New York
Attention: Alan Swerdloff, Vice President
The Closing shall take place at the offices of Lane and Mantell,
991 Route 22 West, Somerville, New Jersey on or about the fifth business day
after the Offering terminates (i.e., on February 15, 1999 unless extended by
mutual consent of the Company and Sunrise Securities Corp.) (the "Termination
Date") or such earlier date that the Company elects to close after receipt of
subscriptions for the Minimum Offering (the "Closing Date"). Promptly after the
Closing, the Company will deliver to the undersigned certificates evidencing the
Shares to be purchased by the undersigned, registered in its name upon receipt
of payment of the Purchase Price. As of the Closing Date, the undersigned shall
be entitled to vote all of the Shares, to receive dividends, if any, and to
obtain all of the rights otherwise granted to the Company's shareholders. The
name of each undersigned shall be registered on the transfer books of the
Company as the record owner of the Shares purchased. If the Company has not
received subscriptions for at least the Minimum Offering on or prior to the
Termination Date, the Purchase Price will be returned promptly without interest.
3. Representations and Warranties of the Company. To induce the
undersigned to enter into this Agreement and to purchase the Shares, the Company
hereby represents and warrants to the undersigned the following:
(a) Organization, Standing, Etc. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New Jersey and has the requisite corporate power and authority to own
or lease its properties and to carry on its business as it is now being
conducted. The Company has the requisite corporate power and authority to issue
the Shares and to perform its obligations under this Subscription Agreement.
(b) Valid Issuance. The Shares, when issued and delivered against
payment therefor pursuant to terms of this Subscription Agreement, will be duly
authorized, validly issued and enforceable in accordance with their respective
terms and the terms of this Subscription Agreement.
(c) Corporate Acts and Proceedings. This Subscription Agreement
and the Offering have been duly authorized by all necessary corporate action on
behalf the Company. This Subscription Agreement has been duly executed and
delivered by an authorized officer of the Company, is a valid and binding
agreement on the part of the Company and is enforceable against the Company in
accordance with its terms. All corporate actions necessary to the authorization,
creation, issuance and delivery of the Shares and the conducting of the Offering
have been taken by the Company.
Subagmt
January 5, 1999
-2-
<PAGE> 3
(d) Compliance with Applicable Laws and Other Instruments.
Neither the execution or delivery of, nor the performance of or compliance with
this Subscription Agreement, the issuance of the Shares nor the consummation of
the transactions contemplated hereby will, with or without the giving of notice
or passage of time, result in any material breach of, or constitute a material
default under, or result in the imposition of any material lien or encumbrance
upon any asset or property of the Company pursuant to, any material agreement or
other instrument to which the Company is a party or by which it or any of its
properties, assets or rights is bound or affected, and will not violate the
Company's Certificate of Incorporation or Bylaws.
(e) Securities Laws. Based in part upon the representations of
the undersigned in Section 5 hereof, no consent, authorization, approval, permit
or order of or filing with any governmental or regulatory authority is required
under current laws and regulations in connection with the execution and delivery
of this Agreement or the offer, issuance, sale or delivery of the Shares, other
than (i) the filing of a Form D pursuant to Regulation D under the Securities
Act of 1933, as amended (the "Act"), (ii) the filing, if required, of any notice
with any state whose laws require such filing, (iii) the qualification thereof,
if required, under other applicable state laws, which qualification has been or
will be effected as a condition of the Offering and (iv) the listing thereof on
The NASDAQ Stock Market. Under the circumstances contemplated by this
Subscription Agreement, the offer, issuance, sale and delivery of the Shares
will not, under current laws and regulations, require compliance with the
prospectus delivery or registration requirements in the Act.
(f) Capital Stock. The authorized and issued capital stock of the
Company as of the Closing is correctly set forth in the unaudited interim
financial statements for the quarter ended September 30, 1998. All of the
outstanding shares of the Company were duly authorized and validly issued and
are fully paid and nonassessable. Except as described in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, (the "Form
10-K"), quarterly report on Form 10-Q for the quarter ended March 31, 1998,
quarterly report on Form 10-Q for the quarter ended June 30, 1998, quarterly
report on Form 10-Q for the quarter ended September 30, 1998 and any other
reports filed prior to Closing (collectively, the "SEC Filings"), in each case
as filed with the Securities and Exchange Commission (the "Commission"), there
are no outstanding subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or arrangements of any
character or nature whatever, other than in connection with the Offering,
pursuant to which the Company is obligated to issue any securities of any kind
representing an ownership interest in the Company. Neither the offer nor the
issuance or sale of the Shares constitutes an event under any anti-dilution
provisions of any securities issued (or issuable pursuant to outstanding rights,
warrants or options) by the Company or any agreements with respect to the
issuance of securities by the Company, which will either increase the number of
securities issuable pursuant to such provisions or decrease the consideration
per share to be received by the Company pursuant to such provisions. No holder
of any securities of the Company is entitled to any preemptive or similar rights
to purchase any securities of the Company in connection with the Offering.
(g) SEC Filings. The Company has furnished, or made available
through the EDGAR Internet web site of the Commission, to the undersigned true
and complete copies of the
Subagmt
January 5, 1999
-3-
<PAGE> 4
SEC Filings. As of their respective filing dates, the SEC Filings complied in
all material respects with the applicable requirements of the Exchange Act of
1934, as amended (the "Exchange Act"). The SEC Filings do not as of their
respective dates contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading.
(h) Representations. The Company certifies that the
representations set forth herein concerning the Company are true and correct as
of the date hereof, shall be true and accurate as of the date of the acceptance
hereof by the Company and shall survive thereafter.
4. Transfer Restrictions.
(a) The undersigned realizes that the Shares are not registered
under the Act or any foreign or state securities laws. The undersigned agrees
that the Shares will not be sold, offered for sale, pledged, hypothecated or
otherwise transferred (collectively, "Transfer"), except in compliance with the
Act and applicable foreign and state securities laws. The undersigned
understands that he can only Transfer the Shares pursuant to registration under
the Act or pursuant to an exemption therefrom. The undersigned understands that
Transfer of the Shares may require in certain jurisdictions specific approval by
the appropriate governmental agency or commission in such jurisdiction. The
undersigned has been advised that, except as set forth in Section 6 hereof, the
Company has no obligation, and does not intend, to cause the Shares to be
registered under the Act or the securities law of any other jurisdiction or to
comply with the requirements for any resale exemption under the Act, including
but not limited to, those provided by Rule 144 and Rule 144A promulgated under
the Act, or under the securities law of any other jurisdiction.
(b) To enable the Company to enforce the transfer restrictions
contained in Section 4(a) hereof, the undersigned hereby consents to the placing
of legends upon, and stop-transfer orders with the transfer agent of the Common
Stock with respect to, the Shares.
5. Representations and Warranties of the Undersigned. To induce the
Company to accept the undersigned's subscription, the undersigned hereby
represents and warrants to the Company that:
(a) the undersigned, if an individual, has reached the age of
majority in the jurisdiction in which he resides, is a bona fide resident of the
jurisdiction contained in the address set forth on the signature page of this
Subscription Agreement, is legally competent to execute this Subscription
Agreement, does not intend to change residence to another jurisdiction and is
not a resident of Canada;
(b) the undersigned, if an entity, is duly authorized to execute
this Subscription Agreement and this Subscription Agreement, when executed and
delivered by the undersigned, will constitute a legal, valid and binding
obligation enforceable against the undersigned in accordance with its terms; and
the execution, delivery and performance of this Subscription Agreement and the
Subagmt
January 5, 1999
-4-
<PAGE> 5
consummation of the transactions contemplated hereby have been duly authorized
by all requisite corporate or other necessary action on the part of the
undersigned;
(c) the Shares subscribed for hereby are being acquired by the
undersigned for investment purposes only, for the account of the undersigned and
not with the view to any resale or distribution thereof except as permitted
under Section 6 hereof, and the undersigned is not participating, directly or
indirectly, in a distribution of such Shares and will not take, or cause to be
taken, any action that would cause the undersigned to be deemed an "underwriter"
of such Shares as defined in Section 2(11) of the Act;
(d) the undersigned has had access to all materials, books,
records, documents and information relating to the Company which the undersigned
has requested, including (i) the SEC Filings and (ii) the Company's Proxy
Statement dated April 27, 1998 (the "Proxy Statement"), and has been able to
verify the accuracy of the information contained therein;
(e) the undersigned acknowledges and understands that investment
in the Share involves a high degree of risk, including without limitation, the
risks set forth in the SEC Filings under the captions "Factors Affecting Future
Operating Results" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" as well as those risk factors set forth in
Annex A;
(f) the undersigned acknowledges that the undersigned has been
offered an opportunity to ask questions of, and receive answers from, officers
of the Company concerning all material aspects of the Company and its business
and the Offering, and that any request for such information has been fully
complied with to the extent the Company possesses such information or can
acquire it without unreasonable effort or expense;
(g) the undersigned has such knowledge and experience in
financial and business matters that the undersigned is capable of evaluating the
merits and risks of an investment in the Company and can afford a complete loss
of his investment in the Company;
(h) The undersigned has, in connection with its decision to
purchase the Shares, relied solely upon the SEC Filings and the Proxy Statement.
The Undersigned has not relied upon any representations or other information
(whether oral or written) from the Company, the Placement Agent or any of its
agents other than as set forth herein and no oral or written representations
have been made or oral or written information furnished to the undersigned or
its advisors, if any, in connection with the offering of the Shares which were
in any way inconsistent with the SEC filings and the Proxy Statement;
(i) The undersigned represents and warrants to and covenants with
the Company that the undersigned has not engaged and will not engage in any
sales of the Shares, including a short sale covered by the Shares, prior to the
effectiveness of the Resale Registration Statement (as defined
Subagmt
January 5, 1999
-5-
<PAGE> 6
in Section 6), except to the extent that any such short sale is fully covered by
shares of Common Stock of the Company other than the Shares;
(j) the undersigned recognizes that no governmental agency has
passed upon or endorsed the merits of the issuance of the Shares or made any
finding or determination as to the fairness of this Offering;
(k) if the undersigned is purchasing the Shares subscribed for
hereby in a representative or fiduciary capacity, the representations and
warranties contained herein shall be deemed to have been made on behalf of the
person or persons for whom such Shares are being purchased;
(l) the undersigned has not entered into any agreement to pay
commissions to any persons with respect to the purchase or sale of the Shares,
except commissions for which the undersigned will be responsible;
(m) the undersigned acknowledges that the Company will pay to
Sunrise Securities Corp. with respect to the sale of the Shares by the Company
to the undersigned (except to the extent otherwise provided in Annex A) (i) a
commission of 5.0% of the aggregate Purchase Price and a non-accountable expense
allowance of 3.0% thereof, payable in either case at the option of Sunrise
Securities Corp. in cash or shares of Common Stock valued at the Purchase Price
less the commission and non-accountable expense allowance, and (ii) five-year
warrants to purchase, at a purchase price of $5.00 per share, that number of
shares of Common Stock equal to 10% of the number of Shares being purchased by
the undersigned hereunder;
(n) all information which the undersigned has provided to the
Company concerning his financial position is correct and complete as the date
set forth below, and if there should be any change in such information prior to
the undersigned's acceptance as a security holder of the Company, the
undersigned will immediately provide such information to the Company and will
promptly send confirmation of such information to the Company and the Placement
Agent;
(o) the undersigned is not subscribing for the Shares as a result
of or subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or meeting to which the public
was invited;
(p) the undersigned is an "Accredited Investor" as that term is
defined in Section 501(a) of Regulation D promulgated under the Act.
Specifically the undersigned is (check appropriate item(s)):
|_| (i) a bank as defined in Section 3(a)(2) of the Act, or a
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Act whether acting in its
Subagmt
January 5, 1999
-6-
<PAGE> 7
individual or fiduciary capacity; a broker or dealer registered pursuant to
Section 15 of the Exchange Act; an insurance company as defined in Section 2(13)
of the Act; an investment company registered under the Investment Company Act of
1940 or a business development company as defined in Section 2(a)(48) of that
Act; a Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) of (d) of the Small Business Investment Act
of 1958; a plan established and maintained by a state, its political
subdivisions, for the benefit of its employees, if such plan has total assets in
excess of $5,000,000, an employee benefit plan within the meaning of the
Employment Retirement Income Security Act of 1974, if the investment decision is
made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment advisor, or if the employee benefit plan has total assets in excess
of $5,000,000, or if a self-directed plan, with investment decisions made solely
by persons that are Accredited Investors;
|_| (ii) a private business development company as defined in
Section 202(a)(22) of the investment Advisers Act of 1940;
|_| (iii) an organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific purpose of acquiring
Shares, with total assets in excess of $5,000,000;
|_| (iv) a director or executive officer of the Company;
|_| (v) a natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of his or her purchase exceeds
$1,000,000;
|_| (vi) a natural person who had an individual income (not
including his or her spouse's income) in excess of $200,000 in 1996 and 1997 or
joint income with his or her spouse in excess of $300,000 in each of those years
and has a reasonable expectation of reaching such income level in 1998;
|_| (vii) a trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring Shares, whose purchase is
directed by a person having such knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits and risks
entailed in the purchase of Shares; or
Subagmt
January 5, 1999
-7-
<PAGE> 8
|_| (viii) an entity in which all of the equity owners are
Accredited Investors. (If this alternative is checked, the undersigned must
identify each equity owner and provide statements signed by each demonstrating
how each is qualified as an Accredited Investor.)
(q) the undersigned certifies that the representations set forth
herein concerning the Undersigned are true and correct as of the date hereof,
shall be true and accurate as of the date of the acceptance hereof by the
Company and shall survive thereafter.
6. Registration of Shares under the Act.
(a) By its acceptance hereof, the Company agrees that it shall,
at its expense, (i) not later than 30 business days after the final closing of
the Offering (the "Filing Deadline") file a registration statement or amend an
existing effective registration statement (in either case, the "Resale
Registration Statement") with the Commission to register under the Act the
resale by the undersigned of the Shares, (ii) use its reasonable best efforts to
cause the Resale Registration Statement to become effective under the Act as
promptly as practicable, (iii) after the Resale Registration Statement is
declared effective under the Act, furnish the undersigned with such number of
copies of the final prospectus included in the Resale Registration Statement
(the "Prospectus") as the undersigned may reasonably request to facilitate the
resale of Shares, and (iv) use its reasonable best efforts to cause such
Registration Statement to remain effective until such time as the undersigned
becomes eligible to resell the Shares pursuant to Rule 144 under the Act.
(b) The Company will prepare and file with the Commission such
amendments and Prospectus supplements, including post-effective amendments to
the Resale Registration Statement, as the Company determines may be necessary or
appropriate, and use its reasonable best efforts to have such post-effective
amendments declared effective as promptly as practicable; cause the Prospectus
to be supplemented by any Prospectus supplement, and as so supplemented, to be
filed with the Commission; and promptly notify the undersigned when a
Prospectus, and any Prospectus supplement or post-effective amendment must be
filed or has been filed (including any filing in response to a Sale Notice) and,
with respect to any post-effective amendment, when the same has become
effective.
(c) In connection with the Resale Registration Statement, the
undersigned shall furnish the Company such information as the Company shall
reasonably request.
(d) At any time the Company may refuse to permit the undersigned
to resell any Shares pursuant to the Resale Registration Statement; provided,
however, that in order to exercise this right, the Company must deliver a
certificate in writing to the undersigned to the effect that withdrawal of such
Resale Registration Statement is necessary because a sale pursuant to the Resale
Registration Statement in its then-current form could constitute a violation of
the federal securities laws. In such an event, the Company shall use its best
efforts to amend the Resale Registration Statement if necessary and take all
other actions necessary to allow such sale under the federal
Subagmt
January 5, 1999
-8-
<PAGE> 9
securities laws, and shall notify the undersigned promptly after it has
determined that such sale has become permissible under the federal securities
laws. The undersigned hereby covenants and agrees that it will not sell any
Shares pursuant to the Resale Registration Statement during the periods the
Resale Registration Statement is withdrawn as set forth in this Section 6(d).
(e) In connection with the Resale Registration Statement, the
Company shall use its best efforts to cause the registered Shares to be
registered or qualified for sale under the securities or "blue sky" laws of such
jurisdictions as the holders of at least a majority of all such registered
Shares and/or as the Placement Agent may reasonably request.
7. Indemnification.
(a) The undersigned understands the meaning and legal
consequences of the representations and warranties made by the undersigned in
this Subscription Agreement, and agrees to indemnify and hold harmless the
Company and each of the Company's directors, officers, stockholders, employees,
counsel, agents, successors and assignees from and against any and all loss,
damage, liability or expenses (including, without limitation, attorneys' fees),
as and when incurred, due to or arising out of (in such case in whole or in
part) any breach of any representation or warranty made by the undersigned set
forth herein or in any other agreement or other document furnished by the
undersigned to any of the foregoing in connection with the Offering, any failure
by the undersigned to fulfill any of its covenants or agreements set forth
herein, or arising out of the resale or distribution by the undersigned of the
Shares or any portion thereof in violation of the Act or any applicable foreign
or state securities or "blue sky" law.
(b) The Company understands the meaning and legal consequences of
the representations and warranties made by it in this Subscription Agreement,
and agrees to indemnify and hold harmless the undersigned and each of the
undersigned's directors, officers, stockholders, employees, counsel, agents,
successors and assigns from and against any and all loss, damage, liability or
expense (including, without imitation, attorneys' fees), as and when incurred,
due to or arising out of (in each case in whole or in part) any breach of any
representation or warranty made by the Company set forth herein, or any failure
by the Company to fulfill any of its covenants or agreements set forth herein.
(c) To the extent permitted by law, the Company will indemnify
and hold harmless each holder of Shares included in the Resale Registration
Statement (a "Holder"), the directors, if any, of such Holder, the officers, if
any, of such Holder, and each person, if any, who controls such Holder within
the meaning of the Act or the Exchange Act, against any losses, claims, damages,
expenses or liabilities to which any of them may become subject, under the Act,
the Exchange Act or otherwise, insofar as such losses, claims, damages, expenses
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violation (collectively, a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in the Resale
Registration Statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or
Subagmt
January 5, 1999
-9-
<PAGE> 10
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or (iii) any violation or alleged violation by the Company of the Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Act, the Exchange Act or any state securities law; and the Company
will reimburse the Holders and each such controlling person, promptly as such
expenses are incurred, for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding.
(d) To the extent permitted by law, each Holder, severally and
not jointly, will indemnify and hold harmless, to the same extent and in the
same manner set forth in Section 7(c), the Company, each of its directors and
officers who have signed the Resale Registration Statement, and each person, if
any, who controls the Company within the meaning of the Act or the Exchange Act,
against any losses, claims, damages or liabilities to which any of them may
become subject, under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened in respect thereof) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with the Resale
Registration Statement; and such Holder will reimburse such persons for any
legal or other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action.
(e) With respect to the indemnification set forth in Sections
7(c) or (d) above, to the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under said Sections 7(c) or (d) to the extent permitted by law; provided that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in said
Sections 7(c) or (d),(ii) no party guilty of fraudulent misrepresentation
(within the meaning of Section 11 of the Act) shall be entitled to contribution
from any party who was not guilty of such fraudulent misrepresentation, and
(iii) contribution from any Holder shall be limited in amount to the net amount
of proceeds received by such Holder from the sale of Shares under the Resale
Registration Statement.
8. Further Documents. The undersigned agrees that it will execute such
other documents as may be necessary or desirable in connection with the
transactions contemplated hereby.
9. Modification. Neither this Subscription Agreement nor any provisions
hereof shall be waived, modified, discharged or terminated except by an
instrument in writing signed by the party against whom any such waiver,
modification, discharge or termination is sought.
10. Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service and delivered against
Subagmt
January 5, 1999
-10-
<PAGE> 11
receipt to the party to whom it is to be given, (i) if to the Company, at the
address set forth on the first page hereof, (ii) if to the undersigned, at its
address set forth on the signature page hereto, or (iii) in either case, to such
other address as the party shall have furnished in writing in accordance with
the provisions of this Section 10. Notice to the estate of any party shall be
sufficient if addressed to the party as provided in Section 10. Any notice or
other communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof. Any notice given by other
means permitted by this Section 10 shall be deemed given at the time of receipt
thereof.
11. Counterparts. This Subscription Agreement may be executed through the
execution of separate signature pages or in any number of counterparts, and each
such counterpart shall, for all purposes, constitute one agreement binding on
all parties, notwithstanding that all parties are not signatories to the same
counterpart.
12. Entire Agreement. This Subscription Agreement contains the entire
agreement of the parties with respect to the subject matter hereof and there are
no representations, covenants or other agreements except as stated or referred
to herein.
13. Severability. Each provision of this Subscription Agreements is
intended to be severable from every other provision, and the invalidity or
illegality of any portion hereof shall not affect the validity or legality of
the remainder hereof.
14. Assignability. This Subscription Agreement is not transferable or
assignable by the undersigned.
15. Applicable Law. This Subscription Agreement has been negotiated and
consummated in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflict of laws.
16. Choice of Jurisdiction. Any action or proceeding arising directly,
indirectly or otherwise, in connection with, out of or from this Subscription
Agreement, any breach hereof or any transaction covered hereby shall be resolved
within New York, New York. Accordingly, the parties consent and submit to the
jurisdiction of the United States federal and state courts located within New
York, New York.
17. Taxpayer Identification Number. The undersigned verifies under
penalties of perjury that any Taxpayer Identification Number or Social Security
Number shown on the signature page hereto is true, correct and complete.
18. Pronouns. Any personal pronoun shall be considered to mean the
corresponding masculine, feminine or neuter personal pronoun, as the context
requires.
Subagmt
January 5, 1999
-11-
<PAGE> 12
IN WITNESS WHEREOF, the undersigned has executed this
Subscription Agreement this __ day of ____________, 199_.
Number of Shares Subscribed for: ____________________ Shares
INDIVIDUAL SUBSCRIBER: ENTITY SUBSCRIBER:
__________________________________ _____________________________
(Signature of Subscriber) (Print Name of Subscriber)
__________________________________ By:_____________________________
(Typed or Printed Name) Name:___________________________
Title:__________________________
__________________________________ _____________________________
(Residence Address) (Address)
__________________________________ _____________________________
(City, State and Zip Code) (City, State and Zip Code)
__________________________________ _____________________________
(Telephone Number) (Telephone Number)
__________________________________ _____________________________
(Telecopier Number) (Telecopier Number)
__________________________________ _____________________________
(Tax I.D. or Social Security Number) (Tax I.D. or Social Security Number)
ACCEPTED:
DUSA PHARMACEUTICALS, INC. For entities desiring that certificates
for Shares be delivered to an address
By:_______________________________ other than that set forth above, set
Name:_____________________________ for the delivery address:
Title:____________________________
Dated: January _____, 1999 _____________________________
(Address)
_____________________________
(City, State and Zip Code)
Subagmt
January 5, 1999
-12-
<PAGE> 13
Annex A
DUSA Pharmaceuticals, Inc.
January 1999 Private Placement
Terms of Offering (Amendment 1)
January 11, 1999
Private placement This offering is being made exclusively to
institutions and high-net worth individuals that
meet the definition of "Accredited Investor" as set
forth in Section 501(a) of Regulation D under the
Securities Act of 1933 ("the Act").
Amount $7,000,000 to $7,500,000
Shares 1,400,000 to 1,500,000 shares of common stock (the
Shares") of DUSA Pharmaceuticals, Inc. (the
"Company")
Price $5.00 per share
Pre-Offering outstanding 9,365,950 shares of common stock
shares
Pre-Offering warrants and 2,275,300
options
Escrow Funds shall be placed in a non-interest bearing
escrow account at US Trust Company pending receipt
of the minimum placement of $4,000,000.
Summary Update This Summary Update is a summary only and is
qualified in its entirety by the information
contained in the registration statements, current
reports and periodic reports ("SEC Filings") filed
by the Company with the Securities and Exchange
Commission.
The Company is a pharmaceutical company engaged
primarily in the development of photodynamic therapy
("PDT") and photodetection ("PD"), using Levulan(R),
the Company's brand of 5-aminolevulinic acid for
various medical indications. The Company's lead
indications are the use of Levulan(R) for PDT of
actinic keratoses ("AKs") and PD of bladder cancer.
AKs are common sun-induced pre-cancerous skin
lesions that occur primarily in fair-skinned
individuals. There are an estimated 4 million
patient visits per year in the US for this
condition.
In 1997 the Company completed a Phase III trial of
Levulan(R) for
<PAGE> 14
multiple AKs. Overall in these trials 91% of the AK
lesions were cleared with Levulan(R) PDT compared
with 25% of controls. Assessed by individual patient
responses, 89% of patients were considered cleared
with Levulan(R)PDT compared to 13% of controls. A
well-tolerated burning, stinging discomfort was
experienced in the AK lesions during light exposure.
There were no significant treatment-related side
effects, and no systemic photosensitivity reported.
Cosmetic responses were rated as good or excellent
by physicians and patients in over 90% of cases, and
84% of patients stated that they would choose
Levulan(R) PDT if they required treatment for AKs in
the future.
On June 30, 1998 the Company submitted to the US
Food and Drug Administration ("FDA") a New Drug
Application ("NDA") for Levulan(R) PDT for AKs. In
September of 1998 the FDA accepted that NDA for
filing.
The Company is in active negotiations with a number
of pharmaceutical companies for a marketing alliance
for Levulan(R) PDT for dermatology.
The Company is close to completing a Phase I/II
trial for the use of Levulan(R) in the PD of bladder
cancer.
Other potential Levulan(R) indications targeted for
development by the Company include acne, hair
removal, endometrial ablation and cervical
cancer/dysplasia.
Risk factors Investment in the Common Stock of the Company
involves a high degree of risk including, but not
limited to, those risks set forth in the SEC Filings
such as: (i) the ability of the Company to obtain
FDA approval of Levulan(R)for AKs or any other
indication, (ii) the ability of the Company to enter
into a marketing alliance for Levulan(R)for AKs or
to market the product itself, (iii) market
acceptance for Levulan(R)or any other product of the
Company, (iv) the potential impact of health care
reforms and the ability to obtain third party
reimbursement for Levulan(R)for AKs or any other
product, (v) the ability of the Company to
manufacture Levulan(R), Kerasticks(TM)and light
device products and its reliance on third-parties to
do so, (vi) the Company's ability to secure adequate
financing for its ongoing operations, (vii) the
potential impact of competitive products and the
pricing of those products and (viii) the ability of
the Company to maintain its patent portfolio. The
Shares have not been registered under the Act or any
foreign or state securities laws. The Shares may not
be sold until registration under the Act in
accordance with the registration rights described
below or pursuant to an exemption from registration.
2
<PAGE> 15
Placement agent Sunrise Securities Corp.("Sunrise") is acting as
placement agent. Sunrise shall be paid a commission
of 5% of the sales price and a non-accountable
expense allowance of 3% of the sales price. Sunrise
may elect to receive all or any part of its
commission and non- accountable expense allowance in
shares of common stock valued at the sales price
less the per-share commission and non-accountable
expense allowance (the "Commission Shares"). In
addition, Sunrise shall be issued warrants to
purchase a number of shares of Common Stock equal to
10% of the shares placed including any Commission
Shares. The term of these warrants is 5 years, and
the exercise price is $5.00 per share. Employees of
the Placement Agent who meet the definition of
"Accredited Investor" as set forth in Section 501(a)
of Regulation D under the Act may purchase Shares
for their own personal account on the same terms and
conditions as other investors in the offering. Any
such purchases shall count towards the minimum and
maximum offerings, respectively. The Company shall
reimburse Sunrise for all reasonable, documented out
of pocket expenses incurred by Sunrise in connection
with the offering including fees of Sunrise's
counsel, printing, postage, overnight delivery and
travel and entertainment.
Registration rights The Company shall, at its expense, (i) not
later than a date 30 business days after the final
closing of the Offering (the "Filing Deadline") file
a registration statement(s) (the "Registration
Statement") with the Securities and Exchange
Commission ("Commission") to register under the Act
the resale by the subscribers to the Shares, (ii)
use its reasonable best efforts to cause the
Registration Statement to become effective under the
Act as promptly as practicable, (iii) after the
Registration Statement is declared effective under
the Act, furnish subscribers with such number of
copies of the prospectus included in the
Registration Statement as the subscribers may
reasonably request to facilitate the resale of the
Shares; and (iv) use its reasonable best efforts to
cause such Registration Statement to remain
effective until such time as the subscribers become
eligible to resell the Shares pursuant to Rule 144.
In the event that the Company shall fail to cause
the Registration Statement to be declared effective
within 90 days of the Filing Deadline, the Company
shall issue to the subscribers as compensation
thereof, shares of Common Stock equal to (i) 1% of
the Shares for each 30 days or part thereof
effectiveness is delayed beyond 90 days up to 150
days after the Filing Deadline and (ii) 2% of the
Shares for each 30 days or part thereof
effectiveness is delayed beyond 150 days after the
Filing Deadline; provided, however, that the Company
shall not be required to issue such shares if such
failure has been caused by (a) the failure of the
subscribers to provide information in connection
with The Registration Statement or (b) the
occurrence of a material event not in the ordinary
course which may delay the effectiveness of the
Registration Statement pending public disclosure,
which disclosure shall be promptly made; and
provided further that no such shares shall be issued
3
<PAGE> 16
to the extent that such issuance would result in a
total number of shares being issued in the placement
that would require the consent of shareholders under
the rules of the Nasdaq Oil Market.
The Company may at any time refuse to permit
subscribers to resell any Shares pursuant to the
Registration Statement upon delivery to the
Subscribers of a written certificate to the effect
that withdrawal of the Registration Statement is
necessary because a sale thereunder in the then
current form would constitute a violation of federal
securities laws. In the event of a withdrawal, the
Company shall use its best efforts to amend the
Registration Statement and/or take all other
necessary actions to again permit sales in
compliance with the federal securities laws.
Lock-up For a period of one year following the final closing
of the offering, the Company shall not sell or offer
to sell any of its securities in a private
placement, except pursuant to the Company's stock
option plan or in connection with a dermatology
corporate alliance transaction, without the written
consent of Sunrise, which consent shall not be
unreasonably withheld. All of the Company's officers
and directors shall agree to lock-up their shares
for a period of 180 days following the final closing
of the offering.
Termination of offering The offering will terminate on February 15,
1999 unless extended by mutual consent of the
Company and Sunrise (the "Termination Date"). On
the Termination Date, any funds remaining in escrow
that have not been closed upon shall be promptly
returned to subscribers, without interest thereon.
4
<PAGE> 1
September 30, 1993
Nathan A. Low,
President
Sunrise Financial Group, Inc.
919 Third Avenue
19th Floor
New York, New York 10022
Re: Investor Relations Retainer Agreement
Gentlemen:
As we discussed, DUSA Pharmaceuticals, Inc. (the "Company") is interested
in retaining Sunrise Financial Group, Inc. ("Sunrise") as its consultant for
financial public relations.
Services
The services Sunrise will provide include the following: preparing a fact
sheet on the Company at the request of and subject to the approval of the
Company (for which the Company will pay for design, printing, postage, list
rental, etc. US$9000 in advance, as well as approve the artwork, content, and
layout); assistance to the Company in planning and supervision of such financial
communication activities as the annual report, quarterly reports and other
financial presentations (except a slide show for which a separate proposal shall
be made); performance of public relations and corporate communications projects
as are mutually agreed on; planning meetings with institutional investors,
research analysts and retail brokers; preparing and disseminating press
releases; updating institutional investors, research analysts, and retail
brokers regularly on new developments concerning the Company; handling all
inquires about the Company; maintaining a mailing list of all those interested
in Company literature; distributing business reply cards and contacting those
brokers who return them to ascertain their interest in meeting management of the
Company; seeking additional market makers for Company securities; and handling
medial relations. Sunrise shall provide a quarterly report to the Company
outlining its progress and plans to further deliver the foregoing services.
<PAGE> 2
-2-
As compensation for Sunrise's services, the Company will pay Sunrise the
following fees:
1. A monthly consulting fee of US$5,000.00 payable upon execution of
this engagement letter and before the first day of each month
thereafter; and
2. Subject to applicable securities regulatory requirements, including
the consent of the Toronto Stock Exchange ("TSE"), the Company will
issue, as soon as practicable after signing this letter, to Sunrise
or its principal Nathan Low a warrant to purchase up to 50,000
shares of the authorized stock of the Company at US$6.00 per share.
The warrant vests immediately and is non-cancellable. The warrant
shall be exercisable for five years from issuance.
Warrant
The Company understands that Deprenyl Research Limited has undertaken to
issue to Sunrise a warrant to purchase 50,000 shares of the Company from its
holdings. Unless otherwise specified, references hereinafter to the "warrant"
shall be deemed to include the warrant issued by Deprenyl Research Limited to
Sunrise. During the term of the warrant and upon written demand from Sunrise,
the Company shall, on one occasion only, and provided that the warrant has been
exercised prior thereto, promptly register the common stock underlying the
warrant at Company expense (excluding Sunrise's counsel's fees and any
underwriting or selling commissions) on Form S-8, or comparable or successor
Registration Statement. The Company further agrees that during the term of the
warrant, if the Company intends to file a Registration Statement for the public
sale of its securities (other than a Form S-8, S-4 or comparable Registration
Statement) it will notify Sunrise and, if so requested, subject to the approval
of its underwriter will include in that Registration Statement the common stock
underlying the warrant, provided that the warrant has been exercised prior
thereto, at Company expense (excluding prorated SEC registration fees, Sunrise's
counsel's fees and any underwriting or selling commissions). For purposes of
exercise of the warrant issued by the Company prior to registration, Sunrise
shall be entitled to pay for the common shares by promissory note which note
shall be payable within 10 business days of completion of registration of such
common stock. The note shall be secured only against the common shares thereby
purchased. The number of shares and exercise price per share subject to the
warrant shall be adjusted in the case of any dividend, stock split or other
recapitalization or reorganization so that the warrant shall not be diminished
or diluted. The warrant is non-assignable.
The Company and its officers hereby commit (subject to fulfilling their
fiduciary obligations) to propose, recommend approval, and vote all shares under
their voting control in favor of a resolution covering the issuance of the
warrant at its next annual shareholders meeting. The company shall use its
reasonable best efforts to ensure that Deprenyl Research Limited also votes its
shares of the Company in favour of such resolution.
<PAGE> 3
-3-
If, by September 30, 1994, the warrant has not been issued and fully
approved, the Company shall compensate Sunrise in cash for what would have been
its fair market value on October 1, 1994, which shall be equal to the difference
between the average closing price of DUSA common shares for the month of
September 1994 and US$6.00 times the number of shares underlying the warrant or
part thereof not then issued and fully approved.
Sunrise understands that neither the warrant nor the underlying shares of
common stock are qualified for sale in Ontario or Canada or registered in the
United States or any of the states thereof. Sunrise undertakes not to offer or
sell such securities directly or indirectly in Ontario or Canada or anywhere in
the United States without registration under the Securities Act of 1933, as
amended, or exemption from such registration. For clarification, if such
underlying shares are registered or otherwise exempt from registration in the
United States, sales made by Sunrise through US based NASDAQ market makers will
not be deemed to be indirect sales in Ontario or Canada, provided that neither
Sunrise nor Nathan Low has actual knowledge that the purchaser is a resident of
Ontario or Canada.
Expense Reimbursement
In addition to the fees payable hereunder, the Company shall reimburse
Sunrise, upon request from time to time, for all reasonable out-of-pocket
expenses incurred by Sunrise (including but not limited to printing and graphic
design, travel, postage, copying, secretarial, legal, and phone expenses) in
connection with Sunrise's services pursuant to this agreement. Individual
out-of-pocket expenses will not exceed US$250.00 without the consent of the
Company. The Company will prepay US$5,000 to Sunrise which Sunrise will draw
against for expenses. The Company will replenish this account monthly to the
US$5,000 level. Upon expiration of this agreement, any balance in this expense
account will be returned to the Company less any fees outstanding.
Term
This agreement shall be for a term of at least one year. Thereafter,
either party may terminate this agreement at any time upon thirty (30) days'
prior written notice, without liability or continuing obligation to the other
party, except that termination shall not affect (a) the reimbursement and
indemnification provisions contained in this agreement, nor (b) The Company's
obligation for the fees called for above. However, if the Company enters in to a
letter of intent for a public offering or a private placement of its securities
in the United States during the term of this agreement and any extension
thereof, and Sunrise shall have been instrumental in arranging such, then this
Agreement shall be automatically renewed for an additional year.
<PAGE> 4
-4-
Confidentiality
Each of the Company and Sunrise possesses confidential information with
respect to its business and affairs which it has acquired through the
expenditure of time and money. Each of the Company and Sunrise shall use all
reasonable efforts to protect the confidential information of the other and keep
such information confidential, using a standard of care that the Company or
Sunrise, as the case may be, would reasonably expect to employ for its own
similar confidential information.
Indemnification
The Company agrees it will indemnify and hold harmless Sunrise, its
officers, directors, employees, agents and controlling persons from and against
any and all losses, claims, damages, liabilities and expenses, joint or several
(including all reasonable fees and expenses of counsel) arising out of Sunrise's
services pursuant to this agreement. However, the Company will not be liable
under this paragraph to the extent that any loss, claim, damage, liability or
expense is found in a final judgment by a court of competent jurisdiction to
have resulted from Sunrise's gross negligence or willful misconduct, or
violation of American laws. The Company agrees to notify Sunrise promptly of the
assertion against it or any other person of any claim or the commencement of any
action or proceeding relating to any matter which involved Sunrise.
Miscellaneous
The benefits of this agreement shall inure to the respective successors
and assigns of the parties, and the obligations and liabilities assumed in this
agreement by the parties shall be binding upon their respective successors and
assigns.
The validity and interpretation of this agreement shall be governed by the
laws of the State of New York as applied to agreements made and to be fully
performed therein.
This agreement shall not come into effect until consent to the issuance of
the warrant, satisfactory to the Company, has been obtained from the TSE.
Sunrise undertakes to refer any inquires or requests with respect to the
Company from residents of Canada to the Company or as it may direct.
<PAGE> 5
-5-
If the foregoing correctly sets forth our agreement, please sign, date and
return to us the enclosed copy of this letter, whereupon this letter shall
constitute a binding agreement between us.
Sincerely,
DUSA PHARMACEUTICALS, INC.
By: S/ D. Geoffrey Shulman
----------------------------------
Dr. D. Geoffrey Shulman, Chairman
Confirmed and Agreed to this
14 day of October, 1993
Sunrise Financial Group, Inc.
by: S/ N. LOW
-------------------------
Nathan A. Low, President
