[FORM
OF SUBORDINATED CONVERTIBLE NOTE]
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR (B) AN OPINION OF COUNSEL,
IN A
FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) IF SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT,
SUCH DOCUMENTS, OPINIONS AND CERTIFICATES AS THE COMPANY MAY REASONABLY REQUIRE.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE
SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS
OF
THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 19(a) HEREOF. THE PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.
pSIVIDA
LIMITED
SUBORDINATED
CONVERTIBLE NOTE
| Issuance Date: November 15, 2005 |
Principal:
U.S.
$15,000,000
|
FOR
VALUE RECEIVED,
pSivida
Limited, an Australian corporation (the “Company”),
hereby promises to pay to the order of _________________ or
registered assigns (“Holder”)
the
amount set out above as the Principal (as reduced pursuant to the terms hereof
pursuant to redemption, conversion or otherwise, the “Principal”)
when
due, whether upon the Maturity Date (as defined below), acceleration, redemption
or otherwise (in each case in accordance with the terms hereof) and to pay
interest (“Interest”)
on any
outstanding Principal at the Interest Rate, from the date set out above as
the
Issuance Date (the “Issuance
Date”)
until
the same becomes due and payable, whether upon an Interest Date (as defined
below), the Maturity Date, acceleration, conversion, redemption or otherwise
(in
each case in accordance with the terms hereof). This Subordinated Convertible
Note (including all Subordinated Convertible Notes issued in exchange, transfer
or replacement hereof, this “Note”)
is one
of an issue of Subordinated Convertible Notes issued pursuant to the Securities
Purchase Agreement (as defined below) on the Closing Date (collectively,
the
“Notes”
and
such other Subordinated Convertible Notes, the “Other
Notes”
and the
holders of the Other Notes, the “Other
Holders”)).
Certain capitalized terms used herein are defined in Section 29.
(1) MATURITY.
On the
Maturity Date, the Holder shall surrender this Note to the Company and the
Company shall pay to the Holder an amount in cash representing all outstanding
Principal, accrued and unpaid Interest and accrued and unpaid Late Charges,
if
any. The “Maturity
Date”
shall
be the date which is three (3) years after the Issuance Date, as may be extended
at the option of the Holder (i) in the event that, and for so long
as, an
Event of Default (as defined in Section 4(a)) pursuant to clause (i), (ii)
or
(iii) of Section 4(a) shall have occurred and be continuing or any event
shall
have occurred and be continuing which with the passage of time and the failure
to cure would result in an Event of Default pursuant to clause (i), (ii)
or
(iii) of Section 4(a) and (ii) through the date that is ten (10) Business
Days
after the consummation of a Change of Control in the event that a Change
of
Control is publicly announced or a Change of Control Notice (as defined in
Section 5) is delivered prior to the Maturity Date.
(2) INTEREST;
INTEREST RATE.
Interest on this Note shall commence accruing on the Issuance Date and shall
be
computed on the basis of a 365-day year and actual days elapsed and shall
be
payable in arrears for each Calendar Quarter on the first (1st) day of the
succeeding Calendar Quarter during the period beginning on the Issuance Date
and
ending on, and including, the Maturity Date (each, an “Interest
Date”)
with
the first Interest Date being January 1, 2006. Interest shall be payable
on each
Interest Date, to the record holder of this Note on the applicable Interest
Date, in ADRs (“Interest
Shares”),
or,
at the option of the Company, in cash (“Cash
Interest”),
or a
combination thereof. On or prior to the fifth (5th) Trading Day prior to
each
Interest Date (each, an “Interest
Notice Due Date”),
the
Company shall deliver written notice (each, an “Interest
Election Notice”)
to the
Holder confirming that the Equity Conditions have been satisfied as of such
Interest Notice Due Date and specifying the amount of Interest that shall
be
paid as Cash Interest and the amount of Interest that shall be paid in Interest
Shares. Notwithstanding the foregoing, unless otherwise waived or consented
to
in writing by the Holder, the Company will not be permitted to issue on any
Interest Date a number of Interest Shares (and must pay any excess in Cash
Interest) which exceeds the Maximum Interest Share Amount. Interest to be
paid
on an Interest Date in Interest Shares shall be paid in a number of fully
paid
and nonassessable (rounded to the nearest whole share in accordance with
Section
3(a)) ADRs equal to the quotient of (a) the amount of Interest payable
on
such Interest Date less any Cash Interest paid and (b) the Interest
Conversion Price in effect on the applicable Interest Date. If any Interest
Shares are to be paid on an Interest Date, then the Company shall
(X) provided that the Company’s transfer agent (the “Transfer
Agent”)
is
participating in the Depository Trust Company (“DTC”)
Fast
Automated Securities Transfer Program, credit such aggregate number of Interest
Shares to which the Holder shall be entitled to the Holder’s or its designee’s
balance account with DTC through its Deposit Withdrawal Agent Commission
system,
or (Y) if the foregoing shall not apply, issue and deliver on the
applicable Interest Date, to the address set forth in the register maintained
by
the Company for such purpose pursuant to the Securities Purchase Agreement
or to
such address as specified by the Holder in writing to the Company at least
two
(2) Business Days prior to the applicable Interest Date, a certificate,
registered in the name of the Holder or its designee, for the number of Interest
Shares to which the Holder shall be entitled. In addition, upon payment of
any
Interest Shares, the Company shall deposit the corresponding number of Ordinary
Shares representing the number of American Depositary Shares (“ADSs”)
underlying the ADRs and pay by wire transfer to the Depositary’s account the ADS
issuance fee of $0.04 per ADS to be issued, together with all applicable
taxes
and expenses otherwise payable under the terms of the Deposit Agreement for
the
deposit of Ordinary Shares and issuance of ADSs (including, without limitation,
confirmation that any Australian stock transfer taxes in respect of such
deposit
(if any) have been paid by the Company), and the Company shall otherwise
comply
with and cause any other necessary party to comply with all the terms of
the
Deposit Agreement. Notwithstanding the foregoing, the Company shall not be
entitled to pay Interest in Interest Shares and shall be required to pay
such
Interest in cash as Cash Interest on the applicable Interest Date if, unless
consented to in writing by the Holder, during the period commencing on the
applicable Interest Notice Due Date through the applicable Interest Date
the
Equity Conditions have not been satisfied. Prior to the payment of Interest
on
an Interest Date, Interest on this Note shall accrue at the Interest Rate
and be
payable by way of inclusion of the Interest in the Conversion Amount in
accordance with Section 3(b)(i). Upon the occurrence and during the continuance
of an Event of Default, the Interest Rate shall be increased to ten percent
(10%). In the event that such Event of Default is subsequently cured, the
adjustment referred to in the preceding sentence shall cease to be effective
as
of the date of such cure; provided that the Interest as calculated and unpaid
at
such increased rate during the continuance of such Event of Default shall
continue to apply to the extent relating to the days after the occurrence
of
such Event of Default through and including the date of cure of such Event
of
Default. The Company’s obligation to pay any taxes in respect of the issuance
and delivery of Interest Shares, or to pay to the Holder any additional amounts
associated with such taxes, shall be determined under Section 4(o) of the
Securities Purchase Agreement.
(3) CONVERSION
OF NOTES.
This
Note shall be convertible into the Company’s ADRs, on the terms and conditions
set forth in this Section 3.
(a) Conversion
Right.
Subject
to the provisions of Section 3(d), at any time or times on or after the Issuance
Date, the Holder shall be entitled to convert any portion of the outstanding
and
unpaid Conversion Amount (as defined below) into fully paid and nonassessable
ADRs in accordance with Section 3(c), at the Conversion Rate (as defined
below).
The Company shall not issue any fraction of an ADR upon any conversion. If
any
conversion would result in the issuance of a fraction of an ADR, the Company
shall round such fraction of an ADR up to the nearest whole share. The Company’s
obligation to pay any taxes in respect of the issuance and delivery of ADRs
or
Ordinary Shares, or to pay to the Holder any additional amounts associated
with
such taxes, shall be determined under Section 4(o) of the Securities Purchase
Agreement.
In
the
event that the Company’s Board of Directors should determine that the Company
shall transform itself (whether by re-incorporation in the United States
or
otherwise) from a foreign private issuer (as defined under the Securities
Act of
1933, as amended), all references to ADRs or ADSs shall be deemed references
to
whatever shares are then issued by the re-domiciled Company and all other
provisions of this Agreement shall be equitably adjusted by the parties hereto
to the extent necessary or appropriate to reflect such new country of
incorporation.
(b) Conversion
Rate.
The
number of ADRs issuable upon conversion of any Conversion Amount pursuant
to
Section 3(a) shall be determined by dividing (x) such Conversion Amount
by
(y) the Conversion Price (the “Conversion
Rate”).
(i) “Conversion
Amount”
means
the sum of (A) the portion of the Principal to be converted, redeemed
or
otherwise with respect to which this (or any other) determination is being
made,
(B) accrued and unpaid Interest with respect to such Principal and
(C) accrued and unpaid Late Charges with respect to such Principal
and
Interest.
(ii) “Conversion
Price”
means,
as of any Conversion Date (as defined below) or other date of determination,
$7.10 per ADR (which is equivalent to $0.71 per Ordinary Share), subject
to
adjustment as provided herein.
(c) Mechanics
of Conversion.
(i) Optional
Conversion.
To
convert any Conversion Amount into ADRs on any date (a “Conversion
Date”),
the
Holder shall (A) transmit by facsimile (or otherwise deliver), for
receipt
on or prior to 11:59 p.m., New York Time, on such date, a copy of an executed
notice of conversion in the form attached hereto as Exhibit I (the “Conversion
Notice”)
to the
Company and (B) if required by Section 3(c)(iii), surrender this Note
to a
common carrier for delivery to the Company as soon as practicable on or
following such date (or an indemnification undertaking with respect to this
Note
in the case of its loss, theft or destruction). On or before the second (2nd)
Business Day following the date of receipt of a Conversion Notice, the Company
shall transmit by facsimile a confirmation of receipt of such Conversion
Notice
to the Holder and the Transfer Agent. On or before the fifth (5th) Business
Day
following the date of receipt of a Conversion Notice (the “Share
Delivery Date”),
the
Company shall (X) provided that the Transfer Agent is participating
in the
DTC Fast Automated Securities Transfer Program, credit such aggregate number
of
ADRs to which the Holder shall be entitled to the Holder’s or its designee’s
balance account with DTC through its Deposit Withdrawal Agent Commission
system
or (Y) if the foregoing shall not apply, issue and deliver to the
address
as specified in the Conversion Notice, a certificate, registered in the name
of
the Holder or its designee, for the number of ADRs to which the Holder shall
be
entitled. If this Note is physically surrendered for conversion as required
by
Section 3(c)(iii) and the outstanding Principal of this Note is greater than
the
Principal portion of the Conversion Amount being converted, then the Company
shall as soon as practicable and in no event later than three (3) Business
Days
after receipt of this Note and at its own expense, issue and deliver to the
holder a new Note (in accordance with Section 19(d)) representing the
outstanding Principal not converted. The Person or Persons entitled to receive
the ADRs issuable upon a conversion of this Note shall be treated for all
purposes as the record holder or holders of such ADRs on the Conversion Date.
Upon conversion of this Note, the Company shall deposit the corresponding
number
of Ordinary Shares representing the number of ADSs underlying the ADRs and
pay
by wire transfer to the Depositary’s account the ADS issuance fee of $0.04 per
ADS to be issued, together with all applicable taxes and expenses otherwise
payable under the terms of the Deposit Agreement for the deposit of Ordinary
Shares and issuance of ADSs (including, without limitation, confirmation
that
any Australian stock transfer taxes in respect of such deposit (if any) have
been paid by the Company), and the Company shall otherwise comply with and
cause
any other necessary party to comply with all the terms of the Deposit
Agreement.
(ii) Company’s
Failure to Timely Convert.
If the
Company shall fail to issue a certificate to the Holder or credit the Holder’s
balance account with DTC for the number of ADRs to which the Holder is entitled
upon conversion of any Conversion Amount on or prior to the date which is
five
(5) Business Days after the Conversion Date (a “Conversion
Failure”),
then
(A) the Company shall pay damages in cash to the Holder for each date
of
such Conversion Failure in an amount equal to an interest rate equal to 10%
per
annum applied to the product of (I) the sum of the number of ADRs
not
issued to the Holder on or prior to the Share Delivery Date and to which
the
Holder is entitled, and (II) the Closing Sale Price of the ADRs on
the
Share Delivery Date and (B) the Holder, upon written notice to the
Company,
may void its Conversion Notice with respect to, and retain or have returned,
as
the case may be, any portion of this Note that has not been converted pursuant
to such Conversion Notice; provided that the voiding of a Conversion Notice
shall not affect the Company’s obligations to make any payments which have
accrued prior to the date of such notice pursuant to this Section 3(c)(ii)
or
otherwise. In addition to the foregoing, if within three (3) Trading Days
after
the Company’s receipt of the facsimile copy of a Conversion Notice the Company
shall fail to issue and deliver a certificate to the Holder or credit the
Holder’s balance account with DTC for the number of ADRs to which the Holder is
entitled upon such holder’s conversion of any Conversion Amount, and if on or
after such Trading Day the Holder purchases (in an open market transaction
or
otherwise) ADRs to deliver in satisfaction of a sale by the Holder of ADRs
issuable upon such conversion that the Holder anticipated receiving from
the
Company (a “Buy-In”),
then
the Company shall, within three (3) Business Days after the Holder’s request and
in the Holder’s discretion, either (i) pay cash to the Holder in an amount
equal to the Holder’s total purchase price (including brokerage commissions, if
any) for the ADRs so purchased (the “Buy-In
Price”),
at
which point the Company’s obligation to deliver such certificate (and to issue
such ADRs) shall be deemed to have been satisfied and shall terminate, or
(ii) promptly honor its obligation to deliver to the Holder a certificate
or certificates representing such ADRs and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product of
(A) such number of ADRs, times (B) the Closing Bid Price on
the
Conversion Date.
(iii) Book-Entry.
Notwithstanding anything to the contrary set forth herein, upon conversion
of
any portion of this Note in accordance with the terms hereof, the Holder
shall
not be required to physically surrender this Note to the Company unless
(A) the full Conversion Amount represented by this Note is being converted
or (B) the Holder has provided the Company with prior written notice
(which
notice may be included in a Conversion Notice) requesting reissuance of this
Note upon physical surrender of this Note. The Holder and the Company shall
maintain records showing the Principal, Interest and Late Charges converted
and
the dates of such conversions or shall use such other method, reasonably
satisfactory to the Holder and the Company, so as not to require physical
surrender of this Note upon conversion.
(iv) Pro
Rata Conversion; Disputes.
In the
event that the Company receives a Conversion Notice from more than one holder
of
Notes for the same Conversion Date and the Company can convert some, but
not
all, of such portions of the Notes submitted for conversion, the Company,
subject to Section 3(d), shall convert from each holder of Notes electing
to
have Notes converted on such date a pro rata amount of such holder’s portion of
its Notes submitted for conversion based on the principal amount of Notes
submitted for conversion on such date by such holder relative to the aggregate
principal amount of all Notes submitted for conversion on such date. In the
event of a dispute as to the number of ADRs issuable to the Holder in connection
with a conversion of this Note, the Company shall issue to the Holder the
number
of ADRs not in dispute and resolve such dispute in accordance with Section
24.
(d) Limitations
on Conversions
(i) Beneficial
Ownership.
The
Company shall not effect any conversion of this Note, and the Holder of this
Note shall not have the right to convert any portion of this Note pursuant
to
Section 3(a), to the extent that after giving effect to such conversion,
the
Holder (together with the Holder’s affiliates) would beneficially own (directly
or indirectly) in excess of 4.99% (the “Maximum
Percentage”)
of the
number of Ordinary Shares outstanding immediately after giving effect to
such
conversion. For purposes of the foregoing sentence, the number of Ordinary
Shares beneficially owned (directly or indirectly) by the Holder and its
affiliates shall include the number of Ordinary Shares represented by the
ADRs
issuable upon conversion of this Note with respect to which the determination
of
such sentence is being made, but shall exclude the number of Ordinary Shares
represented by the ADRs or otherwise which would be issuable upon
(A) conversion of the remaining, nonconverted portion of this Note
beneficially owned by the Holder or any of its affiliates and (B) exercise
or conversion of the unexercised or nonconverted portion of any other securities
of the Company beneficially owned by the Holder or any of its affiliates
(including, without limitation, any Other Notes or warrants) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein. Except as set forth in the preceding sentence, for purposes of this
Section 3(d), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes
of this Section 3(d), in determining the number of outstanding Ordinary Shares,
the Holder may rely on the number of outstanding Ordinary Shares as reflected
in
(x) the Company’s most recent Form 20-F, Form 6-K or other public filing
with the Securities and Exchange Commission, as the case may be (y) a
more
recent public announcement by the Company or (z) any other notice
by the
Company or the Transfer Agent setting forth the number of Ordinary Shares
outstanding. For any reason at any time, upon the written or oral request
of the
Holder, the Company shall within two (2) Business Days confirm orally and
in
writing to the Holder the number of Ordinary Shares then outstanding. In
any
case, the number of outstanding Ordinary Shares shall be determined after
giving
effect to the conversion or exercise of securities of the Company, including
this Note, by the Holder and its affiliates since the date as of which such
number of outstanding Ordinary Shares was reported. By written notice to
the
Company, the Holder may increase or decrease the Maximum Percentage to any
other
percentage not in excess of 9.99% specified in such notice; provided that
(i) any such increase will not be effective until the sixty-first
(61st)
day after such notice is delivered to the Company, and (ii) any such
increase or decrease will apply only to the Holder and not to any other holder
of Notes.
(ii) Principal
Market Regulation.
The
Company shall not be obligated to issue any ADRs upon conversion of this
Note,
and the Holder of this Note shall not have the right to receive upon conversion
of this Note any ADRs, if the issuance of such ADRs would exceed the aggregate
number of ADRs which the Company may issue upon conversion or exercise, as
applicable, of the Notes and Warrants or otherwise without breaching the
Company’s obligations under the rules or regulations of the Principal Market (or
such other Eligible Market on which the ADRs or Ordinary Shares are listed)
and
the ASX (the “Exchange
Cap”),
except that such limitation shall not apply in the event that the Company
obtains the approval of its shareholders as required by the applicable rules
of
the Principal Market and the ASX listing rules for issuances in excess of
such
amount. Until such approval is obtained, no purchaser of the Notes pursuant
to
the Securities Purchase Agreement (the “Purchasers”)
shall
be issued in the aggregate, upon conversion or exercise, as applicable, of
Notes
or Warrants, or otherwise any ADRs in an amount greater than the product
of the
Exchange Cap multiplied by a fraction, the numerator of which is the principal
amount of Notes issued to the applicable Purchaser pursuant to the Securities
Purchase Agreement on the Closing Date and the denominator of which is the
aggregate principal amount of all Notes issued to the Purchasers pursuant
to the
Securities Purchase Agreement on the Closing Date (with respect to each
Purchaser, the “Exchange
Cap Allocation”).
In
the event that any Purchaser shall sell or otherwise transfer any of such
Purchaser’s Notes, the transferee shall be allocated a pro rata portion of such
Purchaser’s Exchange Cap Allocation, and the restrictions of the prior sentence
shall apply to such transferee with respect to the portion of the Exchange
Cap
Allocation allocated to such transferee. In the event that any holder of
Notes
shall convert all of such holder’s Notes into a number of ADRs which, in the
aggregate, is less than such holder’s Exchange Cap Allocation, then the
difference between such holder’s Exchange Cap Allocation and the number of ADRs
actually issued to such holder shall be allocated to the respective Exchange
Cap
Allocations of the remaining holders of Notes on a pro rata basis in proportion
to the aggregate principal amount of the Notes then held by each such
holder.
(4) RIGHTS
UPON EVENT OF DEFAULT.
(a) Event
of Default.
Each of
the following events shall constitute an “Event
of Default”:
(i) the
failure of the applicable Registration Statement required to be filed pursuant
to the Registration Rights Agreement to be declared effective by the SEC
on or
prior to the date that is sixty (60) days after the applicable Effectiveness
Deadline (as defined in the Registration Rights Agreement), or, while the
applicable Registration Statement is required to be maintained effective
pursuant to the terms of the Registration Rights Agreement, the effectiveness
of
the applicable Registration Statement lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to any holder
of the
Notes for sale of all of such holder’s Registrable Securities (as defined in the
Registration Rights Agreement) in accordance with the terms of the Registration
Rights Agreement, and such lapse or unavailability continues for a period
of ten
(10) consecutive days or for more than an aggregate of thirty (30) days in
any
365-day period (other than days during an Allowable Grace Period (as defined
in
the Registration Rights Agreement));
(ii) the
suspension from trading or failure of the ADRs to be listed on an Eligible
Market for a period of five (5) consecutive days or for more than an aggregate
of ten (10) days in any 365-day period;
(iii) the
Company’s (A) failure to cure a Conversion Failure by delivery of the
required number of ADRs within twelve (12) Business Days after the applicable
Conversion Date or (B) notice, written or oral, to any holder of the
Notes,
including by way of public announcement or through any of its agents, at
any
time, of its intention not to comply with a request for conversion of any
Notes
into ADRs that is tendered in accordance with the provisions of the
Notes;
(iv) the
Company’s failure to pay to the Holder any amount of Principal when and as due
or any Interest, Late Charges or other amounts within three Business Days
of the
date when and as due under this Note (including, without limitation, the
Company’s failure to pay any redemption payments) or any other Transaction
Document (as defined in the Securities Purchase Agreement) or any other
agreement, document, certificate or other instrument delivered in connection
with the transactions contemplated hereby and thereby to which the Holder
is a
party;
(v) any
Indebtedness, the aggregate of which obligation(s) exceed(s) US$250,000.00
(or
the equivalent in one or more other currencies) individually or in the aggregate
is declared to be or otherwise becomes due and payable prior to its specified
maturity (other than as a result of a mandatory prepayment not attributable
to
an event of default) or with respect to which the Company or any of its
Subsidiaries fails to make any payment at the maturity date as and when
due;
(vi) the
Company or any of its Material Subsidiaries (as such term is defined under
Regulation S-K under the Securities and Exchange Act of 1933, as amended),
pursuant to or within the meaning of Title 11, U.S. Code, or any similar
Federal, foreign or state law for the relief of debtors (collectively,
“Bankruptcy
Law”),
(A) commences a voluntary case, (B) consents to the entry of
an order
for relief against it in an involuntary case, (C) consents to the
appointment of a receiver, trustee, assignee, liquidator or similar official
(a
“Custodian”),
(D) makes a general assignment for the benefit of its creditors or
(E) admits in writing that it is generally unable to pay its debts
as they
become due;
(vii) a
court
of competent jurisdiction enters an order or decree under any Bankruptcy
Law
that (A) is for relief against the Company or any of its Material
Subsidiaries in an involuntary case, (B) appoints a Custodian of the
Company or any of its Material Subsidiaries or (C) orders the liquidation
of the Company or any of its Material Subsidiaries;
(viii) a
final
judgment or judgments for the payment of money aggregating in excess of
$2,500,000 are rendered against the Company or any of its Subsidiaries and
which
judgments are not, within sixty (60) days after the entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within sixty (60)
days after the expiration of such stay; provided,
however,
that
any such judgment shall not give rise to an Event of Default under this
subsection (viii) if and for so long as (A) the amount of such
judgment is covered by a valid and binding policy of insurance between the
defendant and the insurer covering full payment thereof and (B) such
insurer has been notified, and has not disputed the claim made for payment,
of
the amount of such judgment;
(ix) the
Company breaches any material representation, warranty, covenant or other
term
or condition of any Transaction Document in any material respect, except,
in the
case of a breach of a covenant which is curable, only if such breach continues
for a period of at least ten (10) consecutive Business Days after notice
from
any Holder or the Company becomes or reasonably should be expected to have
become aware of such breach;
(x) any
material breach or failure in any respect to comply with either of Sections
8 or
15 of this Note; or
(xi) any
Event
of Default (as defined in the Other Notes) occurs with respect to any Other
Notes.
(b) Redemption
Right.
Promptly after the occurrence of an Event of Default with respect to this
Note
or any Other Note, the Company shall deliver written notice thereof via
facsimile and overnight courier (an “Event
of Default Notice”)
to the
Holder. At any time after the earlier of the Holder’s receipt of an Event of
Default Notice and the Holder becoming aware of an Event of Default and until
30
days after such Event of Default has been cured, the Holder may require the
Company to redeem all or any portion of this Note by delivering written notice
thereof (the “Event
of Default Redemption Notice”)
to the
Company, which Event of Default Redemption Notice shall indicate the portion
of
this Note the Holder is electing to redeem. Each portion of this Note subject
to
redemption by the Company pursuant to this Section 4(b) shall be redeemed
by the
Company at a price equal to the greater of (i) the product of (x) the
Conversion Amount to be redeemed and (y) the Redemption Premium and
(ii) the product of (A) the Conversion Rate with respect to
such
Conversion Amount in effect at such time as the Holder delivers an Event
of
Default Redemption Notice and (B) the Closing Sale Price of the ADRs
on the
date immediately preceding such Event of Default (the “Event
of Default Redemption Price”).
Redemptions required by this Section 4(b) shall be made in accordance with
the
provisions of Section 13.
(5) RIGHTS
UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.
(a) Assumption.
The
Company shall not enter into or be party to a Fundamental Transaction unless,
and shall use its best endeavors to procure that, (i) the Successor
Entity
(if other than the Company) assumes in writing all of the obligations of
the
Company under this Note and the other Transaction Documents in accordance
with
the provisions of this Section 5(a) pursuant to written agreements in form
and
substance reasonably satisfactory to the Required Holders and approved by
the
Required Holders prior to such Fundamental Transaction, including agreements
to
deliver to each holder of Notes in exchange for such Notes a security of
such
Successor Entity evidenced by a written instrument substantially similar
in form
and substance to the Notes, including, without limitation, having a principal
amount and interest rate equal to the principal amounts and the interest
rates
of the Notes held by such holder and having similar ranking to the Notes,
and
reasonably satisfactory to the Required Holders and (ii) the Successor
Entity is a publicly traded corporation whose common shares (or whose American
Depositary Shares) are quoted on or listed for trading on an Eligible Market.
Upon the occurrence of any Fundamental Transaction, such Successor Entity
shall
succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Note referring to the “Company”
shall refer instead to such Successor Entity), and may exercise every right
and
power of the Company and shall assume all of the obligations of the Company
under this Note with the same effect as if such Successor Entity had been
named
as the Company herein. Upon consummation of the Fundamental Transaction,
such
Successor Entity shall deliver to the Holder confirmation that there shall
be
issued upon conversion or redemption of this Note at any time after the
consummation of the Fundamental Transaction, in lieu of the ADRs (or other
securities, cash, assets or other property) purchasable upon the conversion
or
redemption of the Notes prior to such Fundamental Transaction, such publicly
traded common shares (or their equivalent) of the Successor Entity (including
its Parent Entity), as adjusted in accordance with the provisions of this
Note.
The provisions of this Section shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
on the conversion or redemption of this Note.
(b) Redemption
Right.
No
sooner than thirty (30) days nor later than ten (10) days prior to the
consummation of a Change of Control, the Company shall deliver written notice
thereof via facsimile and overnight courier to the Holder (a “Change
of Control Notice”);
provided that in no case shall the Company deliver or be required to deliver
such Change of Control Notice prior to the public announcement of such Change
of
Control. At any time during the period beginning after the Holder’s receipt of a
Change of Control Notice and ending on the date of the consummation of such
Change of Control (or, in the event a Change of Control Notice is not delivered
at least ten (10) days prior to a Change of Control, at any time on or after
the
date which is ten (10) days prior to a Change of Control and ending ten (10)
days after the consummation of such Change of Control), the Holder may require
the Company to redeem all or any portion of this Note by delivering written
notice thereof (“Change
of Control Redemption Notice”)
to the
Company, which Change of Control Redemption Notice shall indicate the Conversion
Amount the Holder is electing to redeem. The portion of this Note subject
to
redemption pursuant to this Section 5 shall be redeemed by the Company at
a
price equal to the greater of (i) the product of (x) the Conversion
Amount being redeemed and (y) the quotient determined by dividing
(A) the Closing Sale Price of the ADRs immediately following the public
announcement of such proposed Change of Control by (B) the Conversion
Price
and (ii) the product of Change of Control Premium and the Conversion
Amount
being redeemed (the “Change
of Control Redemption Price”).
Redemptions required by this Section 5 shall be made in accordance with the
provisions of Section 13 and shall have priority to payments to shareholders
in
connection with a Change of Control.
(6) RIGHTS
UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.
(a) Purchase
Rights.
If at
any time the Company, directly or indirectly, grants, issues or sells any
Options, Convertible Securities or rights to purchase shares, warrants,
securities or other property pro rata to the record holders of any class
of
Ordinary Shares (the “Purchase
Rights”),
then
the Holder will be entitled to acquire, to the extent permitted by applicable
Law, upon the terms applicable to such Purchase Rights, the aggregate Purchase
Rights which the Holder could have acquired if the Holder had held the number
of
Ordinary Shares underlying the ADRs acquirable upon complete conversion of
this
Note (without taking into account any limitations or restrictions on the
convertibility of this Note) immediately before the date on which a record
is
taken for the grant, issuance or sale of such Purchase Rights, or, if no
such
record is taken, the date as of which the record holders of Ordinary Shares
are
to be determined for the grant, issue or sale of such Purchase
Rights.
(b) Other
Corporate Events.
In
addition to and not in substitution for any other rights hereunder, prior
to the
consummation of any Fundamental Transaction pursuant to which holders of
ADRs or
Ordinary Shares are entitled to receive securities or other assets with respect
to or in exchange for ADRs or Ordinary Shares (a “Corporate
Event”),
the
Company shall make appropriate provision, to the extent not prohibited by
applicable law, to insure that the Holder will thereafter have the right
to
receive upon a conversion of this Note, (i) in addition to the ADRs
receivable upon such conversion, such securities or other assets to which
the
Holder would have been entitled with respect to such ADRs had such ADRs been
held by the Holder upon the consummation of such Corporate Event (without
taking
into account any limitations or restrictions on the convertibility of this
Note)
or (ii) in lieu of the ADRs otherwise receivable upon such conversion,
such
securities or other assets received by the holders of ADRs or Ordinary Shares
in
connection with the consummation of such Corporate Event in such amounts
as the
Holder would have been entitled to receive had this Note initially been issued
with conversion rights for the form of such consideration (as opposed to
ADRs)
at a conversion rate for such consideration commensurate with the Conversion
Rate. Provision made pursuant to the preceding sentence shall be in a form
and
substance satisfactory to the Required Holders. The provisions of this Section
shall apply similarly and equally to successive Corporate Events and shall
be
applied without regard to any limitations on the conversion or redemption
of
this
Note.
(7) RIGHTS
UPON ISSUANCE OF OTHER SECURITIES.
(a) Adjustment
of Conversion Price upon Issuance of Ordinary Shares.
If and
whenever on or after the Subscription Date, the Company issues or sells,
or in
accordance with this Section 7(a) is deemed to have issued or sold, any Ordinary
Shares (including those underlying any ADRs and the issuance or sale of Ordinary
Shares owned or held by or for the account of the Company, but excluding
Ordinary Shares deemed to have been issued or sold by the Company in connection
with any Excluded Security) for a consideration per Ordinary Share (the
“New
Issuance Price”)
less
than a price (the “Applicable
Price”)
equal
to (i) one-tenth (1/10th) of the Conversion Price (in the case of
ADRs) or
(ii) the Conversion Price (in the case that the Conversion Price is
determined by reference to the Ordinary Shares) in effect immediately prior
to
such issue or sale (the foregoing a “Dilutive
Issuance”),
then
immediately after such Dilutive Issuance, the Conversion Price then in effect
shall be reduced to an amount equal to the product of (A) the Conversion
Price in effect immediately prior to such Dilutive Issuance and (B) the
quotient determined by dividing (1) the sum of (I) the product
derived
by multiplying the Conversion Price in effect immediately prior to such Dilutive
Issuance and the number of Ordinary Shares Deemed Outstanding immediately
prior
to such Dilutive Issuance plus (II) the consideration, if any, received
by
the Company upon such Dilutive Issuance, by (2) the product derived
by
multiplying (I) the Conversion Price in effect immediately prior to
such
Dilutive Issuance by (II) the number of Ordinary Shares Deemed Outstanding
immediately after such Dilutive Issuance. Appropriate and equitable adjustment
to the terms and provisions of this Note shall be made in the event of any
change to the ratio of ADRs to Ordinary Shares represented thereby. For purposes
of determining the adjusted Conversion Price under this Section 7(a), the
following shall be applicable:
(i) Issuance
of Options.
If the
Company in any manner grants or sells any Options and the lowest price per
share
for which one Ordinary Share is issuable upon the exercise of any such Option
or
upon conversion or exchange or exercise of any Convertible Securities issuable
upon exercise of such Option is less than the Applicable Price, then such
Ordinary Share shall be deemed to be outstanding and to have been issued
and
sold by the Company at the time of the granting or sale of such Option for
such
price per share. For purposes of this Section 7(a)(i), the “lowest price per
share for which one Ordinary Share is issuable upon the exercise of any such
Option or upon conversion or exchange or exercise of any Convertible Securities
issuable upon exercise of such Option” shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one Ordinary Share upon granting or sale of the Option, upon
exercise of the Option and upon conversion or exchange or exercise of any
Convertible Security issuable upon exercise of such Option. No further
adjustment of the Conversion Price shall be made upon the actual issuance
of
such Ordinary Shares or of such Convertible Securities upon the exercise
of such
Options or upon the actual issuance of such Ordinary Shares upon conversion
or
exchange or exercise of such Convertible Securities.
(ii) Issuance
of Convertible Securities.
If the
Company in any manner issues or sells any Convertible Securities and the
lowest
price per share for which one Ordinary Share is issuable upon such conversion
or
exchange or exercise thereof is less than the Applicable Price, then such
Ordinary Share shall be deemed to be outstanding and to have been issued
and
sold by the Company at the time of the issuance of sale of such Convertible
Securities for such price per share. For the purposes of this Section 7(a)(ii),
the “price per share for which one Ordinary Share is issuable upon such
conversion or exchange or exercise” shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one Ordinary Share upon the issuance or sale of the Convertible
Security and upon the conversion or exchange or exercise of such Convertible
Security. No further adjustment of the Conversion Price shall be made upon
the
actual issuance of such Ordinary Shares upon conversion or exchange or exercise
of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which adjustment
of the Conversion Price had been or are to be made pursuant to other provisions
of this Section 7(a), no further adjustment of the Conversion Price shall
be
made by reason of such issue or sale.
(iii) Change
in Option Price or Rate of Conversion.
If the
purchase price provided for in any Options, the additional consideration,
if
any, payable upon the issue, conversion, exchange or exercise of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into
or exchangeable or exercisable for Ordinary Shares changes at any time, the
Conversion Price in effect at the time of such change shall be adjusted to
the
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold. For purposes of this Section 7(a)(iii),
if
the terms of any Option or Convertible Security that was outstanding as of
the
Subscription Date are changed in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the Ordinary
Shares deemed issuable upon exercise, conversion or exchange thereof shall
be
deemed to have been issued as of the date of such change. No adjustment shall
be
made if such adjustment would result in an increase of the Conversion Price
then
in effect.
(iv) Calculation
of Consideration Received.
In case
any Option is issued in connection with the issue or sale of other securities
of
the Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01. If any Ordinary
Shares, Options or Convertible Securities are issued or sold or deemed to
have
been issued or sold for cash, the consideration received therefor will be
deemed
to be the gross amount paid by the purchaser therefor. If any Ordinary Shares,
Options or Convertible Securities are issued or sold for a consideration
other
than cash, the amount of the consideration other than cash received by the
Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Closing Sale Price of such securities
on the
date of receipt. If any Ordinary Shares, Options or Convertible Securities
are
issued to the owners of the non-surviving entity in connection with any merger
in which the Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such Ordinary
Shares, Options or Convertible Securities, as the case may be. The fair value
of
any consideration other than cash or securities will be determined in good
faith
by the Board of Directors of the Company.
(v) Record
Date.
If the
Company takes a record of the holders of Ordinary Shares for the purpose
of
entitling them (A) to receive a dividend or other distribution payable
in
Ordinary Shares, Options or in Convertible Securities or (B) to subscribe
for or purchase Ordinary Shares, Options or Convertible Securities, then
such
record date will be deemed to be the date of the issue or sale of the Ordinary
Shares deemed to have been issued or sold upon the declaration of such dividend
or the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.
(b) Adjustment
of Conversion Price upon Pro Rata Bonus Issue of Ordinary Shares.
If the
Company makes a pro rata bonus issue of Ordinary Shares to its shareholders
prior to conversion of the Note, and the Note is not converted prior to the
record date for the issue, the Note will, when converted, entitle the holder
to
the number of ADRs that would ordinarily be received under Section 3, plus
the
number of bonus Ordinary Shares which would have been issued to the Holder
if
the Note had been converted prior to the record date.
(c) Adjustment
of Conversion Price upon Subdivision or Combination of Ordinary
Shares.
If the
Company at any time on or after the Subscription Date subdivides (by any
share
split, share dividend, recapitalization or otherwise) one or more classes
of its
outstanding ADRs (or Ordinary Shares underlying such ADRs) into a greater
number
of ADRs (or Ordinary Shares), the Conversion Price in effect immediately
prior
to such subdivision will be proportionately reduced. If the Company at any
time
on or after the Subscription Date combines (by combination, reverse share
split
or otherwise) one or more classes of its outstanding ADRs (or Ordinary Shares)
into a smaller number of ADRs (or Ordinary Shares), the Conversion Price
in
effect immediately prior to such combination will be proportionately increased.
Any adjustment under this Section 7(d) shall be subject to (and will be
correspondingly reorganised in a manner which is permissible under, or necessary
to comply with) the ASX Listing Rules or the rules of any Eligible Market
in
force at the relevant time and shall become effective at the close of business
on the date the subdivision or combination becomes effective.
(d) Capital
reorganizations.
If
there is a reorganisation of the capital of the Company, the number of ADRs
applicable to the Note and/or the Conversion Price of the Note will be
correspondingly reorganised in a manner, which is permissible under, or
necessary to comply, with the ASX Listing Rules or the rules of any other
Eligible Market in force at the relevant time. Subject to the above, if there
is
a reorganisation of the capital of the Company, the number of ADRs applicable
to
the Note or the Conversion Price or both will be reorganised so that the
Holder
of the Note will not receive a benefit that holders of Ordinary Shares do
not
receive. The Company shall give notice to the Holder of the Note of any
adjustments to the number of ADRs which are to be issued on conversion of
the
Note or to the Conversion Price. Before a Note is converted, all adjustment
calculations are to be carried out including all fractions (in relation to
each
of the number of ADRs applicable to the Note and the Conversion Price), but
on
conversion the number of ADRs issued is rounded down to the next lower whole
number and the Conversion Price rounded up to the next higher cent.
(e) Other
Events.
If any
event occurs of the type contemplated by the provisions of this Section 7
but
not expressly provided for by such provisions (including, without limitation,
the granting of share appreciation rights, phantom share rights or other
rights
with equity features), then the Company’s Board of Directors will make an
appropriate adjustment in the Conversion Price so as to protect the rights
of
the Holder under this Note; provided that no such adjustment will increase
the
Conversion Price as otherwise determined pursuant to this Section
7.
(f) Adjustment.
If on
the seventh month anniversary of the Issuance Date, the Subsequent Conversion
Price is less than the then applicable Conversion Price, then the Conversion
Price shall be reset to the Subsequent Conversion Price.
(8) HOLDER’S
RIGHT OF OPTIONAL REDEMPTION.
In the
event that the arithmetic average of the Weighted Average Price of the ADRs
over
the ten (10) Trading Days ending on the Trading Day immediately preceding
each
of the one (1) year anniversary of the Subscription Date, the eighteen (18)
month anniversary of the Subscription Date and the two (2) year anniversary
of
the Subscription Date (each an “Optional
Redemption Date”),
is
less than the then applicable Conversion Price, the Holder shall have the
right,
in its sole discretion, to require that the Company redeem (each a “Holder
Optional Redemption”)
up to
one third of the original Principal amount of the Note plus accrued and unpaid
Interest with respect to such Principal and accrued and unpaid Late Charges
with
respect to such principal and Interest (the “Optional
Redemption Amount”)
by
delivering written notice thereof (a “Holder
Optional Redemption Notice”
and,
collectively with the Event of Default Redemption Notice and the Change of
Control Redemption Notice, the “Redemption
Notices”
and
each a “Redemption
Notice”)
to the
Company no later than ten Business Days after the applicable Optional Redemption
Date. The Holder Optional Redemption Notice shall indicate the amount of
the
applicable Optional Redemption Amount the Holder is electing to have redeemed
on
such Optional Redemption Exercise Date (the “Holder
Optional Redemption Amount”)
and
the date of such redemption (the “Optional
Redemption Exercise Date”);
provided,
however,
that
(a) such Holder Optional Redemption Amount indicated shall not exceed
the
Optional Redemption Amount and (b) such Optional Redemption Exercise
Date
shall not be less than ten (10) Business Days after the date of delivery
of such
Holder Optional Redemption Notice. The portion of this Note subject to
redemption pursuant to this Section 8 shall be redeemed by the Company in
cash
on the applicable Optional Redemption Date at a price equal to the Holder
Optional Redemption Amount being redeemed (the “Holder
Optional Redemption Price”
and,
collectively with the Event of Default Redemption Price and the Change of
Control Redemption Price, the “Redemption
Prices”
and,
each a “Redemption
Price”).
Such
Holder covenants that it will comply with Section 2(j) of the Securities
Purchase Agreement.
(9) COMPANY’S
RIGHT OF MANDATORY CONVERSION.
(a) Mandatory
Conversion.
If at
any time from and after the sixtieth (60th) day after the Effective Date
(as
defined in the Registration Statement) (the “Mandatory
Conversion Eligibility Date”),
(i) the Weighted Average Price of the ADRs exceed for each of any
twenty
(20) out of twenty-five (25) consecutive Trading Days following the Mandatory
Conversion Eligibility Date (the “Mandatory
Conversion Measuring Period”),
200%
of the applicable Conversion Price (subject to appropriate adjustments for
share
splits, share dividends, share combinations and other similar transactions
after
the Subscription Date) and (ii) the Equity Conditions shall have been
satisfied (or waived in writing by the Holder), during the period commencing
on
the Mandatory Conversion Notice Date through the applicable Mandatory Conversion
Date (each, as defined below), the Company shall have the right to require
the
Holder to convert all, or any portion, of the Conversion Amount then remaining
under this Note as designated in the Mandatory Conversion Notice into fully
paid, validly issued and nonassessable ADRs in accordance with Section 3(c)
hereof at the Conversion Rate as of the Mandatory Conversion Date (a
“Mandatory
Conversion”).
The
Company may exercise its right to require conversion under this Section 9(a)
by
delivering within not more than three (3) Business Days following the end
of any
such Mandatory Conversion Measuring Period a written notice thereof by facsimile
and overnight courier to all, but not less than all, of the holders of Notes
and
the Transfer Agent (the “Mandatory
Conversion Notice”
and the
date all of the holders received such notice is referred to as the “Mandatory
Conversion Notice Date”).
The
Mandatory Conversion Notice shall be irrevocable. The Mandatory Conversion
Notice shall state (i) the Business Day selected for the Mandatory
Conversion in accordance with this Section 9(a), which Business Day shall
be at
least twenty (20) Business Days but not more than sixty (60) Business Days
following the Mandatory Conversion Notice Date (the “Mandatory
Conversion Date”),
(ii) the aggregate Conversion Amount of the Notes subject to mandatory
conversion from all of the holders of the Notes pursuant to this Section
9 (and
analogous provisions under the Other Notes) and (iii) the number of
ADRs to
be issued to such Holder on the Mandatory Conversion Date.
(b) Pro
Rata Conversion Requirement.
If the
Company elects to cause a conversion of any Conversion Amount of this Note
pursuant to Section 9(a), then it must simultaneously take the same action
in
the same proportion with respect to the Other Notes. All Conversion Amounts
converted by the Holder after the Mandatory Conversion Notice Date shall
reduce
the Conversion Amount of this Note required to be converted on the Mandatory
Conversion Date. If the Company has elected a Mandatory Conversion, the
mechanics of conversion set forth in Section 3(c) shall apply, to the extent
applicable, as if the Company and the Transfer Agent had received from the
Holder on the Mandatory Conversion Date a Conversion Notice with respect
to the
Conversion Amount being converted pursuant to the Mandatory
Conversion.
(10) [RESERVED]
(11) NONCIRCUMVENTION.
The
Company hereby covenants and agrees that the Company will not, by amendment
of
its Constitution, Bylaws or through any reorganization, transfer of assets,
consolidation, merger, scheme of arrangement, dissolution, issue or sale
of
securities, or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Note, and will at all times in
good
faith carry out all of the provisions of this Note and take all action as
may be
required to protect the rights of the Holder of this Note. Without limiting
the
generality of the foregoing, the Company (i) shall not increase the
par
value of any Ordinary Shares underlying the Conversion Shares receivable
upon
the conversion of this Note above the Conversion Price then in effect and
(ii) shall take all such actions as may be necessary or appropriate
in
order that the Company may validly and legally issue fully paid and
nonassessable Conversion Shares upon the conversion of this Note.
(12) SUBORDINATION
TO PERMITTED SENIOR INDEBTEDNESS.
(a) Subordination.
The
indebtedness represented by this Note and the payment of any Principal,
Interest, Late Charges, redemption amount, liquidated damages, fees, expenses
or
any other amounts in respect of this Note (collectively, the “Subordinated
Indebtedness”)
is
hereby expressly made subordinate and junior and subject in right of payment,
only to the extent expressly set forth in Section 12(b) hereof, to the prior
payment in full of all Permitted Senior Indebtedness of the Company hereinafter
incurred.
(b) Payment
upon Dissolution, Etc.
In the
event of any bankruptcy, insolvency, reorganization, receivership, composition,
assignment for benefit of creditors or other similar proceeding initiated
by or
against the Company or any dissolution or winding up or total or partial
liquidation or reorganization in bankruptcy of the Company (each, a
“Proceeding”),
all
principal, interest and other obligations due upon any Permitted Senior
Indebtedness shall first be paid in full or fully cash collateralized before
the
Holder shall be entitled to receive or, if received, to retain any payment
or
distribution on account of this Note and, during the continuance of any such
Proceeding, any payment or distribution of assets of the Company of any kind
or
character, whether in cash, property or securities, to which the Holder would
be
entitled with respect to any Subordinated Indebtedness but for the provisions
of
this Section 12 shall be paid by the Company or by any receiver, trustee
in
bankruptcy, liquidating trustee, agent or other Person making such payment
or
distribution, or by the Holder who shall have received such payment or
distribution, directly to the holders of the Permitted Senior Indebtedness
(pro
rata to each such holder on the basis of the respective amounts of such
Permitted Senior Indebtedness held by such holder) or their representatives
to
the extent necessary to pay all such Permitted Senior Indebtedness in full
after
giving effect to any concurrent payment or distribution to or for the holders
of
such Permitted Senior Indebtedness, before any payment or distribution is
made
to the Holder or any holders of the Notes; provided,
however,
that
notwithstanding anything to the contrary, in any event the Holder shall be
entitled to receive and retain any and all Junior Securities (as defined
below).
(c) Certain
Rights.
Nothing
contained in this Section 12 or elsewhere in this Note or any other Transaction
Document, is intended to or shall impair, as among the Company, its creditors
including the holders of Permitted Senior Indebtedness and the Holder, the
right, which is absolute and unconditional, of the Holder to convert this
Note
in accordance herewith.
(d) Rights
of Holder Unimpaired.
The
provisions of this Section 12 are and are intended solely for the purposes
of
defining the relative rights of the Holder and the holders of Permitted Senior
Indebtedness and nothing in this Section 12 shall impair, as between the
Company
and the Holder, the obligation of the Company, which is unconditional and
absolute, to pay to the Holder the Principal hereof (and premium, if any),
accrued Interest hereon and all other Subordinated Indebtedness payable
hereunder, all in accordance with the terms of this Note.
(e) Junior
Securities.
As used
herein, “Junior
Securities”
means
debt or equity securities of the Company as reorganized or readjusted, or
debt
or equity securities of the Company or any other Person provided for by a
plan
of reorganization or readjustment authorized by an order or decree of a court
of
competent jurisdiction in a Proceeding under any applicable law, so long
as in
the case of debt securities, such Junior Securities are subordinated in right
of
payment to all Permitted Senior Indebtedness and to whatever is issued to
the
holders of the Permitted Senior Indebtedness on account of the Permitted
Senior
Indebtedness, to the same extent as, or to a greater extent than, the
Subordinated Indebtedness is so subordinated as provided for
herein.
(f) Intercreditor
Arrangements.
In the
event that a holder of Permitted Senior Indebtedness shall require the holders
of the Notes to enter into any intercreditor or subordination agreement or
any
similar arrangements, the Company shall reimburse the Holder for any reasonable
expenses incurred in connection with the negotiation, execution and delivery
of
any such agreement (and any related documents), including without limitation,
reasonable legal fees and expenses.
(g) Lien
Subordination.
Any
Lien of Holder, whether now or hereafter existing in connection with the
amounts
due under this Note, on any assets or property of Company or any proceeds
or
revenues therefrom which Holder may have at any time as security for any
amounts
due and obligations under this Note shall be subordinate to all Liens hereafter
granted to a holder of Permitted Senior Indebtedness by Company or by law,
notwithstanding the date, order or method of attachment or perfection of
any
such Lien or the provisions of any applicable law.
(13) HOLDER’S
REDEMPTIONS.
(a) Mechanics.
The
Company shall deliver the applicable Event of Default Redemption Price to
the
Holder within ten (10) Business Days after the Company’s receipt of the Holder’s
Event of Default Redemption Notice. If the Holder has submitted a Change
of
Control Redemption Notice in accordance with Section 5(b), the Company shall
deliver the applicable Change of Control Redemption Price to the Holder on
the
later of (i) concurrently with the consummation of such Change of
Control
or (ii) within ten (10) Business Days after the Company’s receipt of such
notice. In the event of a redemption of less than all of the Conversion Amount
of this Note, the Company shall promptly cause to be issued and delivered
to the
Holder a new Note (in accordance with Section 19(d)) representing the
outstanding Principal which has not been redeemed. In the event that the
Company
does not pay the applicable Redemption Price to the Holder within the time
period required, at any time thereafter and until the Company pays such unpaid
Redemption Price in full, the Holder shall have the option, in lieu of
redemption, to require the Company to promptly return to the Holder all or
any
portion of this Note representing the Conversion Amount that was submitted
for
redemption and for which the applicable Redemption Price (together with any
Late
Charges thereon) has not been paid. Upon the Company’s receipt of such notice,
(x) the Redemption Notice shall be null and void with respect to such
Conversion Amount, (y) the Company shall immediately return this Note,
or
issue a new Note (in accordance with Section 19(d)) to the Holder representing
such Conversion Amount and (z) the Conversion Price of this Note or
such
new Notes shall be adjusted to the lesser of (A) the Conversion Price
as in
effect on the date on which the Redemption Notice is voided and (B) the
lowest Closing Bid Price of the ADRs during the period beginning on and
including the date on which the Redemption Notice is delivered to the Company
and ending on and including the date on which the Redemption Notice is voided.
The Holder’s delivery of a notice voiding a Redemption Notice and exercise of
its rights following such notice shall not affect the Company’s obligations to
make any payments of Late Charges which have accrued prior to the date of
such
notice with respect to the Conversion Amount subject to such
notice.
(b) Redemption
by Other Holders.
Upon
the Company’s receipt of notice from any of the holders of the Other Notes for
redemption or repayment as a result of an event or occurrence substantially
similar to the events or occurrences described in Sections 4(b), Section
5(b) or
Section 8 (each, an “Other
Redemption Notice”),
the
Company shall immediately forward to the Holder by facsimile a copy of such
notice. If the Company receives a Redemption Notice and one or more Other
Redemption Notices, during the seven (7) Business Day period beginning on
and
including the date which is three (3) Business Days prior to the Company’s
receipt of the Holder’s Redemption Notice and ending on and including the date
which is three (3) Business Days after the Company’s receipt of the Holder’s
Redemption Notice and the Company is unable to redeem all principal, interest
and other amounts designated in such Redemption Notice and such Other Redemption
Notices received during such seven (7) Business Day period, then the Company
shall redeem a pro rata amount from each holder of the Notes (including the
Holder) based on the principal amount of the Notes submitted for redemption
pursuant to such Redemption Notice and such Other Redemption Notices received
by
the Company during such seven (7) Business Day period.
(14) VOTING
RIGHTS.
The
Holder shall have no voting rights as the holder of this Note, except as
required by law, the Corporations
Act 2001
(Cth) and as expressly provided in this Note, or any other Transaction
Documents.
(15) COVENANTS.
(a) Rank.
All
payments due under this Note (a) shall rank pari
passu
with all
Other Notes and all Permitted Indebtedness (other than Senior Indebtedness
and
Permitted Indebtedness described in clause (B) of the definition thereof)
and
(b) shall be senior to all other Indebtedness of the Company and its
Subsidiaries other than Permitted Senior Indebtedness.
(b) Incurrence
of Indebtedness.
So long
as this Note is outstanding, the Company shall not, and the Company shall
not
permit any of its Subsidiaries to, directly or indirectly, incur or guarantee,
assume or suffer to exist any Indebtedness, other than (i) the Indebtedness
evidenced by this Note and the Other Notes and (ii) Permitted
Indebtedness.
(c) Existence
of Liens.
So long
as this Note is outstanding, the Company shall not, and the Company shall
not
permit any of its Subsidiaries to, directly or indirectly, allow or suffer
to
exist any mortgage, lien, pledge, charge, security interest or other encumbrance
upon or in any property or assets (including accounts and contract rights)
owned
by the Company or any of its Subsidiaries (collectively, “Liens”)
other
than Permitted Liens.
(d) Restricted
Payments.
The
Company shall not, and the Company shall not permit any of its Subsidiaries
to,
directly or indirectly, redeem, defease, repurchase, repay or make any payments
in respect of, by the payment of cash or cash equivalents (in whole or in
part,
whether by way of open market purchases, tender offers, private transactions
or
otherwise), all or any portion of any Permitted Indebtedness whether by way
of
payment in respect of principal of (or premium, if any) or interest on such
Indebtedness if at the time such payment is due or is otherwise made or,
after
giving effect to such payment, an event constituting, or that with the passage
of time and without being cured would constitute, an Event of Default has
occurred and is continuing.
(e) Net
Cash Balance.
So long
as this Note is outstanding, the Company shall at all times maintain a Net
Cash
Balance in excess of 30% of the aggregate remaining unamortized or un-converted
Principal amount of Notes then outstanding (the “Net
Cash Balance Test”).
Promptly after any date on which the Net Cash Balance Test is not satisfied
(a
“Failure
Date”),
and
to the extent such failure constitutes non-public material information the
Company shall publicly disclose (on a Current Report on Form 6-K or otherwise)
such material non-public information and provide to the Holder a certification
as to the amount of the Net Cash Balance as of the Failure Date.
(16) PARTICIPATION.
The
Holder, as the holder of this Note, shall be entitled to receive such dividends
paid (other than cash dividends) and distributions made to the holders of
ADRs
or Ordinary Shares to the same extent as if the Holder had converted this
Note
into ADRs (without regard to any limitations on conversion herein or elsewhere)
and had held such ADRs on the record date for such dividends and distributions.
Payments under the preceding sentence shall be made concurrently with the
dividend or distribution to the holders of ADRs or Ordinary Shares.
(17) VOTE
TO ISSUE, OR CHANGE THE TERMS OF, NOTES.
The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting of the Required Holders shall be required for any
change or amendment to this Note or the Other Notes.
(18) TRANSFER.
This
Note and any ADRs issued upon conversion of this Note may be offered, sold,
assigned or transferred by the Holder without the consent of the Company,
subject only to the provisions of Section 2(f) of the Securities Purchase
Agreement.
(19) REISSUANCE
OF THIS NOTE.
(a) Transfer.
If this
Note is to be transferred, the Holder shall surrender this Note to the Company,
whereupon the Company will forthwith issue and deliver upon the order of
the
Holder a new Note (in accordance with Section 19(d)), registered as the Holder
may request, representing the outstanding Principal being transferred by
the
Holder and, if less then the entire outstanding Principal is being transferred,
a new Note (in accordance with Section 19(d)) to the Holder representing
the
outstanding Principal not being transferred. The Holder and any assignee,
by
acceptance of this Note, acknowledge and agree that, by reason of the provisions
of Section 3(c)(iii) following conversion or redemption of any portion of
this
Note, the outstanding Principal represented by this Note may be less than
the
Principal stated on the face of this Note.
(b) Lost,
Stolen or Mutilated Note.
Upon
receipt by the Company of evidence reasonably satisfactory to the Company
of the
loss, theft, destruction or mutilation of this Note, and, in the case of
loss,
theft or destruction, of any indemnification undertaking by the Holder to
the
Company in customary form and, in the case of mutilation, upon surrender
and
cancellation of this Note, the Company shall execute and deliver to the Holder
a
new Note (in accordance with Section 19(d)) representing the outstanding
Principal.
(c) Note
Exchangeable for Different Denominations.
This
Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section
19(d)
and in principal amounts of at least $100,000) representing in the aggregate
the
outstanding Principal of this Note, and each such new Note will represent
such
portion of such outstanding Principal as is designated by the Holder at the
time
of such surrender.
(d) Issuance
of New Notes.
Whenever the Company is required to issue a new Note pursuant to the terms
of
this Note, such new Note (i) shall be of like tenor with this Note,
(ii) shall represent, as indicated on the face of such new Note, the
Principal remaining outstanding (or in the case of a new Note being issued
pursuant to Section 19(a) or Section 19(c), the Principal designated by the
Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes),
(iii) shall have an issuance date, as indicated on the face of such
new
Note, which is the same as the Issuance Date of this Note, (iv) shall
have
the same rights and conditions as this Note, and (v) shall represent
accrued and unpaid Interest and Late Charges on the Principal and Interest
of
this Note, from the Issuance Date.
(20) REMEDIES,
CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF.
The
remedies provided in this Note shall be cumulative and in addition to all
other
remedies available under this Note and any of the other Transaction Documents
at
law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the Holder’s right to pursue
actual and consequential damages for any failure by the Company to comply
with
the terms of this Note. Amounts set forth or provided for herein with respect
to
payments, conversion and the like (and the computation thereof) shall be
the
amounts to be received by the Holder and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at
law
for any such breach may be inadequate. The Company therefore agrees that,
in the
event of any such breach or threatened breach, the Holder shall be entitled,
in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond
or
other security being required.
(21) PAYMENT
OF COLLECTION, ENFORCEMENT AND OTHER COSTS.
If
(a) this Note is placed in the hands of an attorney for collection
or
enforcement or is collected or enforced through any legal proceeding or the
Holder otherwise takes action to collect amounts due under this Note or to
enforce the provisions of this Note or (b) there occurs any bankruptcy,
reorganization, receivership of the Company or other proceedings affecting
Company creditors’ rights and involving a claim under this Note, then the
Company shall pay the costs incurred by the Holder for such collection,
enforcement or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, but not limited to, attorneys’ fees
and disbursements.
(22) CONSTRUCTION;
HEADINGS.
This
Note shall be deemed to be jointly drafted by the Company and all the Purchasers
and shall not be construed against any person as the drafter hereof. The
headings of this Note are for convenience of reference and shall not form
part
of, or affect the interpretation of, this Note.
(23) FAILURE
OR INDULGENCE NOT WAIVER.
No
failure or delay on the part of the Holder in the exercise of any power,
right
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude other
or
further exercise thereof or of any other right, power or privilege.
(24) DISPUTE
RESOLUTION.
In the
case of a dispute as to the determination of the Closing Bid Price, the Closing
Sale Price
or the
Weighted Average Price or the arithmetic calculation of the Conversion Rate
or
the Redemption Price, the Company shall submit the disputed determinations
or
arithmetic calculations via facsimile within two (2) Business Days of receipt,
or deemed receipt, of the Conversion Notice or Redemption Notice or other
event
giving rise to such dispute, as the case may be, to the Holder. If the Holder
and the Company are unable to agree upon such determination or calculation
within two (2) Business Days of such disputed determination or arithmetic
calculation being submitted to the Holder, then the Company shall, within
two
Business Days submit via facsimile (a) the disputed determination
of the
Closing Bid Price, the Closing Sale Price or the Weighted Average Price to
an
independent, reputable investment bank selected by the Company and approved
by
the Holder or (b) the disputed arithmetic calculation of the Conversion
Rate or the Redemption Price to the Company’s independent, outside accountant.
The Company, at the Company’s expense, shall cause the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the Holder of the results no later than seven
(7)
Business Days from the time it receives the disputed determinations or
calculations. Such investment bank’s or accountant’s determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.
(25) NOTICES;
CURRENCY; PAYMENTS.
(a) Notices.
Whenever notice is required to be given under this Note, unless otherwise
provided herein, such notice shall be given in accordance with Section 9(f)
of
the Securities Purchase Agreement. The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Note, including
in
reasonable detail a description of such action and the reason therefore.
Without
limiting the generality of the foregoing, the Company will give written notice
to the Holder (i) immediately upon any adjustment of the Conversion
Price,
setting forth in reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least twenty (20) days prior to the date on
which
the Company closes its books or takes a record (A) with respect to
any
dividend or distribution upon the ADRs or Ordinary Shares, (B) with
respect
to any pro rata subscription offer to holders of ADRs or Ordinary Shares
or
(C) for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided in each case that such
information shall be made known to the public prior to or in conjunction
with
such notice being provided to the Holder.
(b) Currency.
Unless
otherwise indicated, all dollar amounts referred to in this Note are in United
States Dollars.
(c) Payments.
Whenever any payment of cash is to be made by the Company to any Person pursuant
to this Note, such payment shall be made in lawful money of the United States
of
America by a check drawn on the account of the Company and sent via overnight
courier service to such Person at such address as previously provided to
the
Company in writing (which address, in the case of each of the Purchasers,
shall
initially be as set forth on the Schedule of Buyers attached to the Securities
Purchase Agreement); provided that the Holder may elect to receive a payment
of
cash via wire transfer of immediately available funds by providing the Company
with prior written notice setting out such request and the Holder’s wire
transfer instructions. Whenever any amount expressed to be due by the terms
of
this Note is due on any day which is not a Business Day, the same shall instead
be due on the next succeeding day which is a Business Day and, in the case
of
any Interest Date which is not the date on which this Note is paid in full,
the
extension of the due date thereof shall not be taken into account for purposes
of determining the amount of Interest due on such date. Any amount of Principal
or other amounts due under the Transaction Documents, other than Interest,
which
is not paid when due shall result in a late charge being incurred and payable
by
the Company in an amount equal to interest on such amount at the rate of
ten
percent (10%) per annum from the date such amount was due until the same
is paid
in full (“Late
Charge”).
(26) CANCELLATION.
After
all Principal, accrued Interest and other amounts at any time owed on this
Note
have been paid in full, this Note shall automatically be deemed canceled,
shall
be surrendered to the Company for cancellation and shall not be
reissued.
(27) WAIVER
OF NOTICE.
To the
extent permitted by law, the Company hereby waives demand, notice, protest
and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note and the Securities Purchase
Agreement.
(28) GOVERNING
LAW.
This
Note shall be construed and enforced in accor-dance with, and all questions
concerning the construction, validity, interpretation and performance of
this
Note shall be governed by, the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New
York.
(29) CERTAIN
DEFINITIONS.
For
purposes of this Note, the following terms shall have the following
meanings:
(a) “ADRs”
means
the American Depositary Receipts of the Company evidencing the American
Depositary Shares of the Company which each represent ten (10) Ordinary Shares
or any successor securities. Appropriate and equitable adjustment to the
terms
and provisions of this Notes shall be made in the event of any change to
the
ratio of ADRs to Ordinary Shares.
(b) “Approved
Stock Plan”
means
any employee benefit plan which has been approved by the Board of Directors
of
the Company, pursuant to which the Company’s securities may be issued to any
employee, officer, director or consultant for services provided to the
Company.
(c) “ASX”
means
the Australian Stock Exchange.
(d) “Bloomberg”
means
Bloomberg Financial Markets.
(e) “Business
Day”
means
any day other than Saturday, Sunday or other day on which commercial banks
in
The City of New York, State of New York, U.S.A. or Perth, Australia are
authorized or required by law to remain closed.
(f) “Calendar
Quarter”
means
each of: the period beginning on and including January 1 and ending on and
including March 31; the period beginning on and including April 1 and ending
on
and including June 30; the period beginning on and including July 1 and ending
on and including September 30; and the period beginning on and including
October
1 and ending on and including December 31.
(g) “Cash
Equivalents”
means
(i) securities issued, or directly and fully guaranteed or insured,
by the
government of the United States, Australia or the United Kingdom or any agency
or instrumentality thereof having maturities of not more than one year from
the
date of the acquisition by a Person, (ii) demand deposits and time
deposits
and certificates of deposit, having maturities of not more than one year
from
the date of acquisition, of any domestic commercial bank which has, or the
holding company of which has, a commercial paper rating meeting the requirements
specified in clause (iv) below, (iii) repurchase obligations with
a term of
not more than 270 days for underlying securities of the types described in
clauses (i) and (ii) entered into with any financial institution meeting
the
qualifications specified in clause (ii) above, and (iv) commercial
paper
rated at least A-2 or the equivalent thereof by Standard & Poor’s Ratings
Group or P-2 or the equivalent thereof by Moody’s Investors Service, Inc. and in
either case maturing within one year after the date of acquisition.
(h) “Change
of Control”
means
any Fundamental Transaction other than (i) any consolidation, merger,
combination, or any reorganization, recapitalization or reclassification
of the
Ordinary Shares pursuant to, which holders of the Company’s voting power
immediately prior to such consolidation, merger, combination, reorganization,
recapitalization or reclassification continue after such consolidation, merger,
combination, reorganization, recapitalization or reclassification to hold
publicly traded securities and, directly or indirectly, the voting power
of the
surviving entity or entities necessary to elect a majority of the members
of the
board of directors (or their equivalent if other than a corporation) of such
entity or entities, or (ii) pursuant to a migratory merger effected
solely
for the purpose of changing the jurisdiction of incorporation of the
Company.
(i) “Change
of Control Premium”
means
(i) until the 12-month anniversary of the Issuance Date, 120%,
(ii) from and after the 12-month anniversary of the Issuance Date
until the
24-month anniversary of the Issuance Date, 115%, (iii) from and after
the
24-month anniversary of the Issuance Date until the 30-month anniversary
of the
Issuance Date, 110%, and (iv) after the 30-month anniversary of the
Issuance Date, 105%.
(j) “Closing
Bid Price”
and
“Closing
Sale Price”
means,
for any security as of any date, the last closing bid price and last closing
trade price, respectively, for such security on the Principal Market, as
reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the
closing
trade price, as the case may be, then the last bid price or last trade price,
respectively, of such security prior to 4:00:00 p.m., New York Time, as reported
by Bloomberg, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the last closing bid price
or last
trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or
last
trade price, respectively, of such security in the over-the-counter market
on
the electronic bulletin board for such security as reported by Bloomberg,
or, if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the “pink
sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
the Closing Bid Price or the Closing Sale Price cannot be calculated for
a
security on a particular date on any of the foregoing bases, the Closing
Bid
Price or the Closing Sale Price, as the case may be, of such security on
such
date shall be the fair market value as mutually determined by the Company
and
the Holder. If the Company and the Holder are unable to agree upon the fair
market value of such security, then such dispute shall be resolved pursuant
to
Section 24. All such determinations to be appropriately adjusted for any
share
dividend, share split, share combination or other similar transaction during
the
applicable calculation period.
(k) “Closing
Date”
shall
have the meaning set forth in the Securities Purchase Agreement, which date
is
the date the Company initially issued Notes pursuant to the terms of the
Securities Purchase Agreement.
(l) “Consolidated
Total Indebtedness”
means,
with respect to any Person at any date, all Indebtedness of such Person
determined on a consolidated basis in accordance with GAAP, including, in
any
event, with respect to the Company and its Subsidiaries, the outstanding
principal amount of the Notes.
(m) “Consolidated
Total Indebtedness to Market Capitalization Ratio”
means
the ratio of Consolidated Total Indebtedness to Market
Capitalization.
(n) “Convertible
Securities”
means
any shares or securities (other than Options) directly or indirectly
convertible into or exercisable or exchangeable for Ordinary
Shares.
(o) “Deposit
Agreement”
means
that certain Deposit Agreement, dated as of January 24, 2005, by and among
the
Company, the Depositary and the holders and beneficial owners from time to
time
of ADSs evidenced by ADRs issued pursuant to such agreement.
(p) “Depositary”
means
Citibank, N.A. acting in such capacity under
(q) “Eligible
Market”
means
the Principal Market, The New York Stock Exchange, Inc., the American Stock
Exchange, or The Nasdaq SmallCap Market.
(r) “Equity
Conditions”
means:
(i) on each day during the period beginning on the date which is the
later
of (x) the earlier of (A) the Effectiveness Deadline and (B) the
Effective Date and (y) one (1) month prior to the applicable date
of
determination and ending on and including the applicable date of determination
(the “Equity
Conditions Measuring Period”),
either (x) the Registration Statement filed pursuant to the Registration
Rights Agreement shall be effective and available for the resale of all
remaining Registrable Securities in accordance with the terms of the
Registration Rights Agreement and there shall not have been any Grace Periods
(as defined in the Registration Rights Agreement) or (y) all ADRs
issuable
upon conversion of the Notes and exercise of the Warrants shall be eligible
for
sale without restriction and without the need for registration under any
applicable federal or state securities laws; (ii) on each day during
the
Equity Conditions Measuring Period, the ADRs are designated for quotation
on the
Principal Market or an Eligible Market and shall not have been suspended
from
trading on such exchange or market (other than suspensions of not more than
two
(2) days and occurring prior to the applicable date of determination due
to
business announcements by the Company) nor shall delisting or suspension
by such
exchange or market been threatened or pending either (A) in writing
by such
exchange or market or (B) by falling below the minimum listing maintenance
requirements of such exchange or market; (iii) during the Equity Conditions
Measuring Period the Company shall have delivered Conversion Shares upon
conversion of the Notes and ADRs upon exercise of the Warrants to the holders
on
a timely basis as set forth herein hereof (and analogous provisions under
the
Other Notes) and the Warrants; (iv) any applicable ADRs to be issued
in
connection with the event requiring determination may be issued in full without
violating Section 3(d) hereof and the rules or regulations of the Principal
Market or any applicable Eligible Market; (v) during the Equity Conditions
Measuring Period, the Company shall not have failed to timely make any payments
within five (5) Business Days of when such payment is due pursuant to any
Transaction Document; (vi) during the Equity Conditions Measuring
Period,
there shall not have occurred either (A) the public announcement of
a
pending, proposed or intended Fundamental Transaction which has not been
abandoned, terminated or consummated or (B) an Event of Default or
an event
that with the passage of time or giving of notice would constitute an Event
of
Default; (vii) the Company shall have no knowledge of any fact that
would
cause (x) the Registration Statements required pursuant to the Registration
Rights Agreement not to be effective and available for the resale of all
remaining Registrable Securities in accordance with the terms of the
Registration Rights Agreement or (y) any ADRs issuable upon conversion
of
the Notes and ADRs issuable upon exercise of the Warrants not to be eligible
for
sale without restriction pursuant to Rule 144(k) and any applicable state
securities laws; and (viii) during the Equity Conditions Measuring
Period,
the Company otherwise shall have been in material compliance with and shall
not
have materially breached or be in material breach of any material provision,
covenant, representation or warranty of any Transaction Document.
(s) “Excluded
Securities”
means
any Ordinary Shares issued or issuable: (i) in connection with any
Approved
Stock Plan; (ii) upon conversion of the Notes or the exercise of the
Warrants; (iii) pursuant to a bona fide firm commitment underwritten
public
offering with a nationally recognized underwriter which generates gross proceeds
to the Company in excess of $25,000,000 (other than an “at-the-market offering”
as defined in Rule 415(a)(4) under the 1933 Act and “equity lines”);
(iv) in connection with the payment of any Interest Shares on the
Notes;
(v) in connection with any acquisition by the Company, whether through
an
acquisition of shares or a merger of any business, assets or technologies
the
primary purpose of which is not to raise equity capital; (vi) upon
conversion of any Options or Convertible Securities which are outstanding
on the
day immediately preceding the Subscription Date, provided that the terms
of such
Options or Convertible Securities are not amended, modified or changed on
or
after the Subscription Date; (vii) in replacement of outstanding Ordinary
Shares as a result of the re-incorporation of the Company into the United
States; (viii) in connection with any rights offering to all holders
of
Ordinary Shares generally; and (ix) in connection with a Strategic
Financing.
(t) “Fundamental
Transaction”
means
that the Company shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not
the
Company is the surviving corporation) another Person, or (ii) sell,
assign,
transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (iii) allow
another Person to make a purchase, tender or exchange offer that is accepted
by
the holders of more than the 50% of the outstanding Ordinary Shares (not
including any Ordinary Shares held by the Person or Persons making or party
to,
or associated or affiliated with the Persons making or party to, such purchase,
tender or exchange offer), or (iv) consummate a share purchase agreement
or
other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person
whereby
such other Person acquires more than the 50% of the outstanding Ordinary
Shares
(not including any Ordinary Shares held by the other Person or other Persons
making or party to, or associated or affiliated with the other Persons making
or
party to, such share purchase agreement or other business combination), or
(v) reorganize, recapitalize or reclassify its Ordinary
Shares.
(u) “GAAP”
means
United States generally accepted accounting principles, consistently
applied.
(v) “Holder
Pro Rata Amount”
means a
fraction (i) the numerator of which is the Principal amount of this
Note on
the Closing Date and (ii) the denominator of which is the aggregate
principal amount of the Notes issued to the initial purchasers pursuant to
the
Securities Purchase Agreement on the Closing Date of all then outstanding
Notes.
(w) “Interest
Conversion Price”
means,
with respect to any Interest Date, that price which shall be computed as
85% of
the arithmetic average of the Weighted Average Price of the ADRs on each
of the
ten (10) consecutive Trading Days ending on the Trading Day immediately
preceding the applicable Interest Date (each, an “Interest
Measuring Period”).
All
such determinations to be appropriately adjusted for any share split, share
dividend, share combination or other similar transaction during such
period.
(x) “Interest
Rate”
means
eight percent (8.0%) per annum.
(y) “Market
Capitalization”
of the
Company means the amount determined by multiplying the total number of Ordinary
Shares issued and outstanding (as reflected in the Company’s latest Form 20-F or
other publicly filed report) times the arithmetic average of the Weighted
Average Price of the Ordinary Shares for the ten (10) consecutive Trading
Days
preceding the date of measurement.
(z) “Maximum
Interest Share Amount”
means
the Holder Pro Rata Amount of the quotient determined by dividing (A) the
product of (x) 15% and (y) the sum of the Trading Dollar Volume
of the
ADRs for the twenty (20) Trading Days ending on the Trading Day immediately
preceding the applicable Interest Date by (B) the applicable Interest
Conversion Price.
(aa) “Net
Cash Balance”
means,
at any date, the difference between (i) aggregate amount of all cash
and
Cash Equivalents and Short and Long Term Investments reflected on the Company’s
balance sheet as at such date, minus
(ii) the unpaid principal balance of the Permitted Indebtedness (not
including amounts owed under the Notes and any accounts payable) on such
date.
(bb) “Options”
means
any rights, warrants or options to subscribe for or purchase Ordinary Shares
or
Convertible Securities.
(cc) “Ordinary
Shares Deemed Outstanding”
means,
at any given time, the number of shares of Ordinary Shares actually outstanding
at such time (directly or indirectly through ADRs or otherwise), plus the
number
of Ordinary Shares deemed to be outstanding pursuant to Sections 7(a)(i)
and
7(a)(ii) hereof regardless of whether the Options or Convertible Securities
are
actually exercisable at such time, but excluding any Ordinary Shares owned
or
held by or for the account of the Company or issuable upon conversion and
exercise, as applicable, of the SPA Securities and the Warrants.
(dd) “Ordinary
Shares”
means
(i) the Company’s ordinary shares, no par value per share, and
(ii) any share capital into which such Ordinary Shares shall have
been
changed or any share capital resulting from a reclassification of such Ordinary
Shares.
(ee) “Parent
Entity”
of a
Person means an entity that, directly or indirectly, controls the applicable
Person and whose common shares or equivalent equity security is quoted or
listed
on an Eligible Market, or, if there is more than one such Person or Parent
Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental
Transaction.
(ff) “Permitted
Indebtedness”
means
(A) Permitted Senior Indebtedness, (B) Indebtedness incurred
by the
Company that is made expressly subordinate in right of payment to the
Indebtedness evidenced by this Note, as reflected in a written agreement
acceptable to the Holder and approved by the Holder in writing, and which
Indebtedness does not provide at any time for (1) the payment, prepayment,
repayment, repurchase or defeasance, directly or indirectly, of any principal
or
premium, if any, thereon until ninety-one (91) days after the Maturity Date
or
later and (2) total interest and fees at a rate in excess of eight
percent
(8%) per annum, (C) Indebtedness secured by Permitted Liens,
(D) Indebtedness to trade creditors incurred in the ordinary course
of
business, and (E) Indebtedness of any entity acquired by or merged
with the
Company not for capital raising purposes and existing at the date of such
acquisition or merger, (F) Indebtedness not covered by (A) through
(E)
above which is incurred by the Company in an amount not to exceed an aggregate
of $10 million dollars, provided that such Indebtedness is not in any way
convertible into, exchangeable for or in any way payable in equity securities
of
the Company and, provided further that such Indebtedness shall only be incurred
to the extent that the Consolidated Total Indebtedness to Market Capitalization
Ratio does not exceed .15 at the time of incurrence of such Indebtedness
and
(G) extensions, refinancings and renewals of any items of Permitted
Indebtedness, provided that the principal amount is not increased or the
terms
modified to impose more burdensome terms upon the Company or its Subsidiary,
as
the case may be.
(gg) “Permitted
Liens”
means
(i) any Lien for taxes not yet due or delinquent or being contested
in good
faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any statutory Lien arising
in the
ordinary course of business by operation of law with respect to a liability
that
is not yet due or delinquent, (iii) any Lien created by operation
of law,
such as materialmen’s liens, mechanics’ liens and other similar liens, arising
in the ordinary course of business with respect to a liability that is not
yet
due or delinquent or that are being contested in good faith by appropriate
proceedings, (iv) Liens (A) upon or in any equipment acquired
or held
by the Company or any of its Subsidiaries to secure the purchase price of
such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such equipment, or (B) existing on such equipment
at the time of its acquisition, provided that the Lien is confined solely
to the
property so acquired and improvements thereon, and the proceeds of such
equipment, (v) Liens incurred in connection with the extension, renewal
or
refinancing of the indebtedness secured by Liens of the type described in
clauses (i) and (iv) above, provided that any extension, renewal or replacement
Lien shall be limited to the property encumbered by the existing Lien and
the
principal amount of the Indebtedness being extended, renewed or refinanced
does
not increase, (vi) leases or subleases and licenses and sublicenses
granted
to others in the ordinary course of the Company’s business, not interfering in
any material respect with the business of the Company and its Subsidiaries
taken
as a whole, (vii) Liens in favor of customs and revenue authorities
arising
as a matter of law to secure payments of custom duties in connection with
the
importation of goods, (viii) Liens on any assets of any entity acquired
by
or merged with the Company not for capital raising purposes and existing
at the
date of such acquisition or merger, and (ix) Liens arising from judgments,
decrees or attachments in circumstances not constituting an Event of Default
under Section 4(a)(viii).
(hh) “Permitted
Senior Indebtedness”
means
the principal of (and premium, if any), interest on, and all fees and other
amounts (including, without limitation, any reasonable out-of-pocket costs,
enforcement expenses (including reasonable out-of-pocket legal fees and
disbursements), collateral protection expenses and other reimbursement or
indemnity obligations relating thereto) payable by Company and/or its
Subsidiaries under or in connection with any credit facility to be entered
into
by the Company and/or its Subsidiaries with one or more financial institutions
together with any amendments, restatements, renewals, refundings, refinancings
or other extensions thereof); provided,
however,
that
the aggregate outstanding amount of such Permitted Senior Indebtedness (taking
into account the maximum amounts which may be advanced under the loan documents
evidencing such Permitted Senior Indebtedness) does not as of the date on
which
any such Permitted Senior Indebtedness is incurred exceed $10,000,000, with
respect to the unpaid principal balance of loans thereunder and, provided
further that such Permitted Senior Indebtedness shall only be incurred to
the
extent that the Consolidated Total Indebtedness to Market Capitalization
Ratio
does not exceed .15 at the time of incurrence of such Permitted Senior
Indebtedness.
(ii) “Person”
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization, any other entity and
a
government or any department or agency thereof.
(jj) “Principal
Market”
means
the Nasdaq National Market.
(kk) “Redemption
Premium”
means
(i) in the case of the Events of Default described in Section 4(a)(i)
- (v)
and (viii) - (xi), 110% or (ii) in the case of the Events of Default described
in Section 4(a)(vi) - (vii), 100%.
(ll) “Required
Holders”
means
the holders of Notes representing at least a majority of the aggregate principal
amount of the Notes then outstanding.
(mm) “SEC”
means
the United States Securities and Exchange Commission.
(nn) “Securities
Purchase Agreement”
means
that certain securities purchase agreement dated as of the Subscription Date
by
and among the Company and the initial holders of the Notes pursuant to which
the
Company issued the Notes.
(oo) “Strategic
Financing”
means
the issuance, directly or indirectly, of Ordinary Shares or warrants to purchase
Ordinary Shares at a purchase price or an exercise price, as the case may
be,
that is not less than the market price of the Ordinary Shares on the date
of
issuance of such Ordinary Shares or warrant, in connection with any strategic
investor, vendor, lease or similar arrangement (the primary purpose of which
is
not to raise equity capital), provided that the aggregate number of shares
of
Ordinary Shares which the Company may issue pursuant to this definition shall
not exceed ten percent (10%) of the outstanding Ordinary Shares at the time
of
issuance (subject to adjustment for stock splits, stock dividends, stock
combination and similar transactions)
(pp) “Subscription
Date”
means
October 5, 2005.
(qq) “Subsequent
Conversion Price”
means
108% of the arithmetic average of the Weighted Average Price of the ADRs
for the
ten (10) consecutive Trading Days ending on the Trading Day immediately
preceding the seven month anniversary of the Subscription Date. All such
determinations to be appropriately adjusted for any share split, share dividend,
share combination or other similar transaction during such period.
(rr) “Successor
Entity”
means
the Person, which may be the Company, formed by, resulting from or surviving
any
Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made, provided that if such Person is not a publicly traded
entity whose common shares or equivalent equity security is quoted or listed
for
trading on an Eligible Market, Successor Entity shall mean such Person’s Parent
Entity.
(ss) “Trading
Day”
means
any day on which the ADRs are traded on the Principal Market, or, if the
Principal Market is not the principal trading market for the ADRs, then on
the
principal securities exchange or securities market on which the ADRs are
then
traded; provided that “Trading Day” shall not include any day on which the ADRs
are scheduled to trade on such exchange or market for less than 4.5 hours
or any
day that the ADRs are suspended from trading during the final hour of trading
on
such exchange or market (or if such exchange or market does not designate
in
advance the closing time of trading on such exchange or market, then during
the
hour ending at 4:00:00 p.m., New York Time).
(tt) “Trading
Dollar Volume”
means,
for any day on which the ADRs are traded on the Principal Market, the product
of
(i) the daily average trading volume of the ADRs on such day multiplied
by
(ii) the Weighted Average Price for the ADRs on such day.
(uu) “Warrants”
has the
meaning ascribed to such term in the Securities Purchase Agreement, and shall
include all warrants issued in exchange therefor or replacement
thereof.
(vv) “Weighted
Average Price”
means,
for any security as of any date, the dollar volume-weighted average price
for
such security on the Principal Market during the period beginning at 9:30:01
a.m., New York Time (or such other time as the Principal Market publicly
announces is the official open of trading), and ending at 4:00:00 p.m., New
York
Time (or such other time as the Principal Market publicly announces is the
official close of trading) as reported by Bloomberg through its “Volume at
Price” functions, or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market
on
the electronic bulletin board for such security during the period beginning
at
9:30:01 a.m., New York Time (or such other time as such market publicly
announces is the official open of trading), and ending at 4:00:00 p.m., New
York
Time (or such other time as such market publicly announces is the official
close
of trading) as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours, the average
of
the highest closing bid price and the lowest closing ask price of any of
the
market makers for such security as reported in the “pink sheets” by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average
Price cannot be calculated for a security on a particular date on any of
the
foregoing bases, the Weighted Average Price of such security on such date
shall
be the fair market value as mutually determined by the Company and the Holder.
If the Company and the Holder are unable to agree upon the fair market value
of
such security, then such dispute shall be resolved pursuant to Section 24.
All
such determinations to be appropriately adjusted for any share dividend,
share
split, share combination or other similar transaction during the applicable
calculation period.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed as
of the
Issuance Date set out above.
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pSIVIDA
LIMITED |
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By: |
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Name:
Gavin Rezos
Title: Managing
Director
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