[FORM
OF WARRANT]
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISEABLE 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.
pSIVIDA
LIMITED
WARRANT
TO PURCHASE ADRS
Warrant
No.: S-1
Number
of
ADRs: 633,803
Date
of
Issuance: November 15, 2005 (“Issuance
Date”)
PSIVIDA
LIMITED, an Australian corporation (the “Company”),
hereby certifies that, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged,_________________,
the
registered holder hereof or its permitted assigns (the “Holder”),
is
entitled, subject to the terms set forth below, to purchase from the Company,
at
the Exercise Price (as defined below) then in effect, upon surrender of this
Warrant to Purchase ADRs (as defined below) (including any Warrants to Purchase
ADRs issued in exchange, transfer or replacement hereof, the “Warrant”),
at
any time or times on or after the date hereof, but not after 11:59 p.m.,
New
York Time, on the Expiration Date (as defined below), up to six hundred
thirty-three thousand eight hundred three fully paid nonassessable ADRs (as
defined below) (the “Warrant
Shares”).
Except as otherwise defined herein, capitalized terms in this Warrant shall
have
the meanings set forth in Section 15. This Warrant is one of the Warrants
to
purchase Warrant Shares (the “SPA
Warrants”)
issued
pursuant to Section 1 of that certain Securities Purchase Agreement, dated
as of
October 5, 2005 (the “Subscription
Date”),
by
and among the Company and the investors (the “Buyers”)
referred to therein (the “Securities
Purchase Agreement”).
1 EXERCISE
OF WARRANT.
(a) Mechanics
of Exercise.
Subject
to the terms and conditions hereof (including, without limitation, the
limitations set forth in Section 1(f)), this Warrant may be exercised by
the
Holder on any day on or after the date hereof, in whole or in part, by
(i) delivery of a written notice, in the form attached hereto as
Exhibit
A
(the
“Exercise
Notice”),
of
the Holder’s election to exercise this Warrant and (ii) payment to the
Company of an amount equal to the applicable Exercise Price multiplied by
the
number of Warrant Shares as to which this Warrant is being exercised (the
“Aggregate
Exercise Price”)
in
cash or wire transfer of immediately available funds. The Holder shall not
be
required to deliver the original Warrant in order to effect an exercise
hereunder. Execution and delivery of the Exercise Notice with respect to
less
than all of the Warrant Shares shall have the same effect as cancellation
of the
original Warrant and issuance of a new Warrant evidencing the right to purchase
the remaining number of Warrant Shares. On or before the second (2nd) Business
Day following the date on which the Company has received each of the Exercise
Notice and the Aggregate Exercise Price the “Exercise
Delivery Documents”),
the
Company shall transmit by facsimile an acknowledgment of confirmation of
receipt
of the Exercise Delivery Documents to the Holder and the Company’s transfer
agent (the “Transfer
Agent”).
On or
before the fifth (5th) Business Day following the date on which the Company
has
received all of the Exercise Delivery Documents (the “Share
Delivery Date”),
the
Company shall (X) provided that the Transfer Agent is participating
in The
Depository Trust Company (“DTC”)
Fast
Automated Securities Transfer Program, upon the request of the Holder, credit
such aggregate number of Warrant Shares to which the Holder is entitled pursuant
to such exercise to the Holder’s or its designee’s balance account with DTC
through its Deposit Withdrawal Agent Commission system, or (Y) if
the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the address
as
specified in the Exercise Notice, a certificate, registered in the Company’s
share register in the name of the Holder or its designee, for the number
of
Warrant Shares to which the Holder is entitled pursuant to such exercise.
Upon
delivery of the Exercise Delivery Documents, the Holder shall be deemed for
all
corporate purposes to have become the holder of record of the Ordinary Shares
represented by the ADRs with respect to which this Warrant has been exercised,
irrespective of the date of delivery of the certificates evidencing the ADRs.
If
this Warrant is submitted in connection with any exercise pursuant to this
Section 1(a) and the number of Warrant Shares represented by this Warrant
submitted for exercise is greater than the number of Warrant Shares being
acquired upon an exercise, then the Company shall as soon as practicable
and in
no event later than three Business Days after any exercise and at its own
expense, issue a new Warrant (in accordance with Section 7(d)) representing
the
right to purchase the number of Warrant Shares purchasable immediately prior
to
such exercise under this Warrant, less the number of Warrant Shares with
respect
to which this Warrant is exercised. No fractional Warrant Shares are to be
issued upon the exercise of this Warrant, but, at the option of the Company,
(i) the number of Warrant Shares to be issued shall be rounded up
to the
nearest whole number or (ii) in lieu of any fractional Warrant Shares
to
which the Holder would otherwise be entitled, the Company shall make a cash
payment to the Holder equal to the Closing Sale Price on the date of exercise
multiplied by such fraction. Upon exercise of this Warrant, the Company shall
deposit the corresponding number of Ordinary Shares representing the 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. The Company shall pay any and all taxes (excluding any
taxes
on the income of the Holder) which may be payable with respect to the issuance
and delivery of Warrant Shares upon exercise of this Warrant. Appropriate
and
equitable adjustment to the terms and provisions of this Warrant shall be
made
in the event of any change to the ratio of Warrant Shares to Ordinary Shares
represented thereby.
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) Exercise
Price.
For
purposes of this Warrant, “Exercise
Price”
means
$7.20 per ADR (which is equivalent to $0.72 per Ordinary Share), subject
to
adjustment as provided herein.
(c) Company’s
Failure to Timely Deliver Securities.
If the
Company shall fail to issue to the Holder, the number of Warrant Shares to
which
the Holder is entitled upon the Holder’s exercise of this Warrant and register
such Warrant Shares on the Company’s share register or to credit the Holder’s
balance account with DTC for such number of Warrant Shares to which the Holder
is entitled upon the Holder’s exercise of this Warrant on or prior to the date
which is three (3) Business Days after receipt of the Exercise Delivery
Documents (an “Exercise
Failure”),
then
the Company shall pay damages in cash to the Holder for each date of such
Exercise Failure in an amount equal to an interest rate equal to 10% per
annum
applied to the product of (X) the sum of the number of Warrant Shares
not
issued to the Holder on or prior to the Share Delivery Date and to which
the
Holder is entitled and (Y) the Closing Sale Price of the Warrant Shares
on
the Share Delivery Date. In addition to the foregoing, if within three (3)
Trading Days after the Company’s receipt of the facsimile copy of a Exercise
Notice the Company shall fail to issue and deliver to the Holder and register
such Warrant Shares on the Company’s share register or credit the Holder’s
balance account with DTC for the number of Warrant Shares to which the Holder
is
entitled upon such holder’s exercise hereunder, 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
exercise 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 and 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 date of exercise.
(d) Registration
Rights.
Notwithstanding anything contained herein to the contrary, if a Registration
Statement (as defined in the Registration Rights Agreement) covering the
Warrant
Shares that are the subject of the Exercise Notice (the “Unavailable
Warrant Shares”)
is not
available for resale of such Unavailable Warrant Shares then the Holder may
elect to exercise this Warrant for Warrant Shares in the form of ADRs or
in the
form of the Ordinary Shares underlying the ADRs and in either case the Company
must, contemporaneous with the issue of the Warrant Shares that are the subject
of the Exercise Notice, lodge with the ASX Limited a notice complying with
section 708A(5)(E) of the Corporations Act 2001 and the ASX Listing Rules
(“Cleansing
Notice”)
and
notify the Holder that it has so lodged a Cleansing Notice, and upon the
lodgement by the Company of the Cleansing Notice, the Holder is free to dispose
of any Ordinary Shares or any interest in Ordinary Shares it holds on the
Australian Stock Exchange Limited in the ordinary course of trading or otherwise
in Australia to any person and the restrictions on sale in the Securities
Purchase Agreement, including without limitation in section 2(j)(C) of the
Securities Purchase Agreement, does not apply to any such disposal.
Notwithstanding the foregoing, from after the second anniversary of the Issuance
Date, in the event that the aggregate number of Ordinary Shares that trades
on
the ASX is less than either (i) an average of 50,000 Common Shares
on each
Trading Day during any two month period or (ii) a weighted average
trading
price of at least US$50,000 on average during each Trading Day during any
two
month period, then at the request of the Holder the Company as of the date
of
such request once again (each of (i) and (ii), a “Registration
Event”)
shall
be subject to the terms of the Registration Rights Agreement as to the Warrant
Shares; provided, that the Holder makes such request within thirty (30) days
of
a Registration Event.
(e) Disputes.
In the
case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall issue to
the
Holder the number of Warrant Shares that are not disputed and resolve such
dispute in accordance with Section 12.
(f) Limitations
on Exercises.
(i) Beneficial
Ownership.
The
Company shall not effect the exercise of this Warrant, and the Holder shall
not
have the right to exercise this Warrant, to the extent that after giving
effect
to such exercise, the Holder (together with affiliates) would beneficially
own
(directly or indirectly through
Warrant Shares or otherwise) in excess of 4.99% (the “Maximum
Percentage”)
of the
Ordinary Shares outstanding immediately after giving effect to such exercise.
For purposes of the foregoing sentence, the number of Ordinary Shares
beneficially owned (directly or indirectly through Warrant Shares or otherwise)
by the Holder and its affiliates shall include the number of Ordinary Shares
underlying the Warrant Shares issuable upon exercise of this Warrant with
respect to which the determination of such sentence is being made, but shall
exclude the number of Ordinary Shares underlying Warrant Shares which would
be
issuable upon (i) exercise of the remaining, unexercised portion of
this
Warrant beneficially owned by the Holder and its affiliates and
(ii) exercise or conversion of the unexercised or unconverted portion
of
any other securities of the Company beneficially owned by such Person and
its
affiliates (including, without limitation, any convertible notes or convertible
preferred stock 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, beneficial ownership shall
be
calculated in accordance with Section 13(d) of the Securities Exchange Act
of
1934, as amended. For purposes of this Warrant, in determining the number
of
outstanding Ordinary Shares, the Holder may rely on the number of outstanding
Ordinary Shares as reflected in (1) 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, (2) a more recent public announcement by the Company
or
(3) 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 the SPA Securities and the SPA Warrants, 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 SPA
Warrants.
(ii) Principal
Market Regulation.
The
Company shall not be obligated to issue any ADRs upon exercise of this Warrant,
and the Holder of this Warrant shall not have the right to receive upon
conversion of this Warrant, any ADRs, if the issuance of such ADRs would
exceed
that number of ADRs which the Company may issue upon exercise of this Warrant
(including, as applicable, any ADRs issued upon conversion of the SPA
Securities) 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) or the ASX (the “Exchange
Cap”),
except that such limitation shall not apply in the event that the Company
obtains the approval of its stockholders as required by the applicable rules
of
the Principal Market and the ASX listing rules for issuances of ADRs in excess
of such amount. Until such approval is obtained, no Buyer shall be issued,
in
the aggregate, upon exercise or conversion, as applicable, of any SPA Warrants
or SPA Securities, any ADRs in an amount greater than the product of the
Exchange Cap multiplied by a fraction, the numerator of which is the total
number of ADRs underlying the SPA Warrants issued to such Buyer pursuant
to the
Securities Purchase Agreement on the Subscription Date and the denominator
of
which is the aggregate number of ADRs underlying all the Warrants issued
to the
Buyers pursuant to the Securities Purchase Agreement on the Subscription
Date
(with respect to each Buyer, the “Exchange
Cap Allocation”).
In
the event that any Buyer shall sell or otherwise transfer any of such Buyer’s
SPA Warrants, the transferee shall be allocated a pro rata portion of such
Buyer’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
SPA
Warrants shall exercise all of such holder’s SPA Warrants 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 SPA Warrants on a pro
rata
basis in proportion to the ADRs underlying the SPA Warrants then held by
each
such holder.
2 ADJUSTMENT
OF EXERCISE PRICE.
(a) If
the
Company issues or gives the holders of Ordinary Shares in the Company the
right,
pro rata with existing holdings of Ordinary Shares, to subscribe for additional
securities (“Pro
Rata Issue”),
the
Exercise Price in respect of one underlying Ordinary Share shall be reduced
in
accordance with the following formula:
O'
= O -
E[P-(S+D)]/[N+1]
Where:
| |
O'
|
= |
the
new Exercise Price in respect of an underlying Ordinary
Share.
|
| |
|
|
|
| |
O
|
= |
the
original Exercise Price in respect of an underlying Ordinary
Share.
|
| |
|
|
|
| |
E
|
= |
the
number of underlying Ordinary Shares to be issued on exercise of
each
Warrant.
|
| |
|
|
|
| |
P
|
= |
the
average market price per Ordinary Share (weighted by reference
to volume)
of the Ordinary Shares during the 5 trading days ending before
the ex
rights date or ex entitlements date.
|
| |
|
|
|
| |
S
|
= |
the
subscription price for an Ordinary Share under the Pro Rata
Issue.
|
| |
|
|
|
| |
D
|
= |
the
dividend due but not paid on the existing Ordinary Shares (excluding
those
to be issued under the Pro Rata Issue).
|
| |
|
|
|
| |
N
|
= |
the
number of Ordinary Shares which must be held to receive one new
Share in
the Pro Rata Issue.
|
(b) Adjustment
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 the Warrant being exercised, and the Warrant is not exercised prior
to
the record date for the issue, the Warrant will, when exercised, entitle
the
Holder to the number of Warrant Shares that would ordinarily be received
under
Section 1, plus the number of bonus Ordinary Shares which would have been
issued
to the Holder if the Warrant had been exercised prior to the record
date.
(c) Adjustment
upon Subdivision or Combination of Ordinary Shares.
If the
Company at any time on or after the Subscription Date subdivides (by any
stock
split, stock 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 Exercise Price in effect immediately prior
to
such subdivision will be proportionately reduced and the number of Warrant
Shares (or Ordinary Shares underlying such Warrant Shares) will be
proportionately increased. If the Company at any time on or after the
Subscription Date combines (by combination, reverse stock split or otherwise)
one or more classes of its outstanding ADRs (or Ordinary Shares underlying
such
ADRs) into a smaller number of ADRs (or Ordinary Shares underlying such ADRs),
the Exercise Price in effect immediately prior to such combination will be
proportionately increased and the number of Warrant Shares (or Ordinary Shares
underlying such Warrant Shares) will be proportionately decreased. Any
adjustment under this Section 2(c) shall be subject to (and will be
correspondingly reorganized in a manner which is permissible under, or necessary
to comply with) the ASX Listing Rules or the rules of any Recognized Exchange
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) Other
Events.
If any
event occurs of the type contemplated by the provisions of this Section 2
but
not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other
rights
with equity features), then the Company’s Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of Warrant Shares
so
as to protect the rights of the Holder; provided that such adjustment is
made in
accordance with the ASX Listing Rules. No such adjustment pursuant to this
Section 2(d) will increase the Exercise Price or decrease the number of Warrant
Shares as otherwise determined pursuant to this Section 2, unless in accordance
with any ASX Listing Rule.
(e) Other
Capital Reorganizations.
Notwithstanding any other provision contained in this Warrant, the rights
of a
warrant holder will be changed to the extent necessary to comply with the
listing rules applying to a reorganization of capital at the time of
reorganization. Subject to the above, if there is a reorganization of the
capital of the Company, the number of Warrant Shares applicable to the Warrant
and/or Exercise Price of the Warrant will be reorganized as follows: (i) if
the Company returns capital on its Ordinary Shares, the number of Warrant
Shares
applicable to the Warrant will remain the same, and the Exercise Price of
each
Warrant will be reduced by the same amount as the amount returned in relation
to
each Ordinary Share; (ii) if the Company returns capital on its Ordinary
Shares by a cancellation of capital that is lost or not represented by available
assets, the number of Warrant Shares applicable to the Warrant and the Exercise
Price is unaltered; (iii) if the Company reduces its issued Ordinary
Shares
on a pro rata basis, the number of Warrant Shares applicable to the Warrant
will
be reduced in the same ratio as the Ordinary Shares and the Exercise Price
will
be amended in inverse proportion to that ratio; and (iv) if the Company
reorganizes its issued Ordinary Shares in any way not otherwise contemplated
by
the preceding paragraphs, the number of Warrant Shares applicable to the
Warrant
or the Exercise Price or both will be reorganized so that the Warrant Holder
will not receive a benefit that holders of Ordinary Shares do not receive.
The
Company shall give notice to Warrant Holders of any adjustments to the number
of
Warrant Shares applicable to the Warrant or the number of Ordinary Shares
which
are to be issued on exercise of a Warrant or to the Exercise Price. Before
a
Warrant is exercised, all adjustment calculations are to be carried out
including all fractions (in relation to each of the number of Warrant Shares
applicable to the Warrant, the number of Ordinary Shares and the Exercise
Price), but on exercise the number of Warrant Shares or Ordinary Shares issued
is rounded down to the next lower whole number and the Exercise Price rounded
up
to the next higher cent.
3 FUNDAMENTAL
TRANSACTIONS.
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 Warrant and the other Transaction Documents in accordance
with the provisions of this Section (4)(b) 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 Warrants in exchange for such Warrants
a
security of such Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant, including, without
limitation, an adjusted exercise price equal to the value for the Ordinary
Shares reflected by the terms of such Fundamental Transaction, and exercisable
for a corresponding number of shares of capital stock equivalent to the Ordinary
Shares underlying the Warrant Shares acquirable and receivable upon exercise
of
this Warrant (without regard to any limitations on the exercise of this Warrant)
prior to such Fundamental Transaction, and reasonably satisfactory to the
Required Holders and (ii) such 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 Warrant 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
Warrant 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
exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the Warrant Shares (or other securities, cash, assets
or
other property) purchasable upon the exercise of the Warrant prior to such
Fundamental Transaction, such shares of the publicly traded common stock
(or
their equivalent) of the Successor Entity (including its Parent Entity),
as
adjusted in accordance with the provisions of this Warrant. 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 Ordinary Shares
(directly or indirectly through Warrant Shares or otherwise) are entitled
to
receive securities or other assets with respect to or in exchange for 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 an exercise of this Warrant at
any
time after the consummation of the Fundamental Transaction but prior to the
Expiration Date, in lieu of the Warrant Shares purchasable upon the exercise
of
the Warrant prior to such Fundamental Transaction, such, securities or other,
assets which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had the Warrant been exercised immediately
prior
to such Fundamental Transaction. The provisions of this Section shall apply
similarly and equally to successive Fundamental Transactions and Corporate
Events and shall be applied without regard to any limitations on the exercise
of
this Warrant.
4 NONCIRCUMVENTION.
The
Company hereby covenants and agrees that the Company will not, by amendment
of
its Constitution or 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 Warrant, and will at all times
in
good faith carry out all the provisions of this Warrant and take all action
as
may be required to protect the rights of the Holder. Without limiting the
generality of the foregoing, the Company (i) shall not increase the
par
value of any Ordinary Shares underlying the Warrant Shares receivable upon
the
exercise of this Warrant above the Exercise 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 Warrant Shares upon the exercise of this Warrant.
5 WARRANT
HOLDER NOT DEEMED A STOCKHOLDER.
Except
as otherwise specifically provided herein, the Holder, solely in such Person’s
capacity as a holder of this Warrant, shall not be entitled to vote or receive
dividends or be deemed the holder of share capital of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the Holder, solely in such Person’s capacity as the Holder of this Warrant,
any of the rights of a shareholder of the Company or any right to vote, give
or
withhold consent to any corporate action (whether any reorganization, issue
of
stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the Holder of the Warrant
Shares
which such Person is then entitled to receive upon the due exercise of this
Warrant. In addition, nothing contained in this Warrant shall be construed
as
imposing any liabilities on the Holder to purchase any securities (upon exercise
of this Warrant or otherwise) or as a shareholder of the Company, whether
such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 6, the Company shall provide the Holder with
copies
of the same notices and other information given to the shareholders of the
Company generally, contemporaneously with the giving thereof to the
shareholders.
6 REISSUANCE
OF WARRANTS.
(a) Transfer
of Warrant.
If this
Warrant is to be transferred, the Holder shall surrender this Warrant to
the
Company, whereupon the Company will forthwith issue and deliver upon the
order
of the Holder a new Warrant (in accordance with Section 7(d)), registered
as the
Holder may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder and, if less then the total number
of
Warrant Shares then underlying this Warrant is being transferred, a new Warrant
(in accordance with Section 7(d)) to the Holder representing the right to
purchase the number of Warrant Shares not being transferred.
(b) Lost,
Stolen or Mutilated Warrant.
Upon
receipt by the Company of evidence reasonably satisfactory to the Company
of the
loss, theft, destruction or mutilation of this Warrant, 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 Warrant, the Company shall execute and deliver to the
Holder a new Warrant (in accordance with Section 7(d)) representing the right
to
purchase the Warrant Shares then underlying this Warrant.
(c) Exchangeable
for Multiple Warrants.
This
Warrant is exchangeable, upon the surrender hereof by the Holder at the
principal office of the Company, for a new Warrant or Warrants (in accordance
with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new
Warrant
will represent the right to purchase such portion of such Warrant Shares
as is
designated by the Holder at the time of such surrender; provided, however,
that
no Warrants for fractional Warrant Shares shall be given.
(d) Issuance
of New Warrants.
Whenever the Company is required to issue a new Warrant pursuant to the terms
of
this Warrant, such new Warrant (i) shall be of like tenor with this
Warrant, (ii) shall represent, as indicated on the face of such new
Warrant, the right to purchase the Warrant Shares then underlying this Warrant
(or in the case of a new Warrant being issued pursuant to Section 7(a) or
Section 7(c), the Warrant Shares designated by the Holder which, when added
to
the number of Warrant Shares underlying the other new Warrants issued in
connection with such issuance, does not exceed the number of Warrant Shares
then
underlying this Warrant), (iii) shall have an issuance date, as indicated
on the face of such new Warrant which is the same as the Issuance Date, and
(iv) shall have the same rights and conditions as this
Warrant.
7 NOTICES;
CURRENCY.
(a) Notices.
Whenever notice is required to be given under this Warrant, 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 Warrant, 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 Exercise
Price, setting forth in reasonable detail, and certifying, the calculation
of
such adjustment and (ii) at least fifteen 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 Ordinary Shares or Warrant Shares,
(B) with respect to any grants, issuances or sales of any Options,
Convertible Securities or rights to purchase stock, warrants, securities
or
other property to holders of Ordinary Shares or Warrant 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 Warrant are in
United States Dollars.
8 AMENDMENT
AND WAIVER.
The
provisions of this Warrant may be amended by the Company and the Company
may
take any action herein prohibited, or omit to perform any act herein required
to
be performed by it, only if the Company has obtained the written consent
of the
Required Holders and approval from the holders of Ordinary Shares at a
shareholders meeting held in accordance with the ASX Listing Rules and
Corporations
Act 2001
(Cth) or
if otherwise permitted by the ASX Listing Rules. Notwithstanding any provision
of this Warrant, , a term of this Warrant which has the effect of reducing
the
exercise price, increasing the period for exercise or increasing the number
of
Warrant Shares or Ordinary Shares received on exercise is prohibited if it
would
result in a breach of the ASX Listing Rules. Notwithstanding the above, no
change may increase the exercise price of any SPA Warrant or decrease the
number
of Warrant Shares or class of stock obtainable upon exercise of any SPA Warrant
without the written consent of the Holder, unless otherwise provided in the
ASX
Listing Rules. A change which has the effect of reducing the purchase price,
increasing the period for exercise or increasing the number of securities
received cannot be made. In addition, subject to the ASX Listing Rules, no
such
amendment shall be effective to the extent that it applies to less than all
of
the holders of the SPA Warrants then outstanding.
9 SEVERABILITY.
If any
provision of this Warrant or the application thereof becomes or is declared
by a
court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of the terms of this Warrant will continue in full force and
effect.
10 GOVERNING
LAW.
This
Warrant shall be governed by and construed and enforced in accordance with,
and
all questions concerning the construction, validity, interpretation and
performance of this Warrant 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.
11 CONSTRUCTION;
HEADINGS.
This
Warrant shall be deemed to be jointly drafted by the Company and all the
Buyers
and shall not be construed against any person as the drafter hereof. The
headings of this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this Warrant.
12 DISPUTE
RESOLUTION.
In the
case of a dispute as to the determination of the Exercise Price or the
calculation of the Warrant Shares, the Company shall submit the disputed
determinations or arithmetic calculations via facsimile within two (2) Business
Days of receipt of the Exercise Notice 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 three (3) 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 Exercise Price to an independent,
reputable investment bank selected by the Company and approved by the Holder
or
(b) the disputed arithmetic calculation of the Warrant Shares 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 ten 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.
13 REMEDIES,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
The
remedies provided in this Warrant shall be cumulative and in addition to
all
other remedies available under this Warrant and 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 right of the Holder
right
to pursue actual damages for any failure by the Company to comply with the
terms
of this Warrant. 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 of this Warrant
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.
14 TRANSFER.
This
Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company, except as may otherwise be required by Section 2(f)
of
the Securities Purchase Agreement.
15 CERTAIN
DEFINITIONS.
For
purposes of this Warrant, 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.
(b) “ASX”
means
the Australian Stock Exchange
(c) “Bloomberg”
means
Bloomberg Financial Markets.
(d) “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.
(e) “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 12. All such determinations to be appropriately adjusted for any
stock
dividend, stock split, stock combination or other similar transaction during
the
applicable calculation period.
(f) “Convertible
Securities”
means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for ADRs or Ordinary Shares.
(g) “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.
(h) “Depositary”
means
Citibank, N.A., acting in such capacity under the Deposit
Agreement.
(i) “Eligible
Market”
means
the Principal Market, The New York Stock Exchange, Inc., the American Stock
Exchange or The Nasdaq SmallCap Market.
(j) “Expiration
Date”
means
the date that is seventy-two months after the Issuance Date or, if such date
falls on a day other than a Business Day or on which trading does not take
place
on the Principal Market (a “Holiday”),
the
next date that is not a Holiday.
(k) “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 either 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 stock 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 stock purchase agreement or other business combination), or
(v) reorganize, recapitalize or reclassify its Ordinary
Shares.
(l) “Options”
means
any rights, warrants or options to subscribe for or purchase ADRs, Ordinary
Shares or Convertible Securities.
(m) “Ordinary
Shares”
means
(i) the Company’s ordinary shares of common stock, 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.
(n) “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 2(a)(i)
and
2(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.
(o) “Parent
Entity”
of a
Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock 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.
(p) “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.
(q) “Principal
Market”
means
the Nasdaq National Market.
(r) “Registration
Rights Agreement”
means
that certain registration rights agreement by and among the Company and the
Buyers.
(s) “Required
Holders”
means
the holders of the SPA Warrants representing at least a majority of Warrant
Shares underlying the SPA Warrants then outstanding.
(t) “SPA
Securities”
means
the Notes issued pursuant to the Securities Purchase Agreement.
(u) “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 stock or equivalent equity security is quoted or listed
for
trading on an Eligible Market, Successor Entity shall mean such Person’s Parent
Entity.
(v) “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).
(w) “Transaction
Documents”
has the
meaning set forth in the Securities Purchase Agreement.
[Signature
Page Follows]
IN
WITNESS WHEREOF,
the
Company has caused this Warrant to Purchase ADRs 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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