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
No.:
Number
of
ADRs:
Date
of
Issuance: September 26, 2006 ("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 undersigned 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 (including any Warrants to Purchase ADRs issued in
exchange, transfer or replacement hereof, the "Warrant"),
at
any time or times on or after the Issuance Date, but not after 11:59 p.m.,
New
York Time, on the Expiration Date (as defined below), up
to
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 16. 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 (the
"Securities
Purchase Agreement"),
dated
as of September 18, 2006 (the "Subscription
Date"),
by
and among the Company, Absolute Octane Fund (“AOF”),
Australian IT Investments Limited (“AIT”)
and
Absolute European Catalyst Fund (“Absolute
European”
and,
with AOF and AIT, the “Buyers”).
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 Issuance Date, 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").
Subject to Section 7(b), 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
(3) Business Days after any exercise and at its own expense, issue a new Warrant
(in accordance with Section 6(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 $0.04 per ADS to be issued, together with all applicable taxes
and expenses otherwise payable under the terms of the Deposit Agreement for
the
deposit of Ordinary Shares and issuance of ADSs (including, without limitation,
confirmation that any Australian stock transfer taxes in respect of such deposit
(if any) have been paid by the Company), and the Company shall otherwise comply
with and cause any other necessary party to comply with all the terms of the
Deposit Agreement. The Company shall pay any and all taxes (excluding any taxes
on the income of the Holder) which may be payable with respect to the issuance
and delivery of Warrant Shares upon exercise of this Warrant. Appropriate and
equitable adjustment to the terms and provisions of this Warrant shall be made
in the event of any change to the ratio of Warrant Shares to Ordinary Shares
represented thereby.
In
the
event that the Company’s Board of Directors should determine that the Company
shall transform itself (whether by re-incorporation in the United States or
otherwise) from a foreign private issuer (as defined under the Securities Act
of
1933, as amended) all references to ADRs or ADSs shall be deemed references
to
whatever shares are then issued by the re-domiciled Company and all other
provisions of this Agreement shall be equitably adjusted by the parties hereto
to the extent necessary or appropriate to reflect such new country of
incorporation.
(b) Exercise
Price.
For
purposes of this Warrant, "Exercise
Price"
means
US$ 2.00, 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
the 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, the Holder may elect to exercise
this
Warrant for Warrant Shares in the form of ADRs or (subject to Section 7(b))
in
the form of the Ordinary Shares underlying the ADRs. 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 13.
(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 (or Ordinary Shares) 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 (or Ordinary Shares),
if the issuance of such ADRs (or Ordinary Shares) would exceed that number
of
ADRs (or Ordinary Shares) which the Company may issue upon exercise of this
Warrant (including, as applicable, any ADRs (or Ordinary Shares) 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 (or
Ordinary Shares) 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 (or Ordinary Shares)
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 (or Ordinary
Shares) underlying the SPA Warrants issued to such Buyer pursuant to the
Securities Purchase Agreement and the denominator of which is the aggregate
number of ADRs (or Ordinary Shares) underlying all the Convertible Securities
issued to the Buyers pursuant to the Securities Purchase Agreement (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
(or Ordinary Shares) 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 (or Ordinary Shares) 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(or Ordinary Shares) 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
the
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 3 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 5, 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 6(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 6(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 6(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 6(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 6(a) or Section 6(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. TRADING
OF ORDINARY SHARES.
(a) Omnibus
Disclosure Document.
(i) The
Company shall, as soon as practicable after the Issuance Date, use its
reasonable efforts to obtain a modification of the Corporations Act from the
ASIC with respect to the use of the Initial Registration Statement (as defined
in the Registration Rights Agreement) as a disclosure document for the purposes
of Chapter 6D of the Corporations Act (the “Omnibus
Disclosure Document”)
and a
separate modification from the ASIC to the effect that, once the Omnibus
Disclosure Document and any “wrap” required by ASIC has been issued, all further
Warrant Shares which may be issued can be sold without the need for a Cleansing
Notice (as defined below) or Disclosure Document (as defined below). At the
Company’s request, the Holder shall reasonably assist the Company in obtaining
such modifications.
(ii) In
the
event that such modifications referred to in Section 7(a)(i) are granted,
the Company shall, as soon as practicable after the Effective Date (as defined
in the Registration Rights Agreement) of the Initial Registration Statement
but
in no event later than five (5) Business Days after the Effective Date of the
Initial Registration Statement, prepare and lodge with the ASIC the Omnibus
Disclosure Document covering the issuance of the full number of Warrant Shares
or other Ordinary Shares issuable in accordance with the terms of this Warrant
(each such issuance, a “Triggering
Issuance”)
such
that the issue of the Omnibus Disclosure Document will have the effect of
permitting the holders of Ordinary Shares issued in a Triggering Issuance to
make offers for sale of those Ordinary Shares in accordance with Australian
law
without the need for the issue by the Company of either a Cleansing Notice
or a
Disclosure Document.
(b) Cleansing
Notice and/or Disclosure Document.
(i) If
the
required ASIC modifications have not been obtained or an Omnibus Disclosure
Document has not been lodged with the ASIC, then no later than five (5) Business
Days after the issuance of any Warrant Shares hereunder, the Company shall
issue, if permitted by applicable law, a notice complying with section 708A(6)
of the Corporations Act (the “Cleansing
Notice”)
and
shall notify the Holder that it has issued such Cleansing Notice.
(ii) Notwithstanding
Section 7(b)(i), if the issue of any Cleansing Notice would require the Company
to disclose information in accordance with Section 708A(6)(e) of the
Corporations Act, the
Company may delay the issue of such Cleansing Notice (and the issuance of any
Warrant Shares corresponding to such Cleansing Notice) for a period (a
“Delay
Period”)
not
exceeding fifteen (15) consecutive days after receipt by the Company of the
Exercise Notice for such Warrant Shares, provided that during any 365 day period
such Delay Periods shall not exceed an aggregate of forty-five (45)
days.
(iii) If
the
Company is required to issue a Cleansing Notice pursuant to
Section 7(b)(ii) but either (x) the Company is not permitted to issue
such Cleansing Notice under applicable law or (y) the issuance of such
Cleansing Notice would not result in the Warrant Shares covered by such
Cleansing Notice being eligible to be traded on the ASX, the Company shall
as
soon as practicable, but in no event later than twenty (20) Business
Days after
receipt by the Company of the Exercise Notice for such Warrant Shares, lodge
with the ASIC a disclosure document for the purposes of Chapter 6D of the
Corporations Act (a “Disclosure
Document”)
covering the Warrant Shares that would have been covered by such Cleansing
Notice. Notwithstanding the foregoing sentence, the Company (1) shall not
be required to issue any such Disclosure Document or any Warrant Shares
corresponding to such Disclosure Document during any Delay Period, and (2)
shall
not be required to lodge more than one Disclosure Document during any ninety
(90) day period in connection with any issued and outstanding Convertible
Securities of the Company.
(iv) Subject
to the provisions of Section 7(b)(v), the Company will (1) within two (2)
Business Days following the issuance of any Warrant Shares, apply to the ASX
for
unconditional admission to trading for such shares, and (2) take all
reasonable measures to ensure that, from the time of issue of any Warrant
Shares, such shares are eligible to be traded on the ASX.
(v) In
the
event that the Company elects to delay the issuance of any Warrant Shares
pursuant to Sections 7(b)(ii) or 7(b)(iii) for any Delay Period, the Company
shall notify the Holder of such Delay Period and the length of the applicable
Delay Period. The Holder may, no later than two (2) Business Days after the
date
of the notification from the Company, notify the Company in writing of the
Holder’s consent to such Delay, whereupon the Company shall issue the applicable
Ordinary Shares in conjunction with the Cleansing Notice or Disclosure Document,
as the case may be, at the conclusion of the Delay Period. In the absence of
any
such consent by the Holder, the Company shall issue such Ordinary Shares to
such
Holder in accordance with Section 1, it being understood that any Ordinary
Shares thus issued will not be covered by a Cleansing Notice or Disclosure
Document and consequently may not, for a period of twelve (12) months from
the
date of their issuance, be sold or transferred, or have any interest in, or
option over, them granted, issued or transferred.
(vi) Anything
to the contrary notwithstanding, but without prejudice to any rights of the
Holder accrued prior to such time, all obligations of the Company under this
Section 7 shall terminate, and this Section 7 shall have no further force or
effect, on the date that the Ordinary Shares cease to be listed for trading
on
the ASX in the event that the Company is redomiciled (whether through merger
or
otherwise) into the United States or a successor to the Company replaces the
Company as a foreign private issuer under United States securities laws and,
in
either case, the securities of such successor are listed on an Eligible Market.
8. 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.
9. 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 the
Corporations Act 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.
16. 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) “ASIC”
means
the Australian Securities and Investment Commission.
(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) "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 13. All such determinations to be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar transaction during
the
applicable calculation period.
(g) "Convertible
Securities"
means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for ADRs or Ordinary Shares.
(h) “Corporations
Act”
means
the Australian Corporations Act 2001 (Cwth).
(i) "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.
(j) "Depositary"
means
Citibank, N.A., acting in such capacity under the Deposit
Agreement.
(k) "Eligible
Market"
means
the Principal Market, The New York Stock Exchange, Inc., the American Stock
Exchange or The Nasdaq Capital Market.
(l) "Expiration
Date"
means
the date that is sixty 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.
(m) "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.
(n) "Options"
means
any rights, warrants or options to subscribe for or purchase ADRs, Ordinary
Shares or Convertible Securities.
(o) "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.
(p) "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.
(q) "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.
(r) "Principal
Market"
means
the Nasdaq Global Market.
(s) "Registration
Rights Agreement"
means
that certain registration rights agreement, dated the date hereof, by and among
the Company and the Buyers.
(t) "Required
Holders"
means
the holders of the SPA Warrants representing at least a majority of Warrant
Shares underlying the SPA Warrants then outstanding.
(u) "SPA
Securities"
means
the Notes issued pursuant to the Securities Purchase Agreement.
(v) "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.
(w) "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).
(x) "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
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Attested
by Holder:
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EXHIBIT
A
EXERCISE
NOTICE
TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
TO PURCHASE ADRS
PSIVIDA
LIMITED
The
undersigned holder hereby exercises the right to purchase _________________
of
the ADRs, each of which representing ten (10) shares of the ordinary shares
of
common stock, no par value per share ("Ordinary
Shares")
of
pSivida Limited, an Australian corporation (the "Company"),
evidenced by the attached Warrant to Purchase ADRs (the "Warrant").
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.
1. Payment
of Exercise Price.
The
undersigned holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.
2. Delivery
of ADRs.
The
Company shall deliver to the holder __________ ADRs in accordance with the
terms
of the Warrant.
Date:
_______________ __, ______
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ACKNOWLEDGMENT
The
Company hereby acknowledges this Exercise Notice and hereby directs Citibank,
N.A. to issue the above indicated number of Ordinary Shares in accordance with
the Transfer Agent Instructions dated September __, 2006 from the Company
and acknowledged and agreed to by Citibank, N.A.
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PSIVIDA
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