SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
6-K
REPORT
OF
FOREIGN ISSUER
Pursuant
to Rule 13a-16 or 15d-16 of
the
Securities Exchange Act of 1934
For
the month of September 2006
Commission
File Number 000-51122
PSIVIDA
LIMITED
(Translation
of registrant’s name into English)
Level
12
BGC Centre
28
The
Esplanade
Perth
WA
6000
(Address
of principal executive offices)
(Indicate
by check mark whether the registrant files or will file annual reports under
cover Form 20-F or Form 40-F).
Form
20-F
ý Form
40-F o
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(1):
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(7):
Indicate
by check mark whether the registrant by furnishing the information contained
in
this Form is also thereby furnishing the information to the Commission pursuant
to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes
o No
ý
If
“Yes”
is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-___.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant,
pSivida Limited, has duly caused this report to be signed on its behalf by
the
undersigned, thereunto duly authorized.
Date:
September 15, 2006
pSivida
Limited
By:
/s/
Michael J. Soja
Michael
J. Soja
Vice
President, Finance and Chief Financial Officer
EXHIBIT
INDEX
|
Supplemental
Disclosure of pSivida Limited Related To Amendment Agreement, dated
as of
July 28, 2006
|
||
|
Amended
and Restated Convertible Note
|
||
|
Guaranty
|
||
|
Collateral
Assignment
|
||
|
Acknowledgment
and Agreement of Licensee Regarding Collateral
Assignment
|
||
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Amended
and Restated Registration Rights Agreement
|
||
|
Press
Release of pSivida Limited re: Closing of the Transactions Contemplated
by
the Amendment Agreement
|
SUPPLEMENTAL
DISCLOSURE OF PSIVIDA LIMITED, DATED SEPTEMBER 15, 2006, RELATED TO THE
AMENDMENT AGREEMENT, DATED AS OF JULY 28, 2006.
THIS
SUPPLEMENTAL DISCLOSURE SHALL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES DESCRIBED HEREIN IN ANY JURISDICTION WHERE
THE
OFFER OR SALE OF THESE SECURITIES IS NOT PERMITTED.
THE
SECURITIES DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES ABSENT REGISTRATION OR AN APPLICABLE EXEMPTION FROM REGISTRATION
REQUIREMENTS.
IN
ACCORDANCE WITH GENERAL INSTRUCTION B OF FORM 6-K, THE INFORMATION SET FORTH
IN
THIS SUPPLEMENTAL DISCLOSURE SHALL NOT BE DEEMED TO BE “FILED” FOR PURPOSES OF
SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE “EXCHANGE
ACT”), OR OTHERWISE SUBJECT TO THE LIABILITIES OF THAT SECTION, NOR SHALL SUCH
INFORMATION BE DEEMED INCORPORATED BY REFERENCE IN ANY FILING UNDER THE
SECURITIES ACT OR THE EXCHANGE ACT, EXCEPT AS SHALL BE EXPRESSLY SET FORTH
BY
SPECIFIC REFERENCE IN SUCH A FILING. THE INFORMATION SET FORTH IN THIS
SUPPLEMENTAL DISCLOSURE SHALL NOT BE DEEMED AN ADMISSION AS TO THE MATERIALITY
OF ANY INFORMATION IN THIS SUPPLEMENTAL DISCLOSURE.
The
following is a summary of the terms of the transactions contemplated by the
Amendment Agreement. This summary is not intended to be complete and is
qualified in its entirety by reference to the attachments to this Supplemental
Disclosure.
1. Amendment
Agreement
pSivida
Limited (“pSivida”) and an institutional investor (the “Investor”) entered into
an Amendment Agreement dated as of July 28, 2006, providing for the exchange
of
the Subordinated Convertible Note, dated November 16, 2005, purchased in
connection with the Securities Purchase Agreement, dated October 5, 2005, by
and
between the same parties, for an Amended and Restated Subordinated Convertible
Note and warrants.
Under
the
Amendment Agreement, pSivida will exchange with the Investor its original
Subordinated Convertible Note for an Amended and Restated Convertible Note
in
the amount of $12.5 million that is secured by certain royalty payments and
a
warrant exercisable for up to 5,700,000 American Depositary Shares (ADSs) of
pSivida and will pay the Investor $3.5 million in partial satisfaction and
redemption of the original Subordinated Convertible Note, any accrued and unpaid
interest on the Subordinated Convertible Note, and any penalties incurred as
a
result of the delay in effectiveness of the registration statement filed in
connection with the Securities Purchase Agreement.
The
Amendment Agreement was furnished on pSivida’s Form 6-K filed on July 31,
2006. The Amendment Agreement contains representations and warranties that
pSivida and the Investor made to each other as of the date of the Amendment
Agreement or other specific dates, and such representations and warranties
should not be relied upon by any other person.
2. Amended
and Restated Convertible Note
The
following is a summary of the terms of the note:
| · |
The
note has a face value of
US$12,500,000.
|
| · |
The
note may be converted by the holder into ADSs at any time prior to
the
third anniversary of the date of the original issuance of the note.
The
number of shares to be issued upon conversion of the note is to be
calculated by dividing the face value of the note to be converted
(and any
accrued but unpaid interest on the note) by the conversion price,
as
adjusted, of the ADSs.
|
| · |
The
conversion price is US$2.00 per ADS and may be adjusted under certain
circumstances, including, among others, in the event pSivida issues
securities at a lower price than the price at which the note may
be
converted and based on the market price of pSivida’s ADSs on April 30,
2007.
|
| · |
The
note matures on November 16, 2008 and bears interest at the rate
of 8% per
annum.
|
| · |
Under
certain circumstances, pSivida may make interest payments in the
form of
ADSs.
|
| · |
The
note contains certain events of default which allow the Investor
to
accelerate the maturity of the note and permit the Investor to force
payment of the note in the event of a change of control of
pSivida.
|
| · |
pSivida
has the right, in certain specified circumstances, to force the Investor
to convert the note into ADSs, including if the ADSs are trading
at 200%
of the conversion price during a specified
period.
|
| · |
The
Investor has the right to require pSivida to prepay up to 50% of
the
original principal amount (i.e., $6,250,000) on July 31, 2007 and
January 31, 2008.
|
| · |
pSivida
may redeem the note, at its option, in whole or in part at any time
at a
price equal to 108% of the outstanding principal to be redeemed.
In
connection with any such redemption, pSivida will issue warrants
exercisable for a number of shares equal to 30% of such redemption
amount
divided by the then applicable conversion
price.
|
| · |
There
is a limit of 4.99% in respect of the Investor and its affiliates’
beneficial ownership in pSivida, which may prevent it from converting
part
of the note (this limit may be increased or decreased by the Investor
upon
written notice to pSivida).
|
| · |
The
note contains various negative covenants, including limitations on
the
incurrence of debt and liens, and the maintenance of certain cash
levels.
|
The
Form of Amended and Restated Convertible Note was furnished on pSivida’s
Form 6-K filed on July 31, 2006. The final version of the Amended and
Restated Convertible Note is furnished on the Form 6-K to which this
Supplemental Disclosure is also an Exhibit.
3. Guaranty,
Collateral Assignment and Acknowledgment of Collateral
Assignment
The
following is a summary of the security interest granted by pSivida to the
Investor:
| · |
The
indebtedness represented by the note will be secured by a first priority
lien on the royalty payments received by pSivida Inc., pSivida’s
wholly-owned U.S. subsidiary, from Bausch & Lomb Incorporated pursuant
to a license agreement.
|
| · |
In
order to effect the security interest, pSivida Inc. entered into
the
Collateral Assignment assigning its rights under the license agreement
to
the Investor. pSivida Inc. also entered into a Guaranty obligating
it to
guarantee the obligations of pSivida under the
Note.
|
| · |
Bausch
& Lomb Incorporated consented to the assignment of rights pursuant
to
the Collateral Assignment.
|
| · |
The
security interest shall be released upon pSivida’s satisfaction of the
note.
|
-2-
The
Guaranty, Collateral Assignment and Acknowledgment and Agreement of Licensee
Regarding Collateral Assignment are furnished on the Form 6 K to which this
Supplemental Disclosure is also an Exhibit to
provide investors with information regarding their terms.
These agreements contain representations and warranties made between pSivida,
pSivida Inc., the Investor and Bausch & Lomb Incorporated as of the date of
the such documents or other specific dates, and such representations and
warranties should not be relied upon by any other person.
4. Warrants:
The
following is a summary of the terms of the warrants:
| · |
The
warrants constitute options to acquire up to 5,700,000 ADSs at any
time on
or before the fifth anniversary of the issuance of the
warrant.
|
| · |
The
per ADS exercise price under the warrant is US$1.80 and may be adjusted
under certain circumstances, including, among others, in the event
pSivida
issues securities at a lower price than the price at which the warrant
may
be exercised or pSivida makes a pro rata issuance to shareholders.
|
| · |
There
is a limit of 4.99% in respect of the Investor and its affiliates’
beneficial ownership in pSivida, which may prevent it from exercising
part
of the warrant (this limit may be increased or decreased by the Investor
upon written notice to pSivida).
|
| · |
If
there is a fundamental transaction (such as a transaction which involves
a
change in control of pSivida or a transfer of substantially all of
its
assets), pSivida will use its best endeavors to procure that the
successor
entity assumes all of the obligations of pSivida under the
warrant.
|
| · |
Additional
warrants will be issued in the event that pSivida redeems all or
a portion
of the note in connection with an optional redemption or a sale of
collateral. Such warrants will have an exercise price based on the
average
market price prior to their
issuance.
|
The
Form of Series A Warrant and Form of Series B Warrant were furnished on
pSivida’s Form 6-K filed on July 31, 2006.
5. Amended
and Restated Registration Rights Agreement:
The
following is a summary of the amendments to the registration rights
agreement:
| · |
The
effectiveness deadline for registering shares issuable pursuant
to the
note and warrants issued in November 2005 will be extended to October
15,
2006. If pSivida's registration statement is not effective by that
date,
pSivida will pay additional penalties of $765,000 and, from October
15,
2006 until the date on which the effectiveness failure is cured,
2.0% of
the outstanding principal amount of the note per thirty day
period.
|
| · |
The
effectiveness deadline for registering shares issuable pursuant
to the
warrants issued on September 14, 2006 will be December 31, 2006.
If
pSivida's registration statement registering those shares is not
effective
by that date, pSivida must pay penalties of 7.5% of the outstanding
principal amount of the note and, from December 31, 2006 until
the date on
which the effectiveness failure is cured, 1.0% of the outstanding
principal amount of the note per thirty day
period.
|
| · |
Subsequent
registration of shares issuable pursuant to the warrants is required
if
certain events occur with respect to the trading volume or weighted
average trading price of pSivida’s ordinary shares on the Australian Stock
Exchange.
|
The
Form of Amended and Restated Registration Rights Agreement was furnished on
pSivida’s Form 6-K filed on July 31, 2006. The final version of the Amended
and Restated Registration Rights Agreement is furnished on the Form 6-K to
which this Supplemental Disclosure is also an Exhibit.
-3-
EXHIBIT
99.2
AMENDED
AND RESTATED CONVERTIBLE NOTE
NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR (B) AN OPINION OF COUNSEL,
IN A
FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) IF SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT,
SUCH DOCUMENTS, OPINIONS AND CERTIFICATES AS THE COMPANY MAY REASONABLY REQUIRE.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
THE
SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF
THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 19(a) HEREOF. THE PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.
pSivida
Limited
Amended
and Restated Convertible Note
|
Issuance
Date: November 16, 2005
|
Principal:
U.S. $12,500,000
|
FOR
VALUE RECEIVED,
pSivida
Limited, an Australian corporation (the "Company"),
hereby promises to pay to the order of CASTLERIGG MASTER INVESTMENTS LTD. or
registered assigns ("Holder")
the
amount set out above as the Principal (as reduced pursuant to the terms hereof
pursuant to redemption, conversion or otherwise, the "Principal")
when
due, whether upon the Maturity Date (as defined below), acceleration, redemption
or otherwise (in each case in accordance with the terms hereof) and to pay
interest ("Interest")
on any
outstanding Principal at the Interest Rate, from the date set out above as
the
Issuance Date (the "Issuance Date")
until
the same becomes due and payable, whether upon an Interest Date (as defined
below), the Maturity Date, acceleration, conversion, redemption or otherwise
(in
each case in accordance with the terms hereof). This Subordinated Convertible
Note (including all Convertible Notes issued in exchange, transfer or
replacement hereof, this "Note")
amends, supplements, modifies and completely restates and supersedes the
Subordinated Convertible Note, dated as of November 16, 2005 (the "Existing
Note"),
issued by the Company to the order of the Holder in the principal amount of
$15,000,000, but shall not,
-1-
except
as
specifically amended hereby or as set forth in the Amendment Agreement (as
defined below), constitute a release, satisfaction or novation of any of the
obligations under the Existing Note or any other Transaction Document (as
defined in the Securities Purchase Agreement, defined below). This Note is
one
of an issue of Subordinated Convertible Notes issued pursuant to the Amendment
Agreement (the "Amendment
Agreement")
dated
as of July 28, 2006 (collectively, the "Notes"
and
such other Convertible Notes, the "Other Notes"
and the
holders of the Other Notes, the "Other
Holders")).
Certain capitalized terms used herein are defined in Section 29.
(1) MATURITY.
On the
Maturity Date, the Holder shall surrender this Note to the Company and the
Company shall pay to the Holder an amount in cash representing all outstanding
Principal, accrued and unpaid Interest and accrued and unpaid Late Charges,
if
any. The "Maturity Date"
shall
be the date which is three (3) years after the Issuance Date, as may be extended
at the option of the Holder (i) in the event that, and for so long as, an Event
of Default (as defined in Section 4(a)) pursuant to clause (i), (ii) or (iii)
of
Section 4(a) shall have occurred and be continuing or any event shall have
occurred and be continuing which with the passage of time and the failure to
cure would result in an Event of Default pursuant to clause (i), (ii) or (iii)
of Section 4(a) and (ii) through the date that is ten (10) Business Days after
the consummation of a Change of Control in the event that a Change of Control
is
publicly announced or a Change of Control Notice (as defined in Section 5)
is
delivered prior to the Maturity Date.
(2) INTEREST;
INTEREST RATE. Interest on this Note shall commence accruing on the Issuance
Date and shall be computed on the basis of a 365-day year and actual days
elapsed and shall be payable in arrears for each Calendar Quarter on the first
(1st) day of the succeeding Calendar Quarter during the period beginning on
the
Issuance Date and ending on, and including, the Maturity Date (each, an
"Interest Date")
with
the first Interest Date being January 1, 2006. Interest shall be payable on
each
Interest Date, to the record holder of this Note on the applicable Interest
Date, in ADRs ("Interest
Shares"),
or,
at the option of the Company, in cash ("Cash
Interest"),
or a
combination thereof. On or prior to the fifth (5th)
Trading
Day prior to each Interest Date (each, an "Interest
Notice Due Date"),
the
Company shall deliver written notice (each, an "Interest
Election Notice")
to the
Holder confirming that the Equity Conditions have been satisfied as of such
Interest Notice Due Date and specifying the amount of Interest that shall be
paid as Cash Interest and the amount of Interest that shall be paid in Interest
Shares. Notwithstanding the foregoing, unless otherwise waived or consented
to
in writing by the Holder, the Company will not be permitted to issue on any
Interest Date a number of Interest Shares (and must pay any excess in Cash
Interest) which exceeds the Maximum Interest Share Amount. Interest to be paid
on an Interest Date in Interest Shares shall be paid in a number of fully paid
and nonassessable (rounded to the nearest whole share in accordance with Section
3(a)) ADRs equal to the quotient of (a) the amount of Interest payable on such
Interest Date less any Cash Interest paid and (b) the Interest Conversion Price
in effect on the applicable Interest Date. If any Interest Shares are to be
paid
on an Interest Date, then the Company shall (X) provided that the Company's
transfer agent (the "Transfer
Agent")
is
participating in the Depository Trust Company ("DTC")
Fast
Automated Securities Transfer Program, credit such aggregate number of Interest
Shares to which the Holder shall be entitled to the Holder's or its designee's
balance account with DTC through its Deposit Withdrawal Agent Commission system,
or (Y) if the foregoing shall not apply, issue and deliver on the applicable
Interest Date, to the address set forth in the register maintained by the
Company for such purpose pursuant to
-2-
the
Securities Purchase Agreement or to such address as specified by the Holder
in
writing to the Company at least two (2) Business Days prior to the applicable
Interest Date, a certificate, registered in the name of the Holder or its
designee, for the number of Interest Shares to which the Holder shall be
entitled. In addition, upon payment of any Interest Shares, the Company shall
deposit the corresponding number of Ordinary Shares representing the number
of
American Depositary Shares ("ADSs")
underlying the ADRs and pay by wire transfer to the Depositary's account the
ADS
issuance fee of $0.04 per ADS to be issued, together with all applicable taxes
and expenses otherwise payable under the terms of the Deposit Agreement for
the
deposit of Ordinary Shares and issuance of ADSs (including, without limitation,
confirmation that any Australian stock transfer taxes in respect of such deposit
(if any) have been paid by the Company), and the Company shall otherwise comply
with and cause any other necessary party to comply with all the terms of the
Deposit Agreement. Notwithstanding the foregoing, the Company shall not be
entitled to pay Interest in Interest Shares and shall be required to pay such
Interest in cash as Cash Interest on the applicable Interest Date if, unless
consented to in writing by the Holder, during the period commencing on the
applicable Interest Notice Due Date through the applicable Interest Date the
Equity Conditions have not been satisfied. Prior to the payment of Interest
on
an Interest Date, Interest on this Note shall accrue at the Interest Rate and
be
payable by way of inclusion of the Interest in the Conversion Amount in
accordance with Section 3(b)(i). Upon the occurrence and during the continuance
of an Event of Default, the Interest Rate shall be increased to ten percent
(10%). In the event that such Event of Default is subsequently cured, the
adjustment referred to in the preceding sentence shall cease to be effective
as
of the date of such cure; provided that the Interest as calculated and unpaid
at
such increased rate during the continuance of such Event of Default shall
continue to apply to the extent relating to the days after the occurrence of
such Event of Default through and including the date of cure of such Event
of
Default. The Company's obligation to pay any taxes in respect of the issuance
and delivery of Interest Shares, or to pay to the Holder any additional amounts
associated with such taxes, shall be determined under Section 4(o) of the
Securities Purchase Agreement.
(3) CONVERSION
OF NOTES.
This
Note shall be convertible into the Company's ADRs, on the terms and conditions
set forth in this Section 3.
(a) Conversion
Right.
Subject
to the provisions of Section 3(d), at any time or times on or after the Issuance
Date, the Holder shall be entitled to convert any portion of the outstanding
and
unpaid Conversion Amount (as defined below) into fully paid and nonassessable
ADRs in accordance with Section 3(c), at the Conversion Rate (as defined below).
The Company shall not issue any fraction of an ADR upon any conversion. If
any
conversion would result in the issuance of a fraction of an ADR, the Company
shall round such fraction of an ADR up to the nearest whole share. The Company's
obligation to pay any taxes in respect of the issuance and delivery of ADRs
or
Ordinary Shares, or to pay to the Holder any additional amounts associated
with
such taxes, shall be determined under Section 4(o) of the Securities Purchase
Agreement.
In
the
event that the Company's Board of Directors should determine that the Company
shall transform itself (whether by re-incorporation in the United States or
otherwise) from a foreign private issuer (as defined under the Securities Act
of
1933, as amended), all references to ADRs or ADSs shall be deemed references
to
whatever shares are then issued by the re-domiciled Company and all other
provisions of this Agreement shall be
-3-
equitably
adjusted by the parties hereto to the extent necessary or appropriate to reflect
such new country of incorporation.
(b) Conversion
Rate.
The
number of ADRs issuable upon conversion of any Conversion Amount pursuant to
Section 3(a) shall be determined by dividing (x) such Conversion Amount by
(y)
the Conversion Price (the "Conversion
Rate").
(i) "Conversion
Amount"
means
the sum of (A) the portion of the Principal to be converted, redeemed or
otherwise with respect to which this (or any other) determination is being
made,
(B) accrued and unpaid Interest with respect to such Principal and (C) accrued
and unpaid Late Charges with respect to such Principal and
Interest.
(ii) "Conversion
Price"
means,
as of any Conversion Date (as defined below) or other date of determination,
$2.00 per ADR (which is equivalent to $0.20 per Ordinary Share), subject to
adjustment as provided herein.
(c) Mechanics
of Conversion.
(i) Optional
Conversion.
To
convert any Conversion Amount into ADRs on any date (a "Conversion
Date"),
the
Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt
on or
prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice
of conversion in the form attached hereto as Exhibit
I
(the
"Conversion
Notice")
to the
Company and (B) if required by Section 3(c)(iii), surrender this Note to a
common carrier for delivery to the Company as soon as practicable on or
following such date (or an indemnification undertaking with respect to this
Note
in the case of its loss, theft or destruction). On or before the second
(2nd)
Business Day following the date of receipt of a Conversion Notice, the Company
shall transmit by facsimile a confirmation of receipt of such Conversion Notice
to the Holder and the Transfer Agent. On or before the fifth (5th)
Business Day following the date of receipt of a Conversion Notice (the
"Share
Delivery Date"),
the
Company shall (X) provided that the Transfer Agent is participating in the
DTC
Fast Automated Securities Transfer Program, credit such aggregate number of
ADRs
to which the Holder shall be entitled to the Holder's or its designee's balance
account with DTC through its Deposit Withdrawal Agent Commission system or
(Y)
if the foregoing shall not apply, issue and deliver to the address as specified
in the Conversion Notice, a certificate, registered in the name of the Holder
or
its designee, for the number of ADRs to which the Holder shall be entitled.
If
this Note is physically surrendered for conversion as required by Section
3(c)(iii) and the outstanding Principal of this Note is greater than the
Principal portion of the Conversion Amount being converted, then the Company
shall as soon as practicable and in no event later than three (3) Business
Days
after receipt of this Note and at its own expense, issue and deliver to the
holder a new Note (in accordance with Section 19(d)) representing the
outstanding Principal not converted. The Person or Persons entitled to receive
the ADRs issuable upon a conversion of this Note shall be treated for all
purposes as the record holder or holders of such ADRs on the Conversion Date.
Upon conversion of this Note, the Company shall deposit the corresponding number
of Ordinary Shares representing the number of ADSs underlying the ADRs and
pay
by wire transfer to the Depositary's account the ADS issuance fee of $0.04
per
ADS to be issued, together with all applicable taxes and expenses otherwise
payable under the terms of the Deposit Agreement for the deposit of Ordinary
Shares and issuance of ADSs (including, without
-4-
limitation,
confirmation that any Australian stock transfer taxes in respect of such deposit
(if any) have been paid by the Company), and the Company shall otherwise comply
with and cause any other necessary party to comply with all the terms of the
Deposit Agreement.
(ii) Company's
Failure to Timely Convert.
If the
Company shall fail to issue a certificate to the Holder or credit the Holder's
balance account with DTC for the number of ADRs to which the Holder is entitled
upon conversion of any Conversion Amount on or prior to the date which is five
(5) Business Days after the Conversion Date (a "Conversion
Failure"),
then
(A) the Company shall pay damages in cash to the Holder for each date of such
Conversion Failure in an amount equal to an interest rate equal to 10% per
annum
applied to the product of (I) the sum of the number of ADRs not issued to the
Holder on or prior to the Share Delivery Date and to which the Holder is
entitled, and (II) the Closing Sale Price of the ADRs on the Share Delivery
Date
and (B) the Holder, upon written notice to the Company, may void its Conversion
Notice with respect to, and retain or have returned, as the case may be, any
portion of this Note that has not been converted pursuant to such Conversion
Notice; provided
that the
voiding of a Conversion Notice shall not affect the Company's obligations to
make any payments which have accrued prior to the date of such notice pursuant
to this Section 3(c)(ii) or otherwise. In addition to the foregoing, if within
three (3) Trading Days after the Company's receipt of the facsimile copy of
a
Conversion Notice the Company shall fail to issue and deliver a certificate
to
the Holder or credit the Holder's balance account with DTC for the number of
ADRs to which the Holder is entitled upon such holder's conversion of any
Conversion Amount, and if on or after such Trading Day the Holder purchases
(in
an open market transaction or otherwise) ADRs to deliver in satisfaction of
a
sale by the Holder of ADRs issuable upon such conversion that the Holder
anticipated receiving from the Company (a "Buy-In"),
then
the Company shall, within three (3) Business Days after the Holder's request
and
in the Holder's discretion, either (i) pay cash to the Holder in an amount
equal
to the Holder's total purchase price (including brokerage commissions, if any)
for the ADRs so purchased (the "Buy-In
Price"),
at
which point the Company's obligation to deliver such certificate (and to issue
such ADRs) shall be deemed to have been satisfied and shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such ADRs and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of ADRs, times (B) the Closing Bid Price on the Conversion
Date.
(iii) Book-Entry.
Notwithstanding anything to the contrary set forth herein, upon conversion
of
any portion of this Note in accordance with the terms hereof, the Holder shall
not be required to physically surrender this Note to the Company unless (A)
the
full Conversion Amount represented by this Note is being converted or (B) the
Holder has provided the Company with prior written notice (which notice may
be
included in a Conversion Notice) requesting reissuance of this Note upon
physical surrender of this Note. The Holder and the Company shall maintain
records showing the Principal, Interest and Late Charges converted and the
dates
of such conversions or shall use such other method, reasonably satisfactory
to
the Holder and the Company, so as not to require physical surrender of this
Note
upon conversion.
(iv) Pro
Rata Conversion; Disputes.
In the
event that the Company receives a Conversion Notice from more than one holder
of
Notes for the same Conversion Date and the Company can convert some, but not
all, of such portions of the Notes submitted for conversion, the Company,
subject to Section 3(d), shall convert from each holder
-5-
of
Notes
electing to have Notes converted on such date a pro rata amount of such holder's
portion of its Notes submitted for conversion based on the principal amount
of
Notes submitted for conversion on such date by such holder relative to the
aggregate principal amount of all Notes submitted for conversion on such date.
In the event of a dispute as to the number of ADRs issuable to the Holder in
connection with a conversion of this Note, the Company shall issue to the Holder
the number of ADRs not in dispute and resolve such dispute in accordance with
Section 24.
(d) Limitations
on Conversions
(i) Beneficial
Ownership.
The
Company shall not effect any conversion of this Note, and the Holder of this
Note shall not have the right to convert any portion of this Note pursuant
to
Section 3(a), to the extent that after giving effect to such conversion, the
Holder (together with the Holder's affiliates) would beneficially own (directly
or indirectly) in excess of 4.99% (the "Maximum
Percentage")
of the
number of Ordinary Shares outstanding immediately after giving effect to such
conversion. For purposes of the foregoing sentence, the number of Ordinary
Shares beneficially owned (directly or indirectly) by the Holder and its
affiliates shall include the number of Ordinary Shares represented by the ADRs
issuable upon conversion of this Note with respect to which the determination
of
such sentence is being made, but shall exclude the number of Ordinary Shares
represented by the ADRs or otherwise which would be issuable upon (A) conversion
of the remaining, nonconverted portion of this Note beneficially owned by the
Holder or any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the Company
beneficially owned by the Holder or any of its affiliates (including, without
limitation, any Other Notes or warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein. Except as set forth
in
the preceding sentence, for purposes of this Section 3(d), beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended. For purposes of this Section 3(d), in determining
the
number of outstanding Ordinary Shares, the Holder may rely on the number of
outstanding Ordinary Shares as reflected in (x) the Company's most recent Form
20-F, Form 6-K or other public filing with the Securities and Exchange
Commission, as the case may be (y) a more recent public announcement by the
Company or (z) any other notice by the Company or the Transfer Agent setting
forth the number of Ordinary Shares outstanding. For any reason at any time,
upon the written or oral request of the Holder, the Company shall within two
(2)
Business Days confirm orally and in writing to the Holder the number of Ordinary
Shares then outstanding. In any case, the number of outstanding Ordinary Shares
shall be determined after giving effect to the conversion or exercise of
securities of the Company, including this Note, by the Holder and its affiliates
since the date as of which such number of outstanding Ordinary Shares was
reported. By written notice to the Company, the Holder may increase or decrease
the Maximum Percentage to any other percentage not in excess of 9.99% specified
in such notice; provided that (i) any such increase will not be effective until
the sixty-first (61st)
day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of
Notes.
(ii) Principal
Market Regulation.
The
Company shall not be obligated to issue any ADRs upon conversion of this Note,
and the Holder of this Note shall not have the right to receive upon conversion
of this Note any ADRs, if the issuance of such ADRs
-6-
would
exceed the aggregate number of ADRs which the Company may issue upon conversion
or exercise, as applicable, of the Notes and Warrants or otherwise without
breaching the Company's obligations under the rules or regulations of the
Principal Market (or such other Eligible Market on which the ADRs or Ordinary
Shares are listed) and the ASX (the "Exchange
Cap"),
except that such limitation shall not apply in the event that the Company
obtains the approval of its shareholders as required by the applicable rules
of
the Principal Market and the ASX listing rules for issuances in excess of such
amount. Until such approval is obtained, no purchaser of the Notes pursuant
to
the Securities Purchase Agreement (the "Purchasers")
shall
be issued in the aggregate, upon conversion or exercise, as applicable, of
Notes
or Warrants, or otherwise any ADRs in an amount greater than the product of
the
Exchange Cap multiplied by a fraction, the numerator of which is the principal
amount of Notes issued to the applicable Purchaser pursuant to the Securities
Purchase Agreement on the Closing Date and the denominator of which is the
aggregate principal amount of all Notes issued to the Purchasers pursuant to
the
Securities Purchase Agreement on the Closing Date (with respect to each
Purchaser, the "Exchange
Cap Allocation").
In
the event that any Purchaser shall sell or otherwise transfer any of such
Purchaser's Notes, the transferee shall be allocated a pro rata portion of
such
Purchaser's Exchange Cap Allocation, and the restrictions of the prior sentence
shall apply to such transferee with respect to the portion of the Exchange
Cap
Allocation allocated to such transferee. In the event that any holder of Notes
shall convert all of such holder's Notes into a number of ADRs which, in the
aggregate, is less than such holder's Exchange Cap Allocation, then the
difference between such holder's Exchange Cap Allocation and the number of
ADRs
actually issued to such holder shall be allocated to the respective Exchange
Cap
Allocations of the remaining holders of Notes on a pro rata basis in proportion
to the aggregate principal amount of the Notes then held by each such
holder.
(4) RIGHTS
UPON EVENT OF DEFAULT.
(a) Event
of Default.
Each of
the following events shall constitute an "Event
of Default":
(i) the
failure of the applicable Registration Statement required to be filed pursuant
to the Registration Rights Agreement to be declared effective by the SEC on
or
prior to the date that is sixty (60) days after the applicable Effectiveness
Deadline (as defined in the Registration Rights Agreement), or, while the
applicable Registration Statement is required to be maintained effective
pursuant to the terms of the Registration Rights Agreement, the effectiveness
of
the applicable Registration Statement lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to any holder of
the
Notes for sale of all of such holder's Registrable Securities (as defined in
the
Registration Rights Agreement) in accordance with the terms of the Registration
Rights Agreement, and such lapse or unavailability continues for a period of
ten
(10) consecutive days or for more than an aggregate of thirty (30) days in
any
365-day period (other than days during an Allowable Grace Period (as defined
in
the Registration Rights Agreement));
(ii) the
suspension from trading or failure of the ADRs to be listed on an Eligible
Market for a period of five (5) consecutive days or for more than an aggregate
of ten (10) days in any 365-day period;
-7-
(iii) the
Company's (A) failure to cure a Conversion Failure by delivery of the required
number of ADRs within twelve (12) Business Days after the applicable Conversion
Date or (B) notice, written or oral, to any holder of the Notes, including
by
way of public announcement or through any of its agents, at any time, of its
intention not to comply with a request for conversion of any Notes into ADRs
that is tendered in accordance with the provisions of the Notes;
(iv) the
Company's failure to pay to the Holder any amount of Principal when and as
due
or any Interest, Late Charges or other amounts within three Business Days of
the
date when and as due under this Note (including, without limitation, the
Company's failure to pay any redemption payments) or any other Transaction
Document (as defined in the Securities Purchase Agreement) or any other
agreement, document, certificate or other instrument delivered in connection
with the transactions contemplated hereby and thereby to which the Holder is
a
party;
(v) any
Indebtedness, the aggregate of which obligation(s) exceed(s) US$250,000.00
(or
the equivalent in one or more other currencies) individually or in the aggregate
is declared to be or otherwise becomes due and payable prior to its specified
maturity (other than as a result of a mandatory prepayment not attributable
to
an event of default) or with respect to which the Company or any of its
Subsidiaries fails to make any payment at the maturity date as and when
due;
(vi) the
Company or any of its Material Subsidiaries (as such term is defined under
Regulation S-K under the Securities and Exchange Act of 1933, as amended),
pursuant to or within the meaning of Title 11, U.S. Code, or any similar
Federal, foreign or state law for the relief of debtors (collectively,
"Bankruptcy
Law"),
(A)
commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
receiver, trustee, assignee, liquidator or similar official (a "Custodian"),
(D)
makes a general assignment for the benefit of its creditors or (E) admits in
writing that it is generally unable to pay its debts as they become
due;
(vii) a
court
of competent jurisdiction enters an order or decree under any Bankruptcy Law
that (A) is for relief against the Company or any of its Material Subsidiaries
in an involuntary case, (B) appoints a Custodian of the Company or any of its
Material Subsidiaries or (C) orders the liquidation of the Company or any of
its
Material Subsidiaries;
(viii) a
final
judgment or judgments for the payment of money aggregating in excess of
$2,500,000 are rendered against the Company or any of its Subsidiaries and
which
judgments are not, within sixty (60) days after the entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within sixty (60)
days after the expiration of such stay; provided, however, that any such
judgment shall not give rise to an Event of Default under this subsection (viii)
if and for so long as (A) the amount of such judgment is covered by a valid
and
binding policy of insurance between the defendant and the insurer covering
full
payment thereof and (B) such insurer has been notified, and has not disputed
the
claim made for payment, of the amount of such judgment;
-8-
(ix) the
Company breaches any material representation, warranty, covenant or other term
or condition of any Transaction Document in any material respect, except, in
the
case of a breach of a covenant which is curable, only if such breach continues
for a period of at least ten (10) consecutive Business Days after notice from
any Holder or the Company becomes or reasonably should be expected to have
become aware of such breach;
(x) any
material breach or failure in any respect to comply with either of Sections
8 or
15 of this Note; or
(xi) any
Event
of Default (as defined in the Other Notes) occurs with respect to any Other
Notes.
(b) Redemption
Right.
Promptly after the occurrence of an Event of Default with respect to this Note
or any Other Note, the Company shall deliver written notice thereof via
facsimile and overnight courier (an "Event
of Default Notice")
to the
Holder. At any time after the earlier of the Holder's receipt of an Event of
Default Notice and the Holder becoming aware of an Event of Default and until
30
days after such Event of Default has been cured, the Holder may require the
Company to redeem all or any portion of this Note by delivering written notice
thereof (the "Event
of Default Redemption Notice")
to the
Company, which Event of Default Redemption Notice shall indicate the portion
of
this Note the Holder is electing to redeem. Each portion of this Note subject
to
redemption by the Company pursuant to this Section 4(b) shall be redeemed by
the
Company at a price equal to the greater of (i) the product of (x) the Conversion
Amount to be redeemed and (y) the Redemption Premium and (ii) the product of
(A)
the Conversion Rate with respect to such Conversion Amount in effect at such
time as the Holder delivers an Event of Default Redemption Notice and (B) the
Closing Sale Price of the ADRs on the date immediately preceding such Event
of
Default (the "Event
of Default Redemption
Price").
Redemptions required by this Section 4(b) shall be made in accordance with
the
provisions of Section 13.
(5) RIGHTS
UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.
(a) Assumption.
The
Company shall not enter into or be party to a Fundamental Transaction unless,
and shall use its best endeavors to procure that, (i) the Successor Entity
(if other than the Company) assumes in writing all of the obligations of the
Company under this Note and the other Transaction Documents in accordance with
the provisions of this Section 5(a) pursuant to written agreements in form
and
substance reasonably satisfactory to the Required Holders and approved by the
Required Holders prior to such Fundamental Transaction, including agreements
to
deliver to each holder of Notes in exchange for such Notes a security of such
Successor Entity evidenced by a written instrument substantially similar in
form
and substance to the Notes, including, without limitation, having a principal
amount and interest rate equal to the principal amounts and the interest rates
of the Notes held by such holder and having similar ranking to the Notes, and
reasonably satisfactory to the Required Holders and (ii) the Successor
Entity is a publicly traded corporation whose common shares (or whose American
Depositary Shares) are quoted on or listed for trading on an
-9-
Eligible
Market. Upon the occurrence of any Fundamental Transaction, such Successor
Entity shall succeed to, and be substituted for (so that from and after the
date
of such Fundamental Transaction, the provisions of this Note referring to the
"Company" shall refer instead to such Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the
Company under this Note with the same effect as if such Successor Entity had
been named as the Company herein. Upon consummation of the Fundamental
Transaction, such Successor Entity shall deliver to the Holder confirmation
that
there shall be issued upon conversion or redemption of this Note at
any
time after the consummation of the Fundamental Transaction, in lieu of the
ADRs
(or
other securities, cash, assets or other property) purchasable
upon the conversion or redemption of the Notes prior to such Fundamental
Transaction,
such
publicly traded common shares (or their equivalent) of the Successor Entity
(including its Parent Entity), as adjusted in accordance with the provisions
of
this Note. The
provisions of this Section shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations
on the conversion or redemption of this Note.
(b) Redemption
Right.
No
sooner than thirty (30) days nor later than ten (10) days prior to the
consummation of a Change of Control, the Company shall deliver written notice
thereof via facsimile and overnight courier to the Holder (a "Change
of Control Notice");
provided that in no case shall the Company deliver or be required to deliver
such Change of Control Notice prior to the public announcement of such Change
of
Control. At any time during the period beginning after the Holder's receipt
of a
Change of Control Notice and ending on the date of the consummation of such
Change of Control (or, in the event a Change of Control Notice is not delivered
at least ten (10) days prior to a Change of Control, at any time on or after
the
date which is ten (10) days prior to a Change of Control and ending ten (10)
days after the consummation of such Change of Control), the Holder may require
the Company to redeem all or any portion of this Note by delivering written
notice thereof ("Change
of Control Redemption Notice")
to the
Company, which Change of Control Redemption Notice shall indicate the Conversion
Amount the Holder is electing to redeem. The portion of this Note subject to
redemption pursuant to this Section 5 shall be redeemed by the Company at a
price equal to the greater of (i) the product of (x) the Conversion Amount
being
redeemed and (y) the quotient determined by dividing (A) the Closing Sale Price
of the ADRs immediately following the public announcement of such proposed
Change of Control by (B) the Conversion Price and (ii) the product of Change
of
Control Premium and the Conversion Amount being redeemed (the "Change
of Control Redemption Price").
Redemptions required by this Section 5 shall be made in accordance with the
provisions of Section 13 and shall have priority to payments to shareholders
in
connection with a Change of Control.
(6) RIGHTS
UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.
(a) Purchase
Rights.
If at
any time the Company, directly or indirectly, grants, issues or sells any
Options, Convertible Securities or rights to purchase shares, warrants,
securities or other property pro rata to the record holders of any class of
Ordinary Shares (the "Purchase
Rights"),
then
the Holder will be entitled to acquire, to the extent permitted by applicable
Law, upon the terms applicable to such Purchase Rights, the aggregate Purchase
Rights which the Holder could have acquired if the Holder had held the number
of
Ordinary
-10-
Shares
underlying the ADRs acquirable upon complete conversion of this Note (without
taking into account any limitations or restrictions on the convertibility of
this Note) immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of Ordinary Shares are to be determined
for
the grant, issue or sale of such Purchase Rights.
(b) Other
Corporate Events.
In
addition to and not in substitution for any other rights hereunder, prior to
the
consummation of any Fundamental Transaction pursuant to which holders of ADRs
or
Ordinary Shares are entitled to receive securities or other assets with respect
to or in exchange for ADRs or Ordinary Shares (a "Corporate
Event"),
the
Company shall make appropriate provision, to the extent not prohibited by
applicable law, to insure that the Holder will thereafter have the right to
receive upon a conversion of this Note, (i) in addition to the ADRs receivable
upon such conversion, such securities or other assets to which the Holder would
have been entitled with respect to such ADRs had such ADRs been held by the
Holder upon the consummation of such Corporate Event (without taking into
account any limitations or restrictions on the convertibility of this Note)
or
(ii) in lieu of the ADRs otherwise receivable upon such conversion, such
securities or other assets received by the holders of ADRs or Ordinary Shares
in
connection with the consummation of such Corporate Event in such amounts as
the
Holder would have been entitled to receive had this Note initially been issued
with conversion rights for the form of such consideration (as opposed to ADRs)
at a conversion rate for such consideration commensurate with the Conversion
Rate. Provision made pursuant to the preceding sentence shall be in a form
and
substance satisfactory to the Required Holders. The provisions of this Section
shall apply similarly and equally to successive Corporate Events and shall
be
applied without regard to any limitations on the conversion or redemption of
this Note.
(7) RIGHTS
UPON ISSUANCE OF OTHER SECURITIES.
(a) Adjustment
of Conversion Price upon Issuance of Ordinary Shares.
If and
whenever on or after the Subscription Date, the Company issues or sells, or
in
accordance with this Section 7(a) is deemed to have issued or sold, any Ordinary
Shares
(including those underlying any ADRs and the issuance or sale of Ordinary
Shares
owned or
held by or for the account of the Company, but excluding Ordinary
Shares
deemed
to have been issued or sold by the Company in connection with any Excluded
Security) for a consideration per Ordinary Share (the "New
Issuance Price")
less
than a price (the "Applicable
Price")
equal
to (i) one-tenth (1/10th) of the Conversion Price (in the case of ADRs) or
(ii)
the Conversion Price (in the case that the Conversion Price is determined by
reference to the Ordinary Shares) in effect immediately prior to such issue
or
sale (the foregoing a "Dilutive
Issuance"),
then
immediately
after such Dilutive Issuance, the Conversion Price then in effect shall be
reduced to an amount equal to the New Issuance Price. Appropriate
and equitable adjustment to the terms and provisions of this Note shall be
made
in the event of any change to the ratio of ADRs to Ordinary Shares represented
thereby. For purposes of determining the adjusted Conversion Price under this
Section 7(a), the following shall be applicable:
(i) Issuance
of Options.
If the
Company in any manner grants or sells any Options and the lowest price per
share
for which one Ordinary Share
is
issuable upon the exercise of any such Option or upon conversion or exchange
or
exercise of any Convertible Securities issuable upon exercise of such Option
is
less than
-11-
the
Applicable Price, then such Ordinary
Share
shall be
deemed to be outstanding and to have been issued and sold by the Company at
the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 7(a)(i), the "lowest price per share for which one
Ordinary
Share
is
issuable upon the exercise of any such Option or upon conversion or exchange
or
exercise of any Convertible Securities issuable upon exercise of such Option"
shall be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one
Ordinary
Share
upon
granting or sale of the Option, upon exercise of the Option and upon conversion
or exchange or exercise of any Convertible Security issuable upon exercise
of
such Option. No further adjustment of the Conversion Price shall be made upon
the actual issuance of such Ordinary Shares or of such Convertible Securities
upon the exercise of such Options or upon the actual issuance of such Ordinary
Shares upon conversion or exchange or exercise of such Convertible
Securities.
(ii) Issuance
of Convertible Securities.
If the
Company in any manner issues or sells any Convertible Securities and the lowest
price per share for which one Ordinary Share is issuable upon such conversion
or
exchange or exercise thereof is less than the Applicable Price, then such
Ordinary Share shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the issuance of sale of such Convertible
Securities for such price per share. For the purposes of this Section 7(a)(ii),
the "price per share for which one Ordinary Share is issuable upon such
conversion or exchange or exercise" shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one Ordinary Share upon the issuance or sale of the Convertible
Security and upon the conversion or exchange or exercise of such Convertible
Security. No further adjustment of the Conversion Price shall be made upon
the
actual issuance of such Ordinary Shares upon conversion or exchange or exercise
of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which adjustment
of the Conversion Price had been or are to be made pursuant to other provisions
of this Section 7(a), no further adjustment of the Conversion Price shall be
made by reason of such issue or sale.
(iii) Change
in Option Price or Rate of Conversion.
If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exchange or exercise of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into
or exchangeable or exercisable for Ordinary Shares changes at any time, the
Conversion Price in effect at the time of such change shall be adjusted to
the
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold. For purposes of this Section 7(a)(iii),
if
the terms of any Option or Convertible Security that was outstanding as of
the
Subscription Date are changed in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the Ordinary
Shares deemed issuable upon exercise, conversion or exchange thereof shall
be
deemed to have been issued as of the date of such change. No adjustment shall
be
made if such adjustment would result in an increase of the Conversion Price
then
in effect.
-12-
(iv) Calculation
of Consideration Received.
In case
any Option is issued in connection with the issue or sale of other securities
of
the Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01. If any Ordinary
Shares, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the gross amount paid by the purchaser therefor. If any Ordinary Shares,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Closing Sale Price of such securities on
the
date of receipt. If any Ordinary Shares, Options or Convertible Securities
are
issued to the owners of the non-surviving entity in connection with any merger
in which the Company is the surviving entity, the amount of consideration
therefor will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such Ordinary
Shares, Options or Convertible Securities, as the case may be. The fair value
of
any consideration other than cash or securities will be determined in good
faith
by the Board of Directors of the Company.
(v) Record
Date.
If the
Company takes a record of the holders of Ordinary Shares for the purpose of
entitling them (A) to receive a dividend or other distribution payable in
Ordinary Shares, Options or in Convertible Securities or (B) to subscribe for
or
purchase Ordinary Shares, Options or Convertible Securities, then such record
date will be deemed to be the date of the issue or sale of the Ordinary Shares
deemed to have been issued or sold upon the declaration of such dividend or
the
making of such other distribution or the date of the granting of such right
of
subscription or purchase, as the case may be.
(b) Adjustment
of Conversion Price upon Pro Rata Bonus Issue of Ordinary Shares.
If the
Company makes a pro rata bonus issue of Ordinary Shares to its shareholders
prior to conversion of the Note, and the Note is not converted prior to the
record date for the issue, the Note will, when converted, entitle the holder
to
the number of ADRs that would ordinarily be received under Section 3, plus
the
number of bonus Ordinary Shares which would have been issued to the Holder
if
the Note had been converted prior to the record date.
(c) Adjustment
of Conversion Price upon Subdivision or Combination of Ordinary
Shares.
If the
Company at any time on or after the Subscription Date subdivides (by any share
split, share dividend, recapitalization or otherwise) one or more classes of
its
outstanding ADRs (or Ordinary Shares underlying such ADRs) into a greater number
of ADRs (or Ordinary Shares), the Conversion Price in effect immediately prior
to such subdivision will be proportionately reduced. If the Company at any
time
on or after the Subscription Date combines (by combination, reverse share split
or otherwise) one or more classes of its outstanding ADRs (or Ordinary Shares)
into a smaller number of ADRs (or Ordinary Shares), the Conversion Price in
effect immediately prior to such combination will be proportionately increased.
Any adjustment under this Section 7(d) shall be subject to (and will
be
-13-
correspondingly
reorganised in a manner which is permissible under, or necessary to comply
with)
the ASX Listing Rules or the rules of any Eligible Market in force at the
relevant time and shall become effective at the close of business on the date
the subdivision or combination becomes effective.
(d) Capital
reorganizations.
If
there is a reorganisation of the capital of the Company, the number of ADRs
applicable to the Note and/or the Conversion Price of the Note will be
correspondingly reorganised in a manner, which is permissible under, or
necessary to comply, with the ASX Listing Rules or the rules of any other
Eligible Market in force at the relevant time. Subject to the above, if there
is
a reorganisation of the capital of the Company, the number of ADRs applicable
to
the Note or the Conversion Price or both will be reorganised so that the Holder
of the Note will not receive a benefit that holders of Ordinary Shares do not
receive. The Company shall give notice to the Holder of the Note of any
adjustments to the number of ADRs which are to be issued on conversion of the
Note or to the Conversion Price. Before a Note is converted, all adjustment
calculations are to be carried out including all fractions (in relation to
each
of the number of ADRs applicable to the Note and the Conversion Price), but
on
conversion the number of ADRs issued is rounded down to the next lower whole
number and the Conversion Price rounded up to the next higher cent.
(e) Other
Events.
If any
event occurs of the type contemplated by the provisions of this Section 7 but
not expressly provided for by such provisions (including, without limitation,
the granting of share appreciation rights, phantom share rights or other rights
with equity features), then the Company's Board of Directors will make an
appropriate adjustment in the Conversion Price so as to protect the rights
of
the Holder under this Note; provided that no such adjustment will increase
the
Conversion Price as otherwise determined pursuant to this Section
7.
(f) Adjustment.
If on
April 30, 2007, the Subsequent Conversion Price is less than the then applicable
Conversion Price, then the Conversion Price shall be reset to the Subsequent
Conversion Price.
(8) HOLDER'S
RIGHT OF OPTIONAL REDEMPTION.
On each
Holder Optional Redemption Date, the Holder shall have the right, in its sole
discretion, to require that the Company redeem (each a "Holder
Optional Redemption")
up to
$6,250,000 in Principal amount of the Note plus accrued and unpaid Interest
with
respect to such Principal and accrued and unpaid Late Charges with respect
to
such principal and Interest (the "Optional
Redemption Amount")
by
delivering written notice thereof (a "Holder
Optional Redemption Notice"
and,
collectively with the Event of Default Redemption Notice and the Change of
Control Redemption Notice, the "Redemption
Notices"
and
each a "Redemption
Notice")
to the
Company no later than ten (10) Business Days after the applicable Holder
Optional Redemption Date. The Holder Optional Redemption Notice shall indicate
the amount of the applicable Optional Redemption Amount the Holder is electing
to have redeemed on such Optional Redemption Exercise Date (the "Holder
Optional Redemption Amount")
and
the date of such redemption (the "Optional
Redemption Exercise Date");
provided, however, that (a) such Holder Optional Redemption Amount indicated
shall not exceed the Optional Redemption Amount and (b) such Optional Redemption
Exercise Date shall not be less than ten (10) Business Days after the date
of
delivery of such Holder Optional Redemption Notice. The portion of this Note
subject to redemption pursuant to this Section 8 shall be redeemed by the
Company in cash
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on
the
applicable Holder Optional Redemption Date at a price equal to the Holder
Optional Redemption Amount being redeemed (the "Holder
Optional Redemption Price"
and,
collectively with the Event of Default Redemption Price and the Change of
Control Redemption Price, the "Redemption
Prices"
and,
each a "Redemption Price").
Such
Holder covenants that it will comply with Section 2(j) of the Securities
Purchase Agreement.
(9) COMPANY'S
RIGHT OF MANDATORY CONVERSION.
(a) Mandatory
Conversion.
If at
any time from and after the sixtieth (60th)
day
after the Additional Effective Date (as defined in the Registration Statement)
(the "Mandatory
Conversion Eligibility Date"),
(i)
the Weighted Average Price of the ADRs exceed for each of any twenty (20) out
of
twenty-five (25) consecutive Trading Days following the Mandatory Conversion
Eligibility Date (the "Mandatory
Conversion Measuring Period"),
200%
of the applicable Conversion Price (subject to appropriate adjustments for
share
splits, share dividends, share combinations and other similar transactions
after
the Subscription Date) and (ii) the Equity Conditions shall have been satisfied
(or waived in writing by the Holder), during the period commencing on the
Mandatory Conversion Notice Date through the applicable Mandatory Conversion
Date (each, as defined below), the Company shall have the right to require
the
Holder to convert all, or any portion, of the Conversion Amount then remaining
under this Note as designated in the Mandatory Conversion Notice into fully
paid, validly issued and nonassessable ADRs in accordance with Section 3(c)
hereof at the Conversion Rate as of the Mandatory Conversion Date (a
"Mandatory
Conversion").
The
Company may exercise its right to require conversion under this Section 9(a)
by
delivering within not more than three (3) Business Days following
the end of any such Mandatory Conversion Measuring Period a
written
notice thereof by facsimile and overnight courier to all, but not less than
all,
of the holders of Notes and the Transfer Agent (the "Mandatory
Conversion Notice"
and the
date all of the holders received such notice is referred to as the "Mandatory
Conversion Notice Date").
The
Mandatory Conversion Notice shall be irrevocable. The Mandatory Conversion
Notice shall state (i) the Business Day selected for the Mandatory Conversion
in
accordance with this Section 9(a), which Business Day shall be at least twenty
(20) Business Days but not more than sixty (60) Business Days following the
Mandatory Conversion Notice Date (the "Mandatory
Conversion Date"),
(ii)
the aggregate Conversion Amount of the Notes subject to mandatory conversion
from all of the holders of the Notes pursuant to this Section 9 (and analogous
provisions under the Other Notes) and (iii) the number of ADRs to be issued
to
such Holder on the Mandatory Conversion Date.
(b) Pro
Rata Conversion Requirement.
If the
Company elects to cause a conversion of any Conversion Amount of this Note
pursuant to Section 9(a), then it must simultaneously take the same action
in
the same proportion with respect to the Other Notes. All Conversion Amounts
converted by the Holder after the Mandatory Conversion Notice Date shall reduce
the Conversion Amount of this Note required to be converted on the Mandatory
Conversion Date. If the Company has elected a Mandatory Conversion, the
mechanics of conversion set forth in Section 3(c) shall apply, to the extent
applicable, as if the Company and the Transfer Agent had received from the
Holder on the Mandatory Conversion Date a Conversion Notice with respect to
the
Conversion Amount being converted pursuant to the Mandatory
Conversion.
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(10) COMPANY'S
RIGHT OF OPTIONAL REDEMPTION.
(a) Company
Optional Redemption.
At any
time after the Issuance Date, the Company shall have the right to redeem all
or
any portion of the Conversion Amount then remaining under this Note (a
"Company
Optional Redemption").
The
portion of this Note subject to redemption pursuant to this Section 10 shall
be
redeemed by the Company in cash at a price equal to 108% of the Conversion
Amount being redeemed (the "Company
Optional Redemption Price").
The
Company may exercise its redemption right under this Section 10 by delivering
a
written notice thereof by confirmed facsimile and overnight courier to all,
but
not less than all, of the holders of Notes and the Transfer Agent (the
"Company
Optional Redemption Notice"
and the
date such notice is delivered to all the holders is referred to as the
"Company
Optional Redemption Notice Date").
The
Company Optional Redemption Notice shall be irrevocable. The Company Optional
Redemption Notice shall state (A) the date on which the Company Optional
Redemption shall occur (the "Company
Optional Redemption Date")
which
date shall be not less than thirty (30) days nor more than sixty (60) days
after
the Company Optional Redemption Notice Date, (B) the aggregate Principal amount
(the "Company
Optional Redemption Amount")
of the
Notes which the Company has elected to be subject to Optional Redemption from
all of the holders of the Notes pursuant to this Section 10 (and analogous
provisions under the Other Notes) on the Company Optional Redemption Date,
(C)
that in connection with the Company Optional Redemption the Company shall issue
to the Holder Series B Warrants and (D) the number of ADSs for which such Series
B Warrants shall become exercisable shall be equal to the quotient of (1) 30%
of
the Conversion Amount being redeemed and (2) the then applicable Conversion
Price. The Company will make a public announcement containing the information
set forth in the Company Optional Redemption Notice on or before the Company
Optional Redemption Notice Date. The Company may not effect more than one (1)
Company Optional Redemption during any consecutive thirty (30) Trading Day
period. Notwithstanding anything to the contrary in this Section 10, until
the
Company Optional Redemption Price is paid, in full, the Company Optional
Redemption Amount may be converted, in whole or in part, by the holders of
Notes
into ADSs pursuant to Section 3. All Conversion Amounts converted by the Holder
after the Company Optional Redemption Notice Date shall reduce the Conversion
Amount of this Note required to be redeemed on the Company Optional Redemption
Date. Redemptions made pursuant to this Section 10 shall be made in accordance
with Section 13.
(b) Pro
Rata Redemption Requirement.
If the
Company elects to cause a Company Optional Redemption pursuant to Section 10(a),
then it must simultaneously take the same action with respect to the Other
Notes. If the Company elects to cause a Company Optional Redemption pursuant
to
Section 10(a) (or similar provisions under the Other Notes) with respect to
less
than all of the principal amount of the Notes then outstanding, then the Company
shall require redemption of a Principal amount from the Holder and each holder
of the Other Notes equal to the product of (i) the aggregate principal amount
of
Notes which the Company has elected to cause to be redeemed pursuant to Section
8(a), multiplied by (ii) the fraction, the numerator of which is the sum of
the
initial principal amount of Notes purchased by such holder and the denominator
of which is the initial principal amounts of Notes purchased by all holders
holding outstanding Notes (such fraction with respect to each holder is referred
to as its "Redemption
Allocation Percentage",
and
such amount with respect to each holder is
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referred
to as its "Pro
Rata Redemption Amount");
provided that in the event that the initial holder of any Notes has sold or
otherwise transferred any of such holder's Notes, the transferee shall be
allocated a pro rata portion of such holder's Redemption Allocation Percentage
and Pro Rata Redemption Amount.
(11) NONCIRCUMVENTION.
The
Company hereby covenants and agrees that the Company will not, by amendment
of
its Constitution, Bylaws or through any reorganization, transfer of assets,
consolidation, merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Note, and will at all times in good
faith carry out all of the provisions of this Note and take all action as may
be
required to protect the rights of the Holder of this Note. Without limiting
the
generality of the foregoing, the Company (i) shall not increase the par
value of any Ordinary Shares underlying the Conversion Shares receivable upon
the conversion of this Note above the Conversion Price then in effect and
(ii) shall take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable Conversion Shares upon the conversion of this Note.
(12) SUBORDINATION
TO PERMITTED SENIOR INDEBTEDNESS; SECURITY.
(a) Subordination.
Subject to the final sentence of Section (12)(g)
hereof,
the indebtedness represented by this Note and the payment of any Principal,
Interest, Late Charges, redemption amount, liquidated damages, fees, expenses
or
any other amounts in respect of this Note (collectively, the "Subordinated
Indebtedness")
is
hereby expressly made subordinate and junior and subject in right of payment,
only to the extent expressly set forth in Section (12)(b)
hereof,
to the prior payment in full of all Permitted Senior Indebtedness of the Company
hereinafter incurred.
(b) Payment
upon Dissolution, Etc. In the event of any bankruptcy, insolvency,
reorganization, receivership, composition, assignment for benefit of creditors
or other similar proceeding initiated by or against the Company or any
dissolution or winding up or total or partial liquidation or reorganization
in
bankruptcy of the Company (each, a "Proceeding"),
all
principal, interest and other obligations due upon any Permitted Senior
Indebtedness shall first be paid in full or fully cash collateralized before
the
Holder shall be entitled to receive or, if received, to retain any payment
or
distribution on account of this Note and, during the continuance of any such
Proceeding, any payment or distribution of assets of the Company of any kind
or
character, whether in cash, property or securities, to which the Holder would
be
entitled with respect to any Subordinated Indebtedness but for the provisions
of
this Section 12 shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment
or
distribution, or by the Holder who shall have received such payment or
distribution, directly to the holders of the Permitted Senior Indebtedness
(pro
rata to each such holder on the basis of the respective amounts of such
Permitted Senior Indebtedness held by such holder) or their representatives
to
the extent necessary to pay all such Permitted Senior Indebtedness in full
after
giving effect to any concurrent payment or distribution to or for the holders
of
such Permitted Senior Indebtedness, before any payment or distribution is made
to the Holder or any holders of the Notes; provided, however, that
notwithstanding anything to the contrary, in any event the Holder shall be
entitled
-17-
to
receive and retain any and all Junior Securities (as defined below), and shall
be ranked first with respect to the proceeds of the Collateral.
(c) Certain
Rights. Nothing contained in this Section 12 or elsewhere in this Note or any
other Transaction Document, is intended to or shall impair, as among the
Company, its creditors including the holders of Permitted Senior Indebtedness
and the Holder, the right, which is absolute and unconditional, of the Holder
to
convert this Note in accordance herewith.
(d) Rights
of
Holder Unimpaired. The provisions of this Section 12 are and are intended solely
for the purposes of defining the relative rights of the Holder and the holders
of Permitted Senior Indebtedness and nothing in this Section 12 shall impair,
as
between the Company and the Holder, the obligation of the Company, which is
unconditional and absolute, to pay to the Holder the Principal hereof (and
premium, if any), accrued Interest hereon and all other Subordinated
Indebtedness payable hereunder, all in accordance with the terms of this
Note.
(e) Junior
Securities. As used herein, "Junior
Securities"
means
debt or equity securities of the Company as reorganized or readjusted, or debt
or equity securities of the Company or any other Person provided for by a plan
of reorganization or readjustment authorized by an order or decree of a court
of
competent jurisdiction in a Proceeding under any applicable law, so long as
in
the case of debt securities, such Junior Securities are subordinated in right
of
payment to all Permitted Senior Indebtedness and to whatever is issued to the
holders of the Permitted Senior Indebtedness on account of the Permitted Senior
Indebtedness, to the same extent as, or to a greater extent than, the
Subordinated Indebtedness is so subordinated as provided for
herein.
(f) Intercreditor
Arrangements. In the event that a holder of Permitted Senior Indebtedness shall
require the holders of the Notes to enter into any intercreditor or
subordination agreement or any similar arrangements, the Company shall reimburse
the Holder for any reasonable expenses incurred in connection with the
negotiation, execution and delivery of any such agreement (and any related
documents), including without limitation, reasonable legal fees and
expenses.
(g) Lien
Subordination. Any Lien of Holder, whether now or hereafter existing in
connection with the amounts due under this Note, on any assets or property
of
Company or any proceeds or revenues therefrom which Holder may have at any
time
as security for any amounts due and obligations under this Note shall be
subordinate to all Liens hereafter granted to a holder of Permitted Senior
Indebtedness by Company or by law, notwithstanding the date, order or method
of
attachment or perfection of any such Lien or the provisions of any applicable
law. The foregoing sentence shall not apply with respect to the Holder's
security interest set forth in the Security Documents.
(13) REDEMPTIONS.
(a) Mechanics.
The
Company shall deliver the applicable Event of Default Redemption Price to the
Holder within ten (10) Business Days after the Company's
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receipt
of the Holder's Event of Default Redemption Notice. If the Holder has submitted
a Change of Control Redemption Notice in accordance with Section 5(b), the
Company shall deliver the applicable Change of Control Redemption Price to
the
Holder on the later of (i) concurrently with the consummation of such Change
of
Control or (ii) within ten (10) Business Days after the Company's receipt of
such notice. The Company shall deliver (A) the Holder Optional Redemption Price
to the Holder on the Holder Optional Redemption Date, (B) the Company Optional
Redemption Price to the Holder on the Company Optional Redemption Date and
(C)
the Asset Sale Redemption Price to the Holder on the Asset Sale Redemption
Date.
In the event of a redemption of less than all of the Conversion Amount of this
Note, the Company shall promptly cause to be issued and delivered to the Holder
a new Note (in accordance with Section 19(d)) representing the outstanding
Principal which has not been redeemed. In the event that the Company does not
pay the applicable Redemption Price to the Holder within the time period
required, at any time thereafter and until the Company pays such unpaid
Redemption Price in full, the Holder shall have the option, in lieu of
redemption, to require the Company to promptly return to the Holder all or
any
portion of this Note representing the Conversion Amount that was submitted
for
redemption and for which the applicable Redemption Price (together with any
Late
Charges thereon) has not been paid. Upon the Company's receipt of such notice,
(x) the Redemption Notice shall be null and void with respect to such Conversion
Amount, (y) the Company shall immediately return this Note, or issue a new
Note
(in accordance with Section 19(d)) to the Holder representing such Conversion
Amount and (z) the Conversion Price of this Note or such new Notes shall be
adjusted to the lesser of (A) the Conversion Price as in effect on the date
on
which the Redemption Notice is voided and (B) the lowest Closing Bid Price
of
the ADRs during the period beginning on and including the date on which the
Redemption Notice is delivered to the Company and ending on and including the
date on which the Redemption Notice is voided. The Holder's delivery of a notice
voiding a Redemption Notice and exercise of its rights following such notice
shall not affect the Company's obligations to make any payments of Late Charges
which have accrued prior to the date of such notice with respect to the
Conversion Amount subject to such notice.
(b) Redemption
by Other Holders.
Upon
the Company's receipt of notice from any of the holders of the Other Notes
for
redemption or repayment as a result of an event or occurrence substantially
similar to the events or occurrences described in Sections 4(b), Section 5(b)
or
Section 8 (each, an "Other
Redemption Notice"),
the
Company shall immediately forward to the Holder by facsimile a copy of such
notice. If the Company receives a Redemption Notice and one or more Other
Redemption Notices, during the seven (7) Business Day period beginning on and
including the date which is three (3) Business Days prior to the Company's
receipt of the Holder's Redemption Notice and ending on and including the date
which is three (3) Business Days after the Company's receipt of the Holder's
Redemption Notice and the Company is unable to redeem all principal, interest
and other amounts designated in such Redemption Notice and such Other Redemption
Notices received during such seven (7) Business Day period, then the Company
shall redeem a pro rata amount from each holder of the Notes (including the
Holder) based on the principal amount of the Notes submitted for redemption
pursuant to such Redemption Notice and such Other Redemption Notices received
by
the Company during such seven (7) Business Day period.
(14) VOTING
RIGHTS.
The
Holder shall have no voting rights as the holder of this Note, except as
required by law, the Corporations
Act
2001
(Cth) and as expressly
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provided
in this Note, or any other Transaction Documents.
(15) COVENANTS.
(a) Rank.
All
payments due under this Note (a) shall rank pari
passu
with all
Other Notes and all Permitted Indebtedness (other than Permitted Senior
Indebtedness and Permitted Indebtedness described in clause (B) of the
definition thereof) and (b) shall be senior to all other Indebtedness of the
Company and its Subsidiaries other than Permitted Senior Indebtedness.
(b) Incurrence
of Indebtedness.
So long
as this Note is outstanding, the Company shall not, and the Company shall not
permit any of its Subsidiaries to, directly or indirectly, incur or guarantee,
assume or suffer to exist any Indebtedness, other than (i) the Indebtedness
evidenced by this Note and the Other Notes and (ii) Permitted
Indebtedness.
(c) Existence
of Liens.
So long
as this Note is outstanding, the Company shall not, and the Company shall not
permit any of its Subsidiaries to, directly or indirectly, allow or suffer
to
exist any mortgage, lien, pledge, charge, security interest or other encumbrance
upon or in any property or assets (including accounts and contract rights)
owned
by the Company or any of its Subsidiaries (collectively, "Liens")
other
than Permitted Liens.
(d) Restricted
Payments.
The
Company shall not, and the Company shall not permit any of its Subsidiaries
to,
directly or indirectly, redeem, defease, repurchase, repay or make any payments
in respect of, by the payment of cash or cash equivalents (in whole or in part,
whether by way of open market purchases, tender offers, private transactions
or
otherwise), all or any portion of any Permitted Indebtedness whether by way
of
payment in respect of principal of (or premium, if any) or interest on such
Indebtedness if at the time such payment is due or is otherwise made or, after
giving effect to such payment, an event constituting, or that with the passage
of time and without being cured would constitute, an Event of Default has
occurred and is continuing.
(e) Net
Cash Balance.
So long
as this Note is outstanding, from and after September 30, 2006, the Company
shall at all times maintain a Net Cash Balance in excess of 30% of the aggregate
remaining unamortized or un-converted Principal amount of Notes then outstanding
(the "Net
Cash Balance Test");
provided, however, that upon the occurrence of the later of (i) the consummation
of one or more Subsequent Placements (as defined in the Securities Purchase
Agreement) in any nine-month period for which the Company receives aggregate
gross proceeds equal to or greater than $16,000,000 or (ii) the effectiveness
of
the Initial Registration Statement (as defined in the Registration Rights
Agreement), the Company shall no longer be required to satisfy the Net Cash
Balance Test. On September 30, 2006, the Company shall (i) provide to the Holder
a certification certifying whether the Net Cash Balance Test has been satisfied
and (ii) to the extent such certification contains non-public material
information, publicly disclose (on a Current Report on Form 6-K or otherwise)
such material non-public information. Promptly on any date after September
30,
2006 on which the Net Cash Balance Test is not satisfied (a "Failure
Date"),
and
to the extent such failure constitutes non-public material information, the
Company shall publicly disclose (on a Current Report on Form 6-K or
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otherwise)
such material non-public information and provide to the Holder a certification
as to the amount of the Net Cash Balance as of the Failure Date.
(f) Asset
Sales.
Promptly after the occurrence of an Asset Sale, the Company shall deliver
written notice thereof via facsimile and overnight courier (an "Asset
Sale Notice")
to the
Holder. Within sixty (60) Trading Days of such notice, the Holder may require
the Company to redeem (an "Asset
Sale Redemption"),
with
the Available Cash Proceeds of such Asset Sale, all or any portion of the
Conversion Amount of this Note by delivering written notice thereof (the
"Asset Sale
Redemption Notice")
to the
Company, which Asset Sale Redemption Notice shall indicate the portion of this
Note the Holder is electing to redeem; provided
that if
the aggregate principal amount of this Note and Other Notes to be redeemed
with
the cash proceeds of an Asset Sale exceed the amount of Available Cash Proceeds
from such Asset Sale, the Company shall redeem this Note and Other Notes on
a
pro rata basis with such proceeds. In connection with the consummation of such
Asset Sale Redemption, the Company shall issue to the Holder Series B Warrants,
which warrants shall be exercisable for a number of ADSs equal to the quotient
of (1) 30% of the Conversion Amount being redeemed and (2) the then applicable
Conversion Price. Each portion of this Note subject to redemption by the Company
pursuant to this Section 15(f) shall be redeemed by the Company at a price
equal
to 110% of the Conversion Amount being redeemed (the "Asset
Sale Redemption Price").
The
Company shall effect such Asset Sale Redemption including issuing such warrant
on a date ("Asset
Sale Redemption Date")
not
later than two (2) business days after receipt of such Asset Sale Redemption
Notice. Upon the consummation of the Asset Sale, the Holder shall take any
action required pursuant to the terms of the Security Documents to release
any
security interest on such Collateral subject to such Asset Sale. The Company
and
the Holder shall reasonably cooperate to coordinate the release of the Holder's
security interest and any Asset Sale Redemption to facilitate an Asset Sale.
Redemptions required by this Section 15(f) shall be made in accordance with
the
provisions of Section 13.
(16) PARTICIPATION.
The
Holder, as the holder of this Note, shall be entitled to receive such dividends
paid (other than cash dividends) and distributions made to the holders of ADRs
or Ordinary Shares to the same extent as if the Holder had converted this Note
into ADRs (without regard to any limitations on conversion herein or elsewhere)
and had held such ADRs on the record date for such dividends and distributions.
Payments under the preceding sentence shall be made concurrently with the
dividend or distribution to the holders of ADRs or Ordinary Shares.
(17) VOTE
TO
ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting duly
called for such purpose or the written consent without a meeting of the Required
Holders shall be required for any change or amendment to this Note or the Other
Notes.
(18) TRANSFER.
This Note and any ADRs issued upon conversion of this Note may be offered,
sold,
assigned or transferred by the Holder without the consent of the Company,
subject only to the provisions of Section 2(f) of the Securities Purchase
Agreement.
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(19) REISSUANCE
OF THIS NOTE.
(a) Transfer.
If this
Note is to be transferred, the Holder shall surrender this Note to the Company,
whereupon the Company will forthwith issue and deliver upon the order of the
Holder a new Note (in accordance with Section 19(d)), registered as the Holder
may request, representing the outstanding Principal being transferred by the
Holder and, if less then the entire outstanding Principal is being transferred,
a new Note (in accordance with Section 19(d)) to the Holder representing the
outstanding Principal not being transferred. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of the provisions
of Section 3(c)(iii) following conversion or redemption of any portion of this
Note, the outstanding Principal represented by this Note may be less than the
Principal stated on the face of this Note.
(b) Lost,
Stolen or Mutilated Note.
Upon
receipt by the Company of evidence reasonably satisfactory to the Company of
the
loss, theft, destruction or mutilation of this Note, and, in the case of loss,
theft or destruction, of any indemnification undertaking by the Holder to the
Company in customary form and, in the case of mutilation, upon surrender and
cancellation of this Note, the Company shall execute and deliver to the Holder
a
new Note (in accordance with Section 19(d)) representing the outstanding
Principal.
(c) Note
Exchangeable for Different Denominations.
This
Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section
19(d)
and in principal amounts of at least $100,000) representing in the aggregate
the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the
time
of such surrender.
(d) Issuance
of New Notes.
Whenever the Company is required to issue a new Note pursuant to the terms
of
this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall
represent, as indicated on the face of such new Note, the Principal remaining
outstanding (or in the case of a new Note being issued pursuant to Section
19(a)
or Section 19(c), the Principal designated by the Holder which, when added
to
the principal represented by the other new Notes issued in connection with
such
issuance, does not exceed the Principal remaining outstanding under this Note
immediately prior to such issuance of new Notes), (iii) shall have an issuance
date, as indicated on the face of such new Note, which is the same as the
Issuance Date of this Note, (iv) shall have the same rights and conditions
as
this Note, and (v) shall represent accrued and unpaid Interest and Late Charges
on the Principal and Interest of this Note, from the Issuance Date.
(20) REMEDIES,
CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
RELIEF.
The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note and any of the other Transaction Documents
at
law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the Holder's right to pursue
actual and consequential damages for any failure by the Company to comply with
the terms of this Note. Amounts set forth or provided for herein with respect
to
payments, conversion and the like (and
-22-
the
computation thereof) shall be the amounts to be received by the Holder and
shall
not, except as expressly provided herein, be subject to any other obligation
of
the Company (or the performance thereof). The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Holder
and
that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach,
the
Holder shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
(21) PAYMENT
OF COLLECTION, ENFORCEMENT AND OTHER COSTS.
If (a)
this Note is placed in the hands of an attorney for collection or enforcement
or
is collected or enforced through any legal proceeding or the Holder otherwise
takes action to collect amounts due under this Note or to enforce the provisions
of this Note or (b) there occurs any bankruptcy, reorganization, receivership
of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including,
but not limited to, attorneys' fees and disbursements.
(22) CONSTRUCTION;
HEADINGS. This Note shall be deemed to be jointly drafted by the Company and
all
the Purchasers and shall not be construed against any person as the drafter
hereof. The headings of this Note are for convenience of reference and shall
not
form part of, or affect the interpretation of, this Note.
(23) FAILURE
OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in
the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right
or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
(24) DISPUTE
RESOLUTION. In the case of a dispute as to the determination of the Closing
Bid
Price, the Closing Sale Price or the Weighted Average Price or the arithmetic
calculation of the Conversion Rate or the Redemption Price, the Company shall
submit the disputed determinations or arithmetic calculations via facsimile
within two (2) Business Days of receipt, or deemed receipt, of the Conversion
Notice or Redemption Notice or other event giving rise to such dispute, as
the
case may be, to the Holder. If the Holder and the Company are unable to agree
upon such determination or calculation within two (2) Business Days of such
disputed determination or arithmetic calculation being submitted to the Holder,
then the Company shall, within two Business Days submit via facsimile (a) the
disputed determination of the Closing Bid Price, the Closing Sale Price or
the
Weighted Average Price to an independent, reputable investment bank selected
by
the Company and approved by the Holder or (b) the disputed arithmetic
calculation of the Conversion Rate or the Redemption Price to the Company's
independent, outside accountant. The Company, at the Company's expense, shall
cause the investment bank or the accountant, as the case may be, to perform
the
determinations or calculations and notify the Company and the Holder of the
results no later than seven (7) Business Days from the time it receives the
disputed determinations or calculations. Such investment bank's or accountant's
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error.
-23-
(25) NOTICES;
CURRENCY; PAYMENTS.
(a) Notices.
Whenever notice is required to be given under this Note, unless otherwise
provided herein, such notice shall be given in accordance with Section 9(f)
of
the Securities Purchase Agreement. The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Note, including
in
reasonable detail a description of such action and the reason therefore. Without
limiting the generality of the foregoing, the Company will give written notice
to the Holder (i) immediately upon any adjustment of the Conversion Price,
setting forth in reasonable detail, and certifying, the calculation of such
adjustment and (ii) at least twenty (20) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend
or
distribution upon the ADRs or Ordinary Shares, (B) with respect to any pro
rata
subscription offer to holders of ADRs or Ordinary Shares or (C) for determining
rights to vote with respect to any Fundamental Transaction, dissolution or
liquidation, provided in each case that such information shall be made known
to
the public prior to or in conjunction with such notice being provided to the
Holder.
(b) Currency.
Unless
otherwise indicated, all dollar amounts referred to in this Note are in United
States Dollars.
(c) Payments.
Whenever any payment of cash is to be made by the Company to any Person pursuant
to this Note, such payment shall be made in lawful money of the United States
of
America by a check drawn on the account of the Company and sent via overnight
courier service to such Person at such address as previously provided to the
Company in writing (which address, in the case of each of the Purchasers, shall
initially be as set forth on the Schedule of Buyers attached to the Securities
Purchase Agreement); provided that the Holder may elect to receive a payment
of
cash via wire transfer of immediately available funds by providing the Company
with prior written notice setting out such request and the Holder's wire
transfer instructions. Whenever any amount expressed to be due by the terms
of
this Note is due on any day which is not a Business Day, the same shall instead
be due on the next succeeding day which is a Business Day and, in the case
of
any Interest Date which is not the date on which this Note is paid in full,
the
extension of the due date thereof shall not be taken into account for purposes
of determining the amount of Interest due on such date. Any amount of Principal
or other amounts due under the Transaction Documents, other than Interest,
which
is not paid when due shall result in a late charge being incurred and payable
by
the Company in an amount equal to interest on such amount at the rate of ten
percent (10%) per annum from the date such amount was due until the same is
paid
in full ("Late
Charge").
(26) CANCELLATION.
After
all Principal, accrued Interest and other amounts at any time owed on this
Note
have been paid in full, this Note shall automatically be deemed canceled, shall
be surrendered to the Company for cancellation and shall not be
reissued.
(27) WAIVER
OF
NOTICE. To the extent permitted by law, the Company hereby waives demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note and
the
Securities Purchase Agreement.
-24-
(28) GOVERNING
LAW.
This
Note shall be construed and enforced in accor-dance with, and all questions
concerning the construction, validity, interpretation and performance of this
Note shall be governed by, the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New
York.
(29) CERTAIN
DEFINITIONS. For purposes of this Note, the following terms shall have the
following meanings:
(a) "ADRs"
means
the American Depositary Receipts of the Company evidencing the American
Depositary Shares of the Company which each represent ten (10) Ordinary Shares
or any successor securities. Appropriate and equitable adjustment to the terms
and provisions of this Notes shall be made in the event of any change to the
ratio of ADRs to Ordinary Shares.
(b) "Applicable
Asset Sale Amount"
means
the net cash proceeds from the Asset Sale causing the calculation.
(c) "Approved
Stock Plan"
means
any employee benefit plan which has been approved by the Board of Directors
of
the Company, pursuant to which the Company's securities may be issued to any
employee, officer, director or consultant for services provided to the
Company.
(d) "Asset
Sale"
means
the sale, lease, conveyance or other disposition of any assets or rights that
constitute Collateral.
(e) "ASX"
means
the Australian Stock Exchange.
(f) "Available
Amount"
means
$7,500,000 less the aggregate principal amount of this Note previously redeemed
pursuant to Section 15(f).
(g) "Available
Cash Proceeds"
of any
Asset Sale means:
(i) If
both
the Applicable Asset Sale Amount and the Cumulative Asset Sale Amount are less
than $7,500,000, 100% of the gross proceeds of such Asset Sale;
(ii) if
the
Applicable Asset Sale Amount is less than $7,500,000 but the Cumulative Asset
Sale Amount is greater than $7,500,000, the lesser of (I) 100% of the net cash
proceeds of such Asset Sale and (II) the sum of (x) the Available
Amount and (y) the Excess Asset Sale Amount; or
(iii) if
the
Applicable Asset Sale Amount is greater than $7,500,000, the lesser of (I)
$7,500,000 and (II) the sum of (x) the Available Amount and (y) the Excess
Asset
Sale Amount;
-25-
provided,
however, that if such Available Cash Proceeds of an Asset Sale is not a positive
number, no cash proceeds of such Asset Sale shall be Available Cash
Proceeds.
(h) "Bloomberg"
means
Bloomberg Financial Markets.
(i) "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.
(j) "Calendar
Quarter"
means
each of: the period beginning on and including January 1 and ending on and
including March 31; the period beginning on and including April 1 and ending
on
and including June 30; the period beginning on and including July 1 and ending
on and including September 30; and the period beginning on and including October
1 and ending on and including December 31.
(k) "Cash
Equivalents"
means
(i) securities issued, or directly and fully guaranteed or insured, by the
government of the United States, Australia or the United Kingdom or any agency
or instrumentality thereof having maturities of not more than one year from
the
date of the acquisition by a Person, (ii) demand deposits and time deposits
and
certificates of deposit, having maturities of not more than one year from the
date of acquisition, of any domestic commercial bank which has, or the holding
company of which has, a commercial paper rating meeting the requirements
specified in clause (iv) below, (iii) repurchase obligations with a term of
not
more than 270 days for underlying securities of the types described in clauses
(i) and (ii) entered into with any financial institution meeting the
qualifications specified in clause (ii) above, and (iv) commercial paper rated
at least A-2 or the equivalent thereof by Standard & Poor's Ratings Group or
P-2 or the equivalent thereof by Moody's Investors Service, Inc. and in either
case maturing within one year after the date of acquisition.
(l) "Change
of Control"
means
any Fundamental Transaction other than (i) any
consolidation, merger, combination, or any reorganization, recapitalization
or
reclassification of the Ordinary Shares pursuant to, which holders of the
Company's voting power immediately prior to such consolidation, merger,
combination, reorganization, recapitalization or reclassification continue
after
such consolidation, merger, combination, reorganization, recapitalization or
reclassification to hold publicly traded securities and, directly or indirectly,
the voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent if other
than a corporation) of such entity or entities, or (ii) pursuant to a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company.
(m) "Change
of Control Premium"
means
(i)
until
the 12-month anniversary of the Issuance Date, 120%, (ii) from and after the
12-month anniversary of the Issuance Date until the 24-month anniversary of
the
Issuance Date, 115%, (iii) from and after the 24-month anniversary of the
Issuance Date until the 30-month anniversary of the Issuance Date, 110%, and
(iv) after the 30-month anniversary of the Issuance Date, 105%.
(n) "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
-26-
security
on the Principal Market, as reported by Bloomberg, or, if the Principal Market
begins to operate on an extended hours basis and does not designate the closing
bid price or the closing trade price, as the case may be, then the last bid
price or last trade price, respectively, of such security prior to 4:00:00
p.m.,
New York Time, as reported by Bloomberg, or, if the Principal Market is not
the
principal securities exchange or trading market for such security, the last
closing bid price or last trade price, respectively, of such security on the
principal securities exchange or trading market where such security is listed
or
traded as reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security
as
reported by Bloomberg, or, if no closing bid price or last trade price,
respectively, is reported for such security by Bloomberg, the average of the
bid
prices, or the ask prices, respectively, of any market makers for such security
as reported in the "pink sheets" by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If the Closing Bid Price or the Closing Sale Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Closing Bid Price or the Closing Sale Price, as the case may be,
of
such security on such date shall be the fair market value as mutually determined
by the Company and the Holder. If the Company and the Holder are unable to
agree
upon the fair market value of such security, then such dispute shall be resolved
pursuant to Section 24. All such determinations to be appropriately adjusted
for
any share dividend, share split, share combination or other similar transaction
during the applicable calculation period.
(o) "Closing
Date"
shall
have the meaning set forth in the Securities Purchase Agreement, which date
is
the date the Company initially issued Notes pursuant to the terms of the
Securities Purchase Agreement.
(p) "Collateral"
has the
meaning ascribed to such term in the Security Documents.
(q) "Consolidated
Total Indebtedness"
means,
with respect to any Person at any date, all Indebtedness of such Person
determined on a consolidated basis in accordance with GAAP, including, in any
event, with respect to the Company and its Subsidiaries, the outstanding
principal amount of the Notes.
(r) "Consolidated
Total Indebtedness to Market Capitalization Ratio"
means
the ratio of Consolidated Total Indebtedness to Market
Capitalization.
(s) "Convertible
Securities"
means
any shares or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for Ordinary Shares.
(t) "Cumulative
Asset Sale Amount"
means
the aggregate net cash proceeds received by the Company from all Asset Sales
after the Issuance Date (including the Asset Sale that is causing the applicable
calculation).
(u) "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.
-27-
(v) "Depositary"
means
Citibank, N.A. acting in such capacity under the Deposit Agreement.
(w) "Eligible
Market"
means
the Principal Market, The New York Stock Exchange, Inc., the American Stock
Exchange, or The Nasdaq SmallCap Market.
(x) "Equity
Conditions"
means:
(i) on each day during the period beginning on the date which is the later
of
(x) the earlier of (A) the Initial Effectiveness Deadline (as defined in the
Registration Rights Agreement) and (B) the Initial Effective Date (as defined
in
the Registration Rights Agreement) and (y) one (1) month prior to the applicable
date of determination and ending on and including the applicable date of
determination (the "Equity
Conditions Measuring Period"),
either
(x) the Registration Statement filed pursuant to the Registration Rights
Agreement shall be effective and available for the resale of all remaining
Registrable Securities in accordance with the terms of the Registration Rights
Agreement and
there
shall not have been any Grace Periods (as
defined in the Registration Rights Agreement) or (y)
all
ADRs issuable upon conversion of the Notes and exercise of the Warrants shall
be
eligible for sale without restriction and without the need for registration
under any applicable federal or state securities laws;
(ii) on
each day during the Equity Conditions Measuring Period, the ADRs
are
designated for quotation on the Principal Market or an Eligible Market and
shall
not have been suspended from trading on such exchange or market (other than
suspensions of not more than two (2) days and occurring prior to the applicable
date of determination due to business announcements by the Company) nor shall
delisting or suspension by such exchange or market been threatened or pending
either (A) in writing by such exchange or market or (B) by falling below the
minimum listing maintenance requirements of such exchange or market; (iii)
during the Equity Conditions Measuring Period the Company shall have delivered
Conversion Shares upon conversion of the Notes and ADRs
upon
exercise of the Warrants to the holders on a timely basis as set forth herein
hereof (and analogous provisions under the Other Notes) and the Warrants; (iv)
any applicable ADRs to be issued in connection with the event requiring
determination may be issued in full without violating Section 3(d) hereof and
the rules or regulations of the Principal Market or any applicable Eligible
Market; (v) during the Equity Conditions Measuring Period, the Company shall
not
have failed to timely make any payments within five (5) Business Days of when
such payment is due pursuant to any Transaction Document; (vi) during the Equity
Conditions Measuring Period, there shall not have occurred either (A) the public
announcement of a pending, proposed or intended Fundamental Transaction which
has not been abandoned, terminated or consummated or (B) an
Event
of Default or an
event
that with the passage of time or giving of notice would constitute an
Event
of Default;
(vii)
the
Company shall have no knowledge of any fact that would cause (x) the
Registration Statements required pursuant to the Registration Rights Agreement
not to be effective and available for the resale of all remaining Registrable
Securities in accordance with the terms of the Registration Rights Agreement
or
(y) any ADRs
issuable
upon conversion of the Notes and ADRs
issuable
upon exercise of the Warrants not to be eligible for sale without restriction
pursuant to Rule 144(k) and any applicable state securities laws; and (viii)
during the Equity Conditions Measuring Period, the
Company otherwise shall have been in material compliance with and shall not
have
materially breached or be in material breach of any material provision,
covenant, representation or warranty of any Transaction Document.
-28-
(y) "Excess
Asset Sale Amount"
means
solely in the event that the Cumulative Asset Sale Amount is in excess of
$15,000,000, 50% of such net cash proceeds in excess of
$15,000,000.
(z) "Excluded
Securities"
means
any Ordinary Shares issued or issuable: (i) in connection with any Approved
Stock Plan; (ii) upon conversion of the Notes or the exercise of the Warrants;
(iii) pursuant to a bona fide firm commitment underwritten public offering
with
a nationally recognized underwriter which generates gross proceeds to the
Company in excess of $25,000,000 (other than an "at-the-market offering" as
defined in Rule 415(a)(4) under the 1933 Act and "equity lines"); (iv) in
connection with the payment of any Interest Shares on the Notes; (v) in
connection with any acquisition by the Company, whether through an acquisition
of shares or a merger of any business, assets or technologies the primary
purpose of which is not to raise equity capital; (vi) upon conversion of any
Options or Convertible Securities which are outstanding on the day immediately
preceding the Subscription Date, provided that the terms of such Options or
Convertible Securities are not amended, modified or changed on or after the
Subscription Date; (vii) in replacement of outstanding Ordinary Shares as a
result of the re-incorporation of the Company into the United States; (viii)
in
connection with any rights offering to all holders of Ordinary Shares generally;
and (ix) in connection with a Strategic Financing.
(aa) "Fundamental
Transaction"
means
that the Company shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person, or (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of the Company to another Person, or (iii) allow another Person to make
a
purchase, tender or exchange offer that is accepted by the holders of more
than
the 50% of the outstanding Ordinary Shares (not including any Ordinary Shares
held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer),
or (iv) consummate a share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off
or
scheme of arrangement) with another Person whereby such other Person acquires
more than the 50% of the outstanding Ordinary Shares (not including any Ordinary
Shares held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such share
purchase agreement or other business combination), or (v) reorganize,
recapitalize or reclassify its Ordinary Shares.
(bb) "GAAP"
means
United States generally accepted accounting principles, consistently
applied.
(cc) "Holder
Optional Redemption Date"
means
each of July 31, 2007 and January 31, 2008.
(dd) "Holder
Pro Rata Amount"
means a
fraction (i) the numerator of which is the Principal amount of this Note on
the
Closing Date and (ii) the denominator of which is the aggregate principal amount
of the Notes issued to the initial purchasers pursuant to the Securities
Purchase Agreement on the Closing Date of all then outstanding Notes.
-29-
(ee) "Indebtedness"
has the
meaning ascribed to such term in the Securities Purchase Agreement.
(ff) "Interest
Conversion Price"
means,
with respect to any Interest Date, that price which shall be computed as 85%
of
the arithmetic average of the Weighted Average Price of the ADRs on each of
the
ten (10) consecutive Trading Days ending on the Trading Day immediately
preceding the applicable Interest Date (each, an "Interest
Measuring Period").
All
such determinations to be appropriately adjusted for any share split, share
dividend, share combination or other similar transaction during such
period.
(gg) "Interest
Rate"
means
eight percent (8.0%) per annum.
(hh) "Market
Capitalization"
of the
Company means the amount determined by multiplying the total number of Ordinary
Shares issued and outstanding (as reflected in the Company's latest Form 20-F
or
other publicly filed report) times the arithmetic average of the Weighted
Average Price of the Ordinary Shares for the ten (10) consecutive Trading Days
preceding the date of measurement.
(ii) "Maximum
Interest Share Amount"
means
the Holder Pro Rata Amount of the quotient determined by dividing (A) the
product of (x) 15% and (y) the sum of the Trading Dollar Volume of the ADRs
for
the twenty (20) Trading Days ending on the Trading Day immediately preceding
the
applicable Interest Date by (B) the applicable Interest Conversion
Price.
(jj) "Net
Cash Balance"
means,
at any date, the difference between (i) aggregate amount of all cash and Cash
Equivalents and Short and Long Term Investments reflected on the Company's
balance sheet as at such date,
minus
(ii) the
unpaid principal balance of the Permitted Indebtedness (not including amounts
owed under the Notes, any accounts payable or Indebtedness described in Section
29(oo)(B)) on such date.
(kk) "Optional
Redemption Date"
means
any of a Company Redemption Date, an Asset Sale Redemption Date and a Holder
Redemption Date.
(ll) "Options"
means
any rights, warrants or options to subscribe for or purchase Ordinary Shares
or
Convertible Securities.
(mm) "Ordinary
Shares"
means
(i) the Company's ordinary shares, no par value per share, and
(ii) any share capital into which such Ordinary Shares shall have been
changed or any share capital resulting from a reclassification of such Ordinary
Shares.
(nn) "Parent
Entity"
of a
Person means an entity that, directly or indirectly, controls the applicable
Person and whose common shares or equivalent equity security is quoted or listed
on an Eligible Market, or, if there is more than one such Person or Parent
Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental
Transaction.
-30-
(oo) "Permitted
Indebtedness"
means
(A) Permitted Senior Indebtedness, (B) Indebtedness incurred by the Company
that
is made expressly subordinate in right of payment to the Indebtedness evidenced
by this Note, as reflected in a written agreement acceptable to the Holder
and
approved by the Holder in writing, and which Indebtedness does not provide
at
any time for (1) the payment, prepayment, repayment, repurchase or defeasance,
directly or indirectly, of any principal or premium, if any, thereon until
ninety-one (91) days after the Maturity Date or later and (2) total interest
and
fees at a rate in excess of eight percent (8%) per annum, (C) Indebtedness
secured by Permitted Liens, (D) Indebtedness to trade creditors incurred in
the
ordinary course of business, and (E) Indebtedness of any entity acquired by or
merged with the Company not for capital raising purposes and existing at the
date of such acquisition or merger, (F) Indebtedness not covered by (A) through
(E) above which is incurred by the Company in an amount not to exceed an
aggregate of $10 million dollars, provided that such Indebtedness is not in
any
way convertible into, exchangeable for or in any way payable in equity
securities of the Company and, provided further that such Indebtedness shall
only be incurred to the extent that the Consolidated Total Indebtedness to
Market Capitalization Ratio does not exceed .15 at the time of incurrence of
such Indebtedness, (G) extensions, refinancings and renewals of any items of
Permitted Indebtedness, provided that the principal amount is not increased
or
the terms modified to impose more burdensome terms upon the Company or its
Subsidiary, as the case may be and (H) Indebtedness evidenced by this Note
and
the Other Notes.
(pp) "Permitted
Liens"
means
(i) any Lien for taxes not yet due or delinquent or being contested in good
faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any statutory Lien arising in the
ordinary course of business by operation of law with respect to a liability
that
is not yet due or delinquent, (iii) any Lien created by operation of law, such
as materialmen's liens, mechanics' liens and other similar liens, arising in
the
ordinary course of business with respect to a liability that is not yet due
or
delinquent or that are being contested in good faith by appropriate proceedings,
(iv) Liens (A) upon or in any equipment acquired or held by the Company or
any
of its Subsidiaries to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition or
lease of such equipment, or (B) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment, (v)
Liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by Liens of the type described in clauses (i) and (iv)
above, provided that any extension, renewal or replacement Lien shall be limited
to the property encumbered by the existing Lien and the principal amount of
the
Indebtedness being extended, renewed or refinanced does not increase, (vi)
leases or subleases and licenses and sublicenses granted to others in the
ordinary course of the Company's business, not interfering in any material
respect with the business of the Company and its Subsidiaries taken as a whole,
(vii) Liens in favor of customs and revenue authorities arising as a matter
of
law to secure payments of custom duties in connection with the importation
of
goods, (viii) Liens on any assets of any entity acquired by or merged with
the
Company not for capital raising purposes and existing at the date of such
acquisition or merger, (ix) Liens arising from judgments, decrees or attachments
in circumstances not constituting an Event of Default under Section 4(a)(viii)
and (x) Liens securing the obligations under this Note and the Other
Notes.
-31-
(qq) "Permitted
Senior Indebtedness"
means
the principal of (and premium, if any), interest on, and all fees and other
amounts (including, without limitation, any reasonable out-of-pocket costs,
enforcement expenses (including reasonable out-of-pocket legal fees and
disbursements), collateral protection expenses and other reimbursement or
indemnity obligations relating thereto) payable by Company and/or its
Subsidiaries under or in connection with any credit facility to be entered
into
by the Company and/or its Subsidiaries with one or more financial institutions
together with any amendments, restatements, renewals, refundings, refinancings
or other extensions thereof); provided,
however,
that
the aggregate outstanding amount of such Permitted Senior Indebtedness (taking
into account the maximum amounts which may be advanced under the loan documents
evidencing such Permitted Senior Indebtedness) does not as of the date on which
any such Permitted Senior Indebtedness is incurred exceed
$10,000,000, with
respect to the unpaid principal balance of loans thereunder and, provided
further that such Permitted Senior Indebtedness shall only be incurred to the
extent that the Consolidated Total Indebtedness to Market Capitalization Ratio
does not exceed .15 at the time of incurrence of such Permitted Senior
Indebtedness.
(rr) "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.
(ss) "Principal
Market"
means
the Nasdaq National Market.
(tt) "Redemption
Notices"
means,
collectively, the Event of Default Redemption Notice, the Change of Control
Redemption Notice, the Holder Optional Redemption Notice, the Company Optional
Redemption Notice and the Asset Sale Redemption Notice, each of the foregoing,
individually, a Redemption Notice.
(uu) "Redemption
Premium"
means
(i) in the case of the Events of Default described in Section 4(a)(i) - (v)
and
(viii) - (xi), 110% or (ii) in the case of the Events of Default described
in
Section 4(a)(vi) - (vii), 100%.
(vv) "Redemption
Prices"
means,
collectively, the Event of Default Redemption Price, Change of Control
Redemption Price, the Holder Optional Redemption Price, the Company Optional
Redemption Price and the Asset Sale Redemption Price, each of the foregoing,
individually, a Redemption Price.
(ww) "Registration
Rights Agreement"
means
that certain registration rights agreement dated as of August 10, 2006 by and
among the Company and the Holder relating to, among other things, the
registration of the resale of the ADSs issuable upon conversion of the Notes,
payment of interest under the Notes, and exercise of the Warrants and the Series
B Warrants, as the same may be amended, restated, supplemented or otherwise
modified.
(xx) "Required
Holders"
means
the holders of Notes representing at least a majority of the aggregate principal
amount of the Notes then outstanding.
-32-
(yy) "SEC"
means
the United States Securities and Exchange Commission.
(zz) "Securities
Purchase Agreement"
means
that certain securities purchase agreement dated as of the Subscription Date
by
and among the Company and the initial holders of the Notes pursuant to which
the
Company issued the Notes, as amended by the Amendment Agreement, dated July
28,
2006, between the Holder and the Company, as the same may be further amended,
restated, supplemented or otherwise modified.
(aaa) "Security
Documents"
has the
meaning ascribed to such term in the Securities Purchase Agreement.
(bbb) "Series
B Warrants"
has the
meaning ascribed to such term in the Securities Purchase Agreement, and shall
include all warrants issued in exchange therefor or replacement
thereof.
(ccc) "Strategic
Financing"
means
the issuance, directly or indirectly, of Ordinary Shares or warrants to purchase
Ordinary Shares at a purchase price or an exercise price, as the case may be,
that is not less than the market price of the Ordinary Shares on the date of
issuance of such Ordinary Shares or warrant, in connection with any strategic
investor, vendor, lease or similar arrangement (the primary purpose of which
is
not to raise equity capital), provided that the aggregate number of shares
of
Ordinary Shares which the Company may issue pursuant to this definition shall
not exceed ten percent (10%) of the outstanding Ordinary Shares at the time
of
issuance (subject to adjustment for stock splits, stock dividends, stock
combination and similar transactions)
(ddd) "Subscription
Date"
means
October 5, 2005.
(eee) "Subsequent
Conversion Price"
means
108% of the arithmetic average of the Weighted Average Price of the ADRs for
the
ten (10) consecutive Trading Days ending on the Trading Day immediately
preceding April 30, 2007. All such determinations to be appropriately adjusted
for any share split, share dividend, share combination or other similar
transaction during such period.
(fff) "Successor
Entity"
means
the Person, which may be the Company, formed by, resulting from or surviving
any
Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made, provided that if such Person is not a publicly traded
entity whose common shares or equivalent equity security is quoted or listed
for
trading on an Eligible Market, Successor Entity shall mean such Person's Parent
Entity.
(ggg) "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
-33-
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).
(hhh) "Trading
Dollar Volume"
means,
for any day on which the ADRs are traded on the Principal Market, the product
of
(i) the daily average trading volume of the ADRs on such day multiplied by
(ii)
the Weighted Average Price for the ADRs on such day.
(iii) "Warrants"
has the
meaning ascribed to such term in the Securities Purchase Agreement, and shall
include all warrants issued in exchange therefor or replacement
thereof.
(jjj) "Weighted
Average Price"
means,
for any security as of any date, the dollar volume-weighted average price for
such security on the Principal Market during the period beginning at 9:30:01
a.m., New York Time (or such other time as the Principal Market publicly
announces is the official open of trading), and ending at 4:00:00 p.m., New
York
Time (or such other time as the Principal Market publicly announces is the
official close of trading) as reported by Bloomberg through its "Volume at
Price" functions, or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market
on
the electronic bulletin board for such security during the period beginning
at
9:30:01 a.m., New York Time (or such other time as such market publicly
announces is the official open of trading), and ending at 4:00:00 p.m., New
York
Time (or such other time as such market publicly announces is the official
close
of trading) as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours, the average
of
the highest closing bid price and the lowest closing ask price of any of the
market makers for such security as reported in the "pink sheets" by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average
Price cannot be calculated for a security on a particular date on any of the
foregoing bases, the Weighted Average Price of such security on such date shall
be the fair market value as mutually determined by the Company and the Holder.
If the Company and the Holder are unable to agree upon the fair market value
of
such security, then such dispute shall be resolved pursuant to Section 24.
All
such determinations to be appropriately adjusted for any share dividend, share
split, share combination or other similar transaction during the applicable
calculation period.
[Signature
Page Follows]
-34-
IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
the
Issuance Date set out above.
| PSIVIDA LIMITED | ||
| |
|
|
| By: | /s/ Michael J. Soja | |
|
|
||
|
Name:
Michael J. Soja
Title:
Vice President and Chief Financial
Officer
|
||
EXHIBIT
I
PSIVIDA
LIMITED
CONVERSION
NOTICE
Reference
is made to the Convertible Note (the "Note")
issued
to the undersigned by pSivida Limited (the "Company").
In
accordance with and pursuant to the Note, the undersigned hereby elects to
convert the Conversion Amount (as defined in the Note) of the Note indicated
below into ADRs (the "ADRs")
of the
Company, as of the date specified below.
|
Date
of Conversion:
|
|||||||||||
|
Aggregate
Conversion Amount to be converted:
|
|||||||||||
|
Please
confirm the following information:
|
|||||||||||
|
Conversion
Price:
|
|||||||||||
|
Number
of ADRs to be issued:
|
|||||||||||
|
Please
issue the ADRs into which the Note is being converted in the following
name and to the following address:
|
|||||||||||
|
Issue
to:
|
|||||||||||
|
Facsimile
Number:
|
|||||||||||
|
Authorization:
|
|||||||||||
|
By:
|
|||||||||||
|
Title:
|
|||||||||||
|
Dated:
|
|||||||||||
|
Account
Number:
|
|||||||||||
|
(if
electronic book entry transfer)
|
|||||||||||
|
Transaction
Code Number:
|
|||||||||||
|
(if
electronic book entry transfer)
|
|||||||||||
ACKNOWLEDGMENT
The
Company hereby acknowledges this Conversion Notice and hereby directs Citibank,
N.A. to issue the above indicated number of ADRs in accordance with the Transfer
Agent Instructions dated September 14, 2006 from the Company and acknowledged
and agreed to by Citibank, N.A.
|
pSivida
Limited
|
|
By:_________________________________________
|
|
Name:
|
|
Title:
|
