Document:

Warrant issued to YA Global

EXHIBIT 10.2

WARRANT

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.  

ARIEL WAY, INC.

Warrant To Purchase Common Stock

Warrant No.: AWYI-2-2

Number of Shares:

500,000,000

Warrant Exercise Price:

$0.001

Expiration Date:

April 21, 2013

Date of Issuance: April 21, 2008

Ariel Way, Inc., a Florida corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, YA Global Investments, L.P. (the “Holder”), the registered holder hereof or its permitted assigns, is entitled, subject to the terms set forth below, to purchase from the Company upon surrender of this Warrant, at any time or times on or after the date hereof, but not after 11:59 P.M. Eastern Time on the Expiration Date (as defined herein) up to Five Hundred Million (500,000,000) fully paid and nonassessable shares of Common Stock (as defined herein) of the Company (the “Warrant Shares”) at the exercise price per share provided in Section 1(b) below or as subsequently adjusted; provided, however, that in no event shall the holder be entitled to exercise this Warrant for a number of Warrant Shares in excess of that number of Warrant Shares which, upon giving effect to such exercise, would cause the aggregate number of shares of Common Stock beneficially owned by the holder and its affiliates to exceed 4.99% of the outstanding shares of the Common Stock following such exercise, except within sixty (60) days of the Expiration Date (however, such restriction may be waived by Holder (but only as to itself and not to any other holder) upon not less than 65 days prior notice to the Company).  For purposes of the foregoing proviso, the aggregate number of shares of Common Stock beneficially owned by the holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such proviso is being made, but shall exclude shares of Common Stock which would be issuable upon (i) exercise of the remaining, unexercised Warrants beneficially owned by the holder and its affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by the holder and its affiliates (including, without limitation, 

any convertible notes or preferred stock) 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 paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended.  For purposes of this Warrant, in determining the number of outstanding shares of Common Stock a holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company’s most recent Form 10-QSB or Form 10-KSB, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company or its transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written request of any holder, the Company shall promptly, but in no event later than one (1) Business Day following the receipt of such notice, confirm in writing to any such holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the exercise of Warrants (as defined below) by such holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.

Section 1.

(a)

This Warrant is issued pursuant to the Forebearance Agreement (“Forebearance Agreement”) dated the date hereof between the Company, the Holder and Montgomery Equity Partners, Ltd. or issued in exchange or substitution thereafter or replacement thereof.  Each Capitalized term used, and not otherwise defined herein, shall have the meaning ascribed thereto in the Transaction Documents (as such term is defined in the Forebearance Agreement).

(b)

Definitions.  The following words and terms as used in this Warrant shall have the following meanings:

(i)

“Approved Stock Plan” means a stock option plan that has been approved by the Board of Directors of the Company prior to the date of the Forebearance Agreement, pursuant to which the Company’s securities may be issued only to any employee, officer or director for services provided to the Company.

(ii)

 “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law to remain closed.

(iii)

“Closing Bid Price” means the closing bid price of Common Stock as quoted on the Principal Market (as reported by Bloomberg Financial Markets (“Bloomberg”) through its “Volume at Price” function).

(iv)

“Common Stock” means (i) the Company’s common stock, par value $0.001 per share, and (ii) any capital stock into which such Common Stock shall have been changed or any capital stock resulting from a reclassification of such Common Stock.

(v)

“Excluded Securities” means, (a) shares issued or deemed to have been issued by the Company pursuant to an Approved Stock Plan, (b) shares of Common Stock issued or deemed to be issued by the Company upon the conversion, exchange or exercise of any 

2

right, option, obligation or security outstanding on the date prior to date of the Forebearance Agreement, provided that the terms of such right, option, obligation or security are not amended or otherwise modified on or after the date of the Forebearance Agreement, and provided that the conversion price, exchange price, exercise price or other purchase price is not reduced, adjusted or otherwise modified and the number of shares of Common Stock issued or issuable is not increased (whether by operation of, or in accordance with, the relevant governing documents or otherwise) on or after the date of the Forebearance Agreement,  and (c) the shares of Common Stock issued or deemed to be issued by the Company upon conversion of the Convertible Debentures or exercise of the Warrants. 

(vi)

“Expiration Date” means April 21, 2013.

(vii)

“Issuance Date” means the date hereof.

(viii)

“Options” means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities. 

(ix)

 “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

(x)

“Primary Market” means on any of (a) the American Stock Exchange, (b) New York Stock Exchange, (c) the Nasdaq Global Select Market, (d) the Nasdaq Global Market, (e) the Nasdaq Capital Market, or (e) the Over-the-Counter Bulletin Board (“OTCBB”) 

(xi)

“Securities Act” means the Securities Act of 1933, as amended.  

(xii)

“Warrant” means this Warrant and all Warrants issued in exchange, transfer or replacement thereof.  

(xiii)

“Warrant Exercise Price” shall be $0.001 or as subsequently adjusted as provided in Section 8 hereof.  

(b)

Other Definitional Provisions.  

(i)

Except as otherwise specified herein, all references herein (A) to the Company shall be deemed to include the Company’s successors and (B) to any applicable law defined or referred to herein shall be deemed references to such applicable law as the same may have been or may be amended or supplemented from time to time.  

(ii)

When used in this Warrant, the words “herein”, “hereof”, and “hereunder” and words of similar import, shall refer to this Warrant as a whole and not to any provision of this Warrant, and the words “Section”, “Schedule”, and “Exhibit” shall refer to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise specified.  

(iii)

Whenever the context so requires, the neuter gender includes the masculine or feminine, and the singular number includes the plural, and vice versa.  

3

Section 2.

Exercise of Warrant.  

(a)

Subject to the terms and conditions hereof, this Warrant may be exercised by the holder hereof then registered on the books of the Company, pro rata as hereinafter provided, at any time on any Business Day on or after the opening of business on such Business Day, commencing with the first day after the date hereof, and prior to 11:59 P.M. Eastern Time on the Expiration Date (i) by delivery of a written notice, in the form of the subscription notice attached as Exhibit A hereto (the “Exercise Notice”), of such holder’s election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased, payment to the Company of an amount equal to the Warrant Exercise Price(s) applicable to the Warrant Shares being purchased, multiplied by the number of Warrant Shares (at the applicable Warrant Exercise Price) as to which this Warrant is being exercised (plus any applicable issue or transfer taxes) (the “Aggregate Exercise Price”) in cash or wire transfer of immediately available funds and the surrender of this Warrant (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction) to a common carrier for overnight delivery to the Company as soon as practicable following such date (“Cash Basis”) or (ii) if at the time of exercise, the Warrant Shares are not subject to an effective registration statement, by delivering an Exercise Notice and in lieu of making payment of the Aggregate Exercise Price in cash or wire transfer, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (the “Cashless Exercise”):  

Net Number = (A x B) – (A x C)

                                      B

For purposes of the foregoing formula: 

A = the total number of Warrant Shares with respect to which this Warrant is then being exercised. 

B = the Closing Bid Price of the Common Stock on the date of exercise of the Warrant.

C = the Warrant Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise. 

In the event of any exercise of the rights represented by this Warrant in compliance with this Section 2, the Company shall on or before the fifth (5th) Business Day following the date of receipt of the Exercise Notice, the Aggregate Exercise Price and this Warrant (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction) and the receipt of the representations of the holder specified in Section 6 hereof, if requested by the Company (the “Exercise Delivery Documents”), and if the Common Stock is DTC eligible, credit such aggregate number of shares of Common Stock to which the holder shall be entitled to the holder’s or its designee’s balance account with The Depository Trust Company; provided, however, if the holder who submitted the Exercise Notice requested physical delivery of any or all of the Warrant Shares, or, if the Common Stock is not DTC eligible  then the Company shall, on or before the fifth (5th) Business Day following receipt of the Exercise Delivery Documents, issue and surrender to a common carrier for overnight 

4

delivery to the address specified in the Exercise Notice, a certificate, registered in the name of the holder, for the number of shares of Common Stock to which the holder shall be entitled pursuant to such request.  Upon delivery of the Exercise Notice and Aggregate Exercise Price referred to in clause (i) or (ii) above the holder of this Warrant shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised.  In the case of a dispute as to the determination of the Warrant Exercise Price, the Closing Bid Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the holder the number of Warrant Shares that is not disputed and shall submit the disputed determinations or arithmetic calculations to the holder via facsimile within one (1) Business Day of receipt of the holder’s Exercise Notice.  

(b)

If the holder and the Company are unable to agree upon the determination of the Warrant Exercise Price or arithmetic calculation of the Warrant Shares within one (1) day of such disputed determination or arithmetic calculation being submitted to the holder, then the Company shall immediately submit via facsimile (i) the disputed determination of the Warrant Exercise Price or the Closing Bid Price to an independent, reputable investment banking firm or (ii) the disputed arithmetic calculation of the Warrant Shares to its independent, outside accountant.  The Company shall cause the investment banking firm 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 forty-eight (48) hours from the time it receives the disputed determinations or calculations.  Such investment banking firm’s or accountant’s determination or calculation, as the case may be, shall be deemed conclusive absent manifest error.

(c)

Unless the rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, as soon as practicable and in no event later than five (5) Business Days after any exercise and at its own expense, issue a new Warrant identical in all respects to this Warrant exercised except it shall represent rights to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant exercised, less the number of Warrant Shares with respect to which such Warrant is exercised.

(d)

No fractional Warrant Shares are to be issued upon any pro rata exercise of this Warrant, but rather the number of Warrant Shares issued upon such exercise of this Warrant shall be rounded up or down to the nearest whole number.

(e)

If the Company or its Transfer Agent shall fail for any reason or for no reason to issue to the holder within ten (10) days of receipt of the Exercise Delivery Documents, a certificate for the number of Warrant Shares to which the holder is entitled or to credit the holder’s balance account with The Depository Trust Company for such number of Warrant Shares to which the holder is entitled upon the holder’s exercise of this Warrant, the Company shall, in addition to any other remedies under this Warrant or otherwise available to such holder, pay as additional damages in cash to such holder on each day the issuance of such certificate for Warrant Shares is not timely effected an amount equal to 0.025% of the product of (A) the sum of the number of Warrant Shares not issued to the holder on a timely basis and to which the holder is entitled, and (B) the Closing Bid Price of the Common Stock for the trading day immediately preceding the last possible date which the Company could have issued such Common Stock to the holder without violating this Section 2.

5

(f)

If within ten (10) days after the Company’s receipt of the Exercise Delivery Documents, the Company fails to deliver a new Warrant to the holder for the number of Warrant Shares to which such holder is entitled pursuant to Section 2 hereof, then, in addition to any other available remedies under this Warrant, or otherwise available to such holder, the Company shall pay as additional damages in cash to such holder on each day after such tenth (10th) day that such delivery of such new Warrant is not timely effected in an amount equal to 0.25% of the product of (A) the number of Warrant Shares represented by the portion of this Warrant which is not being exercised and (B) the Closing Bid Price of the Common Stock for the trading day immediately preceding the last possible date which the Company could have issued such Warrant to the holder without violating this Section 2.

Section 3.

Covenants as to Common Stock.  The Company hereby covenants and agrees as follows:

(a)

This Warrant is, and any Warrants issued in substitution for or replacement of this Warrant will upon issuance be, duly authorized and validly issued.

(b)

All Warrant Shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof.

(c)

During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved at least one hundred percent (100%) of the number of shares of Common Stock needed to provide for the exercise of the rights then represented by this Warrant and the par value of said shares will at all times be less than or equal to the applicable Warrant Exercise Price.  If at any time the Company does not have a sufficient number of shares of Common Stock authorized and available, then the Company shall call and hold a special meeting of its stockholders within sixty (60) days of that time for the sole purpose of increasing the number of authorized shares of Common Stock.

(d)

If at any time after the date hereof the Company shall file a registration statement, the Company shall include the Warrant Shares issuable to the holder, pursuant to the terms of this Warrant and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Warrant Shares from time to time issuable upon the exercise of this Warrant; and the Company shall so list on each national securities exchange or automated quotation system, as the case may be, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon the exercise of this Warrant if and so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system.

(e)

The Company will not, by amendment of its Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, 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 to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of the holder of this Warrant against dilution or other impairment, consistent with the 

6

tenor and purpose of this Warrant.  The Company will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Warrant Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

(f)

This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets.

Section 4.

Taxes.  The Company shall pay any and all taxes, except any applicable withholding, which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.

Section 5.

Warrant Holder Not Deemed a Stockholder.  Except as otherwise specifically provided herein, no holder, as such, of this Warrant shall be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the holder of this Warrant of the Warrant Shares which he or she is then entitled to receive upon the due exercise of this Warrant.  In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on such holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.  Notwithstanding this Section 5, the Company will provide the holder of this Warrant with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.

Section 6.

Representations of Holder.  The holder of this Warrant, by the acceptance hereof, represents that it is acquiring this Warrant and the Warrant Shares for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act; provided, however, that by making the representations herein, the holder does not agree to hold this Warrant or any of the Warrant Shares for any minimum or other specific term and reserves the right to dispose of this Warrant and the Warrant Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act.  The holder of this Warrant further represents, by acceptance hereof, that, as of this date, such holder is an “accredited investor” as such term is defined in Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange Commission under the Securities Act (an “Accredited Investor”).  Upon exercise of this Warrant  the holder shall, if requested by the Company, confirm in writing, in a form satisfactory to the Company, that the Warrant Shares so purchased are being acquired solely for the holder’s own account and not as a nominee for any other party, for investment, and not with a view toward distribution or resale and that such holder is an Accredited Investor.  If such holder cannot make such representations because they would be factually incorrect, it shall be a condition to such holder’s exercise of this 

7

Warrant that the Company receive such other representations as the Company considers reasonably necessary to assure the Company that the issuance of its securities upon exercise of this Warrant shall not violate any United States or state securities laws.

Section 7.

Ownership and Transfer.

(a)

The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee.  The Company may treat the person in whose name any Warrant is registered on the register as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, but in all events recognizing any transfers made in accordance with the terms of this Warrant.

Section 8.

Adjustment of Warrant Exercise Price and Number of Shares.  The Warrant Exercise Price and the number of shares of Common Stock issuable upon exercise of this Warrant shall be adjusted from time to time as follows:

(a)

Adjustment of Warrant Exercise Price and Number of Shares upon Issuance of Common Stock.  If and whenever on or after the Issuance Date of this Warrant, the Company issues or sells, or is deemed to have issued or sold, any shares of Common Stock (other than Excluded Securities) for a consideration per share less than a price (the “Applicable Price”) equal to the Warrant Exercise Price in effect immediately prior to such issuance or sale, then immediately after such issue or sale the Warrant Exercise Price then in effect shall be reduced to an amount equal to such consideration per share.  Upon each such adjustment of the Warrant Exercise Price hereunder, the number of Warrant Shares issuable upon exercise of this Warrant shall be adjusted to the number of shares determined by multiplying the Warrant Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product thereof by the Warrant Exercise Price resulting from such adjustment.

(b)

Effect on Warrant Exercise Price of Certain Events.  For purposes of determining the adjusted Warrant Exercise Price under Section 8(a) above, the following shall be applicable:

(i)

Issuance of Options.  If after the date hereof, the Company in any manner grants any Options and the lowest price per share for which one share of Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange of any convertible securities issuable upon exercise of any such Option is less than the Applicable Price, then such share of Common Stock 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 8(b)(i), the lowest price per share for which one share of Common Stock is issuable upon exercise of such Options or upon conversion or exchange of such Convertible Securities 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 share of Common Stock upon the granting or sale of the Option, upon exercise of the Option or upon conversion or exchange of any convertible security issuable upon exercise of such Option.  No further 

8

adjustment of the Warrant Exercise Price shall be made upon the actual issuance of such Common Stock or of such convertible securities upon the exercise of such Options or upon the actual issuance of such Common Stock upon conversion or exchange 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 share of Common Stock is issuable upon the conversion or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such convertible securities for such price per share.  For the purposes of this Section 8(b)(ii), the lowest price per share for which one share of Common Stock is issuable upon such conversion or exchange shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale of the convertible security and upon conversion or exchange of such convertible security.  No further adjustment of the Warrant Exercise Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange 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 Warrant Exercise Price had been or are to be made pursuant to other provisions of this Section 8(b), no further adjustment of the Warrant Exercise 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 or exchange of any convertible securities, or the rate at which any convertible securities are convertible into or exchangeable for Common Stock changes at any time, the Warrant Exercise Price in effect at the time of such change shall be adjusted to the Warrant Exercise 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 and the number of Warrant Shares issuable upon exercise of this Warrant shall be correspondingly readjusted.  For purposes of this Section 8(b)(iii), if the terms of any Option or convertible security that was outstanding as of the Issuance Date of this Warrant are changed in the manner described in the immediately preceding sentence, then such Option or convertible security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change.  No adjustment pursuant to this Section 8(b) shall be made if such adjustment would result in an increase of the Warrant Exercise Price then in effect.

(iv)

Calculation of Consideration Received.  If any Common Stock, Options or convertible securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefore will be deemed to be the net amount received by the Company therefore.  If any Common Stock, Options or convertible securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by the Company will be the market price of such securities on the date of receipt of such securities.  If any Common Stock, Options or convertible securities are issued to the owners of the non-surviving entity in 

9

connection with any merger in which the Company is the surviving entity, the amount of consideration therefore 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 Common Stock, Options or convertible securities, as the case may be.  The fair value of any consideration other than cash or securities will be determined jointly by the Company and the holders of Warrants representing at least two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants then outstanding.  If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within five (5) Business Days after the tenth (10th) day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the holders of Warrants representing at least two-thirds (b) of the Warrant Shares issuable upon exercise of the Warrants then outstanding.  The determination of such appraiser shall be final and binding upon all parties and the fees and expenses of such appraiser shall be borne jointly by the Company and the holders of Warrants.

(v)

Integrated Transactions.  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.

(vi)

Treasury Shares.  The number of shares of Common Stock outstanding at any given time does not include shares owned or held by or for the account of the Company, and the disposition of any shares so owned or held will be considered an issue or sale of Common Stock.

(vii)

Record Date.  If the Company takes a record of the holders of Common Stock for the purpose of entitling them (1) to receive a dividend or other distribution payable in Common Stock, Options or in convertible securities or (2) to subscribe for or purchase Common Stock, Options or convertible securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock 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.

(c)

Adjustment of Warrant Exercise Price upon Subdivision or Combination of Common Stock.  If the Company at any time after the date of issuance of this Warrant subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, any Warrant Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of shares of Common Stock obtainable upon exercise of this Warrant will be proportionately increased.  If the Company at any time after the date of issuance of this Warrant combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, any Warrant Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant will be proportionately decreased.  Any adjustment under this Section 8© shall become effective at the close of business on the date the subdivision or combination becomes effective.

10

(d)

Distribution of Assets.  If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case:

(i)

any Warrant Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Warrant Exercise Price by a fraction of which (A) the numerator shall be the Closing Sale Price of the Common Stock on the trading day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of Common Stock, and (B) the denominator shall be the Closing Sale Price of the Common Stock on the trading day immediately preceding such record date; and

(ii)

either (A) the number of Warrant Shares obtainable upon exercise of this Warrant shall be increased to a number of shares equal to the number of shares of Common Stock obtainable immediately prior to the close of business on the record date fixed for the determination of holders of Common Stock entitled to receive the Distribution multiplied by the reciprocal of the fraction set forth in the immediately preceding clause (i), or (B) in the event that the Distribution is of common stock of a company whose common stock is traded on a national securities exchange or a national automated quotation system, then the holder of this Warrant shall receive an additional warrant to purchase Common Stock, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the amount of the assets that would have been payable to the holder of this Warrant pursuant to the Distribution had the holder exercised this Warrant immediately prior to such record date and with an exercise price equal to the amount by which the exercise price of this Warrant was decreased with respect to the Distribution pursuant to the terms of the immediately preceding clause (i).

(e)

Certain Events.  If any event occurs of the type contemplated by the provisions of this Section 8 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s Board of Directors will make an appropriate adjustment in the Warrant Exercise Price and the number of shares of Common Stock obtainable upon exercise of this Warrant so as to protect the rights of the holders of the Warrants; provided, except as set forth in section 8(c),that no such adjustment pursuant to this Section 8(e) will increase the Warrant Exercise Price or decrease the number of shares of Common Stock obtainable as otherwise determined pursuant to this Section 8.

(f)

Voluntary Adjustments By Company.  The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

11

(g)

Notices.

(iii)

Immediately upon any adjustment of the Warrant Exercise Price, the Company will give written notice thereof to the holder of this Warrant, setting forth in reasonable detail, and certifying, the calculation of such adjustment.

(iv)

The Company will give written notice to the holder of this Warrant at least ten (10) 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 Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock or (C) for determining rights to vote with respect to any Organic Change (as defined below), dissolution or liquidation, provided that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder.

(v)

The Company will also give written notice to the holder of this Warrant at least ten (10) days prior to the date on which any Organic Change, dissolution or liquidation will take place, provided that such information shall be made known to the public prior to or in conjunction with such notice being provided to such holder.

Section 9.

Purchase Rights; Reorganization, Reclassification, Consolidation, Merger or Sale.

(a)

In addition to any adjustments pursuant to Section 8 above, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the holder of this Warrant will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant 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 Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(b)

Any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company’s assets to another Person or other transaction in each case which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to herein as an “Organic Change.”  Prior to the consummation of any (i) sale of all or substantially all of the Company’s assets to an acquiring Person or (ii) other Organic Change following which the Company is not a surviving entity, the Company will secure from the Person purchasing such assets or the successor resulting from such Organic Change (in each case, the “Acquiring Entity”) a written agreement (in form and substance satisfactory to the holders of Warrants representing at least two-thirds (iii) of the Warrant Shares issuable upon exercise of the Warrants then outstanding) to deliver to each holder of Warrants in exchange for such Warrants, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to this Warrant and satisfactory to the holders of the Warrants (including an adjusted warrant exercise price equal to 

12

the value for the Common Stock reflected by the terms of such consolidation, merger or sale, and exercisable for a corresponding number of shares of Common Stock acquirable and receivable upon exercise of the Warrants without regard to any limitations on exercise, if the value so reflected is less than any Applicable Warrant Exercise Price immediately prior to such consolidation, merger or sale).  Prior to the consummation of any other Organic Change, the Company shall make appropriate provision (in form and substance satisfactory to the holders of Warrants representing a majority of the Warrant Shares issuable upon exercise of the Warrants then outstanding) to insure that each of the holders of the Warrants will thereafter have the right to acquire and receive in lieu of or in addition to (as the case may be) the Warrant Shares immediately theretofore issuable and receivable upon the exercise of such holder’s Warrants (without regard to any limitations on exercise), such shares of stock, securities or assets that would have been issued or payable in such Organic Change with respect to or in exchange for the number of Warrant Shares which would have been issuable and receivable upon the exercise of such holder’s Warrant as of the date of such Organic Change (without taking into account any limitations or restrictions on the exercisability of this Warrant).

Section 10.

Lost, Stolen, Mutilated or Destroyed Warrant.  If this Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly, on receipt of an indemnification undertaking (or, in the case of a mutilated Warrant, the Warrant), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or destroyed.

Section 11.

Notice.  Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Warrant must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of receipt is received by the sending party transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall be:

		
	If to Holder:

	YA Global Investments, LP

	 
	101 Hudson Street – Suite 3700

	 
	Jersey City, NJ  07302

	 
	Attention:

Mark A. Angelo

	 
	Telephone:

(201) 985-8300

	 
	Facsimile:

(201) 985-8266

	 
	 

	With Copy to:

	David Gonzalez, Esq.

	 
	101 Hudson Street – Suite 3700

	 
	Jersey City, NJ 07302

	 
	Telephone:

(201) 985-8300

	 
	Facsimile:

(201) 985-8266

	 
	 

	 
	 

13

		
	If to the Company, to:

	Ariel Way, Inc.

	 
	8000 Towers Crescent Drive, Suite 1220

	 
	Vienna, VA 22182

	 
	Attention:     The Chief Executive Officer

	 
	Telephone:    703-624-8042

	 
	Facsimile:      703-991-0841

	 
	 

	With a copy to:

	Kirkpatrick & Lockhart Preston Gates Ellis LLP

	 
	200 South Biscayne Blvd. – Suite 2000

	 
	Miami, FL  33131

	 
	Attention:

Clay E. Parker, Esq.

	 
	Telephone:

(305) 539-3306

	 
	Facsimile:

(305) 358-7095

If to a holder of this Warrant, to it at the address and facsimile number set forth in this Section 11, or at such other address and facsimile as shall be delivered to the Company upon the issuance or transfer of this Warrant.  Each party shall provide five days’ prior written notice to the other party of any change in address or facsimile number.  Written confirmation of receipt (A) given by the recipient of such notice, consent, facsimile, waiver or other communication, (or (B) provided by a nationally recognized overnight delivery service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

Section 12.

Date.  The date of this Warrant is set forth on page 1 hereof.  This Warrant, in all events, shall be wholly void and of no effect after the close of business on the Expiration Date, except that notwithstanding any other provisions hereof, the provisions of Section 8(b) shall continue in full force and effect after such date as to any Warrant Shares or other securities issued upon the exercise of this Warrant.

Section 13.

Amendment and Waiver.  Except as otherwise provided herein, the provisions of the Warrants may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the holders of Warrants representing at least two-thirds of the Warrant Shares issuable upon exercise of the Warrants then outstanding; provided that, except for Section 8(d), no such action may increase the Warrant Exercise Price or decrease the number of shares or class of stock obtainable upon exercise of any Warrant without the written consent of the holder of such Warrant.

Section 14.

Descriptive Headings; Governing Law.  The descriptive headings of the several sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant.  The corporate laws of the State of Florida shall govern all issues concerning the relative rights of the Company and its stockholders.  All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New Jersey.  Each party hereby irrevocably submits to the exclusive jurisdiction of the 

14

state and federal courts sitting in Hudson County and the United States District Court for the District of New Jersey, for the adjudication of any dispute hereunder or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  

Section 15.

Waiver of Jury Trial.  AS A MATERIAL INDUCEMENT FOR EACH PARTY HERETO TO ENTER INTO THIS WARRANT, THE PARTIES HERETO HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS WARRANT AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

15

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed as of the date first set forth above.

		
	 
	ARIEL WAY, INC.

	 
	 

	 
	By:

/s/ Arne Dunhem

	 
	Name:

Arne Dunhem

	 
	Title:

Chief Executive Officer

16

EXHIBIT A TO WARRANT

EXERCISE NOTICE

TO BE EXECUTED 

BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

ARIEL WAY, INC.

The undersigned holder hereby exercises the right to purchase ______________ of the shares of Common Stock (“Warrant Shares”) of Ariel Way, Inc. (the “Company”), evidenced by the attached Warrant (the “Warrant”).  Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

Specify Method of exercise by check mark:

1.  ___

Cash Exercise

(a) Payment of Warrant Exercise Price. The holder shall pay the Aggregate Exercise Price of $______________ to the Company in accordance with the terms of the Warrant.  

(b) Delivery of Warrant Shares.  The Company shall deliver to the holder _________ Warrant Shares in accordance with the terms of the Warrant.  

2.  ___

Cashless Exercise

(a) Payment of Warrant Exercise Price.  In lieu of making payment of the Aggregate Exercise Price, the holder elects to receive upon such exercise the Net Number of shares of Common Stock determined in accordance with the terms of the Warrant.  

(b) Delivery of Warrant Shares.  The Company shall deliver to the holder _________ Warrant Shares in accordance with the terms of the Warrant.  

Date: _______________ __, ______

Name of Registered Holder

By:

Name:

Title:

EXHIBIT B TO WARRANT

FORM OF WARRANT POWER

FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to ________________, Federal Identification No. __________, a warrant to purchase ____________ shares of the capital stock of Ariel Way, Inc. represented by warrant certificate no. _____, standing in the name of the undersigned on the books of said corporation.  The undersigned does hereby irrevocably constitute and appoint ______________, attorney to transfer the warrants of said corporation, with full power of substitution in the premises.

		
	Dated:

	

	 
	 

	 
	By:

	 
	Name:

	 
	Title:

	 
	 

B-1Filed by Bowne Pure Compliance

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

HeartWare Limited

Level 57, MLC Centre, 19-29 Martin Place

Sydney NSW 2000

Australia

Ladies & Gentlemen:

The undersigned (the “Investor”), hereby confirms its agreement with you as follows:

1. This Securities Purchase Agreement is made as of May 21, 2008 between HeartWare Limited, a
company organized under the laws of the Commonwealth of Australia (the “Company”), and the
Investor.

2. The Company will seek shareholder authorization for the sale and issuance of up to 72,500,000
ordinary shares in the capital of the Company (the “Shares”) to certain investors in a
private placement (the “Offering”).

3. The Company and the Investor agree that, subject to the shareholder approval and the other
conditions referred to in the Confidential U.S. Private Placement Memorandum, the Investor will
purchase from the Company and the Company will issue and sell to the Investor 
 _____ 

Shares for
a purchase price of AUD $0.50 per Share, or an aggregate purchase price of AUD $
 _____ 

, pursuant
to the Terms and Conditions for Purchase of Shares attached hereto as Annex I and
incorporated herein by reference as if fully set forth herein (the “Terms and Conditions”).
This Securities Purchase Agreement, together with the Terms and Conditions, may hereinafter be
referred to as the “Agreement.” Shares purchased outside the United States will be made
pursuant to a form of Australian Subscription Agreement in accordance with the requirements of
Australian corporate and securities laws. Unless otherwise requested by the Investor, the Shares
purchased by the Investor will be registered in the Investor’s name and address as set forth below.

Please confirm that the foregoing correctly sets forth the agreement between us by signing in
the space provided below for that purpose. This Agreement may be executed in separate
counterparts, each of which shall be deemed to be an original and all of which taken together shall
constitute one and the same instrument.

	 	 	 	 	 	 	 
	AGREED AND ACCEPTED:	 	 	 	 
	HeartWare Limited	 	Investor:
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	By:	 	 
	 
	 	 	 	 	 	 
	 
	 	Name:	 	 	 	Name:
	 

	 	Title:
	 	 	 	Title:
	 
	 	 	 	 	 	 
	 

	 	 	 	Address:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Tax ID No.:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Contact name:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Telephone:	 	 
	 

	 	 	 	 	 	 
	 	 	 	 	Name in which shares should be registered (if different):

	 
	 	 	 	 	 	 
	 	 	 	 	 

 

 

 

ANNEX I

TERMS AND CONDITIONS FOR PURCHASE OF SHARES

1. Authorization and Sale of the Shares. Subject to these Terms and Conditions, the
Company will seek shareholder authorization for the issue of up to 72,500,000 Shares.

2. Agreement to Sell and Purchase the Shares; Subscription Date.

2.1 At the Closing (as defined in Section 4), the Company will sell to the Investor, and the
Investor will purchase from the Company, upon the terms and conditions hereinafter set forth, the
number of Shares as set forth in Section 3 of the Securities Purchase Agreement to which these
Terms and Conditions are attached at the purchase price set forth thereon.

2.2 The Company may enter into (i) the same form of Securities Purchase Agreement, including
these Terms and Conditions, with certain other investors in the United States, and (ii) a form of
subscription agreement in accordance with the requirements of Australian corporate and securities
laws, with certain other investors outside the United States (collectively, the “Other
Investors”) and expects to complete sales of Shares to them at the same time as the sale of
Shares to US Investors. The Investor and the Other Investors are hereinafter sometimes collectively
referred to as the “Investors,” and the Securities Purchase Agreement to which these Terms
and Conditions are attached (the “Agreement”) (including attached Terms and Conditions) and
the Australian form of subscription agreement, as applicable, executed by the Other Investors are
hereinafter sometimes collectively referred to as the “Agreements.” The Company may accept
executed Agreements from Investors for the purchase of Shares commencing upon the date on which the
Company provides the Investors with the proposed purchase price per Share and concluding upon the
date (the “Subscription Date”) on which the Company is no longer accepting additional
Agreements from Investors for the purchase of Shares. The Company may not enter into any
Agreements after the Subscription Date.

2.3 The obligations of each Investor under any Agreement are several and not joint with the
obligations of any Other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor under any Agreement. Nothing contained
herein, and no action taken by any Investor hereto, shall be deemed to constitute the Investors as
a partnership, an association, a joint venture or any other kind of entity, or create a presumption
that the Investors are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated hereby, provided that such obligations or the transactions
contemplated hereby may be modified, amended or waived in accordance with Section 9 below. Each
Investor shall be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement (provided, that such rights may be modified,
amended or waived in accordance with Section 9 below), and it shall not be necessary for any Other
Investor to be joined as an additional party in any proceeding for such purpose.

3. Holding of subscription monies

3.1 The business day after the Subscription Date, the Company shall transfer the subscription
monies into the escrow account established and operated in accordance with this clause 3 and the
attached Escrow Agreement.

3.2 In the event that (a) the Conditions are satisfied on or before August 31, 2008, the
Company shall direct the Escrow Agent to release the subscription monies to the Company promptly
upon becoming aware that the Conditions have been satisfied; or (b) stockholder approval is not
obtained at the General Meeting to be held on or around July 11, 2008 (or at any deferral of that
meeting) or the Conditions are not satisfied on or before August 31, 2008, the Company shall direct
the Escrow Agent to release the subscription monies to the Company for refund to Investors on the
earlier of the business day after (i) the General Meeting (if the resolution approving the offering
was not passed); or (ii) the Company becomes aware that the Conditions are not capable of being
satisfied; or (iii) August 31, 2008.

3.3 Upon receipt of the subscription monies from the Escrow Agent in accordance with section
3.2(b), the Company shall promptly refund the subscription monies to the Investors.

3.4 Any interest which accrues on the Subscription Amounts while in the Escrow Account shall
follow the principal amount and shall be paid to the Company or refunded to Investors (as the case
may be) at the same time as payment of the corresponding principal.

 

-1-

 

4. Delivery of the Shares at Closing. It is expected that the completion of the
purchase and sale of the Shares (the “Closing”) shall occur electronically on or about July 11,
2008 (the “Closing Date”). At the Closing, the Company shall deliver to the Investor the number of
Shares, in each case as is set forth in Section 3 of the Securities Purchase Agreement.

The Company shall not proceed with the sale of Shares hereunder unless it (a) has received the
approval of the requisite number of Company shareholders for the offer and sale of the Shares under
ASX Listing Rule 7.1; and (b) all other requirements of the ASX Listing Rules have been satisfied
in relation to the offering. The Company’s obligation to issue the Shares to the Investor shall be
subject to the following additional conditions, any one or more of which may be waived by the
Company: (a) receipt by the Company of a certified or official bank check or wire transfer of funds
in the full amount of the purchase price for the Shares being purchased hereunder as set forth in
Section 3 of the Securities Purchase Agreement; (b) completion of the purchases and sales under the
Agreements with the Other Investors; and (c) the accuracy of the representations and warranties
made by the Investors and the fulfillment of those undertakings of the Investors to be fulfilled
prior to the Closing.

The Investor’s obligation to purchase the Shares shall be subject to the following conditions,
any one or more of which may be waived by the Investor: (a) the representations and warranties of
the Company set forth herein shall be true and correct as of the Closing Date (except for
representations and warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date) in all material respects and the fulfillment
in all material respects of those undertakings of the Company in this Agreement to be fulfilled on
or prior to the Closing Date and (b) the Investor shall have received such documents as such
Investor shall reasonably have requested in connection with the Offering.

5. Representations, Warranties and Covenants of the Company. The Company hereby
represents and warrants to, and covenants with, the Investor, as follows:

5.1 Organization. The Company is a limited company duly organized and validly
existing in good standing under the laws of Australia, and has the requisite power to own or lease
its properties and to conduct its business as presently conducted. The Company is duly registered
or qualified as a foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it or the location of the properties owned or
leased by it requires such registration or qualification and where the failure to be so registered
or so qualified would have a material adverse effect upon the condition (financial or otherwise),
earnings, business or business prospects, properties or operations of the Company taken as a whole
(a “Material Adverse Effect”), and no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power
and authority, registration or qualification.

5.2 Due Authorization and Valid Issuance. The Company has all requisite power and
authority to execute, deliver and, subject to the approval referred to at clause 5.4 below, perform
its obligations under each Agreement, and each Agreement has been duly authorized and validly
executed and delivered by the Company and constitutes a legal, valid and binding agreement of the
Company enforceable against the Company in accordance with its terms, except as rights to indemnity
and contribution may be limited by applicable securities laws or the public policy underlying such
laws, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and
except as enforceability may be subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The Shares being purchased by
the Investor hereunder will, upon issuance and payment there for pursuant to the terms hereof and
subject to the approval referred to at clause 5.4 below, be duly authorized, validly issued,
fully-paid and non-assessable.

5.3 Non-Contravention. The execution and delivery of each Agreement, the issuance and
sale of the Shares under each Agreement, the fulfillment of the terms of each Agreement and the
consummation of the transactions contemplated thereby will not (A) conflict with or constitute a
violation of, or default (with the passage of time or otherwise) under, (i) any bond, debenture,
note or other evidence of indebtedness, lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument to which the Company is a party or by
which it or its properties are bound, (ii) the charter, articles of association, by-laws,
constitution or other organizational documents of the Company, or (iii) any law, administrative
regulation, ordinance or order of any court or governmental agency, arbitration panel or authority
applicable to the Company, or its properties, except in the case of clauses (i) and (iii) for any
such conflicts, violations or defaults that are not reasonably likely to have a Material Adverse
Effect, or (B) result in the creation or imposition of any lien, encumbrance, claim, security
interest or restriction whatsoever upon any of the properties or assets of the Company or an
acceleration of indebtedness pursuant to any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or any indenture, mortgage, deed of
trust or any other agreement or instrument to which the Company is a party or by which it is bound
or to which any of the material property or assets of the Company is subject, except for such
liens, encumbrances, claims, security interests or restrictions upon any of the properties or
assets of the Company or accelerations of indebtedness that are not reasonably likely to have a
Material Adverse Effect. No consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency, or other governmental body or any other person is required for the execution and
delivery of the Agreements, and the valid issuance and sale of the Shares to be sold pursuant to
the Agreements, other than the stockholder approval referred to in section 4 or such as have been
made or obtained, and except for any post-closing securities filings or notifications required to
be made under applicable securities laws.

 

-2-

 

5.4 Capitalization. As of the date hereof, the capital of the Company is as set out
in the “Summary of Terms and Conditions”. All of the Company’s shares have been duly and validly
issued and are fully paid and non-assessable, have been issued in compliance with all applicable
securities laws, and were not issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. The Shares to be sold pursuant to the Agreements, when they
are issued and paid for in accordance with the terms of the Agreements, will be duly and validly
issued, fully paid and non-assessable. Without limiting the foregoing, no preemptive right, co-sale
right, right of first refusal or other similar right exists with respect to the Shares or the
issuance and sale thereof. Except as stated above, no further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for the issuance and sale
of the Shares. There are no stockholders agreements, voting agreements or other similar agreements
with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of
the Company, between or among any of the Company’s stockholders. The issuance and sale of the
Shares will not result in a right of any current holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities. Except for options issued to
officers, directors and employees of the Company under its employee benefit plans or as otherwise
set forth in the ASX Documents (as defined in Section 5.5 hereof, there are no outstanding rights
(including, without limitation, preemptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any unissued shares of capital stock or other equity interest
in the Company, or any contract, commitment, agreement, understanding or arrangement of any kind to
which the Company is a party or of which the Company has knowledge and relating to the issuance or
sale of any capital stock of the Company, any such convertible or exchangeable securities or any
such rights, warrants or options. Subject to the filing of the notification with the ASX, the
issuance and sale of the Shares under the Agreements do not contravene the rules and regulations of
the ASX, and, in furtherance of the foregoing sentence, other than the approval of the stockholders
which will be sought at or around July 11, 2008, no approval of the stockholders of the Company
thereunder is required for the Company to issue and deliver to the Investor the maximum number of
Shares contemplated by this Agreement.

5.5 Reporting Status. The Company has made or lodged all required disclosures with
the Australian Securities and Investments Commission (the “ASIC”) and the Australian Securities
Exchange Limited (“ASX”) (the “ASX Documents”). All of the Company’s continuous disclosures,
periodic disclosures, and particular disclosures complied in all material respects with the ASX’s
requirements as of their respective dates, and the information contained therein as of the date
thereof did not contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading.

The Company has filed all forms, documents and reports required to be filed prior to the date
hereof by it with the Securities and Exchange Commission (the “Company SEC Documents”). As of
their respective dates, or if amended, as of the date of the last such amendment, the Company SEC
Documents complied in all material respects with the requirements of the Securities Exchange Act of
1934 and the Securities Act of 1933, as the case may be, and the applicable rules and regulations
promulgated thereunder, and none of the Company SEC Documents contained any untrue statement of a
material fact or omitted to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were made, not
misleading.

5.6 Legal Proceedings; Disagreements with Advisors. There is no material legal or
governmental investigations, actions, suits or proceeding pending or, to the knowledge of the
Company, threatened to which the Company is or may be a party or of which the business or property
of the Company is subject that is not disclosed in the ASX Documents. There are no material
disagreements presently existing, or reasonably anticipated by the Company to arise, between the
accountants formerly or presently employed by the Company.

5.7 No Violations. The Company is not (i) in violation of its charter, bylaws, or
other organizational document; (ii) in violation of any applicable law, administrative regulation,
ordinance or order of any court or governmental agency, arbitration panel or authority applicable
to the Company, which violation, individually or in the aggregate, would be reasonably likely to
have a Material Adverse Effect; or (iii) in default (and there exists no condition which, with the
passage of time or otherwise, would constitute a default) in the performance of any bond,
debenture, note or any other evidence of indebtedness in any indenture, mortgage, deed of trust or
any other agreement or instrument to which the Company is a party or by which the Company is bound
or by which the properties of the Company are bound, which would be reasonably likely to have a
Material Adverse Effect.

5.8 Governmental Permits, Etc. The Company has all necessary franchises, licenses,
certificates and other authorizations from any applicable government or governmental agency,
department, or body that are currently necessary for the operation of the business of the Company as currently conducted and as
described in the ASX Documents except where the failure to currently possess would not have a
Material Adverse Effect.

 

-3-

 

5.9 Intellectual Property. Except as specifically disclosed in the ASX Documents (i)
the Company owns or possesses sufficient rights to use all patents, patent rights, trademarks,
copyrights, licenses, inventions, trade secrets, trade names and know-how (including trade secrets
and other unpatented and/or unpatentable property or confidential information, systems, processes
or procedures) (collectively, “Intellectual Property”) described or referred to in the ASX
Documents as owned or possessed by them or that are necessary for the conduct of its business as
now conducted as described in the ASX Documents except where the failure to currently own or
possess would not have a Material Adverse Effect, (ii) to its knowledge, the Company is not
infringing, and have not received any notice of any asserted infringement by the Company of any
rights of a third party with respect to any Intellectual Property that, individually or in the
aggregate, would have a Material Adverse Effect and (iii) the Company has not received any notice
of, and has no knowledge of, infringement by a third party with respect to any Intellectual
Property rights of the Company, individually or in the aggregate, would have a Material Adverse
Effect.

5.10 Financial Statements; Obligations to Related Parties. (a) The financial
statements of the Company and the related notes contained in the ASX Documents present fairly, in
accordance with Australian International Financial Reporting Standards, the financial position of
the Company as of the dates indicated, and the results of its operations and cash flows for the
periods therein specified consistent with the books and records of the Company except that the
unaudited interim financial statements were or are subject to normal and recurring year-end
adjustments that are not expected to be material in amount. Such financial statements (including
the related notes) have been prepared in accordance with Australian International Financial
Reporting Standards applied on a consistent basis throughout the periods therein specified, except
as may be disclosed in the notes to such financial statements and except as disclosed in the ASX
Documents. The other financial information contained in the ASX Documents has been prepared on a
basis consistent with the financial statements of the Company. As of their respective dates, the
financial statements of the Company included in the ASX Documents complied as to form in all
material respects with applicable accounting requirements and published rules and regulations of
the ASX and/or ASIC with respect thereto.

(b) Except as set forth in any ASX Documents, there are no obligations of the Company to
officers, directors, stockholders or employees of the Company or its subsidiaries other than (i)
for payment of salary for services rendered and for bonus payments; (ii) reimbursements for
reasonable expenses incurred on behalf of the Company; (iii) for other standard employee benefits
made generally available to all employees (including stock option agreements outstanding under any
stock option plan approved by the Board of Directors of the Company); and (iv) obligations listed
in the Company’s financial statements.

5.11 No Material Adverse Change. Except as disclosed in the ASX Documents, since
December 31, 2007, there has not been (i) any material adverse change in the financial condition or
earnings of the Company, (ii) any material adverse event affecting the Company, (iii) any
obligation, direct or contingent, that is material to the Company, incurred by the Company, except
obligations incurred in the ordinary course of business, (iv) any dividend or distribution of any
kind declared, paid or made on the capital stock of the Company, or (v) any loss or damage (whether
or not insured) to the physical property of the Company which has been sustained which has a
Material Adverse Effect.

5.12 Disclosure. The representations and warranties of the Company contained in this
Section 4 as of the date hereof and as of the Closing Date, do not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were made, not misleading.
Except with respect to the material terms and conditions of the transaction contemplated by the
Agreements and the anticipated use of the proceeds therefrom, which shall be publicly disclosed by
the Company pursuant to the ASX rules and regulations, the Company confirms that neither it nor any
person acting on its behalf has provided the Investors with any information that the Company
believes constitutes material, non-public information. Subject to section 6.6 below, the Company
understands and confirms that the Investors will rely on the foregoing representations in effecting
transactions in the securities of the Company.

5.13 Listing; Resale of Shares in Australia. The Company shall use reasonable
commercial efforts to comply with all requirements of the ASX with respect to the issuance of the
Shares and the listing of the Shares on the ASX. The Shares issued hereunder will be readily and
immediately saleable on the ASX to non-US persons, by the Investor pursuant to the terms and
conditions of Regulation S under the Securities Act without the need to be held for any period or
length of time prior to said sale. There is nothing in the laws of the Commonwealth of Australia
that will prevent the Investors from selling the Shares in the Commonwealth of Australia on the ASX
immediately following listing of the Shares thereon.

 

-4-

 

5.14 No Manipulation of Stock. The Company has not taken and will not, in violation
of applicable law, take, any action designed to or that might reasonably be expected to cause or
result in stabilization or manipulation of the price of its stock to facilitate the sale or resale
of the Shares.

5.15 Company not an “Investment Company”. The Company has been advised of the rules
and requirements under the Investment Company Act of 1940 of the United States, as amended (the
“Investment Company Act”). The Company is not, and immediately after receipt of payment for the
Shares will not be, an “investment company” or an entity “controlled” by an “investment company”
within the meaning of the Investment Company Act and shall conduct its business in a manner so that
it will not become subject to the Investment Company Act.

5.16 Contracts. The contracts described in the ASX Documents that are material to the
Company are in full force and effect on the date hereof, and neither the Company nor, to the
Company’s knowledge, any other party to such contracts is in breach of or default, or received a
notice of termination under any of such contracts which would have a Material Adverse Effect.

5.17 Taxes. The Company and its subsidiaries have filed (or has obtained an extension
of time within which to file) all necessary tax returns and have paid all taxes shown as due on
such tax returns, except where the failure to so file or the failure to so pay would not have a
Material Adverse Effect. The Company and its subsidiaries are not aware of any tax deficiency that
has been or might be asserted or threatened against them that would have a Material Adverse Effect.

5.18 Private Offering. Assuming the correctness of the representations and warranties
of the Investor set forth in Section 6 hereof and assuming that the Company has not offered or sold
any of the Shares by any form of general solicitation or advertising in the United States, the
offer and sale of the Shares hereunder is exempt from registration under the Securities Act. The
Company has not distributed and will not distribute prior to the Closing Date any offering material
in connection with this Offering and sale of the Shares other than the documents of which this
Agreement is a part the Australian Subscription Agreements and the ASX Documents. The Company has
not in the past nor will it hereafter take any action independent of the Company’s Australian
placement agent to sell, offer for sale or solicit offers to buy any securities of the Company that
would bring the offer, issuance or sale of the Shares as contemplated by this Agreement within the
registration provisions of Section 5 of the Securities Act, unless such offer, issuance or sale was
or shall be within the exemptions from registration available under the Securities Act. Neither
the Company nor any person acting on behalf of the Company has offered or sold any of the Shares by
any form of general solicitation or general advertising in the United States. The Company has
offered the Shares on a private placement basis in the United States for sale only to the Investors
and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

5.20 Transactions With Affiliates. There are no business relationships or
related-party transactions involving the Company or any other person required to be described in
the ASX Documents that have not been described as required.

5.21 ASX Compliance. The issue of the Shares will not violate the Listing Rules of
the ASX. The Company has taken no action designed to, or likely to have the effect of, terminating
the listing of the Company’s ordinary shares from the ASX, nor has the Company received any
notification that the ASX is contemplating terminating such listing.

5.22 Rule 144A Information. Until a Trading Market exists with respect to the Shares,
the Company shall furnish to holders of the Shares, and to prospective purchasers of the Shares,
the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. A
“Trading Market” shall be deemed to exist at such time as the Shares are (i) registered under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (ii) listed on the
New York Stock Exchange or traded on the NASDAQ Marketplace or to any other approved exchange.

5.23 Company Acknowledgement of Investor Representation. The Company acknowledges and
agrees that the Investor does not make or has not made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically set forth in Sections
6 and 16(a) of this Agreement, or in the Investor Questionnaire.

 

-5-

 

6. Representations, Warranties and Covenants of the Investor.

6.1 The Investor represents and warrants to, and covenants with, the Company that: (i) the
Investor is an “accredited investor” as defined in Regulation D under the Securities Act and the
Investor is also knowledgeable, sophisticated and experienced in making, and is qualified to make
decisions with respect to investments in shares presenting an investment decision like that
involved in the purchase of the Shares, including investments in securities issued by the Company
and investments in comparable companies, and has requested, received, reviewed and considered all
information it deemed relevant in making an informed decision to purchase the Shares; (ii) the
Investor is acquiring the Shares set forth in Section 3 of this Agreement in the ordinary course of its business and for its own account for
investment only and with no present intention of distributing any of such Shares; (iii) the
Investor is not acquiring the Shares for the purpose of selling or transferring the Shares or
granting, issuing or transferring interests in, or options over the Shares within 12 months of
their date of issue; (iv) the Investor has not entered into any arrangement or understanding with
any other persons regarding the distribution of such Shares; (v) the Investor will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Shares except in compliance with the
Securities Act, applicable securities laws and the respective rules and regulations promulgated
thereunder; (vi) the Investor shall furnish to the Company such information regarding such Investor
and the distribution proposed by such Investor as the Company may reasonably request in writing and
as shall be reasonably required in connection with any U.S. Registration; and (vii) the Investor
has, in connection with its decision to purchase the number of Shares set forth in Section 3 of
this Agreement relied only upon the ASX Documents and the representations and warranties of the
Company contained herein. The Investor understands that its acquisition of the Shares has not been
registered under the Securities Act or registered or qualified under any applicable securities law
in reliance on specific exemptions therefrom, which exemptions may depend upon, among other things,
the bona fide nature of the Investor’s investment intent as expressed herein. Subject to
compliance with the Securities Act, applicable securities laws and the respective rules and
regulations promulgated thereunder, nothing contained herein shall be deemed a representation or
warranty by such Investor to hold the Shares for any period of time and the confirmation in (iii)
above is understood to be a statement by the Investor of present intention and not an undertaking
not to sell, particularly where the Investor’s investment objectives or market conditions change .
The Investor has completed or caused to be completed and delivered to the Company the Investor
Questionnaire, which questionnaire is true, correct and complete in all material respects.

6.2 The Investor shall not offer, sell, contract to sell or otherwise dispose of or deliver
any of the Shares unless: (i) the Shares are sold on the ASX in compliance with Regulation S of the
Securities Act; or (ii) the Shares are sold in a transaction that does not require registration
under the Securities Act or any applicable laws and regulations of the states of the United States
governing the offer and sale of securities and, (iii) prior to and as a condition to the execution
of the offer, sale or delivery described in subclauses (i) and (ii) above, such Investor has
furnished to the Company an opinion of counsel satisfactory to the Company to such effect, unless
the Company waives receipt of such opinion.

6.3 The Investor further represents and warrants to, and covenants with, the Company that (i)
the Investor has full right, power, authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) this Agreement constitutes a valid
and binding obligation of the Investor enforceable against the Investor in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights
generally and except as enforceability may be subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at law) and except as the
indemnification agreements of the Investors herein may be legally unenforceable.

6.4 The Investor has not engaged in any short sales or similar transactions with respect to
the Company’s capital stock, nor has the Investor, directly or indirectly, caused any person to
engage in any short sales or similar transactions with respect to the Company’s capital stock.
Without limiting the foregoing, Investor will not use any of the Shares acquired pursuant to the
Agreements to cover any short position in the capital stock of the Company if doing so would be in
violation of applicable securities laws and Investor will otherwise comply with federal securities
laws of the United States in the holding and resale of the Shares.

6.5 The Investor understands that nothing in the ASX Documents, the Agreements, or any other
materials presented to the Investor in connection with the purchase and sale of the Shares
constitutes legal, tax or investment advice. The Investor has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of Shares.

6.6 The Investor acknowledges that, if it has material non-public information regarding the
Company, insider trading restrictions may apply to it. The Investor agrees not to, and not to
cause any other person to, acquire (as that term is defined in the Australian Corporations Act 2001
(Cth)) any of the Company’s securities after it has had access to material non-public information
if doing so would be a breach of insider trading restrictions.

7. Survival of Representations, Warranties and Agreements. Notwithstanding any
investigation made by any party to this Agreement, all covenants, agreements, representations and
warranties made by the Company and the Investor herein shall survive the execution of this
Agreement, the delivery to the Investor of the Shares being purchased and the payment therefor,
provided that the representations and warranties contained herein shall expire on the one-year
anniversary of the Closing Date.

 

-6-

 

8. Registration of the Shares in the United States; Compliance with the Securities
Act.

8.1 Registration Eligibility. In the event the Company or its successor entity shall
determine to (i) register directly in the United States its ordinary shares, or in the case of a
successor entity, the class of its securities equivalent to the ordinary shares of the Company
prior to the succession; (ii) effect the listing of American Depositary Receipts in the United
States representing the Company’s ordinary shares, or in the case of a successor entity, the class
of its securities equivalent to the ordinary shares of the Company prior to the succession; or
(iii) otherwise engage in an initial public offering of its securities in the United States, the
Company shall:

(a) promptly give written notice of the proposed registration to the Investor;

(b) use its best efforts to include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved therein, all of the Shares
(the “Registrable Securities”) as are specified in a written request or requests made by
any Investor received by the Company within ten (10) days after such written notice from the
Company is mailed or delivered. Such written request may specify all or a part of the Investor’s
Registrable Securities. In the event the U.S. registration involves an underwritten offering, the
Company shall so advise the Investor. In such event, the right of any Investor to registration
pursuant to this section shall be conditioned upon such Investor’s participation in such
underwriting and the inclusion of such Investor’s Registrable Securities in the underwriting to the
extent provided herein. All Investors proposing to distribute their Registrable Securities through
such underwriting shall (together with the Company and the other holders of securities of the
Company with registration rights to participate therein distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company. If the underwriters advise the Company in
writing that the success of the offering requires a limitation on the number of shares to be
underwritten, the underwriters may (subject to the limitations set forth below) limit or eliminate
the number of Registrable Securities to be included in the registration and underwriting. The
Company shall so advise all holders of securities requesting registration, and the number of shares
of securities that are entitled to be included in the registration and underwriting shall be
allocated, as follows: (i) first, to the Company for securities being sold for its own account,
(ii) second, to the Investor requesting to include Registrable Securities in such registration
statement based on the pro rata percentage of Registrable Securities held by such Investor,
assuming conversion and (iii) third, to others requesting to include their securities in such
registration statement.

8.2 Registration Procedures. Should a U.S. registration be effected by the Company or
its successor entity that includes an Investor’s Registrable Securities, the Company shall:

(a) keep such registration effective for a period of time ending on the earlier of the date
that is sixty (60) days from the effective date of the registration statement or such time as the
Investor or Investors have completed the distribution described in the registration statement
relating thereto;

(b) prepare and file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement for the period set forth in subsection (a)
above;

(c) furnish such number of prospectuses, including any preliminary prospectuses, and other
documents incident thereto, including any amendment of or supplement to the prospectus, as an
Investor from time to time may reasonably request;

(d) use its reasonable best efforts to register and qualify the securities covered by such
registration statement under such other securities laws of such jurisdiction within the U.S. as
shall be reasonably requested by the Investor; provided, that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions;

(e) notify each seller of Registrable Securities covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein not misleading or
incomplete in light of the circumstances then existing, and following such notification promptly
prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such
shares, such prospectus shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein not
misleading or incomplete in light of the circumstances then existing;

 

-7-

 

(f) provide a transfer agent and registrar for all Registrable Securities registered pursuant
to such registration statement and a CUSIP number for all such Registrable Securities, in each case
not later than the effective date of such registration;

(g) cause all such Registrable Securities registered pursuant to this Section 8.2 to be listed
on each U.S. securities exchange on which similar securities issued by the Company are then listed;

(h) make and keep public information regarding the Company or its successor available as those
terms are understood and defined in Rule 144 under the Securities Act; and

(i) file with the SEC in a timely manner all reports and other documents required of the
Company or its successor under the Securities Act and the Exchange Act.

8.3 Indemnification. For the purpose of this Section 8.3:

(i) the term “Selling Stockholder” means the Investor and any affiliate of such Investor;

(ii) the term “Registration Statement” shall include the Prospectus in the form first filed
with the SEC pursuant to Rule 424(b) of the Securities Act or filed as part of the Registration
Statement at the time of effectiveness if no Rule 424(b) filing is required, and any exhibit,
supplement or amendment included in or relating to the Registration Statement referred to in
Section 7.1; and

(iii) the term “untrue statement” for purposes of Section 8.3(d) hereof shall include any
untrue statement or alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading.

(a) The Company agrees to indemnify and hold harmless each Selling Stockholder from and
against any losses, claims, damages or liabilities to which such Selling Stockholder may become
subject (under the Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon (i) any
breach of the representations or warranties of the Company contained herein or failure to comply
with the covenants and agreements of the Company contained herein, (ii) any untrue statement of a
material fact contained in the Registration Statement as amended at the time of effectiveness or
any omission of a material fact required to be stated therein or necessary to make the statements
therein not misleading, or (iii) any failure by the Company to fulfill any undertaking included in
the Registration Statement as amended at the time of effectiveness, and the Company will reimburse
such Selling Stockholder for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or claim, or preparing
to defend any such action, proceeding or claim, provided, however, that the Company
shall not be liable in any such case to the extent that such loss, claim, damage or liability
arises out of, or is based upon, an untrue statement made in such Registration Statement or any
omission of a material fact required to be stated therein or necessary to make the statements
therein not misleading in reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Selling Stockholder specifically for use in preparation of the
Registration Statement, or the failure of such Selling Stockholder to comply with its covenants and
agreements contained in Section 8.2 hereof respecting sale of the Shares or any statement or
omission in any Prospectus that is corrected in any subsequent Prospectus that was delivered to the
Selling Stockholder prior to the pertinent sale or sales by the Selling Stockholder. The Company
shall reimburse each Selling Stockholder for the amounts provided for herein on demand as such
expenses are incurred as reasonably documented by the Selling Stockholder.

(b) The Investor agrees to indemnify and hold harmless the Company (and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act, each officer of
the Company who signs the Registration Statement and each director of the Company) from and against
any losses, claims, damages or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise), insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of,
or are based upon, (i) any failure to comply with the covenants and agreements contained in Section
8.2 hereof respecting sale of the Shares, (ii) any untrue statement of a material fact contained in
the Registration Statement or any omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading if such untrue statement or omission was
made in reliance upon and in conformity with written information furnished by or on behalf of the
Investor specifically for use in preparation of the Registration Statement, and the Investor will
reimburse the Company (or such officer, director or controlling person), as the case may be, for
any legal or other expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim, or (iii) any breach of the representations and warranties of
the Investor contained in Section 6 of this Agreement; provided that Investor’s obligation to
indemnify the Company shall be limited to the net amount received by the Investor from the sale of
the Shares.

 

-8-

 

(c) Promptly after receipt by any indemnified person of a notice of a claim or the beginning
of any action in respect of which indemnity is to be sought against an indemnifying person pursuant
to this Section 8.3, such indemnified person shall notify the indemnifying person in writing of
such claim or of the commencement of such action, but the omission to so notify the indemnifying
person will not relieve it from any liability which it may have to any indemnified person under
this Section 8.3 (except to the extent that such omission materially and adversely affects the
indemnifying person’s ability to defend such action) or from any liability otherwise than under
this Section 8.3. Subject to the provisions hereinafter stated, in case any such action shall be
brought against an indemnified person, the indemnifying person shall be entitled to participate
therein, and, to the extent that it shall elect by written notice delivered to the indemnified
person promptly after receiving the aforesaid notice from such indemnified person, shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to such indemnified
person. After notice from the indemnifying person to such indemnified person of its election to
assume the defense thereof, such indemnifying person shall not be liable to such indemnified person
for any legal expenses subsequently incurred by such indemnified person in connection with the
defense thereof, provided, however, that if there exists or shall exist a conflict
of interest that would make it inappropriate, in the opinion of counsel to the indemnified person,
for the same counsel to represent both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled to retain its own counsel
at the expense of such indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate counsel (together
with appropriate local counsel) for all indemnified parties. In no event shall any indemnifying
person be liable in respect of any amounts paid in settlement of any action unless the indemnifying
person shall have approved the terms of such settlement; provided that such consent shall
not be unreasonably withheld. No indemnifying person shall, without the prior written consent of
the indemnified person, effect any settlement of any pending or threatened proceeding in respect of
which any indemnified person is or could have been a party and indemnification could have been
sought hereunder by such indemnified person, unless such settlement includes an unconditional
release of such indemnified person from all liability on claims that are the subject matter of such
proceeding.

(d) If the indemnification provided for in this Section 8.3 is unavailable to or insufficient
to hold harmless an indemnified person under subsection (a) or (b) above in respect of any losses,
claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying person shall contribute to the amount paid or payable by such indemnified
person as a result of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of the Company on the one hand
and the Investor, as well as any other Selling Stockholders under such registration statement on
the other in connection with the statements or omissions or other matters which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative fault shall be determined by reference to, among
other things, in the case of an untrue statement, whether the untrue statement relates to
information supplied by the Company on the one hand or an Investor or other Selling Stockholder on
the other and the parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement. The Company and the Investor agree that it would not be
just and equitable if contribution pursuant to this subsection (d) were determined by pro rata
allocation (even if the Investor and other Selling Stockholders were treated as one entity for such
purpose) or by any other method of allocation which does not take into account the equitable
considerations referred to above in this subsection (d). The amount paid or payable by an
indemnified person as a result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this subsection (d), the
Investor shall not be required to contribute any amount in excess of the amount by which the net
amount received by the Investor from the sale of the Shares to which such loss relates exceeds the
amount of any damages which such Investor has otherwise been required to pay by reason of such
untrue statement. No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Investor’s obligations in this subsection to contribute
shall be in proportion to its sale of Shares to which such loss relates and shall not be joint with
any other Selling Shareholders.

(e) The parties to this Agreement hereby acknowledge that they are sophisticated business
persons who were represented by counsel during the negotiations regarding the provisions hereof
including, without limitation, the provisions of this Section 8.3, and are fully informed regarding
said provisions. They further acknowledge that the provisions of this Section 8.3 fairly allocate
the risks in light of the ability of the parties to investigate the Company and its business in
order to assure that adequate disclosure is made in the Registration Statement as required by the
Securities Act and the Exchange Act. The parties are advised that federal or state public policy
in the United States as interpreted by the courts in certain jurisdictions may be contrary to
certain of the provisions of this Section 8.3, and the parties hereto hereby expressly waive and
relinquish any right or ability to assert such public policy as a defense to a claim under this
Section 8.3 and further agree not to attempt to assert any such defense.

8.4 Termination of Conditions and Obligations. The conditions precedent imposed by
Section 5 or this Section 8 upon the transferability of the Shares shall cease and terminate as to
any particular number of the Shares when such shares shall have been effectively registered under the Securities Act and sold or
otherwise disposed of in accordance with the intended method of disposition set forth in the
Registration Statement covering such shares, at such time as an opinion of counsel reasonably
satisfactory to the Company shall have been rendered to the effect that such conditions are not
necessary in order to comply with the Securities Act, or at such time when such Shares have been
sold on the ASX.

 

-9-

 

8.5 Restrictions on Transfer.

The Investor expressly agrees that any sale by the Investor of Shares pursuant to the
Registration Statement shall be sold in a manner described under the caption “Plan of Distribution”
in such Registration Statement and the Investor will deliver a copy of the Prospectus contained in
the Registration Statement to the purchaser or purchasers, directly or through the Investor’s
broker, in connection with such sale, in each case in compliance with the requirements of the
Securities Act and Exchange Act applicable to such sale. The Investor further agrees that the
Shares will only be sold while the Registration Statement is effective, unless another exemption
from registration is available.

9. Notices. All notices, requests, consents and other communications hereunder shall
be in writing, shall be mailed (A) if within the United States by first-class registered or
certified mail, or nationally recognized overnight express courier, postage prepaid, or by
facsimile or electronic mail, or (B) if delivered from outside the United States, by International
Federal Express (or other recognized international express courier) or facsimile, and shall be
deemed given (i) if delivered by first-class registered or certified mail, three business days
after so mailed, (ii) if delivered by nationally recognized overnight carrier, one business day
after so mailed, (iii) if delivered by International Federal Express (or other recognized
international express courier), two business days after so mailed, or (iv) if delivered by
facsimile or electronic mail, upon electronic confirmation of receipt and shall be delivered as
addressed as follows:

	 	(a)	 	if to the Company, to:

HeartWare Limited

14000 NW 57th Court

Miami Lakes FLORIDA USA 33014

Attn: Chief Financial Officer

Phone: +1 305 818 4123

Fax: +1 305 818 4111

	 	(b)	 	with copies to:

Summer Street Research Partners

1 Beacon Street, 34th Floor

Boston, Massachusetts 02108

Phone: (617) 532-6409

Fax: (617) 507 8534

	 	(c)	 	if to the Investor, at its address on the Securities Purchase
Agreement to which these Terms and Conditions are attached, or at such other
address or addresses as may have been furnished to the Company in writing in
accordance with this Section 9.

Notwithstanding anything in this Agreement to the contrary, (a) the Company may deliver any
documents, information or notices required to be delivered to an Investor under this Agreement by
email, in any recognized electronic format, including Portable Document Format (PDF) or Microsoft
Word document format, and (b) with respect to any documents, exhibits, filings, furnishings or
other submissions publicly available on the ASX website (each, an “ASX Filing”), such ASX Filing
shall be deemed furnished by the Company to such Investor, in each case as of the date first
publicly available on the ASX.

10. Changes. This Agreement may be modified, amended or waived only pursuant to a
written instrument signed by the Company and (a) Investors holding a majority of the Shares issued
and sold in the Offering, provided that such modification, amendment or waiver is made with respect
to all Agreements and does not adversely affect the Investor without adversely affecting all
Investors in a similar manner; or (b) the Investor.

11. Headings. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of this Agreement.

12. Severability. In case any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or impaired thereby.

 

-10-

 

13. Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, without giving effect to the principles of conflicts of
law.

14. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original, but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more counterparts have been signed by each party
hereto and delivered to the other parties.

15. Entire Agreement. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior understandings or agreements concerning the purchase and
sale of the Shares and the resale registration of the Shares.

16. Confidential Information.

(a) The Investor represents to the Company that, at all times during the Company’s offering of
the Shares, the Investor has maintained in confidence all non-public information regarding the
Company received by the Investor from the Company or its agents, including without limitation, the
existence of the transactions contemplated therein, and covenants that it will continue to maintain
in confidence such information until such information (a) becomes generally publicly available
other than through a violation of this provision by the Investor or its agents or (b) is required
to be disclosed in legal proceedings (such as by deposition, interrogatory, request for documents,
subpoena, civil investigation demand, filing with any governmental authority or similar process),
provided, however, that before making any use or disclosure in reliance on this
subparagraph (b) the Investor shall give the Company at least fifteen (15) days prior written
notice (or such shorter period as required by law) specifying the circumstances giving rise thereto
and will furnish only that portion of the non-public information which is legally required and will
exercise its best efforts to obtain reliable assurance that confidential treatment will be accorded
any non-public information so furnished.

(b) The Company shall on the Closing Date, or on the following business day of the Closing
Date, issue a press release disclosing the material terms of the transactions contemplated hereby
(including at least the number of Shares sold and proceeds therefrom). The Company shall not
publicly disclose the name of Investor, or include the name of Investor in any filing with any
regulatory agency or stock exchange without the prior written consent of Investor except to the
extent such disclosure is required by law or the regulations of any applicable stock exchange.

17. No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other person.

18. Expenses. The parties shall pay their own legal and other expenses in connection
with the preparation, negotiation and execution of the Agreements and the consummation of the
transactions contemplated herein.

 

-11-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00142-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00142-of-00352.parquet"}]]