Document:

EX-4.5

 Exhibit 4.5 

ADS WARRANT AGENT AGREEMENT 
 ADS WARRANT AGENT
AGREEMENT (this “Warrant Agreement”) dated as of August [●], 2015 (the “Issuance Date”) between Benitec Biopharma Limited, ACN 068 943 662, an Australian corporation (the “Company”), and The
Bank of New York Mellon (the “Warrant Agent”). 
 WHEREAS, the Company is engaged in a public offering (the “Offering”) of up to
             American Depositary Shares (“ADSs”), each representing twenty (20) ordinary shares, no par value, of the Company (“Ordinary Shares”), and
up to              Warrants (the “Warrants”), with each such Warrant representing the right of the holder thereof to purchase one ADS (each, a “Warrant
ADS”) for US$        , subject to adjustment as described herein, plus applicable fees, charges and taxes; 

WHEREAS, the ADSs are issuable under the Deposit Agreement dated as of May 30, 2014, as amended by an Amendment to Deposit Agreement dated as of
            , 2015 (as so amended, the “Deposit Agreement”), among the Company, The Bank of New York Mellon, as depositary (the “Depositary”), and all Owners and
Holders (each as defined in the Deposit Agreement) from to time of the ADSs issued thereunder; 
 WHEREAS, the Company has filed with the Securities and
Exchange Commission a Registration Statement, No. 333-205135 on Form F-1 (as the same may be amended from time to time, the “Registration Statement”) for the registration, under the Securities Act of 1933, as amended (the
“Act”) of, among other securities, the Warrants and the Ordinary Shares represented by the Warrant ADSs (the “Warrant Shares”), and such Registration Statement was declared effective on August [●], 2015; 

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance,
registration, transfer, exchange and exercise of the Warrants; 
 WHEREAS, the Company desires to provide for the provisions of the Warrants, the terms upon
which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and 

WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants the valid, binding and legal obligations of the Company,
and to authorize the execution and delivery of this Warrant Agreement. 
 NOW, THEREFORE, in consideration of the mutual agreements herein contained, the
parties hereto agree as follows: 
 1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company
with respect to the Warrants, and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the express terms and conditions set forth in this Warrant Agreement (and no implied terms or conditions). 

2. Warrants. 
 2.1 Warrant. The Warrants shall be
registered securities and shall be evidenced by a global certificate “Global Certificate” in the form of Annex A to this Warrant Agreement., which shall be deposited on behalf of the Company with The Depository Trust Company
(“DTC”) and registered in the name of Cede 

 
& Co., a nominee of DTC. If DTC subsequently ceases to make its book-entry settlement system available for the Warrants, the Company may instruct the Warrant Agent regarding making other
arrangements for book-entry settlement. In the event that the Warrants are not eligible for, or it is no longer necessary to have the Warrants available in, book-entry form, the Warrant Agent shall provide written instructions to the DTC to deliver
to the Warrant Agent for cancellation the Global Certificate, and the Company shall instruct the Warrant Agent to deliver to DTC definitive certificates (“Definitive Certificates and, together with the Global Certificate, “Warrant
Certificates”) representing the Warrants in physical form. 
 2.2. Issuance and Registration of Warrants. 

2.2.1. Warrant Register. The Warrant Agent shall maintain books (“Warrant Register”) for the registration of original issuance and the
registration of transfer of the Warrants. 
 2.2.2. Issuance of Warrants. Upon the initial issuance of the Warrants, the Warrant Agent shall issue
and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with written instructions delivered to the Warrant Agent by the Company. Ownership of beneficial interests in the Warrants
shall be shown on, and the transfer of such ownership shall be effected through, records maintained (i) by DTC and (ii) by institutions that have accounts with DTC (each, a “Participant”). 

2.2.3. Beneficial Owner; Holder. The term “beneficial owner” shall mean any person whose ownership in the Warrants evidenced by the
Global Certificate is recorded in the records maintained by DTC or its nominee or in the records of the Participants. Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat the
person in whose name the warrant shall be registered upon the Warrant Register (the “Holder”) as the absolute owner of such Warrant for all purposes and neither the Company nor the Warrant Agent shall be affected by any notice to
the contrary. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Warrant Agent or any agent of the Company or the Warrant Agent from giving effect to any written certification, proxy or other authorization furnished by DTC
governing the exercise of the rights of a holder of a beneficial interest in any Warrant. The rights of beneficial owners in a Warrant shall be exercised through the DTC subject to the applicable procedures of DTC except to the extent set forth
herein or in a Global Certificate. 
 2.2.4. Execution. The Global Certificate shall be executed on behalf of the Company by any two
(2) authorized officers of the Company (each, an “Authorized Officer”) either manually or by facsimile signature. The Global Certificate shall be countersigned by an authorized signatory of the Warrant Agent and the Global
Certificate shall not be valid for any purpose unless so countersigned. In case any Authorized Officer of the Company that signed any of the Global Certificate ceases to be an Authorized Officer of the Company before countersignature by the Warrant
Agent and issuance and delivery by the Company, such Global Certificate, nevertheless, may be countersigned by the Warrant Agent, issued and delivered with the same force and effect as though the person who signed such Global Certificate had not
ceased to be such officer of the Company. 
 2.2.5. Registration of Transfer. At any time at or prior to the Expiration Date (as defined below), a
transfer of a beneficial interest in any Warrants may be registered and any Warrant may be split up, combined or exchanged for another Warrant evidencing the same number of Warrants as the Warrant surrendered. Any Holder desiring to register the
transfer of Warrants or to split up, combine or exchange any Warrant shall make such request in writing delivered to the Warrant Agent, and shall surrender to the Warrant Agent the Warrant the transfer of which is to be registered or that is or are
to be split up, combined or exchanged and, in the case of registration of transfer, shall provide a signature guarantee. Thereupon, the Warrant Agent shall countersign and deliver to the person entitled thereto a new Warrant

  
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so requested. The Company, shall pay, on behalf of the holder of Warrant requesting a registration of transfer of Warrants or a split-up, combination or exchange of a Warrant, a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with such registration of transfer, split-up, combination or exchange, together with reimbursement of all reasonable expenses of the Warrant Agent incidental thereto. 

2.2.6 Limitation on transfer. At any time in the 12 months from the Issuance Date, the Holder shall not knowingly transfer any Warrants, or any
interest in any Warrants, to any person resident in Australia, unless the transfer can be undertaken without disclosure to that person in accordance with section 708 of the Corporations Act 2001 of the Commonwealth of Australia (the
“Corporations Act”). 
 2.2.7. Loss, Theft and Mutilation of Warrant Certificates. Upon receipt by the Company and the Warrant Agent
of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Warrant Certificate, and, in case of loss, theft or destruction, of indemnity or security in customary form and amount, and reimbursement to the Company
and the Warrant Agent of all reasonable expenses incidental thereto, and upon surrender to the Warrant Agent and cancellation of the Warrant Certificate if mutilated, the Agent shall, on behalf of the Company, countersign and deliver a new Warrant
Certificate of like tenor to the Holder in lieu of the Warrant Certificate so lost, stolen, destroyed or mutilated. The Warrant Agent may charge the Holder an administrative fee for processing the replacement of lost Warrant Certificates, which
shall be charged only once in instances where a single surety bond obtained covers multiple certificates. The Warrant Agent may receive compensation from the surety companies or surety agents for administrative services provided to them. 

2.2.8. Proxies. The Holder of a Warrant may grant proxies or otherwise authorize any person, including the Participants and beneficial holders that may
own interests through the Participants, to take any action that a Holder is entitled to take under this Agreement or the Warrants. provided, however, that at all times that the Warrants are represented by a Global Certificate, exercise of the
Warrants by holders of beneficial interests in the Global Certificate shall be effected on their behalf by Participants through DTC in accordance the procedures administered by DTC. 

3. Terms and Exercise of Warrants. 
 3.1. Exercise
Price. Each Warrant shall entitle the Holder, subject to the provisions of the Global Certificate and of this Warrant Agreement, to purchase from the Company the number of ADSs stated therein, at the price of
US$         per whole ADS, subject to the subsequent adjustments provided in Section 4 hereof. The term “Exercise Price” as used in this Warrant Agreement refers to the price per ADS at
which ADSs may be purchased at the time a Warrant is exercised. Notwithstanding any provision to the contrary in the Deposit Agreement, the Company shall pay to the Warrant Agent the Depositary’s fee of US$.05 per ADS for issuance of ADSs (the
“Issuance Fee”) and an amount sufficient to cover all applicable taxes and charges due in connection with the exercise of such Warrants (the “Additional Expenses”). The Depositary will invoice the Company monthly
for those fees as incurred. 
 3.2. Duration of Warrants. A Warrant may be exercised only during the period (“Exercise Period”)
commencing on the Issuance Date and terminating at 5:00 P.M., New York City time (the “close of business”) on August [●], 2020 (“Expiration Date”). Each Warrant not exercised on or before the Expiration Date shall
become void, and all rights thereunder and all rights in respect thereof under this Warrant Agreement shall cease at the close of business on the Expiration Date. 

  
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 3.3. Exercise of Warrants. 

3.3.1. Exercise and Payment. (a) Subject to the provisions of this Warrant Agreement, either a Holder (or a Participant acting on behalf of a
Holder in accordance with DTC procedures) may exercise a Warrant by delivering, not later than 5:00 P.M., New York time, on any business day during the Exercise Period (the “Exercise Date”) (i) the Warrants to be exercised by
delivery of the Warrant to an account of the Warrant Agent at DTC designated for such purpose in writing by the Warrant Agent to DTC from time to time, (ii) an election to purchase the Warrant ADSs underlying the Warrants to be exercised via an
electronic warrant exercise through the DTC system (an “Election to Purchase”) and (iii) the Exercise Price for each Warrant to be exercised in lawful money of the United States of America by (A) certified or official bank
check payable to The Bank of New York Mellon, (B) by bank wire transfer in immediately available funds to The Bank of New York Mellon, ABA #: 043-000-261, Account Number: DDA” 1361721, Account Name: CSS LLC AAF Client Corporate Actions
Funding, Ref.: Benitec Warrants - Coy BTCB, Kirsten Kulmaczewski, Swift Code MELNUS3P or (C) payment to the Warrant Agent through the DTC system. 

(b) If any of (i) the Warrants, (ii) the Election to Purchase, or (iii) the Exercise Price therefor, is received by the Warrant Agent after
5:00 P.M., New York time, on any date, or on a date that is not a trading day on The Nasdaq Stock Market LLC (a “Trading Day”), the Warrants with respect thereto will be deemed to have been received and exercised on the Trading Day
next succeeding such date. The “Exercise Date” will be the date the materials in the foregoing sentence are received by the Warrant Agent (if by 5:00 P.M., New York time), or the following trading day (if after 5:00 P.M., New York
time), regardless of any earlier date written on the materials. If the Warrants are received or deemed to be received after the Expiration Date, the exercise thereof will be invalid and any funds delivered to the Warrant Agent will be returned to
the Holder or Participant, as the case may be, as soon as practicable. In no event will interest accrue on any funds deposited with the Warrant Agent in respect of an exercise or attempted exercise of Warrants. 

(c) The Warrant Agent shall deposit all funds received by it in payment of the Exercise Price in an account maintained by the Warrant Agent for such purpose
and shall advise the Company via telephone at the end of each day on which funds for the exercise of the Warrants are received of the amount so deposited to such account. The Warrant Agent shall promptly confirm such telephonic advice to the Company
in writing. The Warrant Agent shall pay the Exercise Price funds received to the Company by wire transfer as follows: Westpac Banking Corporation, Swift Code WPACAU2S. Account Name: Benitec Biopharma Limited, Account No.: 034702 013792. 

3.3.2. Issuance of Warrant Shares. (a) The Warrant Agent shall, by 11:00 A.M. New York Time on the Trading Day following the Exercise Date of any
Warrant, advise the Company, the registrar for Ordinary Shares and the Depositary, in respect of (i) the number of Warrant Shares indicated on the Election to Purchase as issuable upon such exercise with respect to such exercised Warrants,
(ii) the instructions of the Holder or Participant provided to the Warrant Agent with respect to the delivery of the Warrant ADSs and (iii) such other information as the Company or the Depositary shall reasonably request. 

(b) The Company shall, by no later than 5:00 P.M., New York time, on the third Trading Day following the Exercise Date of any Warrant and the clearance of the
funds in payment of the Exercise Price (such date and time, the “Delivery Time”), cause its registrar to deliver the Warrant Shares issuable upon exercise to the Depositary’s Australian custodian who, on the date of this
Agreement, is the principal Melbourne, Australia office of National Australia Bank Ltd., for deposit under the Deposit Agreement and (iii) cause the Depositary to deliver the Warrant ADSs issuable upon that deposit as requested in the Election
to Purchase pursuant to the Holder’s instruction through the DTC system. 
 3.3.3. Valid Issuance. All Warrant Shares issuable by the Company
upon the valid exercise of a Warrant in conformity with this Warrant Agreement shall be validly issued and credited as fully paid. 

  
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 3.3.4. No Fractional Exercise. No fractional Warrant ADSs will be issued upon the exercise of the Warrant,
but rather the Company shall adjust the number of Warrant Shares issued up or down to the nearest integral multiple of the number of Ordinary Shares at the time represented by one ADS. 

3.3.5. Transfer Taxes. The Company shall pay any stamp or other tax or charge required to be paid in connection with any transfer involved in the issue
of the Warrant ADSs or Warrant Shares upon the exercise of Warrants. 
 3.3.6. Date of Issuance. The Company will treat an exercising Holder as a
beneficial owner of the Warrant Shares as of the Exercise Date, except that, if the Exercise Date is a date when the share transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the
open of business on the next succeeding date on which the share transfer books are open. However, it is understood and agreed that Warrant ADSs will not be registered or issued until the Depositary receives notice from its custodian that the
Warrant Shares have been deposited under the Deposit Agreement; provided further, however, it is acknowledged and agreed that the Company shall take all reasonable steps to ensure the Warrant ADSs are delivered to the Holder on or prior to the
Delivery Time in accordance with Section 3.3.2(b) hereof. 
 3.3.7. Restrictive Legend Events. The Company will use its reasonable best efforts
to maintain the effectiveness of the Registration Statement and the current status of the prospectus included therein or to file and maintain the effectiveness of another registration statement and another current prospectus covering the Warrants
and the Warrant Shares at any time that the Warrants are exercisable. The Company shall provide to the Warrant Agent and each Holder prompt written notice of any time that the Company is unable to deliver the Warrant ADSs via DTC transfer or
otherwise (without restrictive legend), because (a) the Commission has issued a stop order with respect to the Registration Statement, (b) the Commission otherwise has suspended or withdrawn the effectiveness of the Registration Statement,
either temporarily or permanently, (c) the Company has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or (d) otherwise (each a “Restrictive Legend Event”). To the
extent that a Restrictive Legend Event occurs after a Holder has exercised Warrants in accordance with the terms of the Warrants but prior to the delivery of the Warrant ADSs, the Company shall compensate the Holder pursuant to Section 6.6
hereof. 
 3.3.8. Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant ADSs,
the Company shall promptly cause delivery to the Holder of the number of Warrant ADSs that are not disputed. 
 3.3.9. Beneficial Ownership.
Notwithstanding anything to the contrary contained herein, the Holder shall not have the right to exercise any portion of a Warrant pursuant to the terms and conditions of this Warrant Agreement and the Global Certificate, and any such exercise
shall be null and void and treated as if never made, to the extent that, after giving effect to such exercise, a beneficial owner of the Warrants, together with the other Attribution Parties (as defined below) of such beneficial owner collectively
would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the number of Ordinary Shares outstanding immediately after giving effect to such exercise. To the extent that the limitation contained in this
Section 3.3.9 applies, the determination of whether a Warrant is exercisable and of which portion of a Warrant is exercisable shall be in the sole discretion of the Holder and the submission of an Election to Purchase shall be deemed to be the
Holder’s representation as to whether a Warrant is exercisable and the Company shall have no obligation to verify or confirm the accuracy of such determination. For purposes of the foregoing sentence, the aggregate number of Ordinary Shares
beneficially owned by the beneficial owner and the other Attribution Parties shall include the number of Ordinary Shares held by the beneficial owner and all other Attribution Parties plus the number of Ordinary Shares issuable upon exercise of this

  
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Warrant with respect to which the determination of such sentence is being made, but shall exclude the number of Ordinary Shares which would be issuable upon (A) exercise of the remaining,
unexercised portion of a Warrant beneficially owned by such beneficial owner or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially
owned by such beneficial owner or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 3.3.9. For purposes of this Section 3.3.9, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”). For purposes of a Warrant, in determining the number of outstanding Ordinary Shares a Holder may acquire upon the
exercise of this Warrant without exceeding the Maximum Percentage, a beneficial owner may rely on the number of outstanding Ordinary Shares as reflected in (x) the Company’s most recent public filing with the Securities and Exchange
Commission (the “SEC”) (y) a more recent public announcement by the Company or (3) any other written notice by the Company setting forth the number of Ordinary Shares outstanding (the “Reported Outstanding Share
Number”). For any reason at any time, upon the written or oral request of a Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder, the number of Ordinary Shares then
outstanding. In any case, the number of outstanding Ordinary Shares shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the beneficial owner and any other Attribution Party
since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of Ordinary Shares to the Holder upon exercise of this Warrant results in the beneficial owner and the other Attribution Parties being
deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding Ordinary Shares (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which the aggregate beneficial
ownership of the beneficial owner or Attribution Parties exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to
transfer the ADSs representing the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, the Company shall return to the Holder the exercise price paid for the Excess Shares. Upon
delivery of a written notice to the Company, the Holder may from time to time increase (with such increase not effective until the sixty-first (61st) day after delivery of such notice) or
decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first (61st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to the beneficial owner and the other Attribution Parties and not to any other
holder of Warrants that is not an Attribution Party of the beneficial owner. For purposes of clarity, the Ordinary Shares issuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned
by the beneficial owner for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effect on the applicability of the
provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this
Section 3.3.9 to the extent necessary to correct this paragraph or any portion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 3.3.9 or to make changes or
supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of this Warrant. 

For purposes of this Section 3.3.9, “Attribution Parties” means, collectively, the following persons and entities: (i) any
investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by a beneficial owner’s investment manager or any of its affiliates
or principals, (ii) any direct or indirect affiliates of the beneficial owner or any of the foregoing, (iii) any person acting or who could be deemed to be acting as a group (as such term is used in Section 13(d) of the 1934 Act and
defined in Rule 13d-5 thereunder) together with the beneficial owner or any of the foregoing and (iv) any other persons whose beneficial 

  
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ownership of the Company’s Ordinary Shares would or could be aggregated with the beneficial owner’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act.
For clarity, the purpose of the foregoing is to subject collectively the beneficial owner and all other Attribution Parties to the Maximum Percentage.
 4.
Adjustment of Exercise Price and Number of Warrants. The Exercise Price per Warrant and the number of Warrants held shall be subject to adjustment from time to time after the Issuance Date in accordance with the Official Listing Rules of the
Australian Securities Exchange (“ASX Listing Rules”) upon the occurrence of certain events described in this Section 4 or, if the ASX Listing Rules are amended after the date of issue of the Warrants, in accordance with the
Company’s obligations under the ASX Listing Rules to the extent those obligations are modified by the amendment. 
 4.1 Subdivision or Combination;
Capital Distributions; Other Adjustments. 
 4.1.1. In a consolidation of the Company’s ordinary capital – the number of Warrants will be
consolidated in the same ratio as the ordinary capital and the Exercise Price will be amended in inverse proportion to that ratio. 
 4.1.2 In a
sub-division of the Company’s ordinary capital – the number of Warrants will be sub-divided in the same ratio as the ordinary capital and the Exercise Price will be amended in inverse proportion to that ratio. 

4.1.3. In a return of capital on Ordinary Shares – the number of Warrants will remain the same, and the Exercise Price of each Warrant will be reduced by
the same amount as the amount of cash or value of shares, securities, or other property returned in relation to each Ordinary Share, multiplied by the number of Ordinary Shares represented by each ADS (the “ADS Ratio”). 

4.1.4. In a reduction of the Company’s capital by a cancellation of paid up capital that is lost or not represented by available assets where no
securities are cancelled – the number of Warrants and the Exercise Price of each Warrant will remain unaltered. 
 4.1.5 In a pro rata cancellation of
the Company’s capital on Ordinary Shares – the number of Warrants will be reduced in the same ratio as the ordinary capital and the Exercise Price of each Warrant will be amended in inverse proportion to that ratio. 

4.1.6. In any other case – the number of Warrants or the Exercise Price, or both, will be reorganized in accordance with the ASX Listing Rules so that
the holder of the Warrants will not receive a benefit that holders of Ordinary Shares do not receive. 
 4.2 Bonus Shares and Share dividends. If
there is a pro-rata bonus issue, or a pro-rata dividend to be paid only in Ordinary Shares, to the holders of issued Ordinary Shares, the number of Warrant ADSs upon exercise will be increased by the number of ADSs which the holder of the Warrant
would have received if the Warrant had been exercised before the record date for the bonus issue or share dividend. 
 4.3 Pro-rata Issues. If there
is a pro-rata offer of Ordinary Shares (other than a bonus issue) to the holders of Ordinary Shares (i.e. a rights offer), the Exercise Price will be reduced in accordance with the following formula: 

 

			
	O’ = O -	 	E [P – (S – D)]
		 	    N + 1

  
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 Where: 

O’ is the new Exercise Price 

O is the old Exercise Price 
 E is
the number of Ordinary Shares underlying the Warrant ADSs into which one Warrant is exercisable 
 P is the volume weighted average market
price per Ordinary Share on the Australian Securities Exchange (“ASX”) over the 5 ASX trading days ending on the ASX trading day before the ex rights or ex entitlement date for the pro rata issue 

S is the subscription price for one Ordinary Share under the pro rata offer 

D is the dividend (if any) due but not yet paid on an existing Ordinary Shares which will not be paid on the new Ordinary Shares to be issued
in the pro rata issue 
 N is the number of Ordinary Shares that must be held on the record date for the pro rata issue to receive a right or
entitlement to subscribe for one new Ordinary Share. 
 For the avoidance of doubt, if the formula results in no decrease in the Exercise Price then the
Exercise Price remains unchanged. 
 4.4 Change in ADS Ratio. If after the Issuance Date the ADS Ratio is increased or reduced, then the number of
Warrant ADSs to be issued on exercise of a Warrant will be reduced or increased (respectively) in inverse proportion to the change in the ADS Ratio Ordinary Shares per ADS and the Exercise Price per Warrant will be increased or reduced
(respectively) in proportion to the change in Ordinary Shares per ADS, so that the total number or Warrant Shares underlying the Warrants and the aggregate Exercise Price for all Warrants remain unchanged. 

4.5 Notice of Adjustment. Upon any adjustment of the Exercise Price, and/or any increase or decrease in the number of Warrants, and/or any increase or
decrease in the number of ADSs issuable upon the exercise of the Warrants, the Company shall give written notice thereof to the Warrant Agent and Holder. The notice shall state the Exercise Price resulting from such adjustment and the increase or
decrease, if any, in the number of Warrant ADSs issuable at such price upon the exercise of the Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 

4.6 Other Notices. If at any time: 
 (a)
the Company shall declare any cash dividend upon its Ordinary Shares; 
 (b) the Company shall declare any dividend upon its Ordinary Shares
payable in shares or make any special dividend or other distribution to the holders of its Ordinary Shares; 
 (c) there shall be any
capital reorganization or reclassification of the capital of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another entity; 

  
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 (d) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the
Company; or 
 (e) the Company shall take or propose to take any other corporate action, prior notice of which is actually provided to
holders of the Ordinary Shares; 
 then, in any one or more of said cases, the Company shall give to the Warrant Agent, (i) at least ten days’
prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, or other action and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, or
other action, at least ten days’ written notice of the date when the same shall take place. Any notice given in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription
rights, the date on which the distribution will be made to holders of the Ordinary Shares. 
 5. Restrictive Legends; Fractional Warrants. 

In the event that transfer of a Warrant bears a restrictive legend in the DTC system, the Warrant Agent shall not cancel such Warrant and deliver a new
unrestricted Warrant in exchange therefor until the Warrant Agent has received an opinion of counsel for the Company stating that such transfer may be made and indicating whether the Warrants must also bear a restrictive legend upon that transfer.
The Warrant Agent shall not be required to effect any registration of transfer or exchange which will result in the transfer of or delivery of a fraction of a Warrant. 

6. Other Provisions Relating to Rights of Holders of Warrants. 

6.1. No Rights as Shareholder. Except as otherwise specifically provided herein, a Holder, solely in its capacity as a holder of Warrants, shall not be
entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant Agreement be construed to confer upon a Holder, solely in its capacity as the registered
holder of Warrants, any of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of shares, reclassification of share capital, consolidation, merger,
conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights or rights to participate in new issues of shares, or otherwise, prior to the issuance to the Holder of the Warrant ADSs which it is then entitled to
receive upon the valid exercise of Warrants. 
 6.2. Reservation of Ordinary Shares. The Company shall at all times reserve and keep available a
number of its authorized but unissued Ordinary Shares, and shall use its best efforts to keep registered under the 1933 Act a number of ADSs, Warrants and Ordinary Shares, in each case that will be sufficient to permit the exercise in full of all
outstanding Warrants outstanding under this Warrant Agreement. 
 6.3 Ability to issue cleansing notice. The Company shall at all times use its best
efforts to conduct its activities such that it is able to issue a notice in accordance with section 708A(5)(e) of the Corporations Act in respect of the issue of any Ordinary Shares on the exercise of Warrants. 

6.4 ASX Filings; Nasdaq Listing. The Company will use its best efforts ensure that it applies to ASX for official quotation (as that expression is used
in the ASX Listing Rules) of the Ordinary Shares issued on the exercise of the Warrants in the same class and on the same terms as all other Ordinary Shares quoted on ASX pursuant to ASX Listing Rule 2.7 immediately on issue of those Ordinary
Shares. The Company will ensure the Warrant ADSs and the Warrants are listed for trading on The Nasdaq Stock Market. 

  
 9 

 6.5 Issue of Cleansing Notice. On the issue of any Ordinary Shares on the exercise of any Warrants, the
Company shall use best efforts to ensure that it lodges with ASX a notice in accordance with section 708A(5)(e) of the Corporations Act in respect of that issue of Ordinary Shares within 5 business days of that issue, provided that if it is unable
to comply with the requirements of section 708A(5)(e) of the Corporations Act in respect of an issue of Ordinary Shares issued on exercise of Warrants, the Company shall, at its own expense, do everything necessary to ensure that such Ordinary
Shares are able to be freely traded on ASX in compliance with the ASX Listing Rules and the Corporations Act, including obtaining an exemption from the Australian Securities and Investments Commission (“ASIC”) or the lodging of a
disclosure document with ASIC in accordance with the requirements of Chapter 6D of the Corporations Act. 
 6.6 Compensation for Buy-In on Failure to
Timely Deliver Warrant ADSs Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Depositary to deliver the Warrant ADSs to the Holder pursuant to Section 3.3.2 on or before the
Delivery Time, and if after such date the beneficial owner is required by its broker to purchase (in an open market transaction or otherwise) or the beneficial owner’s brokerage firm otherwise purchases, ADSs or Ordinary Shares to deliver in
satisfaction of a sale by the beneficial owner of the Warrant ADSs, which the beneficial owner anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the beneficial owner’s total purchase price (including brokerage commissions, if any) for the Warrant ADSs or Warrant Shares so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant ADSs or
Warrant Shares, as applicable, that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and
(B) reinstate the portion of the Warrant and equivalent number of Warrant ADSs or Warrant Shares, as applicable, for which such exercise was not honored (in which case such exercise shall be deemed rescinded). For example, if the
beneficial owner purchases Ordinary Shares having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of Warrant ADSs with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause
(A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000 for the benefit of the beneficial owner. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in
respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit right of a Holder to pursue any other remedies available to it hereunder, at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver Warrant ADSs upon exercise of the Warrant as required pursuant to the terms hereof. 

7. Concerning the Warrant Agent and Other Matters. 
 7.1.
Any instructions given to the Warrant Agent orally, as permitted by any provision of this Warrant Agreement, shall be confirmed in writing by the Company as soon as practicable. The Warrant Agent shall not be liable or responsible and shall be fully
authorized and protected for acting, or failing to act, in accordance with any oral instructions which do not conform with the written confirmation received in accordance with this Section 7.1. 

7.2. (a) Whether or not any Warrants are exercised, the Company shall reimburse the Warrant Agent for its out-of-pocket expenses in connection with this
Warrant Agreement, including, without limitation, the charges of Computershare for providing services to the Warrant Agent with respect to the Warrants and the expenses for which the Warrant Agent is obliged to reimburse Computershare and the fees
and expenses of the Warrant Agent’s counsel. While the Warrant Agent endeavors to maintain out-of-pocket charges (both internal and external) at competitive rates, these charges may not reflect actual out-of-pocket costs, and may include
handling charges to cover internal processing and use of the Warrant Agent’s billing systems. 

  
 10 

 (b) All amounts owed to the Warrant Agent under this Warrant Agreement are due within 30 days of the invoice
date. Delinquent payments are subject to a late payment charge of one and one-half percent (1.5%) per month commencing 45 days from the invoice date. The Company agrees to reimburse the Warrant Agent for any attorney’s fees and any other
costs associated with collecting delinquent payments. 
 (c) No provision of this Warrant Agreement shall require Warrant Agent to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of its duties under this Warrant Agreement or in the exercise of its rights. 

7.3 As Warrant Agent for the Company hereunder, the Warrant Agent: 

(a) shall have no duties or obligations other than those specifically set forth herein or as may subsequently be agreed to in writing by the
Warrant Agent and the Company; 
 (b) shall have no obligation to effect any delivery of Warrant ADSs other than to instruct the Depositary
with respect to that delivery; 
 (c) shall be regarded as making no representations and having no responsibilities as to the validity,
sufficiency, value, or genuineness of the Warrants or any Warrant Shares or Warrant ADSs; 
 (d) shall not be obligated to take any legal
action hereunder; if, however, the Warrant Agent determines to take any legal action hereunder, and where the taking of such action might, in its judgment, subject or expose it to any expense or liability it shall not be required to act unless it
has been furnished with an indemnity satisfactory to it; 
 (e) may rely on and shall be fully authorized and protected in acting or failing
to act upon any certificate, instrument, opinion, notice, letter, telegram, telex, facsimile transmission or other document or security delivered to the Warrant Agent and believed by it to be genuine and to have been signed by the proper party or
parties; 
 (f) shall not be liable or responsible for any recital or statement contained in the Registration Statement or any other
documents relating thereto; 
 (g) shall not be liable or responsible for any failure on the part of the Company to comply with any of its
covenants and obligations relating to the Warrants, including without limitation obligations under applicable securities laws; 
 (h) may
rely on and shall be fully authorized and protected in acting or failing to act upon the written, telephonic or oral instructions with respect to any matter relating to its duties as Warrant Agent covered by this Warrant Agreement (or supplementing
or qualifying any such actions) of officers of the Company, and is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Company or counsel to the Company, and may apply to the
Company, for advice or instructions in connection with the Warrant Agent’s duties hereunder, and the Warrant Agent shall not be liable for any delay in acting while waiting for those instructions; any applications by the Warrant Agent for
written instructions from the Company may, at the option of the Agent, set forth in writing any action proposed to be taken or omitted by the Warrant Agent under this Warrant Agreement and the date on or after which such action shall be taken or
such omission shall be effective; the Warrant Agent shall not be liable for any action taken by, or omission of, the Warrant Agent in accordance with a proposal included 

  
 11 

 
in such application on or after the date specified in such application (which date shall not be less than two business days after the date such application is sent to the Company, unless the
Company shall have consented in writing to any earlier date) unless prior to taking any such action, the Warrant Agent shall have received written instructions in response to such application specifying the action to be taken or omitted; 

(i) may consult with counsel satisfactory to the Warrant Agent, including its in-house counsel, and the advice of such counsel shall be full
and complete authorization and protection in respect of any action taken, suffered, or omitted by it hereunder in good faith and in accordance with the advice of such counsel; 

(j) may perform any of its duties hereunder either directly or by or through nominees, correspondents, designees, subagents or subcustodians,
and it shall not be liable or responsible for any misconduct or negligence on the part of any nominee, correspondent, designee, subagent or subcustodian appointed with reasonable care by it in connection with this Warrant Agreement; 

(k) is not authorized, and shall have no obligation, to pay any brokers, dealers, or soliciting fees to any person and 

(l) shall not be required hereunder to comply with the laws or regulations of any country other than the United States of America or any
political subdivision thereof; and Warrant Agent may consult with foreign counsel, at the Company’s expense, to resolve any foreign law issues that may arise as a result of the Company or any other party being subject to the laws or regulations
of any foreign jurisdiction. 
 7.4. (a) In the absence of gross negligence or willful misconduct on its part, the Warrant Agent shall not be liable
for any action taken, suffered, or omitted by it or for any error of judgment made by it in the performance of its duties under this Warrant Agreement. Anything in this Warrant Agreement to the contrary notwithstanding, in no event shall Warrant
Agent be liable for special, indirect, incidental, consequential or punitive losses or damages of any kind whatsoever (including but not limited to lost profits), even if the Warrant Agent has been advised of the possibility of such losses or
damages and regardless of the form of action. Any liability of the Warrant Agent will be limited in the aggregate to the amount of fees paid by the Company hereunder. The Warrant Agent shall not be liable for any failures, delays or losses, arising
directly or indirectly out of conditions beyond its reasonable control including, but not limited to, acts of government, exchange or market ruling, suspension of trading, work stoppages or labor disputes, fires, civil disobedience, riots,
rebellions, storms, electrical or mechanical failure, computer hardware or software failure, communications facilities failures including telephone failure, war, terrorism, insurrection, earthquakes, floods, acts of God or similar occurrences. 

(b) In the event any question or dispute arises with respect to the proper interpretation of the Warrants or the Warrant Agent’s duties under this
Warrant Agreement or the rights of the Company or of any Holder, the Warrant Agent shall not be required to act and shall not be held liable or responsible for its refusal to act until the question or dispute has been judicially settled (and, if
appropriate, it may file a suit in interpleader or for a declaratory judgment for such purpose) by final judgment rendered by a court of competent jurisdiction, binding on all persons interested in the matter which is no longer subject to review or
appeal, or settled by a written document in form and substance satisfactory to you and executed by the Company and each such Holder. In addition, the Warrant Agent may require for such purpose, but shall not be obligated to require, the execution of
such written settlement by all the Holders and all other persons that may have an interest in the settlement. 
 7.5. The Company covenants to indemnify the
Warrant Agent and hold it harmless from and against any loss, liability, claim or expense (“Loss”) arising out of or in connection with the Warrant Agent’s duties 

  
 12 

 
under this Warrant Agreement, including the reasonable costs and expenses of defending itself against any Loss, unless such Loss shall have been determined by a court of competent jurisdiction to
be a result of the Warrant Agent’s gross negligence or willful misconduct. 
 7.6. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days after the earlier of the Expiration Date and the date on which no Warrants remain outstanding (the “Termination Date”). On the business day following the Termination Date, the Agent shall deliver to the
Company any entitlements, if any, held by the Warrant Agent under this Warrant Agreement. The Agent’s right to be reimbursed for fees, charges and out-of-pocket expenses as provided in this Section 7 shall survive the termination of this
Warrant Agreement. 
 7.7. If any provision of this Warrant Agreement shall be held illegal, invalid, or unenforceable by any court, this Warrant Agreement
shall be construed and enforced as if such provision had not been contained herein and shall be deemed an Agreement among the parties to it to the full extent permitted by applicable law. 

7.8. The Company represents and warrants that (a) it is duly incorporated, validly existing and in good standing under the laws of its jurisdiction of
incorporation (to the extent that the concept of “good standing” or an equivalent concept exists in the laws of its jurisdiction), (b) the offer and sale of the Warrants and the execution, delivery and performance of all transactions
contemplated thereby (including this Warrant Agreement) have been duly authorized by all necessary corporate action and will not result in a breach of or constitute a default under the constitution of the Company or any indenture, agreement or
instrument to which it is a party or is bound, (c) this Warrant Agreement has been duly executed and delivered by the Company and constitutes the legal, valid, binding and enforceable obligation of the Company, (d) the Warrants will comply
in all material respects with all applicable requirements of law and (e) to the best of its knowledge, there is no litigation pending or threatened as of the date hereof in connection with the offering of the Warrants. 

7.9. In the event that any claim of inconsistency between this Warrant Agreement and the descriptions in the Registration Statement, as they may from time to
time be amended, the terms of this Warrant Agreement shall control. 
 7.10. Set forth in Annex B to this Warrant Agreement is a list of the names and
specimen signatures of the persons authorized to act for the Company under this Warrant Agreement (the “Authorized Representatives”). The Company shall, from time to time, certify to you the names and signatures of any other persons
authorized to act for the Company under this Warrant Agreement. 
 7.11. Except as expressly set forth elsewhere in this Warrant Agreement, all notices,
instructions and communications under this Agreement shall be in writing, shall be effective upon receipt and shall be addressed, if to the Company, to its address set forth beneath its signature to this Agreement, or, if to the Agent, to The Bank
of New York Mellon, 101 Barclay Street, 22 West, New York, New York 10286, Attention: Violet Pagan, Relationship Manager, Benitec, Telephone: 212-815-2276, Facsimile: 212-571-3050, with a copy to Shareowner Services, 480 Washington Boulevard, Jersey
City, New Jersey 07310, Attention: Gwen Minott and Kirsten Kulmaczewski, Telephone: 201-680-3385, Facsimile: 201-680-4665, or to such other address of which a party hereto has notified the other party. 

7.12. (a) This Warrant Agreement shall be governed by and construed in accordance with the laws of the State of New York. All actions and proceedings
brought by the Warrant Agent relating to or arising from, directly or indirectly, this Warrant Agreement may be litigated in courts located within the Borough of Manhattan, City and State of New York. The Company hereby submits to the personal
jurisdiction of such courts and consents that any service of process may be made by certified or registered mail, return 

  
 13 

 
receipt requested, directed to the Company at its address last specified for notices hereunder. Each of the parties hereto hereby waives the right to a trial by jury in any action or proceeding
arising out of or relating to this Warrant Agreement. 
 (b) This Warrant Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the parties hereto. This Warrant Agreement may not be assigned, or otherwise transferred, in whole or in part, by either party without the prior written consent of the other party, which the other party will not unreasonably withhold,
condition or delay; except that (i) consent is not required for an assignment or delegation of duties by Warrant Agent to any affiliate of Warrant Agent and (ii) any reorganization, merger, consolidation, sale of assets or other
form of business combination by Warrant Agent shall not be deemed to constitute an assignment of this Warrant Agreement. 
 (c) No provision of this Warrant
Agreement may be amended, modified or waived, except in a written document signed by both parties without the consent of any Holder for the purpose of curing any ambiguity, or curing, correcting or supplementing any defective provision
contained herein or adding or changing any other provisions with respect to matters or questions arising under this Agreement as the parties may deem necessary or desirable and that the parties deem shall not adversely affect the interest of the
Holders. All other modifications or amendments shall require the vote or written consent of the beneficial owners of at least 65% of the then outstanding Warrants. Notwithstanding the foregoing, adjustments may be made to the Warrant terms
and rights pursuant to Section 4 without the consent of the Holders.
 7.13 Payment of Taxes. The Company will from time to time
promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or delivery of Warrant Shares or Warrant ADSs upon the exercise of Warrants, 

7.14 Resignation of Warrant Agent. 
 7.14.1.
Appointment of Successor Warrant Agent. The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged from all further duties and liabilities hereunder after giving sixty (60) days’ notice in
writing to the Company, or such shorter period of time agreed to by the Company. If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in
place of the Warrant Agent. If the Company shall fail to make such appointment within a period of 60 days after it has been notified in writing of such resignation or incapacity by the Warrant Agent, then the Warrant Agent or any Holder may apply to
any court of competent jurisdiction for the appointment of a successor Warrant Agent at the Company’s cost. Pending appointment of a successor to such Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent
shall be carried out by the Company. Any successor Warrant Agent (but not including the initial Warrant Agent), whether appointed by the Company or by such court, shall be a person organized and existing under the laws of any state or of the United
States of America, in good standing, and authorized under such laws to exercise shareowner services powers and subject to supervision or examination by federal or state authority. After appointment, any successor Warrant Agent shall be vested with
all the authority, powers, rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed, and except for executing and delivering
documents as provided in the sentence that follows, the predecessor Warrant Agent shall have no further duties, obligations, responsibilities or liabilities hereunder, but shall be entitled to all rights that survive the termination of this Warrant
Agreement and the resignation or removal of the Warrant Agent, including but not limited to its right to indemnity hereunder. If for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the
expense of the Company, an instrument transferring to such successor Warrant Agent all the authority, powers, and rights of such 

  
 14 

 
predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully
and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations. 

7.14.2. Notice of Successor Warrant Agent. In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the
predecessor Warrant Agent and the transfer agent for the ADSs not later than the effective date of any such appointment. 
 7.14.3. Merger or
Consolidation of Warrant Agent. Any person into which the Warrant Agent may be merged or converted or with which it may be consolidated or any person resulting from any merger, conversion or consolidation to which the Warrant Agent shall be a
party or any person succeeding to the shareowner services business of the Warrant Agent or any successor Warrant Agent shall be the successor Warrant Agent under this Warrant Agreement, without any further act or deed. For purposes of this Warrant
Agreement, “person” shall mean any individual, firm, corporation, partnership, limited liability company, joint venture, association, trust or other entity, and shall include any successor (by merger or otherwise) thereof or thereto. 

8. Miscellaneous Provisions. 
 8.1. Persons Having
Rights under this Warrant Agreement. Nothing in this Warrant Agreement expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other
than the parties hereto and the Holders any right, remedy, or claim under or by reason of this Warrant Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. 

8.2. Examination of the Warrant Agreement. A copy of this Warrant Agreement shall be available at all reasonable times at the office of the Warrant
Agent designated for such purpose for inspection by any Holder. Prior to such inspection, the Warrant Agent may require any such Holder to verify ownership of Warrants. 

8.3. Counterparts. This Warrant Agreement may be executed in any number of original, facsimile or electronic counterparts and each of such counterparts
shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 
 8.4. Effect
of Headings. The Section headings herein are for convenience only and are not part of this Warrant Agreement and shall not affect the interpretation thereof. 

  
 15 

 IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the parties hereto as of the day and year
first above written. 
  

			
	BENITEC BIOPHARMA LIMITED
	ACN 068 943 662
		
	By:	 	  

	Name:	 	
	Title:	 	Director
		
	By:	 	  

	Name:	 	
	Title:	 	Director/Company Secretary
	
	Address for notices:
	F6A/1-15 Barr Street
	Balmain, NSW, 2041, Australia
	Attention:
	Telephone:
	Facsimile:
	E-mail:
	
	THE BANK OF NEW YORK MELLON,
	As Warrant Agent
		
	By:	 	  

	Name:	 	
	Title:	 	

 Annex A - Form of Global Certificate 

Annex B - Authorized Representatives 

  
 16 

 ANNEX A 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN. 
 BENITEC BIOPHARMA LIMITED 

WARRANT CERTIFICATE 
 NOT
EXERCISABLE AFTER AUGUST [●], 2020 
 This certifies that the person whose name and address appears below, or registered assigns, is
the registered owner of the number of Warrants set forth below. Each Warrant entitles its registered holder to purchase from Benitec Biopharma Limited (the “Company”) at any time prior to 5:00 P.M. (New York City time) on August
[●], 2020, at the designated office of The Bank of New York Mellon, as warrant agent (the “Warrant Agent”) set forth below, one American depositary share (each, an “ADS”), each ADS representing 20 ordinary
shares, no par value, of the Company (each, a “Share” and collectively, the “Shares”), at price of US$        , subject to possible adjustments as provided in the Warrant
Agreement (as defined below). The Company shall pay the issuance fees of the Depositary for the issuance of new ADSs upon exercise of the Warrants. 

This Global Certificate upon surrender at the designated office of the Warrant Agent, may be exchanged for another Global Certificate
evidencing the same number of Warrants as the Global Certificate surrendered. A transfer of the Warrants evidenced hereby may be registered upon surrender of this Global Certificate at the designated office of the Warrant Agent by the registered
holder in person or by a duly authorized attorney, properly endorsed or accompanied by proper instruments of transfer, a signature guarantee, and such other and further documentation as the Warrant Agent may reasonably request and duly stamped as
may be required by the laws of the State of New York and of the United States of America. 
 The terms and conditions of the Warrants and
the rights and obligations of the holder of this Global Certificate are set forth in an ADS Warrant Agreement dated as of August [●], 2015 (the “Warrant Agreement”) between the Company and the Warrant Agent. A copy of the
Warrant Agreement is available for inspection during business hours at the office of the Warrant Agent. 
 This Global Certificate shall not
be valid or obligatory for any purpose until it shall have been countersigned by an authorized signatory of the Warrant Agent. 
 WITNESS
the facsimile signature of a proper officer of the Company. 
  

			
	BENITEC BIOPHARMA LIMITED
		
	By:	 	  

	Name:	 	
	Title:	 	

  
 17 

 
			
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	Dated: August [●], 2015
	Countersigned:
	
	 THE BANK OF NEW YORK MELLON,
 as
Warrant Agent

		
	By:	 	  

	Name:	 	
	Title:	 	

 PLEASE DETACH HERE 
  

 
 Certificate
No.:             Number of Warrants:              

WARRANT CUSIP NO.: 082053 117 

BENITEC BIOPHARMA LIMITED 
  

			
	[Name & Address of Holder]	  	THE BANK OF NEW YORK MELLON, Warrant Agent
		
		  	By mail:
		
		  	The Bank of New York Mellon
		  	c/o Voluntary Corporate Actions
		  	PO Box 43011
		  	Providence, RI 02940-3011
		
		  	By hand or overnight courier:
		
		  	The Bank of New York Mellon
		  	c/o Voluntary Corporate Actions
		  	250 Royall St, Suite V
		  	Canton, MA 02021

  
 18 

 ANNEX B 

Authorized Representatives 
  

					
	 Name
	  	 Title
	 	 Signature

		  		 	
		  		 	
		  		 	

  
 19Exhibit

Exhibit 4.3

THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE OR SOLD UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER OR SALE. 

ADCARE HEALTH SYSTEMS, INC.

10% CONVERTIBLE SUBORDINATED NOTE DUE APRIL 30, 2017

No. ____
Issuance Date: April 30, 2015    Original Principal Amount: U.S. 

This 10% CONVERTIBLE SUBORDINATED NOTE (including all 10% Convertible Subordinated Notes issued in transfer or replacement hereof, this “Note”) is one of a series of 10% Convertible Subordinated Notes originally issued by AdCare Health Systems, Inc., a Georgia corporation (the “Company”), as contemplated by the Company’s Confidential Offering Memorandum dated March 24, 2015, and pursuant to Subscription Agreements relating thereto between the Company and the Persons signatory thereto (collectively, the “Notes”).  Certain capitalized terms used herein are defined in Section 24.

FOR VALUE RECEIVED, the Company hereby promises to pay to ____________ or his, her or its registered assigns (the “Holder”) the amount set out above as the Original Principal Amount (as reduced pursuant to the terms of this Note by redemption, conversion or otherwise, the “Principal”) when due, whether upon the Maturity Date, acceleration, redemption or otherwise (in each case in accordance with the terms of this Note) and to pay interest on any outstanding Principal (“Interest”) at the applicable interest rate from the date set forth above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon an Interest Payment Date, acceleration, conversion, redemption or otherwise (in each case in accordance with the terms of this Note).  

1.Payments of Principal.  On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding Principal and accrued and unpaid Interest thereon.  
2.    Interest; Interest Rate; Default Interest Rate.  Interest on this Note shall: (i) accrue daily on the outstanding Principal commencing on the Issuance Date, (ii) be computed on the basis of a 360-day year of twelve 30-day months, and (iii) be payable in cash in arrears on each of March 31, June 30, September 30 and December 31 of each year during which this Note remains outstanding and the Maturity Date (each, an “Interest Payment Date”), with the first Interest Payment Date being, notwithstanding the foregoing, June 30, 2015.  Interest hereunder shall be paid to the record holder of this Note.  Absent an Event of Default (as defined in Section 4), Interest on the outstanding 

870353_2

Principal shall accrue at the rate of 10.00% per annum (the “Interest Rate”).  During the existence and continuance of an Event of Default, the outstanding Principal shall accrue Interest at a rate of 14.00% per annum (the “Default Rate”); provided, however, that if such Event of Default is subsequently cured, then the rate of Interest on this Note will be reduced from the Default Rate to the Interest Rate on the date of such cure.
3.    Conversion of Notes.  This Note shall be convertible into shares of the Company’s common stock, no par value (the “Common Stock”), on the terms and conditions set forth in this Section 3.  The shares of Common Stock issuable upon conversion of this Note pursuant to this Section 3 are referred to herein collectively as the “Conversion Shares.”
(a)    Conversion Right.  Subject to the provisions of Section 3(d), the Holder shall be entitled to convert any Conversion Amount (as defined in Section 3(b)(i)) into fully paid and nonassessable Conversion Shares in accordance with Section 3(c), at the Conversion Rate (as defined in Section 3(b)).  The Company shall not issue any fractional Conversion Shares upon any conversion.  If the issuance would result in the issuance of a fractional Conversion Share, then the Company shall round such fractional Conversion Share to the nearest whole Conversion Share.  The Company shall pay any and all expenses of issuance, including transfer, stamp and similar taxes that may be payable with respect to the issuance and delivery of Conversion Shares.
(b)    Conversion Rate.  The number of Conversion Shares issuable upon conversion of any Conversion Amount shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).
(i)    “Conversion Amount” means the sum of (A) the amount of outstanding Principal to be converted, redeemed or otherwise with respect to which this determination is made, plus (B) the amount of accrued and unpaid Interest with respect to such Principal.
(ii)    “Conversion Price” is $4.25.
(c)    Mechanics of Conversion.
(i)    Optional Conversion.  To convert any Conversion Amount into Conversion Shares on any date (a “Conversion Date”), the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt on or before 5:00 p.m., Atlanta Time, on such date, a copy of an executed notice of conversion in the form attached as Exhibit I (the “Conversion Notice”) to the Company and (B) surrender this Note to a common carrier for delivery to the Company as soon as practicable on or following such date (or provide an indemnification undertaking acceptable to the Company with respect to this Note in the case of its loss, theft or destruction).  On or before the second (2nd) Business Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such Conversion Notice to the Holder and the Company’s transfer agent (the “Transfer Agent”).  On or before the third (3rd) Trading Day following the date of receipt of a Conversion Notice, the Company shall: (x) provided that (1) the Transfer Agent is participating in the Depository Trust Company’s (“DTC”) Fast Automated 

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Securities Transfer Program and (2) the Registration Condition is satisfied, credit such aggregate number of Conversion Shares to which the Holder shall be entitled to the Holder’s balance account with DTC through its Deposit/Withdrawal at Custodian system or (y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program or if the Registration Condition is not satisfied, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder, for the number of Conversion Shares to which the Holder shall be entitled, provided, however, that such certificate shall bear the following restrictive legend:  
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE OFFERED OR SOLD UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER OR SALE.
Notwithstanding anything herein to the contrary, the Company shall not be obligated to issue any Conversion Shares until this Note is physically surrendered to the Company, or the Holder notifies the Company that this Note has been lost, stolen or destroyed and provides an indemnification undertaking acceptable to the Company to indemnify the Company from any loss incurred by it in connection therewith.  If the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than four (4) Trading Days after receipt of this Note and at its own expense, issue and deliver to the Holder a new Note (in accordance with Section 14(d)) representing the outstanding Principal not converted.  The Person or Persons entitled to receive the Conversion Shares issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such Conversion Shares.
(ii)    Company’s Failure to Timely Convert.  If the Company shall fail to issue a certificate to the Holder or credit the Holder’s balance account with DTC for the number of Conversion Shares which the Company is obligated to issue to the Holder upon conversion of any Conversion Amount on or prior to the date which is three (3) Trading Days after the Company’s receipt of the facsimile (or otherwise delivered) copy of a Conversion Notice, then the Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned, as the case may be, any portion of this Note that has not been converted pursuant to such Conversion Notice; provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued before the date of such notice pursuant to this Section 3(c)(ii) or otherwise.  In addition to the foregoing, if within three (3) Trading Days after the 

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Company’s receipt of the facsimile (or otherwise delivered) copy of a Conversion Notice, the Company shall fail to issue and deliver a certificate to the Holder or credit the Holder’s balance account with DTC for the number of Conversion Shares to which the Company is obligated to issue to the Holder upon conversion of any Conversion Amount or on any date of the Company’s obligation to deliver Conversion Shares as contemplated pursuant to clause (y) below, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of Common Stock issuable upon such conversion that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three (3) Trading Days after the Holder’s request and in the Holder’s discretion, either (x) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out of pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Common Stock) shall terminate and the applicable portion of the Note will be deemed to have been converted, or (y) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Common Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (I) such number of shares of Common Stock, times (II) the Closing Bid Price on the Conversion Date.
(iii)    Registration; Book-Entry.  The Company shall maintain a register (the “Register”) for the recordation of the names and addresses of the Holders of the Notes and the principal amount of the Notes held by such Holders (the “Registered Notes”).  The entries in the Register shall be conclusive and binding for all purposes, absent manifest error.  The Company and the Holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation, the right to receive payments of Principal and Interest hereunder, notwithstanding notice to the contrary.  Subject to compliance with any requirements of applicable federal and state securities laws and regulations and the provisions of Section 13:  (A) a Holder may assign or sell a Registered Note in whole or in part only by registration of such assignment or sale on the Register; and (B) upon its receipt of a request to assign or sell all or part of any Registered Note by the Holder, the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered Registered Note to the designated assignee or transferee pursuant to Section 14.  
(iv)    Pro Rata Conversion; Disputes.  In the event that the Company receives a Conversion Notice from more than one Holder of the Notes for the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes submitted for conversion, the Company, subject to Section 3(d), shall convert from each Holder of the Notes electing to have Notes converted on such date a pro rata amount of such Holder’s portion of such Holder’s Notes submitted for conversion based on the principal amount of Notes submitted for conversion on such date by such Holder relative to the aggregate principal amount of all the Notes submitted for conversion on such date.  In the event of a dispute as to the number of Conversion Shares issuable to the Holder in 

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connection with a conversion of this Note, the Company shall issue to the Holder the number of Conversion Shares not in dispute and resolve such dispute in accordance with Section 19.
(v)    Company Optional Redemption.  If (i) at any time after the Issuance Date the arithmetic average of the Weighted Average Price of the Common Stock for any ten (10) consecutive Trading Days equals or exceeds 125% of the Conversion Price (subject to appropriate adjustments pursuant to Section 6) and (ii) the Resale Condition has been satisfied as of the Company Optional Redemption Notice Date (as defined below), then the Company shall have the right, at its option and sole discretion, and without penalty, to redeem all or any portion of the outstanding Principal under this Note (the “Company Optional Redemption Amount”) as designated in the Company Optional Redemption Notice (as defined below) (a “Company Optional Redemption”).  The portion of this Note subject to redemption under this Section shall be redeemed by the Company in cash at a price equal to the sum of (i) 100% of the outstanding Principal being redeemed plus (ii) any accrued and unpaid Interest on such outstanding Principal (the “Company Optional Redemption Price”).  The Company may exercise its right to require redemption under this Section by delivering a written notice by facsimile or overnight courier to the Holder (the “Company Optional Redemption Notice,” and the date the Company sends such notice is referred to as the “Company Optional Redemption Notice Date”). Each Company Optional Redemption Notice shall be irrevocable unless revocation by the Company is consented to by the Holder in writing.  The Company Optional Redemption Notice shall state (x) the date on which the Company Optional Redemption shall occur (the “Company Optional Redemption Date”), which date shall not be prior to March 31, 2016, and shall not be less than sixty (60) days following the Company Optional Redemption Notice Date, and (y) the aggregate outstanding Principal of this Note which the Company has elected to be subject to Company Optional Redemption from the Holder pursuant to this Section 3(c)(v) on the Company Optional Redemption Date.  Notwithstanding anything to the contrary in this Section 3(c)(v), until the Company Optional Redemption Price is paid, in full, the Company Optional Redemption Amount may be converted, in whole or in part, by the Holders into Conversion Shares pursuant to Section 3.  If the Holder so elects, any or all of the Principal converted by the Holder after the Company Optional Redemption Notice Date shall reduce the Company Optional Redemption Amount of this Note required to be redeemed on the Company Optional Redemption Date.  Redemptions made pursuant to this Section 3(c)(v) shall be made in accordance with Section 9.
(d)    Limitations on Conversions; Beneficial Ownership. 
(i)    Notwithstanding anything in this Note to the contrary, the Company shall not effect any conversion of this Note, and the Holder shall not have the right to convert any portion of this Note pursuant to Section 3, to the extent that after giving effect to such conversion, the Holder (together with the Holder’s Affiliates) would (A) beneficially own in excess of 4.9% (the “Maximum Percentage”) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion, or (B) control in excess of the Maximum Percentage of the total voting power of the Company’s securities outstanding 

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immediately after giving effect to such conversion.  For purposes of the foregoing sentence, the 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 conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (1) conversion of the remaining, nonconverted portion of this Note beneficially owned by the Holder or any of its Affiliates and (2) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Notes) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 3(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  For purposes of this Section 3(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-K, Form 10-Q, Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  For any reason at any time, upon the written request of the Holder, the Company shall within two (2) Business Days confirm orally and in writing to the 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 conversion or exercise of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  By written notice to the Company, the Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.9% specified in such notice; provided that (1) any such increase or decrease will not be effective until the sixty-first (61st) day after such notice is delivered to the Company, and (2) any such increase or decrease will apply only to the Holder and not to any other Holder of Notes.
(ii)    The Company shall not be obligated to issue any Conversion Shares upon conversion of this Note if the issuance of such shares would exceed the aggregate number of shares of Common Stock which the Company may issue upon conversion of the Notes without breaching the Company’s obligations under the rules or regulations of the Principal Market or any other Eligible Market on which the Conversion Stock is then quoted or listed (the “Exchange Cap”), except that such limitation shall not apply in the event that the Company obtains the approval of its shareholders as required by the applicable rules of the Principal Market (or such Eligible Market, as applicable) for issuances of Common Stock in excess of such amount.  Unless such approval is obtained, no Holder of the Notes shall be issued in the aggregate upon conversion of Notes, Conversion Shares in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the sum of the aggregate Original Principal Amount of the Notes purchased by such Holder of outstanding Notes and the denominator of which is the sum of the aggregate Original Principal Amount of the Notes purchased by all Holders of outstanding Notes (with respect to each Holder, the “Exchange Cap Allocation”).  In the event that any Holder shall 

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sell or otherwise transfer any of such Holder’s Notes, the transferee shall be allocated a pro rata portion of such Holder’s Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee.  In the event that any Holder of Notes shall convert all of such Holder’s Notes into a number of Conversion Shares which, in the aggregate, is less than such Holder’s Exchange Cap Allocation, then the difference between such Holder’s Exchange Cap Allocation and the number of Conversion Shares actually issued to such Holder shall be allocated to the respective Exchange Cap Allocations of the remaining Holders of Notes on a pro rata basis in proportion to the aggregate Outstanding Principal amount of the Notes then held by each such Holder.
(iii)    The Company shall not be obligated to issue any Conversion Shares upon conversion of this Note until the Principal Market has approved the additional listing of such Conversion Shares.  The Company shall apply for such approval as soon as practicable after the Issuance Date.
4.    Rights Upon Event of Default.
(a)    Event of Default.  An Event of Default (as defined below) may only be waived by the written consent of the Holder.  Unless waived pursuant to the immediately preceding sentence, each of the following events shall constitute an “Event of Default”:
(i)    the Company’s failure to pay to the Holder any amount of Principal or Interest by the seventh (7th) Business Day following the date when due under this Note (including, without limitation, the Company’s failure to pay any redemption amounts hereunder);
(ii)    the Company or any of its Subsidiaries, pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal, foreign or state law for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due; or
(iii)    a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its subsidiaries in an involuntary case, (B) appoints a Custodian of the Company or any of its subsidiaries or (C) orders the liquidation of the Company or any of its subsidiaries.
(b)    Redemption Right.  Upon the occurrence and during the continuance of an Event of Default with respect to this Note, the Company shall within two (2) Business Days deliver written notice thereof via facsimile and overnight courier (an “Event of Default Notice”) to the Holder.  Subject to Section 11(c), at any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (the 

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“Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice shall indicate the Conversion Amount of this Note the Holder is electing to require the Company to redeem.  The portion of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the Conversion Amount to be redeemed as specified in the Event of Default Redemption Notice (the “Event of Default Redemption Price”).  Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 9 and Section 11(c).  To the extent redemptions required by this Section 4(b) are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments.  
5.    Rights Upon Change of Control.  
(a)No sooner than twenty (20) days nor later than ten (10) days prior to the consummation of a Change of Control, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a “Change of Control Notice”).  At any time during the period commencing on the earlier to occur of (i) any definitive written agreement by the Company, which upon consummation of the transaction contemplated thereby would reasonably be expected to result in a Change of Control, and (ii) the Holder’s receipt of a Change of Control Notice and ending twenty (20) Trading Days after the date of the consummation of such Change of Control, the Required Holders may require the Company to redeem all or any portion of this Note (and a pro rata portion of all of the other Notes) by delivering written notice thereof (“Holders Change of Control Redemption Notice”) to the Company, which Holders Change of Control Redemption Notice shall indicate the Conversion Amount of this Note (and the pro rata portion of all of the other Notes) that the Required Holders are electing to require the Company to redeem.  The portion of this Note subject to redemption pursuant to this Section 5(a) shall be redeemed by the Company in cash at a price equal to the Conversion Amount to be redeemed as specified in the Holders Change of Control Redemption Notice (the “Holders Change of Control Redemption Price”).  
(b)In addition, at any time during the period commencing on the earlier to occur of (i) any definitive written agreement by the Company, which upon consummation of the transaction contemplated thereby would reasonably be expected to result in a Change of Control, and (ii) the Holder’s receipt of a Change of Control Notice and ending twenty (20) Trading Days after the date of the consummation of such Change of Control, the Company may redeem all or any portion of this Note (and a pro rata portion of all of the other Notes) by delivering written notice thereof (“Company Change of Control Redemption Notice”) to the Holder, which Company Change of Control Redemption Notice shall indicate the Conversion Amount of this Note (and the pro rata portion of all of the other Notes) that the Company is electing to redeem.  The portion of this Note subject to redemption pursuant to this Section 5(b) shall be redeemed by the Company in cash at a price equal to the Conversion Amount to be redeemed as specified in the Company Change of Control Redemption Notice (the “Company Change of Control Redemption Price”).
(c)Redemptions required by Section 5(a) or Section 5(b) shall be made in accordance with the provisions of Section 9 and Section 11(c) and shall have priority to payments to shareholders in connection with a Change of Control.  To the extent redemptions required by Section 5(a) or Section 5(b) are deemed or determined by a court of competent jurisdiction to be 

8

prepayments of the Notes by the Company, such redemptions shall be deemed to be voluntary prepayments.  Notwithstanding anything to the contrary in this Section 5, but subject to Section 3(d): (i) until the Holders Change of Control Redemption Price is paid in full, the Conversion Amount submitted for redemption under Section 5(a) may be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3 and, if so converted, the Holder shall not be entitled to receive the Holders Change of Control Redemption Price with respect to such Conversion Amount; and (ii) until the Company Change of Control Redemption Price is paid in full, the Conversion Amount submitted for redemption under Section 5(b) may be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3 and, if so converted, the Holder shall not be entitled to receive the Company Change of Control Redemption Price with respect to such Conversion Amount.  
6.    Conversion Price Adjustments.  
(a)    [Intentionally Omitted].
(b)    Adjustment of Conversion Price Upon Subdivision or Combination of Common Stock.  If the Company at any time on or after the Issuance Date subdivides (by any stock dividend, stock split, recapitalization or otherwise) outstanding shares of its Common Stock into a greater number of shares, then the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced.  If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) outstanding shares of its Common Stock into a smaller number of shares, then the Conversion Price in effect immediately prior to such combination will be proportionately increased.
7.    Noncircumvention.  The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all of the provisions of this Note.
8.    Reservation of Authorized Shares.
(a)    Reservation.  The Company shall initially reserve out of its authorized and unissued Common Stock a number of Conversion Shares for each of the Notes equal to 120% of the Conversion Rate with respect to the Conversion Amount of each such Note as of the Issuance Date (assuming the Notes are convertible on such date).  So long as any of the Notes are outstanding, the Company shall take all action reasonably necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Notes, 120% of the number of the Conversion Shares as shall from time to time be necessary to effect the conversion of all of the Notes then outstanding; provided that at no time shall the number of Conversion Shares so reserved be less than the number of Conversion Shares required to be reserved by the previous sentence (without regard to any limitations on conversions) (the “Required Reserve Amount”).  The initial number of Conversion Shares reserved for conversions of the Notes and each increase in the number of Conversion Shares so reserved shall be allocated pro rata among 

9

the Holders of the Notes based on the Original Principal Amount of the Notes purchased by each Holder or increase in the number of reserved Conversion Shares, as the case may be (the “Authorized Share Allocation”).  In the event that the initial Holder of any Notes shall sell or otherwise transfer any of such Holder’s Notes, each transferee shall be allocated a pro rata portion of such Holder’s Authorized Share Allocation.  Any Conversion Shares reserved and allocated to any Person that ceases to hold any Notes shall be allocated to the remaining Holders of the Notes, pro rata based on the Principal amount of the Notes then held by such Holders.
(b)    Insufficient Authorized Shares.  If at any time while any of the Notes remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a number of Conversion Shares equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall use commercially reasonable efforts to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Notes then outstanding.  Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than one hundred twenty (120) days after the occurrence of such Authorized Share Failure, the Company shall either (i) hold a meeting of its shareholders for the approval of an increase in the number of authorized shares of Common Stock or (ii) obtain such approval by written consent and take all action necessary to rectify the Authorized Share Failure.  In connection with such meeting, the Company shall provide each shareholder with a proxy statement and shall use commercially reasonable efforts to solicit its shareholders’ approval of such increase in authorized shares of Common Stock and to cause the Company’s Board of Directors to recommend to the shareholders that they approve such proposal.  In connection with such written consent, the Company shall provide each shareholder with an information statement and shall use commercially reasonable efforts to solicit its shareholders’ approval of such increase in authorized shares of Common Stock and to cause the Company’s Board of Directors to recommend to the shareholders that they approve such proposal.
9.    Redemptions.
(a)    Mechanics.  The Company shall deliver the applicable Event of Default Redemption Price to the Holder within five (5) Business Days after the Company’s receipt of the Holder’s Event of Default Redemption Notice.  If the Required Holders have submitted a Holders Change of Control Redemption Notice in accordance with Section 5(a), then the Company shall deliver the applicable Holders Change of Control Redemption Price to the Holder (i) concurrently with the consummation of such Change of Control if such notice is received at least three (3) Business Days prior to the consummation of such Change of Control and (ii) within five (5) Business Days after the Company’s receipt of such notice otherwise.  If the Company has submitted a Company Change of Control Redemption Notice in accordance with Section 5(b), then the Company shall deliver the applicable Company Change of Control Redemption Price to the Holder within five (5) Business Days after the consummation of such Change of Control.  In the event of a redemption of a Conversion Amount which is less than all of the outstanding Principal of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 14(d)) representing the outstanding Principal which has not been redeemed.  In the 

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event that the Company does not pay the applicable Redemption Price to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption Price has not been paid.  Upon the Company’s receipt of such notice, (A) the applicable Redemption Notice shall be null and void with respect to such Conversion Amount, (B) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 14(d)) to the Holder representing such Conversion Amount to be redeemed and (C) the Conversion Price of this Note or such new Notes shall be adjusted to the Conversion Price as in effect on the date on which the applicable Redemption Notice is voided.
(b)    Redemption by Other Holders.  If the Company receives a Redemption Notice and one or more Other Redemption Notices, during the seven (7) Business Day period beginning on and including the date which is three (3) Business Days prior to the Company’s receipt of the Holder’s Redemption Notice and ending on and including the date which is three (3) Business Days after the Company’s receipt of the Holder’s Redemption Notice and the Company is unable to redeem all amounts designated in such Redemption Notice and such Other Redemption Notices received during such seven (7) Business Day period, then the Company shall redeem a pro rata amount from each Holder of the Notes (including the Holder) based on the principal amount of the Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during such seven (7) Business Day period.
10.    Voting Rights.  This Note shall not entitle the Holder to any of the rights of a shareholder of the Company, including, without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of shareholders or any other proceedings of the Company, unless and to the extent converted into Conversion Shares in accordance with the terms hereof.
11.    Subordination.
(a)    Subordination to Senior Debt.  The Company, for itself, its successors and assigns, covenants and agrees, and the Holder by acceptance of this Note, likewise covenants and agrees that the payment of the Principal of, Interest on and all other amounts with respect to this Note is subordinated in right of payment to the payment of all existing and future Senior Debt (as defined below) of the Company.  “Senior Debt” means the principal of, premium, if any, and accrued and unpaid interest on, and all other amounts with respect to, all Indebtedness of the Company, whether outstanding on the date of issuance of this Note or any of the other Notes or thereafter created, incurred or assumed, unless, in the agreement or instrument creating or evidencing such Indebtedness or pursuant to which the same is outstanding, it is provided that such Indebtedness is subordinated to Senior Debt of the Company or that such Indebtedness is not superior in right of payment to this Note; provided, however, that “Senior Debt” shall not to be deemed to include any Indebtedness of the Company to any of its subsidiaries or Affiliates.
(b)    Rank; Future Subordinated Debt.  This Note will rank pari passu with all of the other Notes and with all existing and future subordinated debt of the Company, including, without 

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limitation, the Company’s outstanding Subordinated Convertible Notes due April 30, 2017 and July 31, 2015.
(c)    Default.  Upon any default of the Company in the payment of principal of or interest on Senior Debt, whether at maturity or otherwise, no payment may be made with respect to the Principal of or Interest on this Note or in respect of any redemption, retirement, purchase or other acquisition of this Note, unless and until such default has been cured or waived or has ceased.  Upon any other default with respect to any Senior Debt permitting the holders thereof to accelerate the maturity thereof and upon written notice thereof given to the Company, no payment may be made with respect to the Principal of or Interest on this Note or in respect of any redemption, retirement, purchase or other acquisition of this Note for a period terminating upon the cure, waiver or cessation of such default.
(d)    Liquidation; Dissolution, Etc.  Upon any payment or distribution of the assets of the Company to creditors upon any dissolution, total or partial liquidation or reorganization of or similar proceeding relating to the Company, the holders of Senior Debt will be entitled to receive payment in full before the Holder is entitled to receive any payment in respect of this Note.
12.    Vote to Issue, or Change the Terms of, Notes.  Except as otherwise provided herein, this Note may only be amended by the written consent of the Holder and the Company.
13.    Transfer.  This Note has been issued subject to certain investment representations of the Holder set forth in the Holder’s Subscription Agreement.  This Note and any Conversion Shares issued upon conversion of this Note may not be offered, sold, assigned or transferred by the Holder unless in compliance with, and subject to, this Section 13.  The Holder understands and acknowledges that:
(a)    the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (i) subsequently registered thereunder, or (ii) the Holder shall have delivered to the Company an opinion of counsel reasonably acceptable to the Company to the effect that the Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from the registration of the Securities Act, including, but not limited to, Rule 144;
(b)    without limiting the generality of the foregoing, any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder; and
(c)    neither the Company nor any other Person is under any obligation to register the Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder, except as required under the Registration Rights Agreement.

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Notwithstanding the foregoing, the Securities may be pledged in connection with a bona fide margin account or other loan or financing arrangement secured by the Securities and the pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and the Holder in effecting a pledge of Securities shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Note, including, without limitation, this Section 13; provided, that in order to make any sale, transfer or assignment of Securities, the Holder and the Holder’s pledgee makes the disposition in accordance with or pursuant to a registration statement or an exemption under the Securities Act.
14.    Reissuance of this Note.
(a)    Transfer and Reissuance.  If the Holder seeks to transfer this Note subject to and in compliance with Section 14, then the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 14(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred, a new Note (in accordance with Section 14(d)) to the Holder representing the outstanding Principal not being transferred.  
(b)    Lost, Stolen or Mutilated Note.  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of an indemnification undertaking by the Holder to the Company acceptable to the Company and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 14(d)) representing the outstanding Principal.
(c)    Note Exchangeable for Different Denominations.  This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 14(d) and in Principal amounts of at least $10,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.
(d)    Issuance of New Notes.  Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note: (i) shall be of like tenor with this Note; (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 14(a) or Section 14(c), the Principal designated by the Holder which, when added to the Principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes); (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note; (iv) shall have the same rights and conditions as this Note; and (v) shall represent accrued and unpaid Interest on the Principal from the Issuance Date.
15.    Remedies and Injunctive Relief.  The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note at law or in equity (including a decree of specific performance and/or other injunctive relief).  Amounts set forth or 

13

provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate.  The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.
16.    Payment of Collection, Enforcement and Other Costs.  If (i) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note; or (ii) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.
17.    Construction; Headings.  This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof.  The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.
18.    Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
19.    Dispute Resolution.  In the case of a dispute as to the determination of the Closing Bid Price or the Weighted Average Price or the arithmetic calculation of the Conversion Rate, the Conversion Price or any Redemption Price, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within two (2) Business Days of receipt, or deemed receipt, of the Conversion Notice or Redemption Notice or other event giving rise to such dispute, as the case may be, to the Holder.  If the Holder and the Company are unable to agree upon such determination or calculation within two (2) Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within one (1) Business Day submit via facsimile (i) the disputed determination of the Closing Bid Price or the Weighted Average Price to an independent, reputable investment bank or financial advisor selected by the Company or (ii) the disputed arithmetic calculation of the Conversion Rate, Conversion Price or any Redemption Price to the Company’s independent, outside accountant.  The Company shall cause the investment bank, financial advisor 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 five (5) Business Days from the time it receives the disputed determinations or calculations.  Such investment bank’s, financial advisor’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.  Each of the Company and the Holder 

14

shall pay 50% of the fees and expenses of such investment bank, financial advisor or accountant, as the case may be, incurred pursuant to this Section 19.
20.    Notices; Payments.
(a)    Notices.  Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Note 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 transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Business Day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for the communications shall be:
If to the Company:

AdCare Health Systems, Inc.
Two Buckhead Plaza
3050 Peachtree Road NW
Suite 355
Atlanta, GA 30305
Telephone:  (404) 781-2884
Facsimile:  (404) 842-1899
Attention:  Chief Executive Officer

With a copy (for informational purposes only) to: 

Rogers & Hardin LLP
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, GA 30303
Telephone:  (404) 420-4646
Facsimile:  (404) 230-0940
Attention:  Lori A. Gelchion, Esq.

If to the Holder, to the Holder’s address and facsimile number provided to the Company on the Holder’s Signature Page to the Holder’s Subscription Agreement (as may be updated by the Holder from time to time in writing to the Company), with copies to:
Institutional Securities Corporation
3500 Oaklawn Avenue, Suite 400
Dallas, TX  75219
Telephone:  (214) 520-1115
Facsimile:  (214) 520-3203
Attention:  Chris Doucet

15

or to the other address and/or facsimile number and/or to the attention of the other Person as the recipient party has specified by written notice given to each other party.  Written confirmation of receipt (A) given by the recipient of the notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of the transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.
(b)    Notices Upon Certain Events.  The Company will give written notice to the Holder (i) as soon as practicable upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty (20) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the 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 Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.
(c)    Payments.  Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing; provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions.  Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Payment Date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of Interest due on such date.  
21.    Cancellation.  After all Principal, accrued Interest and other amounts at any time owed on this Note have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.
22.    Waiver of Notice.  To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note.
23.    Governing Law.  This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Georgia, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Georgia or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Georgia.  The Company and the Holder irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the State of Georgia and of the United States District Court for the 

16

Northern District of Georgia, Atlanta Division, for any lawsuits, claims or other proceedings arising out of or relating to this Note and agree not to commence any such lawsuit, claim or other proceeding except in such courts.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform to such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note.  THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
24.    Certain Definitions.  For purposes of this Note, the following terms shall have the following meanings:
(a)    “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.
(b)    “Bloomberg” means Bloomberg Financial Markets.
(c)    “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.
(d)    “Change of Control” means any Fundamental Transaction other than (i) any consolidation or merger of the Company, or any reorganization, recapitalization or reclassification of the Common Stock, in which holders of the Company’s voting power immediately prior to such consolidation, merger, reorganization, recapitalization or reclassification continue after such consolidation, merger, reorganization, recapitalization or reclassification to hold publicly traded securities and, directly or indirectly, are, in all material respect, the holders of the voting power of the surviving entity (or entities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities) after such consolidation, merger, reorganization, recapitalization or reclassification; or (ii) a Fundamental Transaction (A) in which at least one-half of the members of the Company’s Board of Directors immediately prior to such transaction remain as members of the Company’s Board of Directors immediately after such transaction or (B) in which the replacement of more than one-half of the members of the Company’s Board of Directors immediately after such transaction is approved by a majority of those individuals who are members of the Company’s Board of Directors immediately prior to such transaction.

17

(e)    “Closing Bid Price” means, for any security as of any date, the last closing bid price for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price then the last bid price of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price is reported for such security by Bloomberg, the average of the bid prices of any market makers for such security as reported by OTC Markets, Inc.  If the Closing Bid Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 19.  All such determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction during the applicable calculation period.
(f)    “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.
(g)     “Eligible Market” means the Principal Market, The New York Stock Exchange, the NYSE MKT, The NASDAQ Global Select Market, The NASDAQ Capital Market, The NASDAQ Global Market or the OTC Bulletin Board.
(h)    “Fundamental Transaction” means that: (i) the Company shall, directly or indirectly, in one or more related transactions, (A) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person or Persons, or (B) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (C) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination), or (D) reorganize, recapitalize or reclassify the Voting Stock of the Company; or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial 

18

owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate Voting Stock of the Company.
(i)    “GAAP” means United States generally accepted accounting principles, consistently applied.
(j)    “Holders” or “Holders of the Notes” mean, collectively, the holders of the Notes (including, without limitation, the Holder of this Note), and each of the foregoing, individually, a “Holder” or “Holder of the Notes.”
(k)    “Indebtedness” of any Person means, without duplication: (i) all indebtedness for borrowed money; (ii) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, including (without limitation) “capital leases” in accordance with GAAP (other than trade payables entered into in the ordinary course of business); (iii) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments; (iv) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (vi) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, consistently applied for the periods covered thereby, is classified as a capital lease; (vii) all indebtedness referred to in clauses (i) through (vi) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness; and (viii) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (i) through (vii) above.
(l)    “Maturity Date” means April 30, 2017.
(m)    “Original Principal Amount” means, with respect to any Note, the Original Principal Amount set forth on the first page of such Note on the date of its original issuance.
(n)    “Other Redemption Notice” means a notice from any of the Holders of the other Notes for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b) or Section 5(a).
(o)    “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
(p)    “Principal Market” means the NYSE MKT.
(q)    “Redemption Notices” means, collectively, the Event of Default Redemption Notices, the Holders Change of Control Redemption Notices, the Company Change 

19

of Control Redemption Notices and the Company Optional Redemption Notices, and each of the foregoing, individually, a “Redemption Notice.”
(r)    “Redemption Prices” means, collectively, the Event of Default Redemption Price, the Holders Change of Control Redemption Price, the Company Change of Control Redemption Price and the Company Optional Redemption Price, and each of the foregoing, individually, a “Redemption Price.”
(s)    “Registration Condition” means that the resale of the Conversion Shares shall have been registered under the Securities Act and that such registration continues to be effective and available for such resale.
(t)    “Registration Rights Agreement” means the Registration Rights Agreement with respect to the Notes to which the Company, the Holder and the Holders of the other Notes are parties.
(u)    “Required Holders” means the Holders of the Notes representing at least a majority of the aggregate Principal amount of the Notes then outstanding.
(v)    “Resale Condition” means that either: (i) the Registration Condition is satisfied as of the date of the Company Optional Redemption Notice; or (ii) that the Conversion Shares are salable under Rule 144 of the Securities Act without any volume limitations.
(w)    “Rule 144” means Rule 144 promulgated under the Securities Act (or any rule successor thereto).
(x)    “Securities” means, collectively, this Note and the Conversion Shares.
(y)    “Securities Act” means the Securities Act of 1933, as amended.
(z)    “Subscription Date” means the date on which the Company accepts Subscription Agreements for the Notes.
(aa)    “Subscription Agreement” means the Subscription Agreement between the Company and the Holder, with respect to the issuance of this Note.
(bb)    “Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York Time).
(cc)    “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general 

20

power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
(dd)    “Weighted Average Price” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30:01 a.m., New York Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as the Principal Market publicly announces is the official close of trading) as reported by Bloomberg through its “Volume at Price” functions, or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York Time (or such other time as such market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York Time (or such other time as such market publicly announces is the official close of trading) as reported by Bloomberg, or, if no dollar volume- weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported by OTC Markets, Inc.  If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 19. 
[Signature Page Follows]

21

IN WITNESS WHEREOF, the Company has caused this 10% Convertible Subordinated Note Due April 30, 2017 to be duly executed as of the Issuance Date set out above.

	
					
	 
	 
	 
	 
	 

	 
	 
	ADCARE HEALTH SYSTEMS, INC.

	 
	 
	 
	 
	 

	 
	 
	By:
	 
	 

	 
	 
	Name:
	 
	 

	 
	 
	Title:
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

EXHIBIT I
ADCARE HEALTH SYSTEMS, INC.
CONVERSION NOTICE
Reference is made to the 10% Convertible Subordinated Note Due April 30, 2017 (the “Note”) issued to the undersigned by AdCare Health Systems, Inc. (the “Company”).  In accordance with and pursuant to the Note, the undersigned hereby elects to convert the amount of the outstanding Principal (as defined in the Note) of the Note indicated below into shares of Common Stock, no par value (the “Common Stock”), of the Company, as of the date specified below.  Capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to them in the Note.
		
	1.
	Date of Conversion:                                         

		
	2.
	Amount of outstanding Principal to be converted:                         

		
	3.
	Amount of accrued and unpaid Interest on such outstanding Principal:            

		
	4.
	Total Conversion Amount (Sum of lines 2 and 3):                        

		
	5.
	Please confirm the following information:

Conversion Price:                                     
Number of shares of Common Stock to be issued in respect of the Conversion Amount:                                         
		
	6.
	Please issue the Common Stock into which the Note is being converted in the following name and to the following address:

Name of Holder:                                     
Address:                                         
Facsimile Number:                                     
Telephone Number:                                     
By:                         
Title:                         
Dated:                         
Holder Requests Delivery to be made: (check one)
Γ    By Delivery of Physical Certificates to the Above Address
Γ    Through Depository Trust Corporation
(Broker DTC Participant Code:            )

    
	
							
	 
	(Broker Name, Telephone and Contact Person:
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	)
	 

	 
	(Account No.:
	 
	)

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