FORM
      OF SERIES N WARRANT

    


    NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISEABLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR (B) AN OPINION OF COUNSEL,
      IN A
      FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED
      UNDER SAID ACT OR (II) IF SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
      ACT,
      SUCH DOCUMENTS, OPINIONS AND CERTIFICATES AS THE COMPANY MAY REASONABLY REQUIRE.
      NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
      WITH
      A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
      THE
      SECURITIES.

    


    PSIVIDA
      LIMITED

    Warrant
      To Purchase ADRS

    


    Warrant
      No.: N-__

    Number
      of
      ADRs: __________

    Date
      of
      Issuance: _____________ (“Issuance
      Date”)

    


    PSIVIDA
      LIMITED, an Australian corporation (the “Company”),
      hereby certifies that, for good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, the undersigned registered holder
      hereof or its permitted assigns (the “Holder”),
      is
      entitled, subject to the terms set forth below, to purchase from the Company,
      at
      the Exercise Price (as defined below) then in effect, upon surrender of this
      Warrant to Purchase ADRs (including any Warrants to Purchase ADRs issued in
      exchange, transfer or replacement hereof, the “Warrant”),
      at
      any time or times on or after the Issuance Date, but not after 11:59 p.m.,
      New
      York Time, on the Expiration Date (as defined below), up to ______________
      (___________) fully paid nonassessable ADRs (as defined below) (the
      “Warrant
      Shares”).
      Except as otherwise defined herein, capitalized terms in this Warrant shall
      have
      the meanings set forth in Section 16. This Warrant is one of the Warrants to
      purchase Warrant Shares (the “SPA Warrants”)
      issued
      pursuant to Section 1 of that certain Securities Purchase Agreement (the
“Securities
      Purchase Agreement”),
      dated
      as of September 26, 2006 (the “Subscription
      Date”),
      by
      and among the Company and Absolute Octane Fund (“AOF”)
      and
      Australian IT Investments Limited (“AIT”
      and,
      together with AOF, the “Buyers”).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.    EXERCISE
      OF WARRANT .

     

    (a)    Mechanics
      of Exercise.
      Subject
      to the terms and conditions hereof (including, without limitation, the
      limitations set forth in Section 1(f)), this Warrant may be exercised by the
      Holder on any day on or after the Issuance Date, in whole or in part, by
      (i) delivery of a written notice, in the form attached hereto as
Exhibit
      A
      (the
”Exercise
      Notice”),
      of
      the Holder's election to exercise this Warrant and (ii)  payment to the
      Company of an amount equal to the applicable Exercise Price multiplied by the
      number of Warrant Shares as to which this Warrant is being exercised (the
“Aggregate
      Exercise Price”)
      in
      cash or wire transfer of immediately available funds. The Holder shall not
      be
      required to deliver the original Warrant in order to effect an exercise
      hereunder. Execution and delivery of the Exercise Notice with respect to less
      than all of the Warrant Shares shall have the same effect as cancellation of
      the
      original Warrant and issuance of a new Warrant evidencing the right to purchase
      the remaining number of Warrant Shares. On or before the second (2nd) Business
      Day following the date on which the Company has received each of the Exercise
      Notice and the Aggregate Exercise Price (the “Exercise
      Delivery Documents”),
      the
      Company shall transmit by facsimile an acknowledgment of confirmation of receipt
      of the Exercise Delivery Documents to the Holder and the Company's transfer
      agent (the “Transfer
      Agent”).
      Subject to Section 7(b), on or before the fifth (5th) Business Day following
      the
      date on which the Company has received all of the Exercise Delivery Documents
      (the “Share
      Delivery Date”),
      the
      Company shall (X) provided that the Transfer Agent is participating in The
      Depository Trust Company (“DTC”)
      Fast
      Automated Securities Transfer Program, upon the request of the Holder, credit
      such aggregate number of Warrant Shares to which the Holder is entitled pursuant
      to such exercise to the Holder's or its designee's balance account with DTC
      through its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer
      Agent is not participating in the DTC Fast Automated Securities Transfer
      Program, issue and dispatch by overnight courier to the address as specified
      in
      the Exercise Notice, a certificate, registered in the Company's share register
      in the name of the Holder or its designee, for the number of Warrant Shares
      to
      which the Holder is entitled pursuant to such exercise. Upon delivery of the
      Exercise Delivery Documents, the Holder shall be deemed for all corporate
      purposes to have become the holder of record of the Ordinary Shares represented
      by the ADRs with respect to which this Warrant has been exercised, irrespective
      of the date of delivery of the certificates evidencing the ADRs. If this Warrant
      is submitted in connection with any exercise pursuant to this Section 1(a)
      and
      the number of Warrant Shares represented by this Warrant submitted for exercise
      is greater than the number of Warrant Shares being acquired upon an exercise,
      then the Company shall as soon as practicable and in no event later than three
      (3) Business Days after any exercise and at its own expense, issue a new Warrant
      (in accordance with Section 6(d)) representing the right to purchase the number
      of Warrant Shares purchasable immediately prior to such exercise under this
      Warrant, less the number of Warrant Shares with respect to which this Warrant
      is
      exercised. No fractional Warrant Shares are to be issued upon the exercise
      of
      this Warrant, but, at the option of the Company, (i) the number of Warrant
      Shares to be issued shall be rounded up to the nearest whole number or (ii)
      in
      lieu of any fractional Warrant Shares to which the Holder would otherwise be
      entitled, the Company shall make a cash payment to the Holder equal to the
      Closing Sale Price on the date of exercise multiplied by such fraction. Upon
      exercise of this Warrant, the Company shall deposit the corresponding number
      of
      Ordinary Shares representing the American Depositary Shares (“ADSs”)
      underlying the ADRs and pay by wire transfer to the Depositary’s account the ADS
      issuance fee of $0.04 per ADS to be issued, together with all applicable taxes
      and expenses otherwise payable under the terms of the Deposit Agreement for
      the
      deposit of Ordinary Shares and issuance of ADSs (including, without limitation,
      confirmation that any Australian stock transfer taxes in respect of such deposit
      (if any) have been paid by the Company), and the Company shall otherwise comply
      with and cause any other necessary party to comply with all the terms of the
      Deposit Agreement. The Company shall pay any and all taxes (excluding any taxes
      on the income of the Holder) which may be payable with respect to the issuance
      and delivery of Warrant Shares upon exercise of this Warrant. Appropriate and
      equitable adjustment to the terms and provisions of this Warrant shall be made
      in the event of any change to the ratio of Warrant Shares to Ordinary Shares
      represented thereby. 

     

    
      
        
        

      

      
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    In
      the
      event that the Company’s Board of Directors should determine that the Company
      shall transform itself (whether by re-incorporation in the United States or
      otherwise) from a foreign private issuer (as defined under the Securities Act
      of
      1933, as amended) all references to ADRs or ADSs shall be deemed references
      to
      whatever shares are then issued by the re-domiciled Company and all other
      provisions of this Agreement shall be equitably adjusted by the parties hereto
      to the extent necessary or appropriate to reflect such new country of
      incorporation.

     

    (b)    Exercise
      Price.
      For
      purposes of this Warrant, “Exercise
      Price”
means
      US$ 2.00, subject to adjustment as provided herein.

     

    (c)    Company's
      Failure to Timely Deliver Securities.
      If the
      Company shall fail to issue to the Holder, the number of Warrant Shares to
      which
      the Holder is entitled upon the Holder's exercise of this Warrant and register
      such Warrant Shares on the Company's share register or to credit the Holder's
      balance account with DTC for such number of Warrant Shares to which the Holder
      is entitled upon the Holder's exercise of this Warrant on or prior to the date
      which is three (3) Business Days after receipt of the Exercise Delivery
      Documents (an “Exercise
      Failure”),
      then
      the Company shall pay damages in cash to the Holder for each date of such
      Exercise Failure in an amount equal to an interest rate equal to 10% per annum
      applied to the product of (X) the sum of the number of Warrant Shares not issued
      to the Holder on or prior to the Share Delivery Date and to which the Holder
      is
      entitled and (Y) the Closing Sale Price of the Warrant Shares on the Share
      Delivery Date. In addition to the foregoing, if within three (3) Trading Days
      after the Company's receipt of the facsimile copy of a Exercise Notice the
      Company shall fail to issue and deliver to the Holder and register such Warrant
      Shares on the Company's share register or credit the Holder's balance account
      with DTC for the number of Warrant Shares to which the Holder is entitled upon
      the Holder's exercise hereunder, and if on or after such Trading Day the Holder
      purchases (in an open market transaction or otherwise) ADRs to deliver in
      satisfaction of a sale by the Holder of ADRs issuable upon such exercise that
      the Holder anticipated receiving from the Company (a “Buy-In”),
      then
      the Company shall, within three (3) Business Days after the Holder's request
      and
      in the Holder's discretion, either (i) pay cash to the Holder in an amount
      equal
      to the Holder's total purchase price (including brokerage commissions, if any)
      for the ADRs so purchased (the “Buy-In
      Price”),
      at
      which point the Company's obligation to deliver and issue such ADRs shall be
      deemed to have been satisfied and shall terminate, or (ii) promptly honor its
      obligation to deliver to the Holder a certificate or certificates representing
      such ADRs and pay cash to the Holder in an amount equal to the excess (if any)
      of the Buy-In Price over the product of (A) such number of ADRs, times (B)
      the
      Closing Bid Price on the date of exercise.

     

    
      
        
        

      

      
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    (d)    Registration
      Rights.
       Notwithstanding
      anything contained herein to the contrary, the Holder may elect to exercise
      this
      Warrant for Warrant Shares in the form of ADRs or (subject to Section 7(b))
      in
      the form of the Ordinary Shares underlying the ADRs. Notwithstanding the
      foregoing, from after the second anniversary of the Issuance Date, in the event
      that the aggregate number of Ordinary Shares that trades on the ASX is less
      than
      either (i) an average of 50,000 Common Shares on each Trading Day during any
      two
      month period or (ii) a weighted average trading price of at least US$50,000
      on
      average during each Trading Day during any two month period, then at the request
      of the Holder the Company as of the date of such request once again (each of
      (i)
      and (ii), a “Registration
      Event”)
      shall
      be subject to the terms of the Registration Rights Agreement as to the Warrant
      Shares; provided, that the Holder makes such request within thirty (30) days
      of
      a Registration Event.

     

    (e)    Disputes.
      In the
      case of a dispute as to the determination of the Exercise Price or the
      arithmetic calculation of the Warrant Shares, the Company shall issue to the
      Holder the number of Warrant Shares that are not disputed and resolve such
      dispute in accordance with Section 13.

     

    (f)    Limitations
      on Exercises.
      

     

    (i)     Beneficial
      Ownership.
      The
      Company shall not effect the exercise of this Warrant, and the Holder shall
      not
      have the right to exercise this Warrant, to the extent that after giving effect
      to such exercise, the Holder (together with affiliates) would beneficially
      own
      (directly or indirectly through Warrant Shares or otherwise) in excess of 4.99%
      (the “Maximum
      Percentage”)
      of the
      Ordinary Shares outstanding immediately after giving effect to such exercise.
      For purposes of the foregoing sentence, the number of Ordinary Shares
      beneficially owned (directly or indirectly through Warrant Shares or otherwise)
      by the Holder and its affiliates shall include the number of Ordinary Shares
      underlying the Warrant Shares issuable upon exercise of this Warrant with
      respect to which the determination of such sentence is being made, but shall
      exclude the number of Ordinary Shares underlying Warrant Shares which would
      be
      issuable upon (i) exercise of the remaining, unexercised portion of this
      Warrant beneficially owned by the Holder and its affiliates and (ii) exercise
      or
      conversion of the unexercised or unconverted portion of any other securities
      of
      the Company beneficially owned by such Person and its affiliates (including,
      without limitation, any convertible notes or convertible preferred stock or
      warrants) subject to a limitation on conversion or exercise analogous to the
      limitation contained herein. Except as set forth in the preceding sentence,
      for
      purposes of this section, beneficial ownership shall be calculated in accordance
      with Section 13(d) of the Securities Exchange Act of 1934, as amended. For
      purposes of this Warrant, in determining the number of outstanding Ordinary
      Shares, the Holder may rely on the number of outstanding Ordinary Shares as
      reflected in (1) the Company's most recent Form 20-F, Form 6-K or other public
      filing with the Securities and Exchange Commission, as the case may be, (2)
      a
      more recent public announcement by the Company or (3) any other notice by the
      Company or the Transfer Agent setting forth the number of Ordinary Shares
      outstanding. For any reason at any time, upon the written or oral request of
      the
      Holder, the Company shall within two (2) Business Days confirm orally and in
      writing to the Holder the number of Ordinary Shares then outstanding. In any
      case, the number of outstanding Ordinary Shares shall be determined after giving
      effect to the conversion or exercise of securities of the Company, including
      the
      SPA Securities and the SPA Warrants, by the Holder and its affiliates since
      the
      date as of which such number of outstanding Ordinary Shares was reported. By
      written notice to the Company, the Holder may increase or decrease the Maximum
      Percentage to any other percentage not in excess of 9.99% specified in such
      notice; provided that (i) any such increase will not be effective until the
      sixty-first (61st)
      day
      after such notice is delivered to the Company, and (ii) any such increase or
      decrease will apply only to the Holder and not to any other holder of SPA
      Warrants.

     

    
      
        
        

      

      
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    (ii)    Principal
      Market Regulation.
      The
      Company shall not be obligated to issue any ADRs (or Ordinary Shares) upon
      exercise of this Warrant, and the Holder shall not have the right to receive
      upon exercise of this Warrant, any ADRs (or Ordinary Shares), if the issuance
      of
      such ADRs (or Ordinary Shares) would exceed that number of ADRs (or Ordinary
      Shares) which the Company may issue upon exercise of this Warrant (including,
      as
      applicable, any ADRs (or Ordinary Shares) issued upon conversion of the SPA
      Securities) without breaching the Company's obligations under the rules or
      regulations of the Principal Market (or such other Eligible Market on which
      the
      ADRs or Ordinary Shares are listed) or the ASX (the “Exchange
      Cap”),
      except that such limitation shall not apply in the event that the Company
      obtains the approval of its stockholders as required by the applicable rules
      of
      the Principal Market and the ASX listing rules for issuances of ADRs (or
      Ordinary Shares) in excess of such amount. Until such approval is obtained,
      no
      Buyer shall be issued, in the aggregate, upon exercise or conversion, as
      applicable, of any SPA Warrants or SPA Securities, any ADRs (or Ordinary Shares)
      in an amount greater than the product of the Exchange Cap multiplied by a
      fraction, the numerator of which is the total number of ADRs (or Ordinary
      Shares) underlying the SPA Warrants issued to such Buyer pursuant to the
      Securities Purchase Agreement and the denominator of which is the aggregate
      number of ADRs (or Ordinary Shares) underlying all the Convertible Securities
      issued to the Buyers pursuant to the Securities Purchase Agreement and the
      Other
      Stock Purchase Agreement (with respect to each Buyer, the “Exchange
      Cap Allocation”).
      In
      the event that any Buyer shall sell or otherwise transfer any of such Buyer's
      SPA Warrants, the transferee shall be allocated a pro rata portion of such
      Buyer's Exchange Cap Allocation, and the restrictions of the prior sentence
      shall apply to such transferee with respect to the portion of the Exchange
      Cap
      Allocation allocated to such transferee. In the event that any holder of SPA
      Warrants shall exercise all of such holder's SPA Warrants into a number of
      ADRs
      (or Ordinary Shares) which, in the aggregate, is less than such holder's
      Exchange Cap Allocation, then the difference between such holder's Exchange
      Cap
      Allocation and the number of ADRs (or Ordinary Shares) actually issued to such
      holder shall be allocated to the respective Exchange Cap Allocations of the
      remaining holders of SPA Warrants on a pro rata basis in proportion to the
      ADRs
      (or Ordinary Shares) underlying the SPA Warrants then held by each such
      holder.

     

    
      
        
        

      

      
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    2.    ADJUSTMENT
      OF EXERCISE PRICE.

     

    (a) If
      the
      Company issues or gives the holders of Ordinary Shares in the Company
      the right, pro rata with existing holdings of Ordinary Shares, to subscribe
      for additional securities (“Pro
      Rata Issue”),
      the
      Exercise Price in respect of one underlying Ordinary Share shall be reduced
      in
      accordance with the following formula:

     

    
      	
              O'
                = O -

            	
              E
                [P - (S + D)]

            
	
              N
                +
                1

            


    

     

    Where: 

     

    O'
       =
       the
      new
      Exercise Price in respect of an underlying Ordinary Share.

     

    O = the
      original Exercise Price in respect of an underlying Ordinary Share.

     

    E = the
      number of underlying Ordinary Shares to be issued on exercise of each
      Warrant.

     

    P = the
      average market price per Ordinary Share (weighted by reference to volume) of
      the
      Ordinary Shares during the 5 trading days ending before the ex rights date
      or ex
      entitlements date.

     

    S = the
      subscription price for an Ordinary Share under the Pro Rata Issue.

     

    D = the
      dividend due but not paid on the existing Ordinary Shares (excluding those
      to be
      issued under the Pro Rata Issue).

     

    N = the
      number of Ordinary Shares which must be held to receive one new Share in the
      Pro
      Rata Issue.

     

    (b)    Adjustment
      upon pro rata bonus issue of Ordinary Shares.
      If
      the
      Company makes a pro rata bonus issue of Ordinary Shares to its shareholders
      prior to the Warrant being exercised, and the Warrant is not exercised prior
      to
      the record date for the issue, the Warrant will, when exercised, entitle the
      Holder to the number of Warrant Shares that would ordinarily be received under
      Section 1, plus the number of bonus Ordinary Shares which would have been issued
      to the Holder if the Warrant had been exercised prior to the record
      date.

     

    
      
        
        

      

      
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    (c)    Adjustment
      upon Subdivision or Combination of Ordinary Shares.
      If the
      Company at any time on or after the Subscription Date subdivides (by any stock
      split, stock dividend, recapitalization or otherwise) one or more classes of
      its
      outstanding ADRs (or Ordinary Shares underlying such ADRs) into a greater number
      of ADRs (or Ordinary Shares), the Exercise Price in effect immediately prior
      to
      such subdivision will be proportionately reduced and the number of Warrant
      Shares (or Ordinary Shares underlying such Warrant Shares) will be
      proportionately increased. If the Company at any time on or after the
      Subscription Date combines (by combination, reverse stock split or otherwise)
      one or more classes of its outstanding ADRs (or Ordinary Shares underlying
      such
      ADRs) into a smaller number of ADRs (or Ordinary Shares underlying such ADRs),
      the Exercise Price in effect immediately prior to such combination will be
      proportionately increased and the number of Warrant Shares (or Ordinary Shares
      underlying such Warrant Shares) will be proportionately decreased. Any
      adjustment under this Section 2(c) shall be subject to (and will be
      correspondingly reorganized in a manner which is permissible under, or necessary
      to comply with) the ASX Listing Rules or the rules of any recognized exchange
      in
      force at the relevant time and shall become effective at the close of business
      on the date the subdivision or combination becomes effective.

     

    (d)    Other
      Events.
      If any
      event occurs of the type contemplated by the provisions of this Section 2 but
      not expressly provided for by such provisions (including, without limitation,
      the granting of stock appreciation rights, phantom stock rights or other rights
      with equity features), then the Company's Board of Directors will make an
      appropriate adjustment in the Exercise Price and the number of Warrant Shares
      so
      as to protect the rights of the Holder; provided that such adjustment is made
      in
      accordance with the ASX Listing Rules. No such adjustment pursuant to this
      Section 2(d) will increase the Exercise Price or decrease the number of Warrant
      Shares as otherwise determined pursuant to this Section 2, unless in accordance
      with any ASX Listing Rule.

     

    (e)    Other
      Capital Reorganizations.
      Notwithstanding any other provision contained in this Warrant, the rights of
      the
      Holder will be changed to the extent necessary to comply with the listing rules
      applying to a reorganization of capital at the time of reorganization. Subject
      to the above, if there is a reorganization of the capital of the Company, the
      number of Warrant Shares applicable to the Warrant and/or Exercise Price of
      the
      Warrant will be reorganized as follows: (i) if the Company returns capital
      on
      its Ordinary Shares, the number of Warrant Shares applicable to the Warrant
      will
      remain the same, and the Exercise Price of each Warrant will be reduced by
      the
      same amount as the amount returned in relation to each Ordinary Share; (ii)
      if
      the Company returns capital on its Ordinary Shares by a cancellation of capital
      that is lost or not represented by available assets, the number of Warrant
      Shares applicable to the Warrant and the Exercise Price is unaltered; (iii)
      if
      the Company reduces its issued Ordinary Shares on a pro rata basis, the number
      of Warrant Shares applicable to the Warrant will be reduced in the same ratio
      as
      the Ordinary Shares and the Exercise Price will be amended in inverse proportion
      to that ratio; and (iv) if the Company reorganizes its issued Ordinary Shares
      in
      any way not otherwise contemplated by the preceding paragraphs, the number
      of
      Warrant Shares applicable to the Warrant or the Exercise Price or both will
      be
      reorganized so that the Warrant Holder will not receive a benefit that holders
      of Ordinary Shares do not receive. The Company shall give notice to Warrant
      Holders of any adjustments to the number of Warrant Shares applicable to the
      Warrant or the number of Ordinary Shares which are to be issued on exercise
      of a
      Warrant or to the Exercise Price. Before a Warrant is exercised, all adjustment
      calculations are to be carried out including all fractions (in relation to
      each
      of the number of Warrant Shares applicable to the Warrant, the number of
      Ordinary Shares and the Exercise Price), but on exercise the number of Warrant
      Shares or Ordinary Shares issued is rounded down to the next lower whole number
      and the Exercise Price rounded up to the next higher cent.

     

    
      
        
        

      

      
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    3.    FUNDAMENTAL
      TRANSACTIONS.
      The
      Company shall not enter into or be party to a Fundamental Transaction unless,
      and shall use its best endeavors to procure that, (i)  the Successor Entity
      (if other than the Company) assumes in writing all of the obligations of the
      Company under this Warrant and the other Transaction Documents in accordance
      with the provisions of this Section 3 pursuant to written agreements in form
      and
      substance reasonably satisfactory to the Required Holders and approved by the
      Required Holders prior to such Fundamental Transaction, including agreements
      to
      deliver to each holder of Warrants in exchange for such Warrants a security
      of
      such Successor Entity evidenced by a written instrument substantially similar
      in
      form and substance to this Warrant, including, without limitation, an adjusted
      exercise price equal to the value for the Ordinary Shares reflected by the
      terms
      of such Fundamental Transaction, and exercisable for a corresponding number
      of
      shares of capital stock equivalent to the Ordinary Shares underlying the Warrant
      Shares acquirable and receivable upon exercise of this Warrant (without regard
      to any limitations on the exercise of this Warrant) prior to such Fundamental
      Transaction, and reasonably satisfactory to the Required Holders and
      (ii) such Successor Entity is a publicly traded corporation whose common
      shares (or whose American Depositary Shares) are quoted on or listed for trading
      on an Eligible Market. Upon the occurrence of any Fundamental Transaction,
      such
      Successor Entity shall succeed to, and be substituted for (so that from and
      after the date of such Fundamental Transaction, the provisions of this Warrant
      referring to the “Company” shall refer instead to such Successor Entity), and
      may exercise every right and power of the Company and shall assume all of the
      obligations of the Company under this Warrant with the same effect as if such
      Successor Entity had been named as the Company herein. Upon consummation of
      the
      Fundamental Transaction, such Successor Entity shall deliver to the Holder
      confirmation that there shall be issued upon exercise of this Warrant at any
      time after the consummation of the Fundamental Transaction, in lieu of the
      Warrant Shares (or other securities, cash, assets or other property) purchasable
      upon the exercise of the Warrant prior to such Fundamental Transaction, such
      shares of the publicly traded common stock (or their equivalent) of the
      Successor Entity (including its Parent Entity), as adjusted in accordance with
      the provisions of this Warrant. In addition to and not in substitution for
      any
      other rights hereunder, prior to the consummation of any Fundamental Transaction
      pursuant to which holders of Ordinary Shares (directly or indirectly through
      Warrant Shares or otherwise) are entitled to receive securities or other assets
      with respect to or in exchange for Ordinary Shares (a “Corporate
      Event”),
      the
      Company shall make appropriate provision, to the extent not prohibited by
      applicable law, to insure that the Holder will thereafter have the right to
      receive upon an exercise of this Warrant at any time after the consummation
      of
      the Fundamental Transaction but prior to the Expiration Date, in lieu of the
      Warrant Shares purchasable upon the exercise of the Warrant prior to such
      Fundamental Transaction, such, securities or other, assets which the Holder
      would have been entitled to receive upon the happening of such Fundamental
      Transaction had the Warrant been exercised immediately prior to such Fundamental
      Transaction. The provisions of this Section shall apply similarly and equally
      to
      successive Fundamental Transactions and Corporate Events and shall be applied
      without regard to any limitations on the exercise of this Warrant.

     

    
      
        
        

      

      
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    4.    NONCIRCUMVENTION.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Constitution or Bylaws or through any reorganization, transfer of assets,
      consolidation, merger, scheme of arrangement, dissolution, issue or sale of
      securities, or any other voluntary action, avoid or seek to avoid the observance
      or performance of any of the terms of this Warrant, and will at all times in
      good faith carry out all the provisions of this Warrant and take all action
      as
      may be required to protect the rights of the Holder. Without limiting the
      generality of the foregoing, the Company (i) shall not increase the par
      value of any Ordinary Shares underlying the Warrant Shares receivable upon
      the
      exercise of this Warrant above the Exercise Price then in effect and
      (ii) shall take all such actions as may be necessary or appropriate in
      order that the Company may validly and legally issue fully paid and
      nonassessable Warrant Shares upon the exercise of this Warrant.

     

    5.    WARRANT
      HOLDER NOT DEEMED A STOCKHOLDER. 
      Except
      as otherwise specifically provided herein, the Holder, solely in such Person's
      capacity as a holder of this Warrant, shall not be entitled to vote or receive
      dividends or be deemed the holder of share capital of the Company for any
      purpose, nor shall anything contained in this Warrant be construed to confer
      upon the Holder, solely in such Person's capacity as the Holder of this Warrant,
      any of the rights of a shareholder of the Company or any right to vote, give
      or
      withhold consent to any corporate action (whether any reorganization, issue
      of
      stock, reclassification of stock, consolidation, merger, conveyance or
      otherwise), receive notice of meetings, receive dividends or subscription
      rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
      which such Person is then entitled to receive upon the due exercise of this
      Warrant. In addition, nothing contained in this Warrant shall be construed
      as
      imposing any liabilities on the Holder to purchase any securities (upon exercise
      of this Warrant or otherwise) or as a shareholder of the Company, whether such
      liabilities are asserted by the Company or by creditors of the Company.
      Notwithstanding this Section 5, the Company shall provide the Holder with copies
      of the same notices and other information given to the shareholders of the
      Company generally, contemporaneously with the giving thereof to the
      shareholders.

     

    6.    REISSUANCE
      OF WARRANTS.

     

    (a)    Transfer
      of Warrant.
      If this
      Warrant is to be transferred, the Holder shall surrender this Warrant to the
      Company, whereupon the Company will forthwith issue and deliver upon the order
      of the Holder a new Warrant (in accordance with Section 6(d)), registered as
      the
      Holder may request, representing the right to purchase the number of Warrant
      Shares being transferred by the Holder and, if less then the total number of
      Warrant Shares then underlying this Warrant is being transferred, a new Warrant
      (in accordance with Section 6(d)) to the Holder representing the right to
      purchase the number of Warrant Shares not being transferred.

     

    (b)    Lost,
      Stolen or Mutilated Warrant.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Warrant, and, in the case of
      loss, theft or destruction, of any indemnification undertaking by the Holder
      to
      the Company in customary form and, in the case of mutilation, upon surrender
      and
      cancellation of this Warrant, the Company shall execute and deliver to the
      Holder a new Warrant (in accordance with Section 6(d)) representing the right
      to
      purchase the Warrant Shares then underlying this Warrant.

     

    
      
        
        

      

      
        -
          9 -

        
          

        

      

      
        
        

      

    

     

    (c)    Exchangeable
      for Multiple Warrants.
      This
      Warrant is exchangeable, upon the surrender hereof by the Holder at the
      principal office of the Company, for a new Warrant or Warrants (in accordance
      with Section 6(d)) representing in the aggregate the right to purchase the
      number of Warrant Shares then underlying this Warrant, and each such new Warrant
      will represent the right to purchase such portion of such Warrant Shares as
      is
      designated by the Holder at the time of such surrender; provided, however,
      that
      no Warrants for fractional Warrant Shares shall be given.

     

    (d)    Issuance
      of New Warrants.
      Whenever the Company is required to issue a new Warrant pursuant to the terms
      of
      this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
      (ii) shall represent, as indicated on the face of such new Warrant, the right
      to
      purchase the Warrant Shares then underlying this Warrant (or in the case of
      a
      new Warrant being issued pursuant to Section 6(a) or Section 6(c), the Warrant
      Shares designated by the Holder which, when added to the number of Warrant
      Shares underlying the other new Warrants issued in connection with such
      issuance, does not exceed the number of Warrant Shares then underlying this
      Warrant), (iii) shall have an issuance date, as indicated on the face of such
      new Warrant which is the same as the Issuance Date, and (iv) shall have the
      same
      rights and conditions as this Warrant.

     

    7.    TRADING
      OF ORDINARY SHARES.

     

    (a)    Omnibus
      Disclosure Document.
      

     

    (i)   The
      Company shall, as soon as practicable after the Issuance Date, use its
      reasonable efforts to obtain a modification of the Corporations Act from the
      ASIC with respect to the use of the Initial Registration Statement (as defined
      in the Registration Rights Agreement) as a disclosure document for the purposes
      of Chapter 6D of the Corporations Act (the “Omnibus
      Disclosure Document”)
      and a
      separate modification from the ASIC to the effect that, once the Omnibus
      Disclosure Document and any “wrap” required by ASIC has been issued, all further
      Warrant Shares which may be issued can be sold without the need for a Cleansing
      Notice (as defined below) or Disclosure Document (as defined below). At the
      Company’s request, the Holder shall reasonably assist the Company in obtaining
      such modifications. 

     

    (ii)    In
      the
      event that such modifications referred to in Section 7(a)(i) are granted,
      the Company shall, as soon as practicable after the Effective Date (as defined
      in the Registration Rights Agreement) of the Initial Registration Statement
      but
      in no event later than five (5) Business Days after the Effective Date of the
      Initial Registration Statement, prepare and lodge with the ASIC the Omnibus
      Disclosure Document covering the issuance of the full number of Warrant Shares
      or other Ordinary Shares issuable in accordance with the terms of this Warrant
      (each such issuance, a “Triggering
      Issuance”)
      such
      that the issue of the Omnibus Disclosure Document will have the effect of
      permitting the holders of Ordinary Shares issued in a Triggering Issuance to
      make offers for sale of those Ordinary Shares in accordance with Australian
      law
      without the need for the issue by the Company of either a Cleansing Notice
      or a
      Disclosure Document.

     

    
      
        
        

      

      
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          10 -

        
          

        

      

      
        
        

      

    

     

    (b)    Cleansing
      Notice and/or Disclosure Document.
      

     

    (i)    If
      the
      required ASIC modifications have not been obtained or an Omnibus Disclosure
      Document has not been lodged with the ASIC, then no later than five (5) Business
      Days after the issuance of any Warrant Shares hereunder, the Company shall
      issue, if permitted by applicable law, a notice complying with section 708A(6)
      of the Corporations Act (the “Cleansing
      Notice”)
      and
      shall notify the Holder that it has issued such Cleansing Notice.

     

    (ii)   Notwithstanding
      Section 7(b)(i), if the issue of any Cleansing Notice would require the Company
      to disclose information in accordance with Section 708A(6)(e) of the
      Corporations Act, the
      Company may delay the issue of such Cleansing Notice (and the issuance of any
      Warrant Shares corresponding to such Cleansing Notice) for a period (a
“Delay
      Period”)
      not
      exceeding fifteen (15) consecutive days after receipt by the Company of the
      Exercise Notice for such Warrant Shares, provided that during any 365 day period
      such Delay Periods shall not exceed an aggregate of forty-five (45)
      days.

     

    (iii)         
      If
      the
      Company is required to issue a Cleansing Notice pursuant to
      Section 7(b)(ii) but either (x) the Company is not permitted to issue
      such Cleansing Notice under applicable law or (y) the issuance of such
      Cleansing Notice would not result in the Warrant Shares covered by such
      Cleansing Notice being eligible to be traded on the ASX, the Company shall
      as
      soon as practicable, but in no event later than twenty (20) Business
      Days after
      receipt by the Company of the Exercise Notice for such Warrant Shares, lodge
      with the ASIC a disclosure document for the purposes of Chapter 6D of the
      Corporations Act (a “Disclosure
      Document”)
      covering the Warrant Shares that would have been covered by such Cleansing
      Notice. Notwithstanding the foregoing sentence, the Company (1) shall not
      be required to issue any such Disclosure Document or any Warrant Shares
      corresponding to such Disclosure Document during any Delay Period, and (2)
      shall
      not be required to lodge more than one Disclosure Document during any ninety
      (90) day period, including all Disclosure Documents required to be issued
      pursuant to the Registration Rights Agreement, the SPA Warrants and the SPA
      Securities.

     

    
      
        
        

      

      
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          11 -

        
          

        

      

      
        
        

      

    

     

    (iv)   Subject
      to the provisions of Section 7(b)(v), the Company will (1) within two (2)
      Business Days following the issuance of any Warrant Shares, apply to the ASX
      for
      unconditional admission to trading for such shares, and (2) take all
      reasonable measures to ensure that, from the time of issue of any Warrant
      Shares, such shares are eligible to be traded on the ASX.

     

    (v)    In
      the
      event that the Company elects to delay the issuance of any Warrant Shares
      pursuant to Sections 7(b)(ii) or 7(b)(iii) for any Delay Period, the Company
      shall notify the Holder of such Delay Period and the length of the applicable
      Delay Period. The Holder may, no later than two (2) Business Days after the
      date
      of the notification from the Company, notify the Company in writing of the
      Holder’s consent to such Delay, whereupon the Company shall issue the applicable
      Ordinary Shares in conjunction with the Cleansing Notice or Disclosure Document,
      as the case may be, at the conclusion of the Delay Period. In the absence of
      any
      such consent by the Holder, the Company shall issue such Ordinary Shares to
      such
      Holder in accordance with Section 1, it being understood that any Ordinary
      Shares thus issued will not be covered by a Cleansing Notice or Disclosure
      Document and consequently may not, for a period of twelve (12) months from
      the
      date of their issuance, be sold or transferred, or have any interest in, or
      option over, them granted, issued or transferred. 

     

    (vi)   Anything
      to the contrary notwithstanding, but without prejudice to any rights of the
      Holder accrued prior to such time, all obligations of the Company under this
      Section 7 shall terminate, and this Section 7 shall have no further force or
      effect, on the date that the Ordinary Shares cease to be listed for trading
      on
      the ASX in the event that the Company is redomiciled (whether through merger
      or
      otherwise) into the United States or a successor to the Company replaces the
      Company as a foreign private issuer under United States securities laws and,
      in
      either case, the securities of such successor are listed on an Eligible Market.
      

     

    8.    NOTICES;
      CURRENCY .
      

     

    (a)    Notices.
      Whenever notice is required to be given under this Warrant, unless otherwise
      provided herein, such notice shall be given in accordance with Section 9(f)
      of
      the Securities Purchase Agreement. The Company shall provide the Holder with
      prompt written notice of all actions taken pursuant to this Warrant, including
      in reasonable detail a description of such action and the reason therefore.
      Without limiting the generality of the foregoing, the Company will give written
      notice to the Holder (i) immediately upon any adjustment of the Exercise Price,
      setting forth in reasonable detail, and certifying, the calculation of such
      adjustment and (ii) at least fifteen days prior to the date on which the Company
      closes its books or takes a record (A) with respect to any dividend or
      distribution upon the Ordinary Shares or Warrant Shares, (B) with respect to
      any
      grants, issuances or sales of any Options, Convertible Securities or rights
      to
      purchase stock, warrants, securities or other property to holders of Ordinary
      Shares or Warrant Shares or (C) for determining rights to vote with respect
      to
      any Fundamental Transaction, dissolution or liquidation, provided in each case
      that such information shall be made known to the public prior to or in
      conjunction with such notice being provided to the Holder.

     

    (b)    Currency.
      Unless
      otherwise indicated, all dollar amounts referred to in this Warrant are in
      United States Dollars.

     

    
      
        
        

      

      
        -
          12 -

        
          

        

      

      
        
        

      

    

     

    9.    AMENDMENT
      AND WAIVER .
      The
      provisions of this Warrant may be amended by the Company and the Company may
      take any action herein prohibited, or omit to perform any act herein required
      to
      be performed by it, only if the Company has obtained the written consent of
      the
      Required Holders and approval from the holders of Ordinary Shares at a
      shareholders meeting held in accordance with the ASX Listing Rules and the
      Corporations Act or if otherwise permitted by the ASX Listing Rules.
      Notwithstanding any provision of this Warrant, a term of this Warrant which
      has
      the effect of reducing the exercise price, increasing the period for exercise
      or
      increasing the number of Warrant Shares or Ordinary Shares received on exercise
      is prohibited if it would result in a breach of the ASX Listing Rules.
      Notwithstanding the above, no change may increase the exercise price of any
      SPA
      Warrant or decrease the number of Warrant Shares or class of stock obtainable
      upon exercise of any SPA Warrant without the written consent of the Holder,
      unless otherwise provided in the ASX Listing Rules. A change which has the
      effect of reducing the purchase price, increasing the period for exercise or
      increasing the number of securities received cannot be made. In addition,
      subject to the ASX Listing Rules, no such amendment shall be effective to the
      extent that it applies to less than all of the holders of the SPA Warrants
      then
      outstanding.

     

    10.    SEVERABILITY .
      If any
      provision of this Warrant or the application thereof becomes or is declared
      by a
      court of competent jurisdiction to be illegal, void or unenforceable, the
      remainder of the terms of this Warrant will continue in full force and
      effect.

     

    11.    GOVERNING
      LAW .
      This
      Warrant shall be governed by and construed and enforced in accordance with,
      and
      all questions concerning the construction, validity, interpretation and
      performance of this Warrant shall be governed by, the internal laws of the
      State
      of New York, without giving effect to any choice of law or conflict of law
      provision or rule (whether of the State of New York or any other jurisdictions)
      that would cause the application of the laws of any jurisdictions other than
      the
      State of New York.

     

    12.    CONSTRUCTION;
      HEADINGS .
      This
      Warrant shall be deemed to be jointly drafted by the Company and all the Buyers
      and shall not be construed against any person as the drafter hereof. The
      headings of this Warrant are for convenience of reference and shall not form
      part of, or affect the interpretation of, this Warrant.

     

    13.    DISPUTE
      RESOLUTION .
      In the
      case of a dispute as to the determination of the Exercise Price or the
      calculation of the Warrant Shares, the Company shall submit the disputed
      determinations or arithmetic calculations via facsimile within two (2) Business
      Days of receipt of the Exercise Notice giving rise to such dispute, as the
      case
      may be, to the Holder. If the Holder and the Company are unable to agree upon
      such determination or calculation within three (3) Business Days of such
      disputed determination or arithmetic calculation being submitted to the Holder,
      then the Company shall, within two Business Days submit via facsimile (a) the
      disputed determination of the Exercise Price to an independent, reputable
      investment bank selected by the Company and approved by the Holder or (b) the
      disputed arithmetic calculation of the Warrant Shares to the Company's
      independent, outside accountant. The Company at the Company's expense, shall
      cause the investment bank or the accountant, as the case may be, to perform
      the
      determinations or calculations and notify the Company and the Holder of the
      results no later than ten Business Days from the time it receives the disputed
      determinations or calculations. Such investment bank's or accountant's
      determination or calculation, as the case may be, shall be binding upon all
      parties absent demonstrable error.

     

    
      
        
        

      

      
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          13 -

        
          

        

      

      
        
        

      

    

     

    14.    REMEDIES,
      OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF .
      The
      remedies provided in this Warrant shall be cumulative and in addition to all
      other remedies available under this Warrant and the other Transaction Documents,
      at law or in equity (including a decree of specific performance and/or other
      injunctive relief), and nothing herein shall limit the right of the Holder
      right
      to pursue actual damages for any failure by the Company to comply with the
      terms
      of this Warrant. The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to the Holder and that the remedy at
      law
      for any such breach may be inadequate. The Company therefore agrees that, in
      the
      event of any such breach or threatened breach, the holder of this Warrant shall
      be entitled, in addition to all other available remedies, to an injunction
      restraining any breach, without the necessity of showing economic loss and
      without any bond or other security being required.

     

    15.    TRANSFER. This
      Warrant may be offered for sale, sold, transferred or assigned without the
      consent of the Company, except as may otherwise be required by Section 2(f)
      of
      the Securities Purchase Agreement.

     

    16.    CERTAIN
      DEFINITIONS.
      For
      purposes of this Warrant, the following terms shall have the following
      meanings:

     

    (a)    “ADRs”
means
      the American Depositary Receipts of the Company evidencing the American
      Depositary Shares of the Company which each represent ten (10) Ordinary Shares.
      

     

    (b)    “ASIC”
means
      the Australian Securities and Investment Commission.

     

    (c)    “ASX”
means
      the Australian Stock Exchange.

     

    (d)    “Bloomberg”
means
      Bloomberg Financial Markets.

     

    (e)    “Business
      Day”
means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of New York, State of New York, U.S.A. or Perth, Australia are
      authorized or required by law to remain closed.

     

    (f)    “Closing
      Bid Price”
and
      “Closing
      Sale Price”
means,
      for any security as of any date, the last closing bid price and last closing
      trade price, respectively, for such security on the Principal Market, as
      reported by Bloomberg, or, if the Principal Market begins to operate on an
      extended hours basis and does not designate the closing bid price or the closing
      trade price, as the case may be, then the last bid price or last trade price,
      respectively, of such security prior to 4:00:00 p.m., New York Time, as reported
      by Bloomberg, or, if the Principal Market is not the principal securities
      exchange or trading market for such security, the last closing bid price or
      last
      trade price, respectively, of such security on the principal securities exchange
      or trading market where such security is listed or traded as reported by
      Bloomberg, or if the foregoing do not apply, the last closing bid price or
      last
      trade price, respectively, of such security in the over-the-counter market
      on
      the electronic bulletin board for such security as reported by Bloomberg, or,
      if
      no closing bid price or last trade price, respectively, is reported for such
      security by Bloomberg, the average of the bid prices, or the ask prices,
      respectively, of any market makers for such security as reported in the “pink
      sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
      the Closing Bid Price or the Closing Sale Price cannot be calculated for a
      security on a particular date on any of the foregoing bases, the Closing Bid
      Price or the Closing Sale Price, as the case may be, of such security on such
      date shall be the fair market value as mutually determined by the Company and
      the Holder. If the Company and the Holder are unable to agree upon the fair
      market value of such security, then such dispute shall be resolved pursuant
      to
      Section 13. All such determinations to be appropriately adjusted for any stock
      dividend, stock split, stock combination or other similar transaction during
      the
      applicable calculation period.

     

    
      
        
        

      

      
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          14 -

        
          

        

      

      
        
        

      

    

     

    (g)    “Convertible
      Securities”
means
      any stock or securities (other than Options) directly or indirectly convertible
      into or exercisable or exchangeable for ADRs or Ordinary Shares.

     

    (h)    “Corporations
      Act”
means
      the Australian Corporations Act 2001 (Cwth). 

     

    (i)    
“Deposit
      Agreement”
means
      that certain Deposit Agreement, dated as of January 24, 2005 by and among the
      Company, the Depositary and the holders and beneficial owners from time to
      time
      of ADSs evidenced by ADRs issued pursuant to such agreement.

     

    (j)    
“Depositary”
means
      Citibank, N.A., acting in such capacity under the Deposit
      Agreement.

     

    (k)    “Eligible
      Market”
means
      the Principal Market, The New York Stock Exchange, Inc., the American Stock
      Exchange or The Nasdaq Capital Market.

     

    (l)    “Expiration
      Date”
means
      the date that is sixty months after the Issuance Date or, if such date falls
      on
      a day other than a Business Day or on which trading does not take place on
      the
      Principal Market (a “Holiday”),
      the
      next date that is not a Holiday.

     

    (m)    “Fundamental
      Transaction”
means
      that the Company shall, directly or indirectly, in one or more related
      transactions, (i) consolidate or merge with or into (whether or not the Company
      is the surviving corporation) another Person, or (ii) sell, assign, transfer,
      convey or otherwise dispose of all or substantially all of the properties or
      assets of the Company to another Person, or (iii) allow another Person to make
      a
      purchase, tender or exchange offer that is accepted by the holders of more
      than
      the 50% of either the outstanding Ordinary Shares (not including any Ordinary
      Shares held by the Person or Persons making or party to, or associated or
      affiliated with the Persons making or party to, such purchase, tender or
      exchange offer), or (iv) consummate a stock purchase agreement or other business
      combination (including, without limitation, a reorganization, recapitalization,
      spin-off or scheme of arrangement) with another Person whereby such other Person
      acquires more than the 50% of the outstanding Ordinary Shares (not including
      any
      Ordinary Shares held by the other Person or other Persons making or party to,
      or
      associated or affiliated with the other Persons making or party to, such stock
      purchase agreement or other business combination), or (v) reorganize,
      recapitalize or reclassify its Ordinary Shares.

     

    
      
        
        

      

      
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          15 -

        
          

        

      

      
        
        

      

    

     

    (n)    “Options”
means
      any rights, warrants or options to subscribe for or purchase ADRs, Ordinary
      Shares or Convertible Securities.

     

    (o)    “Ordinary
      Shares”
means
      (i) the Company's ordinary shares of common stock, no par value per share,
      and (ii) any share capital into which such Ordinary Shares shall have been
      changed or any share capital resulting from a reclassification of such Ordinary
      Shares.

     

    (p)    “Other
      Securities Purchase Agreement”
      means
      that certain Securities Purchase Agreement, dated the date hereof, by and among
      the Company, the Buyers and Absolute European Catalyst Fund. 

     

    (q)    “Parent
      Entity”
of
      a
      Person means an entity that, directly or indirectly, controls the applicable
      Person and whose common stock or equivalent equity security is quoted or listed
      on an Eligible Market, or, if there is more than one such Person or Parent
      Entity, the Person or Parent Entity with the largest public market
      capitalization as of the date of consummation of the Fundamental
      Transaction.

     

    (r)    “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.

     

    (s)    “Principal
      Market”
means
      the Nasdaq Global Market.

     

    (t)    “Registration
      Rights Agreement”
means
      that certain registration rights agreement, dated the date hereof, by and among
      the Company, the Buyers and Absolute European Catalyst Fund.

     

    (u)    “Required
      Holders”
means
      the holders of the SPA Warrants representing at least a majority of Warrant
      Shares underlying the SPA Warrants then outstanding.

     

    (v)    “SPA
      Securities”
means
      the Convertible Securities issued pursuant to the Other Securities Purchase
      Agreement.

     

    (w)    “Successor
      Entity”
means
      the Person, which may be the Company, formed by, resulting from or surviving
      any
      Fundamental Transaction or the Person with which such Fundamental Transaction
      shall have been made, provided that if such Person is not a publicly traded
      entity whose common stock or equivalent equity security is quoted or listed
      for
      trading on an Eligible Market, Successor Entity shall mean such Person's Parent
      Entity.

     

    
      
        
        

      

      
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          16 -

        
          

        

      

      
        
        

      

    

     

    (x)    “Trading
      Day”
means
      any day on which the ADRs are traded on the Principal Market, or, if the
      Principal Market is not the principal trading market for the ADRs, then on
      the
      principal securities exchange or securities market on which the ADRs are then
      traded; provided that “Trading Day” shall not include any day on which the ADRs
      are scheduled to trade on such exchange or market for less than 4.5 hours or
      any
      day that the ADRs are suspended from trading during the final hour of trading
      on
      such exchange or market (or if such exchange or market does not designate in
      advance the closing time of trading on such exchange or market, then during
      the
      hour ending at 4:00:00 p.m., New York Time).

     

    (y)    “Transaction
      Documents”
has
      the
      meaning set forth in the Securities Purchase Agreement.

     

    [Signature
      Page Follows]

    


    
      
        
        

      

      
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          17 -

        
          

        

      

      
        
        

      

    



    IN
      WITNESS WHEREOF,
      the
      Company has caused this Warrant to Purchase ADRs to be duly executed as of
      the
      Issuance Date set out above.

     

     

    
      	 	 	 
	 	PSIVIDA
              LIMITED
	 
 	 
 	 
 
	 	By:  	 
	 	
               

              Name: 

              Title

            	
              

            
	 	 




    Attested
      by Holder:

    


    ____________________________

     

    
      
        By: 
           
                                                                       


        Name:
          

        Title:

      



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
      A

    


    EXERCISE
      NOTICE

    TO
      BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
      TO PURCHASE ADRS

    


    PSIVIDA
      LIMITED

     

    The
      undersigned holder hereby exercises the right to purchase _________________
      of
      the ADRs, each of which representing ten (10) shares of the ordinary shares
      of
      common stock, no par value per share (“Ordinary
      Shares”)
      of
      pSivida Limited, an Australian corporation (the “Company”),
      evidenced by the attached Warrant to Purchase ADRs (the “Warrant”).
      Capitalized terms used herein and not otherwise defined shall have the
      respective meanings set forth in the Warrant.

     

    1.    Payment
      of Exercise Price.
      The
      undersigned holder shall pay the Aggregate Exercise Price in the sum of
      $___________________ to the Company in accordance with the terms of the
      Warrant.

     

    2.    Delivery
      of ADRs.
      The
      Company shall deliver to the holder __________ ADRs in accordance with the
      terms
      of the Warrant.

     

    


    Date:
      _______________ __, ______

    


    


     

    Name
      of
      Registered Holder

     

    
      By: 
         
                                                                       


      Name:
        

      Title:

    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    ACKNOWLEDGMENT


    


    The
      Company hereby acknowledges this Exercise Notice and hereby directs Citibank,
      N.A. to issue the above indicated number of Ordinary Shares in accordance with
      the Transfer Agent Instructions dated September 26, 2006 from the Company
      and acknowledged and agreed to by Citibank, N.A.

    
       

      
        	 	 	 
	 	PSIVIDA
                LIMITED
	 
 	 
 	 
 
	 	By:  	 
	 	
                 

              	
                

                Name: 

                Title