CAQ HOLDINGS LIMITED — Capital/Financing Update 2005

Jul 19, 2005

TERMS AND CONDITIONS OF OPTIONS CELL AQUACULTURE LIMITED

1. General

Cell Aquaculture Limited (the Company) has the following options on issue;

• $(a)$ 3,500,000 options each exercisable at 20 cents on or before 1 March 2008 (20 Cent Options): and
• $(b)$ 3,000,000 options each exercisable at 35 cents on or before 19 July 2008 (being the date which is 3 years from the date the Company's ordinary shares were admitted to quotation on Australian Stock Exchange Limited) (35 Cent Options).

The 20 Cent Options and the 35 Cent Options (together the Options) are issued on the same terms and conditions save for the expiry date and the exercise price.

$2.$ Option Terms and Conditions

The rights attaching to the Options are as follows:

• The Options shall expire on the applicable expiry dates set out in section 1 above (Expiry $(a)$ Date).
• $(b)$ Each Option is a right in favour of the Option Holder to subscribe for one Share.
• $\mathbf{(c)}$ The Option Holder may exercise an Option anytime prior to the Expiry Date.
• $(d)$ A share allocated to an Option Holder on exercise of an Option shall be issued at the exercise price set out in section I above (Exercise Price).
• The Exercise Price shall be payable in full upon exercise of the Option. $(e)$
• $($ f) An Option shall be excretisable by the delivery to the registered office of the Company of a notice in writing stating the intention of the Option Holder to:
• exercise all or a specified number of Options; and $\left( i\right)$
• $(i)$ pay the subscription monies in full for the exercise of each Option.

The notice must be accompanied by a certificate in respect of the Options and a cheque made payable to the Company for the subscription monies for the Shares. An exercise of only some Options shall not affect the rights of the Option Holder to the balance of the Options held by the Option Holder.

(g) The Company shall allot a resultant Share and deliver the holding statement within five Business Days of the exercise of an Option.

• (h) If the Company is admitted to the official list of the ASX, it will not apply for quotation of the Options.
• The Options are not transferable. $\rm (i)$
• $\ddot{\text{o}}$ . Shares allotted pursuant to an exercise of Options shall rank, from the date of allotment, equally, with existing Shares of the Company in all respects.
• $(\mathbf{x})$ The Company shall in accordance with the Listing Rules make application to have Shares allotted pursuant to an exercise of Options listed for official quotation on the ASX.
• $(1)$ There are no participating rights or entitlements inherent in the Options and the Option Holder will not, by virtue of that Option holding, be entitled to participate in new issues of securities by the Company which may be offered to shareholders during the currency of the Options. However, Option Holder has the right to exercise their Options prior to the date of determining entitlements to any new issues of securities to the then existing shareholders of the Company made during the currency of the Options, and will be granted a period of at least ten business days (as defined in the Listing Rules) before and inclusive of the books closing date to exercise the Options.
• $(m)$ In the event of any reconstruction (including consolidation, sub-division, reduction or return) of the authorised or issued capital of the Company, the number of the Options or the Exercise Price of the Options or both shall be reconstructed (as appropriate) in accordance with the Listing Rules, so as not to result in any benefits being conferred on Option Holders which are not conferred on Shareholders.

19 July 2005