CARNEGIE CLEAN ENERGY LIMITED — Proxy Solicitation & Information Statement 2007

Sep 27, 2007

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28 September 2007

Please find attached Notice of General Meeting and explanatory memorandum for Carnegie Corporation.

For further information please contact:

Michael Ottaviano Carnegie Corporation Ltd +61 8 9486 4466

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NOTICE OF GENERAL MEETING AND EXPLANATORY MEMORANDUM

A General Meeting of CARNEGIE CORPORATION LIMITED ABN 69 009 237 736

will be held at 10.00 am (WDT) on 1 November 2007

at PERTH CONVENTION EXHIBITION CENTRE 21 MOUNTS BAY ROAD PERTH WA 6000

Dated 21 September 2007

CONTENTS

Item				Page
Notice of Meeting				1
Explanatory Memorandum				5
1.	Resolution 1	–	Ratification of Share Issue	5
2.	Resolution 2	–	Approval of Issue of Shares (Private Placement)	6
3.	Resolution 3	–	Approval of Issue of Shares (Underwriting)
4.	Resolutions 4 & 5	–	Issue of Options to Related Parties	7
5.	Resolution 6	–	Employee Share Option Plan	11
6.	Glossary			12
Proxy	Form			(looseleaf)

ACTION REQUIRED BY SHAREHOLDERS

Step 1: Read the notice of meeting and the explanatory memorandum.

The explanatory memorandum sets out details in relation to the resolution. This information is important.

Step 2: Vote on the resolutions.

Your vote is important. You may cast your vote by:

• attending and voting at the meeting to be held at Perth Convention Exhibition Centre, 21 Mounts Bay Road, Perth on Thursday, 1 November 2007 at 10.00 am (WDT); or

• completing and returning the enclosed proxy form so as to be received by the Company at its registered office by no later than 10.00 am (WDT), Tuesday 30 October 2007.

Carnegie Corporation Limited - Notice of Meeting

CARNEGIE CORPORATION LIMITED ABN 69 009 237 736

(“ COMPANY ”)

NOTICE OF GENERAL MEETING

Notice is given that a general meeting of the Shareholders of the Company will be held at Perth Convention Exhibition Centre, 21 Mounts Bay Road, Perth Western Australia commencing at 10.00 am (WDT), Thursday 1 November 2007.

If you are unable to attend the meeting, you are encouraged to complete and return the enclosed proxy form. The completed proxy form must be received by the Company at its registered office at least 48 hours prior to the commencement of the meeting.

AGENDA

1. RATIFICATION OF PREVIOUS SHARE ISSUE

To consider and if thought fit pass as an ordinary resolution:

"For the purposes of Listing Rule 7.4 , and for all other purposes, Shareholders ratify the issue of 37,000,000 Shares at an issue price of 2.8 cents per Share to the persons and on the terms and conditions set out in the Explanatory Memorandum."

Voting exclusion statement

The Company will disregard any votes cast on this resolution by any person who participated in the issue and any associate of those persons. However, the Company need not disregard a vote if it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or it is cast by a person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

2. ISSUE OF SHARES (PRIVATE PLACEMENT)

To consider and if thought fit pass as an ordinary resolution:

"That for the purposes of Listing Rule 7.1, and for all other purposes, the Shareholders authorise the Directors to allot and issue up to 100,000,000 Shares at an issue price of 10 cents per Share to the persons and on the terms and conditions set out in the Explanatory Memorandum."

Voting exclusion statement

The Company will disregard any votes cast on this resolution by any person who may participate in the issue and any person who may obtain a benefit from the issue, or any associate of a participant unless the vote is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

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3. ISSUE OF SHARES (UNDERWRITING)

To consider and if thought fit pass as an ordinary resolution:

"That for the purposes of Listing Rule 7.1, and for all other purposes, the Shareholders authorise the Directors to allot and issue up to 30,000,000 Shares at an issue price of 10 cents per Share pursuant to a partially underwritten share purchase plan adopted by the Company to the persons and on the terms and conditions set out in the Explanatory Memorandum. "

Voting exclusion statement

The Company will disregard any votes cast on this resolution by any person who may participate in the issue and any person who may obtain a benefit from the issue, or any associate of a participant unless the vote is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

4. ISSUE OF OPTIONS TO A RELATED PARTY - MR ALAN BURNS (CHAIRMAN)

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

"That, pursuant to and in accordance with Rule 10.11 of the Listing Rules of ASX Limited and section 208 of the Corporations Act and for all other purposes, the Company approves and authorises the Directors to grant to the Company’s Chairman Mr Alan Burns (or his nominee or nominees) a total of 30,000,000 Options for no consideration, with varying exercise prices and expiry dates and otherwise on the terms and conditions set out in the Explanatory Memorandum accompanying this Notice of Meeting."

Voting exclusion statement

The Company will in accordance with section 224 of the Corporations Act and the Listing Rules of the ASX, disregard any votes cast on this Resolution by Alan Burns and any associates of Alan Burns. However, the Company will not disregard a vote if:

• (a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or

• (b) it is cast by the person chairing the meeting as proxy for person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

5. ISSUE OF OPTIONS TO A RELATED PARTY - MR MICHAEL OTTAVIANO (CHIEF EXECUTIVE OFFICER / DIRECTOR)

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

"That, pursuant to and in accordance with Rule 10.11 of the Listing Rules of ASX Limited and section 208 of the Corporations Act and for all other purposes, the Company approves and authorises the Directors to grant to the Company’s Chief Executive Officer/Director (or his nominee or nominees) a total of 30,000,000 Options for no consideration, with varying exercise prices and expiry dates and otherwise on the terms and conditions set out in the Explanatory Memorandum accompanying this Notice of Meeting."

Carnegie Corporation Limited - Notice of Meeting

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Voting exclusion statement

The Company will in accordance with section 224 of the Corporations Act and the Listing Rules of the ASX, disregard any votes cast on this Resolution by Michael Ottaviano and any associates of Michael Ottaviano. However, the Company will not disregard a vote if:

• (a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or

• (b) it is cast by the person chairing the meeting as proxy for person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

6. APPROVAL OF EMPLOYEE SHARE AND OPTION PLAN

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

"That, for the purpose of Listing Rule 7.2, Exception 9 of the Listing Rules and for all other purposes, the Company approve the issue of securities under the employee incentive option scheme for employees and directors known as “Carnegie Corporation Limited Employee Share Option Plan”, the rules of which are annexed as Annexure A to the Explanatory Memorandum accompanying this Notice of Meeting, as an exception to Listing Rule 7.1."

The Company will disregard any votes cast on this Resolution 6 by a director of the Company and any associates of those persons. However, the Company need not disregard a vote if:

• (b) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or

• (c) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Snapshot Date

The Directors have determined that for the purposes of regulation 7.11.37 of the Corporations Regulations 2001 (Cth) , the persons eligible to attend and vote at the meeting are those persons who are Shareholders at 5.00 pm (WDT) 30 October 2007.

Bodies Corporate

A body corporate may appoint an individual as its representative to exercise any of the powers the body may exercise at meetings of the Shareholders. The appointment may be a standing one. Unless the appointment states otherwise, the representative may exercise all of the powers that the appointing body could exercise at a meeting or in voting on a resolution.

Proxies

In accordance with section 249L(1) of the Corporations Act, Shareholders are advised:

• each Shareholder has a right to appoint a proxy;

• the proxy need not be a Shareholder of the Company; and

• a Shareholder who is entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is entitled to exercise.

If multiple proxies are appointed but no proportion of votes is specified, each proxy shall be entitled to vote an equal proportion of the votes attached to the Shareholder’s Shares.

In accordance with Section 250BA of the Corporations Act, the Company specifies the following address for receipt of completed proxy appointments:

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Registered Office: Level 1, 16 Ord Street West Perth WA 6005 Facsimile Number: (08) 9486 4266

An instrument appointing a proxy must be received at the above specified address no later than 10.00am (Perth time) on 30 October 2007. A completed proxy form may be sent by facsimile transmission to the number specified above and identified in the proxy form.

Incorporation of Explanatory Memorandum

The Explanatory Memorandum to Shareholders attached to this Notice of General Meeting, is hereby incorporated into and forms part of this Notice of General Meeting.

By Order of the Board

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GRANT J. MOONEY Company Secretary Dated 21 September 2007

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CARNEGIE CORPORATION LIMITED EXPLANATORY MEMORANDUM

Resolution 1 – Ratification of previous Share Issue

This resolution seeks Shareholder ratification of the issue 37,000,000 Shares at an issue price of $0.028 (2.8 cents) per Share made on 18 December 2006.

Subject to certain exceptions, Listing Rule 7.1 restricts a company from issuing or agreeing to issue equity securities in any 12 month period which amount to more than 15% of the company’s ordinary securities on issue at the commencement of that period without shareholder approval.

The exception to this rule contained in Listing Rule 7.4 provides an issue made within the 15% limit will be treated as having been made with the approval of Shareholders under Listing Rule 7.1 if subsequently approved by Shareholders, thereby “refreshing” the Company’s ability to issue shares within the 15% limit, and restoring the Company’s ability to make placements within that limit (if that is thought desirable) without the need for Shareholder approval. While the Shares described in this Resolution 1 were issued within the 15% limit, the Company seeks Shareholder ratification of the issue of those Shares for the purpose of Listing Rule 7.4, so that the Company’s ability to issue securities will be “refreshed” and it will have flexibility to issue further securities should the need or opportunity arise.

In accordance with the requirements of Listing Rule 7.5, the following information is provided to Shareholders to allow them to assess the ratification of the issue of the Shares the subject of this Resolution:

• A total of 37,000,000 Shares were issued.

• The Shares were issued at 2.8 cents per Share.

� The Shares the subject of this Resolution were issued and allotted to the following parties: Recipient No. Shares Lindsay and Valerie Baskerville < The Baskerville Super Fund> 3,750,000 Adrienne Bartop 2,000,000 David Hosking 1,000,000 Grass Ridge Pty Ltd 1,500,000 Mikena Pty Ltd 1,500,000 Bermuda Farms Pty Ltd 1,500,000 Cruel Sea Fisheries Pty Ltd 1,000,000 Tethyan Holdings Pty Ltd 3,750,000 Publication Nominees 200,000 Alousis Pty Ltd 357,000 T Reluc Investments Pty Ltd 357,000 Mark Niutta 700,000 MVI Pty Ltd 1,625,000 TIZ Nominees 700,000 Antonio Bartuccio 100,000 Rod McMahon 100,000 Venustus (WA) Pty Ltd 154,000 Christopher McGrath 100,000 N & J Henry 357,000 PW & MJ Taylor 3,000,000 David Irvin 1,000,000 Brett Armstrong 3,000,000 L & J Masters 2,000,000 Susan Masters 500,000 Kenneth Beaumont 1,500,000 Dolphin Technologies Pty Ltd 1,000,000 Parkes Holdings Pty Ltd 1,500,000 D & G Vincent 750,000 Malcolm Thom 500,000 Marite Norris 1,500,000 Total 37,000,000	� The Shares the subject of this Resolution were issued and allotted to the following parties: Recipient No. Shares Lindsay and Valerie Baskerville < The Baskerville Super Fund> 3,750,000 Adrienne Bartop 2,000,000 David Hosking 1,000,000 Grass Ridge Pty Ltd 1,500,000 Mikena Pty Ltd 1,500,000 Bermuda Farms Pty Ltd 1,500,000 Cruel Sea Fisheries Pty Ltd 1,000,000 Tethyan Holdings Pty Ltd 3,750,000 Publication Nominees 200,000 Alousis Pty Ltd 357,000 T Reluc Investments Pty Ltd 357,000 Mark Niutta 700,000 MVI Pty Ltd 1,625,000 TIZ Nominees 700,000 Antonio Bartuccio 100,000 Rod McMahon 100,000 Venustus (WA) Pty Ltd 154,000 Christopher McGrath 100,000 N & J Henry 357,000 PW & MJ Taylor 3,000,000 David Irvin 1,000,000 Brett Armstrong 3,000,000 L & J Masters 2,000,000 Susan Masters 500,000 Kenneth Beaumont 1,500,000 Dolphin Technologies Pty Ltd 1,000,000 Parkes Holdings Pty Ltd 1,500,000 D & G Vincent 750,000 Malcolm Thom 500,000 Marite Norris 1,500,000 Total 37,000,000	� The Shares the subject of this Resolution were issued and allotted to the following parties: Recipient No. Shares Lindsay and Valerie Baskerville < The Baskerville Super Fund> 3,750,000 Adrienne Bartop 2,000,000 David Hosking 1,000,000 Grass Ridge Pty Ltd 1,500,000 Mikena Pty Ltd 1,500,000 Bermuda Farms Pty Ltd 1,500,000 Cruel Sea Fisheries Pty Ltd 1,000,000 Tethyan Holdings Pty Ltd 3,750,000 Publication Nominees 200,000 Alousis Pty Ltd 357,000 T Reluc Investments Pty Ltd 357,000 Mark Niutta 700,000 MVI Pty Ltd 1,625,000 TIZ Nominees 700,000 Antonio Bartuccio 100,000 Rod McMahon 100,000 Venustus (WA) Pty Ltd 154,000 Christopher McGrath 100,000 N & J Henry 357,000 PW & MJ Taylor 3,000,000 David Irvin 1,000,000 Brett Armstrong 3,000,000 L & J Masters 2,000,000 Susan Masters 500,000 Kenneth Beaumont 1,500,000 Dolphin Technologies Pty Ltd 1,000,000 Parkes Holdings Pty Ltd 1,500,000 D & G Vincent 750,000 Malcolm Thom 500,000 Marite Norris 1,500,000 Total 37,000,000	� The Shares the subject of this Resolution were issued and allotted to the following parties: Recipient No. Shares Lindsay and Valerie Baskerville < The Baskerville Super Fund> 3,750,000 Adrienne Bartop 2,000,000 David Hosking 1,000,000 Grass Ridge Pty Ltd 1,500,000 Mikena Pty Ltd 1,500,000 Bermuda Farms Pty Ltd 1,500,000 Cruel Sea Fisheries Pty Ltd 1,000,000 Tethyan Holdings Pty Ltd 3,750,000 Publication Nominees 200,000 Alousis Pty Ltd 357,000 T Reluc Investments Pty Ltd 357,000 Mark Niutta 700,000 MVI Pty Ltd 1,625,000 TIZ Nominees 700,000 Antonio Bartuccio 100,000 Rod McMahon 100,000 Venustus (WA) Pty Ltd 154,000 Christopher McGrath 100,000 N & J Henry 357,000 PW & MJ Taylor 3,000,000 David Irvin 1,000,000 Brett Armstrong 3,000,000 L & J Masters 2,000,000 Susan Masters 500,000 Kenneth Beaumont 1,500,000 Dolphin Technologies Pty Ltd 1,000,000 Parkes Holdings Pty Ltd 1,500,000 D & G Vincent 750,000 Malcolm Thom 500,000 Marite Norris 1,500,000 Total 37,000,000	� The Shares the subject of this Resolution were issued and allotted to the following parties: Recipient No. Shares Lindsay and Valerie Baskerville < The Baskerville Super Fund> 3,750,000 Adrienne Bartop 2,000,000 David Hosking 1,000,000 Grass Ridge Pty Ltd 1,500,000 Mikena Pty Ltd 1,500,000 Bermuda Farms Pty Ltd 1,500,000 Cruel Sea Fisheries Pty Ltd 1,000,000 Tethyan Holdings Pty Ltd 3,750,000 Publication Nominees 200,000 Alousis Pty Ltd 357,000 T Reluc Investments Pty Ltd 357,000 Mark Niutta 700,000 MVI Pty Ltd 1,625,000 TIZ Nominees 700,000 Antonio Bartuccio 100,000 Rod McMahon 100,000 Venustus (WA) Pty Ltd 154,000 Christopher McGrath 100,000 N & J Henry 357,000 PW & MJ Taylor 3,000,000 David Irvin 1,000,000 Brett Armstrong 3,000,000 L & J Masters 2,000,000 Susan Masters 500,000 Kenneth Beaumont 1,500,000 Dolphin Technologies Pty Ltd 1,000,000 Parkes Holdings Pty Ltd 1,500,000 D & G Vincent 750,000 Malcolm Thom 500,000 Marite Norris 1,500,000 Total 37,000,000
		Recipient Lindsay and Valerie Baskerville < The Baskerville Super Fund> Adrienne Bartop David Hosking Grass Ridge Pty Ltd Mikena Pty Ltd Bermuda Farms Pty Ltd Cruel Sea Fisheries Pty Ltd Tethyan Holdings Pty Ltd Publication Nominees Alousis Pty Ltd T Reluc Investments Pty Ltd Mark Niutta MVI Pty Ltd TIZ Nominees Antonio Bartuccio Rod McMahon Venustus (WA) Pty Ltd Christopher McGrath N & J Henry PW & MJ Taylor David Irvin Brett Armstrong L & J Masters Susan Masters Kenneth Beaumont Dolphin Technologies Pty Ltd Parkes Holdings Pty Ltd D & G Vincent Malcolm Thom Marite Norris Total		No. Shares 3,750,000 2,000,000 1,000,000 1,500,000 1,500,000 1,500,000 1,000,000 3,750,000 200,000 357,000 357,000 700,000 1,625,000 700,000 100,000 100,000 154,000 100,000 357,000 3,000,000 1,000,000 3,000,000 2,000,000 500,000 1,500,000 1,000,000 1,500,000 750,000 500,000 1,500,000
				37,000,000

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• None of the allottees are related parties to the Company or their associates.

• The Shares issued are fully paid ordinary shares that rank equally in all respects with existing Shares.

• The funds raised by the issue of the Shares the subject of this Resolution have, and will be, applied toward general working capital purposes.

Resolution 2 – Issue of Shares (Private Placement)

Listing Rule 7.1 provides that a listed company may not issue securities in any 12 month period which, when aggregated with the value of the other securities issued within that 12 month period, exceed 15% of the value of ordinary shares on issue at the beginning of the 12 month period, unless the issue falls within one of the nominated exceptions or the prior approval of members of the company in general meeting is obtained.

The Company is seeking shareholder approval for the issue of up to 100,000,000 Shares at an issue price of 10 cents per Share pursuant to a mandate letter entered into between the Company and stockbroking firm Stripe Capital Pty Ltd (“ Stripe ”) under which the Company is seeking to raise $10,000,000 by way of a private placement of 100,000,000 Shares at 10 cents each in accordance with the ‘excluded offer’ provisions (Section 708) of the Corporations Act.

In compliance with Listing Rule 7.3 shareholders are advised as follows:

• a) The total number of securities which may be allotted is up to 100,000,000 ordinary Shares;

• b) It is proposed that the Shares will be issued to sophisticated investors in accordance with Section 708 of the Corporations Act;

• c) The Shares will be issued on one date within 3 months of the date of this general meeting;

• d) The Shares will be issued at $0.10 (10 cents) each;

• e) The Shares rank pari passu in all respects with the Company's existing fully paid ordinary Shares; and

• f) The Company intends to apply the funds raised towards its research and development commitments, particularly the CETO wave energy project, and any associated working capital commitments.

Resolution 3 – Issue of Shares (Underwriting)

On 21 September 2007 the Company announced it would be undertaking a share purchase plan pursuant to which existing shareholders at 24 September 2007 can subscribe for up to 50,000 Shares at an issue price of 10 cents per Share to raise up to $8,770,156 (" SPP "). The SPP is partially underwritten by Stripe Capital Pty Ltd (“ Stripe ”) such that the minimum amount to be raised under the SPP is $3,000,000. The Company entered into an underwriting agreement with Stripe dated 21 September 2007 (" Underwriting Agreement ") under which Stripe has agreed to underwrite any shortfall resulting from the SPP as announced by the Company on 21 September 2007 to a maximum amount of $3,000,000.

The maximum number of shares which can be issued under the SPP is 87,701,560 however the Underwriting Agreement is for a maximum shortfall of $3,000,000.

Listing Rule 7.1 imposes a limit on the number of equity securities (e.g. shares or options to subscribe for shares) which a company can issue without shareholder approval. In general terms, the limit is that a company may not, without shareholder approval, issue in any 12 month period, equity securities which are more than 15% of:

• the number of fully paid ordinary shares on issue 12 months before the issue; plus

• the number of fully paid ordinary shares issued in that 12 months under an exception contained in Listing Rule 7.2 or with shareholder approval.

Equity securities which are issued under an exception contained in Listing Rule 7.2 or with Shareholder approval do not reduce the number of shares that may be issued by the Company under Listing Rule 7.1.

ASX Listing Rule 7.2 Exception 15 allows a Company to issue shares under a SPP without shareholder approval, but excludes shares issued under an underwriting agreement. Accordingly, any Shares issued to Stripe (or its sub-underwriters or clients) as a result of any shortfall under the SPP will reduce the 15% allowed to be issued by the Company. For this reason shareholder approval at this time negates the

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requirement to ratify the issue at the next general meeting. As the actual number of Shares which will be issued to the Stripe (or its clients) as a result of any shortfall under the SPP is not yet known, approval is sought for the maximum number of Shares which could be issued to them pursuant to the Underwriting Agreement.

In compliance with Listing Rule 7.3 shareholders are advised as follows:

• a) The total number of securities which may be allotted is up to 30,000,000 ordinary Shares;

• b) It is proposed that the Shares will be issued to Stripe and/or clients of Stripe who will be subunderwriters;

• c) The Shares will be issued on one date within 3 months of the date of this general meeting;

• d) The Shares will be issued at $0.10 (10 cents) each;

• e) The Shares rank pari passu in all respects with the Company's existing fully paid ordinary Shares; and

• f) The Company intends to apply the funds raised towards its research and development commitments, particularly the CETO wave energy project, and any associated working capital commitments.

Resolutions 4 and 5 – Issue of Options to Related Parties - Alan Burns and Michael Ottaviano

Resolutions 4 and 5 seek shareholder approval for the Company to allot and issue a total of 30,000,000 Options over ordinary Shares in the Company to each of Mr Alan Burns and Mr Michael Ottaviano (“ the Recipient Director(s) ”) or their nominees.

The options shall be exercisable into fully paid ordinary shares on or before the expiry date in accordance with the table below. The options shall be issued within 1 month of the date of this meeting.

Name	Options
Alan Burns, or his nominee	10,000,000 Options exercisable at 20 cents each and expiring 3 years from the date of issue
	10,000,000 Options exercisable at 30 cents each and expiring 3 years from the date of issue
	10,000,000 Options exercisable at 40 cents each and expiring 3 years from the date of issue
Michael Ottaviano, or his nominee	10,000,000 Options exercisable at 20 cents each and expiring 3 years from the date of issue
	10,000,000 Options exercisable at 30 cents each and expiring 3 years from the date of issue
	10,000,000 Options exercisable at 40 cents each and expiring 3 years from the date of issue

The terms of the Options are set out on page 10 of this Explanatory Memorandum.

Shareholder approval for the grant of the Options the subject of Resolutions 4 and 5 is sought for the purposes of Chapter 2E of the Corporations Act which governs the giving of financial benefits to a "related party", e.g. a director of a company.

Purpose and Basis of the Issue

The purpose of the proposed grant of Options is to provide the Recipient Director with added incentive to achieve predetermined goals. The Options are issued as part of the Director’s remuneration package. The Board of Directors shall have certain discretion in relation to determining whether these Options the subject of Resolutions 4 and 5 will be retained by the Recipient Director in circumstances where the Director resigns from his position with the Company prior to the expiry date.

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The basis for the issue of 30,000,000 options to each of the Recipient Directors is to provide significant upside within the remuneration package to attract a Chairman and Chief Executive Officer / Director of Mr Burns’ and Mr Ottaviano’s calibre to the Company. The independent Directors believe that the quantity of options together with the terms of the Options is on normal commercial terms and is in line with similar packages offered to chairpersons and chief executive officers in the research and development and technology sectors.

In addition to the issue of options, Mr Burns receives annual consulting fees totalling $121,992 plus GST per annum plus administrative cost allowances totalling $27,360.

In addition to the issue of options, Mr Ottaviano shall be paid a fixed annual salary of $250,000 per annum plus superannuation at the required statutory rate. A fully-maintained motor vehicle is also provided.

Chapter 2E of the Corporations Act

Chapter 2E of the Corporations Act prohibits the Company from giving a financial benefit to a related party (such as a director) of the Company, unless either:

• (a) the giving of the financial benefit falls within one of the nominated exceptions to the relevant provisions of the Corporations Act; or

• (b) prior shareholder approval is obtained to the giving of the financial benefit.

For the purposes of Chapter 2E, the Recipient Directors are considered to be related parties of the Company as Directors. Resolutions 4 and 5 provide for the grant of Options to a related party which are financial benefits requiring shareholder approval.

In accordance with the requirements of Chapter 2E of the Corporations Act, the following information is provided:

• (i) The Options will be issued to the Recipient Director or his respective nominee.

• (ii) The proposed financial benefit is the grant to the Recipient Director or his respective nominee, of a total of 30,000,000 Options each, at no consideration, to subscribe for ordinary fully paid Shares in the Company. The Options shall have an exercise prices of 20, 30 and 40 cents each (see table above) and an expiry date 3 years from the date of issue of the Options. An estimate of the total value of the financial benefits has been calculated and is detailed in the below table. These values have been calculated using a Black and Scholes Option Pricing Model with the following assumptions:

• interest rate of 6.25%;

• dividend yield of nil;

• current underlying Share price of $0.12; and

• The Company has used a volatility rate of 85% in the calculation of the value of the options using the Black and Scholes Option Pricing Model.

The estimated value of the Options using the Black and Scholes Option Pricing Model is detailed below.

below.
Option Exercise Price	Value Per Option	Total value per director’s parcel
$	$	$
$0.20	0.048	480,000
$0.30	0.036	360,000
$0.40	0.028	280,000
		1,120,000

• (iii) Should Mr Burns or Mr Ottaviano choose to leave the employment of the Company prior to expiry of the options, he shall have not more than 30 days from the date of ceasing employment to exercise any options which had vested in him at that date, unless the Board agrees otherwise.

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• (iv) The Options are granted for no issue price.

• (v) The options shall survive the death of a recipient.

• (vi) Apart from the option holdings of which shareholder approval is sought, Mr Burns holds no shares in the Company and Mr Ottaviano holds 4,100,000 unlisted options in the Company and is deemed to hold 300,000 shares in the name of his wife, Amanda Ottaviano.

• (vii) The Company presently has 292,383,535 fully paid ordinary shares on issue.

• (viii) The market price of the Company's Shares during the period of the Options will normally determine whether or not holders exercise the Options. At the time any Options are exercised and Shares are issued pursuant to the exercise of the Options, the Company's ordinary Shares may be trading at a price that is higher than the exercise price of the Options.

• (ix) If all of the Options (that is a total of 60,000,000 Options) granted are exercised, the Company's Share capital will be diluted by approximately 17% (based on the number of Shares on issue at the date of the Notice of Meeting and assuming no Shares are issued pursuant to the SPP and Private Placement).

• (x) Over the last 12 months prior to the date of this Notice of Meeting, the Company's Shares have traded from a high of $0.22 on 5 July 2007 and 6 July 2007 to a low of $0.027 on 17 November 2007. The latest available trading price of the Shares prior to the date of this Explanatory Memorandum was $0.125 on 20 September 2007.

• (xi) Following the recent introduction of International Financial Reporting Standards (IFRS), the Company is required to expense options in the year of issue based upon far value determined at the date of grant of the options. As such, the directors estimate that the issue of these options will adversely affect the Company’s profit and loss to the extent of approximately $2,240,000.

With the exception of the above, the Directors do not consider that from an economic and commercial point of view, there are any costs or detriments, including opportunity costs or taxation consequences for the Company or benefits foregone by the Company in issuing the Options to the Recipient Director pursuant to Resolutions 4 and 5.

• (xii) The primary purpose of the grant of the Options is not to raise capital but to give incentive to Mr Burns as the Company’s Chairman and Mr Ottaviano as the Chief Executive Officer / Director.

• (xiii) The Directors are not aware of any other information that would be reasonably required by shareholders to make a decision whether it is in the best interests of the Company to pass Resolutions 3 and 4 as listed above.

Directors' recommendation

Each of Directors Michael Ottaviano, Alan Hopkins, Bruce McLeod and Ian Fisher believe that the issue of these options to Mr Burns is in the best interests of the Company. None of Directors Michael Ottaviano, Alan Hopkins, Bruce McLeod and Ian Fisher has an interest in the outcome of Resolution 4.

Alan Burns is the Recipient Director and has a personal interest in the outcome of Resolution 4. As a result, Alan Burns does not make any recommendation in relation to Resolution 3.

Each of Directors Alan Burns, Alan Hopkins, Bruce McLeod and Ian Fisher believe that the issue of these options to Mr Ottaviano is in the best interests of the Company. None of Directors Alan Burns, Alan Hopkins, Bruce McLeod and Ian Fisher has an interest in the outcome of Resolution 5.

Michael Ottaviano is the Recipient Director and has a personal interest in the outcome of Resolution 4. As a result, Michael Ottaviano does not make any recommendation in relation to Resolution 5.

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Listing Rule 10.11

Listing Rule 10.11 requires shareholder approval for the issue of Options to a related party of the Company. As Mr Alan Burns and Mr Michael Ottaviano are related parties of the Company as noted above, shareholder approval is sought pursuant to Listing Rule 10.11.

The following information is provided to shareholders for the purposes of Listing Rule 10.13:

• (a) the maximum number of Options to be granted under Resolutions 4 and 5 to each Recipient Director is 30,000,000;

• (b) the Options will be issued no later than one month after the date of this Annual General Meeting or such later date as approved by ASX;

• (c) the Options will be granted as incentive Options and hence are granted for no consideration;

• (d) the allottees are Mr Alan Burns or his designated nominee and Mr Michael Ottaviano or his designated nominee;

• (e) the Options will be issued on the terms and conditions as set out below; and (f) no funds will be raised from the grant of the Options.

If approval is given for the issue of the Shares under Listing Rule 10.11, approval is not required under Listing Rule 7.1.

(Note: Listing Rule 7.1 broadly provides, subject to certain exceptions, that shareholder approval is required for any issue of securities where the securities proposed to be issued represent more than 15% of the Company's Shares then on issue. Listing Rule 7.1.4 provides that for the purposes of Listing Rule 7.1, Options are treated as if they were the Shares into which they will, upon exercise, convert.)

Terms and Conditions of Options to be issued to Mr Alan Burns or his nominee and Mr Michael Ottaviano or his nominee

The terms and conditions of the Options are as follows:

• (a) Each Option shall confer the right to subscribe for one fully paid ordinary Share, ranking pari passu with existing issued fully paid ordinary Shares, in the capital of the Company.

• (b) Each Option is exercisable at [insert 20 cents, 30 cents and 40 cents as applicable] each.

• (c) Each Option will expire on the date that is 3 years following the date of issue (" Expiry Date ").

• (d) [ Insert name of Recipient Director ] will be required to retain his position of employment with the Company to enable him to exercise the Options remaining to be exercised by the expiry date, unless otherwise approved by the Independent Board of Directors.

• (e) Those Options vested in the Recipient shall be exercisable by notice in writing to the Company received at any time on or before the Expiry Date, however the fully paid ordinary Shares will be allotted not more than fifteen days after (but not including) the exercise date.

• (f) The Options may be exercised in whole or in part. If the Options are exercised in part each notice of exercise must be for not less than 1,000 Shares and in multiples of 1,000 Shares.

• (g) The Options may be transferred at any time in whole or part.

• (h) The Options shall survive the death of the recipient.

• (i) A statement will be issued for the Options. On the reverse side of the statement there will be endorsed a statement of the rights of the optionholder and a notice that is to be completed when exercising the Options. If there is more than one Option comprised in the statement and prior to the Expiry Date

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those Options are exercised in part, the Company will issue another statement for the balance of the Options held and not yet exercised.

• (j) The optionholder will not be permitted to participate in any new pro rata entitlement issues of securities of the Company, unless the Options are first exercised. However, the Company must ensure that for the purposes of determining entitlements to any such issue, the optionholder will be notified of the proposed issue at least 6 business days (as defined in the Listing Rules of the ASX) before the record date. This will give the optionholder the opportunity to exercise his or her options prior to the date for determining entitlements to participate in any such issue.

• (k) An Option will not confer the right to a change in exercise price or a change in the number of underlying securities over which the Option can be exercised.

• (l) In the event of a reorganisation of the issued capital of the Company, the Options will be reorganised in accordance with the Listing Rules of the ASX.

• (m) The Options will not give any right to participate in dividends until Shares are allotted pursuant to the exercise of the relevant Options.

• (n) The Options shall not be quoted on ASX.

Resolution 6 – Employee Share Option Plan

The Directors considered that it was desirable to establish an option plan under which employees may be offered the opportunity to subscribe for options to acquire shares in the Company in order to increase the range of potential incentives available to them and to strengthen links between the Company and its employees and accordingly adopted the Carnegie Corporation Limited Employee Share Option Plan (" Plan ") on 6 September 2007.

The Plan is designed to provide incentives to the employees of the Company and to recognise their contribution to the Company's success. Under the Company's current circumstances the Directors consider that the incentives to employees are a cost effective and efficient incentive for the Company. To enable the Company to secure employees and Directors who can assist the Company in achieving its objectives, it is necessary to provide remuneration and incentives to such personnel. The Plan is designed to achieve this objective, by encouraging continued improvement in performance over time and by encouraging personnel to acquire and retain significant shareholdings in the Company.

Shareholder approval is required if any issue of Employee Options pursuant to the Plan is to fall within the exception to the calculation of the 15% limit imposed by Listing Rule 7.1 on the number of securities which may be issued without shareholder approval. Accordingly, shareholder approval is sought for the purposes of Listing Rule 7.2 Exception 9(b) which provides that Listing Rule 7.1 does not apply to an issue of securities under an employee incentive scheme that has been approved by the holders of ordinary securities within three years of the date of issue.

Prior shareholder approval will be required before any Director or related party of the Company can participate in the Plan.

Under the Plan, the Board may offer to Eligible Persons the opportunity to subscribe for such number of Employee Options in the Company as the Board may decide and on the terms set out in the rules of the Plan, a copy of which is contained in Annexure A of this Explanatory Memorandum. Employee Options granted under the Plan will be offered to participants in the Plan on the basis of the Board’s view of the contribution of the Eligible Person to the Company.

In accordance with the requirements of Listing Rule 7.2 Exception 9(b) the following information is provided:

(a) a copy of the rules of the Plan is attached as Annexure A to this Explanatory Memorandum;

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• (b) no Employee Options have previously been issued under the Plan; and

• (c) a voting exclusion statement has been included for the purposes of Resolution 6.

Glossary

ASX means ASX Limited ABN 98 008 624 691 and, where the context permits, the Australian Securities Exchange operated by ASX Limited.

Business Day means a trading day on the financial market operated by ASX.

Constitution means the constitution of the Company.

Company means Carnegie Corporation Limited ABN 69 009 237 736.

Corporations Act means Corporations Act 2001 (Cth).

Directors means directors of the Company.

Explanatory Memorandum means this explanatory memorandum.

Listing Rules means the Listing Rules of the ASX.

Share means an ordinary fully paid share in the capital of the Company.

Shareholder or member means a registered member of the Company.

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ANNEXURE A

CARNEGIE CORPORATION LIMITED ACN 009 237 736

RULES OF EMPLOYEE SHARE OPTION PLAN

Blakiston & Crabb Lawyers 1202 Hay Street WEST PERTH WA 6005 Tel: (08) 9322 7644 Fax: (08) 9322 1506 Ref: SJG.MC.CNM/14492

RULES OF EMPLOYEE SHARE OPTION PLAN

CARNEGIE CORPORATION LIMITED ACN 009 237 736

RULES OF EMPLOYEE SHARE OPTION PLAN (adopted by the Board on 6 September 2007)

1. NAME OF PLAN

• 1.1 This Plan shall be called the Carnegie Corporation Limited Employee Share Option Plan 2007.

2. ESTABLISHMENT AND TERMINATION OF THE PLAN

• 2.1 The Board may establish and administer the Plan in accordance with the terms and conditions set out in these Rules and otherwise as it determines from time to time in its absolute discretion.

• 2.2 The Board may terminate the Plan, or suspend its operation for any period it considers desirable, at any time that it considers appropriate.

• 2.3 The Board may not issue any further Options after the Plan has been terminated. However, these Rules will continue to apply to Options on issue at the date of such termination until the last of those Options lapses or is exercised.

3. PURPOSE OF PLAN

• 3.1 The purpose of this Plan is to:

• (a) recognise the ongoing ability of the employees of the Company and their expected efforts and contribution in the long term to the performance and success of the Company;

• (b) provide an incentive to the employees of the Company to remain in their employment in the long term;

• (c) attract persons of experience and ability to employment with the Company and foster and promote loyalty between the Company and its employees; and

• (d) provide employees of the Company with the opportunity to acquire Options, and ultimately Shares, in the Company, in accordance with these Rules.

4.

OPERATION OF THE PLAN

• 4.1 The Plan operates according to these Rules which bind the Company and each Participant.

• 4.2 The number of Shares to be received on exercise of the Options the subject of an Offer when aggregated with:

• (a) the number of Shares which would be issued were each outstanding offer or Option, being an offer made or Option acquired pursuant to the Plan or any other employee share scheme extended only to employees or Directors of the Company, exercised; and

• (b) the number of Shares issued during the previous 5 years pursuant to the Plan or any other employee share scheme extended only to employees or Directors of the Company;

but disregarding any offer made, or Option acquired or Share issued by way of or as a result of:

• (c) an offer to a person situated at the time of receipt of the Offer outside Australia; or

• (d) an offer that did not need disclosure to investors because of section 708 of the Corporations Act; or

• (e) an offer made under a disclosure document,

• (f) must not exceed 5% of the total number of issued Shares as at the time of the Offer.

5. ELIGIBILITY

• 5.1 Subject to these Rules, the Board may from time to time determine that any Eligible Person is entitled to participate in the Plan and the extent of that participation. Prior to making that determination, the Board must consider:

• (a) the seniority of the relevant Eligible Person and the position the Eligible Person occupies within the Company;

• (b) the length of service of the Eligible Person with the Company;

• (c) the record of employment of the Eligible Person with the Company;

• (d) the potential contribution of the Eligible Person to the growth of the Company;

• (e) the extent (if any) of the existing participation of the Eligible Person (or any Permitted Nominee in relation to that Eligible Person) in the Plan; and

• (f) any other matters which the Board considers relevant.

• 5.2 The Board may exercise its powers in relation to the participation of any Eligible Person on any number of occasions.

6. OFFER OF OPTIONS AND EXERCISE PRICE

• 6.1 Subject to these Rules and to the Listing Rules, the Company (acting through the Board) may offer Options to any Eligible Person at such times and on such terms as the Board considers appropriate. Each Offer must state:

• (a) the name and address of the Eligible Person to whom the Offer is made;

• (b) that the Eligible Person to whom the Offer is addressed may accept the whole or any lesser number of Options offered;

  • (c) the minimum number of Options and any multiple of such minimum or any other number which may be accepted;

  • (d) the period within which the Offer may be accepted, and the period or periods during which the Options or any of them may be exercised and the Expiry Date;

  • (e) any Exercise Conditions;

  • (f) the method of calculation of the Exercise Price; and

  • (g) any other matters which the Board may determine.

• 6.2 The method of calculation of the Exercise Price of each Option will be determined by the Board with regard to the Market Value of the Shares when it resolves to offer the Option.

7. ACCEPTING OFFERS

• 7.1 Upon receipt of an Offer, an Eligible Person may, within the period specified in the Offer:

  • (a) accept the whole or any lesser number of Options offered by giving to the Company an Application Form; or

  • (b) nominate a nominee in whose favour the Eligible Person wishes to renounce the Offer by notice in writing to the Board. The Board may, in its absolute discretion, resolve not to allow such renunciation of an Offer in favour of a nominee without giving any reason for such decision.

• 7.2 Upon:

  • (a) receipt of the Application Form referred to in paragraph 7.1(a); or

  • (b) the Board resolving to allow a renunciation of an Offer in favour of a nominee (" Permitted Nominee ") and the Permitted Nominee accepting the whole or any lesser number of Options offered by giving the Company an Application Form,

  • (c) then the Eligible Person or the Permitted Nominee, as the case may be, will be taken to have agreed to be bound by these Rules and will be granted Options subject to these Rules.

• 7.3 If Options are issued to a Permitted Nominee or an Eligible Person, the Eligible Person must, without limiting any provision in these Rules, ensure that the Permitted Nominee complies with these Rules.

• 7.4 On the issue of Options following receipt by the Company of an Application Form, an Eligible Person or the Permitted Nominee, as the case may be, becomes a Participant.

8. NO CONSIDERATION

• 8.1 No consideration is payable by an Eligible Person for a grant of an Option, unless the Board decides otherwise.

9. CERTIFICATES

• 9.1 The Company must give a Participant one or more Certificates stating:

• (a) the number of Options issued to the Participant;

• (b) the Exercise Price of those Options; and

• (c) the Issue Date of those Options.

• 9.2 The Certificates for the Options will be dispatched within 10 Business Days after the Issue Date.

10. QUOTATION

• 10.1 The Company will not apply for Official Quotation of any Options.

• 10.2 If shares of the same class as those allotted pursuant to the exercise of Options granted under the Plan are listed on the ASX, the Company must apply for Official Quotation of those Shares allotted pursuant to the exercise of Options within the time required by the Listing Rules after the date of allotment.

11. NOT TRANSFERABLE

• 11.1 Subject to clause 14.4, Options are not transferable.

12. EXERCISE OF OPTIONS

• 12.1 Subject to any Exercise Conditions, Options may be exercised at any time during the period commencing on the Issue Date and ending on the Expiry Date.

• 12.2 Notwithstanding paragraph 12.1, all Options may be exercised:

• (a) during a Bid Period; or

• (b) at any time after a Change of Control Event has occurred; or

• (c) on an application under section 411 of the Corporations Act, if a court orders a meeting to be held concerning a proposed compromise or arrangement for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company.

• 12.3 Options may only be exercised by the Participant giving notice in writing to the Board delivered to the registered office of the Company. The notice must specify the number of Options being exercised and the Exercise Price for the Options specified in the notice and must be accompanied by:

• (a) the Certificate for those Options, for cancellation by the Company; and

• (b) a cheque payable to the Company (or another form of payment acceptable to the Board) in the amount of the product of the number of Options then being exercised by the Participant and the Exercise Price.

• (c) The notice is only effective (and only becomes effective) when the Company has received value for the full amount referred to in paragraph (b).

• 12.4 Subject to paragraph 14.1, within 10 Business Days after the notice referred to in clause 12.3 becoming effective, the Board must:

• (a) allot and issue the number of Shares to be issued in respect of the Options being exercised;

• (b) cancel the Certificate for the Options being exercised; and

• (c) if applicable, issue a new Certificate for any remaining Options covered by the Certificate accompanying the notice.

• 12.5 The Board may, at its discretion, by notice to the Participant reduce, waive or vary (provided such variation is not adverse to the Participant) the Exercise Conditions attaching to Options in whole or in part at any time and in any particular case.

13. SHARES ALLOTTED ON EXERCISE OF OPTIONS

• 13.1 All Shares allotted upon exercise of the Options rank pari passu in all respects with Shares previously issued and, in particular, entitle the holders of Shares to participate fully in:

• (a) dividends declared by the Company after the date of allotment; and

• (b) all issues of securities made or offered pro rata to holders of Shares.

14. LAPSE OF OPTIONS

• 14.1 Options not validly exercised on or before the Expiry Date will automatically lapse.

• 14.2 Unless otherwise determined by the Board, if any Options are granted subject to Exercise Conditions and, prior to satisfaction of the Exercise Conditions (such that the Options are not exercisable), an Eligible Person ceases to be an Eligible Person then:

• (a) if the Eligible Person ceases to be an Eligible Person for any reason other than a Specified Reason, any such Options held by such Eligible Person, or if appropriate, his or her Permitted Nominee, will automatically lapse; and

• (b) if the Eligible Person ceases to be an Eligible Person for a Specified Reason, such Eligible Person, or if appropriate, his or her Permitted Nominee, may exercise any such Options held by him or her within:

  • (i) 1 month of the date of (as the case may be) Retirement, Redundancy, death or Total and Permanent Disablement; or

  • (ii) such longer period as the Board determines,

subject to the Board, in its absolute discretion, reducing, waiving or varying the Exercise Conditions applying to those Options in accordance with clause 12.5 so that those Options may be exercised. Options the subject of clause 14.2 (b) not exercised within the 1 month or the longer period determined by the Board, will automatically lapse.

• 14.3 A certificate signed by the company secretary of the Company stating that a person ceased for any reason to be an Eligible Person shall (in the absence of manifest error) be conclusive for the purposes of the Plan, both as to such occurrence and the reason for such occurrence and the date of such occurrence.

• 14.4 Subject to clause 14.2, if at any time prior to the Expiry Date of any Options a Holder dies, the deceased Holder's Legal Personal Representative may:

• (a) elect to be registered as the new Holder of the deceased Holder's Options;

• (b) whether or not he or she becomes so registered, exercise those Options in accordance with and subject to these Rules as if he were the Holder of them; and

• (c) if the deceased Holder had already given the Company a notice of exercise of his or her Options, pay the Exercise Price in respect of those Options.

15. PARTICIPATION RIGHTS, BONUS ISSUES, RIGHTS ISSUES, REORGANISATIONS OF CAPITAL AND WINDING UP

15.1 New Issues

• (a) Participants are not entitled to participate in any new issue of securities to existing holders of Shares in the Company unless:

• (i) they have become entitled to exercise their Options under the Plan; and

• (ii) they do so before the record date for the determination of entitlements to the new issue of securities and participate as a result of being holders of Shares.

• (b) The Company must give Participants, in accordance with the Listing Rules, notice of any new issue of securities before the record date for determining entitlements to the new issue.

15.2 Bonus Issues

There is no right to change the exercise price of an Option nor the number of underlying Shares over which the Option can be exercised, if the Company completes a bonus issue.

15.3 Pro Rata Issues

There is no right to change the exercise price of an Option nor the number of underlying Shares over which the Option can be exercised, if the Company completes a pro rata issue.

15.4 Reorganisation of Capital

If, prior to the expiry of any Options, there is a reorganisation of the issued capital of the Company, then the rights of a Participant (including the number of Options to which each Participant is entitled and the Exercise Price) is changed to the extent necessary to comply with the Listing Rules applying to a reorganisation of capital at the time of the reorganisation.

15.5 Winding Up

If, prior to the expiry of any Options, a resolution for a members' voluntary winding up of the Company is proposed (other than the purpose of a reconstruction or amalgamation) the Board may, in its absolute discretion, give written notice to Participants of the proposed resolution. Subject to the Exercise Conditions, the Participants may, during the period referred to in the notice, exercise their Options.

15.6 Fractions of Shares

For the purpose of this clause 15, if Options are exercised simultaneously, then the Participant may aggregate the number of Shares or fractions of Shares for which the Participant is entitled to subscribe. Fractions in the aggregate number only will be disregarded in determining the total entitlement of a Participant.

15.7 Calculations and Adjustments

Any calculations or adjustments which are required to be made under this clause 15 will be made by the Board and, in the absence of manifest error, are final and conclusive and binding on the Company and the Participant.

15.8 Notice of Change

The Company must within a reasonable period give to each Participant notice of any change under clause 15 to the Exercise Price of any Options held by the Participant or to the number of Shares which the Participant is entitled to subscribe for on exercise of an Option.

16. AMENDMENTS TO THE RULES

16.1 Board May Alter Rules

The Board may, subject to clause 16.3 and the Listing Rules, alter, delete or add to these Rules at any time (save for the provisions of clause 4.2).

16.2 Alteration of clause 4.2

The Board may alter clause 4.2 with the prior approval by ordinary resolution of the shareholders of the Company in a general meeting.

16.3 Consent of Participants

If any amendment to be made under clause 16.1 would adversely affect the rights of Participants in respect of any Options then held by them, the Board must obtain the consent of Participants who between them hold not less than 75% of the total number of those Options held by all those Participants before making the amendment.

16.4 Eligible Persons Outside Australia

The Board may make any additions, variations or modifications to the Rules in relation to the implementation of the Plan, and the specific application of the Rules, to Eligible Persons residing outside Australia.

17. POWERS OF THE BOARD

• 17.1 The Plan shall be administered by the Board who shall have the power to:

• (a) determine appropriate procedures and make regulations for the administration of the Plan which are consistent with these Rules;

• (b) resolve conclusively all questions of fact or interpretation arising in connection with the Plan;

• (c) terminate or suspend the operation of the Plan at any time, provided that the termination or suspension does not adversely affect or prejudice the rights of Participants holding Options at that time;

• (d) delegate those functions and powers it considers appropriate, for the efficient administration of the Plan, to any one or more persons whom the Board reasonably believes to be capable of performing those functions and exercising those powers, for such period and on such conditions as the Board may determine;

• (e) take and rely upon independent professional or expert advice in or in relation to the exercise of any of their powers or discretions under these Rules;

• (f) administer the Plan in accordance with these Rules as and to the extent provided in these Rules; and

• (g) make regulations for the operation of the Plan consistent with these Rules.

18. NOTICES

• 18.1 Notices may be given by the Company to any Holder either personally or by sending by post to his or her address as noted in the Company's records or to the address (if any) within the Commonwealth of Australia supplied by him to the Company for the giving of notices. Notices for any overseas Holders shall be forwarded and posted by air. Where a notice is sent by post the notice shall be deemed to be served on the day after posting. The signature of any notice may be given by any Director or secretary of the Company. A notice of exercise given under clause 12.3 shall not be deemed to be served on the Company until actually received.

19. NO COMPENSATION OR DAMAGES

• 19.1 The rights and obligations of any Holder under the terms of his or her employment with the Company are not affected by his or her participation in the Plan.

• 19.2 These Rules do not form part of, and will not be incorporated into, any contract of engagement or employment between a Holder and the Company.

• 19.3 No Holder has any rights to compensation or damages as a result of the termination of his or her employment, so far as those rights arise or may arise from the Holder ceasing to have rights under the Plan as a result of the termination.

• 19.4 Participants do not, as Participants, have any right to attend or vote at general meetings of holders of Shares.

20. GOVERNING LAW

• 20.1 The Plan and any Options issued under it are governed by the laws of Western Australia and the Commonwealth of Australia.

• 20.2 Each Participant irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of Western Australia, the Commonwealth of Australia and courts entitled to hear appeals from those courts.

21. ADVICE

• 21.1 Eligible Persons should obtain their own independent advice at their own expense on the financial, taxation and other consequences to them of or relating to participation in the Plan.

22. DEFINITIONS AND INTERPRETATION

• 22.1 In these Rules, unless the context otherwise requires, the following words and expressions shall have the following meanings:

" Application Form " means a duly completed and executed application for the issue of Options made by an Eligible Person or Permitted Nominee in respect of an Offer, in the form approved by the Board from time to time;

" ASX " means ASX Limited ABN 98 008 624 691 and, where the context permits, the Australian Securities Exchange operated by ASX Limited;

" Bid Period ", in relation to a takeover bid in respect of shares in the Company, means the period referred to in the definition of that expression in section 9 of the Corporations Act provided that where a takeover bid is publicly announced prior to the service of a bidder's statement on the Company in relation to that takeover bid, the Bid Period shall be deemed to have commenced at the time of that announcement;

" Board " means the Directors acting as the board of directors of the Company or a committee appointed by such board of directors;

" Business Day " means a day on which banks are open for business in Perth excluding a Saturday, Sunday or public holiday;

" Certificate " means the certificate issued in accordance with clause 9 by the Company to a Holder in respect of an Option;

" Change of Control Event " means a shareholder, or a group of associated shareholders, becoming entitled to sufficient shares in the Company to give it or them the ability, and that ability is successfully exercised, in general meeting, to replace all or a majority of the Board;

" Company " means Carnegie Corporation Limited ACN 009 237 736;

" Corporations Act " means Corporations Act 2001 (Cth);

" Director " means a director of the Company from time to time but does not include a person who is only a director by virtue of being an alternate director;

" Eligible Person " means at any time a person who then is a Director or an employee (whether full-time or part-time) of the Company or of an associated body corporate of the Company;

" Exercise Condition " means the performance, vesting or other conditions (if any) determined by the Board and specified in an Offer which are, subject to these Rules, required to be satisfied, reached or met before an Option can be exercised;

" Exercise Price " means, in respect of an Option, the subscription price per Share, determined in accordance with clause 6.2, payable by a Holder on exercise of the Option;

" Expiry Date " means, in relation to an Option, the date determined by the Board prior to the offer of the relevant Options, subject to any restriction in the Corporations Act from time to time but in any event no longer than 5 years from the Issue Date;

" Holder " means, in relation to an Option, the person (whether an Eligible Person or a Permitted Nominee) entered in the Company's register of options as the holder of that Option;

" Issue Date " means, in relation to an Option, the date on which the Company grants that Option;

" Legal Personal Representative " means the executor of the will or an administrator of the estate of a deceased person, the trustee of the estate of a person under a legal disability or a person who holds an enduring power of attorney granted by another person;

" Listing Rules " means the Official Listing Rules of ASX as they apply to the Company from time to time;

" Market Value " means, if the Company is admitted to the official list of ASX:

• (a) the weighted average closing sale price of the Shares recorded on the stock market of ASX over the five trading days immediately preceding the day on which the Board resolves to offer an Option; or

• (b) in circumstances where there has been no trading in the Shares during the five trading days immediately preceding the day on which the Board resolves to offer an Option, the last sale price recorded on the stock market of ASX;

" Offer " means an invitation to an Eligible Person made by the Company under clause 6.1 to apply for an issue of Options;

" Official Quotation " has the meaning ascribed to it in the Listing Rules;

" Option " means an option issued under the Plan to subscribe for a Share;

" Participant " means a person who holds Options issued under the Plan and includes, if a Participant dies or becomes subject to a legal disability, the Legal Personal Representative of the Participant;

" Permitted Nominee " has the meaning given to it by clause7.2;

" Plan " means the Carnegie Corporation Limited Employee Share Option Plan 2007 established in accordance with these Rules;

" Redundancy " means, in relation to an Eligible Person, a determination by the Board that the Company's need to employ a person for the particular kind of work carried out by that Eligible Person has ceased (but, for the avoidance of any doubt, does not include the dismissal of an Eligible Person for personal or disciplinary reasons or where the Eligible Person leaves the employ of the Company of his or her own accord);

" Retirement " means, in relation to an Eligible Person, retirement by that Eligible Person from the Company at age 60 or over or such earlier age as considered appropriate by the Board;

" Rules " means these rules, as amended from time to time;

" Series " means, in relation to Options, Options with a common Issue Date;

" Shares " means fully paid ordinary shares in the capital of the Company;

" Specified Reason " means Retirement, Total and Permanent Disablement, Redundancy or death;

" Tax " means any tax, levy, impost, GST, deduction, charge, rate, contribution, duty or withholding which is assessed (or deemed to be assessed), levied, imposed or made by any government or any governmental, semi-governmental or judicial entity or authority together with any interest, penalty, fine, charge, fee or other amount assessed (or deemed to be assessed), levied, imposed or made on or in respect of any or all of the foregoing; and

" Total and Permanent Disablement " means, in relation to an Eligible Person, that the Eligible Person has, in the opinion of the Board and with effect on a date determined by the Board, after considering such medical and other evidence as it sees fit, become incapacitated to such an extent as to render the Eligible Person unlikely ever to engage in any occupation for which he is reasonably qualified by education, training or experience.

• 22.2 In these Rules, unless a contrary intention appears:

• (a) where an expression is defined, another part of speech or grammatical form of that expression has a corresponding meaning;

• (b) the singular includes the plural and vice versa;

• (c) a reference to a gender includes all genders; and

• (d) an expression defined in, or given a meaning for the purposes of, the Corporations Act has the same meaning where used in these Rules.