EMERALD RESOURCES NL — Proxy Solicitation & Information Statement 2005

Nov 17, 2005

Level 17 140 St Georges Terrace Perth WA 6005

	FAX SHEET		FACSIMILE TELEPHONE: REF:	$(08)$ 9322 1262 $(08)$ 9322 2022 Fax - ASX 181105.
Fax to:	Australian Stock Exchange	Attention:	Manager – Company Announcements Office
Fax No:	1900 999 279.	From:	Mrs Brooke Varady
Pages including this: $34$ .		Date:	18 November 2005

Subject: Matrix Oil NL - ASX Code "MXO" Company Announcement

This fax message, including documentation attached, contains confidential information which is the property of the sender. The information contained is intended only for the person, corporation or other entity as shown above. If you are not that intended recipient, you are hereby notified that you have received this material in error, and that any disclosure, distribution, copying or dissemination is strictly prohibited. In the event you have received this message in error, please telephone us immediately - at our expense - so that we can arrange for the return of the material.

Message:

Dear Sir.

MATRIX OIL NL ("the Company")

I refer to the letter received from Marian Tang of your Perth office on 9 November 2005(copy follows) approving the Notice of Meeting and Explanatory Memorandum in respect of the restructure of the above Company.

In accordance with Ms Tang's request please find following the applicable ASX announcement regarding the dispatch of the Notice of Meeting, together with a copy of the final Notice of Meeting and Explanatory Memorandum issued to shareholders. In this regard, we kindly request that you place these documents onto the ASX's Company Announcements Platform on our behalf.

If you have any queries in relation to the above please do not hesitate to contact me on (08) 9322 2022.

Yours faithfully PITCHER PARTNERS

brooke Varady

9 November 2005

Mr Vincent Smith Pitcher Partners Level 17, 140 St Georges Terrace PERTH WA 6000

By facsimile: 9322 1262

Australian Stock Exchange Limited ABN 98 008 624 691 Level 6 Exchange Plaza 2 The Esplanade Perth WA 6000

GPO Box D187 Perth WA 684D

Telephone 61 (08) 9224 0000 Facsimile 61 (08) 9221 2020 Internet http://www.asx.com.au

Dear Mr Smith

MATRIX DIL NL (Subject to Deed of Company Arrangement) - NOTICE OF MEETING

We refer to a revised copy of the draft Notice of General Meeting (the "Notice") for Matrix Oil NL (Subject to Deed of Company Arrangement) received today.

Australian Stock Exchange Limited has reviewed the draft Notice, as amended, and advises that it is not inconsistent with the listing rules.

Please remember to lodge a complete copy of the Notice with the Company Announcements Office prior to despatch to shareholders.

Should you have any queries, please do not hesitate to contact me.

Yours sincerely

Marian Tang

Senior Adviser Issuer

S:\Perth Companies\PER-Code L-O\MXO\rpxp2005.11.091-mt.doc

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ASX ANNOUNCEMENT

MATRIX OIL NL (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 009 795 046 ("the Company")

ASX CODE "MXO"

DISPATCH OF NOTICE OF MEETING

Following the Company's announcement to the Australian Stock Exchange on 28 October 2004, the Deed Administrators advise that a further restructuring proposal was presented to the Deed Administrators and that creditors approved this proposal at a meeting of creditors held on 23 August 2005. In this regard, the Administrators advise that a Notice of Meeting and Explanatory Memorandum has been dispatched to the Company's shareholders today seeking, inter alia, approval for a proposal to recapitalise the Company and seek reinstatement of the Company's securities to trading on Australian Stock Exchange Limited ("ASX").

The shareholders' meeting will be held at 10.30am (WST) on 15 December 2005 at the Celtic Club, 48 Ord Street, West Perth Western Australia.

A copy of the Notice of Meeting and Explanatory memorandum is attached to this announcement.

Dated this 16^th day of November 2005.

VINCENT SMITH Joint and Several Deed Administrator Matrix Oil NL (Subject to Deed of Company Arrangement)

MATRIX OIL NL

(Subject to Deed of Company Arrangement)

ACN 009 795 046

NOTICE OF GENERAL MEETING

AND

EXPLANATORY MEMORANDUM TO SHAREHOLDERS

FOR A GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON 15 DECEMBER 2005 AT THE CELTIC CLUB, 48 ORD STREET, WEST PERTH WA AT 10.30 AM

IMPORTANT INFORMATION This is an important document that should be read in its entirety. If you do not understand it you should consult your professional advisers without delay.

If you wish to discuss any aspects of this document with the Company please contact Mrs Brooke Varady of Pitcher Partners on telephone (+61 8) 9322 2022 Or by e-mail on varadyb@pitcher-wa.com.au

You are encouraged to attend the meeting, but if you cannot, you are requested to Complete and return the enclosed Proxy Form without delay to Pitcher Partners, Level 17, 140 St Georges Terrace, Perth WA 6000 or by facsimile to Pitcher Partners on facsimile number (+61 8) 9322 1262

Legal Adviser to the Proponents JEREMY SHERVINGTON Barrister & Solicitor 52 Ord Street WEST PERTH WA 6005 Tel: (08) 9481 8760 Fax: (8) 9481 5142

RECAPITALISATION PROPOSAL OF MATRIX OIL NL

This Notice of Meeting and Explanatory Memorandum sets out information about the proposed recapitalisation of the Company.

Completion of the recapitalisation will result in:

• the restructure of the Company's capital base; $(a)$
• the raising of working capital for the Company; $(b)$
• the appointment of a new board of directors; $(c)$
• termination of the DOCA and retirement of the Deed Administrators; and $(d)$
• forgiveness of all debts of the creditors of the Company. $\left( \circ \right)$

Further details of the Recapitalisation Proposal are provided in Section 1 of the Explanatory Memorandum with a short explanation of each Resolution to be considered at the General Meeting set out in Section 2. Definitions used in these documents are set out in Section 5 of the Explanatory Memorandum.

In considering the Resolutions, Shareholders must bear in mind the current financial circumstances of the Company.

If the Resolutions are passed and the proposed recapitalisation is completed the Company will not immediately be in a position to seek requotation of its securities on ASX. Any requotation of the Company's securities will be subject to the Company acquiring assets and raising further capital that would enable it to comply with ASX requirements including the applicable provisions of Chapters 1, 2 & 11 of the Listing Rules. One such requirement will be that the Company will need to make an issue of its Shares at no less than 20 cents per Share. Further Shareholder approval will also be required. This will, it is expected, necessitate a further consolidation of the Company's securities over and above the Consolidation proposed in this Notice of Meeting.

The Resolutions are therefore important and affect the future of your Company. You are urged to give careful consideration to the Notice of Meeting and the contents of the Explanatory Memorandum.

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INDEX

NOTICE OF MEETING

EXPLANATORY MEMORANDUM TO SHAREHOLDERS

• $1_r$ RECAPITALISATION PROPOSAL
• $2.$ GENERAL MELTING
• 1. OTHER INFORMATION
• REGULATORY REQUIREMENTS $4.$
• 1. DEFINITIONS

PROXY FORM

MATRIX OIL NL

(Subject to Deed of Company Arrangement)

ACN 009 795 046

NOTICE OF MEETING

NOTICE IS HEREBY GIVEN that a general meeting of the members of Matrix OIL NL ("Matrix" or "the Company") will be held on the date and at the location and time specified below:

DATE:	15 December 2005
LOCATION:	The Celtic Club, 48 Ord Street, West Perth
TIME:	10.30 am

BUSINESS

The business to be transacted at the General Meeting is the proposal of Resolutions 1 to 6 as set out below.

RESOLUTION 1: Consolidation of Capital

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

"That subject to Resolutions 2, 3, 4, 5 $\&$ 6 being passed and subject to and with effect from the time of Completion occurring, and in accordance with Section 254H of the Corporations Act, the Existing Fully Paid Shares be and are hereby converted to 215 million Shares and the Existing Partly Paid Shares be and are hereby converted to 16,345,016 Partly Paid Shares as detailed in the accompanying Explanatory Memorandum, with any fractional entitlements to Shares and Partly Paid Shares that would otherwise arise being disregarded, as and to the extent necessary."

RESOLUTION 2: Issue of Shares to the Secured Creditors

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

"That subject to Resolutions 1,3, 4, 5 & 6 being passed and in accordance with Listing Rule 7.1 and sub-section 208(1) of the Corporations Act and for all other purposes, approval be and is hereby given to the issue of 195 million Shares to the Secured Creditors as detailed in the accompanying Explanatory Memorandum. "

Note - The Shares to be issued pursuant to Resolution 2 are not subject to the Consolidation.

RESOLUTION 3: Issue of Shares and Options to the Proponents and the Proponents Nominees

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

"That subject to Resolutions 1, 2, 4, 5 & 6 being passed and in accordance with Listing Rule 10.11 and sub-section 208(1) of the Corporations Act and for all other purposes, approval be and is hereby given to the issue of:

(a) 500 million Shares at a price of \$0.001 per Share in eash;

(b) 90 million Options

To the Proponents or their nominees, as detailed in the accompanying Explanatory Memorandum."

Note – The Shares and Options to be issued pursuant to Resolution 3 are not subject to the Consolidation.

RESOLUTION 4: Prospectus Issue

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

"That subject to Resolutions 1, 2, 3, 5 & 6 being passed and in accordance with Listing Rule 7.1 and for all other purposes, approval be and is hereby given to the issue of up to 416.666.667 Shares in the Company at a price of \$0.0012 each to raise up to \$500,000 on the terms and conditions set out in the accompanying Explanatory Memorandum.

Note - The Shares to be issued pursuant to Resolution 4 are not subject to the Consolidation.

RESOLUTION 5: Appointment of Director

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

"That subject to Completion occurring and with effect from Completion Mr Jeremy Shervington be appointed as a Director of the Company."

RESOLUTION 6: Appointment of Director

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

"That subject to Completion occurring and with effect from Completion Mr Adam Rankine-Wilson be appointed as a Director of the Company."

DEFINITIONS

Terms used in this Notice have the same meaning as defined in the accompanying Explanatory Memorandum which are deemed to be incorporated in this Notice.

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VOTING EXCLUSION STATEMENT

The following voting exclusion statement applies to Resolutions 2, 3 and 4 under the Listing Rules or where applicable, the provisions of the Corporations Act to the following persons ("Excluded Persons"). The Company will disregard any votes on the various resolutions cast by the following Excluded Persons:

Resolution No.	Title	Excluded Persons
$\overline{2}$	Issue of Shares to the Secured Creditors	The Secured Creditors; ٠ A person who may participate in the ۰ proposed issue and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities in the Company if the Resolution is passed; Any Associate of the abovementioned persons.
3	Issue of Shares and Options to the Proponents and the Proponents nominees	Mr J D Shervington, Mr A Rankine- ٠ Wilson, the Proposed Directors; A person who may participate in the proposed issue and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities in the Company if the Resolution is passed; Any Associate of the abovementioned persons.

However, the Company need not disregard a vote if:

• It is cast by a person as proxy (appointed in writing) for a person who is entitled to vote, $\bullet$ . if the appointment specifies the manner in which they are to vote and they vote in that way; or
• It is east by the person chairing the General Meeting as proxy for a person who is entitled $\bullet$ to vote, if the appointment specifies the manner in which they are to vote and they vote in that way.

Other Resolutions

There are no relevant voting restrictions imposed on any of the other Resolutions.

DATED 9 November 2005

B. Angler

BRYAN HUGHES Joint and Several Deed Administrator

VINCENT SMITH Joint and Several Deed Administrator

NOTES

$\sim$

A member entitled to vote at this General Meeting is entitled to appoint a proxy to attend and vote for the member at the General Meeting. A proxy need not be a member. If the member is entitled to cast 2 or more votes at the General Meeting the member may appoint 2 proxies. If a member appoints 2 proxies and the appointment does not specify the proportion or number of the members votes each proxy may exercise, each proxy may exercise half of the votes. A proxy form is attached at the back of this booklet.

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MATRIX OIL NL

(Subject to Deed of Company Arrangement)

ACN 009 795 046

EXPLANATORY MEMORANDUM TO SHAREHOLDERS

PROPOSAL FOR THE RECAPITALISATION OF MATRIX OIL NL

$\bar{z}$

$\bar{z}$

THE RECAPITALISATION PROPOSAL 1.

1.1 BACKGROUND

In November 2001, commercial oil production began from the Langsa Offshore Technical Assistance Contract in Indonesia (in which Matrix held a 90% working interest). However, major operational difficulties shortly thereafter resulted in the eventual shutdown of the two subsea wells and termination of operations in October 2002. The Company commenced legal proceedings in the United Kingdom against certain contractors for alleged negligence when opening the wells causing mechanical failure and their subsequent shutdown.

On 16 October 2002, the Directors of the Company requested that Matrix shares be suspended from ASX trading and appointed Mr Vincent Smith and Mr Bryan Hughes as joint and several administrators of Matrix. At a subsequent meeting of the Company's creditors on 12 November 2002, the creditors resolved that the Company should enter into a Deed of Company Arrangement which was executed on 2 December 2002. A copy of the DOCA is available for inspection at the office of the Deed Administrators. On 23 August 2005, a meeting of creditors approved the variation of the DOCA to incorporate the Recapitalisation Proposal as referred to in more detail in Section 1.2.

In the period since appointment, the Deed Administrators have disposed of most of the Company's assets as disclosed to the market in various ASX announcements on 21 November 2002, 24 June 2003, 18 December 2003 and 24 March 2004. The proposed assets of the Company should Completion occur are summarised in Section 1.7.

Following the sale of the assets, the Deed Administrators have placed into liquidation or will make application or a request for the liquidation of all subsidiaries of the Company which were dormant and had no assets prior to application or request for liquidation.

On I August 2005, the Deed Administrators entered into an Implementation Agreement with the Proponents to effect the recapitalisation of the Company referred to below.

PRINCIPAL FEATURES OF THE RECAPITALISATION PROPOSAL $1.2$

The principal features of the Recapitalisation Proposal arc included below:

• Consolidation of Capital: Consolidation of the existing issued capital of the Company $(a)$ to 215 million fully paid Shares and 16,345,015 Partly Paid Shares. (See Resolution 1 and Section 2.3).
• Issue of Shares to the Secured Creditors: The issue of 195 million Shares to the $(b)$ Secured Creditors. (See Resolution 2 and Section 2.4).
• Issue of Shares and Options to the Proponents and their nominees: The issue of 500 $(c)$ million Shares and 90 million Options to the Proponents and their nominees in consideration for the payment of \$500,000. Of this \$130,000 is payable to the Trustee. (See Resolution 3 and Section 2.4).
• $(d)$ Prospectus Issue: The offer of up to 416,666,667 Shares in the Company to Existing Fully Paid Shareholders at a price of \$0.0012 each under a prospectus to raise up to \$500,000. (See Resolution 4 and Section 2.6). Note Completion will occur under the Implementation Agreement before the offers are made under the Prospectus and

$\boldsymbol{8}$

Completion under the Implementation Agreement is not conditional upon there being any acceptances for the offers to be made under the Prospectus.

• Board Change: The board of Directors of the Company will change and the three $(e)$ Proposed Directors being Jeremy Shervington, Adam Rankine-Wilson and a person nominated by Mr Shervington will be appointed. All Existing Directors will resign or be removed (See Resolutions 5 & 6 and Section 3.9).
• The existing assets of the Company will be transferred to the Trustee. $(f)$

Completion of the Recapitalisation Proposal will result in the restructure of the Company's capital base, the provision of working capital for the Company, termination of the DOCA in relation to the Company, and forgiveness of all debts of the Company in excess of the payment referred to in point (c) above and the issue of the Shares in point (b) above. Further, as a result of the DOCA all existing debts against the Company will be released, extinguished and barred, with Admitted Creditors claims only able to be met from the Trust Assets.

The Implementation Agreement is conditional on the following:

• The Creditors' Committee approving of the recapitalisation and authorising the 1. Administrators to convene the Creditors meeting. This has occurred;
• The Creditors' Meeting being convened by 9 August 2005 and being held by 23 August $\overline{2}$ . 2005. This has occurred:
• All necessary Creditors' approvals required for the implementation of the 3. Recapitalisation Proposal being obtained at the Creditors' Meeting. This has occurred;
• 1. The Variation Deed being executed by all relevant parties. This has occurred.
• 1. All Resolutions being passed at the Shareholders' Meeting;
• The Creditors not voting to terminate, vary or rescind the Variation Deed for any reason 6. prior to Completion occurring; and
• $7.$ The Company remaining on the official list of ASX until Completion.

For information on the Company's plans following recapitalisation refer to Section 1.4.

$1.3$ INDICATIVE TIME TABLE

Set out in the table below is the expected timing for the completion of the Recapitalisation Proposal, subject to compliance with all regulatory requirements. These dates are indicative only and may be varied without prior notice.

Record Date for Consolidation of Capital	12 December 2005
General Meeting of Existing Shareholders	15 December 2005
Completion Date for Implementation Proposal	16 December 2005
Termination of the DOCA and retirement of the Deed Administrators	16 December 2005
Lodgement of Prospectus with ASIC	19 December 2005
Record Date for Prospectus Issue	28 December 2005
Despatch of Prospectus	3 January 2006
Prospectus offer opens	3 January 2006

The Second Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Con Prospectus offer closes PERSONAL PROPERTY	2006 13 January -
CONTRACTOR	Contract Manager
Allotment/Despatch of Prospectus Shares	2006
--------------------------------------	January

$1.4$ OPERATIONS PLANS OF THE COMPANY

At Completion the only asset of the Company will be eash which, net of liabilities incurred in connection with the Recapitalisation Proposal is estimated at \$300,000. The Proponents intend that the Proposed Directors will seek out opportunities that will enable the Shares to be reinstated to quotation on ASX.

1.5 PROFORMA CAPITAL STRUCTURE

The capital structure of the Company at Completion will be as follows:

Existing Shares	Number of Shares	Number of Partly Paid Shares	Number of Options
(Post Consolidation)	215 million
Existing Partly Paid Shares (Post Consolidation		$16,345,016^{(i)}$
Issue to the Trustee	195 million
Issue to the Proponents and their nominees	500 million		90 million $(i)$
TOTALS	910 million $^{\text{(iii)}}$	16,345.016	90 million

• $\left( i\right)$ . As a result of the Consolidation the amount due on each of the Partly Paid Shares is 80.14683375). It is expected, therefore, that these securities will be forfeited once a call is made which the Proposed Directors intend to make.
• Exercisable at \$0.0013 on or before 5 years from the date of Completion. $(ii)$
• Subject to any increase as a result of issues under the Prospectus. Offers under the $(iii)$ Prospectus will be made after Completion. If the Prospectus is fully subscribed, the total number of Shares on issue will increase from 910 million to 1,326,666,667.

1.6 TRADING OF SHARES ON ASX

Matrix is already admitted to the official list of ASX however trading in the Existing Shares was suspended on 16 October 2002. Following completion of the Recapitalisation Proposal it is not expected that quotation will commence until the Company complies with Chapters 1, 2 and 11 of the Listing Rules.

This will necessitate the acquisition of a suitable asset or business enterprise and a further raising of capital.

PROFORMA STATEMENT OF FINANCIAL POSITION $1.7$

Included below is a summary proforma statement of financial position assuming Completion occurs:

PROFORMA FINANCIAL POSITION	Post Recapitalisation Proposal S000
Assets
Cash assets	370
Total Assets	370
Liabilities
Payables	70
NET ASSETS	300

The proforma statement was prepared assuming Completion had occurring which in turn assumes that the various steps of the Recapitalisation Proposal had occurred other than any issue of Shares under the Prospectus. If the Prospectus Issue was fully subscribed the Net Assets in the above pro-forma statement would increase by approximately \$460,000. The above proforma statement attributes no value to the uncalled capital on the Existing Partly Paid Shares.

$1.8$ FORGIVENESS OF CREDITORS' CLAIMS

As part of the Recapitalisation, a total payment of \$130,000 will be made to the Trust Fund together with the issue of 195 million Shares to the Secured Creditors. Under the DOCA, the debts of the Admitted Creditors of the Company, in excess of this \$130,000 payment and the issue of the 195 million Shares, are to be forgiven or assigned to the Trust (at the Trustee's discretion). In consideration of the forgiveness, the Admitted Creditors become beneficiaries of the Trust Fund.

The DOCA will terminate after all of the DOCA Conditions have been satisfied, and the obligations thereunder performed. However, if any of the DOCA Conditions are not satisfied, then the DOCA is terminated, and the Company will proceed into liquidation.

2. GENERAL MEETING

ACTION TO BE TAKEN BY THE EXISTING SHAREHOLDERS $2.1$

As a condition of the Recapitalisation Proposal, the Company must convene the General Meeting for Existing Shareholders for the purposes of passing the Resolutions in compliance with the requirements of the ASX Listing Rules and the Corporations Act.

The Notice convening the General Meeting is included at the front of this booklet. Existing Shareholders are encouraged to attend and vote in favour of each of the Resolutions to be put at the General Meeting.

Any Existing Shareholder who is not able to attend and vote at the General Meeting is encouraged to complete the Proxy Form at the back of this booklet and return it to Pitcher Partners at the address stated on the form not later than 48 hours before the time specified for the commencement of the General Meeting.

$2.2$ GENERAL MEETING RESOLUTIONS

There are 6 Resolutions to be put to the General Meeting.

All resolutions are ordinary resolutions.

Resolutions 1, 2, 3 & 4 in the Notice of Meeting are conditional on the passing of each of the other Resolutions, so that those Resolutions will not have any effect unless all Resolutions are passed.

Certain voting restrictions are imposed in relation to some of the Resolutions as detailed in the accompanying Notice of Meeting under the heading "Voting Exclusion Statement".

A short explanation of each Resolution is set out in this Section.

2.3 RESOLUTION 1 - CONSOLIDATION OF CAPITAL

Resolution 1 is an ordinary resolution. It proposes that the issued capital of the Company be altered by converting the Existing Fully Paid Shares to 215 million Shares and the Existing Partly Paid Shares on the same proportional basis to 16,345,016 Partly Paid Shares. The Record Date for determining the Consolidation of capital will be two (2) business days before the date of the Meeting. Any fractional entitlements arising as a result of will be disregarded as necessary.

Section 254H of the Corporations Act enables a company to convert all or any of its shares into a smaller number of shares by a resolution passed at a general meeting. The conversion proposed by Resolution 1 is permitted under Section 254H of the Corporations Act.

The Consolidation will not result in any change to the substantive rights and obligations of Existing Shareholders other than as a result of the Listing Rule requirements described below. The purpose of the Consolidation of the existing issued capital of the Company is to reduce the number of existing securities on issue. The Company's issued capital, balance sheet and tax position will remain unaltered as a result of the Consolidation.

Fully Paid Shares

At the date of this Explanatory Memorandum, the Company has 420,923,419 Existing Shares on issue. The Consolidation will reduce the number of fully paid shares on issue to 215 million Shares.

Partly Paid Shares

The Listing Rules require the Company to consolidate the number of Existing Partly Paid Shares in the same ratio as the Existing Fully Paid Shares with the amount unpaid divided equally among the resulting shares. That is, the total amount unpaid on the Existing Partly Paid Shares must not be reduced. Accordingly the Existing Partly Paid Shares will be consolidated as follows:

Proposed Consolidation of Existing Partly Paid Shares

	Before Consolidation			After Consolidation
Existing Number	Total Amount Unpaid	Amount Unpaid per share	New Number :	Total Amount Unpaid (unchanged)	Amount Unpaid per share
32,000,000	\$2,400,000	\$0.075	16,345,016	\$2,400,000	\$0.14683375

Revised Capital after Consolidation

Please refer to Section 1.5 for the capital structure of the Company as at Completion.

RESOLUTION 2 - ISSUE OF NEW SHARES TO THE SECURED CREDITORS 2.4

Resolution 2 is an ordinary resolution and provides for the issue of 195 million Shares to the Secured Creditors. This issue of Shares is to be approved by Existing Shareholders under the requirements of Listing Rule 7 as noted in Sections 4.1.

The Trust Fund shall collectively receive a payment of \$130,000 and the transfer of any remaining assets whilst the Secured Creditors will receive an issue of 195 million Shares in the Company at a deemed issue price of \$0.0012 each. Under the DOCA, the debts of all Creditors of the Company, in excess of these payments and the 195 million Shares, are to be forgiven and/or assigned to the Trust (at the Trustee's discretion). In consideration of the forgiveness, the Creditors become beneficiaries of the Trust Fund. The DOCA will terminate after all of the DOCA Conditions have been satisfied, and the obligations thereunder performed.

2.5 RESOLUTION 3 - ISSUE OF SHARES AND OPTIONS TO THE PROPONENTS AND THEIR NOMINEES

Resolution 3 is an ordinary resolution and provides for the issue of 500 million Shares to the Proponents and their nominees in consideration for the payment of \$500,000 (an issue price of \$0.001 per Share) and the issue of 90 million Options to the Proposed Directors. The full terms and conditions of the Options are set out in Annexure 1.

The issue of Shares and Options under Resolution 3 is to be approved by Existing Shareholders under the requirements of Listing Rule 10.11 and sub-section 208(1) of the Corporations Act. Pursuant to Listing Rule 7.2, as approval for Resolution 3 is being sought under Listing Rule 10.11, approval under Listing Rule 7.1 is not required.

The \$500,000 raised upon the issue of the Shares under this Resolution will be applied to the payment of \$130,000 to the Trustee with the balance of \$370,000 providing initial working capital for the Company.

At the time of the General Meeting, ASX trading in the shares in Matrix will still be suspended and therefore there is no readily available market value for the Shares as at the date of this Explanatory Memorandum. Discussion as to the effect of the Recapitalisation Proposal on the Company and the Shares to be issued is provided elsewhere in this Explanatory Memorandum.

The Options proposed to be issued pursuant to Resolution 3, are being issued for nil consideration. The quantum of the benefit attributable to the Options is dependent, in part, on the price at which the Shares can be traded. As noted above, the Shares will not have a readily attributable market value as ASX trading of Matrix shares is suspended. Based on the proposed Prospectus issue price of \$0.0012 per Share, the value of the Options, based on their intrinsic value at the date of the General Meeting, has been assessed as nil. More detailed commentary on the indicative value of the Options can be found in Section 3.7.

At the date of this Explanatory Memorandum, the precise allocation of the Shares proposed to be issued to the Proponents under Resolution 3 is not known. However, it is expected that the Proponents will subscribe for a majority of the Shares. The Options will be allocated amongst the Proposed Directors at the discretion of Mr Shervington.

2.6 RESOLUTION 4 - PROSPECTUS ISSUE

Resolution 4 is an ordinary resolution and provides for the issue of up to 416,666,667 Shares in the Company at a price of \$0.0012 each through a Prospectus Issue to raise up to \$500,000.

The issue of New Shares under Resolution 4 is to be approved by Existing Shareholders under the requirements of ASX Listing Rule 7.1 as noted in Section 4.1

The Prospectus Issue will be subject to compliance with ASX and Corporations Act regulatory requirements. Any funds raised from the Prospectus Issue (after associated prospectus costs) will provide additional working capital for the Company.

The offers under the Prospectus will be made to Existing Shareholders in the form of a conventional pro-rata entitlement issue except that any Existing Shareholder who by taking up its "entitlement" would subscribe less than \$3,000 will, subject to the following qualification, be required to subscribe at least \$3,000. Based on there being 215 million Shares held by Existing Shareholders post Consolidation, the offer of the 416,666,667 Shares under the Prospectus would be made on the basis of approximately 1.93798 Shares for every post Consolidation Existing Share held by the Existing Shareholders.

The application of this formula will give rise to a notional "entitlement" to participate in the Prospectus offers. In the case where acceptance of the "notional entitlement" would otherwise give rise to the subscription of less than \$3,000 the "notional entitlement" of the relevant Shareholder will, subject to the following qualification, only be able to be subscribed for if, in addition to its "notional entitlement", the relevant Shareholder subscribes for such number of extra new Shares as will bring its subscription moneys to \$3,000.

To the extent that the number of acceptances received under the Prospectus from those Existing Shareholders who are required to subscribe for additional Shares to bring their subscription under the Prospectus to the minimum \$3,000 subscription level is such that the Company would, by issuing one or more other accepting Shareholders their respective entitlement under the Prospectus, be issuing in excess of 416,666,667 Shares, the \$3,000 minimum subscription amount will be reduced accordingly, and to the extent necessary, equally, in respect of each of the relevant accepting Shareholders.

It is proposed that the timetable in the Listing Rules that applies to pro rata offers will be followed in respect of the offers to be made under the Prospectus. The Company will limit the number of Shares it issues to a holder of ordinary securities under the Prospectus Issue to the higher of 5% of all of the securities being offered under the Prospectus Issue and the number the holder would be entitled to under a pro-rata issue of all those securities.

As set out in the indicative timetable in Section 1.3 it is intended that the Prospectus be issued shortly after the General Meeting and would be open for the period prescribed for nonrenounceable pro rata offers under the Listing Rules. In any event, the issue of Shares pursuant to the Prospectus must occur no later than 3 months, or such other period as agreed to by ASX, from the date of the General Meeting.

Completion under the Implementation Agreement will occur prior to and regardless of the outcome of the Prospectus offers.

$\overline{3}$ . OTHER INFORMATION

$3.1$ SCOPE OF DISCLOSURE

The Corporations Act "Related Party" provisions require that this Explanatory Memorandum sets out all other information that is reasonably required by Existing Shareholders in order to decide whether or not it is in the Company's interests to pass the Resolutions and which is known to the Company.

The Company is not, within the knowledge of the Deed Administrators, aware of any relevant information that is material to the decision on how to vote on the Resolutions other than as is disclosed in this Explanatory Memorandum or previously disclosed to Existing Shareholders by the Deed Administrators or by the Company by notification to the ASX.

$3.2$ VOTING INTENTIONS AND INTERESTS OF EXISTING DIRECTORS

The Existing Directors of the Company are set out in the table below. At the date of this Explanatory Memorandum, the voting intentions of the Existing Directors are not known. The Existing Directors will resign or be removed at Completion with the resignation becoming effective immediately thereafter.

The Existing Directors have no interest in the outcome of the Resolutions except as Existing Shareholders of the Company. In this regard, the table below sets out the details of the shareholdings held by the Existing Directors and their Associates and the percentage ownership in the existing voting shares of the Company.

Name of Existing Director	Number of Existing Fully Paid Shares Held	Number of Existing Partly Paid Shares Held	Percentage Interest in Voting Shares
Mr Anthony Rawlinson & Associates	2,000,000	$\blacksquare$	0.4%
Mr Brian Hockney & Associates	2,005,000	w.	$0.4\%$
Mr Frank Silc & Associates	44	$\blacksquare$
Mr Ian Maycock & Associates	500,000	$\blacksquare$	$0.1\%$
TOTALS	3,505,000		0.9%

Based on the total number of existing voting shares of the Company being 452,923,419. $\bullet$ The 32,000,000 Existing Partly Paid Shares are included in this total and in the table

15

above as they entitle the holder to voting rights (on a show of hands every holder of partly paid shares present at a meeting in person or by proxy is entitled to one vote, and upon a poll each partly paid share is entitled to a vote in proportion to the amount paid-up on the share).

$3.3$ RECOMMENDATION BY EXISTING DIRECTORS AND THE ADMINISTRATORS

The Existing Directors have not made any recommendation or otherwise as to whether nonassociated Shareholders should vote in favour of the Resolutions to be considered at the General Meeting as they have not been involved in the review and consideration of the Recapitalisation Proposal and they will resign or be removed from the Company at the conclusion of the General Meeting. Existing Shareholders must decide how to vote based on the matters set out in the Explanatory Memorandum.

The Administrators recommend that in the context of the Company's current insolvent circumstances and given the Creditors approval of the Recapitalisation Proposal, the Existing Shareholders should accept the Recapitalisation Proposal and approve the Resolutions to be put to the General Meeting.

$3.4$ TAXATION

The Recapitalisation Proposal may give rise to income tax implications for the Company. In particular, there is some uncertainty that the Company will be in a position to satisfy any of the loss utilisation tests after the restructure and as such it may not be able to benefit from any of its tax losses incurred in prior years.

Existing Shareholders are advised to seek their own taxation advice on the effect of the Resolutions on their personal position and neither the Company, nor the Existing Directors, the Deed Administrators, the Proposed Directors, the Proponents nor any adviser to the Company accepts any responsibility for any individual Existing Shareholder's taxation consequences on any aspect of the Recapitalisation Proposal.

3.5 INTERESTS OF THE PROPOSED DIRECTORS

The Proposed Directors are Jeremy Shervington, Adam Rankine-Wilson and a person to be nominated by Mr Shervington who is yet to be determined. Brief profiles of Messrs Shervington and Rankine-Wilson are set out below. At the date of this Explanatory Memorandum, the Proposed Directors do not hold any interest in the existing securities of the company.

Under Resolution 3 the Shares and Options to be issued will include the Proposed Directors and/or their Associates. At the date of this Explanatory Memorandum, the precise number of Shares and Options that may be issued to the Proposed Directors and/or their Associates is not known.

Mr Jeremy D Shervington B.Juris, LLB

Mr Shervington operates a legal practice in Western Australia. He specialises in the laws regulating companies and the securities industry in Australia. Mr Shervington has almost 25 years experience as a lawyer, gained since his admission as a Barrister and Solicitor of the Supreme Court of Western Australia. Mr Shervington has since 1985 served as a director of various ASX listed companies as well as a number of unlisted public and private companies. Mr Shervington is currently also a director of the following ASX listed companies: Australian Zircon NL, Biron Apparel Limited and Prairie Downs Metals Limited.

Mr Adam Rankine-Wilson FAICD. ASIA.

Mr Rankine-Wilson was until recently the Managing Director of Grange Resources Limited. He is a director of several public and private companies. Over the past 15 years, Mr Rankine-Wilson has served as a director of various ASX listed companies as well as a number of unlisted public and private companies. He has extensive experience in the mining and investment industries, particularly in Western Australia.

3.6 EFFECT OF THE RECAPITALISATION PROPOSAL

For the purposes of this Explanatory Memorandum, the following information is provided for consideration by the Existing Shareholders.

The Company's shares were last traded on ASX on 16 October 2002, being the date on which the Deed Administrators were appointed to the Company. Given the length of time since the Company last traded on ASX and that all prior trading was before the appointment of the Deed Administrators and before any announcement of the Recapitalisation Proposal, prior ASX share trading prices for the Company are not considered a reliable basis to assess the Shares to be issued under the Recapitalisation Proposal.

As noted previously, the Company is the subject of the DOCA with the majority of the assets having been sold to satisfy secured creditors. Due to the Company's current state of affairs, the lack of profit history and the immediate lack of a reliable future cashflow from remaining assets, maintainable carnings are not considered a reliable basis to assess the Shares to be issued.

Prior to the Recapitalisation Proposal, Matrix is in a net liability position and the Administrators have sold the majority of the Company's assets. There has been insufficient cash realised from the asset sales to pay any unsecured creditors and the secured creditors will not be fully paid. The Administrators of the Company estimate on a liquidation basis, there is a deficiency of funds and the creditors may receive a minimal return based on the consummation of the DOCA. Therefore, on a liquidation basis, the Existing Shareholders interest in Matrix is nil.

Accordingly, the current implicit value of the Existing Shares at the date of this Explanatory Memorandum would be nil cents.

Based on the proforma financial position disclosed in Section 1.7 (which assumes the completion of the Recapitalisation Proposal) the estimated net assets (solely cash) would be equivalent to approximately \$0.0003 per Share at Completion. This amount will be affected by the issue of Shares under the Prospectus. Assuming that \$500,000 was raised under the Prospectus and ignoring the costs of that issue the cash backing per Share would be \$0.0006 per Share.

The advantages of passing the Resolutions and subsequent Completion of the Recapitalisation Proposal and termination of the DOCA include:

• A net cash injection of approximately \$370,000 into the Company together with negligible liabilities, compared with the current position whereby the Company is subject to the DOCA and is in a net liability position.
• The net asset backing of a New Share could be expected to increase from nil cents to approximately \$0.0003 following Completion of the Recapitalisation Proposal.

The Proponents who will control the Board from Completion have broad corporate experience and in particular experience in obtaining reinstatement of quotation of securities in companies in similar position to Matrix.

The principal disadvantage to Existing Shareholders is that their existing shareholdings will be diluted following the Consolidation and the issue of Shares and Options pursuant to the Resolutions. However, this must be balanced with the fact that their existing shareholdings currently have nil value and the fact that, should the Recapitalisation Proposal not proceed, the Company would most likely be placed into liquidation. Following completion of the Recapitalisation Proposal, their reduced shareholdings would have value based on the cash injection to the Company.

It should be noted that, as stated on page 1 of this Booklet, the Company's Shares will remain suspended at the time of and immediately following Completion.

Any requotation of the Company's securities will be subject to the Company acquiring assets and raising further capital that would enable it to comply with ASX requirements including the applicable provisions of Chapters 1, 2 & 11 of the Listing Rules. One such requirement will be that the Company will need to make an issue of its Shares at no less than 20 cents per Share. Further Shareholder approval will also be required. This will, it is expected, necessitate a further consolidation of the Company's securities over and above the Consolidation proposed in this Notice of Meeting.

One of the requirements of Chapter 1 of the Listing Rules is that a Company must only have options on issue which have an exercise price of at least 20 cents. In the absence of a waiver from that requirement a consolidation of approximately 1 for 154 would be required.

3.7 INDICATIVE OPTION VALUATION

The Options proposed to be issued pursuant to Resolution 3 are being issued for nil consideration. The quantum of benefit to be received by the holders of the Options proposed to be issued pursuant to the Resolution will depend on the price at which the underlying Shares may ultimately trade.

As the Company is currently suspended from ASX, there is no readily available market price for a Matrix share. A more appropriate value for the shares, for the purpose of valuing the Options, is considered to be the issue price of \$0.001 per Share pursuant to Resolution 3 and \$0.0012 per Share pursuant to the proposed Prospectus. Based on the proposed Prospectus issue price for the Shares and an exercise price of \$0.0013 cents for the Options, the value of the Options, based on their intrinsic value at the date of the Explanatory Memorandum, has been assessed at nil.

It can be argued that an option has value which can be assessed using various theoretical valuation methodologies. These theoretical models are designed to allow for the intrinsic value, the time value of money and the volatility of the share price movement. The most common valuation method is the Black & Scholes valuation model.

The Black & Scholes Method

In accordance with a policy requirement of ASIC, the Company notes that a value of approximately \$0.00029 per Option may be attributable. This value was derived using the Black $\&$ Scholes valuation method. This value would equate to a total derived value of the Options proposed to be issued under Resolution 3 as follows:

The calculation is based on the following inputs and assumptions:

• Share price $-$ \$0.0012.
• Exercise price $-$ \$0.0013.
• Risk free interest rate $-5.5\%$ .
• Volatility factor of 50% (based on average 90 day volatility of three similar companies listed on ASX).
• Expiry date of 30 September 2010.

A summary of the assumptions underlying the Black & Scholes model is as follows:

• The option is a European option and therefore can only be exercise don the expiration date (in practice, most options issued in Australia are American options and can be exercised at any time during the life of the option);
• There are no margin requirements, taxes or transaction costs; $\bullet$
• Short selling is allowed without restriction or penalty: $\bullet$
• The risk free rate of interest is known and constant throughout the duration of the option contract:
• The underlying shares do not pay a dividend; and $\bullet$
• The volatility of the stock is constant.

Any change in the variables applied in the Black & Scholes model prior to the date the Options are granted would have an impact on their indicative value.

The Options proposed to be issued will only have value if on the date that the Options are exercised, the market price of the Company's Shares exceeds the exercise price of the Options. In these circumstances, recipients of the Options will obtain a financial benefit equivalent to the difference between the market value and exercise price.

It should be noted that the Black & Scholes method is most accurate for pricing exchange traded options which have a relatively short time to expiry, relatively low volatilities and which have significantly large volumes traded in the company's underlying shares. The Black & Scholes method, due to the volatility in the market for the Company's shares, the unknown volume of trading in the Company's shares, the period to expiry and the option holders ability to exercise at any time, the likelihood that asset returns for the Company will not be normally distributed and other key theoretical assumptions of the Black & Scholes method, may result in a potentially misleading valuation of the Options.

3.8 IMPLEMENTATION AGREEMENT

The terms of the Implementation Agreement are summarised in Section 1.2.

DEED OF COMPANY ARRANGEMENT 3.9

On 12 November 2002, pursuant to Section 439A of the Corporations Act, a meeting of the Company's creditors was held at which it was resolved that the Company should execute a Deed of Company Arrangement. The Company entered into the DOCA with its creditors on 2 December 2002.

The variation to the DOCA approved by creditors of the Company on 23 August 2005 provided the following:

• The existing Directors of the Company will resign at the request of the Deed $\mathbf{D}$ Administrators or may be removed if no resignation is forthcoming.
• The Deed Administrators will maintain control of the Company's property, and affairs $2₁$ until such time as all specified assets under the DOCA have been transferred into the Trust Fund established by the Trust Deed, at which time, the Deed Administrators will retire and the new board of directors will take control of the Company.
• For the purposes of advising and assisting the Deed Administrators, the existing 3) Committee of Creditors will remain in place under the varied DOCA with the same powers as if under Section 436F of the Act.
• At any time during the period of the DOCA the Deed Administrators may call a $4)$ meeting of creditors to consider further variation to the terms of the DOCA.
• 5) A Trust will be established under a Creditors Trust Deed to receive the available assets from the Company at completion. The Trust Deed will contain provisions which are similar to the usual provisions of a DOCA and which provide the mechanism to allow the Trustees to adjudicate claims of creditors and distribute the Trust Fund to creditors in the same way as the Administrators would distribute available assets under the DOCA.
• The Deed Administrators of the Company or a corporate entity of which they will be 6) the sole Directors and Shareholders will act as Trustees of the Trust Deed;
• The Deed Administrators are currently finalising a Sale Agreement with respect to the 7) sale of the shares held in Frontier Bonaparte Pty Limited. These shares are currently secured by charges registered by the Secured creditors of the Company. In the event that this sale cannot be concluded prior to the restructure being completed these shares may be transferred to the Trust. However, the proceeds from the sale of these shares will still remain payable to Vitol SA and Jagen/Greevest (the secured creditors) in accordance with an agreement reached with the original owners of the shares (Verona Capital).
• Further, the secured creditors have advanced substantial monies to the Deed 8) Administrators during the period of the DOCA to enable the Deed Administrators to attend to the payment of operational and administration costs incurred during that period. As a result, the Deed Administrators have lodged Business Activity Statements ("BAS") with the Australian Taxation Office claiming GST refunds. These refunds (and all monies held by the Administrators resulting from these BAS returns) are refundable to the secured creditors and will not be available for distribution to creditors under the Trust.
• 9) The Trustees will consider the claims of creditors which arose on or before 16 October 2002 and will pay a dividend from the Trust Fund to creditors whose claims are admitted.
• 10) For the purpose of determining the admissibility and ranking of creditors' claims in the Trust, regulations 5.6.39 to 5.6.72 and Sub-divisions A to E of Division 6 of Part 5.6 of the Corporations Act and Regulations shall apply to the Trust and to the Trustees as if the references to a Liquidator were references to the Trustees, references to winding up

were references to the Trust and with such other modifications as are necessary to give effect to the Trust.

• 11) Creditors, including secured creditors to the extent of the unsecured portion of their debts, will not be permitted to take recovery action against the Company for pre-Administration debts during the period of the DOCA.
• 12) After the execution of the Trust Deed and the transfer of the remaining available assets to the Trustees to be held on trust under the Trust Deed, the Deed Administrators are entitled to terminate the DOCA by lodging a written notice to that effect with ASIC.
• 13) The creditors' claims against the Company will be compromised by the Deed Administrators and assigned to the Trust. Despite the compromise, creditors entitlements under the Trust will be equivalent to their entitlement under the existing DOCA.
• 14) Upon termination of the DOCA, the creditors (including the secured creditors) will absolutely release the Company from all creditors claims and the Company may plead the DOCA in bar to any action, proceedings or suit brought by a participating Creditor in respect of that Creditors' claim.
• 15) The creditors of the Company will also become beneficiaries of the Trust.
• 16) Each participating creditor (including the secured creditors) accepts the creditors' entitlement under the Trust Deed in full and final settlement of the Creditors' claim. The Company, Deed Administrators or Trustees may require the participating creditors to provide a written release to the Company following the termination of the DOCA. In addition, secured creditors will be required to discharge any and all security or encumbrances issued by the Company in favour of the secured creditors.
• 17) The period of the Trust Deed is not anticipated to exceed 6 months, subject to any variation approved in writing by the Trustees.
• 18) The DOCA will also terminate in the event that the Deed Administrators form the opinion that the terms of the DOCA cannot be fulfilled, in which case the Company may proceed into liquidation.
• $19)$ The Administrators and Trustees are entitled to be indemnified out of, and have a lien over, the Trust Fund for their remuneration, costs, fees and expenses for work done in relation to the preparation of the DOCA and the Trust Deed and the performance of their duties pursuant to the original and varied DOCA and the Trust Deed.
• 20) The varied DOCA and Trust Deed may contain such further or other provisions, as determined necessary by the Deed Administrators, the Creditors' Trustees or their legal advisers.

$\ddot{a}$ REGULATORY REQUIREMENTS

The General Meeting has been called to approve specific aspects of the Recapitalisation Proposal in accordance with the ASX Listing Rules and the Corporations Act which are summarised below.

$4.1$ LISTING RULE 7.1 - RESOLUTIONS 2 & 4

Under Chapter 7 of the Listing Rules there are limitations on the capacity of a company to enlarge its capital by the issue of equity securities, without shareholder approval. The limitation is to 15% of a company's capital in any 12 month period.

The total number of Shares that may be issued under Resolution 2 is 195 million.

The total number of Shares that may be issued under Resolution 4 is 416,666,667.

As the proposed issue of Shares will result in an issue of more than 15% of the Company's capital in a 12 month period, shareholder approval is required under Listing Rule 7.1 for the issues under Resolutions 2 and 4.

The Shares to be issued under Resolution 2 will be issued to the Secured Creditors simultaneously at Completion.

The persons to whom the Shares are issued pursuant to Resolution 4 will be those of the Existing Shareholders who may subscribe to the Prospectus and, if the Board elects to issue any Shortfall (which it reserves the right to do), the persons to whom the Board elects to issue such Shortfall Shares. None of the Proposed Directors hold any Existing Shares and none of the Proposed Directors will be issued any Shares under Resolution 4. The Shares will be issued simultaneously after the closure of the Prospectus.

In any event Shares issued pursuant to Resolutions 2 and 4 will be issued within 3 months, or such other period as ASX may agree to, after the General Meeting.

Following approval of the issue of these Shares referred to above, the Company will still have the capacity to issue 15% of its expanded share capital over the next 12 months as those Shares once issued will be excluded from the calculation under Listing Rule 7.1

All of the Shares will, on issue, rank equally in all respects with the Existing Shares.

Funds raised pursuant to the issue under Resolution 4 will be added to working capital of the Company.

The Shares to be issued pursuant to Resolution 2 will be issued in consideration of debt forgiveness at a deemed issue price of \$0.0012 each.

The Shares issued pursuant to Resolution 4 will be issued at \$0.0012 each.

$4.2$ LISTING RULE 10.11

$\sim$

Chapter 10 of the ASX Listing Rules contains certain provisions in relation to transactions between a company and "persons in a position of influence". ASX Listing Rule 10.11 provides that a company must not issue equity securities to a "related party" without the approval of holders of ordinary securities by ordinary resolution. The term "related party" is defined for these purposes to include a related party within the meaning of Section 228 of the Corporations Act and a person whose relationship with the entity or a related party is, in ASX's opinion, such that approval should be obtained.

Jeremy Shervington, Adam Rankine-Wilson are two of the Proposed Directors of the Company. As such, they are considered to be "related parties" of the Company within the terms of the ASX Listing Rules. As such, the issue of the Shares and Options to the Proponents or their nominees pursuant to Resolution 3 falls within the ambit of Listing Rule $10.11.$

Pursuant to Listing Rule 7.2, if Listing Rule 10.11 shareholder approval is being sought, approval under Listing Rule 7.1 is not required.

$4.3$ SECTION 208 OF THE CORPORATIONS ACT

Sub-section 208(1) of the Corporations Act prohibits the Company from giving a financial benefit (including an issue of shares and options) to a related party of the Company without the approval of shareholders by a resolution passed at a general meeting at which no votes are cast in relation to the resolution in respect of any shares held by the related party or by an associate of the related party.

Under Sub-section 228(6) of the Corporations Act, the Proponents and the Proposed Directors are related parties of the Company. Under Sub-section 228(4) of the Corporations Act entities controlled by the Proponents are also related parties. All of the Options will be issued to entities controlled by the Proponents and a third at this stage undetermined person (not an Existing Shareholder or an Existing Director) who, as a Proposed Director, will be a "related party". It is possible, although not likely that all of the Shares the subject of Resolution 3 will be issued to the Proponents or entities controlled by the Proponents. Accordingly, Resolution 3 seeks shareholder approval for the issue of those Shares and Options for the purpose of Section 208(1)(a) of the Corporations Act.

It is necessary pursuant to Section 219 of the Corporations Act to provide the following information that pertains to related parties in the Explanatory Memorandum:

• $(a)$ The related parties to whom the proposed Resolutions would permit financial benefits to be given are the Proposed Directors (Jeremy Shervington, Adam Rankine-Wilson and the Nominee and their nominees).
• The financial benefits to be given are the Shares and Options (if any) to be issued to the $(b)$ Proposed Directors and their nominees, the 195 million Shares to be issued to the pursuant to Resolution 2. The quantum of the benefit will depend in part on the price at which the Shares may ultimately trade on ASX (assuming the Shares are reinstated to official quotation). This price (and therefore the full extent of the benefit) is not currently capable of being quantified. Further commentary on the effect of the Recapitalisation Proposal on the Company and the Shares and Options are provided elsewhere in this Explanatory Memorandum. The terms of the Options are set out in the Appendix.
• The issue of the Shares and Options under Resolution 3 will occur no later than 1 $\left( \text{c} \right)$ month, or such other period as agreed to by ASX, from the date of the General Meeting.
• $(d)$ Appropriate voting exclusion statements are included in the attached Notice of Meeting.
• $(e)$ The Existing Directors of the Company do not make any recommendation regarding the Resolutions as they will resign or be removed from the Company at the conclusion of the General Meeting.
• As noted in Section 3.1 none of the Existing Directors has any interest in the outcome $(f)$ of Resolution 3 other than as the holder of Securities in the Company.
• As noted above the issue of the Shares will cause dilution of the shareholdings of $(g)$ existing Shareholders.

• The Existing Directors played no role in determining the number of Options that are to $(h)$ be issued pursuant to Resolution 3. The number of Options was put forward by the Proponents.

• The Shares that will be issued pursuant to Resolution 3 will be issued on identical terms $(i)$ to the Existing Shares.

• Although it is not a direct interest or benefit a legal firm of which Mr Shervington is a $(i)$ principal, will on Completion be paid professional fees out of the Company's cash reserves in respect of legal work in connection with this Notice of Meeting, the Prospectus and the Recapitalisation Proposal generally.
• If the Options are issued and assuming the Options were exercised (assuming no other $(k)$ Options were exercised and that no other securities were issued by the Company in the meantime) the issued capital of the Company would increase from 910 million Shares to 1,000 million Shares ignoring any Shares that may be issued under the Prospectus Issue.

In that event the exercise of the Options would result in a dilution of all other Shareholders' holdings in the Company and the 90 million Shares issued upon exercise would represent approximately 9% of the then issued capital.

• To the extent that the exercise price of the Options may be below the market price of $\left( 0\right)$ the Company's Shares at the time(s) those Options are exercised the Company will have foregone the opportunity of issuing the relevant Shares at a price higher than the exercise price and closer to the relevant market price at that time.
• (m) Other than as set out in this Explanatory Memorandum, there is no further information which the Existing Shareholders would reasonably require in order to decide whether or not it is in the Company's interests to pass Resolution 3.
• The Administrators recommend that in the context of the Company's current $(n)$ circumstances and given the Creditors approval of the Recapitalisation Proposal, the Existing Shareholders should accept the Recapitalisation Proposal and approve the Resolutions to be put to the General Meeting.

4.4 SECTION 254H OF THE CORPORATIONS ACT

In Resolution 1, the Company proposes to consolidate its existing issued capital in the Company as set out therein in accordance with Section 254H of the Corporations Act. Under Section 254H of the Corporations Act, a company may convert al or any of its shares into a larger or smaller number of shares by resolution passed at a general meeting.

4,5 ASIC AND ASX's ROLE

Under Section 218(1) of the Corporations Act, the Company must lodge the Notice of Meeting and the Explanatory Memorandum at least 14 days before the notice convening a general meeting is given. Under Section 218(2) of the Corporations Act, the Company has applied for a period of less than 14 days for the purposes of Section 218(1) of the Corporations Act.

The fact that the accompanying Notice of Meeting, this Explanatory Memorandum and other relevant documentation has been received by ASX and ASIC is not to be taken as an indication of the merits of the Recapitalisation Proposal or the Company. ASIC, ASX and its respective officers take no responsibility for any decision an Existing Shareholder may make in reliance on any of that documentation.

$5.$ DEFINITIONS

In this Explanatory Memorandum:

"Administration Date" means 16 October 2002, the date on which the Administrators were appointed, or taken to be appointed, as administrators of the Company pursuant to Section 436A of the Corporations Act:

"Administrators" means Mr Bryan Kevin Hughes and Mr Vincent Anthony Smith jointly and severally, in their capacity as deed administrators of the DOCA:

"Admitted Creditor" means any person with a Claim that has been accepted by the Administrators or Trustees:

"ASIC" means Australian Securities and Investments Commission;

"Associate" has the meaning set out in Sections 11 to 17 of the Corporations Act;

"ASX" means the Australian Stock Exchange Limited ACN 009 624 691;

"ASX Listing Rules" means the Listing Rules of the ASX:

"Business Day" means Monday to Friday inclusive, except New Year's Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day:

"Claim" means a debt owing (whether now, in the future or contingently) by, or a claim subsisting against or alleged to be subsisting against, the Company in favour of a person, which arose on or before the Administration Date irrespective of whether the debt or claim arose by virtue of contract, at law, in equity or otherwise and including (without limitation) a claim sounding only in damages, a debt or a claim arising under a guarantee;

"Company" means Matrix Oil NL ACN 009 795 046 (Subject to Deed of Company Arrangement);

"Completion" means completion of the transactions under and in accordance with the Implementation Agreement;

"Consolidation" means the consolidation of the existing issued capital of the Company on the basis as proposed under Resolution 1 and detailed in Section 2.3;

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

"Creditor" means any person having a Claim;

"Deed Administrators" means the Administrators of the DOCA;

"Deposit" means the amount of \$25,000 paid by the Proponents to the Deed Administrators pursuant to the terms of the Implementation Agreement;

"DOCA" means the Deed of Company Arrangement executed on 2 December 2002 between the Deed Administrators and Matrix and varied by resolution of the creditors of the Company on 23 August 2005;

"DOCA Conditions" means:

• $(a)$ the same conditions as the Implementation Agreement;
• $(b)$ the General Meeting being held and all Resolutions being passed:
• \$130,000 to be deposited in the Trust Fund for the benefit of the Admitted Creditors; $(c)$ and
• the issue of 195 million New Shares in the Company to the Secured Creditors; $(d)$

"Existing Director" means a person who was a director on the Company at the Administration Date and who has not ceased to be such immediately before the General Meeting:

"Existing Partly Paid Shares" and "Partly Paid Shares" means the 32,000,000 issued partly paid shares in the Company before the Consolidation:

"Existing Shares" and "Existing Fully Paid Shares" means the 420,923,419 issued fully paid shares in the Company before the Consolidation;

"Existing Shareholder" means the holder of an Existing Share and/or an Existing Partly Paid Share:

"Explanatory Memorandum" means the explanatory memorandum accompanying the Notice of Meeting:

"General Meeting" means the general meeting of the Existing Shareholders convened for the purposes of considering the Resolutions;

"Implementation Agreement" means an agreement dated 1 August between the Proponents and the Company;

"Matrix" means Matrix Oil NL ACN 009 795 046 (Subject to Deed of Company Arrangement);

"Nominee" means the third Proposed Director as a member of the Board post Completion;

"Notice of Meeting" means the notice convening the General Meeting accompanying this Explanatory Memorandum;

"Option" means an option to acquire a Share at an exercise price of \$0.0013 on or before 5 years from Completion subject to the terms and conditions set out in Annexure 1;

"Proponents" means Mr Jeremy Shervington and Mr Adam Rankine-Wilson;

"Proposed Directors" means collectively Jeremy Shervington, Adam Rankine-Wilson and the Nominee:

"Prospectus Issue" means the issue of up to 416,666,667 Shares at a price of \$0,0012 each to Existing Shareholders with registered addresses in Australia or New Zealand and "Prospectus" has a corresponding meaning;

"Recapitalisation Proposal" means the proposal for the recapitalisation of the Company as described in Section 1;

"Related Party" means a party so defined by Section 228 of the Corporations Act;

"Resolution" means a resolution to be considered at the General Meeting as contained in the Notice of Meeting:

"Section" means a section of this Explanatory Memorandum;

"Secured Creditors" means Jagen Pty Ltd, Greevest Investments Pty Ltd and Vitol Asia Pte Ltd being holders of registered debenture charges over the assets and undertakings of Matrix.

"Shortfall" means any shortfall under the Prospectus issue and "Shortfall Shares" has a corresponding meaning;

"Trust Assets" means the assets of the Company to be transferred, the cash to be paid and the Shares to be issued to the Trustee pursuant to the Implementation Agreement and includes the proceeds of any such asset whether in the hands of the Company, the Administrators or the Trustee;

"Trust Deed" means a deed detailing distribution of the Trust Assets in a form acceptable to the Administrators:

"Trust Fund" means the Trust Assets held by the Trustee on behalf of the Admitted Creditors under the Trust Deed from time to time being initially the Trust Assets;

"Trustee" means the Deed Administrators.

ANNEXURE 1

TERMS OF OPTIONS TO BE ISSUED UNDER RESOLUTION 3

• $(a)$ each Option is exercisable on or before 5.00 pm Perth time on or before 5 years from Completion:
• $(b)$ The Options held by each holder can be exercised in whole or in part, and if exercised in part multiples of 500 must be exercised on each occasion;
• $\left( c\right)$ The exercise price of each Option is \$0.0013 in eash;
• $(d)$ The Optionholder will be permitted to participate in any new pro-rata issue of securities of the Company on prior exercise of the Options in which case the Optionholder will be afforded the period of at least 9 Business Days prior to and inclusive of the record date to determine entitlements to the issue to exercise the Options:
• $(e)$ The Options do not confer on the holder any right to participate in dividends until Shares are allotted pursuant to the exercise of the Options;
• $\mathbf{f}$ In the event of a reorganisation of the issued capital of the Company, the Options will be reorganised in accordance with the Listing Rules (if applicable) and in any case in a manner which will not result in any benefits being conferred on Optionholders which are not conferred on Shareholders;
• $(g)$ The number of Shares to be issued pursuant to the exercise of Options will be adjusted for bonus issues made prior to exercise of the Options so that, upon exercise of the Options the number of Shares received by the Optionholder will include the number of bonus Shares that would have been issued if the Options had been exercised prior to the record date for the bonus issues. The exercise price of the Options shall not change as a result of any such bonus issues;
• $(h)$ Application will not be made for the Options to be granted quotation by ASX;
• $(i)$ Subject to paragraph (g) above the Options do not confer on the holder any right to a change in the exercise price of the Options or a change to the number of underlying securities over which the Options can be exercised.

MATRIX OIL NL SUBJECT TO DEED OF COMPANY ARRANGEMENT ACN 009 795 046

FORM OF PROXY

	Appointment of Proxy
I/WE
			being a Member of Matrix Oil NI, entitled to attend and vote at the Meeting, hereby
Appoint
	of my/our shares in the following manner:	Name of Proxy	or failing him/her, the Chairman of the meeting, as my/our proxy at the General Meeting of the Company to be held at The Celtic Club, 48 Ord Street, West Perth commencing at 10.30 am on 15 December 2005, and at any adjournment thereof and to vote for me/us on my/our behalf in respect of all/the following *
Resolution 1 Resolution 2 Resolution 3 Resolution 4			Consolidation of Capital Issue of Shares to the Secured Creditors Issue of Shares and Options to the Proponents and the Proponents Nominees Prospectus Issue				For	Against	Abstain
Resolution 5 Resolution 6			Appointment of Director (J. Shervington) Appointment of Director (A. Rankine-Wilson)
Notes: 1. 2. 3. 4."			must be received by the Company at: c/- Pitcher Partners, Level 17, 140 St George's the appointed time of the Meeting. Proxy forms executed by a corporation must be in accordance with the requirements of the Corporations Act or under the hand of its attorney. Should you desire to direct your proxy on how to vote, place a cross in the appropriate box for each item, otherwise your proxy may vote as your proxy thinks fit or abstain from voting. If two proxies are appointed you may delete "all" and insert the relevant number or proportion of shares in respect of which each such appointment is made. A separate proxy must be completed for						Each proxy form and the power of attorney or a certified copy thereof (if any) under which it is signed Terrace, Perth, WA 6000 facsimile number (+618 9322 1262, not later than 48 hours before
5. 6.	each proxy. The proposed Chairman of the Meeting has informed the Company that it is his intention to vote in favour of all Resolutions in the Notice in respect of any undirected proxies which may be granted in respect of the Chairman. If you do not wish to direct your proxy how to vote, please place a mark in this box.
			By marking this box, you acknowledge that the Chairman may exercise your proxy even if he has an interest in the outcome of the Resolution and votes cast by him other than as a proxy holder will be disregarded because of that interest.

As witness my/our hand/s this day of 2005.

29

	If a natural person:

SIGNED by:

Signature

Signature (if joint holder)

$\boldsymbol{\mathcal{Y}}$ $\overline{\phantom{a}}$

)
)
)

)
)

If a company:

Executed in accordance with 127 of the Corporations Act

Signature of Director

Signature of Director / Secretary

If by Power of Attorney:
SIGNED for and on behalf of

bv
under a Power of
Attorney dated	and who
declares that he/she has not received
any revocation of such Power of
Attorney in the presence of:

Signature of Attorney

Signature of Witness