ENTROPY NEURODYNAMICS LIMITED — AGM Information 2020

Nov 9, 2020

Exopharm Limited https://www.exopharm.com./ HMH Advisory Level 1, 888 Doncaster Road Doncaster East Victoria, 3109 ACN: 136 765 991

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Exopharm Limited

Addendum to Notice of 2020 Annual General Meeting Explanatory Statement | Proxy Form

30 November 2020

11:00AM (AEDT)

Virtual Meeting

Note: This Addendum must be read together with the Notice of AGM (as lodged with ASX on 29 October 2020). Both documents should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting.

Addendum to Notice of Annual General Meeting

Exopharm Limited ( Exopharm or the Company ) gives notice to its shareholders that, in relation to the Notice of Annual General Meeting ( AGM ) dated 29 October 2020 ( Notice of AGM ), in respect of the proposed AGM detailed below, the Directors have determined to issue this addendum to the Notice of AGM ( Addendum to Notice of AGM ).

Time and date of AGM:

Monday, 30 November 2020, commencing at 11.00am (AEDT)

Location of AGM:

The meeting is being held as a virtual meeting.

Reasons for this Addendum to Notice of AGM

Defined terms in the Notice of AGM have the same meaning in this Addendum to Notice of AGM.

This Addendum to the Notice of AGM is issued in respect of Resolution 4.

Resolution 4 seeks shareholder approval for the issue of 200,000 Annual Bonus Shares to Dr Ian Dixon, Managing Director of the Company, following the achievement of his KPI targets for CY2020 as determined by the non-conflicted directors of the Board.

The KPIs had not been included in the summary of the details of Dr Dixon’s employment agreement which was announced to the ASX on 26 November 2019 notifying shareholders that Dr Dixon’s employment agreement had been extended.

Dr Dixon met the criteria for his KPIs, as set by the non-conflicted Directors of the Board, by achieving three of the six KPIs. These KPIs can be found at Appendix A on page 5 of this Addendum.

The changes to the Notice of AGM as outlined in this Addendum to Notice of AGM are as follows:

• (a) the disclosure in the Explanatory Statement of Resolution 4 below has been amended to include the sentence underlined below; and

• (b) new Appendix A (as set out in page 5 of this Addendum to Notice of AGM).

Issue of Annual Bonus Shares

Resolution 4 – Approval of Issue of Annual Bonus Shares to Dr Ian Dixon, Managing Director

Background

As announced to the ASX on 26 November 2019 as part of Dr Ian Dixon’s employment contract, in CY 2020 Dr Dixon is eligible for an at-risk bonus consisting of $80,000 cash ( Cash Bonus ) and 200,000 share bonus ( Share Bonus ) based on achievement of key performance indicators ( KPIs ) that would be monitored by the Board.

The non-conflicted directors, have made careful assessment as to whether Dr Ian Dixon has satisfied the KPIs as set by the Board for the relevant period and have satisfied themselves that Dr Dixon has achieved the KPIs as set by the Board. The KPIs are set out at Appendix A.

Accordingly, this Resolution seeks Shareholder approval to issue and allot 200,000 fully paid ordinary shares ( Annual Bonus Shares ) to Dr Ian Dixon (or his nominee).

Listing Rule 10.11

ASX Listing Rule 10.11 provides that unless one of the exceptions in Listing Rule 10.12 applies, the Company, as a listed company, must not issue equity securities to persons in a position of influence without Shareholder approval.

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A person in a position of influence for the purposes of Listing Rule 10.11 includes:

• (a) a related party;

• (b) a person who is, or was at any time in the 6 months before the issue of agreement, a substantial (30%+) holder in the Company;

• (c) a person who is, or was at any time in the 6 months before the issue or agreement, a substantial (10%+) holder in the Company and who has nominated a director to the board of the Company pursuant to a relevant agreement which gives them a right or expectation to do so;

• (d) an Associate of a person referred to in (a) to (c) above; and

• (e) a person whose relationship with the Company or a person referred to in (a) to (d) above is such that, in the ASX’s opinion, the issue or agreement should be approved by Shareholders.

As Dr Ian Dixon is a Director of the Company, he is considered a person in a position of influence for the purposes of Listing Rule 10.11. The proposed issue does not fall within any of the exceptions in Listing Rule 10.12, and therefore requires the approval of the Company’s Shareholders under Listing Rule 10.11.

To this end, this Resolution seeks the required Shareholder approval to issue the Annual Bonus Shares to Dr Dixon under and for the purposes of Listing Rule 10.11.

If approval is obtained under Listing Rule 10.11, in accordance with Listing Rule 7.2 (exception 14), separate approval is not required under Listing Rule 7.1.

If this Resolution is passed, the Company will be able to proceed with the proposed issue and Dr Dixon will be issued with the Annual Bonus Shares.

If this Resolution is not passed, the Company will not be able to proceed with the proposed issue and Dr Dixon will not be issued with the Annual Bonus Shares.

Chapter 2E of the Corporations Act

Chapter 2E of the Corporations Act prohibits the Company from giving a financial benefit to a related party of the Company unless either:

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

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

The proposed issue of Annual Bonus Shares (which is a type of equity security, for the purposes of the Chapter 2E of the Corporations Act) constitutes the giving of a financial benefit.

A “related party” for the purposes of the Corporations Act and the Listing Rules is widely defined and includes a director of a public company, a spouse of a director of a public company or an entity controlled by a director of a public company. The definition of “related party” also includes a person whom there is reasonable grounds to believe will become a “related party” of a public company.

The non-conflicted Directors of the Company (being Messrs. Jason Watson and David Parker) carefully considered the issue of these Annual Bonus Shares to Dr Dixon and formed the view that the giving of this financial benefit as part of his remuneration would be reasonable, given that the terms of proposed issue were captured in Dr Dixon’s employment agreement (as announced on 26 November 2019), the circumstances of the Company, the quantum and terms of the Annual Bonus Shares, and the responsibilities held by Dr Dixon in the Company.

Accordingly, the non-conflicted Directors of the Company believe that the issue of these Annual Bonus Shares to Dr Dixon fall within the “reasonable remuneration” exception as set out in section 211 of the Corporations Act, and relies on this exception for the purposes of this Resolution. Therefore, the proposed issue of the Annual Bonus Shares to Dr Dixon requires Shareholder approval under and for the purposes of Listing Rule 10.11 only.

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Information required by ASX Listing Rule 10.13

The following information in relation to the issue of the Annual Bonus Shares to Dr Ian Dixon is provided to Shareholders for the purposes of ASX Listing Rule 10.13:

• (a) The allottee is Dr Ian Dixon (or his nominee), Managing Director.

• (b) Dr Dixon is a Director of the Company, accordingly, as a related party of the Company, Dr Dixon satisfies Listing Rule 10.11.1.

• (c) The number of fully paid ordinary shares to be issued is 200,000.

• (d) The Annual Bonus Shares will be fully paid on issue and rank equally in all aspects with all existing fully paid ordinary shares previously issued by the Company.

• (e) The Annual Bonus Shares will be issued within 1 month of Shareholder approval being obtained by the Company (or otherwise, as determined by the ASX in the exercise of their discretion).

• (f) Each of the 200,000 Annual Bonus Shares will be offered for nil cash consideration.

• (g) Funds will not be raised from the issue of these Annual Bonus Shares as the issue is proposed to be made as part of Dr Dixon’s remuneration following fulfillment of his KPI’s for the relevant period (pursuant to the terms his employment agreement).

• (h) As noted above, the issue of the Annual Bonus Shares forms part of Dr Dixon’s remuneration (as announced on 26 November 2019). As at the date of this Notice, Dr Dixon’s current total remuneration package consists of base remuneration of $280,000 per annum (inclusive of superannuation), in addition to bonus remuneration (which consists of the at-risk Cash Bonus, and the at-risk Share Bonus).

Voting by proxy

A shareholder who has already submitted a proxy form for Resolution 4 is not required to resubmit a proxy form as a result of the amendments to the Notice of AGM, unless that shareholder wishes to lodge a revised proxy form.

Any shareholder wishing to lodge a revised proxy form may obtain another proxy form by contacting the Company Secretary at sinead.teague@exopharm.com. All proxy forms received to date by the Company will be treated as valid unless a revised proxy form is received after 11.00am (AEDT) on 28 November 2020.

Enquiries

Shareholders are asked to contact the Company Secretary at sinead.teague@exopharm.com if they have any queries in respect of the matters set out in these documents.

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Appendix A – Managing Director KPIs for CY2020

KPI	KPI Description
1	Share price of >$0.70 (around double the previous 37 cent raise) as measured by 15 day VWAP
2	EX1 conducts first dosing of the first individual in a study using allogenic LEAP purified material
3	Results (which are considered generally positive) reported to the market from the second of two ex vivo or in vivo (non-human) studies conducted during the 12 month period
4	At least 5% of the register (measured by number of shares held by non-retail investors and total shares on issue) held by retail investors (i.e. non retail investors are ‘institutional investors’ and ‘funds managers’)
5	LEAP manufacturing scale is at or above litre-scale (i.e. demonstrated capability to process batch of at least 1 litre)
6	Transitioning to new (i.e. new to Exopharm) premises or expansion of existing facility(ies) for office and laboratory use OR Board determines that the existing facilities are adequate for the business to function (i.e. the Board determines there is no need to transition to new or expanded facility during the 12 month period)

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