EQUATORIAL RESOURCES LIMITED — Proxy Solicitation & Information Statement 2006

Jul 3, 2006

NOTICE OF GENERAL MEETING

Notice is hereby given that a General Meeting of EQiTX Limited ("EQiTX" or "Company") will be held at Level 1, 123 Camberwell Road, Hawthorn East, Victoria on 4 August 2006 at 2.00 pm AEST.

The Explanatory Memorandum that accompanies and forms part of this Notice of General Meeting describes the various matters to be considered.

AGENDA

ORDINARY BUSINESS

RESOLUTION 1: RATIFICATION AND APPROVAL OF PREVIOUS ALLOTMENT AND ISSUE OF SHARES

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

"That for the purposes of Listing Rule 7.1, 7.4 and for all other purposes, Shareholders ratify and approve the allotment and issue of 5,900,000 shares to sophisticated investors (as set out in the Explanatory Memorandum) at \$0.20 per share on 16 February 2006."

Voting Exclusion:

In accordance with ASX Listing Rule 7.5.6, the Company will disregard any votes cast on Resolution 1 any person who participated in the issue (refer to details in the Explanatory Memorandum) and any person who might obtain a benefit, except a benefit solely in the capacity of the security holder, if Resolution 1 is passed and any person associated with 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 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.

RESOLUTION 2: APPROVAL FOR ISSUE OF OPTIONS TO DIRECTOR, MR S. MAJTELES

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

"That for the purposes of Listing Rule 10.11, Chapter 2E of the Corporations Act 2001 and for all other purposes, Shareholders approve the allotment and issue of 1,000,000 options fully vested to shares in the Company with an exercise price of \$0.25 exercisable at any time on or before 5 years from the date of issue to Mr S. Maiteles or his nominee, the details of which are set out in the Explanatory Memorandum."

Voting Exclusion:

In accordance with ASX Listing Rule 10.13.6, the Company will disregard any votes cast on Resolution 2 by Mr. Majteles or any of his associates. However, the Company need not disregard a vote if it is cast by Mr. Majteles or any of his associates as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or 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.

RESOLUTION 3: FUTURE ISSUE OF SHARES

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

"That for the purposes of Listing Rule 7.1 and for all other purposes, Shareholders approve the allotment and issue of up to the number of fully paid ordinary shares in the Company ("New Shares") not exceeding 20% of the total number of fully paid ordinary shares in the Company on issue immediately prior to the issue of New Shares on the terms and conditions set out in the Explanatory Memorandum forming part of this Notice of Meeting."

Voting Exclusion:

In accordance with ASX Listing Rule 7.3.8, the Company will disregard any votes cast on Resolution 2 by any person who may participate in the proposed issue and any person who might obtain a benefit, except a benefit solely in the capacity of the security holder, if Resolution 3 is passed and any person associated with 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 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.

NOTICE OF GENERAL MEETING (cont.)

RESOLUTION 4: RE-APPROVAL OF EMPLOYEE SHARE OPTION PLAN

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

"That re-approval is given for the purposes of the Listing Rules for the issue of options under the Company's existing Employee Share Option Plan ("ESOP") in accordance with the rules of the ESOP as set out in the Explanatory Memorandum and forming part of this Notice of Meeting."

Voting Exclusion:

For the purposes of Resolution 4, the Company will disregard any votes cast by any person who participated in an issue and any person who might obtain a benefit, except a benefit solely in the capacity of the security holder, if Resolution 4 is passed and any person associated with those persons. The Company will also disregard any votes cast by a director of the Company. 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 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.

OTHER BUSINESS

To consider any other business that may be brought before the Meeting in accordance with the Constitution of the Company and the Corporations Act.

BY ORDER OF THE BOARD

IOHN RAWLING Company Secretary Dated: 4 July 2006

INFORMATION FOR MEMBERS:

• 1. A member entitled to attend and vote is entitled to appoint a proxy to attend and vote on the member's behalf. A member entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If no proportion or number is specified, each proxy may exercise half the member's votes.
• 1. A proxy need not be a member of the Company.
• 1. A proxy form (and the power of attorney (if any) under which it is signed or satisfactory proof of that power) must be received at the registered office not less than 48 hours before the time for holding the meeting:
• By hand or mail: at Level 1, 123 Camberwell Road, Hawthorn East Vic 3123;
• By facsimile: (03) 9813 4259.
• 1. Corporate members must either:
• Appoint a proxy, as set out above;
• Appoint a representative; or
• Appoint an attorney.
• The instrument of appointment of a representative or attorney must be produced at the meeting.
• 1. All shareholdings recorded in the Company's share register at the close of business on 1 August 2006 will be taken, for purposes of the Meeting, to be held by the persons who were registered as members at that time.

ADMISSION TO MEETING

Corporate representatives are requested to bring appropriate evidence of appointment as a representative in accordance with the constitution of the Company. Attorneys are requested to bring the original or a certified copy of the power of attorney pursuant to which they were appointed. Proof of identity will also be required for corporate representatives and attorneys.

EXPLANATORY MEMORANDUM

This Explanatory Memorandum has been prepared for the information of members of EQITX Limited ("EQiTX" or "Company") in connection with the business to be conducted at the General Meeting of Shareholders of the Company to be held on 4 August 2006.

This Explanatory Memorandum should be read in conjunction with the accompanying Notice of Meeting.

RATIFICATION AND APPROVAL OF PREVIOUS ALLOTMENT AND RESOLUTION 1 ISSUE OF SHARES

The Directors of the Company issued 5,900,000 Shares at an issue price of \$0.20 each on 16 February 2006 to raise \$1,080,000 before costs.

Resolution 1 has been included so that Shareholders may approve and ratify the issue of those Shares pursuant to ASX Listing Rule 7.4, which enables the shareholders of a company to ratify an issue of securities provided that the issue does not fall within one of the exceptions Listing Rule 7.1 and does not breach the 15% restriction contained in Listing Rule 7.1.

If the issue is ratified by this resolution, then the Company will be entitled to issue further securities in accordance with the terms and restrictions of Listing Rule 7.1.

For the purpose of Listing Rule 7.5, the following information is provided:

• 1. A total of 5,900,000 Shares were issued:
• 1. The Shares were issued at \$0.20 each:
• 1. The Shares issued were fully paid ordinary shares and rank equally in all respects with the existing fully paid ordinary shares issued in the capital of the Company;
• 1. The Shares were issued to the following parties:

Investor	Number of Shares
Pershing Keen Nominees Ltd	3,500,000
Larchmont Services Ltd	437,500
Bayonet Investments Pty Ltd	437,500
Beirne Trading Pty Ltd	250,000
Clodene Pty Ltd	250,000
Carboni Pty Ltd	200,000
Madell Pty Ltd	200,000
Lupa and Company Pty Ltd	200,000
Critical Holdings Pty Ltd	200,000
C Pismiris Pty Ltd	100,000
Pennypacker Pty Ltd	100,000
ACP Investments Pty Ltd	25,000

^5. The funds raised from the issue of the Shares were applied to fund a further investment in the vaccine project and to provide additional working capital.

EXPLANATORY MEMORANDUM

RESOLUTION 2 APPROVAL FOR ISSUE OF OPTIONS TO DIRECTOR, MR S. MAJTELES

Background

Resolution 2 seeks shareholder approval for the Company to grant 1,000,000 options fully vested with an exercise price of \$0.25 each exercisable on or before 5 years from the date of issue to Mr Solomon Maiteles.

The reasons for the proposal to grant options to Mr. Maiteles are as follows:

• Mr. Majteles was Chairman of the Company from 2001 to February 2006. Over the past year, Mr. Majteles has provided significant consultancy services to the Company above and beyond his duties as Chairman of the Company.
• As an early stage biotechnology management company, the Company seeks to channel as much as possible of its available cash into biotechnology projects. As compensation for consultancy services provided over and above the requirements of his position as Chairman, the Company seeks to compensate Mr. Majteles in a manner designed to preserve this cash.
• $\blacksquare$ The options, if exercised at some time in the future, will provide additional cash resources for the Company.

The following information is a summary of the major terms and conditions of the options:

• These Options will rank pari passu with existing unquoted options; a)
• The intended use of funds raised upon exercise of the options (up to \$250,000 before costs) will be $b$ determined at the time in accordance with the investment and operating environment at the time;
• Each Option entitles the holder to one ordinary fully paid Share. c)
• d) The Options are exercisable at anytime prior to 5:00pm Australian Eastern Standard Time on 4 August 2011 (the Expiry Date) by completing the Option Exercise Form together with payment for the number of Shares in respect of which the Options are exercised and delivering to the registered office of the Company.
• $e$ ) The exercise price of the Options is \$0.25 each.
• Subject to the Corporations Act, the Listing Rules and the Constitution of the Company, the $f$ Options are freely transferable.
• All ordinary fully paid Shares issued upon exercise of Options will rank pari passu in any respect $g$ ) with the Company's then issued ordinary fully paid Shares. The Company will apply for Official Quotation by the ASX of all Shares issued upon exercise of Options.
• h) There are no participating rights and entitlements inherent in the Options and holders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options without exercising their Options. However, the Company will ensure that Option holders will be allowed ten (10) business days notice to convert their Options to Shares to participate in an entitlement issue on the same basis as ordinary Shareholders.
• In the event of any reconstruction (including consolidation, subdivision, reduction or return) of í) the issued capital of the Company prior to the Expiry Date, the number of Options or the exercise price of the Options or both shall be reconstructed in accordance with the Listing Rules applying at the time of the reconstruction.

The full terms and conditions are included in this Explanatory Memorandum as Annexure A.

No cash will be received from the issue of the options.

The Company intends to issue the options to Mr Majteles no later than 31 August 2006.

EXPLANATORY MEMORANDUM

RESOLUTION 3 FUTURE ISSUE OF SHARES

ASX Listing Rule 7.1 provides that a company must not, without prior approval of shareholders, issue securities if the securities will in themselves or when aggregated with the securities issued by a company during the previous 12 months, exceed 15% of the number of securities on issue at the commencement of that 12 month period.

Resolution 3 proposes to seek shareholder approval to grant to the board of directors of the Company the authority to issue up to the number of fully paid ordinary shares in the Company ("New Shares") not exceeding 20% of the total number of fully paid ordinary shares of the Company on issue immediately before the issue of the New Shares, on the terms and conditions set out in paragraphs (a) to (h) below. There are currently 45,464,170 fully paid ordinary shares on issue.

For the purposes of obtaining the approval of shareholders under Listing Rule 7.1 and for all other purposes, members are advised that:

• the maximum number of New Shares authorised to be issued under this Resolution will be $(a)$ the number of fully paid ordinary shares in the Company equal or closest to, but not exceeding, 20% of the total number of fully paid ordinary shares in the Company on issue immediately prior to the issue of the New Shares;
• $(b)$ the issue price of the New Shares will be at least 80% of the average market price of ordinary shares in the capital of the Company trading on ASX over the last 5 days on which sales were recorded before the day on which the issue was made (or if there is a prospectus relating to the issue, over the last 5 days on which sales in the shares were recorded before the date of the prospectus);
• $(c)$ the New Shares may be issued at the discretion of the directors to:
• persons who are not Related Parties or deemed to be Related Parties under the Listing $(i)$ Rules: or
• (ii) persons who are Related Parties or deemed to be Related Parties under the Listing Rules subject to shareholder approval being obtained for the purposes of Listing Rule 10.11;
• $(d)$ the date by which the New Shares must be issued shall be not more than three months after the date of the general meeting (or such later date to the extent permitted by any ASX waiver of the Listing Rules);
• the Company may not necessarily issue the full complement of the New Shares and may $(e)$ issue a lesser number, on terms which are the same as the terms to which existing Shares listed on the ASX are subject;
• $(f)$ the Company may, at its discretion, issue and allot the New Shares progressively;
• $(g)$ the allottees are unknown to the Company at this stage and will be selected from persons known to the Company or persons affiliated with the Company. The Company also intends to approach brokers to assist in procuring subscriptions;
• $(h)$ the funds raised as a consequence of the issue (if any) of New Shares will be applied towards:
• $(i)$ further investment in vaccine projects;
• $(ii)$ investment in and development of future opportunities that may arise; and
• $(iii)$ meeting the working capital needs of the Company.

EXPLANATORY MEMORANDUM

RE-APPROVAL OF EMPLOYEE SHARE OPTION PLAN RESOLUTION 4

Shareholder approval was previously given for the implementation and issue of options under the Company's Employee Share Option Plan ("ESOP") in accordance with the Listing Rules at a General Meeting of Shareholders held on Thursday 4 April 2002. The Company wishes to renew shareholder approval for the ESOP so that it can continue to issue options to employees under the same terms and conditions.

Grants under the ESOP are made as medium to long term incentives that are designed to allow employees to be compensated for their role in the sustained growth in shareholder value. The size of such grants correlates with Company performance and the individual's level of responsibility, performance and potential.

ASX Listing Rule 7.1 provides that the Company must not issue more than 15% of its issued capital in any 12 month period without shareholder approval. Listing Rule 7.2 allows for a number of exceptions to Listing Rule 7.1 including where shareholders have, in the previous 3 years, approved issues under an employee share or option scheme. The 3 year time period has now expired and approval is sought to renew it for a further 3 year period.

The terms and conditions of the ESOP are included in this Explanatory Memorandum as Annexure B.

Glossary

In the Notice of Meeting and Explanatory Memorandum, the following terms have the following meaning unless the context otherwise requires:

ASX	Australian Stock Exchange
Board	board of Directors
Company	EQiTX Limited ABN 50 009 188 694
Constitution	constitution of the Company
Corporations Act	Corporations Act 2001 (Cth)
Director	director of the Company
Listing Rules	Listing Rules of the ASX
Related Party	has the same meaning as that term in the Listing Rules and Related Parties has a corresponding meaning
Share	fully paid ordinary share in the capital of the Company
Shareholder	shareholder of the Company
AEST	Australian Eastern Standard Time

ANNEXURE A

TERMS AND CONDITIONS OF OPTIONS

• 1. No monies will be payable for the issue of the options.
• $\overline{2}$ . A Certificate will be issued for the options.
• 1. The options shall expire five (5) years after the date on which they are granted.
• 1. Each option shall carry the right to subscribe for one Share.
• 1. Options may be exercised in whole or in part. An exercise of only some options shall not affect the rights of the option holder to the balance of the options held by him.
• The issue price of Shares the subject of the options shall be payable in full on exercise of the options. 6.
• $7.$ Options shall be exercisable by the delivery to the registered office of the Company of a notice in writing stating the intention of the option holder to exercise all or a specific number of options held by him accompanied by an option certificate and a cheque made payable to the Company for the subscription monies for the Shares.
• 1. The Company shall allot the resultant Shares and deliver the share certificates within five (5) business days of the exercise of the option.
• Options shall not be listed for Official Quotation on ASX. $9₁$
• 1. An option holder may not, except with the approval of the Board of Directors (in its sole and absolute discretion), sell, transfer, assign, give or otherwise dispose of, in equity or in law, the benefit of the options. The approval of the Board of Directors may be given subject to satisfaction of certain conditions in which even such approval will be deemed not to occur until any such conditions have been satisfied. In particular the Board of Directors may require the proposed new holder of options to enter into a covenant with the Company pursuant to which the proposed new holder acknowledges and agrees to be bound by the termination provisions contained in this Plan.
• 1. Shares allotted pursuant to an exercise of options shall rank, from the date of allotment, equally with existing Shares of the Company in all respects.
• 1. The Company shall, in accordance with Listing Rule 2.8, make application to have Shares allotted pursuant to an exercise of options listed for Official Quotation.
• 1. If the options are exercised before the record date of an entitlement, the option holder can participate in a pro rata issue to the holders of the underlying securities in the Company. The Company must notify the option holder of the proposed issue at least nine (9) business days before the record date. Option holders do not have a right to participate in new issues without exercising their options in accordance with Listing Rule 619
• 1. In the event of any reorganisation of capital of the Company, all rights of the option holder will be changed to the extent necessary to comply with the listing rules applying to a re-organisation of capital at the time of the re-organisation in accordance with the Listing Rules.
• 1. The options will not give any right to participate in dividends until Shares are allotted pursuant to the exercise of the relevant options.
• 1. In the event that a pro rata issue (except a bonus issue) is made to the holders of the underlying securities in the Company, the exercise price of the options may be reduced according to the following formula:

$$
O - \frac{E[P - (S + D)]}{N + 1}
$$

$O' =$

• $O' =$ the new exercise price of the option.
• $O =$ the old exercise price of the option.
• $E =$ the number of underlying securities in the Company into which one option is exercisable.
• $P =$ the average market price per security (weighted by reference to volume) of the underlying securities in the Company during the five (5) trading days ending on the day before the exrights date or ex entitlements date.
• $Q =$ the Subscription price for a security under the pro rata issue.
• $D =$ the Dividend due but not yet paid on the existing underlying securities (except those to be issued under the pro rata issue).
• $N =$ the Number of securities with rights or entitlements that must be held to receive a right to one new security in the Company.
• 1. The number of Shares to be issued pursuant to the exercise of options will be adjusted for bonus issues made prior to exercise of options. The effect will be that upon exercise of the options the number of Shares received by the option holder will include the number of bonus Shares that would have been issued if the options had been exercised prior to the record date for bonus issues. The exercise price of the options shall not change as a result of any such bonus issues.
• 1. The Company shall notify each option holder and ASX within one (1) month after the record date for a prorate bonus or cash issue of the adjustment to the number of Shares over which the option exists and/or the adjustment to the exercise price.
• 1. Options may be converted into Shares to be held in the name of the option holders' nominee.

ANNEXURE B

EOITX LIMITED (ABN 50 009 188 694) EMPLOYEE SHARE OPTION PLAN

$\mathbf{1}$ NAME

This Plan shall be called the EQiTX Limited (ABN 50 009 188 694) - Employee Share Option Plan.

$\overline{2}$ PURPOSE

The Purpose of this Plan is to:

• $2.1$ Recognise the ability and efforts of the Directors, employees and consultants of the Company who have contributed to the success of the Company and to provide them with rewards where deemed appropriate;
• $2.2$ Provide an incentive to the Directors, employees and consultants to achieve the long term objectives of the Company and improve the performance of the Company; and
• 2.3 Attract persons of experience and ability to employment with the Company and foster and promote lovalty between the Company and its Directors, employees and consultants.

COMMENCEMENT 3

Subject to the passing of a special Resolution of shareholders in general meeting authorising the establishment of this Plan, the Plan shall take effect from such date subsequent to that meeting as resolved by the Board of Directors.

$\boldsymbol{4}$ INTERPRETATION

In these rules, unless the context otherwise requires:

'ASX' means Australian Stock Exchange Limited;

'Board of Directors' means the Board of Directors of the Company from time to time acting by Resolutions made in accordance with the Corporations Act and the Constitution of the Company;

'Company' means EQITX Limited (ABN 50 009 188 694);

'Directors' means an executive or non-executive Director of the Company, from time to time;

'Eligible Employee' means any full-time or part-time employee of the Company and includes Directors and consultants being individuals or corporate entities;

'Listing Rules' means the Listing Rules of ASX;

'Official Quotation' means quotation of the Official List of ASX;

'Option Holder' means a person to whom options are issued under this Plan;

'Options' means the options granted under this Plan to subscribe for Shares;

'Plan' means this EQiTX Limited (ABN 50 009 188 694) - Employee Share Option Plan as amended from time to time;

'Rules' means these rules as from time to time amended; and

'Shares' means the ordinary fully paid shares in the capital of the Company.

5 ELIGIBILITY

All Eligible Employees shall be entitled to participate in the Plan.

LIMITATION ON NUMBER OF OPTIONS ISSUED 6

The total number of shares in respect of which options over Shares in the Company that may be issued under the Plan at any time shall not exceed 10% of the issued equity securities of the Company. For the purpose of this Rule the calculation of issued equity security shall be made in accordance with Listing Rule 7.1.4.

$\overline{7}$ ENTITLEMENTS

The number of options an Eligible Employee is to be allocated shall be determined by the Board of Directors in its sole and absolute discretion. The number of options that Directors are to be allocated will be subject to the approval of shareholders in general meeting.

$\overline{\mathbf{R}}$ APPLICATION

Eligible Employees shall be invited to apply in their own names or that of a nominee to take up their entitlements, or part of them, to options under the Plan.

9 ACCEPTANCE

The Company shall be obliged to accept any application made in terms of Rule 8 above, provided that the application accords, in all respects, with these Rules and is for such number of options, or part thereof, to which the Eligible Employee is entitled. Upon acceptance of a duly complying application the Company, within ten (10) business days, shall deliver an option certificate in respect of the options applied for by the Eligible Employee.

10 TERMS AND CONDITIONS OF OPTIONS TO BE ISSUED TO ELIGIBLE EMPLOYEES

• 10.1 No monies will be payable for the issue of the options.
• $10.2$ A Certificate will be issued for the options.
• The options shall expire five (5) years after the date on which they are granted. $10.3₁$
• 10.4 Each option shall carry the right in favour of an Eligible Employee to subscribe for one Share.
• 10.5 Options may be exercised in whole or in part. An exercise of only some options shall not affect the rights of the option holder to the balance of the options held by him.
• 10.6 Shares allotted to Eligible Employees on the exercise of options shall be issued at an exercise price to be determined by the Board in its absolute discretion which shall be not less than the minimum exercise price permitted by the Listing Rules.
• In relation to the granting of options to Directors or consultants, a Director or consultant 10.7 of the Company or of a corporation that is a Related Body Corporate to the Company, may only participate (directly or indirectly) in the Plan where the Directors or consultants or their nominees receive the prior approval of shareholders by special Resolution at a general meeting where the notice convening the meeting is advised:
• 10.7.1 the name of the Directors and consultants;
• 10.7.2 the number of options to be granted to the Directors and consultants or their nominees or to which they may otherwise become entitled; and
• 10.7.3 the precise terms and conditions of their participation in the Plan

and the Directors and consultants and their nominees abstain from exercising any voting rights on the Resolution (other than in respect of proxies given by other members of the Company which contain clear instructions as to how such votes are to be exercised).

• 10.8 The issue price of Shares the subject of the options shall be payable in full on exercise of the options.
• 10.9 Options shall be exercisable by the delivery to the registered office of the Company of a notice in writing stating the intention of the option holder to exercise all or a specific number of options held by him accompanied by an option certificate and a cheque made payable to the Company for the subscription monies for the Shares.
• 10.10 The Company shall allot the resultant Shares and deliver the share certificates within five (5) business days of the exercise of the option.
• 10.11 Options shall not be listed for Official Quotation on ASX.
• 10.12 An option holder may not, except with the approval of the Board of Directors (in its sole and absolute discretion), sell, transfer, assign, give or otherwise dispose of, in equity or in law, the benefit of the options. The approval of the Board of Directors may be given subject to satisfaction of certain conditions in which even such approval will be deemed not to occur until any such conditions have been satisfied. In particular the Board of Directors may require the proposed new holder of options to enter into a covenant with the Company pursuant to which the proposed new holder acknowledges and agrees to be bound by the termination provisions contained in this Plan.
• 10.13 Shares allotted pursuant to an exercise of options shall rank, from the date of allotment, equally with existing Shares of the Company in all respects.
• 10.14 The Company shall, in accordance with Listing Rule 2.8, make application to have Shares allotted pursuant to an exercise of options listed for Official Quotation.
• 10.15 If the options are exercised before the record date of an entitlement, the option holder can participate in a pro rata issue to the holders of the underlying securities in the Company. The Company must notify the option holder of the proposed issue at least nine (9) business days before the record date. Option holders do not have a right to participate in new issues without exercising their options in accordance with Listing Rule 6.19.
• 10.16 In the event of any reorganisation of capital of the Company, all rights of the option holder will be changed to the extent necessary to comply with the listing rules applying to a re-organisation of capital at the time of the re-organisation in accordance with the Listing Rules.
• 10.17 The options will not give any right to participate in dividends until Shares are allotted pursuant to the exercise of the relevant options.
• 10.18 In the event that a pro rata issue (except a bonus issue) is made to the holders of the underlying securities in the Company, the exercise price of the options may be reduced according to the following formula:

$$
O' = \qquad O - \frac{E[P - (S + D)]}{N + 1}
$$

• $Q' =$ the new exercise price of the option.

• $Q =$ the old exercise price of the option.

• $E =$ the number of underlying securities in the Company into which one option is exercisable.

• $P =$ the average market price per security (weighted by reference to volume) of the underlying securities in the Company during the five (5) trading days ending on the day before the ex rights date or ex entitlements date.
• $S =$ the Subscription price for a security under the pro rata issue.
• $D =$ the Dividend due but not yet paid on the existing underlying securities (except those to be issued under the pro rata issue).
• $N =$ the Number of securities with rights or entitlements that must be held to receive a right to one new security in the Company.
• 10.19 The number of Shares to be issued pursuant to the exercise of options will be adjusted for bonus issues made prior to exercise of options. The effect will be that upon exercise of the options the number of Shares received by the option holder will include the number of bonus Shares that would have been issued if the options had been exercised prior to the record date for bonus issues. The exercise price of the options shall not change as a result of any such bonus issues.
• 10.20 The Company shall notify each option holder and ASX within one (1) month after the record date for a pro-rate bonus or cash issue of the adjustment to the number of Shares over which the option exists and/or the adjustment to the exercise price.
• 10.21 Options may be converted into Shares to be held in the name of the option holders' nominee.

$11$ TERMINATION OF RIGHT TO EXERCISE OPTION

• The exercise of options under this Plan shall be ineffective in the event of and upon the $111$ option holder ceasing to be an Eligible Employee in circumstances where:
• $(a)$ the Eligible Employee ceases to be an Eligible Employee by reason of the cessation of employment, Directorship or consultancy, for whatever reason, including resignation or retirement, other than the circumstances referred to in Rule 11.1(b) or Rule 11.3, however the option holder may exercise his unexercised options at any time within 90 days or such other period, being not less than 90 days, as determined by the Board of Directors (in its sole and absolute discretion) immediately following the date upon which the Eligible Employee so ceased to be an Eligible Employee; or
• the Eligible Employee ceases to be an Eligible Employee by reason of the Company $(b)$ or any related body corporate (as defined in the Corporations Act) of the Company terminating the Eligible Employee's contract of service in circumstances where the Eligible Employee is found to be guilty of gross misconduct, gross negligence, wilful disobedience or any other cause or matter which entitles the Company or related body corporate to dismiss the Eligible Employee without notice. In such circumstances the option holder's right to exercise unexercised options shall terminate immediately upon dismissal of the Eligible Employee; or
• $(c)$ Options have been assigned in accordance with the terms of this option plan and an event has occurred in respect of the original option holder of the nature referred

to in Rule 11.1 or 11.3. In such circumstances, the person then the holder of the options shall be entitled to exercise the unexercised options within the same time limits specified in Rule 11.1(a) or Rule 11.3.

• 11.2 For the purposes of this Rule 11, the term 'unexercised options' means options granted under the Plan which have not lapsed (i.e. have not been terminated pursuant to the provisions of Rule 11.1 or 11.3), not expired by effluxion of time, have not been exercised or for any reason whatsoever or have ceased permanently to have rights of conversion to Shares).
• The exercise of options under this Plan shall be not ineffective if the option holder ceases 11.3 to be an Eligible Employee in the following circumstances:
• where an option holder dies and at the date of his death that option holder held $(a)$ any unexercised options. In such circumstances, those unexercised options are automatically transferred to the estate of the deceased option holder and shall continue as provided for by the terms of the Plan notwithstanding the option holder is no longer an Eligible Employee;
• except in respect of Rule 11.1(b), where the relevant Eligible Employee is a $(b)$ Director and ceases to hold such office by reason of removal pursuant to a Resolution duly passed by the members of the Company. In such circumstances, the option holder's unexercised options shall continue as provided for by the terms of the Plan notwithstanding the option holder is no longer an Eligible Employee; or
• where the Eligible Employee ceases to be an Eligible Employee by reason of ill $(c)$ health or accident (resulting in permanent disability). In such circumstances, the Eligible Employee's right to exercise unexercised options shall not be terminated and shall continue as provided for by the terms of the Plan prior to the occurrence of the illness or permanent disability notwithstanding the option holder is no longer an Eligible Employee.
• 11.4 The Board of Directors may (by simple majority vote of the Directors) extend or waive the application of any provision of Rule 11.1 or 11.3 or determine that where the provisions of Rule 11.1 or 11.3 are involved that upon expiry of any relevant period nominated in that Rule the subject options shall thereupon terminate (or if such discretion is exercised after the event, shall terminate at the time of exercise of such discretion).
• 11.5 Subject to the requirements of the Listing Rules without limiting the generality of Rule 11.4, the Board of Directors may extend the time within which options may by virtue of Rule 11.1 and 11.3 be exercised irrespective of whether such time in relation to any particular option has passed or not. In exercising any power or discretion under Rule 11.4, the Board of Directors shall have an unfettered absolute discretion and shall not be obliged to assign any reason for the manner in which it has or has not exercised any discretion conferred by this Rule.

$12$ VESTING OF OPTIONS

If the Board of Directors resolve at the time options are granted under this Plan that such options will not vest in the Eligible Employee until a date which is determined by the Directors then the Eligible Employee cannot exercise the options until after the vesting date determined by the Directors (in their absolute discretion) has passed.

RESTRICTION OR ALTERATIONS TO THE PLAN 13

The Plan may only be amended with the prior approval by special Resolution of the shareholders of the Company in general meeting and in accordance with the Listing Rules.

14 RIGHTS OF EMPLOYEES

The Plan shall not form part of any contract of employment between the Company and any of its employees and shall not confer directly or indirectly on any Eligible Employee the right to be employed by or to continue to be employed by or hold any position in relation to the Company.

15 POWERS OF THE DIRECTORS

The Plan shall be administered by the Board of Directors who shall have the power to:

• 15.1 Determine procedures from time to time for administration of the Plan consistent with these rules:
• 15.2 Resolve conclusively all questions of fact of interpretation arising in connection with the Plan: and
• Delegate to any one or more persons for such period and on such conditions as may be $15.3$ determined by the Board of Directors, the exercise of any of the Board of Directors' powers or discretions arising under the Plan.

16 TERMINATION OF PLAN

The Plan may at any time be terminated by the Board of Directors but such termination shall not affect the rights of holders of options issued prior to termination.

17 GOVERNING LAW

This Plan shall be governed by, administered and construed in accordance with the Laws of Victoria.