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GULLEWA LIMITED AGM Information 2003

Oct 19, 2003

65026_rns_2003-10-19_9eeb9dc5-4516-492e-b677-56b1090c7eb0.pdf

AGM Information

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ACN 007 547 480 ABN 30 007 547 480

20 October 2003

The Company Announcements Platform Australian Stock Exchange Limited Level 4 Exchange Centre 20 Bridge Street SYDNEY NSW 2000

Lodged Online

Dear Sirs

ANNUAL GENERAL MEETING

At the Annual General Meeting for Gullewa Limited proposed to be held on Friday, 28 November 2003, a number of resolutions are to be put to shareholders. Attached is the proposed Notice of Meeting and Explanatory Memorandum, which was lodged and cleared with the ASX on 16 October 2003. Once the documents have completed a review procedure with ASIC, (which may result in amendments), they will be despatched to shareholders.

The Company notes that the share price of Gullewa Limited traded between 2.8 and 3 cents on Thursday, 16 October 2003.

Yours faithfully

DAVID DEITZ Chairman

Encl

Ref: S:\G&ELEWA\Announcements\2003\ASXCans-ProposedNOM-20:t0203\dog

Level 11 Shaw House 49-51 York Street SYDNEY NSW 2000 AUSTRALIA Telephone: 61 2 9299 4366 Fax: 61 2 9 29 1817 Email: [email protected]

Web Address: http://www.gullewa.com GULLEWA LIMITED ACN 007 547 480

NOTICE OF ANNUAL GENERAL MEETING

PROXY FORM

AND

EXPLANATORY MEMORANDUM

Date of Meeting
Friday, 28 November 2003

Time of Meeting
$10.00$ am

Place of Meeting
Horwath (NSW) Pty Limited Level 10 1 Market Street Sydney NSW 2000

GULLEWA LIMITED ACN 007 547 480

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given of the Annual General Meeting of Gullewa Limited ("Company" or "Gullewa") to be held at Horwath (NSW) Pty Limited, Level 10, 1 Market Street, Sydney NSW 2000 on Friday, 28 November 2003 at 10.00 am Eastern Davlight Saving Time, for the purpose of transacting the following business referred to in this Notice of Annual General Meeting.

An Explanatory Memorandum containing information in relation to each of the following Resolutions accompanies this Notice of Meeting.

AGENDA

Annual Accounts

To receive and consider the financial statements of the Company for the year ended 30 June 2003, consisting of the Statements of Financial Performance, the Statements of Financial Position, the Statements of Cash Flows, the Directors' Report, the Directors' Declaration and Auditors' Report.

Resolution 1 – Re-election of David Deitz as a Director

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

"That David Deitz, being a Director of the Company, retiring by rotation in accordance with Rule 13.2 of the Company's Constitution and, being eligible, offers himself for re-election, be elected as a Director of the Company."

Resolution $2 -$ Approve Placement Issue of up to 50,000,000 Shares

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

"That, pursuant to Listing Rule 7.1, the Directors be authorised to issue up to $50,000,000$ fully paid ordinary shares in the capital of the Company at a minimum issue price per share which is 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)."

The Company will disregard any votes cast on this Resolution 2 by any person who may participate in the issue and any person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the resolution is passed, or any associate of those persons. However, the Company need not disregard a vote if:

it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form: or
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 – Grant Directors' Options to David Deitz

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

"That, pursuant to section 208 of the Corporations Act and Listing Rule 10.11, the Company approve and authorise the grant of up to $9,000,000$ Directors' Options for no issue price to Mr David Deitz, the Chairman of the Company, on the terms and conditions set out in Annexure A attached to the Explanatory Memorandum accompanying this Notice of Meeting."

The Company will disregard any votes cast on Resolution 3 by David Deitz or any associates of David Deitz. However, the Company need not disregard a vote if:

it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or
it is east 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 4 - Grant Directors' Options to Eddie Lee

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

"That, pursuant to section 208 of the Corporations Act and Listing Rule 10.11, the Company approve and authorise the grant of up to $1,000,000$ Directors' Options for no issue price to Mr Eddie Lee, a Director of the Company, on the terms and conditions set out in Annexure A attached to the Explanatory Memorandum accompanying this Notice of Meeting."

The Company will disregard any votes cast on Resolution 4 by Eddie Lee or any associates of Eddie Lee. However, the Company need not disregard a vote if:

it is east by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the $\bullet$ 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 5 – Grant Directors' Options to David Atkinson

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

"That, pursuant to section 208 of the Corporations Act and Listing Rule 10.11, the Company approve and authorise the grant of up to $1,000,000$ Directors' Options for no issue price to Mr David Atkinson, a Director of the Company, on the terms and conditions set out in Annexure A attached to the Explanatory Memorandum accompanying this Notice of Meeting."

The Company will disregard any votes cast on Resolution 5 by David Atkinson or any associates of David Atkinson. However, the Company need not disregard a vote if:

it is east 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.

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

Resolution 6 – Participation of Directors in Placement

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

"That, subject to the passage of Resolution 2 and pursuant to Listing Rule 10.11, Messrs David Deitz, Eddie Lee and David Atkinson, being Directors of the Company, or their respective nominees, may participate in the placement referred to in Resolution 2 by each or all of them or their respective nominees subscribing for, in aggregate, a maximum of $8,000,000$ fully paid ordinary shares in the capital of the Company."

The Company will disregard any votes cast on Resolution 6 by David Deitz, Eddie Lee and David Atkinson, or any associates of David Deitz, Eddie Lee and David Atkinson. However, the Company need not disregard a vote if:

it is east by a person as a 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.

For the purposes of Resolutions $I - 6$ , the following definitions apply:

"ASX" means Australian Stock Exchange Limited;

"Company" means Gullewa Limited ACN 007 547 480:

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

"Directors" means the Directors of the Company;

"Directors' Option" means an option to acquire one Share exercisable at 6 cents each, on or before 30 June 2009, on the terms and conditions set out in Annexure A to the Explanatory Memorandum accompanying this Notice of Meeting:

"Listing Rules" means the Listing Rules of the ASX; and

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

Other business

To deal with any other business which may be brought forward in accordance with the Constitution and the Corporations Act.

By order of the Board

David Deitz Chairman

Dated: 20 October 2003

PROXIES

Votes at the Annual General Meeting may be given personally or by proxy, attorney or representative.
A shareholder entitled to attend and vote at the above meeting may appoint not more than two proxies to attend and vote at this meeting. Where more than one proxy is appointed, each proxy must be appointed to represent a specified proportion of the shareholder's voting rights.
A proxy may but need not be a shareholder of the Company. $\bullet$
The instrument appointing the proxy must be in writing, executed by the appointor or his attorney duly authorised in writing or, if such appointor is a corporation, either under seal or under hand of an officer of his attorney duly authorised.
The instrument of proxy (and the power of attorney or other authority, if any, under which it is $\bullet$ signed) must be lodged by person, post, courier or facsimile and reach the Registered Office of the Company at least 48 hours prior to the meeting. For the convenience of shareholders a Proxy Form is enclosed.

For the purposes of Regulation 7.11.37 of the Corporations Regulations the Company determines that members holding ordinary shares at the close of business on 26 November 2003 will be entitled to attend and vote at the Annual General Meeting.

GULLEWA LIMITED ACN 007 547 480

PROXY FORM

The Company Secretary Gullewa Limited
Registered Office Address:	Level 11 Shaw House 49-51 York Street SYDNEY NSW 2000
Facsimile:	$(02)$ 9299 1817
I/We (name of shareholder)	of (address) communication in the continuum continuum continuum continuum continuum continuum continuum continuum
	being a member/members of Gullewa Limited HEREBY APPOINT
(name)	of (address) www.manuaran.manuaran.manuaran.manuaran.manuaran.manuaran.manuaran.manuaran.manuaran.manuaran.manu and/or failing him (name)
of (address)	,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, or failing that person then the Chairman of the Annual General Meeting as my/our proxy to vote for me/us and on my/our behalf
	at the Annual General Meeting of the Company to be held at Horwath (NSW) Pty Limited, Level 10, 1 Market Street, Sydney
	NSW 2000 on Friday, 28 November 2003 at 10.00 am Eastern Daylight Saving Time and at any adjournment of the meeting.

For

Against

Abstain

Should you so desire to direct the Proxy how to vote, you should place a cross in the appropriate box below:

l/We direct my/our Proxy to vote in the following manner:

Grant Directors' Options to Eddie Lee Resolution 4 Grant Directors' Options to David Atkinson Resolution 5 Participation of Directors in Placement Resolution 6	Resolution 1 Resolution 2 Resolution 3	Re-election of David Deitz as a Director Approve Placement Issue of up to 50,000,000 Shares Grant Directors' Options to David Deitz
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------	-------------------------------------------------------------------	-------------------------------------------------------------------------------------------------------------------------------------------	--	--	--

If no directions are given my proxy may vote as the proxy thinks fit or may abstain.

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 Resolutions 2-6 and votes cast by him other than as proxy holder will be disregarded because of that interest.

The Chairman intends to vote in favour of Resolutions $2 - 6$ in relation to undirected proxies.

This Proxy is appointed to represent % of my voting right, or if 2 proxies are appointed Proxy 1 represents
_% and Proxy 2 represents ____% of my total votes
$Mv$ total voting right is shares

If the shareholder(s) is an individual:

$\mathrm{Name:}\ \blacksquare$

If the shareholder is a company:

Affix Common Seal (if required by Constitution)

Director/Sole Director and Secretary

Director/Secretary

Dated: 20 October 2003

INSTRUCTIONS FOR APPOINTMENT OF PROXY

$\mathbf{L}$ A shareholder entitled to attend and vote is entitled to appoint no more than two proxies to attend and vote at this Annual General Meeting as the shareholder's proxy. A proxy need not be a shareholder of the Company.
$\overline{2}$ . Where more than one proxy is appointed, each proxy must be appointed to represent a specific proportion of the shareholder's voting rights. If such appointment is not made then each proxy may exercise half of the shareholder's voting rights. Fractions shall be disregarded.
$\overline{3}$ . The proxy form must be signed personally by the shareholder or his attorney, duly authorised in writing. If a proxy is given by a corporation, the proxy must be executed under either the common seal of the corporation or under the hand of an officer of the company or its duly authorised attorney. In the case of joint shareholders, this proxy must be signed by at least one of the joint shareholders, personally or by a duly authorised attorney.
$\overline{4}$ . If a proxy is executed by an attorney of a shareholder, then the original of the relevant power of attorney or a certified copy of the relevant power of attorney, if it has not already been noted by the Company, must accompany the proxy form.
1. To be effective, forms to appoint proxies must be received by the Company no later than 48 hours before the time appointed for the holding of this General Meeting, by person, post or facsimile to the address stipulated in this proxy form.
1. If the proxy form specifies a way in which the proxy is to vote on any of the resolutions stated above, then the following applies:
the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way; $(a)$
$(b)$ if the proxy has 2 or more appointments that specify different ways to vote on the resolution, the proxy must not vote on a show of hands:
$(c)$ if the proxy is Chairperson, the proxy must vote on a poll and must vote that way; and
$(d)$ if the proxy is not the Chairperson, the proxy need not vote on a poll, but if the proxy does so, the proxy must vote that way.

If a proxy is also a shareholder, the proxy can cast any votes the proxy holds as a shareholder in any way that the proxy sees fit.

The Chairman intends to vote in favour of all resolutions set out in the Notice.

GULLEWA LIMITED ACN 007 547 480

EXPLANATORY MEMORANDUM

This Explanatory Memorandum is intended to provide shareholders with sufficient information to assess the merits of the Resolutions contained in the accompanying Notice of Annual General Meeting ("Notice") of Gullewa.

The Directors of the Company ("Directors") recommend shareholders read this Explanatory Memorandum in full before making any decision in relation to the resolutions.

The following information should be noted in respect of the various matters contained in the accompanying Notice:

Resolution 1 – Re-election of David Deitz as a Director

Pursuant to Rule 13.2 of the Company's Constitution, David Deitz, being a Director of the Company, retires by way of rotation and, being eligible, offers himself for re-election as a Director of the Company.

Resolution 2 – Approve Placement Issue of up to 50,000,000 Shares

Listing Rule 7.1

Listing Rule 7.1 broadly provides, subject to certain exceptions, that shareholder approval is required for any issue of securities where the securities proposed to be issued represent more than 15% of the Company's fully paid ordinary shares then on issue. Listing Rule 7.1 approval is sought so that the 15% threshold is maintained and available for use by the Company in the future should the circumstances require it.

Information for Shareholders

Resolution 2 has been included so that shareholders may approve pursuant to Listing Rule 7.1 the proposed issue of up to a maximum of 50,000,000 fully paid ordinary shares to persons selected by the Directors in their discretion.

The maximum issue of shares pursuant to this Resolution will represent 45% of the issued capital of the Company on a fully diluted basis (prior to the issue of the 50,000,000 shares). The Company is required to seek shareholder approval for any issues of securities greater than 15% of its issued capital pursuant to Listing Rule 7.1. The passing of this Resolution will permit the Company to have the right to place up to a further 15% of its issued capital at any time during the next 12 months. The information required to be given to shareholders pursuant to Listing Rule 7.3 is follows:

the maximum number of securities to be issue is 50,000,000 fully paid ordinary shares; $(a)$
$(b)$ the shares will be issued progressively, but no later than 3 months after the date of the meeting:
the shares will be issued at a minimum issue price which is at least 80% of the average market $(c)$ 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);
$(d)$ the proposed allottees are unknown at the date of the Notice but will be chosen at the discretion of the Directors and may be in conjunction with a member firm of the ASX. The Company will disclose the names of the allottees when shares are issued:
the shares to be issued are fully paid ordinary shares which rank pari passu with existing $(e)$ shares: and
the purpose of the placement will be to raise funds to assist in funding the Company's $f(x)$ investigation into potential projects, assessing new projects and working capital.

RESOLUTIONS 3 - 5 GENERALLY

Shareholder approval is being sought in Resolutions $3 - 5$ to grant Directors' Options to David Deitz. Eddie Lee and David Atkinson, for no issue price. The terms and conditions of the Directors' Options to be issued to Messrs Deitz, Lee and Atkinson are set out in Annexure A to this Explanatory Memorandum

The grant of Directors' Options is designed to encourage the recipients to have a greater involvement in the achievement of the Company's objectives and to provide an incentive to strive to that end by participating in the future growth and prosperity of the Company through share ownership.

Under the Company's current circumstances, the Directors consider that the incentives to David Deitz, Eddie Lee and David Atkinson, represented by the issue of these Directors' Options, are a cost effective and efficient reward and incentive for the Company, as opposed to alternative forms of incentive, such as the payment of cash compensation. The Company considers that it is far better for the Directors to be compensated by way of securities in the Company, rather than by way of cash.

Resolution 3 – Grant Directors' Options to David Deitz

Shareholder approval is being sought in Resolution 3 to grant 9,000,000 Directors' Options to David Deitz, Chairman of the Company, for no issue price.

Related Party Transactions

Accordingly, shareholder approval pursuant to Chapter 2E of the Corporations Act is required for the issue of Directors' Options to David Deitz.

For the purposes of Chapter 2E of the Corporations Act the following information is provided.

The related party to whom the proposed resolution would permit the financial benefit to be given

The Directors' Options will be issued to David Deitz.

The nature of the financial benefit

The proposed financial benefit is the grant to Mr Deitz of 9,000,000 Directors' Options, for no issue price.

Directors' recommendation

The following Directors wish to make a recommendation about the proposed Resolution 3:

Directors	Recommendation
Eddie Lee David Atkinson	The Directors recommend shareholders vote in favour of Resolution 3, as the Directors' Options are considered by the Directors to provide a cost effective means of giving an incentive to Mr Deitz to advance the Company's interests in accordance with the directions given from time to time by the Board of Directors.
David Deitz	Abstained from consideration and voting in respect of this recommendation, as he has an interest in the outcome of Resolution 3.

All of the Directors (other than Mr Deitz) were available to consider the proposed resolution.

Interests of Directors

None of the Directors who voted in respect of the above recommendation have an interest in the outcome of Resolution 3.

Any other information that is reasonably required by members to make a decision and that is known to the Company or any of its officers.

$(a)$ The proposed resolution would have the effect of giving power to the Directors to grant 9,000,000 Directors' Options to David Deitz.
$(b)$ The Company's advisers have valued the Directors' Options using the Black-Scholes Option Pricing Model ("BSModel"), which is the most widely used and recognised model for pricing options. The acceptance of this model is due to its derivation being grounded in economic theory. The value of an option calculated by the BSModel is a function of a number of variables. Their assessment of the value of the Directors' Options has been prepared using the following variables:
the price of the underlying share is 3.1 cents;
the exercise price is 6 cents;
the Directors' Option term is 6 years;
a volatility factor of 60%; and
a risk free interest rate of 5.4%, as at 14 October 2003.

In deriving the valuation the BSModel relies upon the following assumptions:

that the Directors' Options are American call options (ie, they can be exercised at any time during the period);
there are no transaction costs, options and shares are infinitely divisible, and information is available to all without cost:
short selling is allowed without restriction or penalty:
the risk free interest rate is known and constant throughout the duration of the option contract:
the underlying shares do not pay a dividend; and
share prices behave in a manner consistent with a random walk in continuous time.

Using the abovementioned variables the BSModel calculates the value of a Directors' Option to be one (1.0) cent. Any change in the variables applied in the BSModel between the date of the valuation and the date the Directors' Options are granted would have an impact on their value.

If the Directors' Options granted to David Deitz are exercised, the effect would be to dilute the $(c)$ shareholdings of the existing shareholders.
As at the date of this Notice, the total issued capital of the Company comprised 110,916,758 $(d)$ ordinary fully paid shares. On a fully diluted basis the issue of 9,000,000 Directors' Options represents approximately 7.51% of the Company's total issued capital.
As at the date of this Notice, David Deitz and his associates do not have a relevant interest in $(e)$ any securities in the Company.
Mr Deitz will be receiving approximately \$60,000 per annum for his role as Chairman. $\Omega$
The market price of the Shares during the term of the Directors' Options will normally $\left( \mathbf{g} \right)$ determine whether or not the option holder exercises the Directors' Option. At the time any Directors' Options are exercised and Shares issued pursuant to the exercise of the Directors' Options, Shares may be trading on the ASX at a price which is higher than the exercise price of the Directors' Options.
$(h)$ The Directors' Options will not be quoted on ASX and as such have no actual market value.
$(i)$ The following table gives details of the highest, lowest and latest price of the Company's shares trading on the ASX over the past 12 months ending on 15 October 2003:

		Security Highest Date of Lowest Price Date of Latest Price Price Date of Latest Price Date of Latest Price Date of Latest Price Date of Latest Price Date of Latest Price Date of Latest Price	$\sim$ lowest price $\sim$ on 14		October 2003
Ordinary Shares	3.5 cents	8 October 2003	$1.3$ cents	28 May 2003	$\vert$ 3.1 cents

The Directors' Options are capable of being converted to shares by payment of the exercise $(i)$ price.

$(k)$ Under the Company's current circumstances, the Directors consider that the incentive to David Deitz which would be represented by the Directors' Options would be a cost-effective and efficient incentive for the Company to provide, as opposed to alternative forms of incentives.
The Directors do not consider that from an economic and commercial point of view, there are $\mathbf{d}$ any costs or detriments, including opportunity costs or taxation consequences for the Company or benefits foregone by the Company in issuing the Directors' Options to David Deitz pursuant to Resolution 3
Neither the Directors nor the Company are aware of any other information that would be $(m)$ reasonably required by shareholders to make a decision in relation to the financial benefits contemplated by Resolution 3.

Listing Rule 10.11

Listing Rule 10.11 requires shareholder approval for the issue of securities to a related party of the Company. As David Deitz is a related party of the Company as noted above, shareholder approval under Listing Rule 10.11 is sought for the issue of Directors' Options to him.

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

$\mathbf{1}$ . the number of Directors' Options to be granted under Resolution 3 is 9,000,000;
$\overline{2}$ . the Directors' Options will be issued within one month of the date of the meeting;
$\overline{3}$ . the Directors' Options will be granted as incentive options hence will attract no issue price;
$\overline{4}$ . the allottee is David Deitz:
1. the terms and conditions of the Directors' Options are set out in Annexure A to this Explanatory Memorandum; and
1. no funds will be raised from the grant of the Directors' Options.

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

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

Resolution 4 – Grant Directors' Options to Eddie Lee

Shareholder approval is being sought in Resolution 4 to grant 1,000,000 Directors' Options to Eddie Lee, a Director of the Company, for no issue price.

Related Party Transactions

Accordingly, shareholder approval pursuant to Chapter 2E of the Corporations Act is required for the issue of Directors' Options to Eddie Lee.

For the purposes of Chapter 2E of the Corporations Act the following information is provided.

The related party to whom the proposed resolution would permit the financial benefit to be given

The Directors' Options will be issued to Eddie Lee.

The nature of the financial benefit

The proposed financial benefit is the grant to Mr Lee of 1,000,000 Directors' Options, for no issue price.

Directors' recommendation

The following Directors wish to make a recommendation about the proposed Resolution 4:

Directors	Recommendation
David Deitz David Atkinson	The Directors recommend shareholders vote in favour of Resolution 4, as the Directors' Options are considered by the Directors to provide a cost effective means of giving an incentive to Mr Lee to advance the Company's interests in accordance with the directions given from time to time by the Board of Directors.
Eddie Lee	Abstained from consideration and voting in respect of this recommendation, as he has an interest in the outcome of Resolution 4.

All of the Directors (other than Mr Lee) were available to consider the proposed resolution.

Interests of Directors

None of the Directors who voted in respect of the above recommendation have an interest in the outcome of Resolution 4.

Any other information that is reasonably required by members to make a decision and that is known to the Company or any of its officers.

The proposed resolution would have the effect of giving power to the Directors to grant $(a)$ 1,000,000 Directors' Options to Eddie Lee.

$(b)$ The Company's advisers have valued the Directors' Options using the Black-Scholes Option Pricing Model ("BSModel"), which is the most widely used and recognised model for pricing options. The acceptance of this model is due to its derivation being grounded in economic theory. The value of an option calculated by the BSModel is a function of a number of variables. Their assessment of the value of the Directors' Options has been prepared using the following variables:
the price of the underlying share is 3.1 cents;
the exercise price is 6 cents:
the Directors' Option term is 6 years;
a volatility factor of 60%; and
a risk free interest rate of 5.4%, as at 14 October 2003.

In deriving the valuation the BSModel relies upon the following assumptions:

that the Directors' Options are American call options (ie, they can be exercised at any time during the period);
there are no transaction costs, options and shares are infinitely divisible, and information is available to all without cost;
short selling is allowed without restriction or penalty;
the risk free interest rate is known and constant throughout the duration of the option contract:
the underlying shares do not pay a dividend; and
share prices behave in a manner consistent with a random walk in continuous time.

Using the abovementioned variables the BSModel calculates the value of a Directors' Option to be one (1.0) cent. Any change in the variables applied in the BSModel between the date of the valuation and the date the Directors' Options are granted would have an impact on their value.

If the Directors' Options granted to Eddie Lee are exercised, the effect would be to dilute the $(c)$ shareholdings of the existing shareholders.
As at the date of this Notice, the total issued capital of the Company comprised 110,916,758 $(d)$ ordinary fully paid shares. On a fully diluted basis the issue of 1,000,000 Directors' Options represents approximately 0.89% of the Company's total issued capital.
As at the date of this Notice, Eddie Lee and his associates do not have any relevant interest in $(e)$ any securities in the Company.
Mr Lee will be receiving \$25,000 per annum for his role as Director. $(f)$
The market price of the Shares during the term of the Directors' Options will normally $(g)$ determine whether or not the option holder exercises the Directors' Option. At the time any Directors' Options are exercised and Shares issued pursuant to the exercise of the Directors' Options, Shares may be trading on the ASX at a price which is higher than the exercise price of the Directors' Options.
$(h)$ The Directors' Options will not be quoted on ASX and as such have no actual market value.
$\ddot{\Omega}$ The following table gives details of the highest, lowest and latest price of the Company's shares trading on the ASX over the past 12 months ending on 15 October 2003:

the contract of the con-	Personal and $\blacksquare$ Trice	Security Highest Date of highest price	Lowest Price Date of	lowest price $\vert$ on 14 $\vert$	Latest Price October 2003
Ordinary Shares	3.5 cents	8 October 2003	1.3 cents	28 May 2003	3.1 cents

The Directors' Options are capable of being converted to shares by payment of the exercise $(i)$ price.
$(k)$ Under the Company's current circumstances, the Directors consider that the incentive to Eddie Lee which would be represented by the Directors' Options would be a cost-effective and efficient incentive for the Company to provide, as opposed to alternative forms of incentives.
$\left( \mathbf{I}\right)$ The Directors do not consider that from an economic and commercial point of view, there are any costs or detriments, including opportunity costs or taxation consequences for the Company or benefits foregone by the Company in issuing the Directors' Options to Eddie Lee pursuant to Resolution 4.
Neither the Directors nor the Company are aware of any other information that would be $(m)$ reasonably required by shareholders to make a decision in relation to the financial benefits contemplated by Resolution 4.

Listing Rule 10.11

Listing Rule 10.11 requires shareholder approval for the issue of securities to a related party of the Company. As Eddie Lee is a related party of the Company as noted above, shareholder approval under Listing Rule 10.11 is sought for the issue of Directors' Options to him.

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

$\mathbf{1}$ . the number of Directors' Options to be granted under Resolution 4 is 1,000,000;
$\overline{2}$ . the Directors' Options will be issued within one month of the date of the meeting;
1. the Directors' Options will be granted as incentive options hence will attract no issue price;
$\overline{4}$ the allottee is Eddie Lee;
1. the terms and conditions of the Directors' Options are set out in Annexure A to this Explanatory Memorandum: and
1. no funds will be raised from the grant of the Directors' Options.

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

Resolution 5 – Grant Directors' Options to David Atkinson

Shareholder approval is being sought in Resolution 5 to grant 1,000,000 Directors' Options to David Atkinson, a Director of the Company, for no issue price.

Related Party Transactions

Accordingly, shareholder approval pursuant to Chapter 2E of the Corporations Act is required for the issue of Directors' Options to David Atkinson.

For the purposes of Chapter 2E of the Corporations Act the following information is provided.

The related party to whom the proposed resolution would permit the financial benefit to be given

The Directors' Options will be issued to David Atkinson.

The nature of the financial benefit

The proposed financial benefit is the grant to Mr Atkinson of 1,000,000 Directors' Options, for no issue price.

Directors' recommendation

The following Directors wish to make a recommendation about the proposed Resolution 5:

Directors	Recommendation
David Deitz Eddie Lee	The Directors recommend shareholders vote in favour of Resolution 5, as the Directors' Options are considered by the Directors to provide a cost effective means of giving an incentive to Mr Atkinson to advance the Company's interests in accordance with the directions given from time to time by the Board of Directors.
David Atkinson	Abstained from consideration and voting in respect of this recommendation, as he has an interest in the outcome of Resolution 5.

All of the Directors (other than Mr Atkinson) were available to consider the proposed resolution.

Interests of Directors

None of the Directors who voted in respect of the above recommendation have an interest in the outcome of Resolution 5.

Any other information that is reasonably required by members to make a decision and that is known to the Company or any of its officers.

The proposed resolution would have the effect of giving power to the Directors to grant $(a)$ 1,000,000 Directors' Options to David Atkinson.
The Company's advisers have valued the Directors' Options using the Black-Scholes Option $(b)$ Pricing Model ("BSModel"), which is the most widely used and recognised model for pricing options. The acceptance of this model is due to its derivation being grounded in economic theory. The value of an option calculated by the BSModel is a function of a number of variables. Their assessment of the value of the Directors' Options has been prepared using the following variables:
the price of the underlying share is 3.1 cents;
the exercise price is 6 cents:
the Directors' Option term is 6 years;
a volatility factor of 60%; and
a risk free interest rate of 5.4%, as at 14 October 2003.

In deriving the valuation the BSModel relies upon the following assumptions:

that the Directors' Options are American call options (ie, they can be exercised at any time during the period);
there are no transaction costs, options and shares are infinitely divisible, and information is available to all without cost;
short selling is allowed without restriction or penalty;
the risk free interest rate is known and constant throughout the duration of the option contract:
the underlying shares do not pay a dividend; and
share prices behave in a manner consistent with a random walk in continuous time.

Using the abovementioned variables the BSModel calculates the value of a Directors' Option to be one (1.0) cent. Any change in the variables applied in the BSModel between the date of the valuation and the date the Directors' Options are granted would have an impact on their value.

$(c)$ If the Directors' Options granted to David Atkinson are exercised, the effect would be to dilute the shareholdings of the existing shareholders.
As at the date of this Notice, the total issued capital of the Company comprised 110,916,758 $(d)$ ordinary fully paid shares. On a fully diluted basis assuming all options are exercised, the issue of 1,000,000 Directors' Options represents approximately 0.89% of the Company's total issued capital.
$(e)$ As at the date of this Notice, David Atkinson and his associates do not have any relevant interest in any securities in the Company.
$(f)$ Mr Atkinson will be receiving \$25,000 per annum for his role as Director.
The market price of the Shares during the term of the Directors' Options will normally $\left( 2 \right)$ determine whether or not the option holder exercises the Directors' Option. At the time any Directors' Options are exercised and Shares issued pursuant to the exercise of the Directors' Options, Shares may be trading on the ASX at a price which is higher than the exercise price of the Directors' Options.
$(h)$ The Directors' Options will not be quoted on ASX and as such have no actual market value.
The following table gives details of the highest, lowest and latest price of the Company's $(i)$ shares trading on the ASX over the past 12 months ending on 15 October 2003:

		Example 1 Price Fight Price 1	Security Highest Date of Lowest Price Date of Latest Price	$\sim$ 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and 2000 and	October 2003
Ordinary Shares	3.5 cents	8 October 2003	$1.3$ cents	28 May 2003	$\vert$ 3.1 cents

The Directors' Options are capable of being converted to shares by payment of the exercise $\ddot{\Omega}$ price.
Under the Company's current circumstances, the Directors consider that the incentive to David $(k)$ Atkinson which would be represented by the Directors' Options would be a cost-effective and efficient incentive for the Company to provide, as opposed to alternative forms of incentives.
$\theta$ The Directors do not consider that from an economic and commercial point of view, there are any costs or detriments, including opportunity costs or taxation consequences for the Company or benefits foregone by the Company in issuing the Directors' Options to David Atkinson pursuant to Resolution 5.
Neither the Directors nor the Company are aware of any other information that would be $(m)$ reasonably required by shareholders to make a decision in relation to the financial benefits contemplated by Resolution 5.

Listing Rule 10.11

Listing Rule 10.11 requires shareholder approval for the issue of securities to a related party of the Company. As David Atkinson is a related party of the Company as noted above, shareholder approval under Listing Rule 10.11 is sought for the issue of Directors' Options to him.

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

$\mathbf{1}$ . the number of Directors' Options to be granted under Resolution 5 is 1,000,000;
$\overline{2}$ . the Directors' Options will be issued within one month of the date of the meeting;
$\mathbf{3}$ the Directors' Options will be granted as incentive options hence will attract no issue price;
$\overline{4}$ . the allottee is David Atkinson:
the terms and conditions of the Directors' Options are set out in Annexure A to this 5. Explanatory Memorandum; and
1. no funds will be raised from the grant of the Directors' Options.

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

Resolution 6 – Participation of Directors in Placement

Subject to the passage of Resolution 2, the Company will be making a placement of up to 50,000,000 Shares

Resolution 6 seeks shareholder approval pursuant to Listing Rule 10.11 to allow Messrs Deitz, Lee and Atkinson, Directors of the Company, to participate in the proposed placement by permitting each or all of them or their nominees to subscribe for in aggregate up to 8,000,000 Shares.

The Directors do not have any voting power in the Company as at the date of the Notice.

The impact of passing Resolution 6 on each Director's voting power in Gullewa, assuming that director receives the full placement of 8,000,000 Shares (although only 8,000,000 Shares in total could be issued to all Directors), is set out in the following table:

Directors 计原型图片化无平衡化硫化物医合物 The structure of the context of the context.	Shares - e de le deux de The contract of the con-	Options Service Country of	Percentage voting power in the Company on an undiluted basis (Total issued share capital of Gullewa is 160,916,758)	Percentage voting power in the Company on a fully diluted basis (Total issued share capital of $\cdots$ Gullewa is 171,916,758)
David Deitz	8,000,000	9,000,000	4.97	9.89
Eddie Lee	8,000,000	1,000,000	4.97	5.24
David Atkinson	8,000,000	1,000,000	4.97	5.24

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

$1.$ the maximum number of Shares the Company can issue under Resolution 6 is 8,000,000 Shares which forms part of, and is NOT additional to, the 50,000,000 Shares to be issued pursuant to Resolution 2;
$\overline{2}$ . the Company will issue the Shares within one month of the date of the meeting;
the shares will be issued at a minimum issue price which is at least 80% of the average market 3. 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);
a maximum of 8,000,000 Shares will be allotted and issued to each or all of Messrs Deitz, Lee $\overline{4}$ . and Atkinson or their respective nominees;
1. the Shares will be issued on the same terms as the Company's existing Shares; and
1. the funds raised will be used to assist in funding the Company's investigation into potential projects, assessing new projects and working capital.

Glossary

"Allegiance" means Allegiance Mining NL ACN 059 676 783;

"ASX" means Australian Stock Exchange Limited;

"Company" means Gullewa Limited ACN 007 547 480;

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

"Directors" means the Directors of the Company:

"Directors' Option" means an option to acquire one Share exercisable at 6 cents each, on or before 30 June 2009, on the terms and conditions set out in Annexure A to the Explanatory Memorandum accompanying this Notice of Meeting;

"Listing Rules" means the Listing Rules of the ASX;

"Notice of Meeting" or 'Notice" means the notice of meeting which accompanies this Explanatory Memorandum; and

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

ANNEXURE A

TERMS OF DIRECTORS' OPTIONS

The terms and conditions of the Directors' Options the subject of Resolutions $3 - 5$ are:

$\mathbf{1}$ . Each option shall be issued for no consideration.
$\overline{2}$ . Each option entitles the holder to subscribe for one ordinary share in Gullewa Limited ACN 007 547 480 ("Company") upon the payment of 6 cents per share subscribed for.
The options will lapse at 5.00 pm, Eastern Standard Time on 30 June 2009 ("Expiry Date"). $\overline{3}$ .
The options are transferable and will not be listed for official quotation on the ASX. $\overline{4}$ .
There are no participating rights or entitlements inherent in these options and holders of the $5₁$ options will not be entitled to participate in new issues of capital that may be offered to shareholders during the currency of the option.
Optionholders have the right to exercise their options prior to the date of determining 6. entitlements to any capital issues to the then existing shareholders of the Company made during the currency of the options, and will be granted a period of at least 10 business days before books closing date to exercise the options.
In the event of any re-organisation (including reconstruction, consolidation, subdivision, $7₁$ reduction or return of capital) of the issued capital of the Company, the options will be reorganised as required by the Listing Rules, but in all other respects the terms of exercise will remain unchanged.
1. The options shall be exercisable at any time before the Expiry Date ("Exercise Period") by the delivery to the registered office of the Company of a notice in writing ("Notice") stating the intention of the optionholder to exercise all or a specified number of options held by them accompanied by an Option Certificate and a cheque made payable to the Company for the subscription monies for the shares. The Notice and cheque must be received by the Company during the Exercise Period. An exercise of only some options shall not affect the rights of the optionholder to the balance of the options held by him.
The Company shall allot the resultant shares and deliver a statement of shareholdings with a $9_r$ holders' identification number within 5 business days of exercise of the options.
$10.$ The shares allotted shall rank, from the date of allotment, equally with the existing ordinary shares of the Company in all respects.