H3 ENERGY LIMITED - Proxy Solicitation & Information Statement 2014

ABN 68 079 432 796

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NOTICE OF GENERAL MEETING

A General Meeting of the Company will be held at Level 7, 1008 Hay Street, Perth WA 6000 on 11 August 2014 at 10.30am (WST).

This Notice of Meeting 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.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on (+61 8) 6555 6000.

CONTENTS PAGE

CONTENTS PAGE
Business of the Meeting (setting out the proposed resolutions)	3
Explanatory Statement (explaining the proposed resolutions)	4
Glossary	6
Proxy Form	7

IMPORTANT INFORMATION

TIME AND PLACE OF MEETING

Notice is given that the general meeting of the Shareholders to which this Notice of Meeting relates will be held at 10.30am on 11 August 2014 at:

Level 7, 1008 Hay Street

Perth WA 6000

YOUR VOTE IS IMPORTANT

The business of the Meeting affects your shareholding and your vote is important.

VOTING ELIGIBILITY

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the General Meeting are those who are registered Shareholders at 4 pm (WST) on 4 July 2014.

VOTING IN PERSON

To vote in person, attend the Meeting at the time, date and place set out above.

VOTING BY PROXY

To vote by proxy, please complete and sign the enclosed Proxy Form and return by the time, and in accordance with, the instructions set out on the Proxy Form.

In accordance with section 249L of the Corporations Act, members are advised that:

each member has a right to appoint a proxy;
the proxy need not be a member of the Company; and
a member who is entitled to cast two (2) or more votes may appoint two (2) proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If the member appoints two (2) proxies and the appointment does not specify the proportion or number of the member’s votes, then in accordance with section 249X(3) of the Corporations Act, each proxy may exercise one-half of the votes.

New sections 250BB and 250BC of the Corporations Act came into effect on 1 August 2011 and apply to voting by proxy on, or after, that date. Shareholders and their proxies should be aware of these changes to the Corporations Act, as they will apply to this General Meeting. Broadly, the changes mean that:

if proxy holders vote, they must cast all directed proxies as directed; and
• any directed proxies which are not voted will automatically default to the Chair, who must vote the proxies as directed.

Further details on these changes are set out below.

Proxy vote if appointment specifies way to vote

Section 250BB(1) of the Corporations Act provides that an appointment of a proxy may specify the way the proxy is to vote on a particular resolution and, if it does:

the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way (i.e. as directed); and
if the proxy has two (2) or more appointments that specify different ways to vote on the resolution – the proxy must not vote on a show of hands; and
if the proxy is the chair of the meeting at which the resolution is voted on – the proxy must vote on a poll, and must vote that way (i.e. as directed); and
if the proxy is not the chair – the proxy need not vote on the poll, but if the proxy does so, the proxy must vote that way (i.e. as directed).

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Transfer of non-chair proxy to chair in certain circumstances

Section 250BC of the Corporations Act provides that, if:

an appointment of a proxy specifies the way the proxy is to vote on a particular resolution at a meeting of the Company's members; and
the appointed proxy is not the chair of the meeting; and
at the meeting, a poll is duly demanded on the resolution; and
either of the following applies:
the proxy is not recorded as attending the meeting;
the proxy does not vote on the resolution,

the chair of the meeting is taken, before voting on the resolution closes, to have been appointed as the proxy for the purposes of voting on the resolution at the meeting.

BUSINESS OF THE MEETING

AGENDA

Resolution – Authority to ISSUE Incentive Options to Directors

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

"That, in accordance with Listing Rule 10.11, and for all other purposes, Shareholders approve and authorise the grant of 120 million Incentive Options to Mr Ian Cockerill (or his nominee), a Director, on the terms and conditions in the Explanatory Memorandum."

Voting Exclusion:

The Company will disregard any votes cast on this Resolution by Mr Ian Cockerill and any of his associates.

However, the Company need not disregard a vote if:

(a) 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
(b) it is cast by the Chairman 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.

DATED: 4 JULY 2014

BY ORDER OF THE BOARD

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Jo-Ann Long Company Secretary

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EXPLANATORY MEMORANDUM

1. INTRODUCTION

This Explanatory Memorandum has been prepared for the information of Shareholders of the Company in connection with the business to be conducted at the Meeting to be held at Level 7, 1008 Hay Street, Perth Western Australia on 11 August 2014 at 10.30am (WST).

This Explanatory Memorandum should be read in conjunction with, and forms part of, the accompanying Notice. The purpose of this Explanatory Memorandum is to provide information to Shareholders in deciding whether or not to pass the Resolution in the Notice.

A Proxy Form is located at the end of the Explanatory Memorandum.

2. ACTION TO BE TAKEN BY SHAREHOLDERS

Shareholders should read the Notice and this Explanatory Memorandum carefully before deciding how to vote on the Resolutions.

2.1 Proxies

A Proxy Form is attached to the Notice. This is to be used by Shareholders if they wish to appoint a representative (a 'proxy') to vote in their place. All Shareholders are invited and encouraged to attend the Meeting or, if they are unable to attend in person, sign and return the Proxy Form to the Company in accordance with the instructions thereon. Lodgement of a Proxy Form will not preclude a Shareholder from attending and voting at the Meeting in person.

Please note that:

(a) a member of the Company entitled to attend and vote at a General Meeting is entitled to appoint a proxy;
(b) a proxy need not be a member of the Company; and
(c) a member of the Company 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, but where the proportion or number is not specified, each proxy may exercise half of the votes.

The enclosed Proxy Form provides further details on appointing proxies and lodging Proxy Forms.

2.2 Voting Prohibition by Proxy Holders

A person appointed as a proxy must not vote, on the basis of that appointment, on the Resolution if:

(a) the proxy is either:
i. a member of the Key Management Personnel; or
ii. a Closely Related Party of such member; and
(b) the appointment does not specify the way the proxy is to vote on the Resolution.

However, the prohibition does not apply if:

(a) the proxy is the Chairman; and
(b) the appointment expressly authorises the Chairman to exercise the proxy even if the Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel of the Company.

This Explanatory Statement has been prepared to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions which are the subject of the business of the Meeting.

3. RESOLUTION – AUTHORITY TO GRANT INCENTIVE OPTIONS TO A DIRECTOR

3.1 General

This resolution seeks Shareholder approval in accordance with Listing Rule 10.11 for the grant of 120 Million Options (Incentive Options) to Mr Ian Cockerill (or his nominees).

The purpose of the grant of the Incentive Options to Mr Cockerill is for the Company to retain a technical director of high calibre and to provide cost effective remuneration to Mr Cockerill for his ongoing commitment and contribution to the Company.

The Board does not consider that there are any significant opportunity costs to the Company or benefits foregone by the Company in issuing the Incentive Options upon the terms proposed. If the Incentive Options are not granted, the Company could pay Mr Cockerill additional cash remuneration. However, the Board considers it reasonable for the remuneration of Mr Cockerill to have a cash component and an equity component to further align Mr Cockerill’s interests with Shareholders and maintain a better cash position for the Company.

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The Incentive Options will be issued on the following terms:

i. All options will be issued within one (1) month of Shareholder approval (upon a final Board approval). ii. The Options will have an expiry date of 31 March 2019.
iii. If Mr Cockerill ceases to be a consultant, employee or director of the Company prior to 31 December 2016, the Board may reduce the remaining exercise period to 28 days.
iv. Pricing - The exercise price will be either 0.5 cents or 125% of the last sale Share price on the ASX on the date of final Board approval (whichever is the greater).

3.2 Listing Rule 10.1

Pursuant to Listing Rule 10.11, a related party of a listed company is precluded from participating in any issue of securities in the company without the prior approval of shareholders.

Mr Cockerill is regarded as a related party of the Company by reason of his position as a Director.

Furthermore, Shareholder approval of the grant of the Incentive Options means that the grant of the Incentive Options will not reduce the Company's 15% placement capacity under Listing Rule 7.1.

The Chairman will cast all available proxies in favour of this Resolution.

3.3 Specific information required by Listing Rule 10.13

Listing Rule 10.13 requires that the following information be provided to Shareholders for the purposes of obtaining Shareholder approval pursuant to Listing Rule 10.11:

(a) The Incentive Options will be granted to Mr Ian Cockerill (or his nominees) for nil consideration.
(b) The maximum number of Incentive Options to be granted under this Resolution is 120 Million.
(c) The Company will grant the Incentive Options no later than one (1) month after the date of the Meeting (or such longer period of time as ASX may in its discretion allow).
(d) The Incentive Options will be issued on the following terms (Full terms and conditions are attached in Schedule 1):
i. The Options will have an expiry date of 31 March 2019.
ii. If Mr Cockerill ceases to be a consultant, employee or director of the Company prior to 31 December 2016, the Board may reduce the remaining exercise period to 28 days.
iii. Pricing - The exercise price will be either 0.5 cents or 125% of the last sale Share price on the ASX on the date of final Board approval (whichever is the greater).
(e) Mr Cockerill has an interest in the Resolution and therefore believes it inappropriate to make a recommendation. The other Directors each recommend the grant of the 120 Million Incentive Options to Mr Cockerill as it aligns the interests of the Company and Mr Cockerill to maximise Shareholder value.
(f) A voting exclusion statement is included for the Resolution in the Notice.

No funds will be raised by the grant of the Incentive Options as each Incentive Option is being granted at nil consideration.

(a) Other than the information above and otherwise in this Explanatory Memorandum, the Company believes that there is no other information that would be reasonably required by Shareholders to pass the Resolution.
(b) The Chairman will cast all available proxies in favour of the Resolution.

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SCHEDULE 1 - TERMS AND CONDITIONS OF OPTIONS

Exercise Date

The Options are exercisable wholly or in part at any time before 5.00 pm WST on 31 March 2019. If Ian Cockerill ceases to be a consultant, employee or director of the Company (or subsidiary) prior to 31 December 2016 the Board may at any time thereafter place the Options (or a portion thereof) on 28 days’ notice, whereupon:

The option holder will be given a notice that the Options (or such portion as is specified in the notice) will expire 28 days after the date of such notice; and
Failure to exercise the specified Options within such period will result in such Options lapsing.

Issue Price

The Options will be issued for nil consideration.

Exercise Price

Each Option shall entitle the option holder to acquire one fully paid ordinary Share upon payment of the exercise price. The exercise price will be either 0.5 cents or 125% of the last sale Share price on the ASX on the date of final Board approval (whichever is the greater).

Transfer of Options

Prior to 31 December 2016 the Options are only transferable to an associate of the option holder or with Board consent.

Notice of Exercise

Each Option may be exercised by notice in writing to the Company at any time before their date of expiry. Any notice of exercise of an option received by the Company with payment in full of the exercise price will be deemed to be a notice of the exercise of that option as at the date of receipt.

Quotation of Options and Shares on Exercise

If the Company is admitted to the official list of ASX, application will be made for official quotation of the Shares issued upon exercise of Options. Unless the Board resolves otherwise, the application will not be made to ASX for official quotation of the Options.

Participation Rights or Entitlements

There are no participating rights or entitlements inherent in the Options and option holders will not be entitled to participate in new issues of securities offered to shareholders during the currency of the Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least four (4) business days after the issue is announced so as to give option holders the opportunity to exercise their Options before the date for determining entitlements to participate in any issue.

Shares Allotted on Exercise

Shares allotted pursuant to the exercise of Options will be allotted following receipt of all the relevant documents and payments and will rank equally with the issued Shares.

Reconstruction of Share Capital

In the event of a reconstruction (including consolidation, subdivision, reduction or return) of the issued capital of the Company, all rights of the option holder shall be reconstructed in accordance with the Listing Rules.

Bonus Issues

If, from time to time, before the expiry of the Options the Company makes a pro-rata issue of Shares to shareholders for no consideration, the number of Shares over which an option is exercisable will be increased by the number of Shares which the option holder would have received if the option had been exercised before the date for calculating entitlements to the pro-rata issue.

GLOSSARY

$ means Australian dollars. ASX means ASX Limited. ASX Listing Rules means the Listing Rules of ASX. Board means the current board of directors of the Company. Chair means the chair of the Meeting. Company means Transerv Energy Limited (ABN 68 079 432 796). Corporations Act means the Corporations Act 2001 (Cth). Directors means the current Directors of the Company. Explanatory Statement means the explanatory statement accompanying the Notice. General Meeting or Meeting means the meeting convened by the Notice. Notice or Notice of Meeting means this notice of meeting including the Explanatory Statement and the Proxy Form. Option means an option to acquire a Share. Optionholder means a holder of an Option. Proxy Form means the proxy form accompanying the Notice. Resolution means the resolution set out in the Notice. Share means a fully paid ordinary share in the capital of the Company. Shareholder means a holder of a Share. WST means Western Standard Time as observed in Perth, Western Australia

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TRANSERV ENERGY LIMITED ABN 68 079 432 796

PROXY FORM

The Company Secretary Transerv Energy Limited

By delivery: Level 7 1008 Hay Street PERTH WA 6000

By post: PO Box 7209 CLOISTERS SQUARE WA 6850

By facsimile: +61 8 6555 6099

By email: [email protected]

*PLEASE PRINT CLEARLY*

Name of Shareholder:

Address of Shareholder:

Number of Shares entitled to vote:

Please mark � to indicate your directions. Further instructions are provided overleaf.

Proxy appointments will only be valid and accepted by the Company if they are made and received no later than 48 hours before the Meeting.

APPOINT A PROXY TO VOTE ON YOUR BEHALF

I/We being Shareholder/s of the Company hereby appoint:

The Chairman (mark box) � OR if you are NOT appointing the Chairman as your proxy, please write the name of the person or body corporate (excluding the registered shareholder) you are appointing as your proxy

or failing the person/body corporate named, or if no person/body corporate is named, the Chairman, as my/our proxy to act generally at the meeting on my/our behalf, including to vote in accordance with the following directions (or, if no directions have been given, and to the extent permitted by law, as the proxy sees fit), at the general meeting of the Company to be held at 10.30am (WST) on 11 August 2014, at Level 7, 1008 Hay Street, Perth, Western Australia and at any adjournment or postponement of the Meeting.

If two (2) proxies are appointed, the proportion or number of votes that this proxy is authorised to exercise is * [ ]% of the Shareholder's votes*/ [ ] of the Shareholder's votes. (An additional Proxy Form will be supplied by the Company, on request).

INSTRUCTIONS AS TO VOTING ON RESOLUTIONS

The proxy is to vote for or against the Resolutions referred to in the Notice as follows:

For Against Abstain

Resolution Issue of Incentive Options to Director Ian Cockerill

If you mark the Abstain box for a particular Resolution, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

Authorised signature/s

This section must be signed in accordance with the instructions below to enable your voting instructions to be implemented.

The Chairman of the Meeting intends to vote undirected proxies in favour of each Resolution.

Individual or Shareholder 1 Shareholder 2 Shareholder 3 Sole Director and Sole Company Secretary Director Director/Company Secretary

____ ____ ______ Contact Name Contact Daytime Telephone Date

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Proxy Notes

A Shareholder entitled to attend and vote at the Meeting may appoint a natural person as the Shareholder's proxy to attend and vote for the Shareholder at that Meeting. If the Shareholder is entitled to cast two (2) or more votes at the Meeting the Shareholder may appoint not more than two (2) proxies. Where the Shareholder appoints more than one proxy the Shareholder may specify the proportion or number of votes each proxy is appointed to exercise. If such proportion or number of votes is not specified each proxy may exercise half of the Shareholder's votes. A proxy may, but need not be, a Shareholder of the Company.

If a Shareholder appoints a body corporate as the Shareholder’s proxy to attend and vote for the Shareholder at the Meeting, the representative of the body corporate to attend the Meeting must produce the Certificate of Appointment of Representative prior to admission. A form of the certificate may be obtained from the Company’s share registry.

You must sign this form as follows in the spaces provided:

Joint Holding: where the holding is in more than one name all of the holders must sign. Power of Attorney: if signed under a Power of Attorney, you must have already lodged it with the registry, or alternatively, attach a certified photocopy of the Power of Attorney to this Proxy Form when you return it.

Companies: a Director can sign jointly with another Director or a Company Secretary. A sole Director who is also a sole Company Secretary can also sign. Please indicate the office held by signing in the appropriate space.

If a representative of the corporation is to attend the Meeting the appropriate "Certificate of Appointment of Representative" should be produced prior to admission. A form of the certificate may be obtained from the Company’s Share Registry.

Proxy Forms (and the power of attorney or other authority, if any, under which the Proxy Form is signed) or a copy or facsimile which appears on its face to be an authentic copy of the Proxy Form (and the power of attorney or other authority) must be deposited at or received by facsimile transmission at the address below no later than 48 hours prior to the time of commencement of the Meeting (WST).

Address: Level 7, 1008 Hay Street, Perth WA 6000. Postal address: PO Box 7209, Cloisters Square WA 6850. Facsimile: (08) 6555 6099 if faxed from within Australia or +61 8 6555 6099 if faxed from outside Australia. Email: [email protected]

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