HYTERRA LTD — Proxy Solicitation & Information Statement 2008

Oct 15, 2008

Explanatory statement and Notice of special meeting

BrainZ Instruments Limited ARBN 116 829 675 Date: 5 November 2008 Time: 11.30am AEDST Location: Offices of Minter Ellison Lawyers, Level 23, 525 Collins Street, Melbourne, Australia

In this document you will find:	Page No.
1. A letter from the chairman outlining the proposal.	2
2. An explanatory statement containing an explanation of, and information about, the proposal.	3
3. Notice of special meeting.	11
4. Proxy form.	13

16 October 2008

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Dear Shareholder

Enclosed with this letter are documents setting out details of the proposal for BrainZ Instruments Limited (BrainZ or the Company) to sell all or substantially all of the Company's assets to Natus Medical Incorporated, a company incorporated in the United States of America (Natus). A meeting of BrainZ's shareholders has been called for 5 November 2008 to approve the proposal.

You are urged to consider carefully all of this material, determine how you wish to vote and cast your vote accordingly.

Proposal

On 7 October 2008 (Melbourne time), BrainZ and Natus entered into an Asset Purchase Agreement pursuant to which the Company proposes to sell all or substantially all of its assets to Natus for NZ$1,300,000 (Agreement). This will include the rights to all of BrainZ's past and present products and designs. Completion of the transaction is conditional on approval by the Company's shareholders. Subject to receipt of shareholder approval and satisfaction of other conditions precedent specified in the Agreement, the transaction is expected to complete on or prior to 30 November 2008.

Benefits of the proposal

Your directors, Dr Damian Pethica, Mr Keith Aitchison and Dr James Brown having examined a number of options available for a sale of the Company or its assets, consider that the proposal represents the best option available for realising some of the Company's value.

Recommendation

Accordingly, your directors unanimously recommend the proposal and encourage shareholders to vote in favour of the resolution proposed in the enclosed Notice of Meeting. Tru-Test Corporation Limited has advised BrainZ that it intends to vote in favour of the resolution.

If you are unable to attend the special meeting, you are strongly urged to complete the proxy form and return it (see proxy form for details) as soon as possible and in any event by 11.30am Melbourne time on 3 November 2008.

Yours sincerely

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Dr D. Pethica Chairman

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Explanatory statement and Notice of special meeting

BrainZ Instruments Limited ARBN 116 829 675

(BrainZ or the Company)

Important notice

This explanatory statement contains an explanation of, and information about, the proposal to be considered at the special meeting of BrainZ on 5 November 2008. It is given to BrainZ's shareholders to help them determine how to vote on the resolution set out in the accompanying notice of meeting.

Shareholders should read this explanatory statement in full because individual sections do not give a comprehensive review of the proposal contemplated in this explanatory statement. This explanatory statement forms part of the accompanying notice of meeting and should be read with the notice of meeting.

If you are in doubt about what to do in relation to the proposal, you should consult your financial or other professional adviser.

This explanatory statement is dated 16 October 2008

Introduction

1. Introduction

The special meeting referred to in the accompanying notice of meeting is being held so BrainZ's shareholders can consider the resolution set out in the notice of meeting in accordance with listing rule 11.2 of ASX Limited (ASX) and section 129 of the New Zealand Companies Act 1993. If the resolution is approved BrainZ can proceed with the proposal contemplated in this explanatory statement without contravening the ASX listing rules or the New Zealand Companies Act 1993.

2. Summary of the proposal

In summary, it is proposed that BrainZ will sell all or substantially all of its assets to Natus Medical Incorporated (Natus) for NZ$1,300,000 pursuant to the terms of an Asset Purchase Agreement executed by the parties on 7 October 2008 (Agreement). Natus will take ownership of the assets and assume BrainZ's obligations under its current customer and supplier contracts.

3. Background and reasons for the proposal

As the Company has stated in past communications, the global market for neonatal bedside brain monitoring has not expanded at the rate anticipated. This has created slower than anticipated sales growth of the Company’s products and resulted in ongoing cash burn with no clear end point despite current endeavours to cut costs. Further cost-cutting would likely impair the eventual market share for BrainZ products by the time that the market does expand, since continued investment into research and development as well as sales and marketing would be required to achieve and maintain a competitive profile. In addition, such measures would also likely impair the future value of the Company’s assets.

BrainZ's business strategy is based on the recognised clinical need for a bedside tool that can monitor brain function. The Company has been focused on the neonatal area and the detection of seizure-like activity. However, while there is a recognised clinical need, bedside brain monitoring is not widely established as a standard of care even for high-risk neonates. One important reason for the slow sales growth, in the view of BrainZ, is the lack of clear outcome benefit from monitoring – evidence to show that the rate of long term brain impairment is improved with continuous monitoring and appropriate intervention as compared to standard clinical practice. BrainZ does not expect such data, other than from small-scale studies, to become available before 2010 by which time the Company would have exhausted its capital reserves. In addition, the results of the running or planned outcomes trials may or may not be positive. While the initial trials may have outcome measures such as the amount of brain white matter damage on imaging, substantial trials evaluating outcomes such as cognitive impairment at 2 years post-birth will most likely not conclude until even further into the future.

Previously BrainZ announced that merger and acquisition opportunities were being explored, but none of these has come to fruition. The Company has looked into three areas that were hoped might provide a strategic direction for BrainZ, being (1) the potential integration of BrainZ into a broader neonatal business in order to achieve the necessary critical mass and capital; (2) appropriate original equipment manufacturer arrangements; and (3) entering partnerships with parties with an interest in specific products (such as RecogniZe). The Company has put significant time and effort into exploring all opportunities over the last 18 months, but none has been found that would deliver the strategic benefits needed to improve BrainZ's performance going forward.

The Board believes that the continuing operation of BrainZ in its current form is likely to result in growing liabilities which the Company may not be able to meet.

Accordingly, after careful consideration of all the available options, the Board has determined that it is in the best interest of Shareholders to approve the sale of the majority of the Company’s assets to Natus pursuant to the terms of the Agreement.

4. The proposal in detail

The details of the proposal are documented in the Asset Purchase Agreement between BrainZ and Natus dated 7 October 2008.

Assets to be sold

BrainZ has agreed to sell the following assets to Natus:

• (a) the Products, comprising:

• (i) all product lines relating to brain monitoring or neurological signal processing together with any accessories associated with those products (Product Lines); and

• (ii) all BrainZ inventories, wherever located, including finished goods, works in progress, raw materials, spare parts and all other materials, supplies and components used by the Company in the design or production of its products, (Inventories);

• (b) all BrainZ's rights to and interest in intellectual property related to or used in connection with the Products (Technology);

• (c) all rights under assumed contracts including all of the Company's accounts receivable;

• (d) all of the Company's rights, claims, credits, causes of action or rights of set off against third parties including to recover damages for past, present and future infringement of BrainZ's intellectual property;

• (e) all of BrainZ's rights under contracts with any of its employees solely to the extent that such contracts relate to the assignment of proprietary rights to the Company or the confidentiality or non-competition obligations of such employees with respect to Products, Technology and any other items that are purchased in the proposed asset sale (Other Items);

• (f) all of BrainZ's electronic and hard copy books, records and documents relating to the Products and Technology;

• (g) all computer software and relevant passwords for all BrainZ products, whether currently in development, being marketed or previously developed or marketed;

• (h) all industrial designs, including registrations and applications, all schematics, netlists, test methodologies, test vectors, emulation and simulation tools and reports, hardware development tools and all rights in prototypes, breadboards and other devices, relating to the Products, Technology and Other Items;

• (i) all governmental authorizations obtained by BrainZ;

• (j) other specified tangible assets; and

• (k) all intangible assets and goodwill associated with items (a) to (j).

Purchase price

Natus has agreed to pay NZ$1,300,000 on completion of the sale.

The purchase price is allocated as follows:

• (a) for Product Lines: NZ$100,000;

• (b) for Inventories: NZ$332,000;

• (c) for BrainZ's rights in and to the assumed contracts, intellectual property, and for all other property, rights, future economic benefits and assets acquired: NZ$50,000;

• (d) for the accounts receivable less accounts payable: NZ$117,400;

• (e) for goodwill: NZ$700,600

Some obligations to be assumed by Natus

As well as paying the purchase price, Natus will assume BrainZ's obligations in respect of:

• (a) any claims arising after the completion of the proposed asset sale (Completion) under express product warranties given by BrainZ; and

• (b) product support and/or maintenance, under the assumed contracts, or otherwise related to the Products (including express product warranties made, or express product support and/or maintenance obligations undertaken, in some cases lasting for up to 5 years).

Conditions precedent

The sale of the assets is conditional on the following taking place:

• (a) the asset sale is not restrained by a court or is otherwise illegal;

• (b) neither party's involvement in the asset sale is restrained by a court or is otherwise illegal;

• (c) each party obtaining any necessary governmental approvals;

• (d) approval by BrainZ shareholders in accordance with the ASX listing rules and the relevant laws of Australia and/or New Zealand;

• (e) BrainZ's New Zealand solicitors, Minter Ellison Rudd Watts, providing a legal opinion in relation to the proposed asset sale that is reasonably satisfactory to Natus in form and substance;

• (f) BrainZ providing evidence to Natus of the novation or consent to assignment of any third party whose novation or consent to assignment may be required in connection with the asset purchase or any related transaction;

• (g) BrainZ obtaining, and providing to Natus, unconditional and irrevocable releases or terminations relating to encumbrances on any part of the purchased assets that are reasonably satisfactory to Natus in form and substance;

• (h) BrainZ providing Natus with a counterpart of the 'Bill of Sale and Assignment and Assumption Agreement' between the parties (this is the document that effects the sale of assets and assumption of liabilities as agreed between the parties and outlined above); and

• (i) BrainZ providing details to Natus of the accounts receivable and accounts payable of the Company arising between the date of the Agreement and the date of Completion, that are reasonably satisfactory to Natus in form and substance.

These conditions are conditions precedent. If they are not fulfilled the Agreement does not have any effect and the sale will not happen.

Completion

If the conditions precedent are fulfilled, the sale should be completed on or prior to 30 November 2008.

Exclusivity

The Agreement with Natus provides that BrainZ will not negotiate with any other party in relation to the sale of the Company's business unless or until the Agreement completes or is terminated.

Break fee

A break fee of NZ$100,000 is payable by BrainZ to Natus in the event that shareholder approval is not obtained or if the Agreement is terminated following the Board of BrainZ changing its unanimous recommendation supporting the proposal. The break fee obligation was required by Natus as a condition of entering into the Agreement.

5. Effects of the proposal

Application of purchase price

Following Completion, BrainZ intends to apply the purchase price received from Natus as follows:

• (a) approximately NZ$525,000 to pay the Company's advisers in respect of the proposed transaction, comprising:

• (i) NZ$425,000 payable to JT Campbell & Co Pty Ltd (JT Campbell) referred to in section 10 below; and

• (ii) NZ$100,000 in legal fees; and

• (b) approximately NZ$650,000 to pay off BrainZ's current debts and liabilities including employee related payments of NZ$520,000.

Company's plans for the future

Following Completion of the proposed sale to Natus, the Company will have divested itself of all its operations.

The Board is considering conducting a return of capital towards the end of 2009. This timeframe is dictated by the length of time to fully wind down the business. Based on current estimates, the Board believes that approximately NZ$1,800,000 to NZ$2,400,000 in surplus cash will be available (equating to approximately NZ$0.03 – NZ$0.04/share) to be returned to shareholders pursuant to a return of capital.

Depending upon the legal means of effecting any distribution, shareholder approval may also be required.

The Directors' investigations regarding any return of capital (which may require the Company to be liquidated) are ongoing and an announcement will be made when a plan has been finalised, alternatives include the sale of the Company's shell.

The amounts specified above are estimates only, based on information currently available to BrainZ.

6. Advantages and disadvantages of the transaction

Advantages

The proposal may allow BrainZ shareholders to receive approximately NZ$0.03 – NZ$0.04/share in BrainZ pursuant to a return of capital, with Natus taking on the contractual liabilities related to product warranty and support. The Directors have investigated many alternatives for the Company given its poor financial performance and do not believe that a better option is likely to be found than the Agreement with Natus.

If shareholders do not approve the transaction, the Directors have no realistic alternative proposal that would retain shareholder value, since cash burn would continue whilst liabilities were discharged.

Disadvantages

The proposed transaction involves the sale of all of BrainZ's material assets and undertaking. This means that the Company will no longer be able to operate in the way it has. All rights to the products, technologies and know-how developed and retained by BrainZ since it came into being as a corporate entity will be sold, with the result that BrainZ will have no real operational capability in respect of the business it has conducted to date.

By selling its assets to Natus as proposed, BrainZ will lose the opportunity to sell its assets to another buyer on better terms and/or for a better price. As at the date of this Explanatory Booklet, the Directors are not aware of a definitive superior proposal than the existing proposal with Natus.

7. Intentions of Tru-Test Limited

The Company's largest shareholder, Tru-Test Corporation Limited, has advised the board of BrainZ in writing that it intends to vote in favour of the proposed transaction.

8. Legal and regulatory requirements

ASX Listing Rules

ASX listing rule 11.2 applies to a significant change to an entity's activities involving the entity disposing of its main undertaking.

Under listing rule 11.2, the disposal by a listed company of its main undertaking must be approved by shareholders at a general meeting. Your directors consider the proposed sale by BrainZ of all or substantially all of the Company's assets is a disposal of its main undertaking for the purposes of listing rule 11.2.

Your directors have accordingly convened this meeting to comply with listing rule 11.2.

New Zealand Companies Act 1993

Under section 129 of the New Zealand Companies Act 1993, a major transaction must be approved by shareholders by special resolution.

A major transaction includes any transaction by which a company disposes of assets with a value of more than half the value of the company's assets before the disposition. Your directors consider the proposed sale by BrainZ of all or substantially all of the Company’s assets is a major transaction for the purposes of section 129 of the New Zealand Companies Act 1993.

Accordingly, this meeting is also convened to comply with section 129 of the New Zealand Companies Act 1993

Minority Buy-out Rights

If the above resolution is passed, any shareholder who has cast all of the votes attached to shares registered in that shareholder’s name (and having the same beneficial owner) against the resolution, is entitled to require the Company to purchase those shares in accordance with section 111 of the New Zealand Companies Act 1993. If shareholders wish to exercise that entitlement they must contact the Company within 10 working days of the passing of the resolution. If a shareholder exercises that entitlement, the Company must purchase that shareholder’s shares unless the Court grants an exemption under section 114 of the New Zealand Companies Act 1993. The Company would apply for an exemption if, as a consequence of shareholders exercising their rights, the Board formed the view that any of the grounds set out in section 114 of the New Zealand Companies Act 1993 existed. Those grounds are:

• (a) The purchase would be disproportionately damaging to the company; or

• (b) The company cannot reasonably be required to finance the purchase; or

• (c) It would not be just and equitable to require the company to purchase the shares.

If a shareholder votes against the above resolution, and as a result the resolution is not passed, then the sale described in the resolution will not proceed and the minority buy-out rights described above will not apply.

Procedural notes

The resolution being put to shareholders is therefore both an ordinary resolution for the purposes of ASX listing rule 11.2 and a special resolution for the purposes of the New Zealand Companies Act 1993. An ordinary resolution is required to be passed by a majority of 50% or more of the votes of those shareholders entitled to vote and voting on that resolution. A special resolution is required to be passed by a majority of 75% or more of the votes of those shareholders entitled to vote and voting on that resolution.

9. Other approvals

As well as BrainZ's shareholders approving the resolution set out in the accompanying notice of meeting, the Company’s Exclusive Distribution Agreement with General Electric will need to be terminated and/or assumed by Natus with the written consent of General Electric on terms reasonably acceptable to the Company and Natus.

This additional approval has been sought or will be sought.

10. Interest of directors

We note that Keith Aitchison is a shareholder and director of Tru-Test Corporation Limited and a director of Tru-Test Limited. Tru-Test Limited is a 57% shareholder of BrainZ.

BrainZ entered into an agreement with JT Campbell in April 2007 to assist in the restructuring of its business. As a result of this agreement a fee of A$375,000 is payable to JT Campbell on Completion (Success Fee). At the time BrainZ entered into the agreement with JT Campbell, Dr. Damian Pethica (Chairman of BrainZ) was a consultant with JT Campbell. Dr. Pethica has advised the Board that he will receive 30% of any Success Fee payable to JT Campbell as consideration for his involvement in the restructuring of the business and completing the transaction with Natus.

11. Voting rights

Some shareholders may not be allowed to vote on the resolution set out in the accompanying notice of meeting. Please refer to the voting exclusion statement in the notice of meeting.

12. Recommendation

Your directors recommend the proposal and recommend that eligible shareholders vote in favour of the resolution set out in the accompanying notice of meeting. The sale of the Company's assets to Natus cannot be completed without shareholder approval. As noted above, the Board believes the terms of the proposed sale are in the best interests of the Company.

If shareholders cannot attend the meeting, they are urged to complete the proxy form and return it (see proxy form for details) as soon as possible, and in any event by 11.30am Melbourne time on 3 November 2008.

13. Indicative timetable

If the resolution set out in the accompanying notice of meeting is approved, the proposal should proceed according to this timetable:

Event	Date
Meeting held and sale of all or substantially	5 November 2008
all of the Company's assets approved
Completion of sale of all or substantially all	On or prior to 30 November 2008
of the Company's assets

Dated: 16 October 2008

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Notice of s ecial meetin p g

BrainZ Instruments Limited ARBN 116 829 675

A special meeting of the members of BrainZ Instruments Limited (BrainZ) will be held:

• on 5 November 2008;

• at 11.30am Melbourne time;

• at the offices of Minter Ellison Lawyers, Level 23, 525 Collins Street, Melbourne, Australia.

Business

Asset Purchase Agreement - Natus

To consider and if thought fit pass the following resolution as an ordinary resolution for the purpose of listing rule 11.2 of ASX Limited, and a special resolution for the purposes of section 129 of the New Zealand Companies Act 1993.

'That, in compliance with Listing Rule 11.2 of ASX Limited and section 129 of the New Zealand Companies Act 1993, the sale by BrainZ Instruments Limited of all or substantially all of the Company's assets to Natus Medical Incorporated, outlined in the explanatory statement dated 16 October 2008 is approved.'

Voting exclusions:

BrainZ will disregard any votes cast by:

• Natus Medical Incorporated; and

• an associate of any such person.

However, BrainZ will 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 a 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.

BrainZ has determined, in accordance with regulation 7.11.37 of the Corporations Regulations 2001 (Cth), that BrainZ's shares quoted on ASX Limited at 11.30am Melbourne time on 3 November 2008, are taken for the purposes of the special meeting to be held by the persons who held them at that time. Accordingly those persons are entitled to attend and vote (if not excluded) at the meeting.

Proxies:

1. A member who is entitled to vote at the meeting may appoint:

2. (a) one proxy if the member is only entitled to one vote; or

3. (b) one or two proxies if the member is entitled to more than one vote.

4. Where the member appoints two proxies, the appointment may specify the proportion or number of votes that each proxy may exercise. If the appointment does not specify a proportion or number, each proxy may exercise one-half of the votes, in which case any fraction of votes will be disregarded.

5. A proxy need not be a member of BrainZ.

6. If you require an additional proxy form, BrainZ will supply it on request.

7. The proxy form and the power of attorney or other authority (if any) under which it is signed (or a certified copy) must be received by BrainZ, at least 48 hours before the time for holding the meeting, at:

8. (a) BrainZ's registered office, 25 Carbine Road, Mt Wellington, Auckland, New Zealand; or

9. (b) by fax to BrainZ's registered office, +64 9 978 8889; or

10. (c) PO Box 51-078, Pakuranga, Manukau 2140, New Zealand.

11. Proxies given by corporate shareholders must be executed in accordance with their constitutions, or signed by a duly authorised officer or attorney.

12. A proxy may decide whether to vote on any motion, except where the proxy is required by law or BrainZ's constitution to vote, or abstain from voting, in their capacity as proxy. If a proxy is directed how to vote on an item of business, the proxy may vote on that item only in accordance with that direction. If a proxy is not directed how to vote on an item of business, the proxy may vote as he or she thinks fit.

13. If a shareholder appoints the chairperson of the meeting as the shareholder's proxy and does not specify how the chairperson is to vote on an item of business, the chairperson will vote, as proxy for that shareholder, in favour of that item on a poll.

Dated 16 October 2008

By order of the Board

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.................................................. Ian R. Hadwin Secretary

FORM OF PROXY

BRAINZ INSTRUMENTS LIMITED

(incorporated in New Zealand) ARBN 116 829 675 (Company)

25 Carbine Rd Mt Wellington, Auckland New Zealand Telephone: +64 9 978 8896 Facsimile: +64 9 978 8889

I/We

(Full name in block letters)

of

(Address)

being a shareholder of BrainZ Instruments Limited hereby appoint:

Name

Address

or failing that person: Name

Address

or failing that person, the Chairman of the Special Meeting as my/our proxy/proxies to vote for me/us and on my/our behalf at the Special Meeting of the Company to be held at the offices of Minter Ellison Lawyers, 525 Collins Street, Melbourne on Wednesday, 5 November 2008 commencing at 11:30am (AEDST) and at any adjournment thereof.

If the Chairman of the Special Meeting is voting as your proxy, please be aware that he intends to vote any undirected proxies held on the item of business in favour of the resolution on that item of business.

If the Chairman of the meeting is appointed as your proxy, or may be appointed by default and you do not � wish to direct your proxy in respect of a resolution, please place a mark in the box.

By marking this box, you acknowledge that the Chairman of the meeting may exercise your proxy even if he has an interest in the outcome of the resolution and that votes cast by the Chairman of the meeting for the resolution other than as proxy holder will be disregarded because of that interest.

If you do not mark this box, and you have not directed your proxy how to vote, the Chairman will not cast your votes on the resolution and your votes will not be counted in calculating the required majority if a poll is called on the resolution.

Signature of shareholder (companies to execute under seal or director’s signature if applicable)

Dated this day of

2008

If you desire to direct your proxy/proxies how to vote, please insert X in the appropriate box. If you do not direct your proxy/proxies they may vote as they think fit or may abstain from voting.

BUSINESS For Against Abstain Resolution 1 – Asset Purchase Agreement - Natus � � �

PROXIES

To be effective, proxy forms must be received by the Company at its office at least 48 hours before the time for holding the Special Meeting.

Hand Delivery: By Mail: 25 Carbine Rd PO Box 51-078 Mt Wellington, Auckland Pakuranga, New Zealand Manukau 2140, New Zealand

By Facsimile: +64 9 978 8889

A shareholder entitled to attend and vote is entitled to appoint not more than two persons as his/her proxy to attend and vote on behalf of the shareholder. A proxy need not be a shareholder of the Company. If more than one proxy is appointed, each proxy must be appointed to represent a specified proportion of the shareholder’s voting rights.

A proxy form executed by a corporation should be executed in accordance with the corporation’s constitution. . If the proxy form is executed under a power of attorney or other authority then the original document or a certified copy must be forwarded to the Company with the proxy form.