IONIC RARE EARTHS LIMITED — AGM Information 2003

Apr 27, 2003

EZENET LIMITED

ABN 84 083 646 477

NOTICE OF GENERAL MEETING

FORM OF PROXY

AND

EXPLANATORY MEMORANDUM

Date of Meeting Friday 30 May 2003

Time of Meeting 3.00pm

Place of Meeting
Sutherland Room, City West Function Centre
45 Plaistowe Mews City West, Western Australia

Ezenet Limited $\overline{2}$

CORPORATE DIRECTORY

Directors	Dr Wolf Martinick Mr Neil O'Loughlin Mr Linton Chapman Mr Graham O'Dea
Secretary	Mr Simon Watson
Auditors	Ernst & Young Central Park 152-158 St George's Terrace PERTH WA 6000
Legal Advisers	Simon Watson Solicitor Level 1, 17 Ord Street WEST PERTH WA 6005
Share Registry	Computershare Registry Services Pty Ltd Level 2, Reserve Bank Building 45 St George's Terrace PERTH WA 6000 Ph: 9323 2000 Fx: 9323 2033
Registered Office	Ground Floor Zurich House 66 Kings Park Road WEST PERTH WA 6005
ABN	84 083 646 477
Stock Exchange Code	EZE

EZENET LIMITED

(ABN 84 083 646 477)

NOTICE OF GENERAL MEETING

Notice is hereby given that a General Meeting of shareholders of Ezenet Limited will be held on Friday 30 May 2003 at 3.00 pm, at CityWest Function Centre, Sutherland Room, 45 Plaistowe Mews, City West, Western Australia.

The following resolutions are to be considered at the meeting and Resolutions 1 to 7 inclusive are discussed in the Explanatory Memorandum to Shareholders which forms part of this notice.

• ISSUE TO SUBSCRIBERS/DIRECTORS $\mathbf{1}$ . As ordinary resolutions
• $1.1$ For the purposes of Rule 10.11 of the Listing Rules and Part 2E of the Corporations Act 2001 and for all other purposes, shareholders approve the allotment and issue for no consideration to Dr Wolf Martinick or his nominee four million seventy five thousand nine hundred and twelve (4,075,912) options each to subscribe for fully paid ordinary shares in the capital of the Company on or before 30 June 2007 for an exercise price of fifteen cents (\$0.15) and otherwise on the terms set out in the options conditions outlined below such issue or placement to be made no later than one (1) month after the passing of the resolution.
• $1.2$ For the purposes of Rule 10.11 of the Listing Rules and Part 2E of the Corporations Act 2001 and for all other purposes, shareholders approve the allotment and issue for no consideration to Mr Neil O'Loughlin or his nominee one million one hundred and fifty nine thousand and eighty eight (1,159,088) options each to subscribe for fully paid ordinary shares in the capital of the Company on or before 30 June 2007 for an exercise price of fifteen cents (\$0.15) and otherwise on the terms set out in the options conditions outlined below such issue or placement to be made no later than one (1) month after the passing of the resolution.

$2.$ ISSUE OF OPTIONS TO DIRECTORS

As ordinary resolutions

• $2.1$ For the purposes of Rule 10.11 of the Listing Rules and Part 2E of the Corporations Act 2001 and for all other purposes, shareholders approve the allotment and issue for no consideration to Dr Wolf Martinick or his nominee up to three million five hundred thousand (3,500,000) options each to subscribe for fully paid ordinary shares in the capital of the Company on or before 30 June 2007 for an exercise price of fifteen cents (\$0.15) and otherwise on the terms set out in the options conditions outlined below such issue or placement to be made no later than one (1) month after the passing of the resolution.
• $2.2$ For the purposes of Rule 10.11 of the Listing Rules and Part 2E of the Corporations Act 2001 and for all other purposes, shareholders approve the allotment and issue for no consideration to Mr Neil O'Loughlin or his nominee up to three million (3,000,000) options each to subscribe for fully paid ordinary shares in the capital of the Company on or before 30 June 2007 for an exercise price of fifteen cents $(\$0.15)$ and otherwise on the terms set out in the options conditions outlined below such issue or placement to be made no later than one (1) month after the passing of the resolution.
• 2.3 For the purposes of Rule 10.11 of the Listing Rules and Part 2E of the Corporations Act 2001 and for all other purposes, shareholders approve the allotment and issue for no consideration to Mr Graham O'Dea or his nominee up to three million (3,000,000) options each to subscribe for fully paid ordinary shares in the capital of the Company on or before 30 June 2007 for an exercise price of fifteen cents (\$0.15) and otherwise on the terms set out in the options conditions outlined below such issue or placement to be made no later than one (1) month after the passing of the resolution.

$3.1$ For the purposes of Rule 10.11 of the Listing Rules and Part 2E of the Corporations Act 2001 and for all other purposes, shareholders approve the allotment and issue for no consideration to Mr Linton Chapman or his nominee up to three million (3,000,000) options each to subscribe for fully paid ordinary shares in the capital of the Company on or before 30 June 2007 for an exercise price of fifteen cents (\$0.15) and otherwise on the terms set out in the options conditions outlined below such issue or placement to be made over an eighteen (18) month year period as set out in the Explanatory Memorandum to this Notice of Meeting.

$4.$ ISSUE OF OPTIONS TO CONSULTANTS

As an ordinary resolution

• $4.1$ For the purposes of Rule 7.1 of the Listing Rules and for all other purposes the Company and the Directors are authorised to issue and allot for no consideration up to such persons. Companies or Trusts as the Directors in their absolute discretion may determine up to ten million (10,000,000) options to subscribe for fully paid ordinary shares exercisable at an exercise price of fifteen cents (\$0.15) and otherwise on the terms set out in the options conditions outlined below such issue or placement to be made no later than three (3) months after the passing of the resolution.
• 1. DIRECTORS INDEMNITIES As an ordinary resolution
• $5.1$ For the purposes of Part 2E.1 of the Corporations Act 2001 to approve the company entering into Directors access, insurance and indemnity Deeds between the Company and each of the present and future Directors and Officers of the Company as set out in the Explanatory Memorandum to this Notice of Meeting.
• 1. RATIFICATION OF ISSUES As an ordinary resolution
• $6.1$ For the purposes of Listing Rule 7.4 the issue of five million two hundred and thirty five thousand (5,235,000) fully paid ordinary shares as set out in the Explanatory Memorandum to this Notice of Meeting to be approved and ratified.
• $7_r$ ISSUE OF SECURITIES

As ordinary resolutions

• $7.1$ For the purposes of Rule 7.1 of the Listing Rules and for all other purposes the Company and the Directors are authorised to issue and allot up to one hundred twenty million (120,000,000) fully paid ordinary shares ranking equally with other fully paid ordinary shares at an issue price of not less than eighty percent (80%) of the average market price of shares on the ASX over the last five (5) days on which sales and shares were recorded before the date of the issue in accordance with Listing Rule 7.3.3 such issue to be made no later than three (3) months after the date of the resolution.
• $7.2$ For the purposes of Rule 7.1 of the Listing Rules and for all other purposes the Company and the Directors are authorised to issue and allot for no consideration up to one hundred and twenty million (120,000,000) options to subscribe for fully paid ordinary shares on or before a date not later than 30 June 2007 exercisable at a price of not less than eighty percent (80%) of the average market price of shares on the ASX over the last five (5) days on which sales and shares were recorded before the date of the issue in accordance with Listing Rule 7.3.3 such issue to be made no later than three (3) months after the date of the resolution.

Dated at Perth this 28 April 2003

By order of the Board of Directors

VOTING ENTITLEMENT

For the purposes of determining voting entitlements at the General Meeting, shares will be taken to be held by the persons who are registered as holding the shares at 3.00pm WST on the Thursday 29 May 2003. Accordingly, transactions registered after that time will be disregarded in determining entitlements to attend and vote at the meeting.

Voting Restrictions

Voting restrictions apply to resolutions 1, 2, 3, 4, 6 and 7.

The Company will disregard any votes cast on resolutions by:

• Dr Wolf Martinick in relation to resolution 1.1; $(a)$
• $(b)$ Mr. Neil O'Loughlin in relation to resolution 1.2:
• Dr Wolf Martinick in relation to resolution 2.1: $\mathcal{L}(\mathbf{C})$
• $(d)$ Mr. Neil O'Loughlin in relation to resolution 2.2:
• Mr. Graham O'Dea in relation to resolution 2.3; $(e)$
• Mr. Linton Chapman in relation to resolution 3.1; $(f)$
• Any person who may participate in a proposed issue and a person who might obtain a benefit, $(q)$ except a benefit solely in the capacity of a security holder;
• A party who is to receive the securities; or $(h)$
• An associate of any such person: $(i)$

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 (a) directions on the proxy form; or
• $(b)$ It is cast by the person chairing the meeting as a proxy for the person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Proxies

A form of proxy with related information and instructions accompanies this Notice of Meeting.

Explanatory Memorandum for Extraordinary General Meeting of Ezenet Limited shareholders

EZENET LIMITED ABN 84 083 646 477

EXPLANATORY MEMORANDUM

INTRODUCTION AND BACKGROUND $\mathbf{1}$

This Explanatory Memorandum is intended to provide shareholders with sufficient information to assess the merits of the resolutions contained in the accompanying Notice of General Meeting of Ezenet Limited.

Shareholders at the General Meeting will be asked to consider resolutions to:

• to approve an issue of options to Dr Wolf Martinick and Mr. Neil O'Loughlin; (a)
• $(b)$ to approve an issue of up to nine million five hundred thousand (9,500,000) incentive options to Directors;
• to approve an issue of up to three million (3,000,000) options to executives: $\mathcal{L}(\mathbf{C})$
• to approve an issue of up to ten million (10,000,000) options to consultants; $(d)$
• to approve establishing Directors Deeds of Indemnity Insurance and Access: $(e)$
• to ratify prior issues of shares; $(f)$
• to approve an issue of up to one hundred twenty million (120,000,000) shares and options $(q)$ for working capital.

This Explanatory Statement has been prepared for the information of Shareholders in relation to the business to be conducted at the Company's General Meeting to be held at Sutherland Room. City West Function Centre, 45 Plaistowe Mews, City West, Western Australia on Friday 30 May, 2003 commencing at 3.00pm.

The purpose of this Explanatory Statement is to provide Shareholders with information that is reasonably required by Shareholders to decide how to vote upon the resolutions.

No options will be issued so that at any time the number of options on issue exceed the number of issued shares in the Company.

The Directors recommend that Shareholders read this Explanatory Statement before determining whether to support the resolution or otherwise.

$2.$ ISSUE TO DR WOLF MARTINICK AND MR. NEIL O'LOUGHLIN AS SUBSCRIBERS

• $2.1$ On 10 January 2003 the Company entered into Subscription Agreements with Dr Martinick and Mr. O'Loughlin. Under the Subscription Agreements Dr Martinick and Mr. O'Loughlin agreed to subscribe for shares with free attaching shares in the Company with free attaching options. The Subscription Agreements provided:
• for the issue of four million seventy five thousand nine hundred and twelve $(a)$ (4.075.912) shares to Dr Martinick at an issue price of five cents (5¢) per share:
• for the issue of one million one hundred and fifty nine thousand and eighty eight $(b)$ (1,159,088) shares to Mr. O'Loughlin at an issue price of five cents (5¢) per share;
• $(c)$ for the issue of one (1) free attaching option for every share issued to Dr Martinick and Mr. O'Loughlin.
• $2.2$ The provision in the Subscription Agreements to issue an option was in excess of the powers of the Directors and accordingly the issue of the options was made subject to shareholder approval.

• 2.3 Dr Martinick and Mr. O'Loughlin have both paid the full amount under the Subscription Agreements and the Company has applied those funds to meet its necessary operational expenses.

• 2.4 For some time the Ezenet has committed all of its resources in the marketing and installation of the Ezenet video services to the Hotel/Motel industry and the development of complementary products and services and strategic alliances. To achieve this the Company requires financial resources to enable it to carry out this objective effectively. The proceeds of the placement was applied towards these objectives.

• 2.5 Resolution 1 seeks shareholders approval for the purposes of Listing Rule 10.11 to issue the options agreed to by the Company under the Subscription Agreements. Approval is sought under Listing Rule 10.11 because Dr Martinick and Mr. O'Loughlin are now Directors of the Company, accordingly approval is not required under Listing Rule 7.1.
• 2.6 Section 208 of the Corporations Act requires a public company giving a financial benefit (such as the issue of options) to a related party (such as a director) to obtain shareholders approval to permit the benefit to be given unless one of a number of exceptions applies. Section 208 of the Corporations Act provides that a public company may give a financial benefit to a company if a shareholder resolution permits the benefit to be given, the public company gives the benefit within 15 months of the passing of this resolution and various conditions prescribed by the Corporations Act have been satisfied in relation to the resolution. This requires the disclosure of certain matters in relation to the resolution

(Section 219 of the Corporations Act). The following information is provided to satisfy the requirements of Section 2.9 of the Corporations Act:-

• the related parties to whom Resolution 1 would permit financial benefits to be given $(a)$ are Dr W G Martinick and Mr. N T O'Loughlin;
• $(b)$ the nature of the financial benefit is the grant to each of the Directors of the options set out above:
• further information is set out in item 3.2 of this Explanatory Memorandum. $(c)$

ISSUE OF DIRECTORS OPTIONS 3.

$3.1$ Issue Of Directors Incentive Options

Resolution 2 seeks approval for the grant of options to acquire ordinary shares of the Company at an exercise price of fifteen cents (15¢) on or before 30 June 2007 to each of the Directors, Dr W.G Martinick, Mr N.T O'Loughlin and Mr G. O'Dea or their respective nominees. The amount will be determined by the directors and the maximum number of options are set out below:

OPTIONS ALLOCATION
Name	No. of Options
Dr Wolf Martinick	3,500,000
Mr Neil O'Loughlin	3,000,000
Mr. Graham O'Dea	3,000,000
TOTAL	9,500,000

The Directors have agreed that there will be no Directors fees paid to Directors for the following two (2) years. The grant of options is to provide an incentive to each of the directors for future services he will provide to the Company and an acknowledgement of past services. The directors consider that the incentive to be provided is cost effective to the Company as opposed to alternative incentives in the form of a monetary bonus or director's fees.

ASX Listing Rule 7.1 requires that the Company obtain shareholder approval prior to the issue of the options as their grant combined with the shares proposed to be issued under the other resolutions may represent more than 15% of the issued capital of the Company.

ASX Listing Rule 10.11 provides that a Company must not issue securities (which includes the options) to a director without shareholder approval. Resolution 2 seeks approval under Listing Rule 10.11 and accordingly approval is not required under Listing Rule 7.1.

ASX Listing Rule 10.13 each require information to be disclosed for shareholders to approve an issue of securities under ASX Listing Rule 10.11.

The following information is provided to satisfy the requirements of ASX Listing Rule 10.13:-

• The maximum number of options the Company will grant is 9,500,000; $(a)$
• $(b)$ The grant of the options will take place no later than 1 month after the date of the meeting convened by this Notice and it is anticipated that the grant will occur on one date:
• $(c)$ Each of the Directors, or their respective nominee will be issued the number of options set out above:
• $(d)$ The options will not be listed on the Australian Stock Exchange. The options will be exercisable at fifteen cents (15¢) on or before 30 June 2007 and will otherwise be on the same terms and conditions as outlined in this Explanatory Memorandum; and
• No funds will be raised from the grant of the options. $(e)$

$3.2$ Corporations Act Requirements

As set out above the Corporations Act requires a public Company giving a financial benefit to a related party (such as a Director) to obtain shareholders approval.

The following information is provided to satisfy the requirements to Section 219 of the Corporations Act:-

• The related parties to whom Resolution 2 would permit financial benefits to be given $(a)$ Dr W.G Martinick, Mr N.T O'Loughlin and Mr G O'Dea;
• $(b)$ The nature of the financial benefit is the grant to each of the Directors (or their respective nominee) of the options set out above. The options will be granted for no consideration:
• $(c)$ The issued capital of the Company at the date of this Notice of Meeting comprises:-
• 40,135,000 fully paid ordinary shares; and $(i)$
• $(ii)$ 29,000,000 options to subscribe for fully paid ordinary shares exercisable at \$0.10 on or before 31 July 2003;
• The present holding by each Director of securities in the Company comprise:- $(d)$

	Fully Paid 31 July 2003	Ordinary Unlisted Options @
	Shares	10 cents
Dr Wolf Martinick	4.081.712
Wolf Martinick	2.802.920
(indirectly)
Mr Neil O'Loughlin	1,956,168
Mr Graham O'Dea	66.000
Mr. Linton Chapman (indirectly)	2.077.419

• The nine million five hundred thousand (9.500,000) options in the class proposed to $(e)$ be issued to the Directors are currently unlisted;
• The Corporations Act requires that this Notice of Meeting and Explanatory $(f)$ Memorandum must be lodged with the ASIC before release. Notice of Meeting and Explanatory Memorandum were lodged with the ASIC on 17 April 2003 ("Lodgment Date"). The closing prices of the Company's shares during five (5) trading days prior to the Lodgment Date of this Notice are set out below.

. The property of the Date	Closing Price
14 April 2003	$$0.09$ cents
15 April 2003	$$0.09$ cents
16 April 2003	\$0.067 cents
17 April 2003	$$0.067$ cents
22 April 2003	\$0.067 cents

• $(g)$ The Company has arranged for an independent valuation of the options proposed to be granted to the directors using the Black Scholes Valuation method. Based upon a volatility factor of seventy five percent (75%) and an underlying share price based upon the current share price of six point one cents $(6.1¢)$ and a risk free rate of 6.5% the options to be issued to the Directors are valued at two point four eight cents (2.48¢) each:
• Because each of the Member of the Board of the Company have an interest in the $(h)$ resolutions, the Board do not wish to make a recommendation about the proposed resolutions.

ISSUE OF OPTIONS TO EXECUTIVES 4.

• $4.1$ Mr. Linton Chapman is a full-time employee of the Company.
• $4.2$ ASX Listing Rule 10.11 provides that a Company must not issue securities (which includes the options) to a Director without shareholder approval. Mr. Chapman is a Director of the Company. Resolution 3 seeks approval under Listing Rule 10.11 and accordingly approval is not required under Listing Rule 7.1. As set out below it is proposed that the options will be issued over an eighteen (18) month period. The ASX have granted a waiver from Listing Rule 10.13.3 to enable the options to be issued over this extended period.
• $4.3$ The options to be granted to Mr. Linton Chapman, a Directors of the Company, form part of the remuneration arrangements with Mr. Chapman.

The options in the class proposed to be issued to Mr. Linton Chapman are currently unlisted on the ASX. The highest and lowest prices of shares recorded on the ASX during the twelve (12) months immediately preceding the Lodgment Date of this Notice of Meeting were:-

• $(a)$ Highest - \$0.21 on 17 June 2002;
• Lowest \$0.04 on 6 November 2002. $(b)$

Section 208 of the Corporations Act requires a public Company giving a financial benefit (such as the issue of options) to a related party (such as Directors must obtain shareholders approval to permit the benefit to be given. Section 211 of the Corporations Act provides that a public Company may give a financial benefit to a related party without shareholders approval if the benefit is remuneration as an officer or employee and the remuneration is reasonable in the circumstances. The members of the Board other than Mr. Linton Chapman consider that the options to be issued to Mr. Linton Chapman are reasonable and appropriate in the circumstances.

• $4.4$ The purpose of the proposed issue to Mr. Linton Chapman is to provide a means by which Mr. Chapman can share in the growth of the Company and accordingly strengthening his commitment to the Company and its operations. It is proposed that up to three million $(3,000,000)$ options will be issued in tranches of up to one million $(1,000,000)$ options each provided that operational targets agreed between Mr. Chapman and the Directors are achieved. Subject to the agreement by the Board and the operational targets being achieved the options will be issued as follows:
• up to 1,000,000 options in July 2003; $(a)$
• up to 1,000,000 options in December 2003; $(b)$
• $(c)$ up to 1,000,000 options in July 2004.

If the agreed operational targets are not achieved in relation to any tranch of option then the entitlement of Mr. Chapman will lapse in relation to that tranch.

It is anticipated that the operational targets or milestones will include:-

• revenue generation from existing services and development of advertising medium; $(a)$
• $(b)$ profits;
• $(c)$ development of products and services and strategic alliances complementary to existing operations;

$(d)$ progressive installation of the Ezenet video services to the Hotel/Motel industry.

5. ISSUE OF OPTIONS TO CONSULTANTS

• $5.1$ The purpose of this resolution is to provide management of the Company which could include staff, consultants or contractors together with other supporters of the Company with the mechanism to participate of the future development of the Company and as an incentive for their past and future involvement and commitment. In relation to the issue:-
• None of the securities will be allotted to Directors or parties associated with the $(a)$ Directors:
• The securities will be issued on one or more dates within three (3) months after the $(b)$ date of passing of the Resolution:
• The names of the allottees are not presently known. They will be determined by the $(c)$ Directors of the Company: and
• No funds will be raised from the grant of the options. $(d)$

ESTABLISHMENT OF DIRECTORS' DEEDS OF INDEMNITY, INSURANCE AND 6. ACCESS THE PROPOSALS

$6.1$ Background

The purpose of Resolution 5 is to enable the Company to provide each Director with a reasonable level of protection in relation to claims made against a Director acting as a Director of the Company or its subsidiaries. The proposed protection will not provide protection for conduct involving a lack of good faith.

The Company presently has no Deeds of Indemnity, Insurance and Access with its Directors.

Accordingly, it is considered appropriate that the Company enter into Deeds of Indemnity, Insurance and Access with its Directors which accord with the Corporations Act.

$6.2$ Reasons for establishing Directors' Deeds of Indemnity, Insurance and Access

Given that their duties and responsibilities as Directors of a public company and their potential liabilities, the Directors consider it appropriate that they be suitably protected from certain claims made against them. The proposed protection will not extend to conduct involving a lack of good faith.

As a person may be called to account for the Director's actions several years after ceasing to be a Director of the Company, it is considered reasonable that suitable protection should extend for a period of time after a Director has ceased to be a director of the Company.

It is generally recognised that a Director or former Director of a Company may face considerable difficulty in properly answering or defending any claim made against him or her, particularly, as is often the case, where the claim is brought after the director ceases to hold office. Difficulties may arise by reason of the following:-

No Indemnity after Directorship Ends $(a)$

Whilst a company's constitution usually provides a Company's Directors with an indemnity in respect of claims made while they remain Directors (as is the case with the Company's new Constitution), arguably, that indemnity ceases when the directorship ends. Without the benefit of any indemnity, the cost of defending such a claim in respect of the actions of a Director or former Director, even if the claim is ultimately proven to be without merit, can be considerable and beyond the financial resources of the individual Director.

Maintenance of Insurance Policies $(b)$

Directors and Officers insurance policies generally only provide cover for claims made during the currency of the insurance policy; ie, while insurance premiums continue to be paid on the policy. Generally, unless insurance premiums continue to be paid after the time a person ceases to be a Director, claims made after cessation of the directorship will not be covered by the insurance policy. The cost to a former Director of the Company of personally maintaining insurance cover after ceasing to

be a Director might be prohibitive, particularly given the number of years for which insurance must be maintained and given that the former Director will no longer be receiving Directors' fees.

$(c)$ Access to Board Papers

Directors have a statutory right to inspect the books of the Company:-

• Whilst they hold office: and $(i)$
• $(ii)$ For a period of seven (7) years after the Director ceases to hold office:

at all reasonable times for the purpose of a legal proceeding to which the Director is a party, that the Director proposes in good faith to bring or that the Director has reason to believe will be brought against them.

Despite this statutory right, Directors and former Directors, might require access to Company documents which are relevant to the Director's holding office as a Director of the Company and not strictly required for the purpose of anticipated, threatened or commenced legal proceedings. Furthermore, although proceedings may be instituted within six (6) years after a cause of action arises, that six year period is calculated from the date the damage is found to have occurred $-$ this may be long after the conduct in question (from which the later damage arose) actually occurred.

Given these difficulties, a person may be unwilling to become or to remain as a Director of the Company without suitable protection being provided by the Company. The benefit to the Company in providing such protection is that it will continue to be able to attract persons of suitable expertise and experience to act as Directors.

6.3 Related Party Corporations Act Requirements

As set out above the Corporations Act provides that a public company may give a financial benefit to a related party if a shareholder resolution permits the benefit to be given.

The following information is provided to satisfy the requirements to Section 219 of the Corporations Act:-

• $(a)$ The related parties to whom the Directors Deed of Indemnity, Insurance and Access and Resolution 3 would permit financial benefits to be given are each of the Directors, namely:-
• $(i)$ Dr Wolf Martinick:
• $(ii)$ Mr Neil O'Loughlin;
• Mr Linton Chapman; and $(iii)$
• $(iv)$ Mr Graham O'Dea.
• The nature of the financial benefit to each of the Directors is that:- $(b)$
• The Company undertakes to indemnify each Director against liabilities $(i)$ incurred during and after the period of directorship on the Board of the Company:
• $(ii)$ The Company agrees to enter into insurance policies and pay the premiums for those policies insuring each Director against certain liabilities in relation to events occurring during the period of directorship; and
• $(iii)$ The cost of the premiums is not yet known and the estimated cost of the premiums is fifty thousand dollars (\$50,000.00);
• Each member of the Board has an interest in the Resolution and does not wish to $(c)$ make a recommendation about the proposed resolution.

6.4 Summary of the Directors' Indemnity, Insurance and Access Deed

To provide Directors with a suitable level of protection, the Company proposes to enter into a Deed of Indemnity, Insurance and Access with each Director. In summary, under each Deed:-

$(a)$ The Company will indemnify each Director during the period the Director's directorship and after the cessation of that directorship, in respect of certain claims made against that Director in the Director's capacity as a Director of the Company or its subsidiaries to the extent allowable under the Corporations Act:

• $(b)$ Provided that the cost is acceptable to the Company the Company will maintain an insurance policy and pay the premiums of insurance as assessed at market rates applicable from time to time, to the extent available under the Corporations Act, for each Director in respect of certain claims made against any Director in the Director's capacity as a Director of the Company or its subsidiaries and to continue to pay those premiums for a period of up to seven (7) years following the termination of their directorship: and
• $(c)$ The Company will provide each Director with access, upon ceasing for any reason to be a Director of the Company and for a period of at least seven (7) years following that cessation, to any Company records which were either prepared or provided to the Director during the period the Director held the relevant office.

Shareholders may inspect a draft copy of the form of the Deeds to be entered into:-

• Before the meeting, at the Company's registered office; and $(a)$
• $(b)$ At the meeting.

Once executed, shareholders may inspect copies of the Deeds the Company has entered into with each Director at the Company's registered office.

6.5 Summary of Indemnity and Insurance Provisions in the Corporations Act

In considering Resolution 3, shareholders should be aware of the following limitations in the Corporations Act concerning the provision of indemnities and insurance to the Company Officers. The Deeds for which shareholder approval is sought under Resolution 3 complies with these limitations:-

Section 199A of the Corporations Act $(a)$

The Corporations Act now sets out specific prohibitions to the Company's ability to grant indemnities for liabilities and legal costs. Any matter that does not fall within those prohibitions is, therefore, permitted. The Company is prohibited from indemnifying its Officers against a liability, if it is a liability:-

• To the Company or any of its related bodies corporate: $(i)$
• $(ii)$ To a third party and arose out of conduct involving a lack of good faith; or
• For a pecuniary penalty order or a compensation order under the $(iii)$ Corporations Act (such orders being made for breaches such as breaches of Director's duties, the related party rules and insolvent trading rules).

The Company is also prohibited from indemnifying its Officers against legal costs incurred:-

• $(i)$ In defending actions where an Officer is found liable for a matter for which they cannot be indemnified by the Company as set out immediately above:
• In defending criminal proceedings where the Officer is found guilty; $(ii)$
• $(iii)$ In defending proceedings brought by the ASIC or a liquidator for a court order if the grounds for making the order are found by the court to be established; or
• In connection with proceedings for relief to the Director under the $(iv)$ Corporations Act where the court denies the relief.
• $(b)$ Section 199B of the Corporations Act

If the Company, or a related body corporate of the Company, pays the premium on an insurance policy in favour of a Director, then Section 199B of the Corporations Act requires the Company to ensure that the relevant contract of insurance does not cover liabilities incurred by the Officer arising out of conduct involving either:-

• A willful breach of duty in relation to the Company; or $(i)$
• Contravention of the provisions relating to an Officer making improper use of $(iii)$ information or improper use of their position for their advantage or gain, or to the detriment of the Company.

6.6 Reasons for seeking Shareholder Approval

To enable the Company to enter into Deeds of Indemnity, Insurance and Access with each Director, Resolution 3 seeks shareholder approval in accordance with Section 200B of the Corporations Act.

Section 200B of the Corporations Act provides that the Company cannot give a benefit to a Director in connection with the retirement of that Director from an office, without shareholder approval.

The Directors consider that as the:-

• $(a)$ Proposed payment of insurance premiums:
• Benefit of the indemnity in relation to liabilities incurred during the period that a $(b)$ Director holds office: and
• Director's access to Company records; $(c)$

continue for a period after the Director ceases to hold office, the Deeds may provide the Director with a benefit in connection with the Director's retirement from the board within the meaning of Section 200B of the Corporations Act.

The value of the benefits that may accrue to Directors under the Deeds of Indemnity, Insurance and Access cannot be determined at this point in time.

The value of any benefit given to a Director by way of the indemnity will depend on various matters, including the quantum of any claims made against the Director.

Ratification of prior Issues 7.

Resolution 6 seeks approval of the issue of five million two hundred and thirty five thousand (5,235,000) fully paid ordinary shares which were issued by the Company during the period from 30 November 2002 to 10 January, 2003 with both dates included. The circumstances of the issues are referred to in more detail in Item 2 of this Explanatory Memorandum and particulars of the issues for the purposes of the approval are:-

SHARES
Date	Allotee	Number	Price	Purpose of issue
		issued	$(\phi/share)$
10/01/2003	Dr Wolf Martinick	4,075,912	\$0.05	Working capital
10/01/2003	Mr. Neil O'Loughlin	1,159,088	\$0.05	Working capital
All shares issued rank equally in all respects with the existing issued shares of the Company.

8. PLACEMENT OF SHARES

Resolution 7 seeks approval for the issue by the company of one hundred and twenty million (120,000,000) fully paid shares and options. The issue is to raise additional working capital and to fund the further developments of the project of the Company. More details are set out in item 2 of this Explanatory Memorandum.

Issue of Shares $8.1$

Resolution 7 authorises the issue of securities comprising shares or options:

• None of the securities will be allotted to Directors or parties associated with the Directors; $(a)$
• The securities will be issued on one or more dates within three (3) months after the date of $(b)$ passing of the Resolution:
• The names of the allottees are not presently known. They will be determined by the $(c)$ Directors of the Company; and
• The purpose for the issue of shares is to raise additional working and investment capital. $(d)$

TERMS AND CONDITIONS OF OPTIONS 9.

Each option entitles the option holder to acquire one (1) fully paid ordinary share in the capital of the Company on the following terms and conditions:-

• $\mathbf{1}$ . The option expires at 5.00pm on [30 June 2007 or on or before 30 June 2007 as the case may bel ("Expiry Date").
• $\overline{2}$ . The option may be transferred at any time before the Expiry Date.
• If the option holder holds more than 1 option, all or any of the options may be 3. exercised in whole or in part from time to time by notice in writing to the Company received before the Expiry Date.
• The exercise price for the option is A\$[0.15 or not less than 80% of the average 4. market price of shares as the case may bel.
• 1. The shares issued upon exercise of the options:
• will rank equally with existing ordinary fully paid shares; and $(a)$
• will (unless the options are designated as restricted securities at the time) be $(b)$ eligible for listing on the official list of the Australian Stock Exchange.
• 1. There is no inherent right in the option to participate in any new issue of securities which may be offered to shareholders of the Company from time to time before the exercise of the option.

The Company will notify option holders of the proposed issue at least 7 business days before the books closing date. This will give the option holders an opportunity to exercise their options before the book's closing date of any such new issue.

1. In the event of any re-organisation of the capital of the Company, the number of options or the exercise price of the option or both shall be reorganised in accordance with the Listing Rules.

$10.$ RECOMMENDATION AND CONCLUSION

Other than those resolutions where a director is personally interested and must abstain from voting or making a recommendation, each of the directors of the company is of the opinion that the resolutions to be considered at the meeting are in the best interests of shareholders of the company and recommends that shareholders of the company vote in favour of all resolutions.

$11.$ ACTION TO BE TAKEN BY SHAREHOLDERS

Attached to the Notice of Annual General Meeting is a Proxy form for use by shareholders. All shareholders are encouraged to attend the meeting, or alternatively, to complete, sign and return the attached Proxy form.

If any shareholder requires copies of the Notice and Explanatory Memorandum, they should contact the company at its management office:-

Ground Floor Zurich House 66 Kings Park Road WEST PERTH WA 6005 Telephone No. $(08)$ 9486 8598 Facsimile No. $(08)$ 9486 8597

$12.$ GLOSSARY

In the Notice of Meeting and this Explanatory Memorandum:-

• $(a)$ "ASIC" means Australian Securities & Investments Commission.
• $(b)$ "ASX" means Australian Stock Exchange Limited.
• "Ezenet" and "Company" means Ezenet Limited (ABN 84 083 646 477). $(c)$
• "Subscription Agreement" means agreements dated 10 January 2003 between the $(d)$ Company, Dr Wolf Martinick and Mr. Neil O'Loughlin.
• "Listing Rules" means the Listing Rules of the ASX. $(e)$

Ezenet Limited

(ACN 083 646 477) PROXY FOR MEETING OF MEMBERS

I/We ____________________________________ of a

being a member of Ezenet Limited and entitled to vote in respect of shares hereby appoint ____________________________________

of or failing him the Chairman of the meeting as my/our proxy to vote for me/us and on my/our behalf at the meeting of members of the company to be held at 3.00pm on Friday the 30th of May, 2003 and any adjournment thereof.

If you do not wish to direct your proxy how to vote, you should 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 the resolution and votes cast by him other than as proxy holder will be disregarded due to that interest. It is the Chairman's intention that all undirected proxies will be directed in favour of all resolutions.

Should you wish to instruct the proxy to vote, you should place a mark in the appropriate box against each item hereunder; otherwise the proxy may vote as he thinks fit (or abstain from voting).

		FOR	AGAINST	ABSTAIN
1.1	Issue to Subscriber/Director - Dr Wolf Martinick
1.2	Issue to Subscriber/Director - Mr Neil O'Loughlin
2.1	Issue of Options to Directors - Dr Wolf Martinick
2.2	Issue of Options to Directors - Mr Neil O'Loughlin
2.3	Issue of Options to Directors - Mr Graham O'Dea
3.1	Issue of Options to Executives - Mr Linton Chapman
4.1	Issue of Options to Consultants
5.1	Approval Directors Indemnities
6.1	Ratification of Issues
7.1	Issue of Securities - Shares
7.2	Issue of Securities - Options

2003 DATED the day of

IF INDIVIDUAL(S)

Signed by the Member in the presence of	***** *****
Member's full name (in block letters)
Address	****** *****
	********

OR, IF A COMPANY

THE COMMON SEAL of
(ACN was hereunto affixed in accordance with its Constitution in the presence of:
Director:
Director/Secretary:

NOTES

• $\mathbf{1}$ . A member entitled to attend and vote at the meeting is entitled to appoint not more than two proxies to attend and vote instead of the member.
• $2.$ Proxies for a corporation must be given under the seal of the corporation or under the hand of an Officer or Attorney duly authorised.
• 1. If no person's name is inserted in the space for the name of your proxy the Chairman of the meeting shall act as your proxy.
• 1. Where two proxies are appointed, each proxy must be appointed to represent a specified proportion of the member's voting rights and neither party is entitled to vote on a show of hands.
• 1. If proxy forms are made out to the Chairman of the meeting of members they will be used in favour of the resolutions unless a contrary direction is given.
• 1. In the case of joint members who are entitled to vote only one proxy will be accepted.
• 1. Proxies must be lodged at the offices of the company, Ground Floor, Zurich House, 66 Kings Park Road, West Perth, Western Australia, not less than 48 hours before the time for holding the meeting.
• 1. An additional Proxy Form will be made available on application to the company.