QUANTUM GRAPHITE LIMITED — Governance Information 2014

Jan 2, 2014

VALENCE INDUSTRIES LIMITED

PERFORMANCE RIGHTS AND OPTIONS PLAN

PLAN TERMS

CONTENTS

1	Name of Plan	Name of Plan	1
2	Definitions and Interpretation		1
2.1		Definitions	1
2.2		Interpretation Rules	3
3	Commencement of Plan		3
4	Administration of Plan		4
4.1		Cap on Plan	4
4.2		Board to Administer	4
4.3		Board to have discretion	5
4.4		Powers to be exercised by the Board	5
4.5		Rights of Eligible Persons	5
5	Invitation to Participate		5
5.1		Board to Determine	5
5.2		Invitation Requirements	5
6	Acceptance by Eligible Person		6
6.1		Acceptance Form	6
6.2		Part Acceptance	6
6.3		Associates	6
7	Performance Rights and Options		6
7.1		Grant	6
7.2		No Quotation on ASX	7
7.3		Prohibition	7
7.4		No dividends	7
8	Exercise of Performance Rights and Options		7
8.1		Exercise	7
8.2		Method of Exercise	7
8.3		Part Exercise	8
9	Issue or Allocation of Shares		8
9.1		Issue or Allocation	8
9.2		Ranking	8
9.3		Allocated Shares - Voting and dividends	8
10		Lapse of Performance Rights and Options	8
11		Cessation of Employment	9
11.1		Other than Qualifying Reason	9
11.2		Qualifying Reason	9
11.3		When Performance Rights or Options are exercisable	9
12		Control Event	9
13		Withdrawal and/or sale of Allocated Shares	10
13.1		Notice	10
13.2		Withdrawal	10
13.3		Sale	10

CONTENTS

14	Clawback and Forfeiture	11
14.1	Forfeiture of Allocated Shares	11
14.2	Clawback	11
14.3	Fraud or breach by an Eligible Person	11
14.4	Board’s powers in relation to Performance Rights and Options	11
15	New Issues	12
15.1	Performance Rights and Options must be exercised	12
15.2	Pro rata Issue	12
15.3	Bonus Issue	12
16	Capital Reorganisations and Business Divestments	12
16.1	Consolidation	12
16.2	Sub-division	12
16.3	Return of Capital	13
16.4	Cancellation in the event of lost capital	13
16.5	Pro Rata Cancellation of Capital	13
16.6	Other Reorganisations	13
16.7	ASX Listing Rules	13
16.8	Divestment of material business or subsidiary	13
17	Fractional Entitlements	14
18	Amendment to this Plan	14
18.1	Amendment	14
18.2	No reduction of rights	14
19	Advice	14
20	Governing Law	14
21	Compliance with ASX Listing Rules and Corporations Act	15
22	Notices	15
Schedule 1 – Form of Acceptance Form		16
Schedule 2 – Form of Exercise Notice		17
Schedule 3 – Form of Withdrawal Notice		18
Schedule 4 – Form of Sale Notice		19

VALENCE INDUSTRIES LIMITED

PERFORMANCE RIGHTS AND OPTIONS PLAN

PLAN TERMS

1 Name of Plan

The name of the plan established by these Terms is the “Valence Industries Performance Rights and Options Plan”.

2 Definitions and Interpretation

2.1 Definitions

In this Plan, unless the context otherwise requires:

Acceptance Closing Day means the day determined by the Board as being the last day on which an Eligible Person may accept Performance Rights or Options.

Allocated Share means a Share held by the Trustee that has been allocated under clause 9.1(b).

ASX means ASX Limited (ACN 008 624 691).

ASX Listing Rules means the Official Listing Rules of the ASX, any other applicable rules of the ASX each as amended or replaced from time to time, except to the extent of any express written waiver given by the ASX.

Board means the board of directors of the Company or a committee appointed by the board of directors of the Company.

Company means Valence Industries Limited (ACN 008 101 979).

Control of an entity means having the right:

• (a) to vote 50% (or more) of the votes that can be cast on the election or removal of the entity’s directors;

• (b) to appoint or remove directors who possess 50% (or more) of the votes exercisable by all directors of the entity; or

• (c) to 50% (or more) of the profits or distributions of the entity or of its net liquidation proceeds.

Control Event means any of the following:

• (a) a Takeover Bid for the Company’s shares becoming unconditional in circumstances where the bidder has voting power in the Company of more than 50%;

• (b) all approvals required for a scheme of arrangement for the merger of the Company with another entity having been obtained;

Doc ID: A8013 - 62414722.1

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• (c) any other event which the Board reasonably considers should be regarded as a Control Event.

Corporations Act means the Corporations Act 2001 (Cth).

Eligible Person means:

• (a) any person who is a full time or part time employee of a company within the Group; or

• (b) any director of a company within the Group; and

• (c) any consultant or contractor engaged by a company within the Group.

Exercise Period means, in respect of a Performance Right or Option, the period during which the Performance Right or Option may be exercised by the Eligible Person, as determined by the Board and stated in the Invitation in relation to the Performance Right or Option.

Exercise Price means the amount payable on exercise of an Option as specified in the Invitation for that Option.

Group means the Company and each related body corporate of the Company, within the meaning of section 50 of the Corporations Act.

Invitation means an invitation to an Eligible Person to participate in the Plan.

Issued Share means a Share that has been issued by the Company under clause 9.1(a).

Marketable parcel has the meaning given to it in the ASX Listing Rules.

Option means a right to acquire a Share (upon payment of the Exercise Price) granted to a Eligible Person under this Plan and on the terms and conditions determined by the Board.

Performance Right means a right to be issued or allocated one Share on the Terms of this Plan.

Plan means the Valence Industries Performance Rights and Options Plan.

Qualifying Reason means:

• (a) the death, Retirement or Retrenchment of an Eligible Person;

• (b) the termination of employment of an Eligible Person other than for cause; and

• (c) any other reason as determined by the Board in its absolute discretion.

Retirement means:

• (a) the termination of an Eligible Person’s employment by a company within the Group by reason of:

• (i) the attainment of the age of 65 years, or such other age as the Board may from time to time specify as the maximum age for retirement, or an earlier age with the consent in writing of the Board; or

• (ii) illness or incapacity (including disability) as certified by a medical practitioner who is approved in writing by the Company; or

• (b) in the case of a director, the director ceasing to hold office as a director of a company within the Group for any reason.

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Retrenchment means the termination of an Eligible Person’s employment by the Company due to his or her position becoming obsolete or redundant.

Share means a fully paid ordinary share in the Company, whether new or existing.

Takeover Bid has the meaning given in section 9 of the Corporations Act.

Trust means a trust established by the Company for the purpose of acquiring, holding and delivering Shares in connection with any plan (including a share plan, equity incentive plan, option plan or rights plan) that is operated by the Company from time to time for the benefit of any of the Group’s employees, officers (including directors) or contractors.

Trust Deed means the trust deed entered into by the Company and Trustee under which the Trust is established (as amended from time to time).

Trustee means the trustee from time to time of the Trust.

Vesting Criteria means, in relation to a Performance Right or Option, such performance, vesting and/or other criteria as determined by the Board and stated in the Invitation in relation to the Performance Right or Option, and which are required to be met before the Eligible Person will be entitled to exercise the Performance Right or Option, as reduced (if at all) or waived in whole or part at any time by the Board and notified to the Eligible Person.

Vesting Period means, in relation to a Performance Right or Option, such period as determined by the Board and stated in the Invitation in relation to the Performance Right or Option, over which the Vesting Criteria (to the extent applicable) will be measured.

2.2 Interpretation Rules

In this Plan:

• (a) a reference to this Plan is a reference to this Plan as amended, varied or supplemented from time to time;

• (b) a reference to any legislation or a provision of any legislation includes:

• (i) all regulations, orders or instruments issued under the legislation or provision; and

• (ii) any modification, consolidation, amendment, re-enactment, replacement or codification of such legislation or provision;

• (c) words or expressions:

• (i) importing the singular include the plural and vice versa;

• (ii) importing a gender include the other genders;

• (d) where a word or phrase is defined or given a meaning, any other part of speech or grammatical form has a corresponding meaning;

• (e) a reference to a clause number is a reference to a clause of this Plan.

3 Commencement of Plan

This Plan will take effect from such date as the Board may determine.

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4 Administration of Plan

4.1 Cap on Plan

Subject to Rule 4.2, an Option or Performance Right may not be granted if, immediately following its grant, the Shares to be received on exercise of the Option or Performance Right when aggregated with:

• (a) the number of Shares which would be issued if each unvested Option and Performance Right granted under the Plan (provided that such Option or Performance Right has not lapsed) or any other employee incentive scheme of the Company were to vest and be exercised; and

• (b) the number of Shares issued during the previous 5 years under the Plan or any other employee incentive scheme of the Company

exceeds 5% of the total number of issued shares of the Company at the time the Option or Performance Right is granted, provided that the Board may, in its absolute discretion, increase this percentage, subject to any applicable Corporations Act, Listing Rule (including the conditions and restrictions on issuing securities in Listing Rule 7.1) or Class Order requirements.

4.2 Exceptions

When aggregating the number of shares for the purposes of Rule 4.1 the Company may disregard any offer made, Option or Performance Right acquired or Share issued by way of or as a result of:

• (a) an offer to a person situated at the time of receipt of the offer outside of Australia;

• (b) an offer that did not need disclosure to investors because of section 708 of the Corporations Act; or

• (c) an offer made under a disclosure document in accordance with Chapter 6D of the Corporations Act.

4.3 Board to Administer

This Plan will be administered by the Board, which has the power to:

• (a) determine appropriate procedures for administration and operation of the Plan consistent with these Terms and, if applicable, the terms of the Trust Deed;

• (b) exercise all powers and discretion vested in it under these Terms;

• (c) resolve conclusively all questions of fact or interpretation arising in connection with the Plan;

• (d) terminate or suspend the operation of the Plan at any time, provided that the termination or suspension will not adversely affect the rights of the Eligible Person holding Performance Rights, Options or Allocated Shares at that time;

• (e) delegate such functions and powers as it may consider appropriate for the efficient administration of the Plan to a committee or any person or persons capable of performing those functions and exercising those powers;

• (f) take and rely upon independent professional expert advice in, or in relation to, the exercise of any of its powers or discretions under this Plan; and

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• (g) administer the Plan in accordance with these Terms and, if applicable, the terms of the Trust Deed as and to the extent provided in these Terms and the terms of the Trust Deed (respectively).

4.4

Board to have discretion

Where this Plan provides for a determination, decision or approval of the Board, such determination, decision or approval may be made or given by the Board in its absolute discretion.

4.5 Powers to be exercised by the Board

Any power or discretion which is conferred on the Board by this Plan may be exercised by the Board in the interests or for the benefit of the Company or any other company in the Group and the Board is not under any fiduciary or other obligation to any other person.

4.6 Rights of Eligible Persons

This Plan does not:

• (a) confer on any Eligible Person the right to be offered any Shares;

• (b) confer on any Eligible Person the right to continue as an employee of the Company or a company in the Group;

• (c) affect the terms of any Eligible Person’s employment; or

• (d) affect any rights which the Company or a company in the Group may have to terminate the employment of any employee.

5 Invitation to Participate

5.1 Board to Determine

The Board will have the sole discretion to determine which Eligible Persons are to be issued Invitations and when those Invitations are to be made.

5.2 Invitation Requirements

Each Invitation must specify:

• (a) the date of the Invitation;

• (b) the maximum number of Performance Rights and/or Options to which the Eligible Person is entitled (and any discretion the Board has to alter the maximum number including having regard to any change in the terms and conditions of employment of an Eligible Person);

• (c) the date of the Acceptance Closing Day;

• (d)

• the Vesting Period for those Performance Rights or Options;

• (e) the Vesting Criteria for those Performance Rights or Options (and any other conditions which must be satisfied or circumstances which must exist before any or all of the Performance Rights or Options may be exercised);

• (f) in the case of Options, the Exercise Price of those Options;

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• (g) the Exercise Period;

• (h) the manner in which the Invitation must be accepted; and

• (i) any other terms and conditions to which those Performance Rights or Options will be subject.

An Invitation may contain any other information which the Board sees fit to include.

An Invitation must be accompanied by a copy of this Plan.

6 Acceptance by Eligible Person

6.1 Acceptance Form

In order to accept Performance Rights or Options to which he or she is entitled, an Eligible Person must:

• (a) send to the Company a notice in the form set out in Schedule 1 of this Plan;

• (b) ensure that such acceptance is received at the Company’s registered office (or such other address as the Company may specify) by no later than 5:00 pm (Adelaide time) on the Acceptance Closing Day,

or by such other manner of acceptance specified in the Invitation in relation to those Performance Rights or Options.

6.2 Part Acceptance

Where an Eligible Person elects to accept less than all of the Performance Rights or Options specified in an Invitation, his or her election must be in multiples of 100.

6.3 Associates

An Eligible Person may, with the consent of the Board, accept an Invitation in the name of an associate of the Eligible Person, in which case this Plan will apply to the associate with the necessary changes, as determined by the Board.

7 Performance Rights and Options

7.1 Grant

Upon an Eligible Person complying with the requirements of clause 6, the Company must:

• (a) grant to that Eligible Person, at no cost, the number of Performance Rights or Options accepted by the Eligible Person (but such number must not exceed the number of Performance Rights or Options offered to the Eligible Person in the Invitation);

• (b) in the case of Performance Rights, issue a certificate to the Eligible Person for those Performance Rights which specifies the Exercise Period of those Performance Rights; and

• (c) in the case of Options, issue a certificate to the Eligible Person for those Options which specifies the Exercise Price and Exercise Period of those Options.

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Performance Rights and Options will be granted on the terms of the Invitation and this Plan and each Eligible Person will be taken to have agreed to be bound by this Plan on acceptance of any Invitation.

7.2 No Quotation on ASX

Performance Rights and Options issued pursuant to this Plan will not be quoted on the ASX.

7.3 Prohibition

• (a) Subject to paragraph (b) below, an Eligible Person must not assign, transfer, provide security over or otherwise deal (or purport to deal) with a Performance Right or Option without the Board’s prior written consent.

• (b) A Performance Right or Option may be transferred to the legal personal representative of an Eligible Person who has died or whose estate is liable to be dealt with under laws relating to mental health. Upon the occurrence of such a transfer, the Company must register the legal personal representative as the holder of the relevant Performance Rights or Options and issue a certificate statement to that person for those Performance Rights or Options.

7.4 No dividends

Unless the Board determines otherwise, Performance Rights and Options will carry no entitlement to dividends or other distributions.

8 Exercise of Performance Rights and Options

8.1 Exercise

An Eligible Person may exercise Performance Rights or Options:

• (a) at any time during the Exercise Period, subject to:

• (i) the Vesting Criteria in respect of the Performance Rights or Option (if any) having been met or waived, as determined by the Board and advised to the Eligible Person; and

• (ii) those Performance Rights or Options otherwise being exercisable in accordance with the terms of an Invitation (and not having lapsed);

• (b) on the occurrence of a Qualifying Reason, in accordance with clause 11.2;

• (c) on the occurrence of a Control Event, in accordance with clause 12; and

• (d) if the Board so determines.

8.2 Method of Exercise

Unless otherwise advised by the Company to an Eligible Person, a Performance Right or Option is exercised by ensuring the Company receives at its registered office (or such other address as the Company may specify) at a time prior to the expiry of the relevant Exercise Period:

• (a) the notice set out in Schedule 2 of this Plan (or any additional copy of that notice subsequently requested and received from the Company by the Eligible Person) specifying the number of Performance Rights or Options the Eligible Person wishes to exercise;

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• (b) if certificates have been issued in relation to the Performance Rights or Options to be exercised, those certificates; and

• (c) in the case of Options, the payment of the Exercise Price for each of the Options to be exercised.

However, if an Eligible Person fails to comply with the above requirements, the Board has a discretion to treat the exercise as valid.

8.3

Part Exercise

If the Eligible Person elects to exercise less than all of his or her Performance Rights or Options, the number exercised must be not less than the number of Performance Rights or Options the exercise of which would result in the allotment of a marketable parcel of Shares in the Company.

9 Issue or Allocation of Shares

9.1 Issue or Allocation

The Company must, as soon as possible after receiving from an Eligible Person the document(s) specified in clause 8.2:

• (a) (if the Trust has not been established at the time of exercise of the applicable Performance Rights or Options), issue to the Eligible Person one Share for each Performance Right or Option exercised ( Issued Shares ); or

• (b) if the Trust has been established at the time of exercise of the applicable Performance Rights or Options), procure the Trustee to allocate to the Eligible Person and to hold within the Trust one Share for each Performance Right or Option exercised ( Allocated Shares ). Each Allocated Share will be held by the Trustee on behalf of the Eligible Person in accordance with the terms of this Plan and the terms of the Trust Deed.

9.2 Ranking

Each Issued Share and each Allocated Share will rank equally with, and have the same rights and entitlements as, the other Shares on issue as at the date they are issued or allocated (as applicable) , other than any right or entitlement which has accrued prior to the date of their issue or allocation.

9.3

Allocated Shares - Voting and dividends

An Eligible Person has the right to exercise voting rights attaching to, and to receive dividends declared by the Company in respect of, the Eligible Person’s Allocated Shares in accordance with the provisions of the Trust Deed which regulate those rights.

10 Lapse of Performance Rights and Options

Unless otherwise specified in the Invitation in relation to the relevant Performance Rights or Options, a Performance Right or Option granted under this Plan will lapse on the earlier of:

• (a) the expiration of the Vesting Period, if the Vesting Criteria remain unsatisfied at that date;

• (b) notice from the Eligible Person that the Eligible Person wishes the Performance Right or Option to lapse;

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• (c) a determination by the Board that the Eligible Person has acted fraudulently, dishonestly or in breach of the Eligible Person’s obligations to the Company or any company in the Group and the Performance Right or Option is to be forfeited;

• (d) a determination by the Board that, in the case where an Invitation is accepted in the name of an associate of the Eligible Person ( Associate ), the applicable Eligible Person has ceased to control the Associate;

• (e) cessation of employment of the Eligible Person other than because of a Qualifying Reason, in accordance with clause 11.1, or by operation of clause 11.3;

• (f) on the occurrence of a Control Event, in accordance with clause 12; and

• (g) the end of the Exercise Period in relation to that Performance Right or Option.

11 Cessation of Employment

11.1 Other than Qualifying Reason

Unless otherwise determined by the Board, where an Eligible Person ceases to be employed by a company within the Group other than because of a Qualifying Reason, any rights of the Eligible Person relating to Performance Rights or Options granted under this Plan in respect of which the Exercise Period has not commenced will immediately lapse.

11.2

Qualifying Reason

Unless otherwise determined by the Board, where an Eligible Person ceases to be employed by a company within the Group because of a Qualifying Reason, the number of Performance Rights or Options granted under this Plan that the Eligible Person will be entitled to (other than Performance Rights or Options in respect of which the Exercise Period has commenced or that have lapsed) will be determined by the Board. In addition, the Board may make a determination that some or all of those Performance Rights or Options become exercisable (subject to such conditions as the Board may impose) immediately or at a time determined by the Board.

11.3 When Performance Rights or Options are exercisable

Unless otherwise determined by the Board, where an Eligible Person ceases to be employed by a company within the Group for any reason, the Eligible Person will be entitled to exercise any of the Eligible Person’s Performance Rights or Options in respect of which the Exercise Period has commenced in accordance with the terms of this Plan and must, by no later than 30 days after the date the Eligible Person ceases to be employed by a company within the Group (or such longer period as may be permitted by the Company):

• (a) exercise all such Performance Rights or Options in accordance with clause 8; and

• (b) withdraw or sell all of the Eligible Person’s Allocated Shares in accordance with clause 13.

Any such Performance Right or Option not exercised, or Allocated Share not withdrawn or sold, during that 14 day period will lapse or be forfeited (respectively), unless otherwise determined by the Board.

12 Control Event

• (a) If a Control Event occurs prior to the vesting of any Performance Rights or Options, then the Board may, within 30 days of the Control Event, decide that some or all of

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those Performance Rights or Options vest, subject to such conditions as the Board may impose, either immediately or at a time determined by the Board.

• (b) Where the Board does not exercise its discretion pursuant to paragraph (a) above, upon a Change of Control of the Company occurring:

• (i) 50% of those unvested Performance Rights will vest and become exercisable during the period and in the manner notified by the Company to Eligible Persons;

• (ii) All unvested Options will vest and become exercisable;

• (iii) the Performance Rights and Options that vest pursuant to paragraphs (b)(ii) and (ii) above must be exercised within 30 days, otherwise those performance Rights and Options will lapse.

• (c) If a Control Event occurs or the Board exercises a discretion following a Control Event, the Company must immediately notify all affected Eligible Persons.

• (d) Where a Control Event occurs, the provisions of the Trust Deed providing for what is occur in respect of Allocated Shares in such circumstances will apply.

13 Withdrawal and/or sale of Allocated Shares

13.1 Notice

An Eligible Person may, in respect of any of his or her Allocated Shares (and provided that those Allocated Shares have not been forfeited under clause 14):

• (a) continue to have his or her Allocated Shares held by the Trustee subject to the terms of this Plan and the Trust Deed;

• (b) decide to withdraw his or her Allocated Shares out of the Trust by submitting to the Company a written direction in the form set out in Schedule 3 of this Plan (or such other form as may be approved by the Board), directing the Company to procure the Trustee to withdraw some or all of his or her Allocated Shares ( Notice of Withdrawal ); or

• (c) decide to sell his or her Allocated Shares by submitting to the Company a written direction in the form set out in Schedule 4 of this Plan (or such other form as may be approved by the Board), directing the Company to procure the Trustee to sell on behalf of the Eligible Person some or all of his or her Allocated Shares ( Notice of Sale ).

A Notice of Withdrawal and a Notice of Sale must specify the number of Allocated Shares to be withdrawn or sold (as applicable) under clause 13.2 or 13.3 (respectively).

13.2 Withdrawal

In the event the Company receives a Notice of Withdrawal in accordance with clause 13.1(b), the Company will procure the Trustee to deliver the Allocated Shares the subject of the Notice of Withdrawal to the Eligible Person in accordance with the provisions of the Trust Deed which regulate the withdrawal of Allocated Shares from the Trust.

13.3 Sale

In the event the Company receives a Notice of Sale in accordance with clause 13.1(c), the Company will procure the Trustee to sell the Allocated Shares the subject of the Notice of

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Sale in accordance with the provisions of the Trust Deed which regulate the sale of Allocated Shares by the Trustee.

14 Clawback and Forfeiture

14.1 Forfeiture of Allocated Shares

An Eligible Person (and any person claiming through him or her) will forfeit any right or interest in any Allocated Shares to the Trustee:

• (a) if there is a determination by the Board that the Eligible Person has acted fraudulently, dishonestly or in breach of the Eligible Person’s obligations to the Company or any company in the Group; or

• (b) for such other reason as may be specified in the Invitation relating to the Performance Rights in respect of which the Allocated Shares were allocated.

14.2 Clawback

Where, in the opinion of the Board, a Performance Right or Option which would not have otherwise become exercisable, becomes exercisable as a result directly or indirectly of:

• (a) the fraud, dishonesty or breach of obligations (including, without limitation, a material misstatement of financial information) of any person; or

• (b) any other action or omission (whether intentional or inadvertent) of any person,

the Board may make a determination under clause 14.4 to ensure that no unfair benefit is obtained by any Eligible Person.

14.3 Fraud or breach by an Eligible Person

Where, in the opinion of the Board, an Eligible Person:

• (a) acts fraudulently or dishonestly;

• (b) is in breach of his or her obligations to the Group;

• (c) commits an act which brings a company within the Group into disrepute; or

• (d) commits, or fails to perform, any other act reasonably and legitimately requested of the Eligible Person,

the Board may make a determination under clause 14.4 to ensure that no unfair benefit is obtained by the Eligible Person.

14.4 Board’s powers in relation to Performance Rights and Options

In the circumstances set out in clauses 14.2 and 14.3, the Board may, in its discretion, and subject to applicable laws and the Listing Rules, determine any treatment in relation to a Performance Right or Option, including, (without limitation) to:

• (a) reset the Vesting Criteria, adjust the Exercise Price and/or alter the Exercise Period applying to the Performance Right or Option;

• (b) deem all or any Performance Rights or Options to have lapsed;

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• (c) deem that the right or interest of any Eligible Person in all or any Allocated Shares be forfeited; and

• (d) where any Issued Shares or Allocated Shares have been subsequently sold by or on behalf of the applicable Eligible Person, require that Eligible Person repay the net proceeds of such a sale.

15 New Issues

15.1 Performance Rights and Options must be exercised

An Eligible Person cannot, in respect of any Performance Right or Option allocated to it under this Plan, participate in new issues by the Company. However, if a Performance Right or Option is able to be exercised and is exercised by the Eligible Person and the Share in respect of the Performance Right or Option is issued to the Eligible Person, or allocated to the Eligible Person under the Trust, before the record date for determining entitlements to the new issue, the Eligible Person may participate in the new issue by the Company.

15.2 Pro rata Issue

• (a) In the event of a rights (or other pro rata) issue of Shares by the Company then, in respect of Allocated Shares, the provisions of the Trust Deed dealing with what is to occur on a pro-rata entitlement issue being made by the Company will apply.

• (b) If the Company makes a rights (or other pro rata) issue of Shares to all or substantially all holders of Shares in the Company (whether or not an issue in lieu or in satisfaction of dividends or by way of dividend reinvestment), unless the Board otherwise determines, the number of the Shares which the Eligible Person is entitled to be issued or allocated (as applicable) on exercise of the Performance Right or Option will not be changed, but the exercise price for the Option will be adjusted in accordance with the formula in the Listing Rules.

15.3 Bonus Issue

If a bonus issue of Shares is made to the holders of Shares (other than pursuant to any dividend reinvestment plan or bonus share plan applying from time to time), the number of Shares over which a Performance Right or Option is exercisable will be increased by the number of Shares which the Eligible Person would have received under the bonus issue if the Eligible Person had exercised the Performance Right or Option before the record date for that bonus issue.

16 Capital Reorganisations and Business Divestments

16.1 Consolidation

If the Company’s share capital is consolidated, Performance Rights or Options held by an Eligible Person must be consolidated in the same ratio as the Shares are consolidated. The Exercise Price of each Option so consolidated must be amended inversely to the ratio in which the Shares are consolidated. In all other respects, the terms of each Performance Right or Option so consolidated will remain the same as each original Performance Right or Option.

16.2 Sub-division

If the Company’s share capital is sub-divided, Performance Rights or Options held by an Eligible Person must be sub-divided in the same ratio as the Shares are sub-divided. The Exercise Price of each Option so sub-divided must be amended inversely to the ratio in which

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the Shares are sub-divided. In all other respects the terms of each Performance Right or Option so sub-divided will remain the same as each original Performance Right or Option.

16.3 Return of Capital

If the amount paid up in respect of the Shares is reduced by a return of capital, the number of Performance Rights or Option held by an Eligible Person will remain the same, but the Exercise Price of each Option must be reduced by the same amount as the amount returned in relation to each Share. In all other respects, the terms of each Performance Right or Option will remain the same.

16.4 Cancellation in the event of lost capital

If part of the amount paid up in respect of the Shares is cancelled because such capital has been lost or is no longer represented by assets, but no Shares are cancelled, the number of Performance Rights or Options held by an Eligible Person, and the Exercise Price of each Option, will remain unchanged. In all other respects, the terms of each Performance Right or Option will remain the same.

16.5 Pro Rata Cancellation of Capital

If the Shares are cancelled on a pro rata basis, the number of Performance Rights or Options held by an Eligible Person must be reduced by cancelling Performance Rights or Options in the same ratio as the Shares are cancelled. The Exercise Price of each remaining Option must be amended inversely to the ratio proportion in which the Shares are cancelled. In all other respects, the terms of each remaining Performance Right or Option will remain the same.

16.6 Other Reorganisations

If the Company’s share capital is reorganised in any other way, the number of Performance Rights or Options held by an Eligible Person must be amended in accordance with the ASX Listing Rules so that the Eligible Person does not receive a benefit which the holder of Shares does not receive.

16.7 ASX Listing Rules

Despite clauses 16.1 to 16.6, the rights of an Eligible Person who holds Performance Rights or Options under this Plan are subject to the ASX Listing Rules relating to capital reorganisation. In the event of any amendment to the ASX Listing Rules, the rights of an Eligible Person will thereby be amended to the extent necessary to comply with the ASX Listing Rules as amended.

16.8 Divestment of material business or subsidiary

• (a) Where the Company divests a business designated by the Board for this purpose as material, the Board may make special rules that apply to Eligible Persons in relation to the Performance Rights or Options held under the Plan (and any other entitlements or shares that may arise in relation to those Performance Rights or Options). Without limiting the Board’s discretion, such rules may include:

• (i) varying the Vesting Criteria applying to the performance Rights or Options to take into account the divestment of the business; and

• (ii) deeming the Eligible Person to remain an employee for a specific period.

• (b) Any special rules made under paragraph (a) above must be notified to the affected Eligible Persons.

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17 Fractional Entitlements

Any entitlements to a fraction of a Performance Right or Option resulting from the operation of any provision in clauses 15 and 16 will be disregarded.

18 Amendment to this Plan

18.1 Amendment

Subject to clause 18.2 and the ASX Listing Rules, the Company may at any time amend this Plan (including this clause 18).

18.2 No reduction of rights

Unless all Eligible Persons with Allocated Shares otherwise agree, no amendment of this Plan may be made unless the Company is reasonably satisfied that such amendment does not reduce the rights of Eligible Persons in respect of their Performance Rights, Options or Allocated Shares acquired under this Plan prior to the date of the amendment other than an amendment introduced primarily:

• (a) for the purposes of complying with or conforming to present or future legislation or ASX Listing Rules, or a requirement, policy or practice of the Australian Securities and Investments Commission or other regulatory body;

• (b) to correct any manifest error or mistake;

• (c) to enable contributions or other amounts paid by the Company (or another company in the Group) to the Trustee to qualify as income tax deductions for the Company (or another company in the Group);

• (d) to enable any company in the Group to reduce the amount of fringe benefits tax under the Fringe Benefits Tax Assessment Act 1986 (Cth) or the amount of any other tax or impost that would (or might) otherwise be payable by the company in relation to this Plan;

• (e) to enable this Plan or any company within the Group to comply with the Corporations Act, the ASX Listing Rules or its constitution; or

• (f) to take into consideration possible adverse tax implications arising from, amongst others, adverse rulings from the Commissioner of Taxation, changes to tax legislation (including an official announcement by the Commonwealth of Australia) and/or changes in the interpretation of tax legislation by a court or tribunal of competent jurisdiction.

19 Advice

Eligible Persons are to obtain their own independent advice at their own expense in respect of the financial, taxation and other consequences to them of or relating to participation in the Plan.

20 Governing Law

This Plan is governed by the law of South Australia.

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21 Compliance with ASX Listing Rules and Corporations Act

If the Company is listed on the ASX and there is an inconsistency between the ASX Listing Rules and/or the Corporations Act and this Plan, this Plan will be deemed to be altered to the extent necessary to comply with the ASX Listing Rules and/or the Corporations Act (as applicable).

22 Notices

Any notice regarding Performance Rights, Options, Shares or the Plan will be sent to the registered address of the Eligible Person as recorded in the register of Eligible Persons maintained by or on behalf of the Company.

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Schedule 1 – Form of Acceptance Form

VALENCE INDUSTRIES PERFORMANCE RIGHTS AND OPTIONS PLAN

ACCEPTANCE FORM

Name of Eligible Person:

Address:

If you wish to nominate an associate of yours to be issued with the [Performance Rights/Options]* accepted below, please complete the following:

Name of Associate:

Address:

I wish to participate in the Valence Industries Performance Rights and Options Plan as follows:

• (a) I (or my associate nominated above) hereby apply to receive ___** [Performance Rights/Options][] ; and

• (b) I request that Valence Industries Limited allot these [Performance Rights/Options] to me (or my associate nominated above) and I (and my associate) agree to be bound by the terms of the Plan [and the Trust Deed.]**

Terms defined in the Valence Industries Performance Rights and Options Plan have the same meaning when used in this Acceptance Form.

EXECUTION:

Signature of Eligible Person: Signature of Associate (if applicable): Date of Execution: / /

• Delete whichever is inapplicable

** If you elect to accept less than all of the Performance Rights/Options offered in the Invitation, your election must be in multiples of 100.

• *** Delete if a Trust is not established as at the date of the Acceptance Form.

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Schedule 2 – Form of Exercise Notice

VALENCE IINDUSTRIES PERFORMANCE RIGHTS AND OPTIONS PLAN

NOTICE OF EXERCISE OF [PERFORMANCE RIGHT/OPTION]*

To: Valence Industries Limited (ACN 008 101 979) ( Company ) From:

Name of holder of [Performance Right/Option]*:

---

Address:

---

---

_

I hereby give notice that I irrevocably exercise _____ [ number ] [Performance Rights/Options] granted by the Company to me on ______ [ date ]. I request the Company to [ issue / procure the Trustee to allocate ] to me _______ [ same number ] fully paid ordinary shares in the Company ( Shares* ).

I agree to be bound by the Constitution of the Company in respect of the Shares [ and acknowledge that the Shares will be held on my behalf by the Trustee on and subject to the terms of the Valence Industries Performance Rights and Options Plan and the Trust Deed ]***.

Terms defined in the Valence Industries Performance Rights and Options Plan have the same meaning when used in this Notice.

EXECUTION:

Signature of holder of [Performance Rights/Options]*:

Date of Execution: / /

• Delete whichever is inapplicable

• ** If a Trust has not been established as at the date of exercise, delete the words ‘procure the Trustee to allocate’. If a Trust has been established, delete ‘issue’.

• *** Delete if a Trust has not been established at the date of exercise.

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Schedule 3 – Form of Withdrawal Notice

VALENCE INDUSTRIES PERFORMANCE RIGHTS AND OPTIONS PLAN

NOTICE OF WITHDRAWAL OF ALLOCATED SHARES

TO : Valence Industries Limited (ACN 008 101 979) ( Company )

FROM : Name of Eligible Person: _____________

AND if the Allocated Shares were allocated to an associate of the Eligible Person, associate’s name:

___________ _ Address: ____________ ______________

I hereby give notice that I irrevocably direct the Company to procure the Trustee to withdraw from the Trust and to transfer to me (or, if applicable, to my associate to whom the Allocated Shares were allocated) legal title to _____ [ number ] of my Allocated Shares in accordance with the applicable provisions of the Trust Deed.

Terms defined in the Valence Industries Performance Rights and Options Plan have the same meaning when used in this Notice.

EXECUTION:

Signature of Eligible Persons: Signature of Associate (if applicable): Date of Execution: / /

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Schedule 4 – Form of Sale Notice

VALENCE INDUSTRIES PERFORMANCE RIGHTS AND OPTIONS PLAN

NOTICE OF SALE OF ALLOCATED SHARES

TO : Valence Industries Limited (ACN 008 101 979) ( Company )

FROM : Name of Eligible Person: _________ AND if the Allocated Shares were allocated to an associate of the Eligible Person, associate’s name: __________ _ Address: ____________ ______________ _

I hereby give notice that I irrevocably direct the Company to procure the Trustee to withdraw from the Trust and sell_____ [ number ] of my Allocated Shares, and to distribute the proceeds of sale to me (or my associate nominated below), after deduction of Sale Costs, in accordance with applicable provisions of the Trust Deed.

I acknowledge and agree that unless the Company agrees otherwise with me, the proceeds will be paid to me (or, if applicable, to my associate) by cheque and the cheque will be sent to the address set out above in this Notice.

Terms defined in the Valence Industries Performance Rights and Options Plan have the same meaning when used in this Notice.

EXECUTION:

Signature of Eligible Person:

Signature of Associate (if applicable): Date of Execution: / /