SOMNOMED LIMITED — Proxy Solicitation & Information Statement 2007

Apr 12, 2007

Limited A.C.N. 003 2

NOTICE OF GENERAL MEETING

NOTICE IS HEREBY GIVEN that a meeting of members of SomnoMed Limited (the "Company") will be held at the McKinnon Room. North Sydney Leagues Club. 12-20 Abbott St Cammeray NSW 2062 on Tuesday 15th May 2007 at 10am for the purpose of transacting the business set out in this Notice.

BUSINESS

Resolution 1 - Issue of Options to Mr Graham Hurst (Director of the Company)

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

"That, for the purpose of Listing Rule 10.11 of the Listing Rules of the ASX Limited and for all other purposes, the members of the Company approve and authorise the grant of 6,000,000 options over unissued ordinary shares with an exercise price of $0.02 per option, by the Company to Mr Graham Hurst (a director of the Company) and such other related parties he so nominates, on the terms and conditions described in the Explanatory Note."

Summary of the Resolution: Under Listing Rule 10.11 of the Listing Rules of the ASX Limited, shareholders must approve any issue of equity securities to a "related party", unless an exception This resolution needs the approval for the grant of options over unissued ordinary applies. shares in the Company to Mr Graham Hurst, a "related party" of the Company.

Voting Exclusion: The Company will disregard any votes cast on this Resolution by:

• Mr Graham Hurst: and
• any associate of Mr Graham Hurst.

However, the Company need not disregard a vote if:

• $11$ 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; and
• $\overline{2}$ . it is cast by the person chairing the meeting as proxy for a person who is entitled to vote in accordance with the directions on the proxy form to yote as the proxy decides.

Resolution 2 - Issue of Options to Mr Alexander Macintosh (Director of the Company)

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

"That, for the purpose of Listing Rule 10.11 of the Listing Rules of the ASX Limited and for all other purposes, the members of the Company approve and authorise the grant of 6,000,000 options over unissued ordinary shares with an exercise price of $0.02 per option, by the Company to Mr Alexander Macintosh (a director of the Company) and such other related parties he so nominates, on the terms and conditions described in the Explanatory Note."

Summary of the Resolution: Under Listing Rule 10.11 of the Listing Rules of the ASX Limited, shareholders must approve any issue of equity securities to a "related party", unless an exception applies. This resolution needs the approval for the grant of options over unissued ordinary shares in the Company to Mr Alexander Macintosh, a "related party" of the Company.

Resolution 2 - Issue of Options to Mr Alexander Macintosh (Director of the Company)-(Continued)

Voting Exclusion: The Company will disregard any votes cast on this Resolution by:

• Mr Alexander Macintosh; and
• by any associate of Mr Alexander Macintosh.

However, the Company need not disregard a vote if:

• $\mathbf{1}$ It is cast by a person as proxy for a person who is entitled to yote in accordance with the directions on the proxy form: and
• $\mathcal{P}$ it is cast by the person chairing the meeting as proxy for a person who is entitled to vote in accordance with the directions on the proxy form to vote as the proxy decides.

Appointment of Proxy

• $(a)$ A member who is unable to attend and vote at the meeting may appoint a proxy by completing and returning the attached proxy form in the manner provided below. The proxy need not be a member of the Company.
• If a member wishes to appoint a proxy, and is entitled to cast 2 or more votes, then the $(b)$ member may appoint 2 proxies, and may specify the proportion or number of votes each proxy may cast.
• A proxy form (and the power of attorney (if any) under which it is signed) must be $(c)$ received at the registered office of the Company not less than 48 hours before the time of the holding of the meeting:
  • By hand: Registries Limited Level 2, 28 Margaret Street, Sydney, NSW, 2000
  • By mail: Registries Limited PO Box R67 Royal Exchange NSW, 1223
  • By facsimile: (02) 9279 0664

Corporate Representatives

Corporate members must either:

• appoint a proxy as set out above; or
• appoint a body corporate representative in accordance with the Corporations Act.

The appointment of a body corporate representative must be produced at the meeting.

Entitlement to Vote

For the purpose of the meeting, those members holding shares at 10am on 13th May 2007 will be voting members at the meeting.

Further Information

This Notice should be read in conjunction with the Explanatory Note.

By the Order of the Board of Directors.

T. A. Flitcroft Company Secretary

Dated: 12th April 2007

EXPLANATORY NOTE

Background

ASX Listing Rule 10.11 provides that a company may not issue "equity securities" to a related party without shareholder approval. An "equity security" includes an option over unissued ordinary shares.

Mr Graham Hurst and Mr Alexander Macintosh are directors of the Board of Directors of SomnoMed Limited and, as such, are related parties of SomnoMed Limited ("SomnoMed").

SomnoMed has agreed to issue options over 12,000,000 unissued ordinary shares in SomnoMed in total to Mr Graham Hurst and Mr Alexander Macintosh Options). The issue provides a longterm incentive to directors of the company. Messrs Hurst and Macintosh have not received director's fees, since they joined the Board in July 2006 and have agreed to waive any fees for the current financial year. As at the date of this Notice of Meeting, SomnoMed has 501,600,064 ordinary shares on issue. No cash or other form of consideration will be required to be made by Mr Graham Hurst or Mr Alexander Macintosh or their nominee for the issue of the Options.

Any funds raised on the exercise by Mr Graham Hurst and Mr Alexander Macintosh or their nominee of the Options will be used for general working capital purposes.

Each of the directors of the Company (other than Mr Graham Hurst and Mr Alexander Macintosh) recommend that shareholders approve the issue of the Options to Mr Graham Hurst and Mr Alexander Macintosh or their nominee.

Terms of Issue

The Options will be issued to Mr Graham Hurst and Mr Alexander Macintosh or their nominee on the following terms:

• The 12,000,000 Options will be issued within 1 month from the date of the members meeting to approve the issue of the options to Mr Graham Hurst and Mr Alexander Macintosh or their nominee. 6,000,000 Options will be issued to Mr Graham Hurst and 6,000,000 Options will be issued to Mr Alexander Macintosh.
• The exercise price per Option will be a fixed price of 2 cents. Each Option exercised entitles the option holder to be issued with one new ordinary share.
• The Options will expire on 30 June 2010. ٠
• If at any time prior to the exercise of any of the Options, there is a reconstruction (including a consolidation, subdivision, reduction or return) of the issued capital of SomnoMed, the outstanding Options will be reorganised in the manner reguired by the Listing Rules of the ASX Limited on a reconstruction of capital at the time of the reconstruction
• If SomnoMed makes a bonus issue of securities, each outstanding Option confers on each option holder the right to receive on exercise of those outstanding Options an allotment of additional securities, which the option holder would have received if it had participated in that bonus issue.
• The Options are not to be quoted on the ASX. ٠
• The Options cannot be exercised before 1 July 2008 unless: ۸
  • A takeover bid is announced for all or part of the shares in SomnoMed: or
  • the board of SomnoMed announces, and the majority of directors recommend, a proposed scheme of arrangement pursuant to which immediately following the implementation of the scheme of arrangement a third party will acquire and/or be the holder of all of the ordinary shares in SomnoMed: or
  • any other proposal is announced which involves a third party acquiring all or a majority interest in SomnoMed's ordinary shares.
  • The Options are not to be quoted on the ASX.