STELLAR RESOURCES LIMITED — Director's Dealing 2005

Apr 26, 2005

TERMS AND CONDITIONS OF OPTIONS ISSUED TO DIRECTORS OF STELLAR RESOURCES LIMITED

$\mathbf{1}$ . Entitlement

Each Option shall entitle the holder of an Option ('Option Holder') to subscribe for and be allotted one fully paid ordinary share ('Share') in the Company on the terms and conditions set out below.

$2.$ Exercise Period

Each Option is exercisable at any time from the granting of the Option to a date up to and including the fourth anniversary of the date the Option was granted ('Option Period').

If the Option is not exercised during the Option Period, the Option shall automatically lapse.

$31$ Method of Exercise of Options

The whole or part of the Options may be exercised in multiples of 10,000, by giving a completed and signed notice, in a form approved by the Board ('Notice of Exercise'), to the Board at any time during the Option Period, together with the money payable on the exercise of the Options.

Within 14 days of receipt of the Notice of Exercise, the Company must allot to the Option Holder the number of Shares in respect of which the Options are exercised.

4. Issue and Exercise Prices

No amount is payable on issue of the Options. Subject to clauses 7 and 8, the exercise price for each Option is 30 cents per Option ('Exercise Price') and is pavable immediately on exercise.

5. Ranking and Quotation of Shares Issued

Shares issued on the exercise of any Options will rank equally in all respects with the then existing issued ordinary fully paid Shares in the Company.

The Company will apply to ASX for official quotation of Shares issued pursuant to the exercise of Options.

6. Participation in Pro Rata Cash Offers and Pro Rata Bonus Issues

The Option Holder will not be entitled to participate in an offer for cash of Shares pro rata to the holders of Shares or a bonus issue of Shares or other securities convertible into Shares (other than an issue in lieu of dividends or by way of dividend reinvestment pursuant to any shareholder election) pro rata to the holders of Shares unless the Option Holder has exercised all or part of the Options before the record date for that offer or issue. The Company will notify the Option Holder at least seven business days before the record date for determining entitlements to such an offer or issue of the proposed terms of the offer or issue and the right to exercise his Options under this clause 6.

7. Adjustments for Pro Rata Cash Offers and Pro Rata Bonus Issues

Adjustment to the number of Shares over which Options exist and/or the Exercise Price will be made to take account of changes to the capital structure of the Company by way of pro rata cash offers and pro rata bonus issues as follows:

Pro-Rata Cash Offer $(a)$

Where a pro rata cash offer is made to the holders of Shares in the Company, the Exercise Price of an Option shall be reduced according to the following formula:

$$ \mathsf{O}'=\mathsf{O}\frac{\mathit{E}[P-(S+D)]}{N+1} $$

where:

• $\bigcap^{\prime}$ = the new exercise price of the Option.
• $Q =$ the old exercise price of the Option.
• $E =$ the number of Shares into which one Option is exercisable.
• $P =$ the average market price per Share (weighted by reference to volume) of the Shares during the five trading days ending on the date before the ex rights date or ex entitlements date.
• $S =$ the subscription price for a Share under the pro rata issue.
• $D =$ the dividend due but not vet paid on the existing Shares (except those to be issued under the pro rata issue).
• $N =$ the number of securities with rights or entitlements that must be held to receive a right to one new security.

$(b)$ Pro-Rata Bonus Issues

If the Company makes a bonus issue of Shares or other securities convertible into Shares pro rata to holders of ordinary shares (other than an issue in lieu of dividends, or by way of dividend reinvestment pursuant to Shareholder election), the number of Shares received on exercise of each Option will include the number of bonus Shares that would have been issued if the Option had been exercised prior to the record date for the bonus issue. The Exercise Price will not change.

8. Reconstruction

• $8.1$ Subject to clause 8.2, in the event of any reorganisation (including consolidation, subdivision, reduction or return) of the issued capital of the Company, the number of Options and/or the Exercise Price will be reconstructed (as appropriate) in the following manner:

  • in the event of a consolidation of the share capital of the Company, the $(a)$ number of Options shall be consolidated in the same ratio as the ordinary share capital of the Company, and the Exercise Price shall be amended in inverse proportion to that ratio:

• $(b)$ in the event of a subdivision of the share capital of the Company, the number of Options shall be sub-divided in the same ratio as the ordinary share capital of the Company, and the Exercise Price shall be amended in inverse proportion to that ratio:

• $(c)$ in the event of a return of share capital, the number of Options shall remain the same and the Exercise Price of each Option must be reduced by the same amount as the amount returned in relation to each ordinary security:

• $(d)$ in the event of a reduction of the share capital of the Company by way of a cancellation of the share capital that is either lost or not represented by available assets where no securities are cancelled, the number of Options and the Exercise Price of each Option shall remain unaltered;

• $(e)$ in the event of a pro-rata cancellation of Shares, the number of Options shall be reduced in the same ratio as the ordinary share capital and the Exercise Price of each Option shall be amended in inverse proportion to that ratio; and

• $(f)$ in the event of any other reconstruction of the issued capital of the Company. the number of Options or the Exercise Price of the Options or both shall be reconstructed (as appropriate) in a manner which will not result in any benefits being conferred on Option Holders which are not conferred on shareholders and, subject to the provisions with respect to rounding of entitlements as sanctioned by the meeting of shareholders approving the reconstruction of capital, in all other respects the terms for the exercise of the Options shall remain unchanged.

• 8.2 If there is a reorganisation (including consolidation, subdivision, reduction or return) of the issued capital of the Company, the rights of the Option Holder will be changed to the extent necessary to comply with the Listing Rules of ASX applying to a reorganisation of capital at the time of the reorganisation.

9. Takeover

If during the currency of any Options and prior to their exercise a takeover offer or a takeover announcement (within the meaning of the Corporations Act 2001 (Cth)) is made to holders of shares then within 10 Business Days after the Company becomes aware of the offer, the Company must forward a notice notifying each Option Holder of the offer and from the date of such notification each Option Holder has 60 days within which to exercise the Options notwithstanding any other terms and conditions applicable to the Options. If the Options are not exercised within 60 days after notification of the offer, the Options may be exercised at any other time according to their terms of issue.

$10.$ Scheme of Arrangement

If an offer for the Shares is made to shareholders of the Company pursuant to a scheme of arrangement which has been approved in accordance with the Corporations Act 2001 (Cth). Option Holders will be entitled to exercise Options held by them within the period notified by the Company.

Transfer and Quotation of Options 11.

The Options are not transferable except with the prior written consent of the Company. If the Company consents to the transfer of the Options, the Company may impose any conditions, including a condition that the transferee agree to be bound by the above terms and conditions, that it in its sole discretion determines to be appropriate. The Options will not be listed for quotation on ASX or any other recognised stock exchange.

$12.$ Notices

Notices may be given by the Company to the Option Holder in the manner prescribed by the Constitution of the Company for the giving of notices to the Shareholders of the Company and the relevant provisions of the Constitution of the Company will apply with all necessary modification to notices to be given to Option Holders.