STRUCTURAL MONITORING SYSTEMS PLC — Proxy Solicitation & Information Statement 2008

Feb 21, 2008

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(registered in England with Company No. 4834265 ARBN 106 307 322)

NOTICE OF GENERAL MEETING

and

EXPLANATORY STATEMENT

-and

PROXY FORM

DATE AND TIME OF MEETING : Tuesday 25 March 2008 at 11.00 WDT

VENUE:

Unit 5, 15 Walters Drive OSBORNE PARK WA 6018

These documents should be read in their entirety. If shareholders are in any doubt as to how they should vote, they should seek advice from their accountant, solicitor or other professional advisor.

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NOTICE IS HEREBY GIVEN that a General Meeting (" Meeting ") of members of Structural Monitoring Systems plc ("the Company ") will be held at Unit 5, 15 Walters Drive, Osborne Park, Western Australia on Tuesday, 25 March 2008 at 11 am WDT.

The accompanying Proxy Form forms part of this Notice of General Meeting (" Notice ").

An Explanatory Statement containing information in relation to the following Resolution accompanies this Notice.

A G E N D A

RESOLUTION 1: APPROVAL TO GRANT SHARE OPTIONS TO MR MARK VELLACOTT

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

“That, for the purpose of ASX Listing Rule 10.11 and for all other purposes, the Directors be and are hereby authorised to grant the following options, each to acquire one ordinary fully paid share of £0.05 issued in the capital of the Company, to Mr Mark Vellacott, the Managing Director of the Company, or his nominee(s):

• a. 3,000,000 options exercisable at 20 cents each between the date of grant and 31 March 2011; and

• b. 2,000,000 options exercisable at 25 cents each between 31 March 2009 and 31 March 2011,

and otherwise on the terms and conditions set out in the Explanatory Statement attached to and forming part of this Notice of Meeting.”

Short Explanation: ASX Listing Rule 10.11 provides that an entity must not permit a director of the entity to acquire securities without shareholder approval. Please refer to the Explanatory Statement for details.

Voting Exclusion Statement: The Company will disregard any votes cast on this resolution by Mr Mark Vellacott or any associates of Mr Mark Vellacott. However, the Company need not disregard a vote if it:

• it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or

• it is cast by a person chairing the Meeting as a proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

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For the purposes of the Resolution, the following definitions apply:

" ASX " means ASX Limited ABN 98 008 624 691 and, where the context permits, the Australian Securities Exchange operated by ASX Limited;

" ASX Listing Rules " means the official listing rules of ASX as amended from time to time;

" Company " means Structural Monitoring Systems plc , registered in England with Company No. 04834265;

" Directors " means the directors of the Company; and

" WDT " means Australian Western Daylight Time.

PROXIES

Shareholders are advised that:

• each shareholder has a right to appoint a proxy;

• the proxy need not be a member of the Company; and

• a shareholder that is entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If no proportion or number is specified then each proxy may exercise one half of the votes.

The Company specifies the following address and facsimile number for the purposes of receipt of proxy appointments:

Postal Address: Structural Monitoring Systems plc PO Box 2067 Churchlands WA 6018

Delivery Address: Structural Monitoring Systems plc Unit 5, 15 Walters Drive Osborne Park WA 6017

Facsimile: +61 8 9204 4866

The instrument appointing the proxy must be received by the Company at either of the addresses specified above or by facsimile at least 48 hours before the time notified for the Meeting (that is, by 11 am WDT on 23 March 2008).

Shares held at 5.00 pm WDT on 19 March 2008 will be taken, for the purposes of the General Meeting, to be held by the persons who held them at that time.

BY ORDER OF THE BOARD

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Colin R McDonald COMPANY SECRETARY Dated: 19 February 2008

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EXPLANATORY STATEMENT

This Explanatory Statement has been prepared for the purposes of the ASX Listing Rules. The purpose of this Explanatory Statement is to provide Shareholders with all the information known to the Company that is material to Shareholders in deciding whether or not to approve the proposed Resolution.

The Directors recommend that Shareholders read this Explanatory Statement in full before making any decision in relation to the Resolution.

Certain capitalised terms in this Explanatory Statement are defined in the Glossary.

RESOLUTION 1 – APPROVAL TO GRANT SHARE OPTIONS TO MR MARK VELLACOTT

1. INTRODUCTION

Shareholder approval is being sought to grant a total of 5,000,000 options to acquire ordinary shares of £0.05 each in the capital of the Company to Mr Mark Vellacott, the Managing Director, or his nominee(s).

The proposed options to be granted to Mr Vellacott or his nominees are as follows:

(a) 3,000,000 options exercisable at 20 cents each between the date of grant and 31 March 2011; and (b) 2,000,000 options exercisable at 25 cents each between 31 Marc ~~h 2~~ 009 and 31 March 2011.

The Company appointed Mr Vellacott as Managing Director on 15th June 2005. He had previously joined the Company as Chief Executive Officer in November 2004.

Mr Vellacott has an impressive record in the aerospace industry and has brought a depth of experience and skill to the management team. Prior to joining Structural Monitoring Systems, Mr Vellacott was the technical director for the Asia Pacific Space Centre project, based in Sydney.

Mr Vellacott has had 21 years' experience with British Aerospace and subsequently BAE SYSTEMS in the areas of Military Aircraft and Corporate Development. From 1998 to 2001 Mr Vellacott was Head of Engineering Technology at BAE SYSTEMS Australia, and was responsible for managing the company’s technology acquisition programs, including operation of the technology board.

During his time with BAE SYSTEMS Australia, Mr Vellacott represented BAE SYSTEMS as chairman of the board and president of the Electronic Industry Association, and served on a number of technology based advisory boards. He was elected as a fellow of the Royal Aeronautical Society in 2001, and is a Chartered Engineer. Mr Vellacott holds a Bachelor of Science in Aeronautical Engineering, a Master of Science in Systems Engineering and a Master of Business Administration.

The Board reassessed and re-negotiated Mr Vellacott’s remuneration package in November 2007 and considered the existing option package formerly agreed as part of Mr Vellacott’s overall remuneration lacked sufficient incentive. Accordingly, the Board has resolved to allot the options as set out in the Resolution, subject to shareholder approval.

The number and terms of the options to be granted to Mr Vellacott or his nominee(s) are considered by the other Directors to be appropriate remuneration for Mr Vellacott in light of his skill, experience and reputation and when considered together with his other remuneration. Mr Vellacott’s salary package will be more in line with market rates upon the grant of the options the subject of the Resolution.

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The Company therefore seeks shareholder approval to the grant of the options as detailed above, to Mr Vellacott or his nominee(s) to ensure the continuity of the incentive.

It is proposed that the options be granted in addition to the options granted to Mr Vellacott under the Structural Monitoring Systems Employee Share Option Plan in December 2005.

2. ASX LISTING RULE 10.11

ASX Listing Rule 10.11 requires Shareholders to approve the grant of options to a related party. As Mr Vellacott is a Director and therefore a related party of the Company, shareholder approval is sought pursuant to Resolution 1.

For the purposes of ASX Listing Rule 10.13, the following information is provided to Shareholders:

• (a) the options will be granted to Mr Mark Vellacott, who is a Director and the CEO of the Company, or his nominee(s);

• (b) the maximum number of options to be granted under this Resolution is 5,000,000;

• (c) the options the subject of Resolution will be granted to Mr Vellacott on a date not later than one month after the date of this General Meeting;

• (d) the options will be granted to Mr Vellacott for nominal consideration and accordingly, no funds will be raised from the grant of the options.

• (e) The exercise price and vesting conditions of the options are as follows:

• (i) 3,000,000 options exercisable at 20 cents each between the date of grant and 31 March 2011; and

• (ii) 2,000,000 options exercisable at 25 cents each between 31 March 2009 and 31 March 2011.

The full terms and conditions of the options the subject of the Resolution are set out in Annexure A to the Explanatory Statement.

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GLOSSARY

“1985 Act”

Companies Act 1985 including any statutory modification or re-enactment thereof for the time being in force and any provisions of the Companies Act 2006 for the time being in force

“ASX” ASX Limited ABN 98 008 624 691 and, where the context permits, the Australian Securities Exchange operated by ASX Limited. “ASX Listing Rules” The official listing rules of ASX as amended from time to time. “Board” The board of Directors. “Director” A director of Structural Monitoring Systems. “Meeting” or “General Meeting” The General Meeting of the Company to be held on 25 March 2008. “Notice of Meeting” The notice convening the Meeting, which accompanies this Explanatory Statement. “Resolution” The resolution contained in the Notice of Meeting. “Share” A fully paid ordinary share of £0.05 in the capital of the Company. “Shareholder” The registered holder of one or more Shares. “Structural Monitoring Systems” or Structural Monitoring Systems plc (ARBN: 106 307 “Company” 322) registered in England with Company Number 4834265. “WDT” Australian Western Daylight Time.

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ANNEXURE A

TERMS AND CONDITIONS OF OPTIONS – TRANCHE 1 (IMMEDIATE VESTING)

1.

Option Entitlement

Each option gives the option holder the right to subscribe for one fully paid ordinary share of £0.05 ("Share") in the capital of Structural Monitoring Systems plc ("Company").

2.

Exercise Price and Option Period

Each option is exercisable at 20 cents and expires at 5.00pm Perth time on 31 March 2011. Options automatically lapse if not exercised before expiry.

3.

Option Exercise

• (a) Subject to clause 2, the option holder may exercise some or all options held. The option holder may only exercise options by lodging with the Company prior to expiry:

• (i) the option certificate;

• (ii) a duly completed and signed notice of exercise; and

• (iii) the subscription monies for the relevant Shares being, subject to these terms and conditions, the number of options exercised multiplied by the exercise price.

• (b) On allotment and issue to the option holder of the Shares specified in a notice of exercise, the option certificate lodged with the Company by the option holder must:

• (i) if all the outstanding options have been exercised, be cancelled by the Company; or

• (ii) if only some of the outstanding options have been exercised, be appropriately endorsed by the Company and then returned to the option holder or cancelled and a new certificate for the remaining options issued to the option holder.

4.

Option Allotment Date

The Company must allot and issue to the option holder the number of Shares which corresponds with the number of options specified in the notice of exercise on or before the date of the next board meeting following the valid exercise of options and in any event not later than 15 business days after the date of exercise of the options.

5.

Option Assignment

The option holder cannot assign options or any interest or right in respect of those options. This does not prevent the exercise of the options by the estate of a deceased option holder.

6.

Adjustment to Number of Outstanding Options

Any adjustment to the number of outstanding options under a reorganisation of the Company's share capital must be made in accordance with the Listing Rules of the Australian Securities Exchange (" ASX ") (" ASX Listing Rules ").

7.

Adjustment to Exercise Price

Any adjustment to the exercise price under a reorganisation of the Company's share capital must be made in accordance with the ASX Listing Rules.

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8. Bonus and Pro Rata Issues

• (a) If there is a bonus issue (" Bonus Issue ") to the holders of Shares, the number of Shares over which an option is exercisable will be increased by the number of Shares which the option holder would have received if the option had been exercised before the record date for the Bonus Issue (" Bonus Shares "). The Bonus Shares must be paid up by the Company out of the profits or reserves (as the case may be) in the same manner as was applied in the Bonus Issue and upon issue rank pari passu in all respects with the other shares of that class on issue at the date of issue of the Bonus Shares.

• (b) If there is a pro rata issue (other than a bonus issue) to the holders of Shares during the currency of, and prior to the exercise of any options, the exercise price of an option will be reduced according to the formula provided for in the ASX Listing Rules.

• (c) Other than as allowed under clauses 8(a), the options do not entitle the option holder to participate in any new issue of securities of the Company or any other company, except in the capacity as a shareholder following exercise of the options.

9. Pari Passu Ranking

• (a) Subject to clause 9(b), any Shares allotted pursuant to the exercise of options will rank pari passu in all respects with other Shares of the Company on issue at the relevant exercise date.

• (b) The Company must apply for official quotation on the ASX of Shares allotted and issued pursuant to the exercise of any options as soon as practicable after allotment and issue and in any event within 10 business days after allotment and issue.

10. Stamp Duty

Any stamp duty payable on the issue and allotment of Shares acquired on the exercise of the options must be borne by the allottee of the Shares.

11. Lapse of Options

An option issued to an option holder in respect of an employee will expire on the earlier of the following:

• (a) the date shown as the expiry date on the face of the option certificate;

• (b) subject to clause 11(c), the date that employment of the employee ceases irrespective of the reason;

• (c) the date 1 year after the death or total and permanent disability (evidenced to the satisfaction of the board of the Company) of the employee; and

• (d) the date a resolution is passed for the voluntary winding-up of the Company.

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TERMS AND CONDITIONS OF OPTIONS – TRANCHE 2 (VESTING 31 MARCH 2009)

1.

Option Entitlement

Each option gives the option holder the right to subscribe for one fully paid ordinary share (" Share ") in the capital of Structural Monitoring Systems plc (" Company ").

2.

Option Period and Exercise Price

Each option is exercisable at 25 cents and, subject to these terms and conditions, is exercisable during the period from 31 March 2009 until expiry at 5.00pm Perth time on 31 March 2011 (" Exercise Period "). Options automatically lapse if not exercised before expiry.

3.

Option Exercise

• (a) Subject to clause 2, the option holder may exercise some or all options held. The option holder may only exercise options by lodging with the Company during the Exercise Period:

• (i) the option certificate;

• (ii) a duly completed and signed notice of exercise; and

• (iii) the subscription monies for the relevant Shares being, subject to these terms and conditions, the number of options exercised multiplied by the exercise price.

• (b) On allotment and issue to the option holder of the Shares specified in a notice of exercise, the option certificate lodged with the Company by the option holder must:

• (i) if all the outstanding options have been exercised, be cancelled by the Company; or

• (ii) if only some of the outstanding options have been exercised, be appropriately endorsed by the Company and then returned to the option holder or cancelled and a new certificate for the remaining options issued to the option holder.

4.

Option Allotment Date

The Company must allot and issue to the option holder the number of Shares which corresponds with the number of options specified in the notice of exercise on or before the date of the next board meeting following the valid exercise of options and in any event not later than 15 business days after the date of exercise of the options.

5.

Option Assignment

The option holder cannot assign options or any interest or right in respect of those options. This does not prevent the exercise of the options by the estate of a deceased option holder.

6.

Adjustment to Number of Outstanding Options

Any adjustment to the number of outstanding options under a reorganisation of the Company's share capital must be made in accordance with the Listing Rules of the Australian Securities Exchange (" ASX ") (" ASX Listing Rules ").

7.

Adjustment to Exercise Price

Any adjustment to the exercise price under a reorganisation of the Company's share capital must be made in accordance with the ASX Listing Rules.

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8. Bonus and Pro Rata Issues

• (a) If there is a bonus issue (" Bonus Issue ") to the holders of Shares, the number of Shares over which an option is exercisable will be increased by the number of Shares which the option holder would have received if the option had been exercised before the record date for the Bonus Issue (" Bonus Shares "). The Bonus Shares must be paid up by the Company out of the profits or reserves (as the case may be) in the same manner as was applied in the Bonus Issue and upon issue rank pari passu in all respects with the other shares of that class on issue at the date of issue of the Bonus Shares.

• (b) If there is a pro rata issue (other than a bonus issue) to the holders of Shares during the currency of, and prior to the exercise of any options, the exercise price of an option will be reduced according to the formula provided for in the ASX Listing Rules.

• (c) Other than as allowed under clauses 8(a), the options do not entitle the option holder to participate in any new issue of securities of the Company or any other company, except in the capacity as a shareholder following exercise of the options.

9. Pari Passu Ranking

• (a) Subject to clause 9(b), any Shares allotted pursuant to the exercise of options will rank pari passu in all respects with other Shares of the Company on issue at the relevant exercise date.

• (b) The Company must apply for official quotation on the ASX of Shares allotted and issued pursuant to the exercise of any options as soon as practicable after allotment and issue and in any event within 10 business days after allotment and issue.

10. Takeover and Winding up

• (a) Notwithstanding clause 2, all options may be exercised:

• (i) in the event that the Company accepts, or enters into an irrevocable undertaking to accept, a general offer for the whole of the issued share capital of the Company; or

• (ii) at any time after a Change of Control Event occurs; or

• (iii) if an order is made by a court of competent jurisdiction, including without limitation an order relating to: (A) a compromise or arrangement between the Company and its creditors or any class of them or between the Company and its members or any class of them which is agreed by the creditors and/or members and sanctioned by an appropriate court under applicable law (if any), or (B) any section 425 of the 2006 Act or (C) the insolvency or winding-up of the Company.

For the purposes of this clause 10(a), " Change of Control Event " means a shareholder, or a group of associated shareholders, becoming entitled to sufficient shares in the Company to give it or them the ability, and that ability is successfully exercised, in general meeting, to replace all or a majority of the board of directors of the Company.

(b) Notwithstanding clause 2, if notice is duly given of a general meeting at which a resolution will be proposed for the voluntary wind-up of the Company, every outstanding option will be exercisable (but so that any exercise of options under this clause 10(b) will only be valid if, at the time of such resolution being passed, that option would not have lapsed under any of the other clauses) at any time between the date of the notice and the date the resolution is duly passed or defeated or the meeting concluded or adjourned indefinitely, whichever occurs first. If such resolution is duly passed all options will, to the extent that they have not been exercised, immediately lapse.

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11. Stamp Duty

Any stamp duty payable on the issue and allotment of Shares acquired on the exercise of the options must be borne by the allottee of the Shares.

12. Lapse of Options

An option issued to an option holder in respect of an employee will expire on the earlier of the following:

• (a) the date shown as the expiry date on the face of the option certificate;

• (b) subject to clause 12(c), the date that employment of the employee ceases irrespective of the reason;

• (c) the date 1 year after the death or total and permanent disability (evidenced to the satisfaction of the board of the Company) of the employee; and

• (d) the date a resolution is passed for the voluntary winding-up of the Company.

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Structural Monitoring Systems plc

PROXY FORM

The Company Secretary Structural Monitoring Systems plc PO Box 2067 CHURCHLANDS WA 6018

I/We (PRINT NAME)

of

(PRINT ADDRESS)

being a Shareholder/Shareholders of Structural Monitoring Systems plc hereby appoint as my/our proxy

The Chairman of the meeting (mark with an X) OR

(PRINT NAME OF PROXY)

of

(PRINT ADDRESS OF PROXY)

or failing the person named, or if no person is named, the Chairman of the meeting as my/our proxy and to vote in accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the General Meeting of Structural Monitoring Systems plc to be held at Unit 5, 15 Walters Drive, Osborne Park, Western Australia on 25 March 2008 at 11:00 am (Perth, Western Australia time) and at any adjournment of that Meeting.

Voting directions to your proxy – please mark X to indicate your instructions

The proxy is to vote for or against the resolutions referred to in the notice convening the Extraordinary General Meeting, as follows:

For Against Abstain Resolution 1 Approval to grant options to Mark Vellacott Appointing a second Proxy (Please read the voting and proxy notes overleaf) If 2 proxies are appointed, the percentage of your voting rights this proxy is authorised to exercise is [ ]% or the number of shares for this proxy is [ ]. Signed: ___ (Affix Common Seal Director/Sole Director and Sole Secretary if required) ___ ___ ___ Director/Secretary Individual or Securityholder 1 Securityholder 2 ___ ___ _____ Director/Secretary Securityholder 3 Securityholder 4 Dated: ________

If 2 proxies are appointed, the percentage of your voting rights this proxy is authorised to exercise is [ ]% or the number of shares for this proxy is [ ].

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Structural Monitoring Systems plc (Company Number 4834265 and ARBN 106 307 322)

VOTING AND PROXY NOTES

1. Voting Entitlement

The board has determined that the persons who will be eligible to attend and vote at the meeting are those persons who are registered members of the Company at 11:00 am (Perth, Western Australia time) on 19 March 2008. Accordingly, Share transfers registered after that time will be disregarded in determining entitlements to attend and vote at the meeting.

2. Appointment of Proxy

A member entitled to attend and vote is entitled to appoint not more than two proxies. Where more than one proxy is appointed and that appointment does not specify the proportion or number of the member’s voting rights, each proxy may exercise half the votes.

If your proxy is the Chairman of the Meeting, a cross should be placed in the box. If the person you are naming is someone other than the Chairman of the Meeting please write the name of that person. If you leave this section blank or your named proxy is unable to attend, the Chairman of the Meeting will be your proxy to vote your shares. A proxy need not be a Shareholder of Structural Monitoring Systems plc. If you are appointing a second proxy, you may copy this form or obtain an additional Proxy Form by telephoning Structural Monitoring Systems plc on +61 (0) 8 9204 4844.

3. Authorised Signature(s)

In order for your Proxy to be valid, you must sign this form as follows in the spaces provided:

Joint Holding: Where the holding is in more than one name, all of the holders must sign.

Power of Attorney: To sign as Power of Attorney, please forward the Power of Attorney for noting (unless already noted). Alternatively, attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: A Director can sign jointly with another Director or a Company Secretary. A sole Director who is also a sole Company Secretary can also sign. Please indicate the office held by signing in the appropriate space.

4. Lodgment of Proxy

To be effective proxy forms, duly completed must be received not less than 48 hours prior to the time for holding the meeting. Proxy forms should be sent to the postal address of Structural Monitoring Systems plc at PO Box 2067, Churchlands, WA 6018 or faxed to the Company on +61 (0) 8 9204 4866.