VINYL GROUP LTD — Proxy Solicitation & Information Statement 2012

Aug 7, 2012

ASX CODE: MBO

For immediate release Date: 8 August 2012

NOTICE OF GENERAL MEETING OF SHAREHOLDERS

Mobilarm Limited attaches a Notice of General Meeting today dispatched to shareholders.

David McArthur COMPANY SECRETARY

MOBILARM LIMITED ACN 106 513 580 NOTICE OF GENERAL MEETING

TIME: 3pm (Perth time) DATE: Friday 7 September 2012 PLACE: 38 Guthrie Street Osborne Park WA 6017.

This Notice of Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting. Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on 08 9423 3200 or davidm@broadwaymgt.com.au.

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CONTENTS PAGE
Business of the Meeting (setting out the proposed resolutions)	6
Explanatory Statement (explaining the proposed resolutions)	8
Glossary	15
Schedule 1 – Statement of Material Information for Shareholders Regarding Financial Assistance	17
Schedule 2 – Terms and Conditions of Options	20
Schedule 3 – Valuation of Options	21

IMPORTANT INFORMATION

TIME AND PLACE OF MEETING

Notice is given that the general meeting of the Shareholders to which this Notice of Meeting relates will be held at 3pm (Perth time) on Friday 7 September 2012 at:

38 Guthrie Street Osborne Park WA 6017

YOUR VOTE IS IMPORTANT

The business of the General Meeting affects your shareholding and your vote is important.

VOTING ELIGIBILITY

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the General Meeting are those who are registered Shareholders at 5:00pm (Perth time) on Wednesday 5 September 2012.

VOTING IN PERSON

To vote in person, a Shareholder must attend the General Meeting at the time, date and place set out above.

A Shareholder that is a body corporate and entitled to vote must appoint a person to act as its representative. The appointment must comply with Section 250D of the Corporations Act and Shareholders who appoint a representative must provide that representative with written evidence of his or her appointment.

If your Shares are jointly held with one or more other persons, only one of you will be entitled to vote. If more than one Shareholder votes in respect of jointly held Shares, only the vote of the Shareholder whose name appears first on the Company's members' register will be counted.

VOTING BY PROXY

A proxy may be appointed in one of the following ways:

(a) By mail: complete and sign the enclosed Voting Form and return to: Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153

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(b) By fax:

complete and sign the enclosed Voting Form and fax to:

Inside Australia: 08 9315 2233 Outside Australia: +61 8 9315 2233

In order to validly appoint a proxy, the Voting Form (and, if the appointment is signed by an attorney or other authority, the authority under which it was signed or a certified copy of the authority) must be received by the Company by no later than 3pm on Wednesday 5 September 2012, being 48 hours before the commencement of the Meeting.

Powers of attorney and authorities should be submitted to the Company by mail or by fax at the address and fax numbers specified above and in the Voting Form.

In accordance with Section 249L of the Corporations Act and clauses 10.28 and 10.29 of the Company's Constitution, Shareholders are advised that:

• each Shareholder has a right to appoint a proxy;

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

• a Shareholder who is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If the Shareholder appoints 2 proxies and the appointment does not specify the proportion or number of the Shareholder's votes, then in accordance with Section 249X(3) of the Corporations Act, each proxy may exercise one-half of the votes.

New Sections 250BB and 250BC of the Corporations Act came into effect on 1 August 2011 and apply to voting by proxy on or after that date. Shareholders and their proxies should be aware of these changes to the Corporations Act, as they will apply to this General Meeting. Broadly, the changes mean that:

• if proxy holders vote, they must cast all directed proxies as directed; and

• any directed proxies which are not voted will automatically default to the Chair, who must vote the proxies as directed.

Further details on these changes are set out below.

Proxy vote if appointment specifies way to vote

Section 250BB(1) of the Corporations Act provides that an appointment of a proxy may specify the way the proxy is to vote on a particular resolution and, if it does:

• the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way (i.e. as directed); and

• if the proxy has 2 or more appointments that specify different ways to vote on the resolution – the proxy must not vote on a show of hands; and

• if the proxy is the Chair of the meeting at which the resolution is voted on – the proxy must vote on a poll, and must vote that way (i.e. as directed); and

• if the proxy is not the Chair – the proxy need not vote on the poll, but if the proxy does so, the proxy must vote that way (i.e. as directed).

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Transfer of non-Chair proxy to Chair in certain circumstances

Section 250BC of the Corporations Act provides that, if:

• an appointment of a proxy specifies the way the proxy is to vote on a particular resolution at a meeting of the Company's members; and

• the appointed proxy is not the Chair of the meeting; and

• at the meeting, a poll is duly demanded on the resolution; and

• either of the following applies:

• the proxy is not recorded as attending the meeting;

• the proxy does not vote on the resolution,

the Chair of the meeting is taken, before voting on the resolution closes, to have been appointed as the proxy for the purposes of voting on the resolution at the meeting.

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BOARD RECOMMENDATION ON HOW TO VOTE

The Board (excluding Mr Gaunt who did not wish to make any recommendation) recommends Shareholders vote in the following way as being in the best interests of the Company.

Resolution number	How to Vote
Resolution 1– Financial Assistance	FOR
Resolution 2– Grant of Options to Director	FOR

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BUSINESS OF THE MEETING

Notice is given that the general meeting of Shareholders will be held at 3pm (Perth time) on Friday 7 September 2012 at 38 Guthrie Street Osborne Park WA 6017.

The Explanatory Statement provides additional information on matters to be considered at the General Meeting. The Explanatory Statement and the Voting Form are part of this Notice of Meeting.

Capitalised terms used but not defined in the Explanatory Statement have the meaning given to them in the Glossary.

AGENDA

1. RESOLUTION 1 – FINANCIAL ASSISTANCE

To consider and, if thought fit, pass the following as a special resolution :

• "That for all relevant purposes under the Corporations Act 2001 (Cth), the members of the Company approve the giving of financial assistance described in the Statement of Material Information for Shareholders set out in Schedule 1 to the Explanatory Statement.”

Voting Exclusion: The Company will disregard any votes cast on this Resolution by or on behalf of Mr Robert Kenneth Gaunt and any associates of Mr Gaunt. 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 directions on the Voting Form, or, 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 Voting Form.

2. RESOLUTION 2 – GRANT OF OPTIONS TO DIRECTOR

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

"That, for the purposes of the Corporations Act 2001 (Cth), the ASX Listing Rules, and for all other relevant purposes, approval is given for the Directors to grant 29,670,487 options (each to subscribe for one fully paid ordinary share) to Mr Robert Kenneth Gaunt (or a nominee of Mr Gaunt) on the terms and conditions set out in the Explanatory Statement and Schedule 2 to the Explanatory Statement."

Voting Exclusion: The Company will disregard any votes cast on this Resolution by or on behalf of Mr Robert Kenneth Gaunt and any associates of Mr Gaunt. 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 directions on the Voting Form, or, 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 Voting Form.

Voting Prohibition Statement: A person appointed as a proxy must not vote, on the basis of that appointment, on this resolution if:

• (a) the proxy is either:

• (i) a member of the key management personnel; or

• (ii) a closely related party of such a member; and

• (b) the appointment does not specify the way the proxy is to vote on this Resolution.

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However, the above prohibition does not apply if:

• (c) the proxy is the Chair of the Meeting; and

• (d) the appointment expressly authorises the Chair to exercise the proxy even if the resolution is connected directly or indirectly with remuneration of a member of the key management personnel.

DATED: 7 August 2012

BY ORDER OF THE BOARD

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David McArthur

COMPANY SECRETARY

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EXPLANATORY STATEMENT

This Explanatory Statement has been prepared to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions which are the subject of the business of the Meeting.

Capitalised terms used but not defined in this Explanatory Statement have the meaning given to them in the Glossary.

1. RESOLUTION 1 – FINANCIAL ASSISTANCE

1.1 Background

The Company proposes to enter into a loan agreement with Mr Gaunt ( Loan Agreement ) under which the Company will provide an interest-free loan to Mr Gaunt of an amount equal to the total Grant Price payable for the 29,670,487 Options, being a total loan amount of $267,034 ( Loan ). The Loan will be a limited recourse loan, and will be repayable upon disposal, cancellation or exercise of the Options. The Company will pay any fringe benefits and other taxes payable in relation to the Loan. The Company expects the fringe benefits tax liability will be approximately $20,000 per annum for the duration of the Loan.

1.2 Shareholder approval – financial assistance

The entering into and performing of obligations under the Loan Agreement, and any other related documents, by the Company as referred to above may constitute the giving of financial assistance to Mr Gaunt in connection with the acquisition by Mr Gaunt (or his nominee) of Shares issued upon exercise of the Options.

A detailed Statement of Material Information for Shareholders prepared pursuant to Section 260B(4) of the Corporations Act in respect of the proposed provision of financial assistance can be found at Schedule 1.

1.3 Shareholder approval – financial benefit

The Corporations Act requires that for a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

• (a) obtain the approval of the public company's members in the manner set out in Sections 217 to 227 of the Corporations Act; and

• (b) give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in Sections 210 to 216 of the Corporations Act.

It is the view of the Directors that the exceptions set out in Sections 210 to 216 of the Corporations Act do not apply in the current circumstances. Accordingly, Shareholder approval is sought for the provision by the Company of the financial benefit (in the form of the Loan) to Mr Gaunt.

Pursuant to and in accordance with the requirements of Sections 217 to 227 of the Corporations Act, the following information is provided in relation to Resolution 1:

• (a) the related party is Mr Gaunt, a Director of the Company;

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• (b) the nature of the financial benefit being provided is the interest-free Loan and the payment by the Company of any fringe benefits and other taxes payable in relation to the Loan, as described in paragraph 1.1 above;

• (c) the amount of the Loan to be provided to Mr Gaunt is $267,034, which is an amount equal to the Grant Price per Option determined and outlined in Schedule 3 multiplied by 29,670,487, which is the number of Options proposed to be granted to Mr Gaunt (or his nominee) under the Terms;

• (d) an independent third party has valued the financial benefit being provided to Mr Gaunt as a result of the Loan Agreement. The following assumptions were made in undertaking this valuation:

• (i) the term of Loan Agreement is 7 years (Source – Loan Agreement);

• (ii) the interest rate being charged on the Loan is 0% (Source – Loan Agreement);

• (iii) the market interest rate for comparable loans is 14.2% (Source - RBA Indicator Lending Rates (F5) for unsecured personal term loans as at July 2012); and

• (iv) the face value of the Loan is $267,034.

Based upon the above assumptions:

• (v) the fair value of the Loan if the commercial interest rate of 14.2% is applied is $267,034;

• (vi) the fair value of the same Loan but with a 0% interest rate (as per the Loan Agreement) is $105,415.

The difference between these fair value calculations is $161,619, which represents the financial benefit being provided to Mr Gaunt as a result of the Company providing the Loan on the terms of the Loan Agreement.

• (e)

• the terms and conditions of the Loan are outlined in Schedule 1:

• (f) the Loan will be provided to Mr Gaunt immediately prior to the grant of the Options, which will occur on a date no later than 1 month after the date of the Meeting (or such later date as permitted by any ASX waiver or modification of the ASX Listing Rules);

• (g) the Directors (other than Mr Gaunt) each recommend that Shareholders vote in favour of Resolution 1 for the following reasons:

• (i) the granting of the Options to Mr Gaunt is in the best interests of the Company as outlined in section 2.3(n) below and provision of the Loan will facilitate the acquisition of the Options by Mr Gaunt; and

• (ii) it is not considered that there are any significant opportunity costs to the Company in granting the Loan upon the terms proposed;

• (h) in forming their recommendations, each of the Directors (other than Mr Gaunt) considered the desirability of facilitating the acquisition of the Options by Mr Gaunt in light of the perceived benefits to the Company in incentivising Mr Gaunt in this manner as described in section 2.3(n) below;

• (i) none of the Directors (other than Mr Gaunt) have an interest in the outcome of Resolution 1;

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• (j) Mr Gaunt is not making a recommendation to Shareholders about Resolution 1 due to Mr Gaunt's interest in the outcome of Resolution 1 as the recipient of the proposed financial assistance; and

• (k) the Board is not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company to pass Resolution 1.

1.4 Relationship with Resolution 2

The Directors have determined that if Resolution 1 is passed but Resolution 2 is not passed then the Company will not enter into the Loan Agreement.

2. RESOLUTION 2 – GRANT OF OPTIONS TO DIRECTOR

2.1 General

The purpose of Resolution 2 is to seek the approval of Shareholders for the grant of 29,670,487 Options to Mr Gaunt (or his nominee) on the Terms, which are outlined below and in Schedule 2. A copy of Terms is also available for inspection at the Company's registered office at 38 Guthrie Street, Osborne Park, Western Australia 6017. Alternatively, a copy of the Terms can be obtained by writing to the Company Secretary at the above address.

The Company has requested an independent third party to value the Options, and the valuation of the Options (including the assumptions underlying that valuation) is included in Schedule 3.

The proposed grant of Options to Mr Gaunt does not represent a free grant of Options or Shares. Mr Gaunt is required to pay for the Options when they are first granted at a price of $0.009 per Option ( Grant Price ). The basis for determining the value of the Options is outlined in Schedule 3. The Grant Price is payable at the time of grant of the Options. The Company proposes to loan Mr Gaunt an amount equivalent to the total Grant Price payable for the 29,670,487 Options under the Loan Agreement. Further details on the Loan Agreement are set out above in the section of the Explanatory Statement regarding Resolution 1.

The Options, once vested, entitle the holder to subscribe for up to 29,670,487 Shares, with the exercise price per Option payable being $0.021 ( Exercise Price ). The Exercise Price is payable upon exercise of the Options.

Before the Options proposed to be granted to Mr Gaunt are able to vest, the market price of the Shares must reach $0.10 per Share. Further details on this vesting hurdle are set out below. The Options will also vest on an accelerated basis in customary circumstances, including on a change in control, takeover or analogous transaction in relation to the Company (collectively a Change in Control ).

2.2 Shareholder approval

The Corporations Act requires that for a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

• (c) obtain the approval of the public company's members in the manner set out in Sections 217 to 227 of the Corporations Act; and

• (d) give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in Sections 210 to 216 of the Corporations Act.

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In addition, ASX Listing Rule 10.11 requires shareholder approval to be obtained where an entity issues, or agrees to issue, securities to a related party unless an exception in ASX Listing Rule 10.12 applies.

It is the view of the Directors that the exceptions set out in Sections 210 to 216 of the Corporations Act and ASX Listing Rule 10.12 do not apply in the current circumstances.

Finally, Section 200C of the Corporations Act requires that for a company to give a benefit to a person who holds, or has at any previous time held, a managerial or executive office in a company or a Related Body Corporate, in connection with the transfer of the whole or any part of the undertaking or property of the company, the company must obtain the approval of the company's members in the manner set out in Section 200E of the Corporations Act.

Accordingly, Shareholder approval is sought for the grant of Options to Mr Gaunt.

2.3 Technical information required by the Corporations Act and ASX Listing Rules

Pursuant to the requirements of the Corporations Act and ASX Listing Rules 10.13 and 10.15, the following information is provided in relation to Resolution 2:

• (a) the related party is Mr Gaunt, a Director of the Company;

• (b) the maximum number of Options (being the nature of the financial benefit being provided) to be granted to Mr Gaunt under the Terms is 29,670,487 Options (subject to adjustment in accordance with the Terms);

• (c) the reason for the grant of the Options and the basis on which it is given (including the reason for the number of Options being granted) is as a method to provide appropriate and cost effective remuneration and incentive to Mr Gaunt for the provision of the services of Mr Gaunt in his role as a director and Chief Executive Officer of the Company. The form of this benefit will allow the Company to spend a greater proportion of its cash reserves on its operations than it would if alternative cash forms of remuneration were required to be paid;

• (d) the Options are being granted for the following cash consideration:

No. of Options	Grant Price per Option	Total Grant Price
29,670,487	$0.009	$267,034

The Grant Price is payable upon grant of the Options.

The Company will not receive any net funds from the grant of Options as the Company proposes to loan Mr Gaunt an amount equivalent to the total Grant Price under the Loan Agreement. Further details on the Loan Agreement are set out above in the section of the Explanatory Statement regarding Resolution 1.

If the Options are exercised, the holder of those Options may elect to pay the Exercise Price of those Options in order to receive Shares ( Approach A ). The holder of the Options may alternatively elect to exercise the Options on a “net value” basis ( Approach B ). "Net value" basis means that the holder of the Options does not pay the Exercise Price, but instead the Exercise Price is accounted for when assessing the value of the Options at the time of exercise. If the holder of the Options elects to take Approach B, the holder will receive Shares equivalent in value to the “net value” or, if the Company agrees, a cash payment equivalent to the “net value”. Approach B can be illustrated as follows:

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A = (B - C)/D

Where:

A = the number of Shares the holder of the Options will receive under Approach B (or, if the Company agrees, a cash payment equivalent to the value of those Shares (using VWAP));

B = an amount equal to the value of the Shares the holder of the Options would have received under Approach A (using VWAP);

C = the Exercise Price; and

D = the value of the Shares (using VWAP) at the time of exercise of the Options.

If all of the Options are exercised and the holder of those Options elects to pay the Exercise Price in return for Shares (Approach A) the Company will raise $623,080.23 (rounded up to the nearest cent) from the exercise of those Options, being $0.021 per Option. How those funds are used by the Company will be determined by the Board at the time, based on the prevailing circumstances of the Company at that time.

If all of the Options are exercised and the holder of those Options elects to pay the Exercise Price in return for Shares (Approach A), the value obtained by the holder of those Options will be an amount per Option equal to the Share price at the time of exercise, less the Exercise Price.

Shareholders should note that as at the date of this Notice, the price of the Shares on ASX is trading substantially below the price vesting hurdle, and therefore there will be no immediate ability for the holder of Options to exercise the Options;

(e) subject to Resolution 1 being passed, the Company will make an interest-free loan to Mr Gaunt in accordance with the Loan Agreement of an amount equivalent to the total Grant Price payable for the 29,670,487 Options, being a total loan amount of $267,034. Further details on the Loan Agreement are set out above in the section of the Explanatory Statement regarding Resolution 1;

• (f)

the Terms of the Options are outlined below and in Schedule 2:

No. of Options	Grant Price	Vesting hurdle price per share*	Expiry Date
29,670,487	$0.009	$0.10	Three years from date of issue

• In order to satisfy the vesting hurdle, the volume weighted average price of the Shares on ASX must be not less than the vesting hurdle price over a 5-day period. Following the satisfaction of the vesting hurdle, the Options will be considered vested and immediately exercisable.

Any Shares issued upon the exercise of the Options will rank pari passu with the Company's existing Shares on issue;

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• (g) the value of the Options on grant (and the methodology used to determine that value) is set out in Schedule 3. The value is derived based on advice received from a qualified independent third party advisor to the Company;

• (h) the Options will be granted to Mr Gaunt (or his nominee) no later than 1 month after the date of the Meeting (or such later date as permitted by any ASX waiver or modification of the ASX Listing Rules). It is anticipated the Options will all be granted on one date;

• (i) Mr Gaunt is the chief executive officer of the Company and a Director of the Company and his remuneration for the last two financial years totalled $120,000. Mr Gaunt's remuneration for the current financial year is $240,000 per annum;

• (j) Mr Gaunt currently holds 24,922,155 Shares and 3,000,660 unlisted options in the Company;

• (k) if Mr Gaunt exercises the Options and receives the Shares and subsequently resigns from his employment with the Company, he will be entitled to retain the Shares;

• (l) if the Options vest and they are all exercised, a total of 29,670,487 Shares would be issued. This will increase the number of Shares on issue from 296,704,866 to 326,375,353 (assuming that no other Options are exercised and there are no other changes to the Shares on issue) with the effect that the shareholding of existing Shareholders would be diluted by a total of 9.1%.

The market price for Shares during the term of the Options would normally determine (assuming vesting occurs) whether or not the Options are exercised. If, at any time any of the Options are exercised and the Shares are trading on ASX at a price that is higher than the Grant Price of the Options, there may be a perceived cost to the Company.

As at the date of this Notice, the Shares are trading on ASX at a price substantially below the price vesting hurdle of $0.10 per Share;

(m) the trading history of the Shares on ASX in the 12 months before the date of this Notice is set out below:

Notice is set out below:
History	Price	Date
Highest	$0.095	9 December 2011
Lowest	$0.021	18, 19 and 24 July 2012

On 6 August 2012 (4 Business Days prior to the day this Notice was dispatched to shareholders) the last recorded sale price of the Shares on ASX was $0.031.

(n) The Directors (other than Mr Gaunt) each recommend that Shareholders vote in favour of Resolution 2 for the following reasons:

• (i) the grant of the Options to Mr Gaunt will align Mr Gaunt's interests in achieving substantial increased value for Shareholders;

• (ii) the grant of the Options is a reasonable and appropriate method to provide cost effective remuneration and incentive to Mr Gaunt for the provision of the services of Mr Gaunt in his role as a director and Chief Executive Officer of the Company, and the form of this benefit will allow the Company to spend a

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greater proportion of its cash reserves on its operations than it would if alternative cash forms of remuneration were required to be paid; and

• (iii) Mr Gaunt will be required to pay the Grant Price for the Options set out at paragraph 2.3(d) above in order to receive Options;

• (iv) it is not considered that there are any significant opportunity costs to the Company in granting the Options upon the terms proposed;

• (o) in forming their recommendations, each of the Directors (other than Mr Gaunt) considered the experience of Mr Gaunt, the current market price of Shares, the current market practices when determining the number of Options to be granted as well as the price vesting hurdle and expiry date of those Options;

• (l) none of the Directors (other than Mr Gaunt) have an interest in the outcome of Resolution 2;

• (p) Mr Gaunt is not making a recommendation to Shareholders about Resolution 1 due to Mr Gaunt's interest in the outcome of Resolution 2 as the person receiving the grant of the Options (whether directly or through a nominee); and

• (q) the Board is not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company to pass Resolution 2.

The Directors have determined that if Resolution 2 is passed but Resolution 1 is not passed the Company will reserve its right to issue the Options to Mr Gaunt (or his nominee) within the period described in paragraph 2.3(h), subject to Mr Gaunt otherwise being able to pay the Grant Price.

Approval pursuant to ASX Listing Rule 7.1 is not required in order to grant the Options to Mr Gaunt (or his nominee) as approval is otherwise being obtained for all relevant purposes (including under ASX Listing Rule 10.11). Accordingly, the grant of the Options to Mr Gaunt (or his nominee) will not be included in the 15% calculation of the Company's annual placement capacity pursuant to ASX Listing Rule 7.1.

3. ENQUIRIES

Shareholders are requested to contact the Company Secretary on 08 9423 3200 or davidm@broadwaymgt.com.au if they have any queries in respect of the matters set out in these documents.

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GLOSSARY

• $ means Australian dollars.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited.

ASX Listing Rules means the Listing Rules of ASX.

Bad Leaver means the Mr Gaunt ceases to be engaged (as an employee or as a contractor of any entity within the Group) prior to the date the Options vest, other than in circumstances where the Mr Gaunt's cessation arises out of the following circumstances:

• (a) because of death of Mr Gaunt; or

• (b) because of sickness, disability or incapacity which renders Mr Gaunt incapable of continued full time engagement in his current position as chief executive officer of the Group; or

(c) because the Group entity that engages Mr Gaunt ceases to be a member of the Group for any reason; or

(d) because the business or part of any business of any member of the Group that engages Mr Gaunt is transferred to a person (other than any member of the Group) and Mr Gaunt transfers his engagement to that other person with the consent of the Company; or

(e) as a result of Mr Gaunt being made redundant or the employing Group entity electing to terminate the engagement other than for Cause (as defined in the Terms); or

(f) where the Board otherwise determines that the circumstances are such that Mr Gaunt should not be treated as a "Bad Leaver".

Board means the current board of directors of the Company.

Business Day means Monday to Friday inclusive, except New Year's Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day.

Company means Mobilarm Limited (ACN 106 513 580).

Chair means the chairperson of the General Meeting;

Change of Control Event means:

• (a) a person acquires voting power in at least 50.1% or more of the issued Shares;

• (b) a person acquires the power to direct or cause the direction of management or policies of the Company;

• (c) a person directly or indirectly acquires all or substantially all of the business and assets of the Group; or

• (d) a person otherwise acquires or merges with the Group,

including by way of a takeover bid, scheme of arrangement, amalgamation, merger, capital reconstruction, consolidation, share acquisition, securities issuance, share buyback or repurchase, reverse takeover, dual listed company structure, establishment of a new holding entity for the Group or any other comparable transaction or arrangement..

Constitution means the Company's constitution.

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Corporations Act means the Corporations Act 2001 (Cth).

Directors means the current directors of the Company.

Explanatory Statement means the explanatory statement accompanying the Notice.

General Meeting or Meeting means the meeting convened by the Notice.

Group means the corporate group comprising the Company and its Related Bodies Corporate.

Notice or Notice of Meeting or Notice of General Meeting means this notice of general meeting including the Explanatory Statement and the Voting Form.

Option means an option to acquire a Share with the terms and conditions set out in this Notice.

Optionholder has the meaning given to that term in Schedule 2.

Related Bodies Corporate has the meaning given to that term in Section 9 of the Corporations Act.

Resolutions means the resolutions set out in the Notice of Meeting, or any one of them, as the context requires.

Share means a fully paid ordinary share in the capital of the Company.

Shareholder means a holder of a Share.

Terms means the terms of grant of the Options as summarised in this Notice.

Voting Form means the voting/proxy form accompanying the Notice.

VWAP means the daily volume weighted average sale price on ASX of the Shares.

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SCHEDULE 1 – STATEMENT OF MATERIAL INFORMATION FOR SHAREHOLDERS REGARDING FINANCIAL ASSISTANCE

Introduction

This statement of material information is given to members of the Company for the purpose of Section 260B(4) of the Corporations Act.

It contains information known to the Company that is material to deciding how to vote on Resolution 1 set out in the accompanying Notice of General Meeting. The resolution may involve the giving of financial assistance by companies once they become subsidiaries of the Company.

Background

The Company proposes to grant 29,670,487 Options at an Grant Price of $0.009 per Option to Mr Gaunt (or his nominee). Mr Gaunt is required to pay the Grant Price upon grant of the Options. Further details regarding the grant of these Options to Mr Gaunt are set out in the section of the Explanatory Statement regarding Resolution 2.

The Company proposes to enter into a loan agreement with Mr Gaunt under which the Company agrees to loan to Mr Gaunt an amount equal to the total Grant Price payable for the 29,670,487 Options ( Loan Agreement ) . The key terms of the Loan Agreement are as follows:

• (a) the Company's recourse under the Loan Agreement is limited to the proceeds arising from a disposal of the Options (which may occur by way of private treaty after the Options have vested) or a disposal of the Shares granted upon exercise of the Options. The Company will have no right to require disposal of the Shares during the term of the Loan. If the proceeds of disposal of the Options or the Shares (as applicable) are not sufficient to repay the Loan in full, then any balance outstanding will be treated as repaid in full;

• (b) if any of the Options lapse unexercised, then the amount of the Loan attributable to the lapsed Options will effectively be treated as repaid in full;

• (c) the Loan is interest-free;

• (d) the Loan is repayable (in whole or in part, depending on the proportion of the Options or underlying Shares that are realised or, in the case of the Options lapsing, having lapsed) only in the following circumstances:

• (i) upon disposal of the Options or the Shares granted upon exercise of the Options; or

• (ii) upon the Options lapsing unexercised;

• (e) the term of the Loan is 7 years, but may be repaid earlier in accordance with paragraph (d) above; and

• (f) the Company will bear all fringe benefits and other taxes payable in relation to the Loan. The Company expects the fringe benefits tax liability will be approximately $20,000 per annum for the duration of the Loan.

In practice, the Company will make the Loan to Mr Gaunt and then immediately receive the funds back by way of payment of the Issue Price, meaning the immediate net effect on the Company of making the Loan is effectively zero. The cost to the Company in making the Loan is not the Loan amount itself, but rather only the fringe benefits tax liability described in paragraph (f) above. For this reason, among others, the Board has formed the view that the provision of this financial assistance to Mr Gaunt does not materially prejudice the interests of the Company or its shareholders, or the Company's ability to pay its creditors.

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Financial assistance

The entering into and performing of obligations under the Loan Agreement by the Company may constitute the giving of financial assistance to Mr Gaunt in connection with the acquisition by Mr Gaunt of Shares issued upon exercise of the Options.

The approval of the members of the Company is therefore sought pursuant to Section 260B(3) of the Corporations Act to the financial assistance described above.

Requirements for shareholder approval

Under Section 260A of the Corporations Act, a company may financially assist a person to acquire shares in the company or a holding company of the company without shareholder approval only if giving the assistance does not materially prejudice:

• (a) the interests of the company or its shareholders; or

• (b) the company's ability to pay its creditors.

Even if there is such prejudice, the company can financially assist a person to acquire shares in the company or a holding company of the company with shareholder approval. The requirements for approval under Section 260B of the Corporations Act are:

• (a) The financial assistance must be approved by shareholders by:

• (i) a special resolution passed at a general meeting of the company, with no votes being cast in favour of the resolution by the person acquiring the shares or by their associates; or

• (ii) a resolution agreed to, at a general meeting, by all ordinary shareholders.

• (b) If immediately after the acquisition, the company has a holding company that is a domestic corporation but not listed and is not itself a subsidiary of a domestic corporation, the financial assistance must also be approved by a special resolution passed at a general meeting of the holding company.

• (c) If immediately after the acquisition, the company becomes a subsidiary of a listed domestic corporation, the financial assistance must also be approved by a special resolution passed at a general meeting of that corporation.

• (d) A company calling a general meeting must issue a statement setting out all the information known to that company that is material to the decision on how to vote on the resolution, unless it would be unreasonable to require that company to do so because that company has previously disclosed the information to its members.

• (e) Before the notice of a meeting for the purpose of approving the giving of financial assistance is sent to members of a company, the company must lodge with the Australian Securities & Investments Commission ( ASIC ) the notice of the meeting of the members and any document relating to the financial assistance that will accompany that notice.

• (f) The company must lodge with ASIC notice that the assistance has been approved at least 14 days before giving the financial assistance.

• (g) A special resolution passed at a general meeting referred to above must be lodged with ASIC within 14 days after it is passed.

Consequences of non-approval of financial assistance

If a special resolution approving the giving of financial assistance described above is not passed at the Meeting, the Company will not enter into the Loan Agreement.

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Recommendation of directors

The Directors recommend that members vote in favour of Resolution 1.

Notice to ASIC

Copies of the notice to members of the proposed resolution and this explanatory statement were lodged with ASIC before being sent to the members, in accordance with Section 260B(5) of the Corporations Act.

Disclosure

The Company considers this statement to contain all material information known to it that could reasonably be required by a member in deciding how to vote on the proposed resolution other than information that would be unreasonable to require the Company to disclose because the Company has previously disclosed that information to the member.

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SCHEDULE 2 - TERMS AND CONDITIONS OF OPTIONS

The Options entitle the holder ( Optionholder ) to subscribe for Shares on the following terms and conditions:

• (a) Subject to the Options vesting under the Terms, each Option entitles the Optionholder subscribe for one Share (subject to adjustment under the Terms).

• (b) The Optionholder may not exercise the Options, nor otherwise deal in the Options (subject to limited exceptions) prior to the Options vesting.

• (c) If the Optionholder becomes a Bad Leaver, any Options that have not vested at that time will lapse on the Company giving written notice of the lapse to the Optionholder.

• (d) The Options vest when the Share Price is equal to or greater than A$0.10 (subject to adjustment under the Terms). In addition, upon a Change of Control Event, the Options automatically vest.

• (e) Where the Options do not vest within 3 years from the date upon the grant of the Options ( Expiry Date ), the Options will lapse without compensation to the Optionholder.

• (f) Where the Options vest, the Options may be exercised at any time (up to the Expiry Date) by delivering to the Company the Certificate held by the Optionholder in respect of the Options exercised, a completed Exercise Notice and payment of the Exercise Price (if applicable) for each Option exercised.

• (g) An Option which has not previously been exercised under the Terms will automatically expire and be of no further force or effect at midnight (Perth time) on the Expiry Date.

• (h) The Options will not be officially quoted on ASX.

• (i) Where there is a reorganisation (including consolidation, subdivision, reduction or return) of the capital of the Company, the rights of an Optionholder in respect of unexercised Options will be correspondingly reorganised in a manner permissible under and in compliance with the ASX Listing Rules.

• (j) An Optionholder is not entitled to participate in new issues of Shares or other securities made by the Company to holders of its Shares ( Issue ) unless the Optionholder's Options are exercised before the record date for determining entitlements to the Issue.

• (k) Subject to certain exceptions, where the Company makes a bonus issue of Shares or other securities convertible into Shares pro rata to Shareholders, the number of Shares issued on exercise of each Option will be increased by the number of bonus Shares that the Optionholder would have received if the Options had been exercised prior to the record date for the bonus Shares.

• (l) A Share issued upon the exercise of an Option will rank pari passu in all respects with all other Shares on issue, subject to the Constitution.

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SCHEDULE 3 – VALUATION OF OPTIONS

Set out below are the key terms of the Options and the value attributed to them on grant:

Table 1: Key Terms of the Options

Key Terms Details	Key Terms Details
Grant Date1 Underlying Share Price ($)2 Exercise Price ($) Legal Expiry Legal Expiry Date Latest Exercise Date3 Vesting Hurdle Price Risk Free Rate (%)4 Volatility Factor (%)5 Dividend Yield (%)6 Early Vesting	31 August 2012 $0.021 $0.021 36 months 31 August 2015 31 August 2015 $0.10 2.28% 75% - 85% Nil The Options will vest on an accelerated basis on a Change of Control Event. Upon a Change of Control Event, all outstanding Options vest immediately.

Notes :

1. As the Options require Shareholder approval, Grant Date has not yet occurred. For the purpose of this valuation, an assumed Grant Date of 31 August 2012 has been employed.

2. The Company’s underlying share price has been based on the closing price of the Company as at 18 July 2012.

3. For the purposes of this valuation, the exercise date is assumed to be the latest date allowable under the Terms as this corresponds to the theoretical maximum share price and therefore highest potential Option value.

4. The risk free rate at the date of grant are the yields on an Australian Government Bonds with similar durations to the Options as at the assumed Grant Date.

5. The estimated future volatility of 75% - 85% was based on an analysis of the Company’s historical monthly share price movement and an analysis of comparable companies.

6. The Company's management has indicated that it does not intend to make dividend payments over the term of the Options.

7. In valuing the Options, a Hoadley Barrier model was utilised which incorporates the probability of the vesting conditions being met.

Table 2: Value of the Options

Key Terms Details	Key Terms Details
Assessed Range ($) Mid-point Value ($) Number of Options Total Value (based on the mid-point value) ($)	$0.008 - $0.010 $0.009 29,670,487 $257,231

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PROXY FORM

APPOINTMENT OF PROXY MOBILARM LIMITED ABN 15 106 513 580

GENERAL MEETING Friday 7 September 2012

I/We

of

being a member of Mobilarm Limited entitled to attend and vote at the General Meeting, hereby

appoint

Name of proxy

OR the Chair of the General Meeting as my/our proxy

or failing the person or body corporate so named or, if no person or body corporate is named, the Chair of the Meeting, or the Chair’s nominee, 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 Mobilarm Limited to be held at 38 Guthrie Street Osborne Park, Perth, Western Australia , on Friday 7 September 2012 at 3:00pm (Perth time) , and at any adjournment thereof.

By marking this box, you acknowledge that the Chair of the General Meeting may exercise your proxy even if he has an interest in the outcome of the Resolutions and that votes cast by the Chair of the General Meeting for the Resolutions other than as proxy holder will be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chair will not cast your votes on the Resolutions and your votes will not be counted in calculating the required majority if a poll is called on the Resolutions.

Voting on Business of the General Meeting

				FOR	AGAINST	ABSTAIN
Resolution	1	-	Financial Assistance
Resolution	2	-	Grant of Options to Director

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Mobilarm Limited ABN 15 106 513 580

Instructions for Completing ‘Appointment of Proxy’ Form

1. ( Appointing a Proxy ): A member entitled to attend and vote at the General Meeting is entitled to appoint a person as the member's proxy to attend and vote for the member at the General Meeting. Members entitled to cast 2 or more votes at the General Meeting may appoint two proxies to attend and vote on a poll on their behalf. The appointment of a second proxy must be done on a separate copy of the Proxy Form. Where more than one proxy is appointed, such proxy must be allocated a proportion of the member’s voting rights. If a member appoints two proxies and the appointment does not specify this proportion, each proxy may exercise half the votes. A duly appointed proxy need not be a member of the Company.

2. ( Direction to Vote ): A member may direct a proxy how to vote by marking one of the boxes opposite each item of business. Where a box is not marked, the proxy may vote as they choose. Where more than one box is marked on an item the vote will be invalid on that item.

3. ( Signing Instructions ):

4. ( Individual ): Where the holding is in one name, the member must sign.

5. ( Joint Holding ): Where the holding is in more than one name, all of the members must sign.

6. ( Power of Attorney ): If you have not already provided the Power of Attorney with the registry, please attach a certified photocopy of the Power of Attorney to this form when you return it.

7. ( Companies ): Where the company has a sole director who is also the sole company secretary, that person must sign. Where the company (pursuant to Section 204A of the Corporations Act) does not have a company secretary, a sole director can also sign alone. Otherwise, a director jointly with either another director or a company secretary must sign. Please sign in the appropriate place to indicate the office held.

8. ( Attending the Meeting ): Completion of a Proxy Form will not prevent individual members from attending the General Meeting in person if they wish. Where a member completes and lodges a valid Proxy Form and attends the General Meeting in person, then the proxy’s authority to speak and vote for that member is suspended while the member is present at the General Meeting.

9. ( Return of Proxy Form ): To vote by proxy, please complete and sign the enclosed Proxy Form and return by:

10. (a) post to Security Transfer Registrars Pty Ltd, 770 Canning Highway Applecross WA 6153; or

11. (b) facsimile to the Company on facsimile number 08 9315 2233 (from inside Australia) or +61 8 9315 2233 (from outside Australia),

so that it is received not later than 3:00pm (Perth time) on Wednesday 5 September 2012.

Proxy forms received later than this time will be invalid.

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