And so we had met every one of our Covenants under the Bonds,...

And so we had met every one of our Covenants under the Bonds, going into October.
During October though, there were a number of discussions between the Bondholders
regarding their holdings. As was announced in early November, Chemeq agreed to vary the
terms of the convertible bonds issued by the company earlier this year. These variations
were prompted by changes to the ownership of the convertible bonds arising out of those
discussions under which the existing bondholder, Stark Trading, purchased the convertiblebonds held by fellow investor, Mizuho International.

Stark Trading and its affiliates have now acquired 100 per cent of the convertible bonds,
which have a face value of $60 million. As mentioned in the announcement, this
demonstrated the confidence in the company and support for its direction by our existing
bondholders. As a reflection of that relationship, Chemeq and Stark have agreed to vary the
bond deed to remove the covenant regarding Australian product registration and to include
two new financial covenants. Chemeq is now required to achieve:

• gross revenue from all sources, not just sales of product in excess of
$4 million for the year ending 30 June 2006, and
• have liquid assets in excess of $24 million at 30 June 2006.
However, as mentioned in the release, to demonstrate my personal commitment to still
achieving Australian regulatory product approval by the original April 2006 deadline, I
advised the Board that I was waiving my right to amend the events, to which my short term
incentive is linked, to the new covenant events.

What is important is that we now have two covenants that are firmly within our control. In
addition, Stark agreed to a black out period for their right to conversion during the 28 days
surrounding the new financial covenants, thus removing any speculation questions.

It should be noted that at some time, Stark may wish us to hold a General Meeting to
approve their future conversion of the bonds they have acquired, as was done earlier thisyear when the deal was originally done.