Sonic Healthcare. Information Memorandum in relation to the Spin-out of shares in SciGen Ltd

Transcription

1 Sonic Healthcare Information Memorandum in relation to the Spin-out of shares in SciGen Ltd Schemes of arrangement between Sonic Healthcare Limited and holders of Sonic Shares and holders of Sonic Options SONIC HEALTHCARE LIMITED ABN The Directors unanimously recommend that you vote in favour of the Capital Reduction and the Schemes. The independent expert has concluded that the Spin-out is in the best interests of Sonic Shareholders and Sonic Optionholders. This is an important document and requires your immediate attention. It should be read in its entirety prior to deciding whether or not to approve the Spin-out. If you are in doubt as to the course you should follow, you should consult your investment adviser or other professional adviser.

2 Contents Letter from the Chairman of Sonic 1 Key Dates 2 Important Notices 3 Your Vote 5 Section 1 Key Features of the Spin-out 7 Section 2 Issues for you to consider 11 Section 3 Details of Shareholder Scheme 19 Section 4 Details of Optionholder Scheme 25 Section 5 Profile of SciGen 29 Section 6 Tax Implications 61 Section 7 Additional Information 71 Section 8 Implications of investment in a Singapore company 77 Section 9 Independent Expert s Report 83 Section 10 Technical Expert s Report 121 Section 11 Investigating Accountant s Report 133 Section 12 Implementation Agreement 149 Section 13 Shareholder Scheme of Arrangement 161 Section 14 Optionholder Scheme of Arrangement 167 Section 15 Glossary 173

3 Letter from the Chairman of Sonic 4 October 2002 Dear Shareholder/Optionholder In the 2001 Annual Report, we reported that Sonic s investment in the Singapore based company SciGen Ltd no longer fitted with Sonic s strategic plan to focus on medical diagnostics. The Sonic directors believe that the underlying value of SciGen s business and its growth potential can be best achieved by the spinout of shares in SciGen and independent listing of SciGen. This proposal is to be implemented by way of a pro rata transfer of shares in SciGen to all Sonic shareholders and other persons who hold rights to Sonic shares together with the issue of SciGen options to Sonic optionholders. Under the proposal, Sonic shareholders will be entitled to receive one SciGen share (in the form of a CUFS) for each Sonic share held. This will involve a capital reduction of an equal amount per Sonic share following the injection by Sonic of $30 million capital at an implied value of $0.20 per SciGen share. Simultaneous with the transfer of SciGen shares to Sonic shareholders, Sonic optionholders will be issued one SciGen option for each Sonic option held. The exercise price of the Sonic options will be spread across the Sonic options and SciGen options and the aggregate of those exercise prices will equal the exercise price of the relevant class of Sonic option prior to the spin-out. CUFS are a form of security offered by the Australian Stock Exchange to allow trading of foreign companies on the ASX. Through CUFS, Sonic shareholders will be the beneficial owners of SciGen shares and have all the rights attaching to those SciGen shares. Simultaneously with the spin-out, SciGen will become a separately listed public company on the Australian Stock Exchange. The spin-out proposal has been reviewed by Deloitte Corporate Finance Pty Limited as independent expert, whose report concludes that the spin-out is in the best interests of Sonic shareholders and Sonic optionholders and is not materially prejudicial to the creditors of Sonic. This report is set out in Section 9 of this Information Memorandum and should be read in full. Each of the Sonic directors believes that the spin-out is in the best interests of Sonic, Sonic shareholders and Sonic optionholders and unanimously recommends that you vote in favour of the resolutions required to implement the spin-out. The Sonic directors intend to vote in favour of the spin-out in respect of any shares and/or options that they own or control. The reasons for the Sonic directors recommendation, including the disadvantages and potential risks of the spin-out, are set out in Sections 2 and 5 of this Information Memorandum. If you do not intend to be present at the meetings, I urge you to vote by proxy. Your personalised proxy forms accompany this Information Memorandum and should be returned in accordance with the directions set out on those forms. Yours sincerely Barry Patterson Chairman INFORMATION MEMORANDUM SCIGEN SPIN-OUT 1

4 Key Dates The timetable below is indicative only and subject to change. Event Date Latest time and date for return of proxy forms for the General Meeting and the Scheme Meetings 11.00am, Monday 11 November 2002 Time and date for determining eligibility to vote at the General Meeting and Scheme Meetings 5.00pm, Monday 11 November 2002 General Meeting 11.00am, Wednesday 13 November 2002 Shareholder Scheme Meeting 11.15am, Wednesday 13 November 2002 Optionholder Scheme Meeting 11.30am, Wednesday 13 November 2002 Court hearing to approve the Schemes Thursday, 14 November 2002 Effective Date Thursday, 14 November 2002 Sonic Shares (ex Capital Reduction) commence trading on ASX Friday, 15 November 2002 SciGen Shares commence trading on a deferred settlement basis on ASX Friday, 15 November 2002 Record Date for determining entitlements to SciGen Shares and SciGen Options under the Schemes Thursday, 21 November 2002 Spin-out Date (transfer of SciGen Shares and issue of SciGen CUFS to Sonic Shareholders and issue of SciGen Options to Sonic Optionholders) Wednesday, 27 November 2002 Despatch of holding statements for SciGen CUFS Wednesday, 27 November 2002 SciGen Shares commence trading on ASX on normal basis Thursday, 28 November 2002 Settlement of all deferred settlement trades Tuesday, 3 December 2002 Notes: All dates following the date of the Scheme Meetings are indicative and subject to the Court approval process and ASX approval. This Information Memorandum is dated 4 October If you have any questions about the Spin-out Proposal, please call Sonic s company secretary on weekdays 9.00 am to 5.00 pm. 2 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

5 Important Notices You should read this Information Memorandum in its entirety before making a decision as to how to vote on the resolutions to be considered at the General Meeting and any Scheme Meeting at which you are entitled to vote. Purpose of this Information Memorandum This Information Memorandum sets out details of the Spin-out Proposal and contains: the Explanatory Statement required by Part 5.1 of the Corporations Act in relation to each of the Schemes; and all information known to Sonic and the Sonic Directors that is material to Sonic Shareholders in deciding how to vote on the Capital Reduction Resolution, as required by section 256C(4) of the Corporations Act. ASIC A copy of this Information Memorandum has been registered with the Australian Securities and Investments Commission (ASIC) for the purposes of section 412(6) of the Corporations Act. Neither ASIC nor any of its officers take any responsibility for the contents of this Information Memorandum. A copy of this Information Memorandum has also been lodged with the ASIC for the purposes of section 256C(5) of the Corporations Act. ASX On or about the date of this Information Memorandum, an application will be made for admission of SciGen to the ASX official list and for official quotation of all SciGen Shares on the ASX (other than those subject to escrow as set out in Section 7.12 of this Information Memorandum). A copy of this Information Memorandum has been lodged with the ASX. Neither the ASX nor any of its officers take any responsibility for the contents of this Information Memorandum. The fact that the ASX may admit SciGen to the official list of the ASX is not to be taken in any way as an indication of the merits of SciGen or the Spin-out. Status of this Information Memorandum This Information Memorandum is not a prospectus lodged under Chapter 6D of the Corporations Act. Section 708(17) of the Corporations Act provides that Chapter 6D of the Corporations Act does not have effect in relation to any offer of securities if it is made under a compromise or arrangement under Part 5.1 of the Corporations Act approved at a meeting held as a result of an order made by the Court under either subsection 411(1) or (1A) of the Corporations Act. Investment Decisions This Information Memorandum does not take into account the investment objectives, financial situation or particular needs of each Sonic Shareholder or Sonic Optionholder or any other person. This Information Memorandum should not be relied upon as the sole basis for any investment decision in relation to Sonic Shares, Sonic Options, SciGen Shares, SciGen CUFS, SciGen Options or any other securities. Independent financial and taxation advice should be sought before making any investment decision in relation to Sonic Shares, Sonic Options, SciGen Shares, SciGen CUFS, SciGen Options or any other security. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 3

6 Important Notices (continued) Responsibility Statement The information concerning Sonic contained in this Information Memorandum has been provided by Sonic (Sonic Information) and is the responsibility of Sonic. The information concerning SciGen contained in Section 5 and Appendices 1, 2 and 3 of Section 11 of this Information Memorandum, including financial information, has been prepared by SciGen (SciGen Information), and is the responsibility of SciGen. Sonic does not assume any responsibility for the accuracy or completeness of the SciGen Information except to the extent that it has been provided by Sonic. SciGen does not assume any responsibility for the accuracy or completeness of the Sonic Information except to the extent it has been provided by SciGen. Notice to New Zealand shareholders and optionholders The offer and issue of SciGen CUFS and SciGen Options is made in accordance with the laws of Australia and Singapore. Sonic and SciGen may not be subject to New Zealand law and contracts in respect of the relevant securities may not be enforceable in New Zealand courts. This Information Memorandum is not a prospectus registered under New Zealand law and may not contain all the information that a New Zealand registered prospectus is required to contain. Notice to other foreign holders This Information Memorandum has been prepared in compliance with the disclosure requirements of Australia which may be different to those in other countries. Financial statements included in this Information Memorandum have been prepared in accordance with Australian accounting standards which may differ from those in other countries. Forward Looking Statements Certain statements in this Information Memorandum relate to the future. Such statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Sonic or SciGen to be materially different from the results, performance or achievements expressed or implied by such statements. Sonic and SciGen give no representation, assurance or guarantee that the occurrence of the events expressed or implied in such statements will actually occur. Such risks, uncertainties and other important factors include amongst other things: general economic conditions, exchange rates, interest rates, the regulatory environment and competitive pressures in research and development, manufacture, distribution and sales in the pharmaceutical and bio-pharmaceutical industries. Certain other risks, issues and other important factors are identified in Section 2 and 5 of this Information Memorandum. These statements reflect views held only as at the date of this Information Memorandum. Defined Terms Capitalised terms used in this Information Memorandum are defined either in the Glossary at Section 15 of this Information Memorandum or in the body of this Information Memorandum. Reference to Time References to time in this Information Memorandum are to Australian Eastern Daylight Savings Time (AEDST). 4 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

7 Your Vote Your vote is important For the Spin-out to take place, it is important that sufficient Sonic Shareholders vote in favour of the Capital Reduction and the Shareholder Scheme. The Optionholder Scheme must also be approved by Sonic Optionholders. How to vote Sonic Shareholders may vote at the General Meeting and the Shareholder Scheme Meeting by attending in person or by completing and returning the proxy forms which accompany this Information Memorandum. Sonic Optionholders may vote at the Optionholder Scheme Meeting by attending in person or by completing and returning the proxy form which accompanies this Information Memorandum. Voting in person To vote in person at the General Meeting, Sonic Shareholders must attend the General Meeting to be held at the Four Seasons Hotel, Ballroom 1, 199 George Street, Sydney, NSW on Wednesday, 13 November 2002 at 11.00am. To vote in person at the Shareholder Scheme Meeting, Sonic Shareholders must attend the Shareholder Scheme Meeting to be held at the Four Seasons Hotel, Ballroom 1, 199 George Street, Sydney, NSW on Wednesday, 13 November 2002 at 11.15am or as soon thereafter as the General Meeting has concluded or been adjourned. To vote in person at the Optionholder Scheme Meeting, Sonic Optionholders must attend the Optionholder Scheme Meeting to be held at the Four Seasons Hotel, Ballroom 1, 199 George Street, Sydney, NSW on Wednesday, 13 November 2002 at 11.30am or as soon thereafter as the General Meeting and Shareholder Scheme Meeting have been concluded or adjourned. Voting by proxy To vote by proxy, please complete and sign the relevant personalised proxy form which accompanies this Information Memorandum as soon as possible and return it to the Sonic Share Registry by 11:00am on 11 November Proxy forms can be returned by posting them in the reply paid envelope provided (for use in Australia only), or by posting or faxing to: the Sonic Share Registry, c/o Computershare Investor Services Pty Limited, GPO Box 1903, Adelaide, South Australia 5001; or facsimile number Personalised proxy forms accompany this Information Memorandum. Further information relating to voting procedures and details of the resolutions are contained in the Notices of Meetings accompanying this Information Memorandum. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 5

8 THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY 6 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

9 Section 1 Section 1 Key Features of the Spin-out INFORMATION MEMORANDUM SCIGEN SPIN-OUT 7

10 Section 1 This section is a summary only. You should read the entire document before making a decision on how to vote. 1.1 What is the Spin-out? In its 2001 Annual Report, Sonic reported that it intended to spin-out the majority of its shareholding in SciGen. SciGen is incorporated in Singapore and is involved in the development, marketing and sales of a portfolio of bio-pharmaceutical products. Under the Spin-out, Sonic will spin-out SciGen Shares to Sonic Shareholders and Vendor Interest Holders representing approximately 62.5% of SciGen Shares on issue. SciGen will also issue new SciGen Options to Sonic Optionholders. Following the Spin-out, Sonic will retain approximately 11.5% of SciGen Shares and will hold these shares subject to escrow arrangements. SciTech Genetics, the founding shareholder of SciGen, will retain its 26% of SciGen Shares and will also hold these shares subject to escrow arrangements. Simultaneous with the Spin-out, it is intended that SciGen will be listed on the ASX. Sonic currently holds 59.5% of SciGen s issued share capital. Immediately prior to the Spin-out, Sonic will subscribe $30 million for additional SciGen Shares. The amount of $30 million will be injected into SciGen to enable it to repay its existing debt owed to Sonic and to provide SciGen with initial working capital in an amount which its directors believe will enable it to pursue its business plan. See Section 5.14 of this Information Memorandum for SciGen s proposed use of these funds. Sonic and SciTech Genetics agreed that the $30 million capital investment would result in an increase in Sonic s interest in SciGen to 74%. The Spin-out and Capital Investment will only occur following the approval of Sonic Shareholders and Sonic Optionholders and the satisfaction of certain other conditions as set out in the Implementation Agreement (a copy of which is set out in Section 12 of this Information Memorandum). This Information Memorandum provides Sonic Shareholders and Sonic Optionholders with information for the purposes of determining whether or not to vote in favour of the resolutions necessary to approve the Capital Reduction, Shareholder Scheme and Optionholder Scheme to give effect to the Spin-out. 1.2 Capital Reduction and Shareholder Scheme Under the Capital Reduction and Shareholder Scheme: the share capital of Sonic will be reduced by the Reduction Amount (being approximately $0.12 per Sonic Share based on the number of Sonic Shares on issue at the date of this Information Memorandum) for each Sonic Share on issue at the Close of Registers; and Sonic Shareholders (other than Ineligible Overseas Shareholders) will be entitled to receive 1 SciGen CUFS for every Sonic Share held at the Close of Registers instead of the cash sum referable to the Reduction Amount. Ineligible Overseas Shareholders will have their SciGen CUFS to which they are otherwise entitled issued to the Nominee and the Nominee will sell the SciGen CUFS on or after the Listing Date and remit the net sale proceeds to the relevant Ineligible Overseas Shareholders. As SciGen is incorporated in Singapore, instead of receiving SciGen Shares, Sonic Shareholders will receive SciGen CUFS representing the beneficial interest in SciGen Shares, to allow trading and clearing on the ASX. CUFS are a common form of security used for trading shares of a company domiciled in a foreign country and which is listed on the ASX. Further details of CUFS are set out in Section 8 of this Information Memorandum. Sonic Shareholders are not required to pay any money for the SciGen CUFS because their entitlement under the Capital Reduction will be automatically applied as consideration for the transfer of interests in SciGen Shares and the issue to them of SciGen CUFS. Further details of the Capital Reduction and Shareholder Scheme are set out in Section 3 and Section 13 of this Information Memorandum. 8 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

11 Section Optionholder Scheme Under the Optionholder Scheme: the reduction in the exercise price of the Sonic Options that would otherwise apply on the implementation of the Capital Reduction will be ignored; each Sonic Optionholder will be entitled to receive 1 SciGen Option for each Sonic Option held by that Sonic Optionholder at the Close of Registers; and the existing exercise price of each Sonic Option will be allocated across the existing Sonic Option and the new SciGen Option in the relative proportion that the market capitalisation of Sonic after completion of the Spin-out (based on the closing price of Sonic Shares on the ASX on the Spin-out Date) bears to the value of the SciGen Shares transferred to Sonic Shareholders and Vendor Interest Holders under the Spin-out (based on a value of $0.20 per share). Further details of the Optionholder Scheme are set out in Section 4 and Section 14 of this Information Memorandum. 1.4 Sonic Directors recommendation The Sonic Directors believe that the Spin-out Proposal is in the best interests of Sonic Shareholders and Sonic Optionholders and will not materially prejudice the interests of Sonic s creditors. The Sonic Directors unanimously recommend that: Sonic Shareholders approve the Spin-out by voting in favour of the Shareholder Scheme and the Capital Reduction; and Sonic Optionholders approve the Spin-out by voting in favour of the Optionholder Scheme. All Sonic Directors who hold Sonic Shares and/or Sonic Options intend to vote in favour of the Spin-out. 1.5Potential advantages, disadvantages and risks of the Spin-out Section 2 of this Information Memorandum sets out the potential advantages, disadvantages and risks of the Spin-out as well as other issues to be considered in relation to the Spin-out. Sections 5.21, 9 and 10 of this Information Memorandum set out additional risk factors relevant to an investment in SciGen. 1.6 Independent Expert Deloitte Corporate Finance Pty Limited has prepared an independent expert s report in relation to the Spin-out Proposal and has concluded that the Spin-out is in the best interests of Sonic Shareholders and Sonic Optionholders. The report also concludes that the Spin-out does not materially prejudice the interests of Sonic s creditors. The independent expert s report is reproduced at Section 9 of this Information Memorandum. 1.7 Information on SciGen Section 5 of this Information Memorandum contains information on SciGen. In addition Aoris Nova Pty Limited has prepared a technical expert s report in relation to SciGen s portfolio of bio-pharmaceutical products. This report is reproduced at Section 10 of this Information Memorandum. 1.8 Tax Consequences The general tax implications of the Spin-out for Sonic and Australian resident Sonic Shareholders and Sonic Optionholders are set out in the report from PricewaterhouseCoopers Securities Limited in Section 6 of this Information Memorandum. Independent advice should be sought as to the taxation consequences of the Spin-out in light of current tax laws and individual investment concerns. 1.9 Key Steps of the Spin-out The key steps in the implementation of, and approvals required for, the Spin-out are as follows. The Capital Reduction must be approved by Sonic Shareholders passing an ordinary resolution at the General Meeting to be held at the Four Seasons Hotel, Ballroom 1, 199 George Street, Sydney, NSW on Wednesday, 13 November 2002 at 11.00am. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 9

12 Section 1 The Shareholder Scheme must be approved by Sonic Shareholders at the Shareholder Scheme Meeting to be held at the Four Seasons Hotel, Ballroom 1, 199 George Street, Sydney, NSW on Wednesday, 13 November 2002 at 11.15am. The Optionholder Scheme must be approved separately by Sonic Optionholders at the Optionholder Scheme Meeting to be held at the Four Seasons Hotel, Ballroom 1, 199 George Street, Sydney, NSW on Wednesday, 13 November 2002 at 11.30am. If the Schemes are approved as referred to above, the Schemes as approved will be submitted to the Court for its approval. It is expected that the Court hearing to approve the Schemes will take place on or about Thursday, 14 November Further details of these steps and the approvals required are set out in Sections 3, 4, 13 and 14 of this Information Memorandum Who can vote? If you are registered as a Sonic Shareholder at the Meeting Record Date, you are entitled to vote in person or by proxy at the General Meeting and the Shareholder Scheme Meeting. If you are registered as a Sonic Optionholder at the Meeting Record Date, you are entitled to vote in person or by proxy at the Optionholder Scheme Meeting How to vote Details of how you can vote are contained on page 5 and in the relevant Notices of Meeting accompanying this Information Memorandum Key Dates The key dates for the Spin-out are set out on page 2 of this Information Memorandum Conditions Implementation of the Spin-out is subject to certain conditions which are summarised in Section 3.7 of this Information Memorandum and clauses 2 and 3 of the Implementation Agreement (a copy of which is set out in Section 12 of this Information Memorandum). 10 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

13 Section 1 Section 2 Issues For You To Consider INFORMATION MEMORANDUM SCIGEN SPIN-OUT 11

14 Section Introduction Sonic s investment in SciGen no longer fits with its strategic plan to focus on medical diagnostics. The Sonic Directors believe that continued funding and operation of SciGen within the Sonic Group is not perceived as enhancing value for Sonic Shareholders and that the underlying value of SciGen s business and its growth potential can be best achieved by the Spin-out and independent listing of SciGen. The Spin-out will give Sonic Shareholders and Sonic Optionholders the opportunity of holding a direct interest in SciGen. Sonic will be a minority shareholder in SciGen following the Spin-out. Sonic Shareholders and Sonic Optionholders should carefully consider the following advantages, disadvantages and potential risks of the Spin-out and other relevant considerations, as well as the other information contained in this Information Memorandum, in deciding whether or not to vote in favour of the resolutions required to implement the Spin-out. The Sonic Board believes that the advantages of the Spin-out outweigh the disadvantages and potential risks and that the Spin-out is in the best interests of Sonic Shareholders and Sonic Optionholders. 2.2 Advantages of the Spin-out (a) Focus on core competencies As a result of the Spin-out, both Sonic and SciGen will be able to focus their attention and financial resources on their respective core businesses. This focus will enable the respective companies to explore and implement strategies which are the most appropriate for their individual businesses. (b) Increased investor choice The Spin-out will result in two independently listed companies. The separate listing of SciGen will provide Sonic Shareholders and Sonic Optionholders and other investors with increased investment choice between Sonic, a medical diagnostic services focused company, and SciGen, a bio-pharmaceutical focused company. The Spin-out may also attract new investors. (c) Enhanced investor awareness After the Spin-out, it will be easier for investors to evaluate the individual financial performance, strategies, and other characteristics of SciGen. SciGen may be subject to coverage by research analysts with particular expertise in the bio-pharmaceutical industry. This should increase investor understanding of SciGen. (d) Greater financial flexibility for SciGen As a provider of medical diagnostic services, Sonic has a different earnings profile and capital requirements than the bio-pharmaceutical focused SciGen. In recent years, Sonic has imposed capital constraints on the SciGen business. As a partially-owned subsidiary of Sonic, SciGen has had to compete with other parts of Sonic for funds and resources. This has, to some extent, limited the ability of SciGen to pursue strategic growth opportunities. As a separately listed company, SciGen is expected to have greater financial flexibility to pursue acquisitions, joint ventures and alliances and fund internal growth that might not otherwise have been possible under the partial ownership of the Sonic Group. (e) Earnings, gearing and dividends Due to the size and nature of SciGen s business relative to Sonic, the Spin-out is not expected to have a material impact on Sonic s earnings or gearing. The Spin-out is not, of itself, expected to affect the level of Sonic s dividend payments for the year ending 30 June The level of Sonic s dividends following the Spin-out has not yet been determined and will be a matter for consideration by the Sonic Board at the relevant time. In addition, as a result of the Spin-out, those persons who retain their SciGen CUFS will be entitled to any future dividends paid by SciGen. However, the level of SciGen dividends following the Spinout has not yet been determined and will be a matter for consideration by the SciGen Board at the relevant time. The proposed dividend policy of SciGen is set out in Section 5.20(b) of this Information Memorandum. 12 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

15 Section Disadvantages of the Spin-out (a) Additional corporate costs for SciGen As SciGen will be separately listed on the ASX it will necessarily involve additional corporate costs including ASX fees, share registry and company secretarial costs. SciGen will also incur costs associated with certain services and internal management systems which have previously been provided by Sonic, such as payroll and other administrative services. (b) Spin-out transaction costs Transaction costs of the Spin-out incurred by Sonic are estimated at $0.5million. The majority of this has been incurred, or will be committed, to progress the Spin-out prior to the date of the Meetings. Sonic s transaction costs are likely to be recorded as an expense against earnings. Transaction costs of the Spin-out incurred by SciGen are estimated at $885,000. The majority of this has been incurred, or will be committed, to progress the Spin-out prior to the date of the Meetings. (c) Market capitalisation of SciGen The market capitalisation of SciGen will be much lower than that of Sonic. As a result, there may be considerably lower institutional investor interest in SciGen than there is in Sonic. 2.4 Risks associated with the Spin-out (a) Spin-out value The SciGen Shares are being spun-out at an implied value of $0.20 per SciGen Share. This is based on the per share price payable by Sonic to increase its holding in SciGen to 74% following arms length negotiation with SciTech Genetics, the other shareholder in SciGen. See Section 1.1 of this Information Memorandum for further details. The reduction in the cost base of Sonic Shares for capital gains purposes will be equal to the market value of the SciGen Shares on the Spin-out Date. See Section 6 of this Information Memorandum for further details of the general tax implications of the Spin-out. However, there has not previously been a public market for SciGen Shares. There can be no assurance that SciGen Shares will trade in the public market at a particular level. (b) Market price There can be no assurance that an active trading market will develop for SciGen Shares after the Spin-out. There is also the risk that SciGen Shares will not meet the investment criteria or profile of existing Sonic investors which could lead to short to medium term selling pressure on SciGen Shares resulting in a decrease in the market price of those shares. As a result of a number of factors, including other risk factors described below, there is a risk that the combined market value of Sonic Shares and SciGen Shares after the Spin-out will be less than the market value of Sonic Shares before the Spin-out, resulting in an adverse financial and tax impact to Sonic Shareholders. (c) Investor Scrutiny SciGen s business (independent of Sonic) will be subject to greater scrutiny by the investment community and shareholders, and actions SciGen takes to fund any acquisition, joint venture or alliances, such as increasing gearing levels or raising new capital, could impact either positively or negatively on, amongst other things, SciGen s financial performance and share price. (d) Size of SciGen SciGen will be much smaller and less diversified than Sonic. The occurrence of a significant adverse event will not be capable of being offset by other developments in the Sonic Group. Accordingly, the proportionate impact of an adverse development on the value of a SciGen Share can be expected to be more significant than the expected impact on the value of a Sonic Share would have been. (e) Risks associated with an investment in SciGen Section 5.21 of this Information Memorandum sets out other risks associated with an investment in SciGen relating to SciGen s business. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 13

16 Section 2 2.5Financial impact of Spin-out on Sonic (a) Introduction The following analysis estimates what the impact of the Spin-out would have been on the financial performance of Sonic for the year ended 30 June 2002 had the Spin-out occurred on 1 July 2001, and the financial position of Sonic as at 30 June 2002 had the Spin-out occurred on 30 June This proforma financial information does not purport to represent the actual results of Sonic had the Spin-out occurred on those dates, nor the projected results of Sonic for any future period. (b) Basis of preparation The table below sets out the impact of the Spin-out on Sonic as outlined above. This financial information is prepared in accordance with Australian Generally Accepted Accounting Principles (GAAP) and is presented in Australian dollars. Terms used in the table are described below. Sonic Actual depicts the consolidated accounts of the Sonic Group as reported in Sonic s Preliminary Final Report for the year ended 30 June SciGen Actual is a summary of SciGen s actual unaudited financial performance for the year ended 30 June 2002 and the financial position of SciGen as at 30 June 2002, as included in the actual results of the Sonic Group. Impact of Spin-out includes the effects of: Sonic investing $30 million for additional SciGen Shares, taking Sonic s holding from 59.5% to 74%, immediately prior to the Spin-out and Capital Reduction. The $30 million is assumed to increase interest bearing debt and results in an increase in net interest expense for the year; the Capital Reduction via a reduction in share capital of Sonic of approximately $32 million; Sonic continuing to hold approximately 11.5% of SciGen Shares which is recorded as an investment of $9.6 million in Sonic s statement of financial position as Sonic will no longer consolidate SciGen; Sonic s Investment in SciGen: $ 000 Carrying value at 30 June 2002* 11,466 ADD: Capital Investment pre Spin-out 30,000 LESS: Cost base of SciGen shareholding spun out (31,829) Balance of investment post Spin-out $9,637 * Not reflected on the consolidated balance sheet as, under GAAP, it is consolidated out whilst SciGen is a subsidiary of Sonic. the repayment by SciGen of loans from Sonic totalling $5.6 million as at 30 June These loans, which are being used to fund working capital for SciGen, are expected to increase to approximately $7.5 million at the time of the Spin-out. SciGen will fund the repayment of the loans out of the proceeds of Sonic s $30 million Capital Investment; and transaction costs of the Spin-out process which have been incurred by Sonic being conservatively estimated at $0.5 million. These are assumed to be non-deductible for income tax, and relate primarily to advisers fees, legal expenses and the printing and distribution of documents. These costs have been shown as an expense in the statement of financial performance. Sonic proforma results are a summary of Sonic s financial performance for the year ended 30 June 2002 assuming that the Spin-out was effective from 1 July 2001 and a summary of Sonic s financial position as at 30 June 2002 assuming that the Spin-out was effective at that date. 14 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

17 Section 2 COMPARISON OF SONIC BEFORE AND AFTER THE SPIN-OUT Sonic Less Impact of Sonic Actual SciGen Spin-out Proforma Actual $ 000 $ 000 $ 000 $ 000 Statement of Financial Performance for the year ended 30 June 2002 Revenue (excluding interest income) 858,100 (1,604) 856,496 Other expenses (674,370) 5,648 (500) (669,222) EBITDA 183,730 4,044 (500) 187,274 Depreciation (36,999) 57 (36,942) EBITA 146,731 4,101 (500) 150,332 Net interest (31,544) 10 (1,370) (32,904) Amortisation of intangibles (49,402) 95 (49,307) Profit before tax 65,785 4,206 (1,870) 68,121 Tax expense (33,578) 411 (33,167) Profit after tax 32,207 4,206 (1,459) 34,954 Outside equity interest 1,551 (1,847) (296) Net profit attributable to members 33,758 4,206 (3,306) 34,658 Statement of Financial Position as at 30 June 2002 Cash 22,939 (383) 22,556 Receivables 108,620 (490) 108,130 Inventories 15,705 (131) 15,574 Current assets 147,264 (1,004) 146,260 Receivables 3,314 3,314 Investments 29,447 (31) 9,636 39,052 Property, plant and equipment 210,439 (180) 210,259 Intangibles 1,189,721 (21,991) 3,702 1,171,432 Deferred tax assets 18,524 18,524 Non-current assets 1,451,445 (22,202) 13,338 1,442,581 Payables 68,199 (1,720) 66,479 Interest bearing liabilities 57,468 57,468 Provisions 107,885 (26) (411) 107,448 Amounts owing to vendors 47,608 47,608 Current liabilities 281,160 (1,746) (411) 279,003 Payables 3,809 (3,576) 233 Interest bearing liabilities 457,805 26, ,076 Provisions 18,470 18,470 Non-current liabilities 480,084 (3,576) 26, ,779 Net assets 837,465 (17,884) (12,522) 807,059 Share Capital 867,156 (31,829) 835,327 Reserves 5,711 1,257 6,968 Retained profits/(accumulated losses) (40,505) 4,998 (35,507) Outside equity interest 5,103 (4,832) 271 Total equity 837,465(30,406) 807,059 INFORMATION MEMORANDUM SCIGEN SPIN-OUT 15

18 Section 2 Sonic Actual Sonic Proforma Key ratios EBITA Margin (EBITA/revenue) 17.1% 17.6% EBITDA Margin (EBITDA/revenue) 21.4% 21.9% EBITA Interest Cover (times)(1) 4.7 times 4.6 times EBITDA Interest Cover (times)(2) 5.8 times 5.7 times Gearing (3) 38.1% 40.2% (1) Calculated as operating profit before net interest expense, income tax expense and intangibles amortisation, divided by net interest expense. (2) Calculated as operating profit before net interest expense, income tax expense, depreciation and amortisation, divided by net interest expense. (3) Total interest bearing liabilities as a percentage of total interest bearing liabilities plus shareholders equity. (c) Discussion of the financial impact of the Spin-out The financial impact of the Spin-out on Sonic relates principally to the exclusion of the losses and net assets of SciGen. The Spin-out will result in the following: a minor reduction in Sonic s sales and net assets due to the loss of the sales and net assets of SciGen; an increase in Sonic s profit due to the removal of SciGen s losses; a reduction in Sonic s Shareholders share capital due to the Capital Reduction; and an increase in Sonic s net debt (being debt less cash) resulting from the Capital Investment of $30 million, less the loans which SciGen will repay. Changes to the key financial ratios include: increased EBITA and EBITDA margins reflecting the removal of SciGen s loss over this period; and a marginal increase in the level of gearing due to the low level of gearing in SciGen. (d) Financial impact on the creditors of Sonic The Sonic Board is of the opinion that the Spin-out will not affect the Sonic Group s ability to pay its creditors or to meet its debts as and when they fall due. Having conducted an equity raising of $170 million in November 2001, Sonic is in a strong financial position, with significant undrawn debt facilities. Deloitte Corporate Finance Pty Limited, the independent expert, has also concluded that the Spinout does not materially prejudice the interests of Sonic s creditors. The report provided by Deloitte Corporate Finance Pty Limited is set out in Section 9 of this Information Memorandum. 2.6 Other relevant considerations (a) Why are Sonic Optionholders participating in the Spin-out? Sonic believes that the Spin-out Proposal seeks to treat all persons who have an interest in Sonic equitably. The proposed demerger tax legislation (New Business Tax System (Consolidation, Value Shifting, Demergers and Other Measures) Bill 2002) essentially requires that Sonic Optionholders, as well as Sonic Shareholders, receive an interest in SciGen in order for the proposed tax demerger relief to apply to Sonic and the Sonic Shareholders. Accordingly, the Spin-out Proposal includes Sonic Optionholders receiving an interest in SciGen through the issue by SciGen of SciGen Options on the same ratio (namely one for one) that Sonic Shareholders are to receive SciGen Shares. Under the Optionholder Scheme, the reduction in the exercise price of the Sonic Options that would otherwise apply on the implementation of the Capital Reduction will be ignored and instead the existing exercise price of the Sonic Options will be allocated across the existing Sonic Option and new SciGen Options by reference to the relative proportion that the market capitalisation of Sonic after the Spin-out bears to the value of the SciGen Shares being spun-out from Sonic. 16 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

19 Section 2 (b) Ongoing relationships with SciGen Following the Spin-out, it is intended that Sonic will have an approximate 11.5% interest in SciGen and will seek to maintain two nominees on the SciGen Board. Further details are set out in Section 7 of this Information Memorandum. (c) Effect of Spin-out on Sonic Shares already held The Capital Reduction and the Shareholder Scheme will not affect the number of Sonic Shares on issue. The proceeds of the Capital Reduction otherwise payable to Sonic Shareholders will be automatically applied towards the transfer of interests in SciGen Shares and the issue of SciGen CUFS to Sonic Shareholders on the Spin-out Date. All things being equal, the value of Sonic Shares may decrease reflecting the value of the interests in SciGen Shares transferred by Sonic to Sonic Shareholders. (d) Shares in a Singapore company As SciGen is incorporated in Singapore, it is subject to the requirements of Singapore law, including the provisions of the Singapore takeovers regime. In addition, the interest in SciGen Shares to be transferred or issued under the Spin-out will be in the form of SciGen CUFS rather than SciGen Shares. This is to allow trading and clearing on the ASX. CUFS are a form of security used to allow trading on the ASX in ordinary shares of companies that are domiciled in foreign countries, where the relevant foreign law does not recognise the paperless transfer of shares through CHESS. Section 8 of this Information Memorandum sets out the principal differences which result as a consequence of holding shares in a Singapore incorporated company and further details of the rights attaching to CUFS. Some of these differences may be regarded by Sonic Shareholders or Sonic Optionholders as being disadvantageous. (e) Independent Expert s opinion The Sonic Board has commissioned Deloitte Corporate Finance Pty Limited as independent expert, to prepare a report stating whether, in its opinion, the Spin-out is in the best interests of Sonic Shareholders and Sonic Optionholders. Deloitte Corporate Finance Pty Limited has also been requested to give its opinion as to whether the Spin-out is materially prejudicial to the creditors of Sonic. The report concludes that the Spin-out is in the best interests of Sonic Shareholders and Sonic Optionholders. The report also concludes that the Spin-out does not materially prejudice the interests of the creditors of Sonic. The full report is set out in Section 9 of this Information Memorandum and should be read in full. (f) Alternatives to the Spin-out The Sonic Board has considered other divestment options relating to SciGen. These include a trade sale and an initial public offering of all or part of Sonic s interest in SciGen. The Sonic Board has concluded that the Spin-out Proposal offers Sonic Shareholders and Sonic Optionholders the opportunity to participate directly in the growth potential of SciGen and is more likely to enhance shareholder value than other divestment alternatives. (g) Implications if the Spin-out does not proceed If any of the conditions to the Spin-out are not satisfied or (where applicable) waived: (i) the Capital Reduction will not proceed; (ii) Sonic Shareholders will not receive SciGen CUFS; (iii) Sonic Optionholders will not receive SciGen Options; (iv) the Vendor Interest Holders will not receive SciGen CUFS; (v) Sonic will not proceed with the Capital Investment and will continue to own its interest in SciGen; (vi) SciGen will not be listed on the ASX; (vii) the advantages of the Spin-out will not be realised. However, the risks and disadvantages of the Spin-out identified by the Sonic Board may not arise; and (viii) the Sonic Board and management will continue to consider alternatives for the divestment of its interest in SciGen. It is the Sonic Board s opinion that alternative proposals will not deliver as much value to Sonic Shareholders and Sonic Optionholders as the Spin-out. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 17

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21 Section 1 Section 3 Details of Shareholder Scheme INFORMATION MEMORANDUM SCIGEN SPIN-OUT 19

22 Section Capital Reduction and Shareholder Scheme Under the Capital Reduction and Shareholder Scheme: the share capital of Sonic will be reduced by the Reduction Amount (being approximately $0.12 per Sonic Share based on the number of Sonic Shares on issue as at the date of this Information Memorandum) for each Sonic Share on issue at the Close of Registers; and instead of a cash sum, Sonic Shareholders (other than Ineligible Overseas Shareholders) will be entitled to receive 1 SciGen CUFS for every Sonic Share held at the Close of Registers. Ineligible Overseas Shareholders will have their SciGen CUFS, to which they are otherwise entitled, issued to the Nominee and the Nominee will sell the SciGen CUFS on or after the Listing Date and remit the net sale proceeds to the Ineligible Overseas Shareholders. As at the date of this Information Memorandum, there are 259,631,661 Sonic Shares on issue. The aggregate Capital Reduction will be approximately $32 million. The SciGen Shares transferred under the Shareholder Scheme will represent a total of 259,631,661 shares (approximately 62% of SciGen Shares in issue following the Capital Investment). The implied value of each SciGen Share at the Spin-out Date will be $0.20. This is based on the price per SciGen Share payable by Sonic under the Capital Investment. 3.2 Ineligible Overseas Shareholders Ineligible Overseas Shareholders are those Sonic Shareholders whose registered address on the Sonic Share Register as at the Close of Registers is in a jurisdiction other than Australia, New Zealand, United Kingdom, Singapore or Hong Kong or a Sonic Shareholder to the extent that he/she holds Sonic Shares on behalf of persons resident in those other jurisdictions. Ineligible Overseas Shareholders will participate in the Capital Reduction on the same basis as all other Sonic Shareholders. However, Ineligible Overseas Shareholders will not receive the SciGen CUFS to which they would otherwise be entitled and would otherwise receive under the Shareholder Scheme. Instead, the SciGen CUFS will be issued to the Nominee to be sold on the ASX on or after the Listing Date and the proceeds of sale (after deduction of the transaction costs of the sale) will be remitted to those Ineligible Overseas Shareholders either to the Ineligible Overseas Shareholders accounts to which dividends are paid by Sonic or by cheque. The receipt by Ineligible Overseas Shareholders of the proceeds of sale will be in full satisfaction of the rights of Ineligible Overseas Shareholders under the Shareholder Scheme. Cheques will be dispatched to Ineligible Overseas Shareholders at their risk. Cheques will be denominated in Australian currency or, if Sonic so decides, in the currency of the jurisdiction in which the Ineligible Overseas Shareholder s registered address is located at the prevailing exchange rate. 3.3 Sonic Creditors In the opinion of the Sonic Directors, neither the Spin-out nor the Schemes, if implemented, will have a material adverse effect on the interests of Sonic s creditors. No material additional liability will be incurred by Sonic other than the debt associated with the Capital Investment. Apart from the Capital Investment and the Capital Reduction, there will be no other outflow of funds or assets from Sonic under, or by reason of, the Spin-out or the Schemes, other than transaction costs incurred in connection with the implementation of the Spin-out and the Schemes as disclosed in Section 2.3(b) of this Information Memorandum, and as otherwise disclosed in this Information Memorandum (see particularly Section 2.5(d)). Deloitte Corporate Finance Pty Limited has been requested to provide its opinion as to whether, amongst other things, the Spin-out is materially prejudicial to Sonic s creditors. Deloitte Corporate Finance Pty Limited report concludes that the Spin-out does not materially prejudice the interests of Sonic s creditors. The full report is set out in Section 9 of this Information Memorandum. 3.4 General Meeting (a) Date and Purpose The Sonic Board has convened a General Meeting to consider and, if thought fit, to pass an ordinary resolution to approve a reduction of Sonic s share capital by the Reduction Amount for each Sonic Share on issue at the Close of Registers, such reduction to take effect on the Spin-out Date. The Capital Reduction will be conditional, amongst other things, on the Shareholder Scheme and 20 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

23 Section 3 Optionholder Scheme becoming effective. If you are a Sonic Shareholder, the terms of the Capital Reduction Resolution are set out in the yellow notice of General Meeting accompanying this Information Memorandum. The General Meeting is to be held at the Four Seasons Hotel, Ballroom 1, 199 George Street, Sydney, NSW on Wednesday, 13 November 2002 at 11.00am. (b) Entitlement to attend and vote Each Sonic Shareholder who is registered on the Sonic Share Register as the holder of a Sonic Share on the Meeting Record Date is entitled, either in person, by proxy or attorney or, in the case of corporate shareholders, by a corporate representative, to attend the General Meeting and vote on the Capital Reduction Resolution put to that meeting. Voting at the General Meeting will be by poll. (c) Majority required to approve the Capital Reduction The Capital Reduction Resolution requires the approval of a majority of votes cast by the Sonic Shareholders present and voting at the General Meeting, whether in person, by proxy, by attorney or by corporate representative. 3.5Shareholder Scheme Meeting (a) Date and Purpose On 3 October 2002, the Court ordered a meeting of all Sonic Shareholders to be convened to consider and, if thought fit, approve the Shareholder Scheme, with or without amendment or modification. This meeting is to be held at the Four Seasons Hotel, Ballroom 1, 199 George Street, Sydney, NSW on Wednesday, 13 November 2002 at 11.15am or as soon thereafter as the General Meeting has concluded or been adjourned. If you are a Sonic Shareholder, the blue notice of Shareholder Scheme Meeting accompanies this Information Memorandum. The order of the Court convening the Shareholder Scheme Meeting is not and should not be treated as an endorsement by the Court, or any other expression of opinion by the Court, of the Shareholder Scheme. (b) Entitlement to attend and vote at the Shareholder Scheme Meeting Each Sonic Shareholder who is registered on the Sonic Share Register as the holder of a Sonic Share on the Meeting Record Date is entitled to attend and vote, either in person, by proxy, by attorney or by corporate representative at the Shareholder Scheme Meeting. Voting at the Shareholder Scheme Meeting will be by poll. (c) Majority required to approve the Shareholder Scheme The Shareholder Scheme will be binding on all Sonic Shareholders and on Sonic if a resolution approving the Shareholder Scheme is passed by: (i) a majority in number of Sonic Shareholders, present and voting, either in person or by proxy or attorney; and (ii) seventy five percent of the votes cast on the resolution. The Shareholder Scheme must also be approved by the Court. 3.6 Steps involved in implementation of the Shareholder Scheme (a) Effective Date The Effective Date of the Shareholder Scheme is the date on which an office copy of the Court Order approving the Shareholder Scheme pursuant to section 411(4)(b) of the Corporations Act is lodged with ASIC by Sonic. (b) Notice to ASX Upon the Shareholder Scheme becoming Effective, Sonic will give notice of that fact to the ASX. (c) Determination of Sonic Shareholders participating in the Shareholder Scheme Each Sonic Shareholder registered on the Sonic Share Register as the holder of a Sonic Share at the Close of Registers will participate in the Shareholder Scheme. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 21

24 Section 3 For the purpose of determining an entitlement to SciGen CUFS under the Shareholder Scheme, any dealing in Sonic Shares will be recognised provided that: (i) in the case of dealings of a type to be effected using CHESS, the transferee is registered as the holder of the relevant Sonic Shares on or before the Close of Registers; and (ii) in all other cases, if registrable transfers or transmission applications in respect of those dealings are received by Sonic at the Sonic Share Registry during business hours on or before the Close of Registers. Sonic will not accept for registration, or recognise for the purposes of determining an entitlement under the Shareholder Scheme, any transfer or transmission application in respect of Sonic Shares if received after business hours on the Close of Registers. (d) Transfer of SciGen Shares and issue of SciGen CUFS On the Spin-out Date, Sonic will transfer to CDN in respect of each Sonic Shareholder on the Sonic Share Register as at the Close of Registers, the SciGen Shares to which each Sonic Shareholder is entitled or otherwise entitled under the Shareholder Scheme. SciGen will then procure the issue of SciGen CUFS by CDN and the entry of the name of each Sonic Shareholder (other than Ineligible Overseas Shareholders) on the SciGen CUFS Register in respect of the SciGen CUFS to which they are entitled under the Shareholder Scheme. SciGen will also procure the issue of SciGen CUFS by CDN and the entry of the name of the Nominee on the SciGen CUFS Register in respect of the SciGen CUFS to which Ineligible Overseas Shareholders are otherwise entitled. In the case of joint holdings, the names will be entered in the same order as they stand in the Sonic Share Register as at the Close of Registers. (e) Shareholder instructions Any binding instructions between Sonic Shareholders and Sonic relating to their respective Sonic Shares at the Close of Registers (including, without limitation, any instructions relating to payment of dividends or communications from Sonic) will, from the Record Date, be deemed to be similarly binding instructions to, and accepted by, SciGen in respect of the SciGen CUFS issued to those Sonic Shareholders, until those instructions are, in each case, revoked or amended in writing by those Sonic Shareholders and addressed to SciGen at the SciGen Share Registry. (f) Listing of SciGen and trading of SciGen Shares On or about the date of this Information Memorandum, an application will be made for admission of SciGen to the ASX official list and for official quotation of all SciGen Shares on the ASX other than those subject to escrow. See Section 7.12 of this Information Memorandum for further details regarding escrow. Based on the indicative timetable on page 2 of this Information Memorandum, SciGen Shares will commence trading on the ASX on a deferred settlement basis on the Business Day after the Effective Date, which is expected to be on Friday, 15 November After the Record Date, there will be a further period of deferred settlement trading until the despatch of holding statements in respect of the SciGen CUFS, which is expected to be completed by Thursday, 3 December It is the responsibility of each Sonic Shareholder to determine their entitlement to SciGen Shares before trading any SciGen CUFS to avoid the risk of selling SciGen CUFS they do not own. The Record Date (presently intended to be Thursday, 21 November 2002) for determining a Sonic Shareholders entitlement to SciGen CUFS will occur after the date that SciGen Shares commence trading on a deferred settlement basis (presently intended to be Friday, 15 November 2002) and SciGen CUFS will not be issued to Sonic Shareholders until the Spin-out Date. Accordingly, the SciGen Share Registry will not be able to confirm SciGen CUFS holdings until after the Spin-out Date. If a Sonic Shareholder sells his/her SciGen CUFS without receiving confirmation of his/her entitlement, he/she does so at his/her own risk. In addition, the indicative timetable is subject to variation, and is conditional on receiving ASX and Court approvals. It is not expected that SciGen Shares will be traded or listed on any exchange other than the ASX. 22 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

25 Section 3 (g) Timetable An indicative timetable is set out on page 2 of this Information Memorandum. The times and dates in the indicative timetable may change depending on a number of factors, some of which are outside the control of Sonic, for example, the timing of Court approval of the Schemes. Once the Effective Date is known, Sonic will announce to the ASX the timetable for the balance of the transaction. 3.7 Conditions Precedent to the Spin-out The obligation of Sonic to implement the Spin-out is subject to the satisfaction or (where applicable) waiver of various conditions, including: (a) approval of the Capital Reduction by Sonic Shareholders; (b) approval by the requisite majority for the Shareholder Scheme at the Shareholder Scheme Meeting; (c) approval by the requisite majority for the Optionholder Scheme at the Optionholder Scheme Meeting (as set out in Section 4.3 of this Information Memorandum); (d) agreement to the Spin-out by the Vendor Interest Holders; (e) approval of the Schemes by the Court; (f) the making of the Capital Investment by Sonic; (g) approval of resolutions of the shareholders of SciGen to, amongst other things, increase the authorised share capital and subdivide the share capital into a larger number of shares; (h) receipt from the Australian Tax Office of: a Class Taxation ruling that current sections 45A and 45B of the Income Tax Assessment Act 1936 do not apply to the Spin-out; and an Administrative Opinion that the new demerger tax rules apply to the Spin-out; (i) approval by the ASX for the admission of SciGen to the official list of the ASX; and (j) CDN formally agreeing to act as depository nominee in respect of the SciGen CUFS. The conditions are set out in full in clauses 2 and 3 of the Implementation Agreement (a copy of which is set out in Section 12 of this Information Memorandum). If any of the conditions are not satisfied or (where applicable) waived by the End Date, the Spin-out will not take effect. 3.8 End Date If the Effective Date has not occurred by the End Date then the Schemes will lapse. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 23

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27 Section 1 Section 4 Details of Optionholder Scheme INFORMATION MEMORANDUM SCIGEN SPIN-OUT 25

28 Section Optionholder Scheme Under the Optionholder Scheme: the reduction in the exercise price of the Sonic Options that would otherwise apply on the Capital Reduction will be ignored; each Sonic Optionholder will be entitled to 1 SciGen Option for every Sonic Option held by that Sonic Optionholder at the Close of Registers; and the existing exercise price of each Sonic Option will be allocated across the existing Sonic Option and the new SciGen Option in the relative proportion that the market capitalisation of Sonic after completion of the Spin-out (based on the closing price of Sonic Shares on the ASX on the Spin-out Date) bears to the value of the SciGen Shares transferred to Sonic Shareholders and Vendor Interest Holders under the Spin-out (based on a value of $0.20 per share). As at the date of this Information Memorandum, there are 12,824,450 Sonic Options outstanding. This would result in 12,824,450 SciGen Options being issued to Sonic Optionholders under the Optionholder Scheme. This represents an approximate 3% interest in SciGen on a fully diluted basis. 4.2 Terms of SciGen Options Each SciGen Option issued to a Sonic Optionholder will have an exercise price as described above in Section 4.1 and will otherwise be issued on materially the same terms as the existing Sonic Option to which each particular SciGen Option relates. The expiry dates and the exercise dates of the SciGen Options received by a Sonic Optionholder will be the same as those that apply to the Sonic Options held by that Sonic Optionholder. Upon exercise of a SciGen Option, Sonic Optionholders will receive a SciGen Share in the form of a SciGen CUFS. See Section 8 of this Information Memorandum for further details about CUFS. 4.3 Optionholder Scheme Meeting (a) Date and Purpose On 3 October 2002, the Court ordered a meeting of all Sonic Optionholders to be convened to consider and, if thought fit, approve the Optionholder Scheme, with or without amendment or modification. This meeting is to be held at the Four Seasons Hotel, Ballroom 1, 199 George Street, Sydney, NSW on Wednesday, 13 November 2002 at 11.30am or as soon thereafter as the General Meeting and the Shareholder Scheme Meeting have concluded or been adjourned. If you are a Sonic Optionholder, the notice of Optionholder Scheme Meeting accompanies this Information Memorandum. The order of the Court convening the Optionholder Scheme Meeting is not and should not be treated as an endorsement by the Court, or any other expression of opinion by the Court of the Optionholder Scheme. (b) Entitlement to attend and vote at the Optionholder Scheme Meeting Each Sonic Optionholder who is registered on the Sonic Options Register as the holder of a Sonic Option on the Meeting Record Date is entitled to attend and vote, either in person, by proxy or by attorney at the Optionholder Scheme Meeting. Voting at the Optionholder Scheme Meeting will be by poll. (c) Majority required to approve the Optionholder Scheme The Optionholder Scheme will be binding on all Sonic Optionholders and on Sonic if, and only if, a resolution approving the Optionholder Scheme is passed by: (i) a majority in number of Sonic Optionholders, present and voting, either in person or by proxy or attorney; and (ii)seventy five percent of the votes cast (representing the value of the debt voted as set out in Section 4.3(d) below). The Optionholder Scheme must also be approved by the Court. (d) Voting Rights For the purposes of the Optionholder Scheme only, voting rights will be weighted as between different tranches of Sonic Options to reflect the value of debt voted attributable to each Option. 26 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

29 Section 4 This will be calculated by reference to the exercise price of a Sonic Option on a pro rata basis with the lowest exercise price options (or the most in the money options) having the greatest vote. The number of votes for each Sonic Option will be as follows: Votes per Sonic Option Sonic Options with an exercise price of $ Sonic Options with an exercise price of $ Sonic Options with an exercise price of $ Sonic Options with an exercise price of $ Sonic Options with an exercise price of $ The number of votes for each Sonic Option set out above only applies in relation to voting as between Sonic Optionholders on the Optionholder Scheme due to the requirements of the Corporations Act relating to optionholders schemes. It is not comparable with the voting by Sonic Shareholders on the Shareholder Scheme or the Capital Reduction. 4.4 Steps involved in implementation of the Optionholder Scheme (a) Effective Date The Effective Date of the Optionholder Scheme is the date on which an office copy of the Court Order approving the Optionholder Scheme pursuant to section 411(4)(b) of the Corporations Act is lodged with ASIC by Sonic. (b) Notice to ASX Upon the Optionholder Scheme becoming Effective, Sonic will give notice of that fact to the ASX. (c) Determination of Sonic Optionholders participating in the Optionholder Scheme Sonic Optionholders registered on the Sonic Options Register at the Close of Registers are entitled to participate in the Optionholder Scheme. (d) Issue of SciGen Options On the Spin-out Date, SciGen will issue to each Sonic Optionholder that number of SciGen Options which is equal to the number of Sonic Options held by that Sonic Optionholder as at the Close of Registers. 4.5Conditions Precedent The Optionholder Scheme is subject to the satisfaction or (where applicable) waiver of the conditions to which the Shareholder Scheme is subject, as described in Section 3.7 of this Information Memorandum. If any of these conditions are not satisfied or (where applicable) waived by the End Date, the Spin-out will not take effect. 4.6 Information about Optionholders In accordance with section 170 of the Corporations Act, Sonic maintains a register of Sonic Optionholders, which includes the names and addresses of Sonic Optionholders and details of the Sonic Options held by them. Under section 173 of the Corporations Act, Sonic Optionholders have the right to: inspect the register of Sonic Optionholders free of charge. The register may be inspected at Sonic s office, 95 Epping Road, North Ryde, New South Wales ((02) ) during normal business hours; and be provided with a copy of the register of Sonic Optionholders (or any part of it), in paper form or on computer disk, within 7 days of requesting Sonic for a copy. All requests must be addressed to the Company Secretary, Sonic Healthcare Limited, 95 Epping Road, Sydney, New South Wales ((02) ). 4.7 Other Information The information contained in Sections 3.3 (Sonic Creditors), 3.6(f) (Listing of SciGen and trading of SciGen Shares), 3.6(g) (Timetable) and 3.8 (End Date) of this Information Memorandum apply equally to the Optionholder Scheme. Sonic Optionholders should read those sections for further details. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 27

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31 Section 1 Section 5 Profile of SciGen INFORMATION MEMORANDUM SCIGEN SPIN-OUT 29

32 Section The Pharmaceutical and Bio-pharmaceutical Industries The pharmaceutical and bio-pharmaceutical industries are global and comprise manufacturers, wholesalers, distributors, contract research organisations, contract manufacturing organisations and a range of entities undertaking related activities. Corporate activities range from early stage research and development, to clinical trials through to manufacture, distribution and marketing. Some companies specialise in one aspect of this chain while the large, multinational pharmaceutical companies may undertake the full spectrum of these activities. Pharmaceutical companies work with synthetic products. In contrast, companies focusing on biopharmaceutical products specialise in naturally occurring proteins and peptides. Bio-pharmaceutical companies are expanding and changing the possible approaches to the treatment of disease. As the industry develops a better understanding of disease processes at the molecular level, intervention at this level can more effectively address the underlying cause of disease in contrast to many current therapies that address only the disease manifestations. 5.2 Market Size and Forecast Growth Rates The global ethical pharmaceutical market was estimated to be worth some US$333 billion in 1998, with an average growth rate of 6-7%. The value of the Asia Pacific market was estimated to be US$25.1 billion in 1998, with an average growth rate of 12%. The Asia Pacific market is the primary target of SciGen. Within the industry, there is intense competition in research and development (R&D), distribution and sales. A recent feature of the industry has been the increase in collaborations and strategic alliances between companies in order to spread the R&D risk and gain access to broader markets. Multinational companies are actively licensing-in technology from smaller, innovative companies as well as licensing-out their own products to companies that have specialist marketing and distribution skills within regional markets. 5.3 Global Vaccine Market Vaccines have been used to prevent a range of chronic and infectious diseases since the middle of the 18th century. Preventative vaccines are termed prophylactic vaccines. Increasingly, vaccines are being designed and used to eradicate, suppress or reduce disease progression in patients who have already contracted a particular disease. Vaccines used for this purpose are termed therapeutic vaccines. 5.4 An Overview of the Drug Development Process Many Governments require pharmaceutical and bio-pharmaceutical products to obtain stringent regulatory approvals before they can be marketed, requiring a complex time consuming and expensive development process. While the time taken to pass each individual phase of the development process depends on the nature of the compound, the typical drug development process takes approximately years from discovery to launch. The process for obtaining regulatory approvals for new pharmaceutical products can be broadly split into six identifiable stages discussed below: (a) Discovery The initial discovery of a new compound that has been isolated or synthesised in the laboratory and which may lead to a new treatment or application. This is the longest time period of the development process, taking several years of extensive research. (b) Pre clinical Trials Before any testing on humans can occur, extensive laboratory research must be undertaken on the identified compound. If the results are successful, approval is sought from the relevant regulatory body to commence tests on humans. Pre-clinical trials can run for a period of up to three years. (c) Phase 1 Trials Phase 1 trials are designed to establish safety and toxicity of a new product. The trials are conducted on a small number of volunteers or in the case of oncology products on consenting terminally ill patients. Researchers are particularly interested in how the drug is absorbed, metabolised and excreted from the body. Phase 1 trials can take several months. 30 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

33 Section 5 (d) Phase 2 Trials Phase 2 trials are designed to determine the efficacy of a new product on a specific condition. The results from a control group provided with a placebo are compared with the results obtained from volunteers taking the product. Phase 2 trials can take from several months to several years. (e) Phase 3 Trials Phase 3 trials are conducted on a larger number of volunteers and designed to test more rigorously the product s efficacy and longer-term effects. Phase 3 trials can last several years. (f) Regulatory Approval The results of these various stages are then provided to the relevant regulatory authority for approval in each country in which the product is intended to be sold. This registration process is the primary means by which governments ensure the safety and quality of pharmaceutical and bio-pharmaceutical products sold. The requirements pertaining to drug registration differ from country to country in the Asia-Pacific region. As a condition of the approval, regulatory agencies may require Phase 4 studies monitoring the long-term benefits and risks of the new product after it has entered the market. 5.5 Pharmaceutical Product Lifecycle Throughout the drug development process and subsequent commercial exploitation, all pharmaceutical and bio-pharmaceutical products broadly tend to follow the same product lifecycle, being: pure form R&D undertaken by pharmaceutical company or scientific partner; application for patent protection lodged with relevant authorities; commencement and completion of clinical trials; application and gaining of regulatory approval; marketing and sales under patent protection; expiration of patent protection; and increased competition due to presence of generic products. The patent protection is an extremely important part of the pharmaceutical product life cycle as it enables the originator to exclusively exploit the product for a specified period of time. In most countries, including Australia, the term of the patent is twenty years. As it can take up to ten years to obtain the regulatory approvals from the date the patent is obtained, the period of time to recoup the initial investment is significantly shortened. Once the patent expires, the regulatory agencies normally allow other companies to manufacture and sell equivalent (or generic) versions of the original product, opening the market to increased competition. These products are typically marketed under a different brand name or under its generic (chemical compound) name. SciGen operates within this segment of the bio-pharmaceuticals market with three of its products. 5.6 The Generic Pharmaceutical and Bio-pharmaceutical Market Generic pharmaceutical and bio-pharmaceutical products are copies of drugs which have been previously approved and marketed and for which patent protection has expired. Generic products are interchangeable with the original brand-name medicinal product as they contain the same active substances. Generic bio-pharmaceutical companies must obtain registration and regulatory approvals for each product in each country in which those products are proposed to be sold. Industry experience suggests that from the time that the requisite documentation is lodged with the relevant regulatory authorities, it takes between months in most Asian countries for the standard approval process to be completed. In many cases, generic pharmaceutical companies need only demonstrate to regulatory agencies that their products are: pharmaceutically equivalent to the original brand-name product, meaning they have the same active ingredients, the same dosage form and are identical in strength; and bioequivalent to the original brand-name product, meaning it is absorbed into the bloodstream at the same rate and extent (i.e. they are equally effective). INFORMATION MEMORANDUM SCIGEN SPIN-OUT 31

34 Section 5 Generic products that can satisfactorily demonstrate each of the above factors are said to be therapeutically equivalent to the comparable brand-name product. Proving to regulatory agencies that a generic product is therapeutically equivalent can be achieved through a more limited process than that required to be undertaken by the original brand-name product. Registration procedures for generic products include pivotal Phase 2 and Phase 3 clinical trials and a review of proposed manufacturing facilities. As a result, bringing generic pharmaceuticals to market does not generally require the same expensive, time-consuming pre-clinical and clinical studies that must be conducted at the time of a brand-name product s initial approval. The benefit to the consumer is that generic pharmaceuticals can be very competitively priced against their brand-name counterparts while providing the same quality, efficacy and safety. 5.7 Overview of SciGen s Business For the sake of clarity, each reference to SciGen throughout this Section 5 is intended to be a reference to either SciGen or a wholly owned subsidiary of SciGen, depending on which corporate entity carries out a specific business activity. Further details of which SciGen entity holds direct contractual rights are set out in Section 5.19(c). SciGen, in essence will be a holding company, and all the primary development, marketing, sales and operational activities will be carried on by wholly owned subsidiaries of SciGen. Wherever necessary, SciGen will sub-licence or otherwise transfer to the relevant wholly-owned SciGen subsidiary the intellectual property necessary to carry out such activities. SciGen s business was established in 1988 by SciGen s Vice Chairman Mr Saul Mashaal. From its inception, SciGen has been and remains principally involved in the development, marketing and sales of a portfolio of bio-pharmaceutical products. These products include vaccines, which are designed to prevent disease and therapeutic bio-pharmaceuticals, which are intended to cure, suppress or minimise disease progression. In 1999, Sonic acquired an initial 18.25% share in SciGen and since that time has increased its shareholding to 59.5% by providing further working capital. After completing the implementation of the Capital Investment, Capital Reduction and the Schemes referred to in this Information Memorandum, Sonic will hold approximately 12% of SciGen s Shares. Subject to escrow restrictions on Sonic s corporate holding, Sonic may decide, at some future time, to spin-out or otherwise dispose of some or all of the balance of its SciGen shareholding. SciGen has the rights to market proprietary and generic products under licence from other bio-pharmaceutical companies. For the generic products, this provides the significant advantage that the products have already undergone much of the rigorous clinical development and trials that are required for the development of new drugs. Such rights also minimise the risks associated with early stage product development as SciGen currently only undertakes R&D activities in conjunction with strategic partners, collaborators or institutions. SciGen s portfolio currently includes six bio-pharmaceutical products and SciTojet-2 that are at different stages of development. Management focuses on licensing products that have completed pre-clinical drug discovery and are about to complete or have completed the clinical development phase. Five of these products are generic and have previously been registered and sold around the world. Through collaboration with research institutions, biotechnology companies and private contract research organisation, SciGen undertakes joint R&D for new and generic pharmaceutical products. The collaboration strategy has led to the successful development of a third generation recombinant hepatitis B vaccine (Sci-B-Vac (TM) ). Sci-B-Vac (TM) represents an exciting opportunity for SciGen with early clinical trial results proving SciGen s product to elicit a faster response and higher immunogenicity from the first dose than Hepatitis B vaccines currently on the market. The development process has also indicated the potential for Sci-B-Vac (TM) to have therapeutic qualities in the treatment of persons infected with hepatitis B, which should significantly increase the potential market for the product. 32 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

35 Section SciGen s Business Operations SciGen has a range of licence agreements across the Asia Pacific region and the world. SciGen currently maintains sales and other representative offices in six countries. SciGen is incorporated in Singapore. SciGen s initial focus will be on the nearby Asian markets which may offer high global growth rates in the bio-pharmaceutical product range due to the generally lower cost of generic products. In addition to the sales offices noted above, SciGen has access to manufacturing facilities in Israel, Poland and The Netherlands, through its licensors and/or various contract manufacturing organisations. SciGen also maintains an office in Minneapolis, Minnesota, USA for the strategic purpose of identifying product opportunities, building strategic alliances with emerging biotechnology companies, research institutions and SciGen s principal licensor, BioTechnology General Corporation (BTG). 5.9 Sales and Marketing SciGen management have put considerable thought into the optimal sales and marketing strategy. This is due to the specialist nature of the products and the fact that the customer is, in many cases, the treating clinician who prescribes or dispenses the product to the patient. SciGen intends to continue with a specialised in-house sales and marketing strategy in most of its territories. Technical and marketing support for each country will be provided by marketing and scientific operations based in Singapore and Australia. In most countries in which SciGen expects to carry on business, the market for its products falls into two categories: government sponsored health care regimes (public sector) covering a broad cross-section of the population; and individuals who seek health care privately (private sector). SciGen intends to address its marketing and sales efforts to both sectors. The public sector often requires a tender process that can have the effect of reducing profit margins but can deliver a large volume of sales. Sole reliance upon public sector purchasers can result in a material adverse impact if a particular supply contract is terminated due to competitive pricing or changes in governmental regulation or healthcare objectives. The risk does not exist to the same degree in respect of sales to the private sector. However, SciGen will not neglect the potential for large Government contracts where a clear opportunity exists for SciGen s shareholders to benefit from entering into such a contract. In certain countries, SciGen management do not believe the cost of maintaining an in-house sales and marketing team can be justified. In these countries, SciGen will outsource the function to a local distributor (see Distribution Arrangements in the table of material contracts in Section 5.19(c)). In countries such as Singapore, Hong Kong and Philippines, SciGen currently carries out physical distribution through arrangements with local pharmaceutical companies. Some of these physical distribution arrangements are with Zuellig Pharma (Zuellig). Zuellig is a Swiss company with its Asia Pacific headquarters in Hong Kong. Zuellig provides the infrastructure and carries out the physical distribution for a percentage of the sales it generates. In India, SciGen has entered into partnership with two large international pharmaceutical companies being Ranbaxy Laboratories Limited and Shreya Life Sciences Pvt Ltd for the purposes of marketing and distribution of products, as referred to in Section 5.19(c) Employees As at 30 June 2002, SciGen employed 24 staff within the following business groups: Business Group Total Corporate 9 Sales & Marketing 11 Scientific Affairs 2 Regulatory Affairs 2 Total 24 INFORMATION MEMORANDUM SCIGEN SPIN-OUT 33

36 Section SciGen s Business Cycle SciGen s business cycle can be broken into six discrete albeit related activities. Many bio-pharmaceutical companies incur significant time delays and cost in the product development phase of the business cycle. However, SciGen s strategies of collaborating with other companies and focus on products with expired or soon to expire patents contributes to ensuring that much of the time, expense and risk of this phase may be reduced. The chart below sets out the key stages involved in SciGen s business cycle. Stage 1 Product Licensing Stage 2 Product Development Stage 3 Product Manufacturing, Filling and Packing Stage 4 Product Marketing Stage 5 Product Distribution Stage 6 Product Shipping SciGen acquires the product licence from its development partner for a specific region and time frame. Before securing the licence, SciGen will ensure that it has appropriate distribution channels in place through which to market and sell the product. SciGen begins co-development of generic bio-pharmaceutical products in collaboration with leading biotechnology and/or pharmaceutical companies. Within this development phase the products undergo clinical trials and meet regulatory requirements. As the targeted products are largely generic, the product development phase is often shorter than in the case of branded or proprietary pharmaceuticals. Depending on the particular product and sales region SciGen will either: use a contract manufacturing organisation (CMO); or contract with the licensor to supply the product. This is happening, for example, in the case of SciTropin(tm) that is being supplied to SciGen by BTG. The selection is based on a number of financial and non-financial considerations. As the sales volumes increase to sustainable levels, SciGen intends to operate its own manufacturing, filling and packaging facilities. SciGen management have put considerable thought into the optimal sales and marketing strategy. Given the specialised nature of the products and the fact that the customer is, in many cases, the treating clinician and not the end user, SciGen intends to continue with a specialised in-house sales and marketing strategy. However, in certain countries, SciGen management does not believe the cost of maintaining an in-house sales and marketing team can be justified. In these cases SciGen will outsource the function to a local distributor. Once the decision to purchase has been made, customers place their order direct with the designated physical distributor or wholesaler. The physical distributor in turn places the order with SciGen. SciGen ships the finished product to the physical distributor who in turn delivers the product to the customer who placed the order. The physical distributor (such as Zuellig Pharma) is responsible for issuing the invoice and collecting the revenue Registration Status SciGen s products are at various stages of the registration process. The following tables show the current registration and development status of each of SciGen s products. Country Product and Status Sci-Tropin (TM) Sci-B-Vac (TM) Sci-Lin (TM) Sci-DaPT Vac SciTojet 2 Australia M TBS TBS M New Zealand S TBS TBS Singapore M S TBS S M Hong Kong M S TBS M Korea M TBS TBS M* Vietnam TBS M* TBS TBS TBS Philippines M S TBS M Malaysia A S India TBS TBS S TBS LEGEND: * Marketing is commencing in September M Registered, approved for sale and marketed A Registered and approved for sale but not marketed S Dossier submitted; under evaluation with health authorities TBS Dossier available; to be submitted 34 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

37 Section 5 SciGen has the rights to market these products in several other countries including China, Indonesia, Thailand and Taiwan. Other countries for which SciGen holds the licence are listed with the products as shown below. The registration dossiers will be compiled and submitted to these countries as resources become available in SciGen. Products in development/clinical development are summarised in the table below: Product Alpha Interferon Sci-DaPT/HB Vac Development phase Laboratory Early clinical Late clinical (Phase1 / 2) (Phase 3) X X In order to market its products, SciGen must go through a health registration process in each of its target markets. SciGen has demonstrated a history of successfully working within various regulatory frameworks and considers this to be a core competency and competitive advantage. As a result, the SciGen Directors expect that each of these existing products will be progressively registered and generating revenue within the next five years Product Portfolio SciGen s current portfolio of products, details of their applications and the relevant licensing arrangements are described below. Sci-Tropin (tm): Recombinant Human Growth Hormone What is Sci-Tropin (TM)? Sci-Tropin (TM), synthesised in E.coli cells, is a methionine-free recombinant human growth hormone. The product is identical to the natural human growth hormone, being the hormone without N-terminal methionine. What diseases and conditions are targeted by human growth hormone? Human growth hormone is approved in some countries for the treatment of: short stature due to pituitary growth hormone deficiency; Turner s syndrome which is a chromosomal disorder that affects females; short stature associated with renal insufficiency; Cachexia in AIDS wasting; and Growth Hormone Deficiency in adults. Sci-Tropin (TM) currently has an indication in some countries for: short stature due to pituitary growth hormone deficiency; Turner s syndrome which is a chromosomal disorder that affects females; and short stature associated with renal insufficiency. What is the global market for Sci-Tropin (TM)? The estimated world market for human growth hormone was US$1.6 billion in 2000 with an estimated market of US$400 million in the Asia-Pacific region. What are the licensing arrangements in respect of Sci-Tropin (TM)? Under an agreement with BTG, SciGen has the exclusive right to market and distribute Sci-Tropin (TM) in Taiwan, Hong Kong, Singapore, Thailand, South Korea, Australia, New Zealand, the Philippines, Malaysia, Indonesia and India for a period of ten years from the date of the approval of Sci-Tropin (TM) for sale in each of the relevant countries. The agreement with BTG also provides for the grant of exclusive marketing and distribution rights with respect to new clinical indications for Sci-Tropin (TM) which may be approved in the future, such INFORMATION MEMORANDUM SCIGEN SPIN-OUT 35

38 Section 5 as hormonal replacement therapy in adults, cardiac myopathy, renal insufficiency, in-vitro fertilisation and treatment of trauma and fractures. Sci-Tropin (TM) is registered for sale in Australia, Hong Kong, Malaysia, Philippines, Korea and Singapore. What else should you know about Sci-Tropin (TM)? Sci-Tropin (TM) can be self administered by a patient via a needle-free delivery system, SciTojet2 (TM), to which SciGen has the exclusive rights for the Asia Pacific region. The SciTojet2 (TM) releases a fine stream of Sci-Tropin (TM) without the use of a needle. The device aids in self-administration and leads to better compliance with therapy, especially for paediatric patients. Sci-Lin (tm): Recombinant Human Insulin What is Sci-Lin (TM)? Sci-Lin (TM) is a second-generation recombinant human insulin expressed in E.coli. What diseases and conditions are targeted by Sci-Lin (TM)? Insulin is used in treating diabetes. What is the global market for Sci-Lin (TM)? The total world market for insulin is estimated to be US$2.7 billion per annum. The total world market for diabetes therapeutics is forecast to grow by 15% per annum over the medium term. What are the licensing arrangements in respect of Sci-Lin (TM)? Under an agreement with BTG, SciGen has the option to manufacture (either itself or through a CMO or sub-licence) and the exclusive right to market and distribute Sci-Lin (TM) in Taiwan, Hong Kong, Singapore, Thailand, South Korea, Australia, New Zealand, the Philippines, Malaysia, Indonesia, Brunei, Myanmar, Pakistan, Sri Lankap, Cambodia, China, Bangladesh, Vietnam and Laos for a period of seventeen years from the date of the first approval of Sci-Lin (TM) for sale in any of the above countries. What else should you know about Sci-Lin (TM)? BTG s patented process may reduce costs significantly as the process used to fold the protein utilises a one-step approach as opposed to the two-step approach adopted by competitors. Due to its identical molecular structure, recombinant human insulin mimics the action of the endogenous human insulin. Earlier forms of insulin were of animal origin, such as from cattle and pigs, and differ from the recombinant human insulin in one or more amino acids in its structure. Sci-Feron (tm): Recombinant Alpha Interferon What is Sci-Feron (TM)? Sci-Feron (TM) is a highly homogenous, methionine-free recombinant human interferon. What diseases and conditions are targeted by Sci-Feron (TM)? Interferon is used in treating virological, oncological and haematological diseases. The therapeutic efficacy is believed to be due to four different biological effects being anti viral, anti proliferative, differentiation inducing and immunomodulatory. Alpha interferon can be used to treat: Chronic viral hepatitis B Chronic viral hepatitis C Malignant melanoma Hairy cell leukaemia AIDS related Kaposi s sarcoma Condylonata acuminata (venereal warts) Herpes zoster in cancer patients Herpes kerato-conjunctivitis The protein s antiviral and immunomodulatory effects are in clinical trials for a number of other viral and metastatic diseases, including hepatitis A, HIV, and a number of blood and solid tumour cancers. What is the global market for Sci-Feron (TM)? The worldwide interferon market is estimated to be worth US$1.8 billion per annum. 36 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

39 Section 5 What are the licensing arrangements in respect of Sci-Feron (TM)? Under an agreement with Peprotech, SciGen has funded and will continue to fund the development of Sci-Feron ATM (alpha-interferon 2a) and Sci-Feron BTM (alpha interferon 2b) by Peprotech. Peprotech is a United States company dedicated to developing cost-effective processes for the commercial production of 70 fully biologically active cytokines and proteins of the utmost purity. In consideration of this funding, Peprotech has granted SciGen the exclusive right to manufacture, market, distribute and sell the product throughout the world for a 99 year period from 1993 and shall be automatically renewed thereafter for a successive additional 99 year term. What else should you know about Sci-Feron (TM)? The host-response that is thought to occur with prolonged treatment with more heterogeneous recombinant interferon alphas is not expected to arise with Sci-Feron (TM) due to its higher purity, which is closer to the naturally occurring interferon. This may mean that patients on prolonged treatment with Sci-Feron (TM) face less risk of relapse. Sci-Feron (TM) is now ready for clinical trials. The SciGen Board anticipates that only limited clinical development will be required for registration purposes. In comparison with interferon produced by competitors, the higher purity of Sci-Feron (TM) could result in a lowering of the dosage and an increase in the product yield which would have a clinical and price advantage over existing interferons. Sci-B-Vac (tm): Recombinant Hepatitis B Vaccine What is Sci-B-Vac (TM)? Sci-B-Vac (TM) is a third generation recombinant hepatitis B vaccine produced in Chinese hampster ovary (CHO) cells (mammalian cell). It contains purified recombinant pre-s1, pre-s2, and S protein antigens in the glycosylated and non-glycosylated forms. The pre-s epitopes are known to play an important immunogenic role in: eliciting a high titre anti-s response; eliciting pre-s directed antibodies relating to viral clearance; stimulation of a specific T cell response; and overcoming genetic non responsiveness. What immunisation and conditions are targeted bysci-b-vac (TM)? Sci-B-Vac (TM) is a vaccine against hepatitis B. Mammalian cell-derived hepatitis B vaccines such as Sci-B-Vac could be used together with anti-viral agents for the treatment of patients with chronic hepatitis B infection. If proven in clinical trials, this could be a major breakthrough. What is the global market for Sci-B-Vac (TM)? The world market for hepatitis B vaccines is estimated at US$800 million with US$350 million in South East Asia, with an annual growth of 20%. What are the licensing arrangements in respect of Sci-B-Vac (TM)? SciGen has three license agreements with BTG relating to Sci-B-VacTM. First licence marketing and distribution SciGen has the exclusive right to market and distribute Sci-B-Vac (TM) in Australia, Myanmar, Hong Kong, India, Indonesia, Malaysia, New Zealand, Pakistan, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, the Philippines and Vietnam, for a period of between 15 and 20 years, depending on the country. Second licence - manufacturing and distribution SciGen has an exclusive right to use technology provided by BTG to establish a large-scale production facility in either China, India or Australia, and to manufacture Sci-B-Vac (TM) in one of these countries. SciGen has also been granted the exclusive right to use, sell or otherwise deal in or dispose of Sci-B-Vac (TM) INFORMATION MEMORANDUM SCIGEN SPIN-OUT 37

40 Section 5 manufactured by SciGen in Australia, Afghanistan, Bangladesh, Bhutan, Brunei, Cambodia, Hong Kong, India, Indonesia, Laos, Malaysia, the Maldive Islands, Myanmar, Nepal, New Zealand, North Korea, Pakistan, the Philippines, Singapore, Sri Lanka, South Korea, Taiwan, China, Thailand, Tibet and Vietnam for a period of 10 years from the date of approval in each licensed territory. Third licence research, development and technical services SciGen is a party to a research and development program with BTG to further develop Sci-B-Vac (TM). Pursuant to the licence, SciGen owns all of the results of the research and development program although BTG retains an irrevocable, transferable and royalty free, non-exclusive licence to utilise the results of the research and development program in any territories for which SciGen does not have a licence to sell Sci-B-Vac (TM). The licence is not for a specified term and remains current until completion of the research and development program and registration of Sci-B-Vac (TM). What else should you know about Sci-B-Vac (TM)? Clinical development of Sci-B-Vac (TM) in more than 5000 subjects is now complete. BTG obtained health registration of the vaccine in Israel in February SciGen obtained health registration of Sci-B-Vac in Vietnam in In summary, Sci-B-Vac (TM) has been proven to elicit a more rapid immunogenic response and to be significantly more immunogenic in comparison with the yeast derived hepatitis B vaccines. In a pilot study, Sci-B-Vac (TM) was shown to seroconvert successfully in 78% of the non-responders to the existing yeast-derived vaccines. Efficacy studies in neonates born to infected mothers have shown that without administration of Hepatitis B Immunoglobulin (HBIg) (which is normally administered prior to vaccination with other hepatitis B vaccines), Sci-B-Vac (TM) has protective efficacy of 97%. Sci-B-Vac (TM) is a unique vaccine against hepatitis B due to: rapid and efficacious protection against hepatitis B; induction of high protective antibody titre against hepatitis B; and potent in immune suppressed patients who do not respond adequately to conventional immunisation. Early clinical development has indicated that Sci-B-Vac (TM) would appear to have therapeutic applications when used with other anti-viral agents. Should these therapeutic implications be proven, this will represent a substantial market opportunity for SciGen. Sci-DaPT-Vac (tm): Diphtheria, Acellular Pertussis and Tetanus Vaccine What is Sci-DaPT-Vac (TM)? Sci-DaPT (TM) is a second-generation DaPT (TM) vaccine containing the patented acellular pertussis vaccine from the Kaketsuken Institute of Japan. Sci-DaPT (TM) contains this second generation acellular pertussis (whooping cough) vaccine in combination with diphtheria and tetanus toxoids. What diseases and conditions are targeted by Sci-DaPT (TM)? The vaccine is designed to be effective against: Diphtheria; Pertussis (whooping cough); and Tetanus. What are the licensing arrangements in respect of Sci-DaPT (TM)? Under an agreement with the Kaketsuken Institute, SciGen is currently permitted to act as the sublicensee of SciTech Genetics in connection with the exclusive importation and distribution in Laos, Pakistan, the Philippines, Singapore, Vietnam, Brunei, Cambodia, Myanmar and Sri Lanka, and the non-exclusive importation and distribution in Malaysia, Indonesia, India, China and Hong Kong of Sci-DaPT-Vac (TM) for a period of ten years from November INFORMATION MEMORANDUM SCIGEN SPIN-OUT

41 Section 5 What else should you know about Sci-DaPT-Vac (TM)? Acellular pertussis vaccines do not have the risks associated with whole cell vaccines and provide longer lasting protection. Development of Sci-DaPT-Vac (TM) is currently not a high priority on the SciGen agenda. The current formulation of Sci-DaPT-Vac (TM) may preclude its registration in some jurisdictions. Sci-DaPT/HB-Vac (tm): DaPT and Hepatitis B Quadrivalent Vaccine What is Sci-DaPT/HB-Vac (TM)? Sci-DaPT/HB-Vac (TM) is a non-generic diphtheria, acellular pertussis (whooping cough), tetanus and hepatitis B combination (quadrivalent vaccine). This mammalian derived vaccine encompasses a combination of third generation hepatitis B vaccine with a second-generation acellular pertussis vaccine, in addition to diphtheria and tetanus. What immunisation and conditions are targeted by Sci-DaPT/HB Vac (TM)? Sci-DaPT/HB-Vac (TM) is targeted at: Diphtheria; Acellular Pertussis (whooping cough); Tetanus; and Hepatitis B. What is the global market for Sci-DaPT/HB-Vac (TM)? To date there is no sales history or existing market size for this product. In estimating the potential market size, SciGen management has considered the birth rate in target countries, policies pertaining to national immunisation programs, the number of doses required in order to complete the immunisation of a child and the sales of other vaccines that operate within similar parameters. What are the licensing arrangements in respect of Sci-DaPT/HB-Vac (TM)? Under a bulk supply agreement with the Kaketsuken Institute, SciTech Genetics is appointed as the exclusive importer in all the Asia-Pacific countries except Japan of DaPT vaccine in the form of bulk solution for the purpose of formulating, finishing, selling and distributing Sci-DaPT/HB-Vac (TM) (a combination of DaPT vaccine and HB-Vac). However, the parties to that agreement are currently permitting SciGen to act as the sub-licensee of SciTech Genetics in connection with the distribution of this vaccine in the abovementioned countries. Distribution rights within certain territories also exist. The initial term of the agreement is for a period of ten years from Whilst SciGen is not a direct contracting party to this agreement, Kaketsuken and SciTech Genetics have permitted SciGen to act as sub-licensor of Sci-DaPT/HB-Vac (TM), in the abovementioned countries. The territories within which SciGen may distribute Sci-DaPT/HB-Vac (TM) are determined by whether the Sci-B-Vac (TM) forming part of Sci-DaPT/HB-Vac (TM) is purchased from BTG, in which case SciGen is restricted to the countries specified in the first Sci-B-Vac (TM) licence agreement or is manufactured by Sci-Gen, in which case the territories under the second Sci-B-Vac (TM) licence agreement apply. What else should you know about Sci-DaPT/HB-Vac (TM)? The current formulation of Sci-DaPT/HB-Vac (TM) may preclude its registration in some jurisdictions. Further development of Sci-DaPT/HB-Vac is not a high priority for SciGen at this point Use of Proceeds The table below sets out SciGen s proposed use of proceeds from the Spin-out and public listing of SciGen. These proceeds provide SciGen with initial working capital in an amount which the SciGen Directors believe will enable SciGen to pursue its business plan. The information in this table is an estimate of expenditure as at the Spin-out Date and is not directly comparable with pro-forma figures in Section 11 of this Information Memorandum which are based on historical figures as at 30 April INFORMATION MEMORANDUM SCIGEN SPIN-OUT 39

42 Section 5 Total A$ 000 % R & D and Clinical Research 4, Regulatory Affairs 1,100 4 Acquisition of fixed assets 1,600 5 Licence costs 3, Market Development 1,900 6 General Corporate Purposes 8, Costs of Spin out* Repayment of loans extended by Sonic 7, Total Expenditure 30, % * Includes reimbursement of part of other legal costs in connection with the Spin-out. Much of the work ahead for SciGen and the use of funds will be in continuing to build the sales and marketing infrastructure throughout SciGen s territories. In addition, SciGen will step-up the activity in its regulatory and scientific affairs areas to aggressively pursue registrations of products in the appropriate territories. An integral part of this will be undertaking a number of clinical studies and post-marketing (phase 4) studies of some of SciGen s products. These funds are identified in the R & D and clinical research development budget Intellectual Property SciGen s industry partners have either not sought or sought only limited patent protection in the Asia Pacific region for the products they have licensed to SciGen. Under the various licence agreements, SciGen is responsible for ensuring that the products it distributes in these countries do not infringe the patents of third parties and is required to hold its industry partners harmless for any patent infringement actions brought against them as a result of SciGen s activities in the region. To the extent that third party patents are relevant, SciGen s management believes that these patents have expired or will have expired by the time SciGen s products are ready to be marketed Strategic Partners SciGen has established several corporate and strategic partnerships with major global biotechnology firms. These partnerships have resulted in obtaining product rights, access to new technology, manufacturing rights and access to product development pipelines. SciGen s corporate partners provide SciGen with access to a wide range of products without the cost and time required to carry products from the research stage into clinical development. SciGen has also successfully developed collaborations with leading academic institutions and researchers in the Asia-Pacific region, Belgium, UK, Israel, Canada and the United States. SciGen s strategic partners include: (a) BioTechnology General Corporation BTG is a Delaware corporation with headquarters in Iselin, New Jersey, and is listed on the Nasdaq National Market under the symbol BTGC. BTG and its wholly-owned subsidiary, BioTechnology General (Israel) Ltd (BTG Israel), were formed in 1980 to research, develop, manufacture and market products through the application of genetic engineering and related biotechnologies. BTG has developed expertise in E.coli and mammalian cell (CHO) technology and is one of the leading biotechnology companies in the USA. (b) The Chemo-Sero-Therapeutic Research Institute (Kaketsuken) The Chemo-Sero-Therapeutic Research Institute (KIJ) is one of the largest health and biological science research institutions in Japan. KIJ focuses on developing recombinant gene techniques, cell fusion, large-scale cell culture and refinement techniques. One of KIJ s current research themes is to utilise as many biological components as possible for the prevention and cure of diseases through advanced biotechnology. (c) Peprotech Inc. Peprotech Inc. (Peprotech) is a United States company with headquarters in Princeton, New Jersey. Peprotech is dedicated to developing cost-effective processes for the commercial production of over 70 fully biologically active cytokines and proteins of the utmost purity. 40 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

43 Section 5 (d) Cytolab Ltd Cytolab is an Israeli company based in Rehovot, Israel, home of the Weizmann Institute and the centre of the biotechnology industry of Israel. It is developing and manufacturing cytokines and peptides. (e) Antares Pharma Inc Antares Pharma Inc (Antares) is a United States company with its headquarters in Exton, Pennsylvania. Antares develops and markets innovative and effective pharmaceutical delivery solutions, including needle-free and mini needle injector systems, gel technologies and transdermal products. Antares provides their drug delivery technology for use with the drugs of their pharmaceutical partners. (f) Other SciGen has relied on the valuable support of academic partners in the Asia-Pacific region, such as the National University of Singapore and the World Health Organisation immunology centre. By working closely with these organisations, SciGen has been able to reduce significantly the development time frame for the hepatitis B vaccine, including the completion of clinical trials Future Growth The SciGen Directors believe SciGen is well positioned to capitalise upon the growth of the Asia-Pacific and global bio-pharmaceutical and pharmaceutical markets. SciGen s strategies for growth of the business include: the achievement of health registration for its existing products in each of its target markets within the next five years; further development of the indicated therapeutic applications offered by Sci-B-Vac (TM) in the treatment (not just prevention) of early stage chronic hepatitis B in neonates, children and adults; increased penetration into target markets through the active utilisation of SciGen s local sales and marketing team to allow the easy integration of product in SciGen s portfolio; continued development of new pharmaceutical products targeted at vaccination and/or treatment of diseases that have a high level of occurrence in humans; expansion of its existing product base to geographic locations outside of the Asia-Pacific region through distribution, licensee and/or joint venture arrangements; and investment in infrastructure to develop its own manufacturing operations when the economics suggested it would be more profitable for SciGen than maintaining existing contract manufacturing relationships Board of Directors and Senior Management (a) Board of Directors The Directors and proposed Directors of SciGen at the date of this Information Memorandum are: Paul E Freiman B.Sc, PhMb Chairman (Age 68) Paul E Freiman is President and Chief Executive Officer of Neurobiological Technologies, Inc. (NTI). He is the former Chairman and Chief Executive Officer of Syntex Corporation (Syntex), where he had a long and successful career and was instrumental in the sale of Syntex to Roche Holdings for US$5.3 billion. Mr Freiman currently serves as Chairman of the board of Digital Gene Technologies and is also a director of Burrell & Company, Penwest Pharmaceutical Co., Calypte Biomedical Corporation, Omware, Inc., PHYTOS Inc. and Otsuka America Pharmaceuticals, Inc. and has been Chairman of the Pharmaceutical Manufacturers Association of America. Saul A Mashaal PhMb, MBA Executive Director and Vice Chairman (Age 66) Mr Mashaal is the founder, Executive Director and Vice Chairman of SciGen. Mr Mashaal has more than 30 years experience in the pharmaceutical industry. He started his career with Syntex Laboratories Ltd (now Roche Bioscience Inc.) in Canada and subsequently with Syntex International S.A. where he was INFORMATION MEMORANDUM SCIGEN SPIN-OUT 41

44 Section 5 responsible for the management of systemic steroid products. In 1973, Mr Mashaal joined the 3M Company and was given responsibility for assisting in the creation of a clinical research group and managing the clinical research development of new molecules in the field of non-steroidal antiinflammatory (NSAID) analgesic and cardiovascular. In 1975, Mr Mashaal was given responsibility for international business development in the health and sciences sector at 3M. In 1980, Mr Mashaal founded Mashaal Enterprises Ltd, a holding company with interests in healthcare and biotechnology related companies, for the investment in and development of emerging companies in the health and sciences fields. In 1987, Mr Mashaal founded SciTech Medical for the international market development of pharmaceuticals, medical devices and diagnostics. Mr Mashaal is Chairman of both Mashaal Enterprises Limited and SciTech Medical. In 1988 Mr Mashaal founded SciTech Genetics to develop, manufacture and market bio-technology derived products, first in the Asia Pacific region and expanding into the markets of Europe and the Americas. In 1999, SciTech Genetics transferred its business to SciGen, when Sonic made a substantial equity investment, and Mr Mashaal became its President and Chief Executive Officer. Mr Mashaal will remain an Executive Director and Vice Chairman of SciGen following the listing of SciGen. Dr Colin Goldschmidt MBBCh, FRCPA, FAICD Non-Executive Director (Age 48) Dr Goldschmidt became the Managing Director of Sonic and its subsidiaries in 1992, prior to which he was the Medical Director of Douglass Hanly Moir Pathology. He joined Sonic after completing his Australian Pathology Fellowship training in Sydney in Dr Goldschmidt is also a non-executive director of Silex Limited. Christopher Wilks B.Comm., ASA, FCIS, FCIM, FAICD Non-Executive Director (Age 43) Mr Wilks is a consultant with a background in chartered accounting and investment banking. He has been a director of Sonic since 1989 and has played a major role in Sonic s development since he became an Executive Director in He was also responsible for the spin out of Silex Systems Limited in 1996 and its subsequent listing on the ASX in Mr Wilks retains a part-time executive role with Silex responsible for corporate development. Kenneth Gross CPA, MBA Non-Executive Director (Age 73) Mr Gross co-founded Goldmark Plastic Compounds in That company has since become a major distributor of plastic raw materials within the United States. In addition, Mr Gross holds a number of directorships in various companies involved in chemicals, metals, engineering resins and lubricating oils. Mr Gross is presently the Chairman and Chief Executive Officer of Goldmark Plastics Inc. Mark Compton BSc (Pharmacology) MBA MAICD AFCHSE FAIM Managing Director and Chief Executive Officer (Age 41) Mr Compton was appointed as Chief Executive Officer of SciGen in September Prior to his appointment Mr Compton was Managing Director of Alpha Healthcare Limited, a publicly listed Australian healthcare group with operations involving nine private hospitals and the provision of related medical facilities. Mr Compton is a graduate in pharmacology and spent the early part of his career in clinical and basic research, postgraduate study and teaching at the University of Sydney. Mr Compton holds a Masters in Business Administration (Executive) from the Australian Graduate School of Management (UNSW) and is a Fellow of the Australian Institute of Management, Associate Fellow of the Australian College of Health Service Executives and a Member of the Australian Institute of Company Directors. Mr Compton is also Chairman of St John Ambulance Australia (NSW) and a Director on the National Board of St John Ambulance. 42 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

45 Section 5 Barrie R Martin BEC, ANZIIF (Fellow) Non-Executive Director (Age 66) Chairman Remuneration and Audit Committees Mr Martin was a non-executive Chairman of Prudential Corporation Australia (Prudential) and New Zealand from 1995 to 1997 and was Managing Director for Prudential in Australia and New Zealand from 1984 to 1994, having joined Prudential in 1968 as its DP Manager. Mr Martin was Chairman of the Life Insurance Federation of Australia from May 1990 to May 1992 and was Chairman of the Insurance Employers Industrial Association from ; President of the Australian Insurance Institute in 1994/1995; and Deputy President of the State Chamber of Commerce (NSW) in 1991 after being a Council member for several years before. Mr Martin is Chairman of Brazin Limited (appointed 1997), the Barkworth Group (since 1996), Inglewood Olive Processors Limited (since 1998) and is a Director of Macquarie Bank Limited (since 1993), Macquarie Life Limited (since 1998) and BHP SVC Pty Limited (since 2001). Mr Martin was previously Chairman of Alpha Healthcare Limited ( ), and a director of the Sundowner Group ( ) and Homemaker Retail Property Trust ( ). He was a director of the Australian Brandenburg Orchestra from 1990 to 2001 and Chairman from 1990 to Peter Campbell FCA, FTIA, MAICD Non-Executive Director (Age 57) Mr Campbell is a Chartered Accountant with his own practice based in Sydney. Mr Campbell is an independent non-executive director of Bligh Corporate Pty Ltd, Damott Pty Ltd, Damott Management Services Pty Ltd, Global Access Publications Pty Ltd, Outbox Pty Ltd, Mithena Holdings Pty Ltd, Prime City Properties Pty Ltd, RP Campbell Associates Pty Ltd, RPCA (No. 1) Pty Ltd, Search Corporation Pty Ltd, Meridian Property Management Pty Ltd, Sonic, St Laurence Australia Limited and Silex Systems Limited. He is a Fellow of both the Institute of Chartered Accountants in Australia and the Taxation Institute of Australia and is a registered company auditor. (b) Senior Management Mark Compton Managing Director and Chief Executive Officer (see details above) Jenny Low Chartered Accountant Chief Financial Officer Ms Low is a Chartered Accountant and has held senior accountancy positions in various companies in both Malaysia and Singapore. With over 20 years accounting experience, Ms Low is well versed with accounting practices and tax laws of the Asia-Pacific region. Prior to joining the SciGen Group in September 1991, Ms Low was with Abacus Distribution Systems Pte Ltd, a company owned jointly by the major airline companies in Asia. Dr Eric Meyer B.Pharm, M.Sc, Ph.D Director of Scientific Affairs Dr Meyer was a lecturer at Rhodes University (South Africa) and Sydney University and joined the Australian pharmaceutical industry in 1994 as Medical Affairs Manager with Searle (now Pharmacia). Dr Meyer gained experience in medical affairs, clinical development, pharmacoeconomics and project coordination with Searle. His last position involved him in regulatory affairs, clinical development and business development giving Dr Meyer a well rounded experience in the pharma industry, especially helpful for an emerging company. Based in Sydney, Dr Meyer is responsible for all matters related to scientific affairs, including clinical development, regulatory affairs and pharmacoeconomics. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 43

46 Section 5 Sian Stubbs B.Pharm Regulatory Affairs Manager Ms Stubbs is a pharmacist having worked in the pharmaceutical industry since 1988 in the area of regulatory affairs. She has worked with companies including Syntex, Johnson & Johnson, and until recently as Regulatory Affairs Manager with Sanofi-Synthelabo. Ms Stubbs has gained considerable experience with a broad range of products and joined SciGen with a sound background in Australian and New Zealand regulatory affairs. (c) Scientific Advisory Board The Scientific Advisory Board is an advisory group that consists of a number of eminent scientists and clinicians. Its purpose is to assist SciGen in its formulation and execution of scientific policies and to establish close relationships between SciGen and academia and research institutions. The Scientific Advisory Board acts as an advisor to the SciGen Board. No member of the Scientific Advisory Board has authority to represent or bind SciGen. The Scientific Advisory Board consists of the following members: Professor Marian Gorecki Ph.D Professor Gorecki received a Ph.D from the Weizmann Institute of Science and was a post graduate fellow in Biology at the Massachusetts Institute of Technology (MIT) in Cambridge, Mass, USA. In 1976, he was appointed Senior Research Scientist and Associate Professor at the Weizmann Institute. In 1980 Professor Gorecki founded BTG and was responsible for its R & D group. He was appointed Sr. Vice President and Chief Technical Officer for BTG. Professor Gorecki was appointed Professor of molecular biology at the Weizmann Institute in recognition of his expertise in peptide and protein chemistry. Professor Gorecki has authored over 80 publications and numerous patents. Professor Gorecki took early retirement from BTG and is a consultant to BTG, SciGen and the Biotechnology Investment division of Clal Industries. Professor Chan Soh Ha MBBS, Ph.D. Professor Chan is currently a professor at the Department of Microbiology, National University of Singapore and Director of the World Health Organisation Immunology Centre, National University of Singapore. He was awarded the Singaporean National Science & Technology Award in 1992 for his discovery of new tissue-type antigens and research in monoclonal antibodies. Professor Chan is a member of the Singaporean National Scientific Advisory Committee on Hepatitis and Related Diseases, Ministry of Health and the National Biotechnology Committee, Economic Development Board. Professor Daniel Shouval MD Professor Shouval currently is Dean of Medicine at Hebrew University Medical School, Jerusalem and Chief Physician, Department of Medicine and Head, Liver Unit at Hadassah University Hospital, Jerusalem. He has also held academic positions at Albert Einstein College of Medicine and Harvard Medical School and was a Visiting Fellow of the GI Unit, Molecular Hepatology, Massachusetts General Hospital. Professor Shouval has received a number of awards for his outstanding research work, including the E Stanner Prize (1972), Dr Birnbaum Award (1978), International J E Fogarty Prize (1979), American Liver Foundation Research Award (1981), Hebrew University Michael Sherwood Research Award (1982) and Judith Segal Foundation Research Award ( ). Professor Shouval is currently involved in research on liver disease and liver transplantation. Dr Yitzhak Stabinsky Ph.D Chairman, CEO and director of Protein Chemistry at Peprotech Inc., and based in California. Dr Stabinsky has developed commercial processes for the folding and purification of E.coliderived human growth factors. He has considerable experience in the design and synthesis of important human structural genes, such as Interleukin and Interferon, and in the modification of nucleic acids. As well as being the author of an extensive list of publications, Dr Stabinsky holds 44 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

47 Section 5 ten patents in the field of biotechnology. He is assistant editor of the Intra-science Research Foundation, California. Professor David J Handelsman MB BS, Ph.D. FRACP Professor Handelsman is a Director, ANZAC Research Institute and Professor of Reproductive Endocrinology and Andrology, University of Sydney. He has extensive experience in regulatory affairs as well as basic and clinical sciences in all areas of male reproductive health including conducting key clinical trials in hormone replacement therapy. (d) Corporate Governance The SciGen Directors will adopt best current practices and procedures for the corporate governance of SciGen. These establish the framework of how the SciGen Directors carry out their duties and obligations on behalf of SciGen s shareholders. SciGen Board The SciGen Board has responsibility for protecting the rights and interests of shareholders and is responsible for the overall governance of SciGen. Upon the listing of SciGen, the Board will comprise of 8 directors, including 6 non-executive directors and 2 executive directors. The Chairman will be a non-executive director. The SciGen Board will be responsible for: the overall strategic direction and leadership of SciGen; approving and monitoring the implementation by management of SciGen s objectives and strategies; reviewing SciGen s overall performance and financial results against its stated objectives, by receiving regular management reports on SciGen s business situation, opportunities and risks; reviewing and considering management and Scientific Advisory Board recommendations for involvement in new development or commercialisation projects and any consequential capital expenditure or commitment; ensuring that adequate systems of internal control and corporate governance exist and are appropriately monitored for compliance; reviewing the degree of compliance by SciGen and its executive management with all applicable statutory and reporting requirements, patent rights and general regulatory obligations; deciding the payment of dividends to SciGen Shareholders; and reviewing the performance of the Chief Executive Officer and other members of senior management. As SciGen is a Singaporean incorporated entity, the SciGen Board will meet at appropriate times in Singapore to consider important strategic issues for SciGen, particularly those involving SciGen s accounts, dealing with major intellectual property issues and other significant issues affecting SciGen Shareholders. Nomination, Appointment and Retirement of Directors The SciGen Board will be responsible for succession planning and identification of new SciGen Board members. The composition of the SciGen Board will be reviewed on a regular basis to ensure that it has appropriate expertise and range of skills. SciGen s articles of association require that SciGen Directors appointed by the SciGen Board submit themselves for re-election at the first meeting of shareholders following their appointment. While SciGen Directors are not appointed for a fixed term, under the articles of association to be adopted by SciGen with effect from its admittance to the official list, and the ASX Listing Rules, at least one third of the SciGen Directors (excluding the Managing Director) must retire by rotation each year and submit themselves for re-election by shareholders. The Chairman will review the performance of SciGen Directors each year. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 45

48 Section 5 Directors Access to Professional Advice In the discharge of their duties, SciGen Directors will have the right to seek independent professional advice at the expense of SciGen, subject to the prior approval of the Chairman. Compensation Arrangements The remuneration of SciGen Directors and senior executives will be reviewed annually by the Remuneration Committee, to be composed of Mr Barrie Martin (Chairman of Audit and Remuneration Committees), Mr Peter Campbell and Mr Paul Freiman. Under the newly adopted SciGen articles of association, the maximum aggregate annual remuneration of non-executive directors will be fixed at A$500,000. This amount will be divided among the nonexecutive directors as determined by the SciGen Board. (e) Audit Committee The Audit Committee will consist of at least two non-executive directors and the Chief Financial Officer of SciGen will attend all meetings. Upon completion of the Schemes, it is proposed that the members of the Audit Committee will be Mr Barrie Martin (Chairman), Mr Ken Gross and Mr Christopher Wilks, and Ms Jenny Low will attend all meetings. The principal functions of the Audit Committee will include: liaising with the external auditors, reviewing external audit reports and managing the prompt responses in respect of any matters raised in those reports; assessing the quality of financial statements issued by SciGen and reviewing any related party transactions of SciGen; reviewing all areas of significant financial risk and the arrangements in place to contain those risks to acceptable levels; and reviewing SciGen s accounting policies, taxation affairs and insurance cover. The Audit Committee will also be responsible for the appointment of external auditors, for reviewing their remuneration and terms of engagement and the scope and quality of audit. In fulfilling its responsibilities, the Audit Committee receives regular reports from management and the external auditors. It also meets with the external auditors at least twice per year. The activities of the Audit Committee assist in ensuring the independence of the external auditors. (f) Risk Management SciGen is committed to the management of risks to protect its employees, assets, earnings, markets, reputation and the environment. The SciGen Board has implemented risk management procedures that aim to identify the sources of risk and loss, quantify the impact of these sources and control and reduce the risk through practical and cost effective control measures. In addition, SciGen uses risk-financing techniques, including insurance, to reduce the financial impact of any uncontrollable or catastrophic losses Additional Information about SciGen (a) Rights attaching to SciGen Shares The rights attaching to the SciGen Shares are set out in the Companies Act and the SciGen articles of association. These rights are affected by the issue of SciGen Shares in the form of SciGen CUFS to Sonic Shareholders, Sonic Optionholders and Vendor Interest Holders, as detailed in Section 8.3 of this Information Memorandum. Following is a summary of the key clauses in the SciGen articles of association. Precedence of Listing Rules Despite anything in the SciGen articles of association, once SciGen is admitted to the official list of the ASX, if there is any inconsistency between the SciGen articles of association and the Listing Rules, the Listing Rules will prevail. Voting At a general meeting every SciGen Shareholder present in person or by proxy, attorney or representative has one vote on a show of hands and on a poll has one vote for each SciGen Share held. The number 46 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

49 Section 5 of votes to which a holder of partly paid SciGen Shares is entitled on a poll is equivalent to the proportion that the amount paid on the SciGen Share is of the issue price of the SciGen Share (ignoring amounts paid in advance). Dividends and Reserves Subject to any special terms and conditions of issue, the profits of SciGen which the SciGen Board from time to time determines to distribute by way of dividend are divisible amongst the SciGen Shareholders in proportion to the amount paid up on the SciGen Shares held by them. The SciGen Board is authorised to adopt and amend share plans such as bonus-share plans, employee share plans, dividend re-investment plans and dividend selection plans. Issue of Further SciGen Shares The SciGen Board may (subject to the SciGen articles of association, the Listing Rules and the Companies Act) allot, grant options in respect of or otherwise issue further SciGen Shares on such terms and conditions as it sees fit. Transfer of SciGen Shares A SciGen Shareholder may transfer SciGen Shares by a proper transfer effected in accordance with the business rules of the ASX Settlement and Transfer Corporation and ASX and as otherwise permitted by the Companies Act. The SciGen Board may decline to register a transfer of SciGen Shares if the transfer is not in registerable form or where the refusal to register the transfer is permitted under the Listing Rules. If the SciGen Board declines to register a transfer, SciGen must give the party lodging the transfer, written notice of the refusal and reason for refusal. General Meetings and Notices General meetings may be convened in the manner provided for in the Companies Act and the Listing Rules. Each SciGen Shareholder entitled to vote at a general meeting is entitled to receive notice of and to attend (except in certain circumstances where admission may be refused by the chairperson) and vote at general meetings of SciGen and receive all financial statements, notices and other documents required to be sent to SciGen Shareholders under the SciGen articles of association or the Companies Act. Winding Up Subject to any special or preferential rights attaching to any class or classes of shares, SciGen Shareholders will be entitled on a winding up to participate in any surplus assets of SciGen in proportion to the SciGen Shares held by them less any amounts which remain unpaid on their SciGen Shares at the time of distribution. Number of SciGen Directors and Appointment The number of SciGen Directors must be not less than three and the maximum is to be fixed by the SciGen Board but must not be more than twelve unless SciGen passes a resolution varying that number. At least one SciGen Director must ordinarily reside in Singapore. At least one-third of SciGen Directors, other than the Chief Executive Officer, must retire and seek re-election at each annual general meeting of SciGen. Remuneration of SciGen Directors The remuneration of the Chief Executive Officer, or any other SciGen Director appointed to an executive office, is fixed by the SciGen Directors. The combined annual remuneration of non-executive SciGen Directors must not exceed A$500,000 per annum until and unless the SciGen Shareholders, by an ordinary resolution, approve some other fixed sum. SciGen Directors Indemnity SciGen must, to the extent permitted by law, indemnify each officer of SciGen and each officer of a related body corporate of SciGen, against any liability incurred by that person in that capacity, including but not limited to liability for negligence or costs incurred by defending proceedings in which judgement is given in favour of the person or in which the person is acquitted. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 47

50 Section 5 The SciGen Directors are also empowered to pay premiums in respect of a contract insuring a person who is an officer of SciGen against a liability incurred by the person as such an officer, or as an officer of a related body corporate. However, the liability insured against must not include that which the law prohibits. Any such premium in relation to a SciGen Director is in addition to, and not regarded as part of, the remuneration approved by the SciGen Shareholders under the SciGen articles of association. Proportional Takeover Provisions The SciGen articles of association contain provisions for SciGen Shareholder approval in relation to any proportional takeover scheme. The provision will lapse unless it is renewed by special resolution of SciGen Shareholders within three years from the date of its adoption. Alteration of the SciGen Articles of Association The SciGen articles of association can only be amended by a special resolution passed by at least three-quarters of SciGen Shareholders present and voting at a general meeting of SciGen. SciGen must give at least 28 days written notice to the SciGen Shareholders of a meeting of SciGen Shareholders (unless consent to shorter notice is obtained in accordance with the provisions of the Companies Act), including specific notice of any special resolution proposed. SciGen Share Buy-Backs SciGen may buy back SciGen Shares in itself in accordance with the provisions of the Companies Act. (b) SciGen Employee Share Option Plan (ESOP) The objective of the ESOP is to assist in the recruitment, rewarding, retention and motivation of employees of SciGen. Offers Under the ESOP, the SciGen Board may offer options to acquire SciGen Shares (each an option ), such offer being in a form determined by the SciGen Board. Price The SciGen Board has the discretion to grant options set their exercise price and other terms. Unless otherwise determined by the SciGen Board, and subject to the prevailing legal and regulatory requirements, no amount will be payable for the grant of options and their exercise price will be a price that is determined by the SciGen Directors and specified in an offer of options. Proposed Offer The SciGen Board has resolved to offer options to eligible persons for nil cash consideration. However, the right to exercise those options may be subject to the prior satisfaction of any performance conditions in accordance with the terms of the ESOP set out below. Each eligible person who accepts an offer to participate in the ESOP is hereafter referred to as a Participant. Exercise Period Unless otherwise determined by the SciGen Board, an option may be exercised at any time prior to the first to occur of: (i) if the Participant is a SciGen Director, the expiry of four years after the issue date of that option; the expiry of 30 days after the Participant ceases to be a SciGen Director; and the date of determination by the SciGen Directors that a Participant has acted fraudulently, dishonestly or in breach of a Participant s obligations to SciGen and that the option has been forfeited, (ii) if the Participant is an employee of SciGen, the expiry of four years after the issue date of that option; the expiry of 30 days after termination of the Participant s employment without cause; and immediately upon termination of the Participant s employment with cause. 48 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

51 Section 5 Unless the SciGen Directors resolve otherwise, but only for the purposes of the ESOP, where a SciGen Director is also a SciGen employee, the termination of that SciGen Director s employment or holding of office as a SciGen Director will be deemed to have occurred simultaneously with the termination of that SciGen Director s holding of office as a SciGen Director or employment, respectively. Restrictions Unless otherwise determined by the SciGen Board, options will be exerciseable in the following tranches: 33% of the number of options granted will be exercisable on or after the first anniversary of the issue date of those options (First Anniversary Date); a further 33% of the number of options granted will be exercisable on or after the second anniversary of the issue date of those options (Second Anniversary Date); and the final 34% of the number of options granted will be exercisable on or after the third anniversary of the issue date of those options. No option can be exercised until it has vested and the relevant performance condition has been met or waived by the SciGen Directors, after which each option may be exercised only during the exercise period. Performance Condition Within 60 consecutive calendar days of each issue date of an option, the First Anniversary Date and the Second Anniversary Date, the SciGen Board may impose such performance conditions (if any) as it considers appropriate. In the event that a performance condition set by the SciGen Board is not met on or in respect of a particular exercise date, the performance condition can be satisfied on a cumulative basis so that if satisfied on any following date, the option holder will be able to exercise options which have vested but in respect of which the performance condition was not satisfied on any previous exercise date. Rights of options If SciGen makes any bonus issue, when those options are exercised in accordance with the ESOP, the Participant will be entitled to receive the number of SciGen Shares that he or she would have been entitled to under the bonus issue as if the Participant s options had been exercised and the SciGen Shares allotted, each before the date on which eligibility to participate in that bonus issue was determined. If there is a rights issue, the exercise price of an option will be adjusted in accordance with the ASX formula in order to provide the Participant with the bonus element which may be present in a pro rata rights issue. There is to be no change in the number of SciGen Shares to which the Participant is entitled. In the event of any reconstruction of the capital of SciGen, the entitlement to SciGen Shares attaching to each option will be reconstructed in the same proportion as the issued ordinary capital of SciGen is reconstructed, and in a manner which will not result in any additional benefits being conferred on the Participant which are not conferred on SciGen Shareholders. All rights and entitlements attaching to an option under the ESOP will be amended to the extent necessary to comply with the Listing Rules that apply to a reorganisation of the capital of SciGen at the time that the reorganisation becomes effective. Any reorganisation of the capital of SciGen must not be done in a manner or with the effect that will prejudice the rights or interests, or the value of the rights or interests, of the Participants in the options they hold immediately prior to the time of such reorganisation. Suspension of the Plan The SciGen Board may resolve at any time to amend, terminate or suspend the operation of the ESOP. In order to comply with the requirements of Policy Statement 49 issued by ASIC, the SciGen Directors: (a) do not intend to issue any options under the ESOP until after the first anniversary of the date of listing of SciGen on the ASX; and INFORMATION MEMORANDUM SCIGEN SPIN-OUT 49

52 Section 5 (b) will send to a Participant without charge upon receipt of a request from that Participant, a complete copy of the terms and conditions of the ESOP, and the options to be issued under the ESOP. It is the intention of SciGen Directors that the only SciGen options to be issued during the course of the Spin-out will be those referred to in Section 5.19(c) to Saul Mashaal and Mark Compton respectively. (c) Material Contracts Material Contracts Summary 1. EXCLUSIVE LICENCE HEPATITIS B VACCINE AGREEMENT: 22 November 1988 Parties: BTG and SciGen (pursuant to an assignment dated 18 February 1999). Term: 15 years from the date of approval of the Hepatitis B Virus vaccine for India, Indonesia, Philippines, South Korea and Taiwan with automatic 2 year renewals. For all other nominated countries, the term is 20 years from the date of approval of the Hepatitis B Virus vaccine with automatic 2 year renewals. Brief Description: Grant by BTG to SciTech Medical of exclusive marketing and distribution rights of a Hepatitis B vaccine product in Australia, Burma, Hong Kong, India, Indonesia, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam. 1 April 1992: SciTech Medical assigned its obligations and rights under the agreement to SciTech Genetics. 18 February 1999: SciTech Genetics assigned its obligations and rights under the agreement to SciGen. 2. LICENCE AGREEMENT HEPATITIS B VACCINE: 23 December 1997 Parties: BTG and SciGen (pursuant to an assignment dated 18 February 1999). Term: 10 years from the date of approval for the sale of the Hepatitis B vaccine in the territories noted. Option for additional 7 years for lump sum payment of US$100,000. Brief Description: Grant by BTG to SciTech Genetics to use BTG s proprietary process information for the production of Hepatitis B vaccine and the right to sell that vaccine in Afghanistan, Australia, Bangladesh, Bhutan, Brunei, Cambodia, Hong Kong, India, Indonesia, Laos, Malaysia, Maldives, Myanmar, Nepal, New Zealand, North Korea, Pakistan, the Philippines, Singapore, South Korea, Sri Lanka, Taiwan, the People s Republic of China, Thailand, Tibet and Vietnam. 18 February 1999: SciTech Genetics assigned its obligations and rights under the agreement to SciGen. BTG has the right to terminate this licence agreement if SciGen undergoes a material change in ownership which can be objectively shown to be materially detrimental to BTG s interest. BTG has confirmed that it: (a) waives any right to terminate the licence agreement upon completion of the Spin-out; (b) confirms that the remainder of the licence agreement is unchanged; and confirms that the terms and conditions of the licence agreement are valid, binding and fully enforceable. 3. RESEARCH DEVELOPMENT & TECHNICAL SERVICES AGREEMENT FOR HEPATITIS B VACCINE: 23 December 1997 Parties: BTG and SciGen (pursuant to an assignment dated 18 February 1999). Term: Until completion of the research and until registration of the product being researched is obtained Brief Description: BTG agrees to conduct research for SciTech Genetics on the Hepatitis B vaccine. 18 February 1999: SciTech Genetics assigned its obligations and rights under the agreement to SciGen. 50 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

53 Section 5 4. EXCLUSIVE LICENCE AGREEMENT HUMAN GROWTH HORMONE: 30 October 1988 Parties: BTG and SciGen (pursuant to assignment dated 18 February 1999). Term: 10 years from the date of the approval of the human growth hormone product in the territories listed and automatic 2 year renewals thereafter. Brief Description: BTG grants to SciTech Medical exclusive marketing and distribution rights of human growth hormone product in Taiwan, Hong Kong, Singapore, Thailand, South Korea, Australia, New Zealand, the Philippines, Malaysia, Indonesia and India. 1 April 1992: SciTech Medical assigned its obligations and rights under the agreement to SciTech Genetics. 18 February 1999: SciTech Genetics assigned its obligations and rights under the agreement to SciGen. 5. DPT DISTRIBUTION AGREEMENT: Date: 1 November 1994 Parties: The Chemo-Sero-Therapeutic Research Institute of Japan (Kaketsuken), Teijin Limited (Teijin) and SciTech Genetics. Term: 10 years and automatic renewal for additional 1 year terms. If the Diphtheria Vaccine is not registered within 3 years after the date of this agreement in a territory or not sold in a reasonable quantity within 2 years after gaining approval, these territories may be eliminated from the list of territories which SciGen as sub-licensee is permitted to distribute to. Brief Description: SciTech Genetics to purchase Diptheria Vaccine from Kaketsuken through Teijin and distribute exclusively in Laos, Pakistan, the Philippines, Singapore, Vietnam, Brunei, Cambodia, Myanmar and Sri Lanka and non-exclusively in Malaysia, Indonesia, India, China and Hong Kong. At this point in time, SciGen is not a party to this agreement but is nevertheless allowed by all parties to assume a sub-licensing role. The parties are in the process of assigning the benefit of this agreement to SciGen. 6. DPT BULK SUPPLY AGREEMENT: 1 November 1994 Parties: Kaketsuken, Teijin and SciTech Genetics. Term: 10 years. Automatic renewal for additional 1 year terms. Brief Description: SciTech Genetics to develop, sell or distribute Diptheria Vaccine in all Asian Pacific countries including Korea, Taiwan, Hong Kong, China, the Philippines, Singapore, Brunei, Malaysia, Thailand, Vietnam, Indonesia, Myanmar, Laos, Cambodia, Sri Lanka, India, Pakistan, Nepal, Bhutan, Bangladesh, Australia and New Zealand. At this point in time, SciGen is not a party to this agreement, but is nevertheless allowed by all parties to assume a sub-licensing role. The parties are in the process of assigning the benefit of this agreement to SciGen. 7. PEPROTECH RECOMBINANT ALPHA INTERFERON AGREEMENT: 10 November 1993 Parties: Peprotech Inc (PTI) and SciGen (pursuant to a deed of assignment dated 15 February 1999). Term: 99 years and automatically renewable for another 99 years. Brief Description: PTI agrees to carry out development programs for active recombinant alpha interferon and following market approval, SciTech Genetics to manufacture, market and distribute that product throughout the world. 15 February 1999: SciTech Genetics assigned its obligations and rights under the agreement to SciGen. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 51

54 Section 5 8. MEDI-JECT EXCLUSIVE LICENSE AND SUPPLY AGREEMENT FOR INJECTOR DEVICES: 16 September 1998 Parties: Medi-Ject Corporation (Medi-Ject) and SciGen (pursuant to a deed of assignment dated 16 February 1999). Term: 8 years following First Commercial Sale of any component of the Product (as defined). Renewable for additional terms of 1 year. Brief Description: Medi-Ject grants to SciTech Genetics the right to use and sell needle free injector devices under SciTech Genetics trademarks in Australia, China, Hong, Kong, Indian sub-continent, Indonesia, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Taiwan. 16 February 1999: SciTech Genetics assigned its obligation and rights under the agreement to SciGen with approval by Medi-Ject. 9. MEDI-JECT INTERNATIONAL DISTRIBUTION AGREEMENT: 1 October 2000 Parties: Medi-Ject and SciGen as distributor. Term: 1 year plus option to renew. This agreement has expired and SciGen is negotiating with Medi-Ject with regard to extending the term of this agreement. Brief Description: SciGen appointed distributor of needle free jet insulin injector product by Medi-Ject in Australia, Bangladesh, Brunei, Cambodia, China, Hong Kong, India, Indonesia, Laos, Malaysia, Myanmar, New Zealand, Pakistan, the Philippines, Singapore, South Korea, Thailand, Taiwan and Vietnam. This agreement has expired and SciGen is in the process of negotiating with Antares Pharma, who has recently acquired the Medi-Ject business, with regard to extending the terms of this agreement. 10. REGULATORY SERVICES MASTER AGREEMENT: 31 August 2000 Parties: SciGen Pty Limited and Omnicare Clinical Research Pty Limited (Omnicare). Term: No express term. Brief Description: Omnicare agrees to provide various regulatory and product registration services (including duties in respect of Sci-B-Vac in Australia) to SciGen Pty Limited. 11. HONG KONG: MANAGEMENT SERVICE AGREEMENT: 10 August 1999 Parties: SciGen and Zuellig Pharma Ltd (Zuellig). Term: Valid until 31 December Brief Description: Agreement for the provision of office space by Zuellig to SciGen. 12. HONG KONG: DISTRIBUTION AND MARKETING AGREEMENT: 10 August 1999 Parties: SciGen and Zuellig. Term: 3 years commencing on first sale. Successive annual periods. Brief Description: Zuellig to distribute SciGen products in Hong Kong and Macau. 13. MALAYSIA: DISTRIBUTION AGREEMENT: 1 March 2001 Parties: SciGen and Zuellig Pharma SDN BHD as distributor (Zuellig BHD). Term: 3 years from first sale or the date the products are given health registration approval Renewed automatically for successive annual periods unless notice is given. Brief Description: Zuellig BHD agrees to distribute Sure & Easy Pregnancy Test, Sure & Easy 52 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

55 Section 5 Ovulation Prediction Test, SciTropin Injection (rhgh), ALLON Thermal Wraps, Rejuvamin (food supplement), Sci-B-Vac, Sci-Feron and Sci-Lin in Malaysia. However, pursuant to a verbal agreement between Zuellig BHD and SciGen, Zuellig BHD will no longer distribute the Sure & Easy Pregnancy Tests, Sure & Easy Ovulation Prediction Tests, ALLON Thermal Wraps, and Rejuvamin (food supplement). 14. PHILIPPINES: PROMOTION AGREEMENT: 16 August 1999 Parties: SciTech Genetics and Zuellig Pharma Corporation (Zuellig Corp). Term: 5 years. Thereafter renewed on an annual basis. Brief Description: SciTech Genetics agrees for Zuellig Corp to promote pharmaceuticals in the Philippines. Whilst SciGen is not a party to this agreement, the parties are in the process of assigning the benefit of this agreement to SciGen. 15. PHILIPPINES: DISTRIBUTION AGREEMENT: 11 October 1999 Parties: SciTech Genetics and Zuellig Corp. Term: 1 September 1999 to 1 September 2004 Successive annual renewals until terminated by either party on 6 months notice. Brief Description: SciTech Genetics appoints Zuellig Corp to distribute and sell certain products in the Philippines. Whilst SciGen is not a party to this agreement, the parties are in the process of assigning the benefit of this agreement to SciGen. 16. SINGAPORE: REGIONAL DEPOT AGREEMENT: 24 February 2000 Parties: SciGen and Zuellig Pharma Pte Ltd (Zuellig Pte). Term: 3 years from 1 March 2000 and automatic renewal for periods of 1 year. Brief Description: Zuellig Pte to, inter alia, hold stocks of Sure & Easy Pregnancy Test, Sure & Easy Ovulation Test and SciTropin for SciGen for purpose of sale and export to Singapore, Malaysia, Brunei, Thailand, Hong Kong, Taiwan, Vietnam, Myanmar, Indonesia, India, Korea and the Philippines. 17. SINGAPORE: DISTRIBUTION AGREEMENT Date: 24 February 2000 Parties: SciGen and Zuellig Pte. Term: 3 years from March 2000 and automatic renewal for 1 year periods. Brief Description: SciGen appoints Zuellig Pte as its exclusive distributor of Sure & Easy Pregnancy Test, Sure & Easy Ovulation Test and SciTropin in Singapore. However pursuant to a verbal agreement between Zuellig Pte and SciGen, Zuellig Pte will no longer distribute the Sure & Easy Pregnancy Test or the Sure & Easy Ovulation Test. 18. KOREAN: COMMERCIALIZATION AGREEMENT: 1 March 1999 Parties: SciGen and SciGen Korea Ltd. Term: Ending on 28 February By agreement, extension for successive 2 year terms. Brief Description: SciGen appoints SciGen Korea Ltd as its sole distributor of all SciGen products in Korea. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 53

56 Section PRINCIPAL AGREEMENT ON DRUG DISTRIBUTION: 15 May 2002 Parties: SciGen and Vaccine and Biological Company No. 1 (Vabiotech). Term: Commences 1 June 2002 and terminates 31 December Can be extended by one year periods by written agreement between parties. Brief Description: Distribution agreement for Vabiotech to distribute Hepatitis B vaccine in Vietnam. 20. AGREEMENT ON SUPPLY OF BULK FORMULATED HbsAG AND PRODUCTION OF SCI-B-VAC Date: 15 June 2002 Parties: SciGen and Vabiotech. Term: Commences 15 June 2002 and is for a term of 5 years. Is automatically extended thereafter for one year periods unless non-renewal notice given by either party not less than 6 months prior to end of term. Brief Description: Vabiotech is granted an exclusive licence to fill the Hepatitis B vaccine and distribute and to obtain registration and production licences for Hepatitis B Vaccine in Vietnam. 21. PRINCIPAL CONTRACT ON DRUG DISTRIBUTION: 18 December 2001 Parties: SciGen and Hoang Due Pharmaceuticals Co., Ltd. (Lyth Pharma). Term: Commences 1 January 2002 and terminates 31 December Can be extended by one year periods by written agreement between parties. Brief Description: Distribution agreement for Lyth Pharma to distribute Hepatitis B vaccine in southern Vietnam. 22. PRINCIPAL CONTRACT ON DRUG REGISTRATION AND DISTRIBUTION: Undated Parties: SciGen and Hapharco. Term: Commences 1 January 2002 and terminates 31 December Can be extended by one year periods by written agreement between parties. Brief Description: SciGen appoints Hapharco to undertake the application and registration procedures for drugs SciGen intends to export to Vietnam. Hapharco is also appointed as the favoured distributor of drugs for which it has undertaken the application and registration processes. 23. SUPPLY AGREEMENT: 29 March 2002 Parties: SciGen and Diosynth BV. Term: 5 years from date of agreement but automatically renews for successive 1 year period unless either party gives at least 6 months written notice. Brief Description: Diosynth BV agrees to supply SciGen with recombinant human insulin for distribution by SciGen in Australia, Bangladesh, Brunei, Burma, Bhutan, Cambodia, People s Republic of China, East Timor, Hong Kong, India, Indonesia, Laos, Malaysia, Maldives, Nepal, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Tahiti, Taiwan, Thailand and Vietnam. 24. DISTRIBUTION AGREEMENT: 28 June 2002 Parties: SciGen and Ranbaxy Laboratories Limited (Ranbaxy). Term: Commences on the date of the agreement for a period of 5 years from the first commercialisation in India. The parties may, 12 months prior to the expiry of the term, agree to extend the agreement for successive 2 year terms. 54 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

57 Section 5 Brief Description: Grants Ranbaxy a semi-exclusive right to sell, market and distribute recombinant human insulin in India. Ranbaxy is responsible for seeking the relevant government approval in relation to the product. 25. INSULIN LICENSING AGREEMENT: 1 April 2002 Parties: SciGen and BTG. Term: 15 years from the date on which regulatory approval is granted to market the Product in the countries listed. At the expiration of the term in a particular country, SciGen will have a royalty free licence to market in such country. Brief Description: BTG grants right to SciGen to market recombinant human insulin in Australia, Bangladesh, Bhutan, Brunei, Burma, Cambodia, China PR, Hong Kong, India, Indonesia, Laos, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand and Vietnam. 26. EXCLUSIVE DISTRIBUTION AGREEMENT: 18 June 1999 Parties: SciTech Medical and BTG. Term: From 18 June 1999 until 31 December 2006 with automatic annual renewals thereafter until terminated. Brief Description: Exclusive Distribution Agreement to distribute 2.5mg oxandrolone tablet product, trademarked Oxandrin in Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand. Whilst SciGen is not a party to this agreement the parties are in the process of assigning or sublicensing the benefit of this agreement to SciGen. 27. SUPPLY AGREEMENT Date: 29 October 2001 Parties: SciGen and Bioton Spolka z ograniczona odpowiedzialnoscia (Bioton). Term: 6 years from 29 October 2001 with automatic renewal of 1 year terms unless 6 months prior to the relevant renewal year notice of termination is given by either party. Brief Description: Agreement for the supply of genetically engineered human recombinant human insulin by Bioton to SciGen for distribution by SciGen in Australia, Bangladesh, Brunei, Burma, Bhutan, Cambodia, P.R China, East Timor, Hong Kong, India, Indonesia, Laos, Malaysia, Maldives, Nepal, New Zealand, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Tahiti, Taiwan, Thailand and Vietnam. 28. GENERAL CONVEYANCE AGREEMENT: 1 March 1999 Parties: SciTech Genetics, SciGen and SciTech Medical. Term: No relevant term provided. Brief Description: Agreement whereby certain assets, authorisations, contracts and intellectual property are assigned to SciGen by SiTech Genetics. Where assignment is not possible prior to the closing in this General Conveyance Agreement, SciTech Genetics must use best efforts to ensure the assignment/transfer. Where these assets are not assignable, they are to be held by SciTech Genetics on trust for SciGen and any obligations will be performed by SciGen in the name of SciTech Genetics or as its agent and all benefits derived under this arrangement will be for the benefit of SciGen. A list of the assigned rights is set out in the schedules to this General Conveyance Agreement and includes the agreements numbered 5 and 6 with Kaketsuken in this Material Contracts Summary. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 55

58 Section HEP B VACCINE AND HUMAN INSULIN ASSIGNMENT OF LICENCES: 18 February 1999 Parties: SciTech Genetics,BTG and SciGen. Term: Not applicable. Brief Description: SciTech Genetics assigned its rights in the following licences: Development and Exclusive Distribution Agreement dated 22 November 1988 (agreement 1 above); Licence Agreement dated 23 December 1997 (agreement 2 above); Research Development and Technical Services Agreement dated 23 December 1997 (agreement 3 above); Exclusive Licence Agreement dated 30 October 1988 (agreement 4 above); and Agreement dated 10 May 1990 (this agreement has since been terminated and replaced with agreement 25 above). 30. COMMERCIALIZATION AGREEMENT: 3 March 2002 Parties: Scigen and Shreya Life Sciences Pvt Ltd (Shreya). Term: 3 March 2002 until 31 December 2007 with extensions for successive 2 year terms on written agreements. Brief Description: Agreement to appoint Shreya as SciGen s semi exclusive distributor and marketer of Human Growth Hormone within India, Nepal, Sri Lanka, Bangladesh, Burma and Afghanistan. Notes of Caution The summary detailed above does not include or refer to all material terms of each agreement. Sonic Shareholders, Sonic Optionholders, and other validly interested parties can inspect copies of these agreements at the office of SciGen in Sydney, Australia during its normal business hours. As noted in the table above, SciGen is not a contracting party to some of the agreements summarised above. In respect of agreements summarised in 5 and 6 above (see also section 5.13 in respect of Sci-DAPT-VacTM and Sci-DAPT/HB-VacTM) by mutual agreement and conduct of the parties to these agreements, SciGen has been permitted to act effectively as a licensor or sub-licensor of the relevant products or services. In addition, SciGen is seeking to obtain a direct contractual relationship by assignment, under certain of these agreements, as quickly as practicable. In some instances, the parties to the agreements summarised above have, during the ordinary course of dealings, acted with mutual consent outside the express terms or scope of those agreements. Such conduct may be deemed to effect an amendment or amendments to those agreements, the terms of which have not been verified. Employment Agreement for Saul Mashaal Mr Mashaal is employed as the Vice Chairman and as a Senior Adviser to the SciGen Board until 31 December Mr Mashaal s base salary is US$190,000 per annum which is reviewed every 12 months. In addition, in December of each year, Mr Mashaal receives an amount equal to one month of his base salary as a bonus payment. SciGen also provides Mr Mashaal with a range of other benefits including payments for Mr Mashaal s residence and car and the provision each year of 2 round trips between Singapore and the United States of America. If the SciGen Shares are admitted to the official list of the ASX, Mr Mashaal will be granted options to purchase SciGen Shares equal to 2% of SciGen s issued share capital that will vest as at the date of admission, with an exercise price equal to the value ascribed to the SciGen Shares under this Information Memorandum. 56 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

59 Section 5 The options may be exercised as follows: Percentage of options which may be exercised Up to 33% of total options Up to a further 33% of total options Up to a further 34% of total options Vesting Date 12 months after date of admission 24 months after date of admission 36 months after date of admission 100% of options 48 months after date of admission Mr Mashaal s right to exercise his options will lapse on the earlier to occur of: (a) the fourth anniversary of their issue date; and (b) the date that his employment is terminated because of a breach of this agreement. If the term of this agreement expires after 31 December 2004, Mr Mashaal may exercise all of his options on or before the tenth (10th) anniversary of the date of execution of this agreement. However, if prior to the expiry of such term, Mr Mashaal ceases to act as a SciGen Director or his employment by SciGen under this agreement is terminated without cause or he resigns voluntarily as an employee, he may exercise his options at any time up to 31 December After the first anniversary of this agreement, SciGen will be entitled to terminate Mr Mashaal s employment by giving 6 months written notice or 10 days written notice if Mr Mashaal has materially breached the terms of his employment agreement or engaged in other serious misconduct. Mr Mashaal is restricted by a range of non-compete provisions for a period of 12 months after he leaves SciGen. Employment Agreement for Mark Compton Mark Compton commenced employment with SciGen on 18 September Mr Compton is employed by SciGen as its Chief Executive Officer and Managing Director for an initial term of 3 years. Mr Compton is paid a total remuneration package of A$395,000 that is due for review by SciGen on 18 September If the SciGen Shares are admitted to the official list of the ASX, Mr Compton will be granted options to purchase SciGen Shares equal to 2% of SciGen s issued share capital that will vest as at the date of admission, with an exercise price equal to the value ascribed to the SciGen Shares under this Information Memorandum. The options may be exercised as follows: Percentage of options which may be exercised Vesting Date Up to 33% of total options 12 months after date of admission Up to a further 33% of total options 24 months after date of admission Up to a further 34% of total options 36 months after date of admission 100% of options 48 months after date of admission Mr Compton s right to exercise his options will lapse on the earlier to occur of: (a) the fourth anniversary of their issue date; and (b) the date that his employment is terminated because of a breach of this agreement. However, if Mr Compton ceases to act as a SciGen Director or his employment by SciGen under this agreement is terminated without cause or he resigns voluntarily as an employee prior to 18 September 2004, he may exercise his options at any time up to 31 December SciGen may terminate Mr Compton s employment immediately in the event that Mr Compton has engaged in serious or persistent breaches of his employment agreement or if he has acted in a manner which is materially and detrimentally disadvantageous to the reputation of SciGen. SciGen may at any other time terminate the employment of Mr Compton by giving 6 months notice. Mr Compton may terminate his employment by giving three months written notice or one month written notice in the event that his position or the terms of his employment are materially downgraded or otherwise varied by SciGen without his consent. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 57

60 Section 5 Mr Compton is restricted by a variety of restrictive covenants in the event that his employment is terminated or after the term of his employment with SciGen ceases SciGen Financial Information (a) Summary Financial Information The summary financial information set out below should be read in conjunction with the detailed financial information and the Investigating Accountant s Report set out in Section 11 of this Information Memorandum. For the purposes of presenting financial information the results have been adjusted and translated into Australian dollars in accordance with the basis set out in Section 11 of this Information Memorandum. Year ended Year ended 10 months ended 30 June June April 2002 A$ A$ A$ Operating revenue (adjusted) 360, ,542 1,034,071 EBITDA (2,709,360) (4,638,407) (3,365,639) Depreciation and amortisation 117, , ,322 EBIT (2,826,794) (4,772,205) (3,487,961) Net interest (income)/expense (32,425) (17,971) 250,182 Net Profit/(Loss) Before Tax 2,794,369 4,754,234 (3,738,143) The SciGen Directors have approved internal projections on which to plan and manage the business of SciGen. However, they are of the view that the inclusion of this prospective financial information in this Information Memorandum would be inappropriate as a number of the primary underlying assumptions are based on judgement and are hypothetical in nature. On balance, the SciGen Directors believe there is not sufficiently reasonable grounds to present this prospective financial information in this Information Memorandum. (b) Dividend Policy The SciGen Directors do not intend to declare or pay any dividends until such time as SciGen achieves sustainable profit levels. The payment of any future dividends will be at the discretion of the SciGen Board. The amount, timing and payment of any future dividend will depend on a large range of factors, including the operating performance of SciGen, resulting cash flow and the requirement to retain earnings to fund growth. (c) Investment Risks An investment in SciGen should be considered speculative and high risk. In reviewing an investment in SciGen investors should read the entire Information Memorandum and in particular consider the risk factors that could affect the financial performance of SciGen. For a detailed discussion of the risks associated with an investment in SciGen, please refer to Section 5.21 (Risk Factors) Risk Factors (a) Introduction An investment in SciGen should be considered speculative and will be accompanied by various risks. Some of these risks relate to an investment in shares of this nature generally. Other risks relate to SciGen s business. The business activities of SciGen are subject to risks and uncertainties and there are many factors which may affect its future performance. In reviewing your investment, you should consider each of the following risks, as well as other information in this Information Memorandum. There may be other risks not specifically mentioned here which arise from the business activities of SciGen as described in Section INFORMATION MEMORANDUM SCIGEN SPIN-OUT

61 Section 5 (b) Future Losses SciGen has not begun to generate significant revenues from its business and will not do so until such time as it secures registration of the various products for commercialisation. No guarantee or assurance can be given, however, that the expected dates for registration and commencement of marketing of SciGen s products, as detailed in Section 5.12, will be achieved. (c) Ongoing Financial Requirements The capital requirements associated with the development and commercialisation of SciGen s products has been and will continue to be significant. Some of SciGen s products have not been fully developed or tested, and will require the injection of additional funds to advance to the next stage. However, it is believed that the short-medium term capital requirements of SciGen will be able to be funded through existing cash reserves. It is possible however that SciGen may exhaust its available working capital prior to the generation of significant revenues. For further information refer to Section 5.14 (Use of Proceeds). (d) Products in Clinical Development and Regulatory Approval Companies involved in licensing-in products, such as SciGen, must comply with the regulatory framework applicable to the pharmaceutical industry. Although the approval process is similar in many countries, each company that intends to market a pharmaceutical product must submit a complete file to the competent authorities in each of the countries in which it wishes to market its product and each authority may require that additional data be submitted and trials undertaken. The regulatory requirements will vary according to the status of the agent or product in question and the nature of the approvals or changes being considered. In general, recently introduced agents or products, and established agents which have more significant proposed changes, will face more substantial requirements for demonstration of safety and efficacy. (e) Dependence on Partners and Commercial Agreements SciGen depends on a number of partners and commercial agreements in carrying out research and development activities and in the marketing and distribution of its products. The most important of these partners are referred to in Section The provisions of SciGen s material licensing arrangements are summarised in Section 5.19(c). Any circumstances which cause the loss of one or more of these partners or material contracts could materially and adversely impact on SciGen s operations. In addition, a significant part of SciGen s future business and its revenue are dependent upon SciGen entering into collaborations relating to the research and development of new intellectual property and pharmaceutical drug candidates and marketing and distribution agreements for the sale of its products. There is no assurance that SciGen will be able to negotiate commercially acceptable agreements for the research and development of intellectual property nor for the future of the commercialisation of its products. (f) Competition and Competing Products In general, the development and marketing of non-immunosuppressive therapies and biopharmaceuticals for therapeutic and vaccine purposes is intensely competitive and composed of numerous large and well-financed firms. These include large pharmaceutical and biotechnology companies as well as universities and other research institutions, that are constantly developing or acquiring rights to new products. Moreover, in many cases competing products have not been generally accepted by medical professionals. These medical professionals have been traditionally slow to change to the use of alternative products, and many of SciGen s competitors have established distribution networks in place and sufficient marketing resources to effectively resist attempts to dislodge use of their products in the market. (g) Reliance on Key Personnel SciGen is dependent upon the expertise of certain of its own and its subsidiaries key officers and scientists. SciGen believes that its future success depends in part on its ability to attract and retain suitably qualified management, scientific and technical personnel. SciGen has in place an Employee Share Option Plan (which is summarised in Section 5.19(b)) in order to provide incentives and to INFORMATION MEMORANDUM SCIGEN SPIN-OUT 59

62 Section 5 promote the recruitment and retention of key personnel. Despite this, failure to attract or retain key personnel could have a material adverse effect on SciGen. Key management is, however, committed to SciGen and has significant personal wealth invested in the business. (h) Intellectual Property and Patent Protection The commercial success of SciGen depends in part on its ability and/or that of its licensors to obtain patent protection for products in the major markets and to preserve the confidentiality of its own and its collaborators know-how. There is no assurance that SciGen will develop or acquire technology or products that are patentable, that patents will be granted in relation to products currently being developed or, if granted, that patents will be sufficiently broad in their scope to provide protection for SciGen and exclude competitors with similar technology. As patent applications can take considerable time before being published, no assurance can be given that patents granted to SciGen s licensors will not be challenged, invalidated or circumvented, or that the rights granted under the patents will provide competitive advantages to SciGen as new patents are approved. (i) Product Liability and Insurance SciGen has secured adequate product liability insurance from a reputable and worldwide recognised insurance company. To be successful, SciGen products must be manufactured in commercial quantities, at acceptable costs and in compliance with regulatory requirements. Having established relationships with key suppliers and manufacturers, SciGen believes this risk is manageable. It should be noted that in the longer term, SciGen intends to establish in-house manufacturing capabilities, in which case this risk will be reduced. (j) Currency Fluctuations and Economic conditions A large proportion of SciGen s revenues are expected to be earned in currencies other than Australian or Singaporean dollars. In addition, as SciGen enters into manufacturing arrangements as its products become ready for marketing, a proportion of its expenses may be incurred in currencies other than Australian or Singaporean dollars. Consequently, in the absence of appropriate hedging arrangements, volatility in the Australian and Singaporean dollar exchange rates could result in fluctuations in SciGen s operating results and financial condition. The performance of SciGen can be significantly affected by changes in economic conditions in the regions in which SciGen operates. Factors such as market growth, inflation, interest rates, foreign currency exchange rates and consumer and industrial demand may affect the profitability and assets of SciGen. (k) Political environment SciGen operates in many countries throughout the Asia-Pacific region. Each country has a unique political system with varying degrees of stability. SciGen may be affected by significant changes in the political environment of the countries in which it operates. (l) Realisation risk There is a risk that the price obtainable for the SciGen Shares upon sale, either on ASX or privately, may be less than the amount implied through the Spin-out. (m)risk of holding small parcels of SciGen Shares Holders of small parcels of SciGen Shares may not be able to realise a return of their investment by sale of the SciGen Shares in each case because of lack of market liquidity and/or expenses of sale, such as brokerage. 60 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

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73 Section 1 Section 7 Additional Information INFORMATION MEMORANDUM SCIGEN SPIN-OUT 71

74 Section 7 The information contained in this Section is provided pursuant to section 411(3) of the Corporations Act in compliance with Regulation and Part 3 of Schedule 8 of the Corporations Regulations. 7.1 Sonic Directors and Sonic Directors recommendation The Sonic Directors are: Mr Barry Patterson (Chairman) Dr Colin Goldschmidt Mr Christopher Wilks Dr Michael Barratt Mr Michael Boyd Mr Peter Campbell Dr Philip Dubois Mr Colin Jackson Dr Michael Robinson Dr Hugh Scotton Each of the Sonic Directors desires to make and considers himself justified in making a recommendation in relation to the Capital Reduction and the Schemes. Each of the Sonic Directors recommends Sonic Shareholders vote in favour of the Capital Reduction and the Shareholder Scheme. Each of the Sonic Directors recommends Sonic Optionholders vote in favour of the Optionholder Scheme. The reasons for each Sonic Director s recommendation are set out in Section 2 of this Information Memorandum. 7.2 How the Sonic Directors intend to vote Each of the Sonic Directors intends to vote in favour of the Capital Reduction, the Shareholder Scheme and the Optionholder Scheme in respect of the Sonic Shares and/or Sonic Options held by him or on his behalf (as set out in Section 7.3 below). 7.3 Marketable securities of Sonic held by the Sonic Directors No marketable securities of Sonic are held by or on behalf of Sonic Directors as at the date of this Information Memorandum except as follows: Name Sonic Shares held by Sonic Options held by or on behalf of the or on behalf of the Sonic Director Sonic Director Mr Barry Patterson 3,816,646 Dr Colin Goldschmidt 950,000 3,000,000 Mr Christopher Wilks 623,000 1,500,000 Dr Michael Barratt 1,300,000 Mr Michael Boyd 21,458,704 Mr Peter Campbell Dr Philip Dubois 616,486 Mr Colin Jackson 517,640 Dr Michael Robinson 200,000 Dr Hugh Scotton 175, Marketable securities in SciGen held by the Sonic Directors No marketable securities of SciGen are held by or on behalf of Sonic Directors as at the date of this Information Memorandum. Sonic Directors who are Sonic Shareholders will be entitled to receive SciGen CUFS under the Shareholder Scheme. 72 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

75 Section 7 Sonic Directors who are Sonic Optionholders will be entitled to receive SciGen Options under the Optionholder Scheme (see also Section 7.6 below). 7.5Payments or other benefits to directors, secretaries or executive officers No payment or other benefit is proposed to be made or given to any director, secretary or executive officer of Sonic or of any related body corporate as compensation for loss of, or as consideration for or in connection with, his retirement from office as director, secretary or executive officer of Sonic or any corporation related to Sonic as a result of the Spin-out. 7.6 Agreements or arrangements with Sonic Directors Messrs Colin Goldschmidt, Christopher Wilks and Peter Campbell (who is an independent non-executive Sonic Director) are currently directors of SciGen and will remain directors of SciGen immediately following the Spin-out. Messrs Colin Goldschmidt and Christopher Wilks will represent Sonic. Each of these persons will be granted one million options in SciGen prior to the Spin-out with an exercise price of $0.20. There are no other agreements or arrangements made between any Sonic Director and any other person in connection with or conditional upon the outcome of the Spin-out. 7.7 Material changes in the financial position of Sonic To the knowledge of the Sonic Directors, there has not been a material change in the financial position of Sonic since 30 June 2002, being the date of the yearly accounts (including statements of financial performance and financial position for the year ended 30 June 2002) released to the ASX on 22 August (See Section 7.11 below). 7.8 Intention about Sonic s business, assets and employees It is the intention of the Sonic Directors following the implementation of the Spin-out: to continue the business of Sonic focussed on medical diagnostics; not to make any major changes to the business of Sonic; and to continue the present policies of Sonic relating to the employment of its employees. 7.9 Vendor Interest Holders Under the Spin-out, each Vendor Interest Holder will be entitled to receive 1 SciGen CUFS for every Vendor Interest held at the Close of Registers. The maximum number of Sonic Shares to which Vendor Interest Holders are entitled is 2,270,385 (approximately 0.8% of the Sonic Shares in issue). The Vendor Interest Holders are the vendors of Roadhaven Limited, a pathology business in the United Kingdom known as The Doctors Laboratory, acquired by Sonic Healthcare Holdings Limited, a subsidiary of Sonic, on 10 April As vendors, they are each entitled to be issued Sonic Shares as deferred consideration under the relevant acquisition agreement Consideration offered Following the Capital Investment, SciGen will have 418,965,443 issued shares of which Sonic will hold 310,034,427 (74%). The Sonic Board considers it appropriate to transfer approximately 62.5% of the total number of SciGen Shares to Sonic Shareholders and Vendor Interest Holders (i.e. approximately million SciGen Shares) leaving Sonic with a holding of approximately 11.5% of issued SciGen Shares. The consideration for and the basis on which Sonic Shareholders will receive SciGen Shares is set out in Section 3.1 of this Information Memorandum and the consideration for and the basis on which Sonic Optionholders will receive SciGen Options is set out in Section 4.1 of this Information Memorandum Regulatory relief (a) ASIC relief (i) Financial reporting requirements Clause 8302(h) of Part 3 of Schedule 8 of the Corporations Regulations requires the Information Memorandum to set out whether, within the knowledge of the Sonic Directors, the financial position of Sonic has materially changed since the date of the last balance sheet laid before a Sonic annual general meeting or sent to Sonic Shareholders in accordance with section 314 or 317 of the Corporations Act. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 73

76 Section 7 ASIC has allowed Sonic to depart from complying with the requirements of clause 8302(h) of Part 3 of Schedule 8 of the Corporations Regulations on the basis that Sonic: has complied with Division 2 of Part 2M.3 of the Corporations Act by releasing yearly accounts for the year ended 30 June 2002 (Financial Report); has disclosed all other material changes to Sonic s financial position after the balance date of the yearly accounts in the Information Memorandum and/or in announcements to ASX; the Information Memorandum provided to Sonic Shareholders and Sonic Optionholders is in substantially the same form as that given to ASIC on 1 October 2002; and the Information Memorandum sent to Sonic Shareholders is sent together with a copy of the Financial Report. (ii) Creditor scheme information requirements The Optionholder Scheme is proposed as a creditor s scheme. The information requirements for creditors schemes are contained in Part 2 of Schedule 8 to the Corporations Regulations. Those requirements differ from those which apply to members schemes (contained in Part 3 of Schedule 8 to the Corporations Regulations). In particular, a report on the state of affairs of Sonic would be required in respect of the Optionholder Scheme. ASIC has allowed Sonic to depart from complying with the requirements of Part 2 of Schedule 8 on the basis that in the case of optionholders, the requirements for a members scheme under Part 3 of Schedule 8 to the Corporations Regulations are more suitable for optionholders consideration of the scheme. (b) ASX waivers The ASX has granted waivers to Sonic or in principle waivers to SciGen of the following Listing Rules: Listing Rule to allow a number of SciGen Shares held by Sonic that are otherwise subject to escrow and which are to be transferred by Sonic to Sonic Shareholders and Vendor Interest Holders under the Spin-out to be released from escrow; Listing Rule to allow Sonic to adjust the exercise price of Sonic Options in the manner described in the Optionholder Scheme; Listing Rule to permit SciGen to grant SciGen Options to Messrs Colin Goldschmidt and Christopher Wilks under the Optionholder Scheme without the need for separate SciGen Shareholder approval; and Condition 11 of Listing Rule 1.1 to allow SciGen to issue SciGen Options with an exercise price that is less than $0.20 cash Escrow Provisions SciGen will enter into escrow agreements with Sonic, SciTech Genetics and each of the Sonic Directors who receive SciGen Shares under the Spin-out under which they will each agree not to dispose of the number of SciGen Shares set out below for a period of 24 months from the Listing Date. Shareholder Number of SciGen Shares subject to escrow Sonic 48,132,381 (11.5%)* SciTech Genetics 108,931,016 (26%) Sonic Directors Number equal to the number of Sonic Shares held for or on behalf of that Director as set out in Section 7.3. * Note: this is subject to minor variation depending upon the final number of SciGen Shares transferred by Sonic under the Spin-out. 74 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

77 Section Transitional arrangements Sonic and SciGen will enter into transitional arrangements in connection with the ongoing relationship between Sonic and SciGen, which will be effective on the Spin-out Date. These transitional arrangements will principally relate to payroll and other administrative services which Sonic has agreed to provide to SciGen on an arm s length basis Capital Raising by SciGen SciGen has not raised any capital for the three months before the date of this Information Memorandum and will not need to raise any capital in the three months after the date of this Information Memorandum other than the Capital Investment by Sonic as described in Section 1.1 of this Information Memorandum. Upon listing, the approximate market capital of SciGen will be $46.5 million (based on 232,493,574 shares of $0.20 each, which are not subject to escrow arrangements). 7.15Grant of SciGen Options to SciTech Genetics Under the Implementation Agreement, SciGen will grant to SciTech Genetics on the Spin-out Date, a number of SciGen Options equal to approximately 35% of the number of SciGen Options of each class granted to Sonic Optionholders under the Optionholder Scheme. The SciGen Options to be granted to SciTech Genetics will be granted on the same terms as the equivalent classes of SciGen Options granted to Sonic Optionholders. Based on the number of Sonic Options as at the date of this Information Memorandum, this would result in SciGen Options being granted to SciTech Genetics over 4,189,817 SciGen Shares (approximately 1% of SciGen Shares on a fully diluted basis) Other material information Other than as contained in this Information Memorandum, there is no information material to the making of a decision in relation to the Schemes or the Capital Reduction (being information that is within the knowledge of any Sonic Director or a related company) which has not previously been disclosed to Sonic Shareholders or Sonic Optionholders Consent to be named and to the inclusion of information The following parties have given and have not, before the date of this Information Memorandum, withdrawn their written consent to the inclusion of the following information in this Information Memorandum in the form and context in which it is included and to all references in this Information Memorandum to that information in the form and context in which they appear: PricewaterhouseCoopers Securities Limited - as to certain matters of Australian taxation and to the inclusion of their report set out in Section 6 of this Information Memorandum; Deloitte Corporate Finance Pty Limited - to be named as the independent expert and to the inclusion of their report set out in Section 9 of this Information Memorandum; Aoris Nova Pty Ltd - to be named as the technical expert and to the inclusion of their report set out in Section 10 of this Information Memorandum; PricewaterhouseCoopers Securities Limited to be named as Investigating Accountants and to the inclusion of their report set out in Section 11 of this Information Memorandum; and PricewaterhouseCoopers to be named as auditors to SciGen Supplementary Information Sonic will issue a supplementary document to this Information Memorandum if it becomes aware of any of the following between the date of lodgment of this Information Memorandum for registration by ASIC and the Listing Date: a material statement in this Information Memorandum is false or misleading; a material omission from this Information Memorandum; a significant change affecting a matter included in this Information Memorandum; or a significant new matter has arisen and it would have been required to be included in this Information Memorandum if it had arisen before the date of lodgment of this Information Memorandum for registration by ASIC. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 75

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79 Section 1 Section 8 Implications of investment in a Singapore Company INFORMATION MEMORANDUM SCIGEN SPIN-OUT 77

80 Section 8 This Section describes the material legal and practical implications that will arise through holding an interest in a Singapore incorporated company. 8.1 Singaporean Takeover Regulations The Singapore Code on Takeovers and Mergers (which came into effect on 1 January 2002) (Code) regulates the acquisition of ordinary shares of Singapore incorporated public companies and contains certain provisions that may delay, deter or prevent a future takeover or change in control of a company. Any person acquiring an interest, either on his own or together with parties acting in concert with him, in 30% or more of the voting shares in that company must extend a takeover offer for the remaining voting shares in accordance with the provisions of the Code. A mandatory takeover offer is also required to be made if a person holding, either on his own or together with parties acting in concert with him, between 30% and 50% of voting shares in that company acquires additional voting shares representing more than 1% of voting shares in any 6 month period. Parties acting in concert include: a company and its related and associated companies; a company and its directors (including their relatives, related trusts and companies controlled by any of those directors, relatives or related trusts); a company and its pension funds or employee share schemes; a person and any investment company, unit trust or other fund whose investment such person manages on a discretionary basis; a financial or other professional adviser and its clients in respect of shares held by the financial adviser and shares held by funds managed by the financial adviser on a discretionary basis where the shareholdings of the financial adviser and any of those funds in the client total 10% or more of the client s equity share capital; directors of a company (including their relatives, related trusts and companies controlled by any of the directors or their relatives or related trusts) which is subject to an offer or where the directors have reason to believe a bona fide offer for their company may be imminent; partners; and individuals and their relatives, related trusts, persons accustomed to acting in accordance with their instructions or companies controlled by any of the aforementioned. An offer for consideration other than cash must be accompanied by a cash alternative at not less than the highest price paid by the offeror or parties acting in concert with the offeror within the preceding 6 months. 8.2 Comparison of Singaporean and Australian laws in relation to shareholder rights This section briefly compares Singaporean and Australian laws with respect to shareholders rights to assist Sonic Shareholders and Sonic Optionholders in understanding the implications of owning shares in a Singaporean company. This section does not provide an exhaustive analysis of the shareholder rights in each jurisdiction. Independent advice should be sought if a more in-depth understanding is required. Other than various technical differences, Singaporean and Australian laws with respect to capital reductions, share buy-backs, pre-emptive rights in relation to newly-issued shares, notification of shareholdings, insider trading, shareholder derivative actions, oppressive conduct by the company, amendments to Articles of Association or Constitution, directors duties, removal of directors, retirement benefits, conflicts of interest, ultra vires transactions, related party benefits and inspection of corporate records and registers are substantially the same. There are some differences in relation to the following rights: (a) Par value and share premium Australian law has abolished the notion of par value, authorised capital and share premium accounts whilst Singaporean law retains these concepts. 78 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

81 Section 8 (b) Capital reductions Under Australian law, a company may reduce its capital if the reduction is fair and reasonable to the company s shareholders as a whole, does not materially prejudice the company s ability to pay its creditors and is approved by a company s shareholders by the requisite majority. A similar regime applies in Singapore, although the High Court of Singapore must approve the capital reduction. When the High Court is asked to confirm the reduction, it will generally consider whether the reduction will prejudice creditors, whether it has been properly explained to the members so that they can exercise an informed judgment on whether to approve the reduction and whether it is fair among the members. (c) Financial assistance Under Australian law, a company may assist a person to acquire shares in the company provided that the giving of the assistance: does not materially prejudice the interests of the company or its shareholders or the ability to pay its creditors; or is approved by shareholders; or falls within a prescribed exemption. Under Singapore law, a company may not give financial assistance to any person, whether directly or indirectly, for the purpose of the acquisition or proposed acquisition of shares in the company or in its holding company or units of such shares, unless it is approved by special resolution or falls within a prescribed exemption. (d) General meetings Under Australian law, a general meeting can be convened by 100 shareholders or holders of 5% or more of the issued share capital. Under Singapore law, two or more members holding not less than 10% of the issued share capital may call a meeting of the company. 8.3 CHESS Units of Foreign Securities (CUFS) The ASX has implemented an electronic transfer system, called the Clearing House Electronic Subregister System (CHESS) for the transfer and settlement of securities quoted on the ASX. Transfers of CHESS securities are effected electronically, so share certificates are not issued or required. CHESS cannot be used directly for the transfer of securities of foreign companies where the laws of the foreign company s place of incorporation do not recognise CHESS. At present, the SciGen Shares cannot be CHESS approved. To enable SciGen to have its securities cleared electronically in CHESS, the ASX has established depositary instruments known as CUFS. CUFS enable shares to be cleared and settled electronically though the CHESS system. In order to give Sonic Shareholders and Sonic Optionholders the opportunity to participate in the electronic transfer and settlement of SciGen Shares in Australia, Sonic Shareholders and Sonic Optionholders (on exercise of their SciGen Options) will receive their SciGen Shares in the form of SciGen CUFS. A summary of the rights and entitlements of SciGen CUFS holders is set out below. Further information about CUFS is available from the Sonic Share Registry, CHESS or any broker. (a) Nature of CUFS CUFS are units of beneficial ownership in foreign securities, legal title to which will be held by an Australian depository entity, CDN, a subsidiary of the ASX. The legal title in the SciGen Shares will therefore be vested in CDN. The name of CDN will be entered on SciGen s register as the holder of the SciGen Shares. CDN will hold the SciGen Shares on behalf and for the benefit of the holders of CUFS. (b) Number of SciGen CUFS issued Sonic Shareholders and Sonic Optionholders will be issued CUFS in respect of such number of SciGen Shares as to reflect their beneficial interests in the SciGen Shares to which they are entitled. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 79

82 Section 8 Under section 3A of the ASTC Business Rules, once SciGen Shares are approved for quotation on the ASX and subsequently transferred pursuant to the Spin-out, SciGen is obliged to make the CUFS available to each Sonic Shareholder entitled to receive SciGen Shares under the Spin-out. (c) Trading in SciGen CUFS SciGen Shares will be quoted on the ASX, but trades in the SciGen Shares will be settled electronically through CHESS by the delivery of SciGen CUFS thereby avoiding the need to effect settlement by the physical delivery of SciGen share certificates. Sonic Shareholders and Sonic Optionholders will be able to freely trade their SciGen Shares on the ASX. However, only the beneficial interest in the SciGen Shares will be transferred electronically in CHESS and changes in beneficial ownership will be entered in the register of SciGen CUFS holders. Legal title to each SciGen Share will remain with CDN, unless a SciGen CUFS holder requires a conversion of his/her SciGen CUFS holding to a holding of SciGen Shares in which case a paper transfer will be effected in accordance with SciGen s constitution and Singaporean law. SciGen will operate a certificated register of shares and an uncertificated issuer sponsored subregister of SciGen CUFS and CHESS will operate an uncertificated CHESS sub-register of SciGen CUFS. The certificated register will be the register of legal title and the two uncertificated SciGen CUFS sub-registers combined will make up the register of beneficial title. All Sonic Shareholders and Sonic Optionholders will receive SciGen CUFS on the issuer sponsored sub-register or CHESS sub-register. For Sonic Shareholders or Sonic Optionholders who hold on the CHESS sub-register the ASX Settlement and Transfer Corporation Pty Limited (ASTC) (acting on behalf of SciGen) will provide a SciGen CUFS holding statement (similar to a bank account statement) that confirms the number of SciGen CUFS held on the CHESS sub-register. Where Sonic Shareholders or Sonic Optionholders do not elect to hold on the CHESS sub-register, SciGen will, on the transfer of SciGen Shares under the Spin-out, issue a SciGen CUFS holding statement which sets out the number of SciGen CUFS held on the issuer sponsored sub-register. All SciGen CUFS holders will receive a holding statement rather than a share certificate. The holding statement sets out the number of SciGen CUFS issued to each holder. The holding statement will also provide details of a Holders Identification Number (HIN) (in the case of a holding on the CHESS sub-register) or Shareholder Reference Number (SRN) (in the case of a holding on the issuer sponsored sub-register). (d) Converting from a SciGen CUFS holding to a certified holding of SciGen Shares SciGen CUFS holders may at any time convert a SciGen CUFS holding to a holding of SciGen Shares by: in the case of issuer-sponsored SciGen CUFS, notifying the SciGen Share Registry; or in the case of SciGen CUFS sponsored on the CHESS sub-register, notifying the CHESS participant (in most cases, a stockbroker). In both cases, once the SciGen Share Registry has been notified, it will transfer the relevant number of SciGen Shares from CDN into the name of the SciGen CUFS holders. A holder of certificated SciGen Shares may also convert to holding SciGen CUFS by contacting the SciGen Share Registry. Holding SciGen Shares will, however, prevent a person from selling his/her SciGen Shares on the ASX, as only SciGen CUFS will be settled on the ASX. A conversion of SciGen CUFS into SciGen Shares does not give rise to any Australian capital gains tax liability for the SciGen CUFS holder, as there is no change in beneficial ownership. Provided that the transfer from CDN into the name of the SciGen CUFS holder is executed and the transfer registered outside Singapore, there should be no Singaporean stamp duty payable on the conversion. 80 INFORMATION MEMORANDUM SCIGEN SPIN-OUT

83 Section 8 (e) Dividends, rights and other investor entitlements Under the ASTC Business Rules, holders of SciGen CUFS will be entitled to all the direct economic benefits of legal ownership of the SciGen Shares such as the right to receive rights issues, bonus issues, dividend reinvestment plans, bonus share plans and full dividend payments as though they were holders of the legal title. If a cash dividend or any other cash contribution is made in a currency other than A$, SciGen s Share Registry (acting as CDN s agent) will convert the dividend or other cash disbursement into A$ (unless a foreign currency is not readily convertible to A$). The dividend or cash disbursement will then be distributed to SciGen CUFS holders in A$ in accordance with each SciGen CUFS holders entitlement. (f) Voting Entitlements SciGen CUFS holders will not be entitled to attend and personally vote on a show of hands at SciGen shareholder meetings. However, SciGen will be required to provide notice of meetings to all SciGen CUFS holders which will include a proxy form permitting the SciGen CUFS holder to direct CDN to cast proxy votes in the manner directed by the SciGen CUFS holder. SciGen will permit SciGen CUFS holders to attend shareholder meetings as a visitor but they will be permitted to vote only by direction to CDN. The notice of meeting will include a form permitting SciGen CUFS holders to direct CDN to cast proxy votes according to the wishes of the SciGen CUFS holder. CDN, as a shareholder of SciGen, will receive notice of all shareholder meetings and be entitled to attend and vote at SciGen Shareholder meetings. (g) Takeovers If a takeover bid is made in respect of any of the SciGen Shares of which CDN is the registered holder, CDN is prohibited from accepting the offer made under the takeover bid except to the extent that acceptance is authorised by the SciGen CUFS holders in accordance with the ASTC Business Rules. (h) Fees A SciGen CUFS holder will not incur any additional fees or charges as a result of holding SciGen CUFS rather than SciGen Shares, whether as a result of implementation of the Spin-out or in the future. 8.4 Singaporean Stamp Duty Singaporean stamp duty is not applicable to electronic transfers of shares and does not apply to the trading of SciGen CUFS. Singaporean stamp duty is payable on an instrument of transfer of SciGen Shares executed in or received in Singapore for the purpose of registering the transfer with SciGen. INFORMATION MEMORANDUM SCIGEN SPIN-OUT 81

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