THE PROGEN DIRECTORS AND EMPLOYEE OPTION
                              INCENTIVE PLAN RULES



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                                TABLE OF CONTENTS

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1.   INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .     3
     1.1  Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . .     3
     1.2  Interpretation . . . . . . . . . . . . . . . . . . . . . . . . .     4
     1.3  Proper law . . . . . . . . . . . . . . . . . . . . . . . . . . .     4
     1.4  Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . .     4
2.   PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .     4
     2.1  Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . .     4
     2.2  Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . .     4
     2.3  Voluntary participation. . . . . . . . . . . . . . . . . . . . .     4
3.   OFFER OF OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .     5
     3.1  Board may offer. . . . . . . . . . . . . . . . . . . . . . . . .     5
4.   EXERCISE OF OPTION. . . . . . . . . . . . . . . . . . . . . . . . . .     6
     4.1  Time for exercise of options . . . . . . . . . . . . . . . . . .     6
     4.2  Exercise of option . . . . . . . . . . . . . . . . . . . . . . .     6
     4.3  Official quotation . . . . . . . . . . . . . . . . . . . . . . .     6
     4.4  Participation in new issues. . . . . . . . . . . . . . . . . . .     6
     4.5  Reorganisation of capital. . . . . . . . . . . . . . . . . . . .     6
     4.6  Issue of Shares. . . . . . . . . . . . . . . . . . . . . . . . .     6
     4.7  No transfer of options . . . . . . . . . . . . . . . . . . . . .     7
     4.8  Takeovers. . . . . . . . . . . . . . . . . . . . . . . . . . . .     7
     4.9  Reconstructions. . . . . . . . . . . . . . . . . . . . . . . . .     7
     4.10  Winding up. . . . . . . . . . . . . . . . . . . . . . . . . . .     7
5.   LAPSE OF OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .     8
     5.1  Resignation. . . . . . . . . . . . . . . . . . . . . . . . . . .     8
     5.2  Retirement, redundancy or permanent disability . . . . . . . . .     8
     5.3  Death. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     8
     5.4  Cessation of employment for any other reason . . . . . . . . . .     8
     5.5  End of exercise period on the expiry date. . . . . . . . . . . .     8
6.   EMPLOYMENT RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . .     8
     6.1  Plan not part of employment contract . . . . . . . . . . . . . .     8
     6.2  Termination of employment. . . . . . . . . . . . . . . . . . . .     9
7.   ADMINISTRATION OF PLAN. . . . . . . . . . . . . . . . . . . . . . . .     9
     7.1  Board to administer. . . . . . . . . . . . . . . . . . . . . . .     9
     7.2  Powers of the Board. . . . . . . . . . . . . . . . . . . . . . .     9
8.   TERMINATION OR SUSPENSION OF PLAN . . . . . . . . . . . . . . . . . .     9
9.   CHANGES IN PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . .     9
     9.1  General. . . . . . . . . . . . . . . . . . . . . . . . . . . . .     9
     9.2  Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . .     9
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PROGEN INDUSTRIES LIMITED
                               ABN 82 010 975 612

            THE PROGEN DIRECTORS AND EMPLOYEE OPTION INCENTIVE PLAN
                                      RULES

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THIS PLAN IS ESTABLISHED IN ACCORDANCE WITH APPROVAL BY A RESOLUTION OF
SHAREHOLDERS AT THE ANNUAL GENERAL MEETING OF THE COMPANY HELD ON 30 NOVEMBER
2004.
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1.   INTERPRETATION


1.1  DEFINITIONS

     In this Plan:

     'ACCEPTANCE CLOSING DATE' means the last day upon which an eligible
     employee may accept options.

     'ACCEPTANCE FORM' means the form of acceptance approved by the Board.

     'ASX' means Australian Stock Exchange.

     'ASSOCIATE' in relation to a participating employee means an entity
     controlled by that employee or a member of that employee's immediate family
     (spouse, defacto spouse, parents and children).

     'BOARD' means the board of directors of the Company.

     'BUSINESS DAY' has the meaning given to that term in the Listing Rules.

     'COMPANY' means Progen Industries Limited ABN 82 010 975 612.

     'CORPORATIONS ACT' means the Corporations Act 2001 (Cth).

     'ELIGIBLE EMPLOYEE' means a person who is eligible to participate in this
     Plan under rule 2.

     'EMPLOYEE SHARE SCHEME' has the meaning given by the Corporations Act.

     'EXERCISE NOTICE', in relation to an option, means the notice to be
     completed to exercise that option which shall be in such form as may be
     approved by the Board from time to time.

     'EXERCISE PERIOD' means the period during which Options may be exercised.

     'EXERCISE PRICE' means the price at which Options may be exercised,
     determined in accordance with rule 3.4.

     'GROUP' means the Company and each of its subsidiaries (as that term is
     defined in the Corporations Act).

     'GROUP COMPANY' means the Company and each of its subsidiaries and
     controlled entities.

     'INVITATION' means an invitation to eligible employees to take Options;


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     'LISTING RULES' means the Listing Rules of ASX in their application to the
     Company.

     'OPTION' means an option granted under this Plan.

     'OPTION CERTIFICATE' means the form of option certificate approved by the
     Board.

     'PLAN' means this plan as amended from time to time.

     'PARTICIPATING EMPLOYEE' means an eligible employee who has accepted an
     invitation from the Board to participate in this Plan.

     'SHARE' means a fully paid ordinary share issued by the Company.


1.2  INTERPRETATION

     In the interpretation of this Plan:

     (a)  Words denoting the singular include the plural and vice versa.

     (b)  Words denoting a gender include each other gender.

     (c)  Headings are for convenience only and do not affect interpretation.

1.3  PROPER LAW

     The laws of Queensland govern this Plan.

1.4  COMPLIANCE

     In administering this Plan the Company must comply with the Corporations
     Act and the Listing Rules. To the extent that any provision of this Plan is
     or becomes inconsistent with the Corporations Act or the Listing Rules, the
     Company will do all things reasonably necessary to ensure that this Plan is
     amended so that it complies with the provisions of the Corporations Act and
     the Listing Rules.

2.   PARTICIPATION

2.1  EMPLOYEES

     Subject to the Board's discretion, permanent full time and permanent part
     time employees of the group are eligible to participate in this Plan.

2.2  DIRECTORS

     Subject to the Board's discretion, executive and non-executive directors of
     the group are eligible to participate in this Plan.

     In accordance with Listing Rule 10.14 Options issued to directors under
     this Plan are subject to specific approval at a general meeting of
     shareholders.

2.3  VOLUNTARY PARTICIPATION

     Participation in this Plan is voluntary and no person is required, whether
     by the terms of his or her employment or otherwise, to participate in this
     Plan.


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3.   OFFER OF OPTIONS

3.1  BOARD MAY OFFER

     The  Board  may,  having  regard to the incentive and remuneration policies
     from time to time applied by the Board to employees either as a group or
     individually, and any other relevant policy of the Board, despatch an
     Invitation to one or more eligible employees.

     The Invitations shall be in writing and shall invite the recipient to
     accept Options.

     Each Invitation shall be accompanied by a form which specifies:

     a)   the maximum number of Options to which an eligible employee is
          entitled under the Invitation;

     b)   the number of Shares to which the Options relate;

     c)   the Exercise Price of those Options;

     d)   the Exercise Period for those Options;

     e)   the manner in which an Invitation may be accepted; and

     f)   the date of the Acceptance Closing Date.

3.2  ACCEPTANCE BY ELIGIBLE PERSON

     An eligible employee may only accept Options by completing the Acceptances
     Form and delivering that Acceptance Form by post or in person to the
     Company at its registered office by no later than 5:00 pm on the Acceptance
     Closing Date.

3.3  GRANT OF OPTIONS

     Upon receipt of an acceptance pursuant to rule 3.2, the Company shall grant
     Options at no cost to those eligible employees who have accepted the same
     and shall issue to each of them an Option Certificate or Holding Statement
     in respect of the number of Options accepted by that eligible employee.

3.4  EXERCISE PRICE OF OPTIONS

     The Exercise Price per Share of any Option shall not be less than the
     average closing share price as recorded on the ASX in the 5 business days
     preceding the grant of Options under rule 3.3.

     Subject to the above the Exercise Price per Share of an Option granted
     under this Plan shall be that amount which is determined by the Board and
     stated in the Invitation.

3.5  LIMIT ON NUMBER

     An offer of options must not be made under this Plan if the number of
     Shares that may be acquired on exercise of such options, when aggregated
     with:

     (a)  the number of Shares that would be issued if each outstanding offer or
          option to acquire unissued Shares, being an offer made or option
          acquired in accordance with an Employee Share Scheme, was to be
          accepted or exercised (as the case may be); and

     (b)  the number or Shares issued during the previous five years in
          accordance with an Employee Share Scheme,

     but disregarding any offer made, or option acquired or Share issued, by way
     of or as a result of:


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     (c)  an offer to a person situated outside Australia at the time of receipt
          of the offer; and

     (d)  an offer that did not require disclosure because of section 708 of the
          Corporations Act,

     exceeds 5% of the total number of Shares on issue at the time of that
     offer.

4.   EXERCISE OF OPTION

4.1  TIME FOR EXERCISE OF OPTIONS

     Options  not  exercised  by 5.00 pm Brisbane time on their expiry date will
     lapse.

4.2  EXERCISE OF OPTION

     Options may be exercised in accordance with their terms by notice in
     writing to the Company in such form as the Board may approve from time to
     time, together with payment to the Company in the amount of the Exercise
     Price for each Option exercised and the Options Certificate for the Options
     to which the Exercise Notice relates.

4.3  OFFICIAL QUOTATION

     The  Company:

     (a)  will  not  apply  for official quotation of options granted under this
          Plan;  and

     (b)  must  make  an  application for official quotation of Shares issued on
          exercise  of  options  as soon as practicable after the issue of those
          Shares.

4.4  PARTICIPATION IN NEW ISSUES

     Participating  employees  are not permitted to participate in new issues of
     securities  by  the  Company,  unless  there  is  a  pro  rata:

     (a)  issue  of Shares to ordinary shareholders of the Company (other than a
          bonus  issue),  in  which  case  the  relevant  exercise  price may be
          adjusted  by  the Company in accordance with the relevant formulae set
          out  in  the  Listing  Rules;  and

     (b)  bonus  issue  of  Shares  to  ordinary shareholders of the Company, in
          which  case  the  number of Shares over which an option is exercisable
          may be increased by the number of bonus Shares which the participating
          employee  would  have received if the option had been exercised before
          the  record  date for the bonus issue (as determined under the Listing
          Rules).

4.5  REORGANISATION OF CAPITAL

     In  any  reorganisation of capital, the option terms will be changed to the
     extent  necessary  to  comply  with  the  Listing  Rules applying to such a
     reorganisation  of  capital  at  the  time  of  the  reorganisation.

4.6  ISSUE OF SHARES

     Shares  issued  after  the  exercise  of  an  Option  will:

     (a)  be  issued  not  more  than  15 business days after the receipt of the
          exercise  notice  and  the  application  moneys;  and

     (b)  rank  equally,  from  the  date  of  issue,  in  all respects with all
          existing  Shares  on  issue  at  that  time.


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4.7  NO TRANSFER OF OPTIONS

     Options may not be transferred, except at the Board's sole discretion to an
     associate  of the participating employee, and no security interest or other
     encumbrance  may  be  granted  over options granted under this Plan. In the
     case  of  a  transfer  to an associate, the terms of this Plan apply to the
     associate  as  if  that  person  was  the  participating  employee.

4.8  TAKEOVERS

     (a)  A participating employee may exercise his or her Options:

          (i)   if any offer is made for Shares under a takeover bid (as defined
                in  the  Corporations  Act);  and

          (ii)  offers  under  the  takeover  bid extend to Shares issued on the
                exercise  of  options;  and

          (iii) a  majority of the Board has recommended acceptance of the offer
                made  under  the  takeover  bid;  and

          (iv)  within  the  offer  period (as defined in the Corporations Act).

     (b)  The Company will use its best endeavours to issue to the participating
          employee,  before the end of the offer period, the number of Shares in
          respect  of  which Options have been validly exercised under paragraph
          (a);

     (c)  If  the  Shares  cease to be quoted by ASX because of any takeover bid
          referred  to  in  paragraph (a), all unexercised Options will lapse on
          the  date  that  the  Shares  cease  to  be  quoted.

4.9  RECONSTRUCTIONS

          (a)  If under Part 5.1 of the Corporations Act the court sanctions a
               compromise or arrangement for the purposes of or in connection
               with a scheme for the reconstruction of the Company or its
               amalgamation with any other company or companies, then, subject
               to paragraph (b), a participating employee may exercise his or
               her Options within one month of the date of the court giving the
               sanction.

          (b)  If the Shares cease to be quoted on ASX because of the compromise
               or arrangement referred to in paragraph (a), all unexercised
               Options will lapse on the date that the Shares cease to be
               quoted.

          (c)  If the circumstances in paragraph (a) will result in another
               company acquiring control of the Company, the Company will use
               its best endeavours to have the Options transferred or cancelled
               in exchange for an issue of shares or options over shares in that
               company. Participating employees may still exercise options under
               paragraph (a).

          (d)  The Company will use its best endeavours to issue the number of
               Shares in respect of which Options have been validly exercised
               under paragraph (a)as soon as practicable after that exercise.

4.10  WINDING UP

     If notice is given to members of the Company of a proposed resolution for
     the voluntary winding up of the Company, each participating employee may
     exercise his or her Options during the period beginning at the time the
     notice is given and ending at the time a resolution for voluntary winding
     up is passed.


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5.   LAPSE OF OPTIONS

5.1  RESIGNATION

     Subject to rule 5.5, if a participating employee's employment or office
     with a group company ceases due to his or her resignation, all Options
     granted to that participating employee up to the date of cessation of
     employment or office may be exercised during the three month period
     following that date of cessation, after which all those Options will lapse
     unless the Board determines otherwise.

5.2  RETIREMENT, REDUNDANCY OR PERMANENT DISABILITY

     Subject to rule 5.5, if a participating employee's employment or office
     with a group company ceases due to his or her retirement after the age of
     55 (or such younger age as may be determined by the Board), redundancy or
     permanent disability, all Options granted to that participating employee up
     to the date of cessation of employment or office may be exercised during
     the six month period following that date of cessation, after which all
     those options will lapse unless the Board determines otherwise.

5.3  DEATH

     Subject to rule 5.5, if a participating employee's employment or office
     with a group company ceases due to his or her death, all Options granted to
     that participating employee up to the date of death may be exercised by
     that participating employee's executor or personal representative during
     the 12 month period following the date of death, after which all those
     options will lapse unless the Board determines otherwise.

5.4  CESSATION OF EMPLOYMENT FOR ANY OTHER REASON

     Subject to rule 5.5, if a participating employee's employment or office
     with a group company ceases for any reason other than referred to in rules
     5.1, 5.2 or 5.3, all Options granted to that participating employee may be
     exercised during the three month period following the date of cessation,
     after which all those options will lapse, unless the Board determines
     otherwise.

5.5  END OF EXERCISE PERIOD ON THE EXPIRY DATE

     If an Option has not lapsed earlier in accordance with this rule 5, it will
     lapse on the expiry date specified by the Board under rule 4, which date
     must not exceed 10 years from the date of grant of the option.

6.   EMPLOYMENT RIGHTS

6.1  PLAN NOT PART OF EMPLOYMENT CONTRACT

     (a)  This Plan does not form part of any contract of employment or service
          between any group company and any person, including any eligible
          employee.

     (b)  Nothing in this Plan confers on any person, including any eligible
          employee, the right to be offered or granted options.

     (c)  It is the condition of this Plan that it may be terminated at any time
          at the discretion of the Board and that no compensation under any
          employment or service contract will arise as a result of any such
          termination.


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6.2  TERMINATION OF EMPLOYMENT

     This Plan:

     (a)  does not confer on any eligible employee or participating employee the
          right to continue as an employee or officer of any group company; and

     (b)  does not affect any rights which any group company may have to
          terminate the employment or office of any eligible employee or
          participating employee; and

     (c)  may not be used to increase damages in any action bought against any
          group company in respect of the termination of any eligible employee
          or participating employee.

7.   ADMINISTRATION OF PLAN

7.1  BOARD TO ADMINISTER

     This Plan will be administered by the Board in accordance with its terms.
     The Board may delegate the administration of this Plan to appropriate
     officers or executives and may make regulations for the operation of this
     Plan that are consistent with its terms.

7.2  POWERS OF THE BOARD

     The determination, decision, approval or opinion of the Board as to the
     interpretation, effect or application of the terms of this Plan is final.

8.   TERMINATION OR SUSPENSION OF PLAN

     The operation of this Plan may be terminated or suspended at any time by
     the Board. Termination or suspension of this Plan does not affect the
     accrued rights of participating employees under this Plan.

9.   CHANGES IN PLAN

9.1  GENERAL

     Subject to rule 9.2, the Corporations Act and the Listing Rules, the Board
     may, in its absolute discretion, amend, add to, delete or otherwise vary
     this Plan at any time and in any manner (AMENDMENT).

9.2  LIMITATION

     No amendment to this Plan may be made which reduces or adversely affects
     the rights of any participating employee in respect of Options granted
     prior to the effective date of the amendment, other than an amendment
     primarily introduced:

     (a)  for the purpose of complying with or conforming to the Listing Rules
          or to current or future Commonwealth, State or Territory legislation;

     (b)  to correct any manifest error or mistake; or

     (c)  for the purpose of enabling participating employees to take advantage
          of favourable taxation treatment concerning their participation in
          this Plan.

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