EMPLOYMENT
      AGREEMENT




THIS
      EMPLOYMENT AGREEMENT (the “Agreement”), effective as of date of signing between
      Prana Biotechnology Limited, an Australian corporation (the “Company”) with its
      principal offices at Level 2, 369 Royal Parade, Parkville, Victoria, Australia,
      and Ross Murdoch (the “Executive”), residing at 53 Kingston Street, Hampton,
      3188, Victoria, Australia.




WHEREAS,
      the Company desires to employ the Executive, and the Executive desires to be
      employed by the Company, upon the terms and conditions set forth
      herein;




NOW,
      THEREFORE, in consideration of the mutual covenants contained herein and other
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the parties hereto agree as follows:





1.  Employment .
      The
      Company hereby employs the Executive, and the Executive agrees to accept such
      employment, upon the terms and conditions herein set forth.





2.  Employment
      Period .
      The
      term of employment hereunder shall commence on the date of signing, and continue
      until termination as provided herein (the “Employment Period”). It is
      acknowledged that the Executive is a current employee of the company, and has
      been a continuous employee since the commencement of his employment on 29 May
      2002. It is agreed that entitlements accrued will be preserved in this
      agreement.





3.  Position
      and Duties. The
      Executive hereby agrees to serve as President and Chief Operating Officer
      (President and COO) of the Company and shall have the duties, responsibilities
      and authority as more fully set forth on Attachment A attached hereto. In such
      capacity the Executive shall report to the Chief Executive Officer (CEO) of
      the
      Company The Executive shall devote his best efforts and attention to the
      performance of services to the Company in accordance with the terms hereof
      and
      as may reasonably be requested by the Company.





4.  Compensation
      and Other Terms of Employment .





(a)  Base
      Compensation .
      In
      consideration of the performance of his duties for the Company, the Executive's
      base compensation will be $295,000 per year (the “Base Salary”), or as otherwise
      agreed, payable in accordance with the Company’s regular payroll practices
      ( *e.g* .,
      timing
      of payments and standard employee deductions, such as income and employment
      tax
      withholdings). In addition to the base salary the Executive shall receive
      superannuation equivalent to 9% of the base salary or to the percentage as
      stipulated by Australian legislation, paid into a Superannuation Scheme
      nominated by the Executive.





(b)  The
      Company has agreed to immediately grant to the Executive 1,250,000 zepo options
      for a number of ordinary shares. Such options will vest as follows, 312500
      (25%)
      will vest on signing of this contract, 312500 (25%) will vest on 29 May 2007,
      312500 (25%) on 29 May 2008 and the remaining 312500 (25%) on 29 May 2009.
      The
      options will expire at the end of eight years from the initial date of the
      grant, being the 7 August 2014. No options may be exercised until and unless
      the
      price of the Company’s ordinary shares has achieved and maintained a minimum
      value of $0.40 for five consecutive trading days. The Executive will be entitled
      to sell any of the options so exercised unless otherwise directed for a period
      due to a specific company policy.











(c)  Business
      Expenses .
      Upon
      presentation of vouchers and similar receipts, the Executive shall be entitled
      to receive reimbursement in accordance with the policies and procedures of
      the
      Company maintained from time to time for all reasonable business expenses
      actually incurred in the performance of his duties for the Company.





(d)  Leave .
      The
      Executive shall be entitled to twenty (20) days of vacation during each calendar
      year of the Employment Period. Any vacation days that the Executive does not
      use
      in a calendar year will automatically be carried over for use in the following
      year to a maximum carry of two years. Any vacation days that the Executive
      has
      not used at the termination of the Employment Period will be paid to the
      Executive at his Base Salary rate in effect at the time of termination.




The
      Executive shall be entitled to 10 days Sick Leave for each subsequent calendar
      year of the Employment Period. Unused credits are non-cumulative. A medical
      certificate may be required. Unused sick leave is not paid out on termination
      of
      your employment.




The
      Executive shall be entitled Long
      Service Leave to
      1 week
      per year (pro rata) for each year of service since engagement of the executive
      by the company, including recognised prior service. Long service leave
      entitlement is subject to a minimum service period of 7 years.





The
      Executive shall be entitled Other
      Leave (such as
      parental leave) in accordance with the statutory minimum leave provisions
      applicable to your employment.





Subject
      to agreement with the CEO or Board of Directors the Executive may be granted
      leave with pay for the following purposes: Bereavement leave, compassionate
      leave, leave to appear in court or serve as a juror, leave to train with the
      Australian Defence Force Reserves, leave to attend courses of study,
      etc.





Subject
      to agreement with the CEO or Board of Directors the Executive may be granted
      Leave without pay.





(e)  Benefits .
      The
      Executive shall be entitled to participate in such employment benefits,
      including but not limited to a retirement plan, health, dental, life insurance,
      and short and long term disability plans as are established by the Company
      in
      Australia and as are in effect from time to time applicable to executives of
      the
      Company.





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(f)  Home
      Office .
      The
      company will provide the Executive with, and pay for the maintenance of, a
      mobile phone (or equivalent) for business use and pay directly the cost
      associated with its running and use.





The
      company will provide the Executive with, and pay for the maintenance of, the
      appropriate computer and internet requirements to connect to Head Office and
      operate remotely from a home office.





(g)  Review. The CEO
      with a Company Director shall review the Executive not less than once each
      year
      and provide (i) feedback on his performance against expectations since the
      last
      review and (ii) expectations and objectives moving forward.





The
      CEO
      shall not less than once each year consider and if thought fit recommend to
      the
      Remuneration Committee changes to the compensation to be received by the
      Executive pursuant to this Agreement or as applying after an earlier Review
      or
      amendment of terms. The purpose of the Review and recommended or proposed
      changes shall be to ensure that the compensation of the Executive, when
      considered together with all other benefits to which the Executive is or may
      become entitled under this Agreement, is at least comparable with and maintains
      parity with salaries representatives payable to executives in like circumstances
      when benefits to which such executives may reasonably be expected to be or
      to
      become entitled are taken into account. Such review shall be carried out in
      accordance with the corporate governance policies of the Company applicable
      at
      the time (if any). The Executive shall not be involved in any discussions or
      decision concerning recommendations or proposals.





5.  Termination
      and Consequences .





(a)  The
      Executive’s Right to Terminate .
      Notwithstanding any other provision of this Agreement to the contrary, the
      Executive may terminate this Agreement: (i) at any time during the
      Employment Period for Good Reason (as defined in Section 5(f) below), on at
      least thirty (30) days' prior written notice; or (ii) without Good Reason
      on at least one hundred and twenty (120) days' prior written notice to the
      Company.





b)  The
      Company's Right to Terminate *.* Notwithstanding any other provision of this Agreement to the contrary, the
      Company may terminate this Agreement: (i) at any time during the Employment
      Period, with Cause (as defined in Section 5(g) below); or (ii) without Cause,
      giving not less than one hundred and twenty (120) days notice, and under the
      conditions outlined in section 5(c) below. The company may elect to payout
      the
      executive for all or part of the notice period. Termination of the Executive
      will require Board of Directors approval.





(c)  Consequences
      of Termination Without Cause or for Good Reason *.* If the
      Company terminates this Agreement without Cause, or if the Executive terminates
      this Agreement with Good Reason, the Company shall (i) pay the Executive
      within ninety (90) days of the termination date such sum or sums as he would
      have been entitled to receive had he continued to provide services under this
      Agreement until 29 May 2008, or, if termination occurs after 29 May 2007, then
      1
      year from the time of termination (less any payout made for the ninety (90)
      day
      notice period), notwithstanding that those services will not be required to
      be
      provided. The company can elect to pay such sum as cash, equity in Prana or
      as a
      combination of both cash and equity; (ii) immediately pay the Executive all
      unreimbursed business expenses and accrued, unused vacation days; (iii) allow
      the executive adequate time and opportunity after termination to remove all
      and
      any personal information from his computer (lap-top or otherwise) and
      (iv) accelerate the vesting of any unvested options to purchase ordinary
      shares and permit Executive to exercise such options during the remainder of
      the
      exercise period for such options.





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(d)  Consequences
      of Termination With Cause or Without Good Reason .
      If the
      Company terminates this Agreement with Cause or the Executive terminates this
      Agreement Without Good Reason, then (i) the Executive's Base Salary shall
      be discontinued upon the termination of the Employment Period; (ii)  the
      Company shall pay the Executive all unreimbursed business expenses and accrued,
      unused vacation days; (iii) the company shall allow Executive adequate time
      and
      opportunity after termination to remove all and any personal information from
      his computer (lap-top or otherwise) and (iv) the Executive shall be permitted
      to
      keep and /or exercise options that have vested at the time of termination to
      purchase shares.





(e)  Consequences
      of Termination for Death or Disability .
      If the
      Executive dies during the term of this Agreement, then the Agreement shall
      terminate, except that the Company shall pay to Executive's estate all accrued
      Compensation, unreimbursed business expenses and accrued, unused vacation days
      that the Executive would otherwise have been entitled to receive. Executive's
      estate shall also be permitted to exercise Executive's vested options for
      shares. If the Executive is unable to perform his functions because of
      Disability and the Agreement is terminated for that reason, the Executive shall
      be entitled to receive the same amount that the Company would be obligated
      to
      pay if the Executive had died during the term of this Agreement less the amounts
      of payment under any disability policy maintained by the Company. If the
      Executive dies or is disabled during the term of this Agreement, reasonably
      deemed by the Company to be as a direct result of undertaking activities
      required by his position with the company (including business travel), then
      the
      Agreement shall terminate, except that the Company shall pay the Executive
      or
      Executive's estate as though the termination occurred under the conditions
      of
      section 5(c) of this contract.





(f)  Definition
      of Good Reason .
“Good
      Reason” means (i) a material reduction of the Executive's duties, authority
      level (unless reasonably required for what in the Board’s opinion is the optimal
      forward strategy for the Company) and/or responsibilities from those in effect
      immediately prior to the reduction or change, unless that reduction is a
      consequence of a failure to perform adequately in the role after having been
      provided 3 consecutive warnings and having been provided appropriate further
      time to comply or remedy (ii) a requirement that the Executive relocate his
      primary office more than 50 kilometres from Melbourne CBD, Victoria, or (iii)
      material breach by the Company of any provision of this Agreement after receipt
      of ten (10) days written notice thereof from the Executive and failure by the
      Company to cure the breach within thirty (30) days thereafter. With regard
      to
      any of (i), (ii) and (iii) of this clause 5(f) the Executive must provide
      written notification to the Company within 30 days of the Executive reasonably
      becoming aware of an event or events occurring (a) that the Executive claims
      that the event meets the definition “Good Reason” under this clause, and (b) of
      the Executives directive to terminate this agreement for Good
      Reason.





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(g)  Definition
      of Cause .
“Cause”
      means the Executive's (i) conviction of a felony, (ii) commission of
      acts of fraud, misappropriation, embezzlement, or theft, or (iii) willful
      or repeated failure to follow lawful specific directives of the CEO to act
      or
      refrain from acting, which directives are consistent with the Executive's
      position as President and COO of the Company. Before the Company can terminate
      the Executive for Cause under clause (g)(iii) of this Section 5(g), the Company
      must give the Executive written notice setting forth the Company’s
      dissatisfaction with the Executive and the reasons therefor, and give the
      Executive thirty (30) days to cure the circumstances supporting the for Cause
      determination.





(h)  Definition
      of Disability *.* “Disability”
means
      the inability of the Executive to perform the Executive’s
      duties of employment to the Company pursuant to the terms of this Agreement,
      because of physical or mental disability where such disability shall have
      existed for a period of more than sixty (60) consecutive days or an aggregate
      of
      ninety (90) days in any 365 day period. The existence of a Disability means
      that
      the Executive’s mental and/or physical condition substantially interferes with
      the Executive’s performance of his substantive duties for the Company as
      specified in this Agreement. The fact of whether or not a Disability exists
      hereunder shall be determined by a professionally qualified medical expert
      selected by the Company and the Executive.




(i)  Non-disparagement .
      In the
      event that Executive terminates this Agreement with or without Good Reason,
      or
      that the Company terminates this Agreement with or without Cause, the Company
      and the Executive agree that they will not disparage each other in any
      way.





6.  Records
      and Confidential Data .





(a)  Acknowledgement .
      The
      Executive acknowledges that in connection with the performance of his duties
      during the term of his employment the Company will make available to the
      Executive, or the Executive will have access to, certain Confidential
      Information (as defined below) of the Company. The Executive acknowledges and
      agrees that any and all Confidential Information learned or obtained by the
      Executive during the course of his employment by the Company whether developed
      by the Executive alone or in conjunction with others or otherwise, shall be
      and
      is the property of the Company and its affiliates.





(b)  Confidentiality
      Obligations .
      During
      the term of his employment and thereafter Executive shall keep all Confidential
      Information confidential and will not use such Confidential Information other
      than in connection with the Executive’s discharge of his duties hereunder, and
      will be safeguarded by the Executive from unauthorized disclosure. This covenant
      is not intended to, and does not limit in any way Executive’s duties and
      obligations to the Company under statutory and common law not to disclose or
      make personal use of the Confidential Information or trade secrets.





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(c)  Return
      of Confidential Information .
      Following the Executive’s termination of employment, as soon as possible after
      the Company’s written request, the Executive will return to the Company all
      written Confidential Information which has been provided to the Executive and
      the Executive will destroy all copies of any analyses, compilations, studies
      or
      other documents prepared by the Executive or for the Executive’s use containing
      or reflecting any Confidential Information.




(d)  Definition .
      For the
      purposes of this Agreement, “Confidential Information” shall mean all
      confidential and proprietary information of the Company, and its affiliates,
      including, without limitation, the Company’s scientific information, marketing
      strategies, pricing policies or characteristics, customers and customer
      information, product or product specifications, designs, software systems,
      leasing costs, cost of equipment, customer lists, business or business
      prospects, plans, proposals, codes, marketing studies, research, reports,
      investigations, or other information of similar character. For purposes of
      this
      Agreement, the Confidential Information shall not include and the Executive’s
      obligations under this Section 6 shall not extend to (i) information which
      is
      generally available to the public, (ii) information obtained by the Executive
      from third persons **,** other
      than Executives of the Company, the Company and the Company’s affiliates, not
      under agreement to maintain the confidentiality of the same and (iii)
      information which is required to be disclosed by law or legal process and (iv)
      information known to Executive prior to commencement of his employment with
      the
      Company, as evidenced by written documentation.





7. Arbitration .





(a) Good
      Faith Discussions. The
      parties shall meet and discuss in good faith any dispute between them arising
      out of this Agreement.





(b) Mediation. If the
      discussions referred to in the preceding Section 7(a) fail to resolve the
      relevant dispute, either party may (by written notice to the other party)
      require that the dispute be submitted for mediation by a single mediator
      nominated by the President for the time being of the Victorian Law Institute
      of
      Victoria Society. In the event of any such submission to mediation:





i)
            The
                mediator shall be deemed to be not acting as an expert or as an
                arbitrator;





ii)
            The
                mediator shall determine the procedure and timetable for the mediation;
                and





iii)
            The
                cost of the mediation shall be shared equally between the
                parties.





(c) Legal
      Proceedings. Neither
      party may issue any legal proceedings in respect of any such dispute unless
      that
      party has first taken all reasonable steps to comply with Sections 7(a) and
      (b).





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8.  Miscellaneous
      Provisions .





(a)  Notices .
      All
      notices, offers or other communications required or permitted to be given
      pursuant to this Agreement shall be in writing and shall be considered as
      properly given or made (i) if delivered personally; (ii) after the
      expiration of thirty (30) days from the date upon which such notice was mailed
      from within the United States or Australia by certified mail, return receipt
      requested, postage prepaid; or (iii) upon receipt by prepaid telegram,
      facsimile transmission or electronic mail transmission (with written
      confirmation of receipt for each kind of transmission). All notices given or
      made pursuant hereto shall be so given or made to the Executive at the address
      contained in the Company's personnel records and to the Company at its
      headquarters, addressed to the attention of the CEO.




(b)  The
      Executive’s Representations and Warranties .
      The
      Executive hereby represents and warrants that he is not a party to any
      agreement, contract or understanding that would in any way restrict or prohibit
      him from undertaking or performing any of his obligations under this Agreement.







(c)  Amendments .
      Except
      as set forth in Section 4 above, this Agreement shall not be changed or amended
      unless in writing and signed by both the Executive and the Company.





(d)  Governing
      Law .
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the **State
      of Victoria** applicable
      to contracts executed in and to be performed entirely within that jurisdiction.
      Each party irrevocably submits to the non-exclusive jurisdiction of courts
      of
      that state and the courts of appeal therefrom and waives any right to object
      to
      such jurisdiction on the basis of domicile or of being an inconvenient
      forum.





(e)  Counterparts .
      This
      Agreement may be executed in counterparts, each of which shall be an original,
      but all of which shall constitute one and the same instrument.





IN
      WITNESS WHEREOF, this Agreement has been executed as of the date and year first
      above written.






PRANA
                BIOTECHNOLOGY LIMITED
              
              By: 
                __________________________________
              Name:Mr.
                Geoffrey Kempler
              Title:Chairman
                and CEO
              
              THE
                EXECUTIVE:
              
              _____________________________________
              Dr
                Ross Murdoch
              Signed
                on 7thAugust 2006.





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ATTACHMENT
      A




DESCRIPTION
      OF DUTIES




The
      Executive shall have the responsibilities and functions generally associated
      with the position of Chief Operating Officer (COO), including but not limited
      to:





**Position
      Description**





**Position
              Title:**
            President
                & Chief Operating Officer





**Location:**
            Melbourne
                Head Office





**Responsibilities:**





1. Manage
      development assets





a)
            Determine
                and approve development strategy for all development assets once
                selected
                for development (as of January 2006 PBT1, PBT2, PBT3).


b)
            Manage
                the process of development candidate
                selection.





2. Manage
      Budget (Board
      Approved)





a)
            Determine
                allocation between company departments and
                subsidiaries.


b)
            Provide
                CEO and Board with variance, explanation of variance against budget,
                forecasts and yearly budget.


c)
            Manage
                interaction between Prana and finance
                contractors.


d)
            Responsible
                for approval of all company invoices above up to $250,000


e)
            Manage
                cash flow reporting, estimates of cash reserves, foreign currency,
                banking
                strategies.





3. Manage
      Grants





a)
            Manage
                and approve reporting, expenditure and application for all Government
                and
                other grants.


b)
            Manage
                interaction between Prana and contractors assisting Prana with grant
                administration.


c)
            Act
                as company operational head to Granting
                authorities.





4. Manage
      Human Resources and Site Operations





a)
            All
                policies and procedures and SOP’s.


b)
            Staff
                review and remuneration


o
            Directly
                - Chemistry, development, clinical, pre-clinical, administration,
                finance.


o
            As
                part of Senior Management Committee - all below Senior Vice
                President


c)
            Recruitment,
                retention and termination of staff - as b) (hiring with approved
                budget).


d)
            Site
                management including computer system, rent
                negotiation.





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5. Member
      of





a)
            Senior
                Management Committee (SVP, CEO,
                COO).


b)
            Clinical
                Development Committee (Chair).


c)
            DMC
                (Chair_ - Senior committee managing
                Development).


d)
            Assorted
                R & D committees (Focus (Res), Project Teams
                etc.).





6. Direct
      Reports











7. Other
      roles currently held





a)
            Head
                of Chemistry.


b)
            Head
                of Development.


c)
            Regulatory/Commercial
                representative on Project teams.


d)
            Head
                HR and Finance.





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