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                                                                          PROGEN
                                                              INDUSTRIES LIMITED
                                                                  [LOGO OMITTED]

                                                              ABN 82 010 975 612

                                                      P.O. Box 28 Richlands D.C.
                                                       Queensland 4077 Australia
                                                      Telephone: +61 7 3273 9100
                                                      Facsimile: +61 7 3375 9318

Thursday 5th August 2004

Dear Linton,

The company is pleased to offer you employment on the terms contained in this
agreement.

We are confident that you will have a challenging and rewarding association with
us.  Should you wish to discuss any of the terms of your employment, please
contact me.

1.   ENGAGEMENT

     Your employment with the company  (Progen) will be in the position set out
     in section 14 (Schedule 2) from the commencement date set out in Section 13
     (Schedule 1), subject to termination in accordance with sections 1.1 and 8.

1.1  Your employment is subject to a 3-month probationary period from the
     commencement date. During the probationary period the company may terminate
     your employment at any time by giving you 8 weeks notice (or payment of
     your salary in lieu).

1.2  The company will employ you on a full-time basis. The nature of your work
     means that your employment will be based at the workplaces set out in
     schedule 1 ('your workplace').

1.3  Your normal working hours are set out in Schedule 1, but in order to meet
     the demands of your position you will be required to work as can be
     reasonably expected of someone assuming the position. This may include
     travelling and working outside normal hours to undertake and accomplish
     your duties pursuant to this agreement.

1.4  Overtime will be paid in accordance with any applicable award. In the
     absence of an applicable award, any overtime worked will not be paid for.

2.   YOUR DUTIES

2.1  The principal duties of your position are set out in Schedule 2 to this
     agreement and may include other duties outside this scope as advised by the
     company from time to time ('your duties') but within the scope of
     performance expected of this position in the Biotech industry.

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2.2  While employed by the company(1), you will not, without the company's
     written permission:

     (a)  perform your duties other than for the company or on its behalf;  or
     (b)  engage in any other employment, business or profession.

2.3  You warrant that you have the expertise, qualifications, licences and
     registration necessary to perform your duties and will perform them in a
     manner appropriate to a person having such expertise, qualifications,
     licences or registration. You must maintain that expertise, qualifications,
     licences and registration and the company will reimburse your for
     reasonable costs associated with this maintenance on a case-by-case and
     needs basis.

2.4  You will at all times act in the best interests of, well and faithfully
     serve and promote the company's business and interests.

2.5  Subject to your remuneration as described in Schedule 1, or any other
     benefit you may be paid by the company, by way of bonus or reimbursement,
     you will not accept any payment or any other benefit from any person as an
     inducement or reward for any act or forbearance in connection with any
     matter or business transacted by the company, on the company's behalf or on
     behalf of an Associated Business or Client.

3.   REMUNERATION AND LEAVE ENTITLEMENTS

3.1  You will be provided with the remuneration and leave entitlements set out
     in Schedule 1.

3.2  You authorise the company to deduct from your remuneration and leave
     entitlements any amount attributable to unauthorised absences or approved
     unpaid leave.

3.3  The superannuation fund into which contributions on your behalf will be
     paid is set out in Schedule 1. Your superannuation will be calculated on
     the basis of the rate prescribed in the superannuation guarantee
     legislation from time to time (currently 9%), calculated on your salary.

3.4  Prior to departing on annual leave you are to ensure that:

     (a)  all work for which you are responsible has been delegated to other
          suitably qualified employees for the period of your absence; and

     (b)  where possible your contact details during the period of your absence
          have been provided to your supervisor/manager so that you can be
          contacted if necessary.

3.5  On provision of receipts or other documentary evidence to the company's
     satisfaction, you will be reimbursed for reasonable work-related expenses
     properly incurred by you in the performance of your duties. The company
     will meet your accommodation, attendance and travelling costs whenever is
     necessary for you to travel or stay away from your residence in the
     performance of your duties. Please refer the Progen Employee Manual Version
     2.0 for further details.

3.6  Your remuneration and entitlements set out in this letter of appointment
     are the only entitlements you are entitled to and you will receive no other
     benefits regardless of the number of hours, the days on which or the
     conditions in which you work.

-------------------------

1    This does not apply to the transition period following the commencement
date and up to August 23rd 2004.

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4.   PERFORMANCE REVIEWS

4.1  Your work performance and conduct will be reviewed by the company and
     discussed with you from time to time. You acknowledge that the performance
     reviews are not necessarily linked to your salary increases.

4.2  You should raise any query or concern regarding your employment as soon as
     a query or concern arises, and not await the performance review.

5.   DUTY OF CONFIDENTIALITY

5.1  You will not at any time, whether or not employed by the company, use or
     disclose any Confidential Information, without the company's prior
     permission, unless:

     (a)  it is strictly necessary for you to perform your duties; or

     (b)  for the purpose of disclosure only, you are legally obliged to
          disclose by a court, commission or tribunal.

5.2  You will not, and will not permit anybody else to, without our prior
     permission seek to obtain Confidential Information to which you have not
     been granted access, nor will you;

     (a)  remove any Confidential Information from the company's or any
          Associated Business' or Clients' premises;

     (b)  make any copies of Confidential Information; or

     (c)  bring any computer software, tapes or disks onto the company's or an
          Associated Business' or Clients' premises other than for the purposes
          of carrying out your duties;

     unless it is for the purposes of satisfying sections 5.1(a) and 5.1(b).

5.3  When Confidential Information is disclosed in accordance with paragraph
     5.1, you will ensure that the person to whom the information is disclosed
     is made aware of its confidential nature and do everything in your power to
     ensure that person does not use or disclose that information.

5.4  You acknowledge that if confidential information is released to the market
     it may affect the price of Progen's securities, which are quoted on the
     Australia Stock Exchange and NASDAQ. You undertake not to engage in trading
     in Progen's securities, which may give rise to a breach by you or Progen of
     any law in Australia, USA or elsewhere relating to insider trading or
     unlawful conduct in relation to dealings in securities.

5.5  'CONFIDENTIAL INFORMATION' means all information belonging to us or an
     Associated Business, and includes information which:

     (a)  the company or an Associated Business or a Client indicates is
          confidential;

     (b)  by its very nature, might reasonably be understood to be confidential
          or to have been disclosed in confidence;

     (c)  would be of commercial value to a competitor of the company or an
          Associated Business or Client;

     (d)  relates to the company's or an Associated Business' or Clients'
          financial or business affairs (including financial information,
          accounts work, financing information, management reports and
          performance or profitability reports and margins);

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     (e)  relates to any of the company's or an Associated Business' clients
          (including but not limited to client details, client lists, details of
          client requirements, details of prospective clients, the identity or
          contact details of any client, their requirements and their financial
          affairs and details of our clients' dealings or financial arrangements
          with other parties);

     (f)  relates to any arrangements or transactions between the company or an
          Associated Business and a Client (including the prices charged to
          clients and details of the arrangements or transactions);

     (g)  relates to or is contained in any manuals or handbooks produced by the
          company or an Associated Business or Client;

     (h)  relates to the company's or an Associated Business' or Clients' fees,
          quotations, prices or charges in respect of services or products;

     (i)  relates to the marketing and selling techniques used by the company or
          an Associated Business or Client (including marketing and targeting
          plans, prospect lists or databases, sales plans, research and data
          surveys);

     (j)  relates to trade secrets, technical specifications, know-how, plans,
          design concepts, ideas, design specifications, manufacturing or
          development processes, research, formulae, processes, applications,
          unique features or techniques in respect of any of the company's or an
          Associated Business' or Clients' products or services, whether
          existing or in development;

     (k)  relates to or is contained in any of the company's or an Associated
          Business' or Clients' computer databases or software;

     (l)  relates to any arrangements or transactions between the company or an
          Associate Business or Client and or its suppliers, contractors,
          employees or consultants (including their identity and the existence
          or size of any fees, prices, commissions or charges paid or payable);

     (m)  all copies of the information, notes and other records referred to in
          paragraph (a) to (l) above,

     except for information that:

     (n)  was rightfully in your possession and not subject to an obligation of
          confidentiality on you before the negotiations leading to the
          commencement of your employment with the company or an Associate
          Business; or

     (o)  is or, after the date of this agreement, becomes available in the
          public domain (other than as a result of a breach of this agreement).

6.   DUTY TO NOT ENDANGER HEALTH AND SAFETY

6.1  The company gives a high priority to health and safety and will not
     tolerate smoking in the workplace, or discrimination or harassment of our
     employees. If you are or become a smoker, you will not smoke in or in the
     vicinity of any of our offices or workplaces.

6.2  For the safe and effective operation of the workplace and the welfare of
     other employees, you undertake to abide by, implement and enforce state and
     federal laws and policies of the workplace relating to health and safety,
     discrimination and harassment.

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7.   PROGEN POLICIES AND PROCEDURES

7.1  You agree to be bound by all of the company's policies and procedures as
     varied from time to time.

8.   TERMINATION

8.1  You may resign, and thereby terminate this agreement, by giving the company
     the appropriate notice of 12 weeks (or payment of your salary in lieu
     thereof). If you do not give the required notice or payment in lieu, you
     authorise the company to withhold or deduct from any money owed to you, an
     amount in total or partial satisfaction of that obligation.

8.2  The company may dismiss you, and thereby terminate this agreement:

     (a)  without notice if the company has reasonable grounds to suspect that
          you are guilty of Misconduct; or

     (b)  by giving you 12 weeks notice, or payment of salary in lieu.

8.3  'MISCONDUCT' has its ordinary meaning at law, and includes:

     (a)  any conduct which the company indicate is misconduct or will result in
          summary dismissal;

     (b)  dishonesty or misrepresentation of your expertise, qualifications,
          registration or employment history;

     (c)  not complying with the legislative requirements for a person in your
          position;

     (d)  wilful disobedience of the company's lawful directions;

     (e)  conviction of a criminal offence that affects your suitability for
          your position;

     (f)  drunkenness or intoxication;

     (g)  neglect of duty or incompetence;

     (h)  conduct of a sort which may injure our reputation;

     (i)  engaging in misleading or deceptive conduct or making any
          misrepresentations in relation to the performance of your duties or
          the company's business; or

     (j)  breaching your obligations in paragraphs 0 or 0.

9.   POST-TERMINATION ASSISTANCE

9.1  Following termination of your employment, you will, upon request, provide
     the company or an Associated Business with reasonable assistance to the
     best of your ability in relation to any matter relating directly or
     indirectly to your employment, or which arises out of events which occurred
     during the period of your employment, including providing statements or
     affidavits, attending meetings and attending hearings or inquiries as may
     be legally required.

9.2  Upon provision of receipts or other documentary evidence to the company's
     satisfaction, the company will reimburse you for any reasonable expenses,
     such as travel and accommodation,

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     incurred by you in providing assistance in accordance with section 9.1. The
     company will also pay you a consultancy fee for work undertaken by you in
     providing that assistance, at an hourly rate calculated on the basis of
     your salary as at termination for a 40 hour work week, upon provision of
     invoices.

10.  INTELLECTUAL PROPERTY

10.1 You acknowledge and agree that all existing and future Intellectual
     Property Rights:

     (a)  in any Confidential Information;

     (b)  in respect of any intellectual property developed, in development,
          created or conceived wholly or partly by you, alone or together with
          any other person or body, whether during or outside working hours:

          (i)  on the company's or an Associated Business' or Clients' premises
               or using the company's or an Associated Business' or Clients'
               facilities or resources, or facilities or resources which were in
               the care and control of the company or an Associated Business or
               Client or any of our employees, officers, agents, sub-contractors
               or representatives;

          (ii) directly or indirectly as a result of your or anybody else's
               access to Confidential Information;

          (iii) in the course of, as a consequence of or in relation to the
                performance of your duties; or

          (iv) relating to the company's or an Associated Business' or Clients'
               general methods of operation; or

     (c)  in respect of or associated with any of the company's or an Associated
          Business' or Clients' products or services, and any alterations or
          additions or methods of making, using, marketing, selling or providing
          those products or services,

     vest in and belong to the company or our nominee to the extent that they
     may for any reason vest in you, are assigned by you to and vest in the
     company or our nominee.

10.2 You agree to execute all documents, including any assignments, and do all
     acts and things, required by the company for the purpose of effecting and
     perfecting the title of the company or the company's nominee to the
     Intellectual Property Rights described in paragraph 10.1, in Australia and
     such other countries as we require.

10.3 You will immediately disclose to the company in writing, any invention or
     improvement you make or of which you conceive during or in the course of
     performing your duties.

10.4 You consent to the company infringing any moral rights that you may have or
     become entitled to in any work created in the course of your employment.
     For the purpose of this consent, 'work' has the meaning given to that term
     in the Copyright Amendment (Moral Rights) Act 2000 (Cth) and 'moral rights'
     refers to any right arising under the provisions of the legislation.

10.5 'INTELLECTUAL PROPERTY RIGHTS' means any and all beneficial and legal
     ownership and intellectual and industrial protection rights throughout the
     world, both present and future, including rights in respect of or in
     connection with any confidential information, copyright (including future
     copyright and rights in the nature of or analogous to copyright), moral
     rights, inventions (including patents), trade marks, service marks,
     designs, circuit layout and performance protection

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     (whether or not now existing and whether or not registered or registrable)
     and includes any right to apply for the registration of such right and all
     renewals and extensions.

11.  SECURITY

11.1 You will take all reasonable steps to ensure the security of and protect
     all Confidential Information and intellectual property of the company or
     Associated Business or Client in your possession, power or control.

11.2 You will comply with, and to the best of your endeavours ensure that all
     other employees or contractors engaged by the company or an Associated
     Business comply with, all of the company's or an Associated Business'
     security guidelines, procedures, rules and regulations (whether formal or
     informal).

11.3 If you are provided with any kind of security access device, such as a key
     or computer coded access card, you will:

     (a)  immediately return the device to the company on termination of your
          employment, or earlier request;

     (b)  not copy nor permit the copying of the device or any aspect of it
          which is integral to its function of security;

     (c)  not give the device to anybody else or permit anybody else to use the
          device; and

     (d)  use the device strictly in accordance with any conditions advised by
          the company in respect of it.

11.4 Immediately upon termination of your employment, or upon request at any
     time by the company, you will provide the company with any:

     (a)  Confidential Information;

     (b)  item in respect of which Intellectual Property Rights are held by the
          company or an Associated Business or Client;

     (c)  property, records or information belonging to the company or an
          Associated Business or Client,

     in your possession, power or control, in the form requested by the company
     and to the company's satisfaction.

12.  INTERPRETATION

12.1 All the provisions of this agreement are reasonable in all the
     circumstances and each provision is and shall be deemed to be severable and
     independent and shall not affect the validity or enforceability of any
     other provision.

12.2 This document represents a full record of the company's agreement with
     respect to your employment, and supersedes any prior oral or written
     agreement or understanding between the company and yourself.

12.3 Any award or legislation applicable to your employment does not form part
     of your employment agreement.

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12.4 Subject to the company's right to amend policies and manuals and change
     your duties, any amendment to this agreement is not binding unless agreed
     between you and the company and recorded in writing.

12.5 This agreement is governed by and is to be construed in accordance with the
     laws of Queensland and the Commonwealth of Australia. You and the company
     submit to the non-exclusive jurisdiction of the courts of Queensland.

12.6 'ASSOCIATED BUSINESS' includes any company, partnership, trust or sole
     trader with common ownership or control (whether in whole or part, directly
     or indirectly, or through interposed entities or not) to the company,
     including any Related Body Corporate (as defined in the Corporations Law)
     to the company.

12.7 'CLIENT' means any persons, company, association or any other entity to
     whom the company, or any of our Associated Business, provides services,
     advice, products or any other knowledge or know-how during the period of
     your employment.

Please confirm your acceptance of these terms of employment by signing and
returning this letter to me.  I will countersign and return a signed copy for
your own records.

Yours sincerely,

/s/  Lewis Lee
----------------------------
LEWIS LEE
CEO/MANAGING DIRECTOR
PROGEN INDUSTRIES LIMITED

I accept the offered employment on the terms contained in this letter:

/s/  Linton Burns
----------------------------                DATE:  5/8/2004
LINTON BURNS

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<TABLE>
<CAPTION>
13.  SCHEDULE 1

EMPLOYMENT DETAILS
------------------

==============================================================================================================
<S>                        <C>
EMPLOYER                        PROGEN INDUSTRIES LIMITED
--------------------------------------------------------------------------------------------------------------
EMPLOYEE'S FULL NAME            LINTON WAYNE PAUL BURNS
--------------------------------------------------------------------------------------------------------------
DATE OF AGREEMENT               Thursday 5th August 2004
--------------------------------------------------------------------------------------------------------------
DATE OF COMMENCEMENT(2)         Monday 23rd August 2004
--------------------------------------------------------------------------------------------------------------
WORKPLACE                       2806 Ipswich Road, Darra, Queensland 4076
--------------------------------------------------------------------------------------------------------------
NORMAL WORKING HOURS            8:30am - 5:00pm (1 hour for lunch)
--------------------------------------------------------------------------------------------------------------
REMUNERATION               -    Gross salary of $140,000 p.a. inclusive of a base salary of $128,440
                                plus statutory superannuation (9%).  You may choose to re-package
                                your salary to include a novated car lease.

                           -    Reimbursement of relocation expenses including but not limited to
                                removal of furniture.  Two quotations must be supplied for due
                                consideration before relocation expenses are approved.  Car freightage
                                from Adelaide to Brisbane, or, fuel and accommodation for a 2-day
                                drive will be reimbursed.  Quotations and a receipt for freight must be
                                provided if this option is selected, or alternatively, provision of
                                receipts for fuel and accommodation.

                           -    The company will also agree to cover lease termination fees on your
                                Adelaide residence of $275/week for up to 4 weeks on a receipt basis.

                           -    Sign-on Incentive - An allocation of 99,000 options will be
                                provided as follows:

                           -    Tranche 1: Assignment of 33,000 Employee Options (subject
                                to the approval of the Employee Option Plan 2004 at AGM
                                2004(2))
                                -    Strike price - AUD$4.00
                                -    Exercise date - on approval of EOP 2004 at AGM 2004
                                -    Expiry date - February 28th 2006

                           -    Tranche 2: Assignment of 33,000 Employee Options (subject to the
                                approval of the EOP 2004 at AGM 2004(3))
                                -    Strike price - TBD subject to pricing and conditions of new
                                     EOP 2004 - 1st issue.
                                -    Exercise date - August 5th 2005
                                -    Expiry date - subject to conditions of EOP 2004 -1st issue

                           -    Tranche 3: Assignment of 33,000 Employee Options (subject to the
                                approval of the EOP 2004 at AGM 2004(3))
                                -    Strike price - TBD subject to pricing and conditions of EOP
                                     2004 - 1st issue.
                                -    Exercise date - August 5th 2006
                                -    Expiry date - subject to conditions of EOP 2004 - 1st issue
==============================================================================================================

-------------------------

2    The company agrees and acknowledges that you wish to take two weeks unpaid
leave from August 9th to 22nd inclusive.
3    Reference is to a new Option Plan 2004 that will be presented at the AGM
2004 for shareholder approval.

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==============================================================================================================
MANNER OF SALARY PAYMENT   Fortnightly in arrears into a bank account nominated by you.
SUPERANNUATION FUND        AMP Customsuper unless a superannuation fund is nominated by the
                           employee.
--------------------------------------------------------------------------------------------------------------
LEAVE ENTITLEMENTS         Annual leave, sick leave and long service leave at the minimum levels
                           prescribed by the Industrial Relations Act 1999 (Qld), in accordance with
                           that Act.  Those levels currently are:
                                -    4 weeks' annual leave per completed year of employment(4)
                                -    10 days' sick leave per completed year of employment(5)
                                -    13 weeks' long service leave after 15 years' continuous service, or
                                     pro rata on termination after 10 years' service.
--------------------------------------------------------------------------------------------------------------
TRAVEL/TRAINING            You will be required to reimburse the company, pro-rata any substantial
REIMBURSEMENT              training and training related travel costs incurred by the company if you
                           decide to terminate up to 6 months post the event (for costs >$2,000) e.g. if
                           a course costs $5,000 and you decide to leave 3 months after the event, you
                           will be required to repay ($5,000/12) x (12-3) = $3,750 back to the company.
--------------------------------------------------------------------------------------------------------------
OTHER ENTITLEMENTS         -    Nokia 8310 mobile phone or similar will be provided for your work
                                purposes.
                           -    Membership into the Chartered Accountants and Chartered Secretaries
                                Societies.
                           -    Cash Bonuses and Share Option plans are introduced by the company
                                from time to time to incentivise staff and management. As a member
                                of the executive management team, you are entitled to participate in
                                these option schemes as they arise according to the Progen Employees
                                Option Plan charter that have to be approved by shareholders.
                                Following shareholder approval, allocations are made by the Board of
                                Directors Remuneration Committee on recommendation from the
                                Managing Director/Chairman on the basis of position and duties,
                                performance and time with the company.
==============================================================================================================
</TABLE>

-------------------------

4    To be taken in the year following its accrual pro rata.  All leave is
subject to approval and will not be granted where it interferes with significant
work commitments.
5    Available in circumstances when you are unable to attend work because of
your own incapacity or the need to care for a member of your immediate family.
Paid sick leave will not be available where your absence exceeds 2 days unless a
medical certificate (for you or your family member) is provided.  Unused sick
leave may be accumulated from year to year but will not be paid out at
termination.

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14.  SCHEDULE 2

POSITION DESCRIPTION
--------------------

===================================================================
POSITION:         CFO/COMPANY SECRETARY

REPORTING TO:     CEO/MANAGING DIRECTOR AND BOARD OF DIRECTORS.

JOB DESCRIPTION   AS DESCRIBED AND SENT ON JUNE 22ND 2004 VIA EMAIL

KPI'S             AS DESCRIBED AND SENT ON JUNE 28TH 2004 VIA EMAIL
===================================================================

--------------------------------------------------------------------------------
END OF CONTRACT

<PAGE>THE PROGEN DIRECTORS AND EMPLOYEE OPTION
                              INCENTIVE PLAN RULES

<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                            PAGE
<S>                                                                         <C>
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
</TABLE>

                                                                    Page 2 of 10
<PAGE>
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;

                                                                    Page 3 of 10
<PAGE>
     '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.

                                                                    Page 4 of 10
<PAGE>
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:

                                                                    Page 5 of 10
<PAGE>
     (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.

                                                                    Page 6 of 10
<PAGE>
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.

                                                                    Page 7 of 10
<PAGE>
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.

                                                                    Page 8 of 10
<PAGE>
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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                                                                    Page 9 of 10
<PAGE>
     END OF DOCUMENT

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<PAGE>

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