**Exhibit 10.3.2**

 
|           |                        | **Major Client Group** |
|----------------|-----------------------------|------------------------|
|           |                        |                   |
| Tel            | :  (02) 9237 9731 | Level 23               |
| Fax            | :  (02) 9237 9773 | 255 George Street      |
|           |                        | SYDNEY NSW 2000        |
|           |                        |                   |
| 13th July 2004 |                        |

 

The Directors

Channell Bushman Pty Limited

ACN 109 821 614

Suite 5, 391 Park Road

**Regents Park NSW 2143**

 

 

Dear Sirs,

 

**BANKING FACILITIES**

 

Further to our recent discussions we are pleased toadvise that National Australia Bank Limited ABN 12 004 044 937 (the **Bank**) has agreed to provide the facilities (each a **Facility** and collectively the **Facilities**)described below to Channell Bushman Pty Limited ACN 109 821 614 (the **Company**) and its subsidiaries and related companiesspecified in the **Annexure E****Schedule**to this letter (collectively the **Group** and eacha **Group Member)**.  The word **Borrower** usedin this letter means the Company, the Group, each Group Member and theParticipating Companies, individually and collectively as the context permitsand unless otherwise specified.

 

The Facilities are offered subject to the terms andconditions of this letter of offer and the normal conditions applicable to Bankfacilities of this sort and this letter of offer supersedes all priorunderstandings and agreements between the Bank and the Borrower, whetherwritten or oral, unless specified in this letter of offer.

 
| **NATIONAL DEBTOR  FINANCE FACILITY** | ** **                                                                                                     |
|---------------------------------------|----------------------------------------------------------------------------------------------------------------|
| ** **                            | ** **                                                                                                     |
| **Participating Companies:**          | Bushmans Group Pty Limited ACN 090 744 022                                                                     |
|                                  |                                                                                                           |
| **Limit:**                            | $2,000,000 (Two million dollars).                                                                              |
|                                  |                                                                                                           |
| **Purpose:**                          | To cover financial requirements of the day to day  operations of the Borrower.                                 |
|                                  |                                                                                                           |
| **Facility Fee:**                     | 1.25% per annum, charged monthly. This fee is  calculated on the Limit or peak debt, whichever is the greater. |

 

1

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| **Interest:**                                                     | The 30 day BBSY bid rate shown at approximately  10.10 am (Sydney time) on page “**BBSY** on the  Reuters Monitor System” on the day the facility is drawn and then monthly  thereafter, plus a margin of 1.25%.                                                                                                                                                                                                                                                                                      |
|-------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                              | The BBSY Rate is currently 5.47% per annum,  variable.                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                              | Interest is payable monthly in arrears on the last  business day of each month, and will be debited to the Participating  Company’s account.                                                                                                                                                                                                                                                                                                                                                               |
|                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Establishment Fee:**                                            | Nil                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Expiry Date:**                                                  | 31st July 2005. The availability of this  Facility and its repayment are at all times at the Bank’s discretion.                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Conditions:**                                                   | The terms contained in the **Annexure  F, Debtor Finance Facility Agreement (“Agreement”)- Terms** attached  to this letter of offer.                                                                                                                                                                                                                                                                                                                                                                 |
| ** **                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| ** **                                                        | Fundamentally, the Agreement sets out the procedure  and conditions for the future sale to the Bank of debts arising out of your  business. Under the Agreement, you may from time to time offer to sell the  Bank debts by delivering an offer document called an Invoice Statement. It is  then up to the Bank, in its discretion, whether or not to accept your offer.                                                                                                                                       |
| ** **                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| ** **                                                        | The Agreement sets our all the terms and conditions  of the facility. The terms of this letter are in addition to the Agreement.                                                                                                                                                                                                                                                                                                                                                                                |
|                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **BILL  ACCEPTANCE/DISCOUNT FACILITY – ACQUISITION FUNDING** |
|                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Participating Companies:**                                      | Channell Bushman Pty Limited ACN 109 821 614                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Limit:**                                                        | $8,000,000 (Eight million dollars).                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Purpose**:                                                      | To assist with the acquisition of the Bushman’s  Group of Companies.                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Utilisation**:                                                  | The Participating Companies may present Bills to the  Bank for acceptance and discounting by the Bank at the Discount Rate. The  Participating Companies may select the drawdown date and rollover periods for  the Bills which may be for periods of between 30 and 180 days or any other  period that the Bank in its discretion permits. Each Bill presented for  acceptance/discount is to have a face value of $100,000 (one hundred thousand  dollars) and a maturity date no later than the Expiry Date. |

 

2

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| **Discount Rate:**     | The Discount Rate means the rate (expressed as a  percentage yield to maturity and rounded upwards to the nearest two decimal  places) which is the bid rate shown at approximately 10.10 am (Sydney time)  on page **BBSY** on the Reuters Monitor System on  the day the Bills are to be discounted for Bills of like amounts and tenors.  If such rate is not available or if, in the Bank’s reasonable opinion the  rate becomes inappropriate, the Discount Rate will be the rate reasonably  determined by the Bank to be the appropriate equivalent rate, having regard  to prevailing market conditions.                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Establishment Fee:** | 1.25% of the facility limit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Activation Fee:**    | 1.40% per annum, payable upon activation and  calculated on the face value and term of Bills accepted/discounted by the  Bank.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Line Fee:**          | 0.50% per annum on the Limit, payable half yearly in  advance from initial draw down date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Roll Fee:**          | $150 per Bill role/negotiation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Expiry Date:**       | 31st July 2009                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Fixed Rate Option:** | (a)           The Company may request that the  Discount Rate applicable to the whole or any part of this Facility be fixed  for a period of up to five years with effect from a specified date being the  rollover date or the date of initial drawdown and terminating on or before  the Expiry Date.

 

(b)           Subject to the availability of  funds and the appropriateness of the period selected, the Bank will quote a  fixed Discount Rate as at the rollover date or the date of drawdown, and a  time by which the quote must be accepted. If the Company accepts that quote  within that time, the quoted fixed Discount Rate will apply to Bills drawn by  any Participating Company and accepted and discounted by the Bank during the  selected period.

 

(c)           Bills drawn, accepted and  discounted under this fixed rate option will have a term of 90 days. |
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Repayments:**        | The facility is to reduce by $400,000 (Four hundred  thousand dollars) each September, December, March and June until cleared in  full.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Conditions:**        | The terms contained in the **Annexure  D, Bill Acceptance / Discount Facility - Terms** attached to this  letter of offer and (as applicable) in the Bank’s Fixed Rate Bill Facility  Letter dated on or about the date of this letter of offer will also apply.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

 

3

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| **BILL  ACCEPTANCE/DISCOUNT FACILITY – EARN-OUT FUNDING** |
|----------------------------------------------------------------|
|                                                           |   |
| **Participating Companies:**                                   | Channell Bushman Pty Limited ACN 109 821 614 |
|                                                           |   |
| **Limit:**                                                     | $1,750,000 (One million seven hundred and fifty  thousand dollars). |
|                                                           |   |
| **Purpose**:                                                   | To fund the ‘Earn-Out’ associated with the  acquisition of the Bushman’s group of companies. |
|                                                           |   |
| **Utilisation**:                                               | The Participating Companies may present Bills to the  Bank for acceptance and discounting by the Bank at the Discount Rate. The  Participating Companies may select the drawdown date and rollover periods for  the Bills, which may be for periods of between 30 and 180 days or any other  period that the Bank in its discretion permits. Each Bill presented for  acceptance/discount is to have a face value of $100,000 (one hundred thousand  dollars) and a maturity date no later than the Expiry Date. |
|                                                           |   |
| **Discount Rate:**                                             | The Discount Rate means the rate (expressed as a  percentage yield to maturity and rounded upwards to the nearest two decimal  places) which is the bid rate shown at approximately 10.10 am (Sydney time)  on page **BBSY** on the Reuters Monitor System on  the day the Bills are to be discounted for Bills of like amounts and tenors.  If such rate is not available or if, in the Bank’s reasonable opinion the  rate becomes inappropriate, the Discount Rate will be the rate reasonably  determined by the Bank to be the appropriate equivalent rate, having regard  to prevailing market conditions. |
|                                                           |   |
| **Establishment Fee:**                                         | 1.25% of the facility limit. |
|                                                           |   |
| **Activation Fee:**                                            | 1.40% per annum, payable upon activation and  calculated on the face value and term of Bills accepted/discounted by the  Bank. |
|                                                           |   |
| **Line Fee:**                                                  | 0.50% per annum on the Limit, payable half yearly in  advance from initial draw down date. |
|                                                           |   |
| **Expiry Date:**                                               | 31st July 2009 |
|                                                           |   |
| **Repayments:**                                                | Subject to the additional conditions detailed below  and draw down of the facility, commencing the 30th June 2005 the  facility is to reduce by $63,000 (Sixty three thousand dollars) each  September, December, March and June until cleared in full. Should the second  drawing be made the facility repayments are to increase to $146,000 (One  hundred and forty six thousand dollars) each September, December, March and June  until cleared in full. |

 

4

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| **Conditions:**                                             | Initial drawn down in July 2005 will only be  permitted if net sales for the financial year ending June 2005 achieve  $45,650,000.

 

Second drawing in July 2006 will only be permitted  is net sales for the financial year ending June 2006 achieves $50,215,000.

 

The terms contained in the **Annexure  D, Bill Acceptance / Discount Facility - Terms** attached to this  letter of offer will also apply.                                                                                                                                                                                        |
|-------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| **BILL  ACCEPTANCE/DISCOUNT FACILITY – CAPEX FUNDING** |
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| **Participating Companies:**                                | Channell Bushman Pty Limited ACN 109 821 614                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| **Limit:**                                                  | **Year One****:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | $2,500,000 (Two million five hundred thousand  dollars) until 30th June 2005 then, subject to ‘Special  Conditions’ detailed below: |
| ** **                                                  | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
| ** **                                                  | **Year Two****:**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | $4,500,000 (Four million five hundred thousand  dollars) until 30th June 2006 then, subject to ‘Special  Conditions’ detailed below: |
| ** **                                                  | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |
| ** **                                                  | **Year Three**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | $6,000,000 (Six million dollars). |
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| **Purpose**:                                                | To fund capital expenditure for the Bushman’s group of  companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| **Utilisation**:                                            | The Participating Companies may present Bills to the  Bank for acceptance and discounting by the Bank at the Discount Rate. The  Participating Companies may select the draw down date and roll over periods  for the Bills which may be for periods of between 30 and 180 days or any  other period that the Bank in its discretion permits. Each Bill presented for  acceptance/discount is to have a face value of $100,000 (one hundred thousand  dollars) and a maturity date no later than the Expiry Date.                                                                                                     |
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| **Discount Rate:**                                          | The Discount Rate means the rate (expressed as a  percentage yield to maturity and rounded upwards to the nearest two decimal  places) which is the bid rate shown at approximately 10.10 am (Sydney time)  on page **BBSY** on the Reuters Monitor System on  the day the Bills are to be discounted for Bills of like amounts and tenors.  If such rate is not available or if, in the Bank’s reasonable opinion the  rate becomes inappropriate, the Discount Rate will be the rate reasonably  determined by the Bank to be the appropriate equivalent rate, having regard  to prevailing market conditions. |
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| **Establishment Fee:**                                      | 1.25% of the facility limit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

 

5

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| **Activation Fee:**     | 1.40% per annum, payable upon activation and  calculated on the face value and term of Bills accepted/discounted by the  Bank.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| **Line Fee:**           | 0.50% per annum on the Limit, payable half yearly in  advance from initial draw down date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| **Expiry Date:**        | 31st July 2009                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| **Special Conditions:** | Eligibility to drawn down Facility Limit Year Two  will only be permitted if 1) net sales for the financial year ending June  2005 are greater than $45,000,000 (forty five million dollars) and EBIT  (Earnings before interest and tax) is greater than $3,000,000 (three million  dollars).

 

Eligibility to drawn down Facility Limit Year Three  will only be permitted if 1) net sales for the financial year ending June  2005 are greater than $49,000,000 (forty nine million dollars) and EBIT  (Earnings before interest and tax) is greater than $4,000,000 (four million  dollars).

 

The terms contained in the **Annexure  D, Bill Acceptance / Discount Facility - Terms** attached to this  letter of offer will also apply. |

 

**TREASURY FACILITIES**

 

In addition tothe above facilities, the Bank’s Treasury Operations have been allocated thenecessary authority to quote for the Company’s risk managementrequirements.  Such facilities willremain uncommitted.

 

**SECURITY**

 

Thedocumentation required by the Bank as security for the Facilities is set out inthe**Schedule**and must be provided in aform and substance acceptable to the Bank.

 

6

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**CONDITIONS SUBSEQUENT**

 

In the periodup to and including the Financial Assistance Satisfaction Date, the Borrowermust not drawdown any funds or request any other advances under the Facilitiesfor a purpose connected or associated, directly or indirectly, with theacquisition of the shares or issued capital of the Bushman’s Group of Companieswithout obtaining the prior written consent of the Bank.

 

If for anyreason the requirements of sections 260A and 260B of the Corporations Act inconnection with the financial assistance to be provided for the acquisition ofthe shares and issued capital of the Bushman’s Group of Companies have not beensatisfied by the Financial Assistance Satisfaction Date, an Event of Defaultshall be deemed to have occurred and all the Money Owing under the Facilitiesshall become immediately due and payable on demand by the Bank.

 

**REVIEW DATE**

 

All Facilitiesare subject to annual review by 31st July 2005.  If the Bank decides to extend one or all ofthe Facilities, it may do so on whatever terms it thinks fit, in its absolutediscretion after consulting with the Company and will notify the Company accordingly.

 

**GENERAL**

 

In addition tothe normal banking terms and conditions applicable to the Facilities, thespecial terms and conditions set out in the following annexures will alsoapply:

 
| **Annexure** | ** ** | **Title**                                                 |
|--------------|------------|-----------------------------------------------------------|
|         |       |                                                      |
| A            |       | General Terms and Conditions                              |
| B            |       | Financial Undertakings                                    |
| C            |       | Conditions Precedent                                      |
| D            |       | Bill Acceptance/Discount Facility - Terms and  Conditions |
| E            |       | Schedule                                                  |
| F            |       | Debtor Finance Facility Agreement                         |

 

**VARIATION OF INTERESTRATES, MARGINS AND FEES**

 

Unless specificallystated, interest rates, margins and fees may be varied by the Bank in the lightof conditions, prevailing from time to time. Although we will endeavour tonotify the Company of any change to fees as it occurs, if the Bank does not doso for any reason, this will not prevent the charging of the new or adjustedfee.

 

**ACCEPTANCE**

 

This offerremains available for acceptance until 30th July 2004 after which itwill at the Bank’s option lapse.

 

Acceptance ofthese Facilities and all the terms and conditions of this letter of offer isrequired by way of a certified extract of resolution of directors of theCompany. Upon receipt of this resolution the Bank will be entitled to drawn onyour account for the Establishment Fees detailed within this document.

 

7

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**THE CODE OF BANKINGPRACTICE**

 

The Bank hasadopted the Code of Banking Practice and relevant provisions of the Code applyto this Letter of Offer if the Borrower is a small business customer (asdefined by the Code).  The Borrower canobtain from the Bank upon request:

 

(a)                        information on the Bank’s current interest rates and standard feesand charges relating to the Facilities as described in this Letter of Offer ifany;

 

(b)                       general descriptive information concerning the Bank’s bankingservices including:

 

(i)                           for accounts with cheque access, general descriptive informationabout cheques;

 

(ii)                        account opening procedures;

 

(iii)                     the Bank’s obligations regarding the confidentiality of the Borrower’sinformation;

 

(iv)                    complaint handling procedures;

 

(v)                       bank cheques;

 

(vi)                    the advisability of the Borrower informing the Bank promptly whenthe Borrower is in financial difficulty;

 

(vii)                 the advisability of the Borrower reading the terms and conditionsapplying to each banking service the Bank provides to the Borrower;

 

(c)                        general descriptive information above:

 

(i)                           the identification requirements of the Financial TransactionsReports Act 1988;

 

(ii)                        the options available to the Borrower under the tax file numberlegislation; and

 

(d)                       a copy of the Code of Banking Practice.

 

**GENERAL**

 

Please notethat the terms, conditions and pricing detailed in this letter have beenprovided for the sole use of the Borrower on the understanding that none of thematerial will be divulged to outside parties without the prior written consentof the Bank.

 

8

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We trust thatthe Facilities meet Borrower’s current requirements.  If any matter needs clarification, please donot hesitate to contact me.

 
| Yours faithfully            |
|-----------------------------|
|                        |
|                        |
| **Graeme Johnson**          |
| Senior Relationship Manager |

 

9

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**ANNEXURE A**

 

**GENERAL TERMS AND CONDITIONS**

 

 
| **CONTENTS** |
|--------------|
|         |   |
| 1.           | REPRESENTATIONS AND  WARRANTIES |
| 2.           | GENERAL UNDERTAKINGS |
| 3.           | ACCOUNTS |
| 4.           | EVENTS OF DEFAULT |
| 5.           | POTENTIAL EVENTS OF  DEFAULT |
| 6.           | OPEN TREASURY  TRANSACTIONS |
| 7.           | NON-WAIVER |
| 8.           | CLASS ORDER |
| 9.           | COSTS AND EXPENSES |
| 10.          | PAYMENTS AND TAXES |
| 11.          | LATE PAYMENTS |
| 12.          | ILLEGALITY |
| 13.          | CHANGE IN CIRCUMSTANCE |
| 14.          | TRUSTS |
| 15.          | SET-OFF |
| 16.          | CHANGE OF OWNERSHIP |
| 17.          | APPOINTMENT OF  CONSULTANTS |
| 18.          | BREAK COSTS |
| 19.          | HOLDING OVER |
| 20.          | ASSIGNMENT |
| 21.          | CONFIDENTIALITY |
| 22.          | INCONSISTENCY |
| 23.          | GOVERNING LAW AND  JURISDICTION |
| 24.          | DEFINITIONS |

 

10

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**1.         REPRESENTATIONS AND WARRANTIES**

 

The Borrowerrepresents and warrants to the Bank that as at the date of this letter of offerand at all times thereafter:

 

(a)                        (**incorporation**)  It is duly incorporated and validly existingunder the laws of its place of incorporation;

 

(b)                       (**power**)  It has full power, authority and legal right tocarry on its business as presently conducted;

 

(c)                        (**information is accurate**)  All financial accounts, reports and factualinformation furnished to the Bank at any time are true and accurate and notmisleading in any material respect, and no material change has taken place inrespect to any of them since the date they were presented to the Bank;

 

(d)                       (**no default**)   It is not in material default of any law orany agreement, security or instrument with the Bank or any other financialinstitution, and it is not in default in respect of any material monetaryobligation contracted by or imposed upon it;

 

(e)                        (**no litigation**)   No litigation, arbitration or administrativeproceedings are current or pending or, to its knowledge, threatened against it;

 

(f)                          (**solvency**)   It is solvent;

 

(g)                       (**no potential event of default**)  No Potential Event of Default has occurredand is continuing;

 

(h)                       (**no undisclosed trusts**)  Except as disclosed to and agreed to by theBank in writing, it is not trustee of any trust;

 

(i)                           (**insurance**)  It has taken out and kept in full force andeffect insurance over all of its physical assets and its premises for suchamounts and against such risks as a reasonably prudent person in the Borrower’sposition would take out including, without limitation, terrorism insurance.

 

The Borroweralso gives the above representations and warranties in respect of everyguarantor and Security Provider.

 

Theserepresentations and warranties are deemed to be repeated with reference to thefacts and circumstances then existing at each date of utilisation of anyfinancial accommodation, rollover of any bills of exchange or notes, at thebeginning of each new interest period and at the date of execution of each newdocument under which credit or financial accommodation is granted by the Bank.

 

**2.****                           GENERAL UNDERTAKINGS**

 

The Borrowerundertakes to the Bank that, except with the prior written consent of the Bank:

 

11

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(a)                        (**notify defaults**)  It will promptly advise the Bank of any Eventof Default or potential Event of Default;

 

(b)                       (**insurance**)  It will take out and keep in full force andeffect the insurance policies referred to in sub-paragraph 1(i) above, andfurther:

 

(i)                          provide evidence to the Bank of the currency of all insurances oneach annual review, or upon request by the Bank, whichever is the earlier, andpromptly comply with any request to take out further insurance cover as theBank may reasonably require to supplement the existing insurance policies ofthe Borrower; and

 

(ii)                       not do or omit to do, or suffer or permit to be done or not done,anything which may materially prejudice any insurance policy; and

 

(iii)                    not vary, rescind, terminate or cancel any insurance policy withoutthe written consent of the Bank;

 

(c)                        (**comply with laws**)  It will comply with all applicable laws andpay all obligations that if unpaid might result in a lien or claim against anyof the Borrower’s assets;

 

(d)                       (**plant and machinery**)  It will maintain its plant and machinery in astate of good repair, fair wear and tear excepted;

 

(e)                        (**other financial accommodation**)  It will not raise any financial accommodationfrom any other party, or give any security in relation to it;

 

(f)                          (**disposal of assets**)  It will not dispose of any assets having anaggregate value greater than $200,000 other than in its usual and ordinarycourse of business;

 

(g)                       (**continue to stay in business**)  It will not engage in any other businessother than that in which it is presently operating;

 

(h)       (**no merger or acquisition**)  It will not merge with or acquire anothercompany or entity;

 

(i)        (**no disposal ofsubsidiaries**)  It will notdispose of any of its subsidiaries;

 

(j)        (**not give security**)  It will not give any security over itsassets;

 

(l)                           (**asset purchase**) It will not purchaseassets that exceed a value of $250,000 without the prior written consent of theBank.  This undertaking will not apply tocapital expenditures;

 

(m)                     (**dividends)** It will not make anypayments of dividends without the prior written consent of the Bank; and

 

(n)                       (**related party debt**) Any relatedparty debt to be subordinated to the Bank and have no repayments or interestcost conditions while senior debt remains.

 

12

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**3.****                           ACCOUNTS**

 

The Borrowerwill prepare its financial accounts in accordance with generally acceptedAccounting Standards.

 

The Borrowerwill deliver to the Bank:

 

(a)                        (**annual accounts**) within fourmonths after the close of each financial year a copy of the annual report ofthe Borrower, and an audited consolidated balance sheet and consolidated profitand loss account of the Borrower for that financial year;

 

(b)                       (**annual accounts**) within fourmonths after the close of each financial year a copy of the auditedconsolidated balance sheet and consolidated profit and loss account of ChannellPty Ltd. In addition the Borrower must also provide a management consolidationof the Borrower and Channell Pty Ltd, balance sheet and profit & loss.

 

(c)                        (**management accounts**) within 30days after the close of each calendar quarter, management reports (whichinclude integrated balance sheet, profit and loss statements and cash flow) areto be provided. Showing actuals to budgets with comments on any negativevariance on Sales, Gross Profit, Operating Expenses and EBIT in excess of 10%.Any negative variance greater than 15% to constitute a right of review;

 

(d)                       (**management accounts**) within 30days after the close of each calendar quarter Channell Pty Ltd is to providemanagement reports (which include integrated balance sheet, profit and lossstatements). In addition the Borrower must also provide a managementconsolidation of the Borrower and Channell Pty Ltd, balance sheet and profit& loss.

 

(e)                        (**forecast reports**) revised annualforecasts, projected monthly incorporating an integrated balance sheet, profitand loss statements and cash flow with comments on assumptions are to beprovided on or before the commencement of each financial year; and

 

(f)                          (**other information**) such otherfinancial information as the Bank may reasonably require, within fourteen daysafter request.

 

**4.****                           EVENTS OF DEFAULT**

 

If an Event ofDefault occurs, the Borrower will immediately notify the Bank.  The notice will contain full details of theEvent of Default, and such further information as the Bank may require from theBorrower regarding the Event of Default.

 

If an Event ofDefault occurs, the Bank may, by written notice to the Borrower, terminate theFacilities and demand repayment of the Money Owing.

 

**Event of Default** means:

 

(a)                        (**payment default**) the Borrowerfails to pay to the Bank any Money Owing from time to time due and payable tothe Bank;

 

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(b)                       (**other defaults**) the Borrower failsto perform and observe any other terms or conditions of the Documents;

 

(c)                        (**representations and warranties**) arepresentation or warranty given to the Bank in a Document or otherwise isincorrect or false in a material respect when made or deemed to be repeated;

 

(d)                       (**other financial accommodation**) theBorrower fails to duly perform or observe any of the terms and conditions ofany other financial accommodation (whether provided by the Bank or any otherperson);

 

(e)                        (**orders and judgments**) an order forpayment is made or judgment is entered or signed against the Borrower and isnot satisfied within 14 days;

 

(f)                          (**receivers**) a receiver, manager,receiver and manager, liquidator, provisional liquidator or administrator isappointed in respect of the Borrower for the whole or any part of itsundertaking, property or assets;

 

(g)                       (**investigators**) a person isappointed under legislation to investigate or manage any part of the affairs ofthe Borrower;

 

(h)                       (**winding up**) a ground for windingup or bankruptcy of the Borrower arises;

 

(i)                           (**stop payment**) the Borrower or anySecurity Provider stops payment generally or ceases or threatens to cease tocarry on its business or the material part of its business;

 

(j)                           (**meeting of creditors**) the Borrowerconvenes a meeting of its creditors or proposes or enters into any arrangementor composition for the benefit of its creditors;

 

(k)                        (**winding up resolution**) aresolution is passed for the winding up of the Borrower, other than for thepurpose of a reconstruction or amalgamation previously approved in writing bythe Bank;

 

(l)                           (**material adverse change**) a changeoccurs in the financial condition or in the whole or a major part of theoperations of the Borrower, which has had or could reasonably be expected tohave a materially adverse effect on the ability of the Borrower to perform itsobligations to the Bank;

 

(m)                     (**other security providers**) any ofthe above events occurs in relation to any person or Borrower who is aguarantor, or Security Provider in connection with the Facilities;

 

(n)                       (**loss of security**) anything occurswhich in the Bank’s reasonable opinion terminates or reduces the enforceabilityof any part of the Security Documents.

 

**5.         POTENTIAL EVENT OF DEFAULT**

 

If a Potential Event of Default occurs, theBorrower will keep the Bank fully informed of all developments in resolving thematter.

 

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If a PotentialEvent of Default occurs, the Bank retains the right to review the availabilityof the Facilities and to notify the Borrower of the outcome of the review.

 

**6.         OPEN TREASURY TRANSACTIONS**

 

If the Bankterminate the Facilities following the occurrence of an Event of Default, andif at that time there are any Treasury Transactions in existence between theBank and the Borrower (**Open Positions**)then:

 

(a)                        the Bank may close out the Open Positions, by entering into oppositepositions for the balance of the unexpired term, or by such other means as maybe usual in the relevant market.  Anysuch close out shall be at market rates prevailing at the time;

 

(b)                       any costs incurred by the Bank in closing out Open Positions under **paragraph (a)** will be paid by the Borrower to the Bank upondemand by the Bank.  Any gain derivedfrom the closing out of the Open Positions will be credited to the Borrower andset off against the Money Owing;

 

(c)                        the Bank will give to the Company reasonable particulars of themanner of close out of the Open Positions, and the basis of calculation of anyamounts payable by or to the Borrower arising from that close out.

 

**7.****                           NON-WAIVER**

 

Theliabilities of the Borrower and the rights of the Bank are not affected byanything which might otherwise have that effect at law or in equity including,without limitation, one or more of the following (whether occurring with orwithout the consent of a person):

 

(a)                        any inaccuracy, insufficiency or forgery of or in any certificate orother instrument which purports to be made, issued or delivered under theDocuments or under any letter of credit, Bank guarantee or other instrumentissued under the Documents; or

 

(b)                       the Bank or another person granting time or other indulgence (withor without the imposition of an additional burden) to, compounding orcompromising with or wholly or partially releasing the Borrower or anotherperson in any way; or

 

(c)                        laches, acquiescence, delay, acts, omissions or mistakes on the partof the Bank or another person; or

 

(d)                       any variation or novation of a right of the Bank or another person,or alteration of a document, in respect of the Borrower or another personincluding, without limitation, an increase in the maximum liability of or othervariation in connection with a letter of credit or guarantee; or

 

(e)                        the invalidity or unenforceability of an obligation or liability ofa person other than the Borrower; or

 

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(f)                          invalidity or irregularity in the execution of this agreement by theBorrower or any deficiency in the powers of the Borrower to enter into orobserve its obligations under this letter of offer.

 

**8.****                           CLASS ORDER**

 

If theBorrower applies for a Class Order, it will notify the Bank immediately inwriting.  The Bank may review (and ifconsidered appropriate, terminate) all or any of the Facilities made availableto the Borrower.

 

In thisparagraph a “Class Order” means an order made by the Australian Securities andInvestments Commission pursuant to Part 2M.6 of the Corporations Act.

 

**9.****                           COSTS AND EXPENSES**

 

The Borrowerwill pay to the Bank on demand all Taxes, costs and expenses of any natureincurred by the Bank in relation to the Documents and the Facilities, whetherpayable directly or indirectly.  Theseamounts are payable regardless of whether the Facilities are ever drawn down.

 

The Borrowerwill pay to the Bank all legal costs incurred in relation to the preparation,negotiation, execution, registration, administration and enforcement of theDocuments (including the Bank’s solicitors’ fees on a solicitor and own clientbasis).

 

**10.****                    PAYMENTS AND TAXES**

 

All paymentsdue by the Borrower to the Bank must be made on the due date in immediatelyavailable funds.

 

If payment isdue on a day on which the Bank is not open for business in the relevant State,then payment must be made on the next business day in that State.

 

Notwithstanding,and without limitation to, any other provision of this letter of offer:

 

**(a)**                        if GST is imposed on any supply made bythe Bank under or in connection with this letter of offer or the facilitiesoffered in this letter of offer, where any amount or consideration (“consideration”)payable or to be provided by or on behalf of the Borrower under or inconnection with this letter of offer or the facilities offered in this letterof offer in relation to that supply is exclusive of GST (“GST-exclusive consideration”), the Bank may in addition to that GST-exclusive consideration,recover from the Borrower, or from a person acting on its behalf, an additionalamount on account of GST, such additional amount to be calculated bymultiplying the GST-exclusive consideration for the relevant supply by theprevailing GST rate. This sub-paragraph (a) does not apply to a supply forwhich the consideration is inclusive of GST; or

** **

(b)                       where the Bank makes a supply under or in connection with thisletter of offer or the facilities offered in this letter of offer which is nota taxable supply and the Bank is not entitled to an input tax credit (whetherin whole or in part) in respect of the amount of any GST charged to orrecovered from the Bank by any person, or payable by the Bank, or in respect ofany amount which is recovered from the Bank by way of reimbursement of GST

 

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referabledirectly or indirectly to that supply, the Bank shall be entitled to increaseany amount or consideration payable by the Borrower on account of such inputtax and recover from the Borrower the amount of any such increase.

 

Any additional amount on account of GST, oron account of an amount for which the Bank is not entitled to an input taxcredit, recoverable from the Borrower pursuant to sub-paragraph (a) orsub-paragraph (b) of this paragraph shall be calculated without any deductionor set-off of any other amount and is payable by the Borrower upon demand bythe Bank whether such demand is by means of an invoice or otherwise.

 

In relation to any consideration payable orto be provided under or in connection with this letter of offer or thefacilities offered in this letter of offer that is inclusive of GST (“**the existing GST inclusive consideration**”) in the event ofan increase in the GST rate, the Bank may, subject to issuing a Tax Invoice orAdjustment Note, as appropriate, recover from the Borrower an additional amounton account of the increase in the GST rate. This additional amount is to bedetermined by converting the existing GST inclusive consideration to a GSTexclusive amount (“**value**”) andmultiplying it by the new prevailing GST rate and by subtracting from thatresult the previous GST component.

 

For the purposes of the above paragraph:

 

(i)                           theexisting GST inclusive consideration is to be converted to the value by usingthe GST rate immediately prior to the new prevailing GST rate; and

 

(ii)                        the previous GST component is equal to the difference between theexisting GST inclusive consideration and the value.

 

**11.****                    LATE PAYMENTS**

 

If any amountis not paid to the Bank when due, it will accrue interest at the Default Rateuntil it is paid.  That interest will becalculated on daily balances and added to the debt monthly if not paid.  This paragraph does not relieve the Borrowerof its obligation to make payments when due.

 

All paymentsmust be made without set-off or counter-claim, and be free and clear of anywithholding or deduction for taxes, levies, imposts or government charges ofany kind unless prohibited by law.  Ifany deduction is required by Law, the Borrower will make the deduction, pay theTax, and pay to the Bank further amount(s) sufficient to ensure that the Bankreceives the same net amount as it would have received if no deduction had beenmade.

 

**12.****                    ILLEGALITY**

 

If any changein Law makes it unlawful or impossible for the Bank to maintain or give effectto its obligations under the Documents, then the Bank shall promptly notify theBorrower.

 

The Bank andthe Borrower will negotiate in good faith to restructure each affected Facilityin a manner which resolves the problem. If no agreement is reached within 30 (thirty) days after the Banknotified the Borrower, then the Borrower will repay to the Bank on demand somuch of the Money Owing as relates to the affected Facility.

 

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**13.****                    CHANGE INCIRCUMSTANCE**

 

This paragraph applies if any order of anycourt or any change in Law, or in the official interpretation or application ofLaw by any government authority:

 

(a)                        subjects the Bank to any Taxes or duties with respect to theFacilities or any part of them, or changes the basis of taxation of the Bankfor payment under the Documents (except for taxes on the overall net income ofthe Bank); or

 

(b)                       imposes, modifies or deems applicable any reserve, capital, adequacyor liquidity adequacy requirements against any asset of, deposit with or forthe account of or loans by the Bank; or

 

(c)                        imposes on the Bank any other condition with respect to theDocuments or the obligations of the Bank under them, or if the Bank complieswith any request from any applicable fiscal or monetary authority (whether ornot having the force of law);

 

If the result of the above is to increasethe cost to the Bank of making available or maintaining a Facility, or to reducethe amount receivable in respect of a Facility, or reduce any other amount dueto the Bank in connection with a Facility by an amount which the Bank considersmaterial, then:

 

I.                               the Bank will use its best efforts to notify the Borrower of thatevent; and

 

II.                           the Borrower and the Bank will negotiate in good faith torestructure each affected Facility in a manner which resolves the problem; and

 

III.                       if no agreement is reached within 30 days after the Bank notifiedthe Borrower, the Borrower will pay to the Bank on demand, as additionalinterest or charges, an amount which will compensate the Bank for theadditional costs, calculated from the date of that notification.

 

**14.****                    TRUSTS**

 

TheBorrower warrants to the Bank that it is not the trustee of any trust.

 

**15.****                    SET-OFF**

 

If an Event ofDefault occurs, the Bank may at any time without notice to the Borrowercombine, consolidate or merge all or any of the Borrower’s accounts, and mayset off the whole or any part of the Money Owing against any credit balance inthose accounts.

 

For thatpurpose, the Bank may redeem and/or appropriate all or any part of any account,deposit or other arrangement between the Bank and the Borrower under which theBank may be indebted to the Borrower, even if the balance on any such accountand the Money Owing are not expressed in the same currencies.  The Bank may make any currency conversion itconsiders necessary or desirable for this purpose.

 

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**16.****                    CHANGE OF OWNERSHIP**

 

No transfer ofshares (or issue of shares) in that company may be made, without the Bank’sprior written consent.  That consent willnot apply to a transfer or issue to any company which is a related corporationof the Company.

 

The Bank mayreview (and if considered appropriate terminate) all Facilities made availableto the Borrower upon the occurrence of a change in shareholdings or an issue ofshares referred to in this paragraph.

 

**17.****                    APPOINTMENT OFCONSULTANTS**

 

The Bank mayat any time appoint accounting, financial management and other consultants toexamine the affairs of the Borrower and to make recommendations relating to themanner in which the Borrower carries on its business.  The Borrower will provide all assistanceconsidered necessary or desirable by the consultant to enable the consultant toconduct a proper examination of the affairs of the Borrower.  This includes, without limitation, making theBorrower’s financial records available to the Consultant.  The Borrower shall pay the fees of theConsultant.

 

**18.****                    BREAK COSTS**

 

The Borrowerindemnifies the Bank against any loss, cost, charge, loss of profit or expenseincurred by the Bank in connection with:

 

(a)                        the Borrower making a payment under any Document on a date which isnot expressly contemplated in the Document, whether that payment is made as aresult of demand by the Bank following an Event of Default or any other reason;and

 

(b)                       any financial accommodation provided by the Bank at a fixed ratebeing repaid in whole or in part during the period to which that fixed rateapplies.

 

**19.****                    HOLDING OVER**

 

If the Bankcontinues to make a Facility available to the Borrower after its Expiry Date,and this letter of offer has not been extended, amended or replaced, then theterms of this letter of offer will continue to apply to the Facility unless theBank otherwise notifies the Borrower. The previous sentence is not a waiver of any Event of Default, or awaiver of any of the Bank’s rights under this letter of offer.

 

**20.****                    ASSIGNMENT**

 

The Bank mayassign, novate, sub-participate or sell down by whatever form, all its rightsunder the Documents with the prior consent of the**Borrower,which consent will not be unreasonably withheld or delayed.

 

The Borrowermay not assign its rights or novate its obligation under the Documents.

 

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**21.****                    CONFIDENTIALITY**

 

The Bank andthe Borrower will keep confidential the terms of the Facilities, the Documents,and any information which either of them may provide to the other.  This obligation does not prevent disclosure:

 

(a)                        if allowed or required by Law, or required by any stock exchange;

 

(b)                       in connection with legal proceedings relating to the Documents;

 

(c)                        if the information is generally and publicly available;

 

(d)                       to a subsidiary of the Bank, in which case this **paragraph 21**will apply to the subsidiary.

 

**22.****                    INCONSISTENCY**

 

                                      If any provision of this letter of offer is inconsistent with anyprovision of the Documents, this letter of offer will prevail.

 

**23.****                    GOVERNING LAW ANDJURISDICTION**

 

This letter ofoffer is governed by the Laws of New South Wales.  Each party submits to the jurisdiction of theLaws of that state, including appeal courts.

 

**24.       DEFINITIONS**

 

The followingterms shall have the following meanings in this letter of offer:

 

**Accounting Standards** means the accounting standards prescribed under the CorporationsAct, Chapter 2M to the Corporations Regulations and, where not inconsistentwith those accounting standards and schedule, the accounting standards adoptedfrom time to time by the major accounting bodies in Australia in respect of thepreparation of accounts and financial statements.

 

**Authorised Officer** means:

 

(a)                        in the case of the Bank, a director, secretary or an officer whosetitle contains the word **manager** or aperson performing the functions of any of them; and

 

(b)                       in the case of the Borrower or a Security Provider, a personappointed by the Borrower or that Security Provider to act as an AuthorisedOfficer under the Documents to which it is a party and whose specimen signatureas Authorised Officer has been provided to the Bank.

 

**Base Lending Rate** means the rate described as such or any rate replacing that rate aspublished from time to time by the Bank in the financial press and includes anyrate adopted by the Bank to replace it.

 

**Bill** has the same meaning as in the Bills of Exchange Act 1909 (Cwlth)and a reference to the drawing or acceptance or endorsement of, or otherdealing with, a Bill is to be interpreted in accordance with that act.

 

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**Bushman’s Group ofCompanies** means Bushmans Group Pty LimitedABN 90 090 744 022, Polyrib Tanks Pty Limited ABN 49 062 942 661, Hold-OnIndustries Australia Pty Limited ABN 49 072 185 461 and Australian BushmanTanks Pty Limited ABN 21 058 504 108.

 

**Business Day** means a day (not being a Saturday or a Sunday) on which the Bank isopen for general banking business in Sydney.

 

**Default Rate** means 6.00% per annum above the Bank’s Base Lending Rate from timeto time.

 

**Documents** means this letter of offer, the Security Documents and eachsecurity document (however described) including every guarantee, mortgage,charge, debenture, set-off agreement and other instrument, notice, form,agreement or encumbrance from time to time held by the Bank from the Borrowerand any Security Provider.

 

**Dollars**,**$ or A$** means the lawful currencyof Australia.

 

**Financial AssistanceSatisfaction Date** means the earlier of:

 

(a)                        the date on which all the requirements of sections 260A and 260B ofthe Corporations Act (including the 14 day notice period in section 260B(6))have been complied with in connection with the financial assistance to beprovided for the acquisition of the shares and issued capital of the Bushman’sGroup of Companies; and

 

(b)                       25 days after the date of acceptance of this letter of offer by theBorrower.

 

**Law** means any law or regulation (including any policy, directive orguidelines, whether or not having the force of law, but compliance with whichis in accordance with the practice of responsible bankers).

 

**Money Owing** means all money owing to the Bank by the Borrower on any account,and includes without limitation:

 

(a)                        all money lent or advanced by the Bank to the Borrower, in anycurrency, and which have not been repaid to the Bank;

 

(b)                       all money owing by the Borrower to the Bank in respect of any billsaccepted and/or endorsed and/or discounted facility made available by the Bank,including the face value of all bills of exchange which are from time to timeoutstanding (although the maturity dates of such outstanding bills has notoccurred);

 

(c)                        the aggregate amount of the Bank’s liability under any documentaryletter of credit, standby letter of credit, performance bond or bank guaranteeissued by the Bank on behalf of or at the request of the Borrower, although nopayment under it shall have been made or demanded;

 

(d)                       the aggregate amount of money unpaid to the Bank in respect of anyTreasury Transaction, in any currency;

 

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(e)                        all interest, fees, charges and other money which the Borrower isrequired to pay to Bank under any Document, and which are from time to timeowing or unpaid to the Bank; and

 

(f)                          Break Costs being any loss, cost, charge or expense incurredpursuant to paragraph 18 of this Annexure.

 

The termincludes, without limitation, any money and amounts owing by the Borrower tothe Bank which:

 

(a)                        are presently owing and payable, are owing but not presently payableor are owing upon a contingency;

 

(b)                       may become owing or remain unpaid or for which the Bank may becomeliable by reason wholly or partly of past events or by reason of anything doneor omitted by the Bank or the Borrower;

 

(c)                        may reasonably, foreseeably become owing or remain unpaid on anyaccount or in any manner whatsoever by reason of the relation of bank andcustomer or by operation of law or equity or otherwise by reason of anythingdone by the Bank with the consent or at the express or implied request of theBorrower.

 

**Potential Event of Default** means an event omission or circumstance which with the giving ofnotice and/or lapse of time and/or other condition would become an Event ofDefault.

 

**Schedule** means the schedule to this letter of offer set out as **Annexure E**.

 

**Security Documents** means the various documents described in the **Schedule**to this letter of offer.

 

**Security Provider** means each person who is party to any of the Security Documents****but excluding the Bank and the Company.

 

**Taxes** or **Tax** means any tax, levy, impost,deduction, charge, withholding and duty imposed by any authority and includeswithout limitation any withholding tax, financial institutions duty, stampduty, transaction duty and other government charges or any kind (includingpenalties) payable in respect of the Documents, or any payments, ortransactions under them.  It does notinclude income tax on the Bank’s own income.

 

**Treasury Transaction**includes, without limitation, any interest rate or currency forwardrate agreement, swap, financial option, futures contract, currency exchangeagreement, reciprocal purchase agreement, swaption, floor, collar, cap and anysimilar type of interest rate or currency risk management or forward purchaseor sale agreement, however described.

 

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**ANNEXURE B**

 

**FINANCIALUNDERTAKINGS**

 

**1.         FINANCIALRATIOS**

 

The Borrowerundertakes to the Bank to comply with the following financial undertakingsunless the Bank otherwise consents in writing. The covenants (a), (b), (c)& (d) are to be calculated on the consolidated position of the Borrower andChannell Pty Ltd.:

 

(a)                        Debt to EBIT: Commencing December 2004Gross debt (outstanding balance of Bank Bills and Debtor Finance but excludingsubordinated and related party debt) is not to exceed four times EBIT, reducingto 3.50 times from September 2005. Calculations from September 2005 are to bebased on a four quarter rolling average.;

 

(b)                       Capital Adequacy Ratio; Commencing June2005 shareholder funds must remain greater than 45% of Total Assets (includinggoodwill). Ratio is to increase to 50% by June 2007.

 

(c)                        Debt Service Cover: Commencing June 2005EBITDA must not at any time fall below a figure of 1.25 times the total amountof interest payments and scheduled repayments. To be calculated on a four quarterrolling average.

 

(d)                       Interest Cover Ratio: earnings beforeinterest and tax (EBIT) divided into the total amount of interest payable bythe Borrower must not at any time fall below a figure of 2.00 times for theSeptember 2004 and December 2004 quarters, then increase to 2.5 times for March2005 and June 2005 quarters. Subsequent calculations are to be based on a fourquarter rolling average.

 

(e)                        Dividends: dividends are not to bedeclared or paid until senior debt is cleared.

 

(f)                          No change to equity structure withoutthe Banks prior consent.

 

FinancialRatio’s are to be reviewed at each annual review.

 

**2.****                           **The ratios in **paragraph 1**will be determined on an annualised basis, based on the most recent accounts ofthe Borrower available at that time.

 

**3.****                           TERMS USED**

 

In thisAnnexure any accounting or financial terminology will be interpreted inaccordance with the Accounting Standards in respect of the accounts of theBorrower on a consolidated basis.

 

**4.****                           DEPARTURESFROM ACCOUNTING STANDARDS**

 

If the Borrowerwishes to depart from the Accounting Standards in preparing its accounts, theparties will consult with each other on the changes (if any) required to theundertakings in **paragraph 1** to ensure that theyremain consistent.

 

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**5.****                           COMPLIANCECERTIFICATE**

 

The Borrowerwill also deliver to the Bank on a calendar quarterly basis a certificate as tocompliance, with Financial Undertakings, giving reasonable particulars of anycalculations.  The certificate will besigned by a director or chief financial officer of the Borrower.

 

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**ANNEXURE C**

 

**CONDITIONSPRECEDENT**

 

The Bank is not obliged to make the Facilitiesavailable to the Borrower unless the Bank has received the following in formand substance acceptable to the Bank:

 

(a)                       (**board minutes**) a certified copy of:

 

(i)                           an extract of the minutes of a meeting of the board of directors ofthe Borrower which evidences the resolutions authorising the acceptance and observanceof obligations under (and acknowledgment that the Borrower will benefit from)this letter of offer and the appointment of Authorised Officers of theBorrower; and

 

(ii)                        an extract of the minutes of a meeting of the board of directors ofeach Security Provider which evidences the resolution authorising theappointment of Authorised Officers of the Security Provider;

 

(b)                       (**other authorisations**) a certifiedcopy of each authorisation necessary to enter into, observe obligations underand enforce the Documents;

 

(c)                        (**power of attorney**) the original ofeach power of attorney under which any person signs and delivers a Document forthe Borrower or any Security Provider and, if required by the Bank, evidence ofits stamping and registration;

 

(d)                       (**specimen signatures**) a certifiedspecimen signature of each Authorised Officer of each Borrower and of everySecurity Provider;

 

(e)                        (**signed Documents**) each Documentsigned and delivered and, if required by the Bank, evidence of its stamping andregistration;

 

(f)                          (**solvency declaration**) a statutorydeclaration that each Borrower is solvent, signed by a director of theBorrower;

 

(g)                       (**securities**) the SecurityDocuments;

 

(h)                       (**no Events of Default**) evidencethat no Event of Default or event which with the giving of notice, lapse oftime or fulfilment of any conditions would be likely to become an Event ofDefault continues unremedied or would result from the provision of the proposeddrawing;

 

(i)                           (**other documents**) the Bank hasreceived the other approvals, opinions or documents which it has reasonablyrequested;

 

(j)                           (**establishment fee**) payment of theestablishment fee, if any and however described;

 

(k)                        (**other requirements**) such otherconditions precedent as the Bank may specify by notice to the Company;

 

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(l)                           (**payment of costs**) evidence thatall legal and other costs and expenses (including stamp duty and registrationfees) incurred by the Bank in connection with the Facilities have been paid;

 

(m)                     (**due diligence**) Grant Thornton DueDiligence to be assigned to the National Australia Bank Ltd;

 

(n)                       (**insurance**) copy of all InsurancePolicies;

 

(o)                       (**employment contracts**) writtenconfirmation that employment contracts with key staff are still in effect; and

 

(p)                       (**equity**) written confirmation thatChannell Commercial Corp Inc has contributed $15,000,000 as Paid Up Capital.

 

 

**Conditions Precedent to the Debtor FinanceFacility Agreement**

 

Notwithstanding anything contained in the Agreement,it will not come into force until the following conditions have been fulfilledor waived by the Bank:-

 

1.          TheAgreement and all security documents must be executed by all the appropriateparties and unconditionally delivered to the Bank, together with all otherdocuments or other evidence the Bank may require to satisfy itself as to thedue execution, full effectiveness and priority of the securities;

2.          A copyof your company’s and each incorporated guarantor’s Certificate ofIncorporation and Memorandum and Articles of Association certified by twodirectors as being true, correct and up to date must be delivered to the Bank;

3.          If thetrust provisions of the Agreement apply, all relevant instruments of trust andany other documents relating thereto certified as being true, correct and up todate must be delivered to the Bank;

4.          Anyencumbrances that would in any way affect the priority of the securitiesintended by the Bank must be removed or discharged;

5.          At theBank’s expense an officer of the Bank must have examined your accounts with theresult being to the Bank’s total satisfaction.

6.          A copyof the most recent debtor validations completed by the company’s externalauditors is the be provided to the Bank prior to the initial drawdown of thefacility, and on a half yearly basis as completed by the company’s externalauditors.

 

**Other Conditions**

 

•                  Field Examination tobe conducted prior to the commencement of the facility, with the provision ofthe facility dependent upon the results of the examination being satisfactoryto the Bank.

•                  Field Examinations to be conducted on a regular basis, with thefrequency determined by the Bank, with specific reference to clause 13.3(g).

•                  In terms of clause  8.1(c) ofthe Debtor Finance Facility Agreement the Certificate of Debtors, and****the Debtor Aged Trial Balance is to be provided to the Bankwithin 5 working days of previous month end

•                  In terms of clause 3.2 of the Debtor Finance Agreement all invoicesexceeding $15,000 are to be supported by some additional evidence of actual orconstructive delivery of goods or services, to the bank’s satisfaction.

 

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•                  Financing against individual debtors account will be restricted to15% of the total financed debtors ledger of $100,000 (whichever is the lesser)unless the Bank specifically approves amounts in excess of either of those twofigures.

•                  Subject always toClause 1.1(24) of the Agreement, the Bank shall on a weekly basis determine theRequired Retention level of the Retention Reserve by bringing to account theretention percentage of all monies collected in that week from Customers withregard to Purchased Debts. This shall be in addition to the determination ofthe Required Retention Level that would normally occur after the receipt by theBank of the month end Certificate of Debtors.

•                  The Bank will notpurchase any contract-related debt, which includes retentions, progress claimsor liquidated damages.

•                  All lendingcovenants currently in place for other facilities provided by the Bank (and asthey may be amended from time to time) are also to apply to this facility.

•                  Inter-companyaccounts, foreign debtors, personal debtors and COD sales are not to befinanced.

 

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**ANNEXURED**

 

**BILL ACCEPTANCE/DISCOUNTFACILITY - TERMS**

 

References to the **Borrower** inthis Annexure are references to the company or companies specified as **Participating Companies** in respect of this Bill Facility inthe letter of offer.

 

**1.****                           DRAWINGS**

 

1.1                       Bills drawn by the Borrower under this Bill acceptance and/ordiscount facility will be accepted by the Bank in accordance with the Bank’snormal requirements and this letter of offer for the accommodation of theBorrower.  Subject to **paragraph 2** below, the Bank will pay to the Borrower the discountedproceeds of the Bills less any money due and payable to the Bank by theBorrower.  The face value of all Bills soaccepted by the Bank and outstanding will not exceed the limit of the Facilityat any time.

 

1.2                       The Borrower must give the Bank not less than three Business Days’written notice prior to the proposed discount date specifying the proposed dateof drawdown/rollover, the aggregate face value of the Bills, the number ofBills and their tenor and must deliver to the Bank the Bills which the Borrowerwishes the Bank to accept and discount.

 

1.3                       The Bank is not obliged to accept any Bill having a maturity datelater than the Expiry Date of the Facility.

 

1.4                       Bills will be drawn by the Borrower on the Bank with face values,payable on such days to such persons and at such places in Australia as theBorrower and the Bank agree.  A Bill mustnot mature on a day which is not a Business Day.

 

1.5                       The Borrower and the Bank agree to observe the provisions of theBills of Exchange Act (Cwlth) as to anything necessary to be done to ensure thevalidity of any Bills to be drawn or accepted under this Facility or to attractthe benefit of any provision of that Act.

 

1.6                       Bills accepted by the Bank will be discounted by the Bank at therate agreed between the Bank and the Borrower. The proceeds will be paid to the Borrower’s account, or applied under **paragraph 2.2** below.

 

1.7                       Each Bill accepted by the Bank under the Facility will be a **Document** for purposes of this letter of offer.

 

1.8                       The obligation of the Bank to accept Bills is subject to theBorrower’s compliance with all of its obligations under this letter of offer.

 

1.9                       Each Bill drawn by the Trustee and accepted by the Bank must bear anendorsement to the effect that the Bills are drawn by the Trustee in itscapacity as trustee of the Trust and an express stipulation negativing theliability of the Trustee as drawer and signed by drawer “without recourse”.

 

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1.10                 TheBank will issue to the Borrower an advice in relation to Bills drawn by theBorrower as soon as practicable after they are drawn.  This advice will include details of thediscount or yield rate(s) applicable to those Bills.

 

**2.****                           REPLACEMENTBILLS**

 

2.1                       The Bank will accept and discount replacement Bills tendered to itin accordance with **paragraph 1** atleast two days before the maturity of those Bills previously accepted anddiscounted pursuant to the letter of offer so that the maturing Bills will befunded in whole or in part by replacement Bills and in such circumstances theamount payable by the Bank to the Borrower in respect of the replacement Billswill be netted off to satisfy or partly satisfy the payment obligations of theBorrower in respect of the maturing Bills.

 

2.2                       As regards the replacement Bills and notwithstanding the provisionsof paragraph 1.

 

(a)                       If the Borrower has not appointed the Bank as the attorney of theBorrower then the Borrower shall (except with the consent of the Bank) deliversuch replacement Bills to the Bank at least two Business Days prior to thematurity date of the maturing Bills.

 

(b)                      If the Borrower has appointed the Bank as the attorney of theBorrower, then, subject to sub-paragraphs (c) and (d) below, on the maturitydate of each Bill drawn and accepted under the Bill Facility, the Borrower istaken to have instructed the Bank to draw in the Borrower’s name Bills on thesame terms as the maturing Bills, except that:-

 

(i)                           the replacement Billswill have a face value equal to the lower of the face value of the maturingBills and the amount up to the available limit of the Bill Facility prevailingon the maturity date of the maturing Bills (after such Bills mature); and

 

(ii)                        the maturity date of the replacement Bills will be the date thatoccurs at the end of a period of the same length as the period between the dateon which the maturing Bills were drawn and the maturity date of those maturingBills.  However:

 

(A)                    if this means that the replacement Bills have a maturity date thatis not a Business Day, then the replacement Bills will be drawn to have amaturity date that is the next Business Day after that day.  Any days that are added to such a periodbecause the day at the end of the period is not a Business Day, will bedisregarded for the purpose of calculating the next subsequent maturity date(for example, if a ninety day Bill would mature on a Saturday, then thematurity date for the purposes of this paragraph will be the next BusinessDay.  However, a replacement Billsubsequently drawn to replace that Bill will be for ninety days, again unlessthe maturity date for that Bill would not be a Business Day, in which case itwill mature on the next Business Day); and

 

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(B)                      if this means that the maturity date of the replacement Bills wouldoccur after the expiry date of the Bill Facility, then paragraph (A) above doesnot apply and the maturity date for the replacement Bill will be:

 

•                                theexpiry date of the Bill Facility, if the expiry date is a Business Day; or

 

•                                thelast Business Day before the expiry date, if the expiry date is not a BusinessDay.

 

(c)                       If sub-paragraph (b) above applies, the Borrower may subsequentlynotify the Bank that it does not wish the procedure in sub-paragraph (b) toapply for a specified period or for the remainder of the term of the BillFacility, by providing the Bank with a written notice to this effect in a formacceptable to the Bank.  If such noticeis received by the Bank at least five Business Days prior to the maturity dateof a maturing Bill, then sub-paragraph (b) above will not apply to the Bankthat matures on that maturity date.

 

(d)                      If the Borrower gives or has given the Bank separate and specificinstructions to draw and sign Bills on its behalf (as the attorney of theBorrower) on each relevant draw down date, then those instructions will prevailover the procedure contained in sub-paragraph (b).  If this paragraph applies, the Bank will notseparately reconfirm these instructions with the Borrower on each draw downdate.

 

2.3                       Where the Bank has agreed to accept a replacement Bill under **paragraph 2.1**, the obligation of the Borrower to pay to theBank the face value of a maturing Bill on its maturity date may, at thediscretion of the Bank, be satisfied by the Bank:

 

(a)                       debiting the face value of the maturing Bill to an internal suspenseaccount of the Bank;

 

(b)                      accepting a replacement Bill;

 

(c)                       crediting the discounted proceeds of the replacement Bill to thenominated account of the Borrower; and

 

(d)                      debiting the nominated account of the Borrower with all fees,charges and premiums payable by the Borrower in respect of the replacementBill.

 

2.4                       As an alternative to the procedure as set out in paragraph 2.3above, the Bank may:-

 

(a)                       debit the face value of the maturing Bills to an internal suspenseaccount of the Bank;

 

(b)                      accept the replacement Bill;

 

(c)                       credit the discounted proceeds of the replacement Bills in reductionof the debit created to the internal suspense account referred to insub-paragraph (a);

 

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(d)                      debit the nominated account of the Borrower for the amount of theremaining balance of the internal suspense account referred to in sub-paragraph(a); and

 

(e)                       debit all fees, charges and premiums payable by the Borrower inrespect of the replacement Bills to the nominated account of the Borrower.

 

2.5                       The procedure outlined in **paragraphs 2.3 and 2.4**shall be adopted for administrative convenience only and shall not prejudicethe right of the Bank at any time to require the Borrower to pay to it the facevalue of any Bill on its maturity date.

 

**3.****                           INDEMNITYIN RESPECT OF BILLS**

 

3.1                       The Borrower indemnifies the Bank against all liabilities of anykind whether actual or contingent which are incurred by the Bank in accepting,discounting, endorsing or becoming the payee or other holder of any Bill towhich a Borrower is party.  Subject to **paragraph 2.2**, the Borrower will pay to the Bank inimmediately available funds an amount equal to the face value of each Bill notlater than 11 a.m. on the date of maturity of each Bill.

 

3.2                       The obligations and liabilities of the Borrower under this Facilityand in relation to each Bill drawn and accepted shall continue notwithstandingthat the Bank becomes the holder of a Bill in its own right on or after itsmaturity date.

 

3.3                       The Bank may pay any Bill on or after its maturity date withoutbeing under any obligation to enquire as to the title of the person presentingthe same for payment.

 

3.4                       If the Borrower fails to pay to the Bank the face value of any Billeither on its maturity date or upon service of a notice of default pursuant tothis letter of offer, the Bank may debit an account in the name of the Borrower(whether opened by the Bank or the Borrower) with the face value of each suchBill, and any costs, expenses and outgoings payable by the Borrower pursuant tothis letter of offer.

 

**4.****                           BANK TOSIGN BILLS**

 

4.1                       The Borrower appoints severally, each Authorised Officer of the Bankas its attorney and authorises:

 

(a)                       to sign as drawer and endorser and to deliver and issue for theBorrower each Bill to be drawn and endorsed by the Borrower under thisagreement; and

 

(b)                      severally, each Authorised Officer of the Bank to complete Bills inaccordance with the particulars specified in the relevant Drawdown Notice(including any agreed variation of it) and otherwise in accordance with thisagreement in all respects in which they are incomplete (including, withoutlimitation, the completion of the face value and tenor of the Bills) and todate them.

 

4.2                       The Borrower indemnifies the Bank and each Authorised Officer of theBank against all liabilities incurred in acting under the authority given by **paragraph 4.1**.

 

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**5.         CHANGES TO THE TERMS AND CONDITIONS OF THE BILL FACILITY**

 

5.1                       The Bank may vary the terms and conditions of the Facility at anytime by giving the Borrower notice of the change.

 

5.2                       The Bank will give the Borrower written notice of the introductionof any new fee or charge.  The Bank willgive the Borrower notice of other changes to the terms and conditions of thisFacility, either by writing to the Borrower or by press advertisement.

 

5.3                       The Bank does not have to give the Borrower notice of theintroduction of, or any change to, government fees and charges if theintroduction or change is publicised by or on behalf of the government.

 

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| **ANNEXURE “E”** | **SCHEDULE** |
|----------------------------|--------------|

 

**GROUP MEMBERS:**

 
| **Company Name**                         | ** ** | **ACN**     | ** ** | **Registered office**                        |
|------------------------------------------|------------|-------------|------------|----------------------------------------------|
| Channell Bushman Pty Limited             |       | 109 821 614 |       | Suite 3, 391 Park Road Regents Park NSW 2143 |
| Bushmans Group Pty Limited               |       | 090 744 022 |       | Suite 3, 391 Park Road Regents Park NSW 2143 |
| Polyrib Tanks Pty Limited                |       | 062 942 661 |       | Suite 3, 391 Park Road Regents Park NSW 2143 |
| Hold-On Industries Australia Pty Limited |       | 072 185 461 |       | Suite 3, 391 Park Road Regents Park NSW 2143 |
| Australian Bushman Tanks Pty Limited     |       | 058 504 108 |       | Suite 3, 391 Park Road Regents Park NSW 2143 |

 

**SPECIFIED ACCOUNTS:**

 
| **Account Name**                         | ** ** | **BSB** | ** ** | **Account Number**       |
|------------------------------------------|------------|---------|------------|--------------------------|
| Channell Bushman Pty Limited             |       | 082-057 |       | 57-189-3025              |
| Bushmans Group Pty Limited               |       | 082-057 |       | 57-132-0868  57-185-8852 |
| Polyrib Tanks Pty Limited                |       | 082-057 |       |                     |
| Hold-On Industries Australia Pty Limited |       | 082-057 |       |                     |
| Australian Bushman Tanks Pty Limited     |       | 082-057 |       |                     |

 

LEFT BLANK ONPURPOSE

 

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**SECURITIES:**

 

The following Security Documents must be held in aform and substance satisfactory to the Bank prior to drawdown of theFacilities.

 

1.          First ranking registered charge givento the Bank by Channell Bushman Pty Limited ACN 109 821 614 over all its assetsand undertakings both present and future including uncalled and called butunpaid capital.

 

2.          Guarantee andIndemnity on account of Channell Bushman Pty Limited ACN 109 821 614 for  $15,750,000 given to the Bank by:

 

(a)        Bushmans Group Pty Limited ABN 90 090744 022 supported by a first ranking registered charge over all its assets andundertakings both present and future including uncalled and called but unpaidcapital;

 

(b)        Polyrib Tanks Pty Limited ABN 49 062 942661 supported by a first ranking registered charge over all its assets andundertakings both present and future including uncalled and called but unpaidcapital;

 

(c)        Hold-On Industries Australia Pty LimitedABN 49 072 185 461 supported by a first ranking registered charge over all itsassets and undertakings both present and future including uncalled and calledbut unpaid capital;

 

(d)        Australian Bushman Tanks Pty Limited ABN21 058 504 108 supported by a first ranking registered charge over all itsassets and undertakings both present and future including uncalled and calledbut unpaid capital;

 

(e)        Channell Pty LimitedABN 29 002 735 622 supported by a first ranking registered charge over all itsassets and undertakings both present and future including uncalled and calledbut unpaid capital

 

3.          Debtor FinanceAgreement on account of Bushmans Group Pty Limited ABN 90 090 744 022 securedby a first ranking registered charge over all its assets and undertakings bothpresent and future including uncalled and called but unpaid capital and aguarantee given to the Bank by:

 

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(a)        Channell Bushman Pty Limited ACN 109 821614 supported by a first ranking registered over all its assets andundertakings both present and future including uncalled and called but unpaidcapital.

 

(b)        Polyrib Tanks Pty Limited ABN 49 062 942661 supported by a first ranking registered charge over all its assets andundertakings both present and future including uncalled and called but unpaidcapital;

 

(c)        Hold-On Industries Australia Pty LimitedABN 49 072 185 461 supported by a first ranking registered charge over all itsassets and undertakings both present and future including uncalled and calledbut unpaid capital;

 

(d)        Australian Bushman Tanks Pty Limited ABN21 058 504 108 supported by a first ranking registered charge over all itsassets and undertakings both present and future including uncalled and calledbut unpaid capital;

 

LEFT BLANK ONPURPOSE

 

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