<PAGE>
 
                         PUBLIC TRANSPORT CORPORATION
                                    ("PTC")

                                    - and -

                  READING PROPERTIES PTY LTD ACN 071 195 429
                                 ("Developer")

                                    - and -

                     MACKIE GROUP PTY LTD ACN 006 524 456
                                  ("Mackie")


                                   AGREEMENT
<PAGE>
 
                                       1



                               TABLE OF CONTENTS

<TABLE> 
<CAPTION> 
Clause                                                                                   Page
<S>                                                                                      <C>
RECITALS.................................................................................   1

 1.      DEFINITIONS AND INTERPRETATION..................................................   2
         1.1     DEFINITIONS.............................................................   2
         1.2     INTERPRETATION..........................................................   8
         1.3     CONTENTS AND HEADINGS...................................................   9
         1.4     PRECEDENCE..............................................................   9

 2.      GENERAL OBLIGATIONS.............................................................   9
         2.1     DEVELOPER'S OBLIGATIONS.................................................   9
         2.2     PTC'S OBLIGATIONS.......................................................  10
         2.3     INDEPENDENCE OF DEVELOPER...............................................  11
         2.4     ASSIGNMENT..............................................................  11
         2.5     EXERCISE OF PTC'S POWERS................................................  11

 3.      NON DEVELOPMENT OBLIGATIONS.....................................................  12
         3.1     CAR PARK AGREEMENT......................................................  12
         3.2     SECTION 173 AGREEMENT...................................................  12
         3.3     LICENCE FOR ACCESS......................................................  12

 4.      ENGAGEMENT OF CONSULTANTS.......................................................  12
         4.1     DEVELOPER'S CONSULTANTS.................................................  12
         4.2     PERIOD OF ENGAGEMENT....................................................  12
         4.3     NO DIMINISHING OF RESPONSIBILITY........................................  12

 5.      PROJECT DOCUMENTATION...........................................................  12
         5.1     DEVELOPMENT OF PROJECT DOCUMENTATION....................................  12
         5.2     SUBMISSION OF DOCUMENTATION TO PTC'S REPRESENTATIVE.....................  12
         5.3     APPROVAL OF DOCUMENTATION BY PTC'S REPRESENTATIVE.......................  13
         5.4     DOCUMENTATION TO BE INCORPORATED INTO THE CONTRACT......................  13
         5.5     COPIES OF DOCUMENTATION.................................................  13

 6.      PROGRAMME AND REVIEW OF CONSTRUCTION PROGRESS...................................  13
         6.1     DEVELOPER TO PREPARE PROGRAMME..........................................  13
         6.2     FORM OF PROGRAMME.......................................................  13
         6.3     APPROVAL OF PROGRAMME BY PTC'S REPRESENTATIVE...........................  14
         6.4     MEETINGS AND REPORTS....................................................  14
         6.5     CONSTRUCTION PROGRAMME REVIEW PROCESS...................................  14

 7.      THE SITE........................................................................  15
         7.1     DEVELOPER'S OBLIGATIONS.................................................  15
         7.2     DEVELOPER'S WARRANTIES AND ACKNOWLEDGMENTS..............................  15
         7.3     ACCESS TO THE SITE......................................................  16
         7.4     ACCESS TO MAKE GOOD.....................................................  16
         7.5     ACCESS FOR PTC'S REPRESENTATIVE.........................................  17
         7.6     ACCESS TO ADJOINING PTC LAND............................................  17
         7.7     SITE CONDITIONS.........................................................  17
         7.8     SITE ESTABLISHMENT AND CLEANING.........................................  17
         7.9     CHANGES TO SITE.........................................................  18
         7.10    CONDITION OF THE LAND...................................................  18
</TABLE> 
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                                       2

<TABLE> 
<S>                                                                                        <C> 
 8.      SUBCONTRACTS....................................................................  19
         8.1     SUBCONTRACTING..........................................................  19
         8.2     DEVELOPER'S RESPONSIBILITY..............................................  19

 9.      ROLE OF PTC'S REPRESENTATIVE....................................................  19
         9.1     AGENT OF PTC............................................................  19
         9.2     PTC'S REPRESENTATIVE'S AUTHORITY........................................  19
         9.3     EMPLOYMENT OF OTHERS ON DEVELOPER'S DEFAULT.............................  20

10.      EXECUTION OF THE WORKS..........................................................  20
         10.1    SCOPE OF THE WORKS......................................................  20
         10.2    PROVISION OF MATERIALS AND LABOUR.......................................  20
         10.3    CONSTRUCTION METHODS AND QUALITY ASSURANCE..............................  21
         10.4    SUPERVISION.............................................................  21
         10.5    REQUIREMENTS OF AUTHORITIES.............................................  21
         10.6    SETTING OUT INFORMATION.................................................  21
         10.7    SETTING OUT THE WORKS...................................................  22
         10.8    MATERIALS AND WORKMANSHIP...............................................  22
         10.9    OPENING UP THE WORKS....................................................  23
         10.10   QUALITY OF WORK AND MATERIALS...........................................  23

11.      PTC SAFETY AWARENESS............................................................  24
         11.1    SAFETY AWARENESS TRAINING COURSE........................................  24
         11.2    DEVELOPER TO NOMINATE PERSONNEL.........................................  25
         11.3    COMPLIANCE WITH SAFEWORKING INSTRUCTIONS................................  25
         11.4    SAFEWORKING INSTRUCTIONS PRESENTATIONS..................................  25

12.      GENERAL ENGINEERING AND OPERATIONAL CONDITIONS..................................  25
         12.1    COMPLIANCE WITH GENERAL ENGINEERING AND OPERATIONAL CONDITIONS..........  25
         12.2    NOTICE OF ABSOLUTE OCCUPATIONS..........................................  25
         12.3    PTC NOT LIABLE..........................................................  26
         12.4    DEVELOPER TO NOTIFY RELEVANT AUTHORITIES................................  26
         12.5    PTC FLAGMEN.............................................................  26
         12.6    ABSOLUTE OCCUPATION DAMAGE..............................................  26
         12.7    PTC COSTS...............................................................  26
         12.8    CHANGES TO PROGRAMME....................................................  27

13.      PTC INFRASTRUCTURE..............................................................  27
         13.1    PTC INFRASTRUCTURE WORKS MODIFICATIONS..................................  27
         13.2    PTC INFRASTRUCTURE WORKS................................................  27

14.      TIME............................................................................  27
         14.1    NOTIFICATION OF DELAYS..................................................  27
         14.2    NOTICE OF CLAIMED EXTENSION.............................................  28
         14.3    PTC'S REPRESENTATIVE'S DETERMINATION....................................  28
         14.4    CONDITION PRECEDENT TO EXTENSION OF TIME................................  28
         14.5    PRACTICAL COMPLETION....................................................  28
         14.6    DEFECTS LIABILITY PERIOD................................................  29
         14.7    DEVELOPER TO RECTIFY....................................................  29
         14.8    TIME FOR MAKING GOOD....................................................  30
         14.9    SUBMISSION OF CERTIFICATES, SURVEY PLANS AND OPERATING DOCUMENTS........  30
</TABLE>
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                                       3

<TABLE> 
<S>                                                                                        <C>      
15.      INDEMNITIES AND INSURANCE.......................................................  30
         15.1    DEVELOPER'S INDEMNITY...................................................  30
         15.2    DEVELOPER'S INSURANCE...................................................  30
         15.3    INSURANCE REQUIREMENTS..................................................  31
         15.4    INSURANCE CONDITIONS FOR JOINT POLICIES.................................  32
         15.5    COPIES OF POLICIES......................................................  32
         15.6    PAYMENT OF PREMIUMS.....................................................  32
         15.7    CERTIFICATES OF CURRENCY................................................  32

16.      BANK GUARANTEE..................................................................  32
         16.1    DEVELOPER TO PROVIDE BANK GUARANTEE.....................................  32
         16.2    TERMINATION OF CONTRACT.................................................  32
         16.3    RELEASE OF BANK GUARANTEE...............................................  33
         16.4    RELEASE OF DEFECTS GUARANTEE............................................  33
         16.5    DRAWDOWN................................................................  33
         16.6    PTC'S OTHER RIGHTS NOT PREJUDICED.......................................  33
         16.7    REPLACEMENT BANK GUARANTEE..............................................  33

17.      DEFAULT AND TERMINATION.........................................................  34
         17.1    DEFAULT EVENTS..........................................................  34
         17.2    OCCURRENCE OF DEFAULT EVENT.............................................  34
         17.3    CURE PERIOD.............................................................  34
         17.4    EXTENSION TO CURE PERIOD................................................  34
         17.5    REMEDIES FOR DEFAULT EVENTS.............................................  35
         17.6    RIGHTS AND LIABILITIES OF THE PARTIES FOLLOWING TERMINATION BY PTC......  36
         17.7    WAIVER..................................................................  37

18.      ASSIGNMENT OF INTEREST BY MACKIE................................................  37

19.      CONSENT BY PTC..................................................................  37

20.      DISPUTE RESOLUTION..............................................................  37

21.      NOTICES.........................................................................  38
         21.1    NOTICE REQUIREMENTS.....................................................  38
         21.2    NOTICES ON PTC'S REPRESENTATIVE.........................................  39
         21.3    TIME OF EFFECT OF NOTICE................................................  39
         21.4    RECEIPT OF NOTICE.......................................................  39
         21.5    NOTICES TO US PARENT....................................................  39
         21.6    FAILURE TO SERVE NOTICE.................................................  39

22.      COSTS...........................................................................  39
         22.1    LEGAL COSTS.............................................................  39
         22.2    COSTS ON DEFAULT........................................................  39

23.      MISCELLANEOUS...................................................................  40
         23.1    CERTIFICATE.............................................................  40
         23.2    EXERCISE OF RIGHTS......................................................  40
         23.3    SINGLE OR PARTIAL EXERCISE..............................................  40
         23.4    FAILURE OR DELAY IN EXERCISE............................................  40
         23.5    NO LIABILITY............................................................  40
         23.6    WAIVER AND VARIATION....................................................  40
</TABLE> 
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                                       4

<TABLE> 
<S>                                                                                        <C> 
         23.7    WAIVER DOES NOT EXTEND TO ANOTHER.......................................  40
         23.8    ACCEPTANCE OF PAYMENT...................................................  40
         23.9    SUPERVENING LEGISLATION.................................................  40
         23.10   REMEDIES CUMULATIVE.....................................................  41
         23.11   SET-OFF.................................................................  41
         23.12   REDUCTION OF AMOUNT PAYABLE.............................................  41
         23.13   INDEMNITIES.............................................................  41
         23.14   ENFORCEMENT OF INDEMNITY................................................  41
         23.15   FURTHER ASSURANCES......................................................  41
         23.16   ANTECEDENT BREACHES AND OBLIGATIONS.....................................  41
         23.17   ENTIRE AGREEMENT........................................................  41

24.      SEVERABILITY....................................................................  42

25.      GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS..............................  42
         25.1    GOVERNING LAW...........................................................  42
         25.2    JURISDICTION............................................................  42
         25.3    SERVICE OF PROCESS......................................................  42

26.      GOOD FAITH......................................................................  42
 
SCHEDULE 1
STANDARDS FOR PTC WORKS..................................................................  44

SCHEDULE 2
PUBLIC TRANSPORT CORPORATION GENERAL CRITERIA
for Developments at Railway Locations
Railway Operations and Engineering Design and Construction Aspects
ENG-AD-STD-0001. Dated 29.7.97...........................................................  45

SCHEDULE 3
PROCEDURES FOR CONTRACTORS WORKING ON PUBLIC TRANSPORT CORPORATION'S
Property and Facilities..................................................................  46

SCHEDULE 4
SITE PLAN - BEVERIDGE WILLIAMS (JOB NO: MSM-576).........................................  47

SCHEDULE 5
CAR PARK AGREEMENT.......................................................................  48

SCHEDULE 6
Reading Development Plans (McGauran Soon Plans)..........................................  49

SCHEDULE 7
PTC INFRASTRUCTURE WORKS.................................................................  50

SCHEDULE 8
SECTION 173 AGREEMENT....................................................................  51

SCHEDULE 9
PTC SITE SPECIFIC REQUIREMENTS...........................................................  52

SCHEDULE 10
LICENCE FOR CARPARKING (CLAUSE 2.2B).....................................................  53

SCHEDULE 11
LICENCE FOR ACCESS TO ADJACENT PTC LAND (CLAUSE 3.3).....................................  54
</TABLE>
<PAGE>
 
                                       5

                                   APPENDIX

ITEM 1  PUBLIC TRANSPORT CORPORATION

ITEM 2  DEVELOPER
        READING PROPERTIES PTY LTD ACN 071 195 429

ITEM 3  PTC'S REPRESENTATIVE 
        MANAGER, COMMERCIAL DEVELOPMENT SERVICES, BAYSIDE TRAINS PUBLIC
        TRANSPORT CORPORATION

ITEM 4  SITE
        LAND ADJACENT TO FRANKSTON RAILWAY STATION
        (REFERENCE PLAN ATTACHED)

ITEM 5  COMMENCEMENT DATE
        THE DATE OF THIS AGREEMENT


ITEM 6  DATE FOR PRACTICAL COMPLETION
        36 MONTHS FROM THE COMMENCEMENT DATE

ITEM 7  DEFECTS LIABILITY PERIOD
        12 MONTHS FROM DATE OF PRACTICAL COMPLETION OF PTC INFRASTRUCTURE WORKS

ITEM 8  BANK GUARANTEE
        AMOUNT $5 MILLION
 
ITEM 9  NOTICE REQUIREMENTS
        PTC -
        LEVEL 10
        589 COLLINS STREET
        MELBOURNE 3000
        ATTN. MANAGER, COMMERCIAL DEVELOPMENT SERVICES BAYSIDE TRAINS
        TELEPHONE:  9619 1990
        FAX:  9619 1979

        DEVELOPER -
        READING PROPERTIES PTY LTD
        6 BAY STREET
        PORT MELBOURNE   3207
        TELEPHONE:  (03) 9646 1955
        FAX:  (03)  9646 1185
<PAGE>
 
                                       6


        AND

        READING ENTERTAINMENT INC -
        ONE PENN SQUARE WEST
        30 SOUTH FIFTEENTH STREET
        PHILADELPHIA PA 19102-4813
        ATTENTION: MR JAMES WUNDERLE
        BUS.TEL: 215 569 5166
        BUS. FAX: 215 569 2862
        E-MAIL: 103424,3310

        MACKIE -
        MACKIE GROUP PTY LTD
        11-13 CRANBOURNE ROAD
        FRANKSTON  3199
        TELEPHONE: (03) 9781 4066
        FAX: (03) 9783 1157

ITEM 10 DEFECTS GUARANTEE
        $50,000.00
<PAGE>
 
THIS Agreement is made on 28th day of May 1998.



BETWEEN :

PUBLIC TRANSPORT CORPORATION of 589 Collins Street,
Melbourne, Victoria, 3000   (PTC)

and

READING PROPERTIES PTY LTD ACN 071 195 429 of Level 9,
66 Hunter Street, Sydney, New South Wales   (DEVELOPER)

and

MACKIE GROUP PTY LTD ACN 006 524 456 of 11-13 Cranbourne Road, Frankston,
Victoria  (MACKIE)

RECITALS

A.    PTC is or is entitled to be registered as proprietor of the Land, as
      successor to the State Transport Authority under the Transport Act 1983.

B.    Under the Brief PTC requested the registration of interest of developers
      for the development of the Site referred to in the PFFA at the Frankston
      Railway Station.

C.    PTC and Mackie entered into the PFFA.

D.    PTC, the Developer and Mackie entered into the Heads of Agreement to
      enable the Developer and Mackie to complete the milestones remaining
      outstanding under the PFFA and the Developer to establish whether it is
      feasible to proceed with the proposed development.

E.    The Developer has completed the Preliminary Work under the PFFA including,
      without limitation, its obligations under CLAUSE 10.1 of the PFFA and all
      elements of the Fourth Milestone under CLAUSE 20 of the PFFA except
      executing a development agreement and the Developer has satisfied itself
      that it is feasible to proceed with the Development as contemplated by
      this Agreement.

F.    The parties agree to enter into this Agreement for the development of the
      Works.
<PAGE>
 
                                       2


G.    Mackie has agreed to assign all of its right, title and interest in and to
the PFFA the Heads of Agreement and this Agreement to the Developer and PTC has
consented to such assignment.


1.    DEFINITIONS AND INTERPRETATION
1.1   DEFINITIONS
            The following words have these meanings in this Agreement, unless
            the contrary intention appears:

            "ABSOLUTE OCCUPATION" means suspending the movement of trains over
            the whole or part of any railway running line in the whole of the
            area of the Frankston Railway Station Site for a defined period of
            time.

            "AGREEMENT" means this Agreement between PTC the Developer and
            Mackie and includes the Appendix and each Schedule.

            "AUTHORISED OFFICER" means in the case of any party, a person
            appointed by that party to act on its behalf under this Agreement.

            "AUTHORITY" includes all Commonwealth and State Governments and
            instrumentalities and their departments, municipalities and any
            other public authority or provider of services having jurisdiction
            over the Works or the Land or any part of the Works or the Land.

            "BANK GUARANTEE" has the meaning given to it in CLAUSE 16.1.
            "BRIEF" means the Registration of Interest Brief dated October 1993
            issued by PTC for the commercial development of the Site.
            "CAR PARK AGREEMENT" means the agreement substantially in the form
            attached to this Agreement as SCHEDULE 5.
            "COMMENCEMENT DATE" means the date in ITEM 5.

            "CONTAMINATION" means a solid, liquid, gas, odour, heat, sound,
            vibration, radiation or substance of any kind which makes or may
            make the Land unsafe, unfit or harmful for habitation, use or
            occupation by any person or animal or is such that any part of the
            Land does not satisfy the contamination criteria or standards
            published or adopted by the Victorian Environment Protection
            Authority from time to time and the word Contaminant has a
            corresponding meaning.

            "CONSTRUCTION COMMENCEMENT DATE" means the date the Developer is
            first granted access to the Site for the purposes of commencing
            construction under this Agreement.
            "CONTRACT OF SALE" means the contract for the sale and purchase of
            the Land to be entered into on the same date as this Agreement.

            "CURE PERIOD" means in respect of a Default Event, such period of
            time from and including the date of service of a Default Notice as,
            in all 
<PAGE>
 
                                       3

            circumstances, is a reasonable period of time specified by the PTC
            in the Default Event Notice in which to cure the Default Event to
            which the Default Event Notice relates or any greater period as may
            be allowed in CLAUSE 17.4 but in any case not less than thirty (30)
            days.

            "CURE PLAN" means a plan by the Developer to remedy a Default Event
            which:
            (a)     is proposed during the Cure Period; and
            (b)     details:
                    (i)     if and why an extension of the Cure Period is
                            required;
                    (ii)    the time required to cure the relevant Default
                            Event: and
                    (iii)   a work plan setting out each task to be undertaken
                            to cure the relevant Default Event and the time for
                            each task to be completed.

            "DATE FOR PRACTICAL COMPLETION" means the date specified in ITEM 6.

            "DATE OF PRACTICAL COMPLETION" means the date PTC's Representative
            issues a Notice of Practical Completion.

            "DEFAULT EVENT" means an event described in CLAUSE 17.1.  "DEFAULT

            EVENT NOTICE" means a notice given by the PTC under CLAUSE 17.2.

            "DELAY EVENTS" means:
            (a)     loss or damage by fire, explosion, earthquake, lightning,
                    storm, tempest, civil commotion of any kind and not caused
                    by the Developer or the Developer's employees, servants,
                    contractors or subcontractors;
            (b)     industrial disputes, strikes or lockouts resulting from
                    industry-wide third party disputes and not caused directly
                    by the Developer;
            (c)     unusual delays in obtaining approvals by any relevant
                    Authority including any delay occasioned by any demanded
                    resubmission of requests where consent has been refused ;
            (d)     inclement weather;
            (e)     any matter beyond the reasonable control of the Developer
                    which results in a delay of the Works;
            (f)     any prohibition or embargo imposed under or by virtue of any
                    Law;
            (g)     any delay in PTC giving its consent approval to or
                    authorisation of any matter thing or action under this
<PAGE>
 
                                       4

                    Agreement including any delay occasioned by demanded
                    resubmission;
            (h)     any interruption of access to the Site under CLAUSE 7.3; and
            (i)     dispute resolution proceedings instigated by either party
                    under CLAUSE 20

            "DEVELOPER" means the person named in ITEM 2 bound to execute the
            Works under this Agreement and includes the Developer's employees,
            agents, contractors, consultants and invitees where the context
            permits.

            "DEVELOPER'S CONSULTANT" means such consultant as is agreed between
            Reading and PTC in writing.

            "GENERAL CRITERIA FOR DEVELOPMENT AT RAILWAY LOCATIONS, RAILWAY
            OPERATIONS AND ENGINEERING DESIGN ASPECTS AND CONSTRUCTION ASPECTS,
            ENG-AD-STD-0001" dated 29/7/97, means the guidelines, a copy which
            is attached to this Agreement as SCHEDULE 2, as amended from time to
            time.

            "HEADS OF AGREEMENT" means the Heads of Agreement between Mackie,
            the Developer and PTC dated 28 May 1997.

            "INFRASTRUCTURE DOCUMENTATION" means the drawings, programs, plans,
            specifications and schedules of finishes which are required to
            construct and complete the PTC Infrastructure Works as are approved
            by PTC's Representative.

            "INSOLVENCY EVENT" means the happening of any of these events and
            such events not being rectified within 30 days of the Developer
            becoming aware of the occurrence of the event:
            (a)     an application is made to a court for an order or an order
                    is made that a body corporate be wound up; or
            (b)     an application is made to a court for an order appointing a
                    liquidator or provisional liquidator in respect of a body
                    corporate, or one of them is appointed whether or not under
                    an order; or
            (c)     except to reconstruct or amalgamate while solvent on terms
                    approved by PTC, a body corporate enters into, or resolves
                    to enter into, a scheme of arrangement, deed of company
                    arrangement or composition with, or assignment for the
                    benefit of, all or any class of its creditors, or it
                    proposes a reorganisation, moratorium or other
                    administration involving any of them; or
            (d)     a body corporate resolves to wind itself up, or otherwise
                    dissolve itself, or gives notice of intention to do so,
 
<PAGE>
 
                                       5

                    except to reconstruct or amalgamate while solvent on terms
                    approved by PTC or is otherwise wound up or dissolved; or
            (e)     a body corporate is or states that it is insolvent; or
            (f)     as a result of the operation of section 459F(1) of the
                    Corporations Law, a body corporate is taken to have failed
                    to comply with a statutory demand; or
            (g)     a resolution is passed to appoint an Administrator or an
                    Administrator is appointed to a body corporate; or
            (h)     a Receiver and Manager is appointed to a body corporate; or
            (i)     a mortgagee takes possession of any one of the assets or
                    undertakings of a body corporate.
            "INSURED" has the meaning given to it in CLAUSE 15.2.

            "LAND" means Lot 2 on unregistered plan of subdivision no 414499C (a
            copy of which is attached to the Contract of Sale) and being part of
            the land described in certificates of title Volume 10248 Folio 656,
            Volume 1272 Folio 356, Volume 1806 Folio 184, Volume 5350 Folio 831,
            Volume 5365 Folio 824 and Volume 10104 Folio 349.

            "LAW" means the law in force in Victoria including, without
            limitation, all statutes, rules, regulations, ordinances, by-laws,
            instruments, directives and proclamations made under the authority
            either direct or indirect of any statute (including any Commonwealth
            statute), rules of common law and equity and the legal requirements
            of any Authority.

            "NOTICE OF PRACTICAL COMPLETION" means the notice issued by PTC's
            Representative under CLAUSE 14.5(B)(I).
            "PFFA" means the Project Feasibility and Facilitation Agreement
            dated 30 June 1995 between PTC and Mackie.
            "PLANNING PERMIT" means permit number 96-432 issued on 29 April 1997
            by the City of Frankston.

            "POLLUTANT" means a discharge, emission or deposit which brings
            about a detrimental change in the condition of the environment which
            creates any one or more of the conditions of environment referred to
            in sections 39(1), 41(1) or 45(1) of the Environmental Protection
            Act and the word Pollution has a corresponding meaning.

            "PRACTICAL COMPLETION" means, in respect of the PTC Infrastructure
            Works, the state of being completed in accordance with the Standards
            and fit for use and occupation by PTC and after:
            (a)     an Occupancy Permit or evidence of compliance with the
                    requirements of all relevant Authorities is submitted to
                    PTC's Representative;
<PAGE>
 
                                       6


            (b)     all plant and equipment forming part of the PTC
                    Infrastructure Works are tested and operational;
            (c)     all omissions and defects have been rectified other than
                    items:
                    (i)     the immediate making good of which by the Developer
                            is not practicable;
                    (ii)    which do not prevent the PTC Infrastructure Works
                            from being reasonably capable of being used for
                            their intended purpose;
                    (iii)   the rectification of which will not prejudice the
                            convenient use of the PTC Infrastructure Works; and
                    (iv)    which do not cause any legal impediment to PTC's use
                            or occupation of the PTC Infrastructure Works;
            (d)     those tests which are required by this Agreement to be
                    carried out and passed before the PTC Infrastructure Works
                    reach Practical Completion have been carried out and passed;
                    and
            (e)     the Developer has delivered to PTC a certificate from the
                    Developer's Consultant that all aspects of the PTC
                    Infrastructure Works are completed in accordance with sub-
                    clauses (a) to (d), the drawings, plans, specifications and
                    schedules of finishes contained in the Infrastructure
                    Documentation and the Standards, and that the PTC
                    Infrastructure Works are fit for use and occupation by the
                    PTC.

            PRACTICAL COMPLETION means in respect of the Reading Development:
            the state of being completed;
            (a)     to comply with the safety and operational requirements under
                    this Agreement;
            (b)     after an Occupancy Permit or evidence of compliance with the
                    requirements of all relevant Authorities is submitted to
                    PTC's Representative; and
            (c)     after a statement from the Developer's Consultant certifying
                    that the Reading Development has reached Practical
                    Completion in accordance with the plans and specifications
                    approved by PTC is submitted to PTC's Representative.

            "PROGRAMME" means the design and construction programme prepared
            under CLAUSES 6.1 AND 6.2 and approved by PTC's Representative .
<PAGE>
 
                                       7

            "PROJECT CONTROL MEETINGS" has the meaning given to it in CLAUSE
            6.4.

            "PROJECT DOCUMENTATION" means the drawings, programs, plans,
            specifications and schedules of finishes which are required to
            construct and complete the Works as are approved by PTC's
            Representative.

            "PTC" means the person named in ITEM 1 and includes that person's
            successors and assigns.
            "PTC INFRASTRUCTURE WORKS" means the part of the Works to be
            constructed in accordance with CLAUSE 13.2.

            "PTC'S REPRESENTATIVE" means the person named in ITEM 3 or other
            person from time to time appointed by PTC to be PTC's Representative
            and notified to the Developer in writing or that person's delegate
            which person is acting as an employee and as agent of PTC and whose
            directions will bind PTC.

            "PTC SITE SPECIFIC REQUIREMENTS" means the requirements set out in
            SCHEDULE 9.

            "READING DEVELOPMENT" means the proposed development of a multi-
            screen cinema complex and entertainment centre depicted in the plans
            specified in SCHEDULE 6 and which includes:

            - 500 carparking spaces (the subject of the Car Park Agreement and
            the Section 173 Agreement) in compliance with all relevant
            Australian Standards
            - aerobridge with escalators
            - lifts and stairs
            - "kiss and ride" facilities
            - bus "drop-off" at Fletcher Road
            - concourse improvements
            - full fencing of carpark site boundaries

            "SAFEWORKING INSTRUCTIONS" means Procedures for Contractors Working
            on Public Transport Corporation Property and Facilities a copy of
            which is attached to this Agreement as SCHEDULE 3, as amended from
            time to time.

            "SECTION 173 AGREEMENT" means the agreement substantially in the
            form attached to this Agreement as SCHEDULE 8.

            "SITE" means the land described in ITEM 4 and being the areas
            delineated on the Site Plan and any other land or places made
            available to the Developer by PTC for the purpose of this Agreement.

            "SITE PLAN" means the plan attached to this Agreement as SCHEDULE 4.
<PAGE>
 
                                       8

            "STANDARDS" means the standards attached to this Agreement as
            SCHEDULES 1, 2 AND 3 and any subsequent modification directed or the
            use of which has been permitted by PTC's Representative under this
            Agreement.

            "SUBCONTRACT" means any contract between the Developer and a
            subcontractor to carry out any part of the Works.

            "SUBCONTRACTOR" means Mackie or such other subcontractor as is
            agreed between PTC and Reading.

            "WORKS" means the PTC Infrastructure Works and the Reading
            Development.

1.2   INTERPRETATION
            In this Agreement, unless the contrary intention appears:
            (a)     a reference to this Agreement or another instrument includes
                    any variation or replacement of any of them; and
            (b)     a reference to a statute, ordinance, code or other Law
                    includes regulations and other instruments under it and
                    consolidations, amendments, re-enactments or replacements of
                    any of them; and
            (c)     the singular includes the plural and vice versa; and
            (d)     "person" includes a firm, a body corporate, an
                    unincorporated association or a responsible authority, as
                    constituted from time to time; and
            (e)     a reference to a person includes a reference to the person's
                    executors, administrators, successors, substitutes, assigns,
                    employees, servants, agents, contractors, subcontractors or
                    consultants; and
            (f)     an agreement, representation or warranty on the part of or
                    in favour of two or more persons binds or is for the benefit
                    of them jointly and severally; and
            (g)     words importing any gender include all other genders, as
                    applicable; and
            (h)     a reference to any thing (including, without limitation, any
                    amount) is a reference to the whole or any part of it and a
                    reference to a group of persons is a reference to any one or
                    more of them; and
<PAGE>
 
                                       9

            (i)     a reference to a CLAUSE, SCHEDULE OR APPENDIX is to a
                    CLAUSE, SCHEDULE OR APPENDIX in or to this Agreement and a
                    reference to an ITEM is to an item in the APPENDIX to this
                    Agreement; and
            (j)     a reference to a day must be interpreted as the period of
                    time commencing at midnight and ending 24 hours later; and
            (k)     a reference to the payment of money within a specified time
                    is a reference to the full clearance of any personal cheque
                    into the account of the payee within that time.

1.3   CONTENTS AND HEADINGS
            The table of contents and headings are inserted for convenience and
            do not affect the interpretation of this Agreement.

1.4   PRECEDENCE
            If this Agreement contains any discrepancy or inconsistency, it must
            be interpreted giving precedence to those documents listed below in
            the following order:
            (a)     these terms and conditions;
            (b)     the Standards;
            (c)     the other Schedules to this Agreement;
            (d)     the Project Documentation; and
            (e)     documents referred to or incorporated in the Schedules to
                    this Agreement.

2.    GENERAL OBLIGATIONS
      2.1   DEVELOPER'S OBLIGATIONS
            The Developer must;
            (a)     diligently proceed to execute and complete the Works on and
                    from the Construction Commencement Date in accordance with
                    this Agreement to the stage of Practical Completion on or
                    before the Date for Practical Completion;
            (b)     provide temporary car-parking facilities during construction
                    (the details of which will be included in the Programme) to
                    replace, as a minimum, the 350 existing car parks available
                    to PTC and PTC users such facilities to be secure, well lit
                    and with adequate at-grade access to the reasonable
                    satisfaction of the PTC's Representative;

            (c)     complete the Works:
                    (1)     in accordance with the Planning Permit;
<PAGE>
 
                                       10

                    (2)     in accordance with the Programme (3)in accordance
                            with the Project Documentation and Standards
                            referred to in this Agreement;
                    (4)     in a professional and workmanlike manner; and
                    (5)     in accordance with all applicable Laws and the
                            requirements of the relevant public Authorities
                            (including PTC but subject to CLAUSE 2.2(C)); and
            (d)     co-operate with PTC to facilitate appropriate signage for
                    PTC users provided that PTC must ensure that such signage
                    meets the requirements and standards for signage in the
                    Reading Development.

2.2   PTC'S OBLIGATIONS
            PTC must:
            (a)     provide the Developer with access to the Site to carry out
                    the Developer's obligations under this Agreement;
            (b)     subject to the Developer performing the Developer's
                    obligations under this Agreement perform its obligations
                    under CLAUSES 3.1, 3.2 AND 3.3 and grant to the Developer a
                    licence of the area located at the south end of the Site
                    (and identified on the Site Plan in SCHEDULE 4) for use as a
                    car park, for a period of one year and at a licence fee of
                    $1.00 per annum in a form attached as SCHEDULE 10 not more
                    than 14 days after the Date of Practical Completion of the
                    whole of the Works. PTC will also grant to the Developer a
                    right of first refusal in the event of any proposed sale or
                    lease in respect of the licensed area other than for
                    operational purposes or as part of any corporatisation or
                    privatisation process.
            (c)     in relation to the Reading Development approve such plans as
                    are submitted by the Developer and in carrying out its
                    obligations and exercising its rights under this Agreement
                    make no objection or refuse any request or generally prevent
                    the Developer from proceeding with the Reading Development
                    unless to grant such approval or to withhold such objections
                    or refusal would breach the safety and operational
<PAGE>
 
                                       11

                    requirements of the Standards, any Law or this Agreement
                    with the intent that PTC will limit its supervision and
                    control of the Reading Development to ensure only that such
                    Works comply with such safety and operational requirements
                    under the Standards and also complies with all applicable
                    Laws and this Agreement.

2.3   INDEPENDENCE OF DEVELOPER
            The Developer acknowledges that:
            (a)     it is an independent developer and not the agent of PTC in
                    executing the Works and must execute the Works in accordance
                    with its own methods, subject to compliance with this
                    Agreement;
            (b)     nothing contained in this Agreement or any Subcontract
                    creates any contractual relationship between any
                    subcontractor (other than Mackie) and PTC or PTC's
                    Representative;
            (c)     PTC and its agents, employees, consultants and
                    representatives, including PTC's Representative, are not
                    liable in contract or tort (including negligence) or to the
                    extent legally possible, under any statute or other
                    principle of law upon any claim in connection with any
                    information provided by PTC or for any errors or omissions
                    with respect to information given to the Developer;
            (d)     it enters into this Agreement based on its own
                    investigations and determinations; and
            (e)     in entering into this Agreement and in the execution of the
                    Works, the Developer and its employees, subcontractors and
                    suppliers have and must continue to use commercially
                    reasonable trade practices and exercise the standard of
                    skill, care and diligence appropriate to the nature of the
                    Works.

2.4   ASSIGNMENT

            The Developer must not assign this Agreement or any payment or other
            right or benefit or interest under this Agreement without the prior
            written consent of PTC except that the Developer will be entitled to
            assign this Agreement or any payment or other right or benefit under
            this Agreement to its holding company or any subsidiary of its
            holding company.  The Developer must notify PTC of any assignment
            under this clause.

2.5   EXERCISE OF PTC'S POWERS

            The parties acknowledge that PTC will be entitled to exercise its
            powers in relation to matters where it has jurisdiction as a
            statutory authority only in accordance with the Transport Act 1983.
<PAGE>
 
                                       12

3.    NON DEVELOPMENT OBLIGATIONS
 3.1   CAR PARK AGREEMENT
            PTC and the Developer will enter into the Car Park Agreement within
            14 days after the date when the whole of the Works reach the stage
            of Practical Completion.
 3.2   SECTION 173 AGREEMENT

            PTC and the Developer will enter into the Section 173 Agreement with
            the City of Frankston within 14 days after the date when the whole
            of the Works reach the stage of Practical Completion.

 3.3   LICENCE FOR ACCESS

            PTC and the Developer will enter into the Licence for Access to
            adjacent PTC Land substantially in the form attached as SCHEDULE 11
            within 14 days after the date when the whole of the Works reach the
            stage of Practical Completion.

4.            ENGAGEMENT OF CONSULTANTS
 4.1   DEVELOPER'S CONSULTANTS

            The Developer must engage only such consultants to carry out such
            functions as it may require in relation to the PTC Infrastructure
            Works on terms to be agreed between the Developer and the
            Developer's Consultants and which are approved by PTC.

 4.2   PERIOD OF ENGAGEMENT
            The Developer must engage the consultants referred to in CLAUSE 4.1
            to the end of the Defects Liability Period.
 4.3   NO DIMINISHING OF RESPONSIBILITY
            The engagement of consultants does not create any assumption of
            responsibility or risk on PTC or lessen any responsibility of the
            Developer under this Agreement.

5.    PROJECT DOCUMENTATION
 5.1   DEVELOPMENT OF PROJECT DOCUMENTATION

            The Developer must develop the Project Documentation to provide full
            working construction drawings to fully incorporate the Standards and
            embodying all other matters required by this Agreement in accordance
            with all Laws and to the extent that the Standards do not deal with
            or are unclear on any matter, to the satisfaction of PTC's
            Representative.

 5.2   SUBMISSION OF DOCUMENTATION TO PTC'S REPRESENTATIVE

            The Developer must submit certified copies of all the Project
            Documentation to PTC's Representative for review and approval as
            soon as reasonably practicable after preparation and, in any event,
 
<PAGE>
 
                                       13

            on or before the prescribed date for that task in the Programme.
            PTC must use its reasonable endeavours to procure PTC's
            Representative to notify the Developer of its approval or rejection
            under this clause within the time period after the Project
            Documentation is submitted as contemplated by CLAUSE 19.

 5.3   APPROVAL OF DOCUMENTATION BY PTC'S REPRESENTATIVE

            If PTC's Representative rejects the whole or any part of the Project
            Documentation, the Developer must revise the Project Documentation
            as soon as practicable and resubmit it to PTC's Representative for
            approval under the preceding clause.

 5.4   DOCUMENTATION TO BE INCORPORATED INTO THE CONTRACT

            The Project Documentation will, on approval by PTC's Representative,
            be incorporated into this Agreement and all documentation in
            relation to the PTC Infrastructure Works will become the property of
            PTC.

 5.5   COPIES OF DOCUMENTATION

            The Developer must provide PTC's Representative with three full
            copies of the complete Infrastructure Documentation and one full
            copy of the Reading Development documentation immediately after it
            is approved under CLAUSE 5.3.  The Developer must ensure that a full
            copy of the Infrastructure Documentation is kept at the Site and
            made available to PTC's Representative upon request.

6.    PROGRAMME AND REVIEW OF CONSTRUCTION PROGRESS
 6.1   DEVELOPER TO PREPARE PROGRAMME

            The Developer must, not less than 20 business days prior to the
            Construction Commencement Date, prepare and provide PTC's
            Representative with the Programme for commencement, carrying out and
            completion of the Works.

 6.2   FORM OF PROGRAMME
            The Developer must ensure the Programme:
            (a)     is in the form of a bar chart and provides a sequence for
                    the Works which conforms with the sequence requirements for
                    completion of the Works set out in the Standards;
            (b)     identifies milestones for various stages comprising the
                    Works;
            (c)     sets out a project calendar for the Works which must contain
                    reasonable allowances for public holidays, Christmas shut-
                    down, rostered days off, overtime and other contingencies;
                    and
            (d)     can be reviewed at each Project Control Meeting.
<PAGE>
 
                                       14

 6.3   APPROVAL OF PROGRAMME BY PTC'S REPRESENTATIVE

            PTC must procure PTC's Representative to approve or reject the
            Programme within 7 days after it is submitted by the Developer.  The
            Developer must immediately revise and resubmit the Programme to
            PTC's Representative if it is rejected in any way.

 6.4   MEETINGS AND REPORTS
            The Developer must:
            (a)     ensure that meetings (PROJECT CONTROL MEETINGS) are held at
                    least fortnightly and at other times as may be reasonably
                    required by PTC's Representative;
            (b)     invite and allow PTC's Representative to participate in all
                    Project Control Meetings;
            (c)     give at least 5 business days' written notice to PTC's
                    Representative of the time, place and agenda of all Project
                    Control Meetings;
            (d)     ensure that its project and construction managers attend
                    Project Control Meetings and are available to discuss
                    matters with PTC's Representative at all reasonable times;
            (e)     prepare accurate minutes of all Project Control Meetings and
                    submit them to PTC's Representative within 4 business days
                    after the meeting; and
            (f)     at the reasonable request of PTC's Representative, provide
                    evidence of the implementation of any action arising out of
                    a Project Control Meeting.
 6.5   CONSTRUCTION PROGRAMME REVIEW PROCESS
            Before each Project Control Meeting, the Developer must provide to
            PTC's Representative a status report showing:
            (a)     progress made in execution of the Works since the previous
                    Project Control Meeting;
            (b)     the current status of the Works in relation to the
                    Programme;
            (c)     whether progress is being maintained in accordance with the
                    Programme;
            (d)     a list of planned activities to be carried out during the
                    following month;
            (e)     a list of matters which require a decision to be made by
                    PTC;
            (f)     a list of activities that are behind their planned start or
                    completion dates with reasons for any discrepancy; and
<PAGE>
 
                                       15

            (g)     at the request of PTC's Representative, a proposed
                    management solution to correct the activities behind
                    schedule.

7.    THE SITE
 7.1   DEVELOPER'S OBLIGATIONS
            The Developer must, at its own cost and expense:
            (a)     ensure that the Works are constructed within the external
                    title boundaries of the Site, except only for parts of the
                    Works specifically required by this Agreement to be outside
                    those boundaries; and
            (b)     provide all allowances and take all necessary steps and
                    measures that may be required in the execution of the Works
                    for working in or close to or diverting any service line or
                    installations of any relevant Authority, including power
                    lines, high tension lines and related structures in, on,
                    above, below or adjacent to the Site.

 7.2   DEVELOPER'S WARRANTIES AND ACKNOWLEDGMENTS
            The Developer warrants at the date of this Agreement and
            acknowledges it has and is deemed to have:
            (a)     examined and checked this Agreement, the Standards and all
                    documentation mentioned in either;
            (b)     examined and taken into consideration all information which
                    is relevant to the risks, contingencies and other
                    circumstances which would in any way affect its obligations
                    under this Agreement;
            (c)     examined the Site and its surroundings;
            (d)     informed itself of all relevant physical conditions above
                    and below the surface of the Site and the climatic
                    conditions at and near the Site;
            (e)     informed itself of the nature of the Works and materials and
                    constructional plant and equipment necessary for the
                    execution of the Works, the facilities at the Site, the
                    times permitted by the relevant authorities for the
                    construction of the Works and the means of access to and
                    egress from the Site;
            (f)     informed itself as to the availability of labour and the
                    accommodation required and all labour conditions and
                    conditions of employment relevant to the execution of the
                    Works;
<PAGE>
 
                                       16

            (g)     satisfied itself as to the correctness and sufficiency of
                    the cost allowed by the Developer for completing the Works
                    and to cover the cost of performing all of its obligations
                    under and in connection with this Agreement in the manner
                    prescribed by this Agreement;
            (h)     made its own independent enquiries and assessments as to the
                    ability, suitability and financial standing of any
                    Subcontractor engaged by the Developer in the execution of
                    the Works; and
            (i)     made its own interpretation as to the difficulties of
                    executing the Works.
 7.3   ACCESS TO THE SITE

            Unless PTC's Representative directs otherwise, PTC authorises the
            Developer to have reasonable access to the Site for the purposes of
            carrying out its obligations under this Agreement from the
            Construction Commencement Date until Practical Completion of the
            whole of the Works or until PTC lawfully terminates this Agreement
            (whichever is earlier).  The parties acknowledge that the
            Developer's access to the Site will be subject to compliance with
            the General Criteria for Development at Railway Locations Railway
            Operations and Engineering Design and Construction Aspects ENG-AD-
            STD-0001 in SCHEDULE 2. With respect to the Reading Development PTC
            will only be able to deny the Developer access due to operational
            and safety issues under such criteria.  If access is denied at any
            time the Developer will be granted a reasonable extension of time
            taking into account the circumstances and at least equal to the
            period during which access has been denied.

            If the Developer requires access prior to the Construction
            Commencement Date PTC must use its reasonable endeavours to allow
            such access subject to compliance with reasonable conditions
            required by PTC.

 7.4   ACCESS TO MAKE GOOD
            Following Practical Completion of the PTC Infrastructure Works, PTC
            must allow the Developer access to the Site for making good defects
            as required under this Agreement.
<PAGE>
 
                                       17

 7.5   ACCESS FOR PTC'S REPRESENTATIVE

            Subject to CLAUSE 7.3 the Developer must allow PTC's Representative
            access at all reasonable times to the Site and the Works and to
            places other than the Site where Works are being performed.

 7.6   ACCESS TO ADJOINING PTC LAND
            The Developer must at its own cost and expense:
            (a)     obtain any necessary or appropriate permission to work on,
                    to, in, over or under any adjoining or neighbouring PTC
                    land; and
            (b)     make all arrangements for any access to any adjoining or
                    neighbouring PTC land,

            and the Developer indemnifies PTC against any cost damage loss or
            liability incurred or suffered in connection with the Developer's
            access to adjoining or neighbouring land provided that PTC will use
            its best endeavours to ensure that all such permission and
            arrangements are obtained if the adjoining or neighbouring land is
            owned by PTC.

 7.7   SITE CONDITIONS

            The Developer assumes the risk of all increased costs, losses and
            expenses caused or contributed to by the physical condition or
            characteristics of the Site (including, without limitation, sub-
            surface, latent conditions or hidden defects or contamination of any
            kind) and its surroundings suffered or incurred by the Developer in
            or about the execution of the Works.  PTC will co-operate with the
            Developer in providing all information possible in relation to Site
            conditions provided that no legal consequences can arise out of the
            provision of any such information.

 7.8   SITE ESTABLISHMENT AND CLEANING
            The Developer must, at its own cost and expense:
            (a)     establish and maintain Site hoardings and a Site Office
                    suitable for holding Project Control Meetings connected with
                    electricity, accommodation and storage area for plant and
                    equipment and materials in such areas of the Site in a
                    manner from time to time approved by PTC's Representative;
            (b)     regularly remove all rubbish and debris from the Site
                    created or caused by the execution of the Works and at other
                    times in accordance with procedures approved by the  PTC's
                    Representative; and
 
<PAGE>
 
                                       18

            (c)     prior to Practical Completion of the PTC Infrastructure
                    Works or the Reading Development (whichever is the latter),
                    remove from the Site any hoardings, the Site Office, all
                    plant and equipment and other material as may be required by
                    PTC's Representative to enable PTC to quietly and peaceably
                    enjoy and occupy the PTC Infrastructure Works.

 7.9   CHANGES TO SITE
            If the Site changes for the purposes of this Agreement the Developer
            will submit an amended plan for the purposes of SCHEDULE 4.

 7.10  CONDITION OF THE LAND
            (a)     The Developer releases the PTC and its officers or agents
                    and indemnifies them against any claims, costs, losses,
                    damages, expenses, judgements, suits, awards and liabilities
                    whatever arising out of or in respect of:-
                    (i)     any Contamination or Pollution caused or contributed
                            by the Developer or its servants, agents, employees
                            or contractors or any work performed by or for the
                            Developer on the Land which results in the release
                            or disturbance of Contamination or Pollution; and
                    (ii)    complying with any notice, order or requirement
                            issued after the Commencement Date by or of any
                            Authority requiring any Contaminant or Pollutant in,
                            on or under or which has emanated from the Land
                            after the Commencement Date to be cleaned up,
                            contained, removed, diluted or dealt with in any
                            manner whatsoever.
            (b)     The Developer may at its option take over and conduct, at
                    its cost, in the name of any party to whom indemnity has
                    been given the defence of any claim brought by any person
                    against the Developer, the PTC or any other person or their
                    servants, agents, employees or contractors and arising out
                    of or relating to the indemnity provided in SUB-CLAUSE
                    7.10(A) and the PTC will use all reasonable endeavours to
                    ensure that it and any other person affected by this clause
                    fully co-operates in that defence.
            (c)     The release and indemnity in SUB-CLAUSE 7.10(A) survives
                    termination of this Agreement.
<PAGE>
 
                                       19

8.    SUBCONTRACTS
 8.1   SUBCONTRACTING
            The Developer may subcontract any part of the Works, provided
            however, that in the case of the PTC Infrastructure Works such
            subcontracting will be subject to the PTC's approval.
 
8.2   DEVELOPER'S RESPONSIBILITY
            The Developer:
            (a)     by subcontracting any part of the PTC Infrastructure Works
                    is not relieved from any of its liabilities or obligations
                    under this Agreement;
            (b)     assumes the risk for all delays, cost increases, losses and
                    expenses caused or contributed to by any act or omissions of
                    a Subcontractor; and
            (c)     remains responsible to perform its obligations under this
                    Agreement, even if a Subcontract is terminated, disclaimed
                    or repudiated for any reason,

            provided that the Developer will not be liable for any such matters
            which are the direct result of any breach of this Agreement by the
            PTC, its servants, agents or the PTC's Representative.

9.    ROLE OF PTC'S REPRESENTATIVE
 9.1   AGENT OF PTC

            PTC's Representative will act for and on behalf of PTC as its agent
            for the purposes of this Agreement and the Developer must comply
            promptly with all reasonable written instructions and directions of
            PTC's Representative.

 9.2   PTC'S REPRESENTATIVE'S AUTHORITY

            PTC and the Developer agree that PTC's Representative may subject to
            CLAUSE 2.2(C) issue reasonable instructions or directions to the
            Developer or be the sole independent assessor, valuer or certifier,
            acting reasonably, concerning any of the following matters:

            (a)     the Works;
            (b)     any ambiguity, error or other fault in documents;
            (c)     substitute materials or workmanship;
            (d)     testing of materials or Works;
            (e)     Practical Completion of the PTC Infrastructure Works; and
            (f)     making good of any defects in the Works.
<PAGE>
 
                                       20

9.3   EMPLOYMENT OF OTHERS ON DEVELOPER'S DEFAULT
            If the Developer does not comply with a reasonable instruction or
            direction of PTC's Representative which has been confirmed to the
            Developer in writing;
            (a)     PTC's Representative may issue a notice to the Developer
                    requiring compliance within a specified time which is
                    reasonable having regard to the circumstances;
            (b)     if the Developer does not comply with the notice within the
                    specified time, PTC may employ and pay others to execute the
                    work which may be necessary to give effect to the relevant
                    instruction or direction;
            (c)     all costs incurred by PTC in doing so may be recovered by
                    PTC as a debt due to PTC by the Developer or may be deducted
                    by PTC from any money payable to the Developer under this
                    Agreement or the Bank Guarantee; and
            (d)     the Developer remains responsible to PTC for any work
                    executed by others as if it had been executed by the
                    Developer under this Agreement.

10.   EXECUTION OF THE WORKS
 10.1  SCOPE OF THE WORKS
            The scope of the Works includes:
            (a)     all necessary work required to alter and add to existing PTC
                    infrastructure (in accordance with the Standards) to enable
                    construction of the Reading Development;
            (b)     all items of work obviously to be inferred from this
                    Agreement for the proper execution and completion of the
                    Works,
            whether or not such items have been shown or described in this
            Agreement.
 10.2  PROVISION OF MATERIALS AND LABOUR

            The Developer must provide at its own cost and expense everything
            necessary for the proper execution of the Works and for the proper
            performance by the Developer of its obligations under this
            Agreement.
<PAGE>
 
                                       21

 10.3  CONSTRUCTION METHODS AND QUALITY ASSURANCE
            The Developer is and remains responsible for:
            (a)     all construction means, methods, techniques, sequences and
                    procedures employed and to be employed by the Developer and
                    its Subcontractors in and concerning the execution of the
                    Works and for co-ordinating the execution of all portions of
                    the Works; and
            (b)     ensuring that all quality assurance procedures required to
                    be undertaken by the Developer under this Agreement are
                    properly implemented and carried out by the Developer to the
                    satisfaction of PTC's Representative.

 10.4  SUPERVISION

            The Developer is responsible for the supervision of the Works so as
            to ensure that the Works are executed in accordance with this
            Agreement.  For the purposes of supervision, the Developer must
            ensure that a competent person to supervise the Works is always
            present on the Site when works are being carried out who will
            respond to reasonable requests and directions from PTC's
            Representative.

 10.5  REQUIREMENTS OF AUTHORITIES
            The Developer must, at its own cost and expense:
            (a)     apply for and obtain all permits, approvals and consents
                    necessary for the Works;
            (b)     comply with the requirements of all Laws and the lawful
                    requirements of all relevant Authorities which arise by
                    reason of the execution of the Works, including, without
                    limitation, obtaining registration and effecting and
                    maintaining insurance for building practitioners as
                    prescribed by the Building Act 1993;
            (c)     pay all fees in connection with the execution of the Works
                    which have not been paid by PTC prior to entering into this
                    Agreement; and
            (d)     provide, on reasonable request from PTC's Representative, a
                    true copy of any document in its possession issued by or
                    evidencing the approval of Authorities in connection with
                    the Works.

 10.6  SETTING OUT INFORMATION
            The Developer is responsible for obtaining all such information to
            enable the Developer:
            (a)     to accurately set out the Works in accordance with this
                    Agreement; and
<PAGE>
 
                                       22


            (b)     to establish levels for the Works by reference to some
                    established datum or benchmark on or adjacent to the Works.

 10.7  SETTING OUT THE WORKS
            The Developer must correctly set out and establish the levels for
            the Works in accordance with the information referred to in CLAUSE
            10.6 and:
            (a)     must, at its own cost and expense, rectify any error arising
                    from its own inaccurate setting out and establishment of
                    levels;
            (b)     is not relieved of any of its responsibility by any check or
                    examination by PTC's Representative;
            (c)     after setting out and establishing the levels for the Works,
                    give PTC's Representative a certificate from a licensed
                    surveyor certifying that the setting out and levels are in
                    accordance with this Agreement; and
            (d)     must, in accordance with CLAUSE 14.9 give PTC's
                    Representative:
                    (i)     a certificate and survey plan signed by a licensed
                            surveyor stating that the whole of the Works are
                            within the title boundaries of the Site except only
                            for parts of the Works specifically required by this
                            Agreement to be outside those boundaries and
                            detailing the location of the Works on the Site; and
                    (ii)    a certificate signed by a chartered engineer stating
                            that structural elements of the Works are within the
                            tolerances specified.

 10.8  MATERIALS AND WORKMANSHIP
            10.8.1  All materials used in the PTC Infrastructure Works and the
                    standard of workmanship must be in conformity with the
                    provisions of this Agreement provided that:
                    (a)     in the absence of a provision in the Contract
                            specifying a material or standard of workmanship,
                            the Developer must ensure that the material or
                            standard of workmanship used or employed is both
                            suitable for its purpose and consistent with the
                            nature and character of that part of the PTC
                            Infrastructure Works for which it is used;
<PAGE>
 
                                       23

                    (b)     any materials not otherwise specified (except in the
                            case of temporary works) must be new and of
                            appropriate quality;
                    (c)     the Developer must provide PTC's Representative with
                            full details of suitable and appropriate substitutes
                            and seek the direction of PTC's Representative in
                            relation to any substitute material or standard of
                            workmanship; and
                    (d)     the Developer must produce evidence to the
                            reasonable satisfaction of PTC's Representative that
                            materials used in connection with the PTC
                            Infrastructure Works comply with the provisions of
                            this Agreement.

            10.8.2  The quality of work to be carried out by the Developer and
                    materials used in the Reading Development will be to a
                    commercially reasonable standard and will comply with the
                    guidelines and standards set out in SCHEDULES 2 AND 3
                    relating to operational and safety issues and access for PTC
                    customers.

 10.9  OPENING UP THE WORKS

            If PTC's Representative instructs the Developer to open up for
            inspection any work covered up or to arrange for or carry out any
            testing of any materials or goods (whether already incorporated in
            the Works or not) or of any executed work, the cost of that opening
            up or testing (including the cost of making good any damage) must be
            paid to the Developer unless:
            (a)     the opening up or testing is consequent upon a failure of
                    the Developer to comply with any provision of this
                    Agreement;or
            (b)     the opening up or testing shows that work, materials or
                    goods are not in accordance with this Agreement; or
            (c)     the cost of opening up or testing has been included in the
                    Standards.

 10.10 QUALITY OF WORK AND MATERIALS

            If PTC's Representative considers, acting reasonably, that the
            quality of any work or material in respect to the PTC Infrastructure
            Works is not in accordance with the requirements of this Agreement:
 
<PAGE>
 
                                       24

            (a)     PTC's Representative may instruct the Developer to remove or
                    re-execute or replace that work or material or to make good
                    any defect; and
            (b)     the Developer must carry out any instruction without the
                    right to any extension of time or any compensation unless
                    the Developer establishes that the work originally carried
                    out has been executed in accordance with the requirements of
                    this Agreement, in which case the cost of re-executing or
                    replacing that work will be borne by PTC.

11.   PTC SAFETY AWARENESS
 11.1  SAFETY AWARENESS TRAINING COURSE
            (a)     Except as otherwise provided in this CLAUSE 11, the
                    Developer and any of its employees, agents, consultants or
                    Subcontractors involved in work on or beside railway
                    property (SITE PERSONNEL) must complete a Safety Awareness
                    Training Course (THE COURSE) presented by PTC at the
                    Developer's expense, before commencing any work within 6
                    metres of the centre line of any railway track or overhead
                    facility in accordance with the Safeworking Instructions as
                    amended from time to time.
            (b)     The Developer must erect a 1.8 metre high fence, not less
                    than 2.5 metres from the centre line of the nearest railway
                    track, to protect the Site.  Site Personnel who are not
                    required to work on the railway track side of this fence,
                    (EXEMPT PERSONNEL), do not have to attend the Course.
                    However, Exempt Personnel will be required to attend a site
                    induction meeting, which will include extensive information
                    provided at the Course.
            (c)     All Site Personnel, (including Exempt Personnel), who:
                    (i)     have a supervisory role; or
                    (ii)    are in charge of or operate plant within 6 metres of
                            the centre line of the nearest railway track; or
                    (iii)   are in charge of or operate plant that may interfere
                            with any overhead electric cabling,

                    will be required to attend the PTC's "Electrical and
                    Overhead Appreciation Course".  This requirement applies to
                    and includes site foremen, project managers, piling rig
                    operators, crane operators, dogmen, excavator operators and
                    "cherry picker" operators.
<PAGE>
 
                                       25


 11.2  DEVELOPER TO NOMINATE PERSONNEL

            The Developer must nominate personnel required to complete the
            course referred to in CLAUSE 11.1 and PTC will arrange for enrolment
            in a suitable course.  All personnel required to complete the course
            referred to in CLAUSE 11.1 must sign an acknowledgment that he or
            she has been informed of the safety procedures in accordance with
            this CLAUSE 11.

 11.3  COMPLIANCE WITH SAFEWORKING INSTRUCTIONS

            The Developer and any of its employees, agents, consultants or
            Subcontractors involved in work on or beside trains or buses must,
            before commencing any work on or beside trains or buses:
            (a)     read the Safeworking Instructions as amended from time to
                    time and any other documents provided to the Developer by
                    PTC; and
            (b)     attend one or more presentations on-site by PTC for that
                    purpose in relation to particular classes of trains or
                    buses.
 
 11.4  SAFEWORKING INSTRUCTIONS PRESENTATIONS

            The Developer must nominate personnel required to attend the
            presentation referred to in CLAUSE 11.3 and PTC will arrange for the
            presentation to take place.  All personnel required to read the
            materials and attend the presentation in accordance with CLAUSE 11.3
            must sign an acknowledgment that he or she has been informed of the
            safety procedures in accordance with this CLAUSE 11.

12.   GENERAL ENGINEERING AND OPERATIONAL CONDITIONS
 12.1  COMPLIANCE WITH GENERAL ENGINEERING AND OPERATIONAL CONDITIONS

            The Developer must and must ensure that its servants agents and
            Subcontractors comply with the General Criteria for Development at
            Railway Locations, Railway Operations and Engineering Design and
            Construction Aspects ENG-AD-STD-0001 as set out in SCHEDULE 2.

 12.2  NOTICE OF ABSOLUTE OCCUPATIONS

            The Developer must give PTC's Representative at least 20 Business
            Days notice in writing when it requires each Absolute Occupation
            specified in the Programme.  The Developer must specify in the
            notice the dates, times and location of Absolute Occupation
            required.  The granting of Absolute Occupation by PTC will be
            dependent on train running requirements.
<PAGE>
 
                                       26

 12.3  PTC NOT LIABLE

            PTC is not liable for any consequences arising from being unable to
            grant Absolute Occupation on dates or at times requested unless an
            Absolute Occupation has been previously requested by the Developer
            and agreed by PTC.

 12.4          DEVELOPER TO NOTIFY RELEVANT AUTHORITIES
            With respect to each train track Absolute Occupation the Developer
            must give all Authorities proper notice to facilitate compliance
            with relevant Laws.

 12.5  PTC FLAGMEN

            With respect to railway lines, notwithstanding any arrangements to
            commence an Absolute Occupation at a specified time, the Developer
            must not commence to obstruct the rail track until PTC's
            Representative has confirmed in writing that the Absolute Occupation
            has commenced and is being protected by a PTC or approved flagman
            and has authorised the track to be obstructed.

 12.6  ABSOLUTE OCCUPATION DAMAGE

            The Developer will be liable for and indemnifies PTC if the
            Developer or its subcontractors in the execution of the Works or
            Absolute Occupation damage property, cause any loss claim proceeding
            or injury in respect of any injury or damage to any real or personal
            property or person including but not limited to public utilities and
            services and property on or adjacent to the Land (unless such injury
            or damage has been due to the negligence or wilful default of PTC
            its servants or agents) and must promptly repair and make good the
            damage and pay any compensation which the law requires the Developer
            or PTC to pay.

 12.7  PTC COSTS
            The Developer must pay or reimburse PTC on monthly invoice the cost
            of:
            (a)     the Absolute Occupations specified in the Programme;
            (b)     any PTC supervision to ensure that construction of the PTC
                    Infrastructure Works is carried out in compliance with this
                    Agreement;
            (c)                       any train stabling, bus substitution and
                                      like operations costs; and
            (d)     delay costs, arising from disruption caused by the Developer
                    or its employees, agents, contractors or consultants to
                    train services;
            at the rates set out in SCHEDULE 9.
<PAGE>
 
                                       27

 12.8  CHANGES TO PROGRAMME

            If the nature or length of an Absolute Occupation mentioned in
            CLAUSE 12.2 changes or a further Absolute Occupation is agreed
            between the parties the Developer must pay PTC a sum equivalent to
            the increase in cost of the change or further Absolute Occupation on
            demand in addition to the amount paid under CLAUSE 12.7.

13.   PTC INFRASTRUCTURE
 13.1  PTC INFRASTRUCTURE WORKS MODIFICATIONS

            The Developer is to carry out at its own cost and expense and to
            PTC's reasonable satisfaction all necessary PTC Infrastructure Works
            modifications which are required to build the Reading Development.
            The Developer acknowledges that the onus of identifying all
            necessary PTC Infrastructure Works modifications rests with the
            Developer.

 13.2  PTC INFRASTRUCTURE WORKS
            (a)     The Developer must construct PTC Infrastructure Works as
                    detailed in SCHEDULE 7 and any other infrastructure
                    necessarily required to enable the development to proceed
                    and which is required to be modified to enable the
                    construction of the Reading Development to be completed or
                    as otherwise agreed between the parties.

                    The PTC Infrastructure Works must be constructed in
                    accordance with the guidelines and standards set out in
                    SCHEDULES 1, 2 AND 3.
            (b)     PTC must use all reasonable endeavours to work and co-
                    operate with the Developer to minimise the cost of the PTC
                    Infrastructure Works.
 
14.   TIME
 14.1  NOTIFICATION OF DELAYS

            If progress of the Works is delayed by any Delay Event in a manner
            which might reasonably be expected to result in a delay in the Works
            reaching Practical Completion, the Developer must, if it wishes to
            claim an extension of time for Practical Completion of the Works, as
            soon as practicable and, in any event, not later than 14 days after
            the Delay Event occurs, give a notice in writing to PTC's
            Representative stating the nature, the cause and, where possible,
            the extent of the delay.
<PAGE>
 
                                       28

 14.2  NOTICE OF CLAIMED EXTENSION

            As soon as practicable, but not later than 14 days after the notice
            under CLAUSE 14.1 is issued, the Developer must give a further
            notice in writing to PTC's Representative stating a fair and
            reasonable time by which, in its opinion, the time for Practical
            Completion of the Works should be extended together with a statement
            of facts on which it bases its claim.

 14.3  PTC'S REPRESENTATIVE'S DETERMINATION

            Subject to the Developer having complied with the provisions of
            CLAUSE 14.1 and 14.2, PTC's Representative must as soon as
            practicable determine what, if any, extension of time for Practical
            Completion of the Works will be granted to the Developer and must
            notify in writing the Developer accordingly.  The Developer
            acknowledges that the Delay Events constitute the only grounds upon
            which the Developer is entitled to claim an extension of time for
            Practical Completion.

 14.4  CONDITION PRECEDENT TO EXTENSION OF TIME

            Notwithstanding the preceding provisions of this CLAUSE 14, the
            Developer is not entitled to any extension of time unless it has
            taken proper and reasonable steps both to preclude the occurrence of
            the cause of delay and to avoid or minimise the consequences of the
            delay.

 14.5       PRACTICAL COMPLETION
            (a)     When the Developer is of the opinion that either the PTC
                    Infrastructure Works or the Reading Development have reached
                    Practical Completion, the Developer must give written notice
                    to PTC's Representative specifying which of the Works have
                    reached Practical Completion. The notice must be accompanied
                    by any necessary documentary evidence demonstrating that the
                    requirements for achieving Practical Completion have been
                    satisfied.
            (b)     Within 7 days of receipt of the Developer's notice in
                    accordance with CLAUSE 14.5(A), PTC's Representative must
                    undertake a joint inspection of the relevant Works with the
                    Developer and either:
                    (i)     issue to PTC and the Developer a notice which shall
                            state the date on which the relevant Works reached
                            Practical Completion;
                    (ii)    issue to the Developer written notice of matters and
                            things required to be done before the relevant Works
                            shall reach Practical Completion; or
<PAGE>
 
                                       29

                    (iii)   issue to the Developer written notice that the
                            relevant Works are too far from Practical Completion
                            and requiring the Developer to continue with the
                            execution of the relevant Works in accordance with
                            this Agreement.

                    Provided that in relation to the Reading Development the
                    PTC's Representative's requirements under this sub-clause to
                    inspect the Reading Development will be limited only to
                    safety and operational requirements as set out in CLAUSE
                    2.2(C).
            (c)     If PTC's Representative issues to the Developer a written
                    notice under either of CLAUSE 14.5(B)(II) or (III), the
                    Developer must upon compliance with that notice give to
                    PTC's Representative further written notice that the
                    Developer has so complied and that further notice is deemed
                    to be a notice given by the Developer under CLAUSE 14.5(A)
                    and CLAUSES 14.5(B) and (C) shall reapply until such time as
                    PTC's Representative shall issue a Notice of Practical
                    Completion.
            (d)     Upon the issue of a Notice of Practical Completion or upon
                    the PTC Infrastructure Works being deemed to have reached
                    Practical Completion PTC may take possession of the PTC
                    Infrastructure Works.

 14.6  DEFECTS LIABILITY PERIOD

            The Defects Liability Period commences on the date the PTC
            Infrastructure Works reach or are deemed to reach Practical
            Completion under this Agreement and will continue for the period
            stated in ITEM 7.

 14.7  DEVELOPER TO RECTIFY
            If at any time during the Defects Liability Period, any fault,
            omission, shrinkage or other failure to comply with this Agreement
            is apparent:
            (a)     the Developer must make good those defects which are
                    notified to it by PTC's Representatives within the time
                    prescribed in the notice at no cost to PTC; and
            (b)     if the defect is not made good within the specified time,
                    PTC may have the defect made good itself and the cost of
                    doing so shall be a debt due from the Developer to PTC which
                    PTC may draw down on the Defects Guarantee referred to in
                    ITEM 10 or the Bank Guarantee referred to in ITEM 8 (if the
                    Bank Guarantee has not been returned to the Developer).
<PAGE>
 
                                       30

 14.8  TIME FOR MAKING GOOD
            Subject to CLAUSES 7.4 AND 14.7, the Developer must complete the
            making good of all defects within a reasonable time of the end of
            the Defects Liability Period.
 
 14.9  SUBMISSION OF CERTIFICATES, SURVEY PLANS AND OPERATING DOCUMENTS

            The Developer will submit to PTC's Representative within 28 days
            from the Date of Practical Completion the certificates and survey
            plan in accordance with CLAUSES 10.7(C) and (D) and all operating
            manuals, warranties, guarantees, as-built drawings and other
            documents and information required under this Agreement which, in
            the opinion of PTC's Representative, are necessary for the use,
            operation and maintenance of the PTC Infrastructure Works.

15.   INDEMNITIES AND INSURANCE
 15.1  DEVELOPER'S INDEMNITY

            The Developer indemnifies PTC against all costs, liability, loss or
            damage incurred or suffered in connection with the Developer's
            obligations under this Agreement which results in or may result in:
            (a)     any damage to any real or personal property; or
            (b)     the death of or injury to any person,

            caused or contributed to by any act, omission, negligence or default
            of the Developer its employees, agents, contractors, subcontractors
            or invitees unless such damage death or injury has been due to the
            act or default of PTC its servants or agents.

 15.2  DEVELOPER'S INSURANCE

            The Developer must ensure that the following insurances are effected
            on and from the Construction Commencement Date and maintained until
            the expiry of the Defects Liability Period in the joint names of PTC
            the Developer and the Subcontractor (together THE INSURED) for their
            respective rights, interests and liabilities:
            (a)     Contractor's all risk insurance on terms and conditions
                    (including, without limitation, any exclusions or excesses)
                    reasonably required by PTC for the whole of the Works
                    (including, without limitation, any associated temporary
                    works, material incorporated or to be incorporated in the
                    Works and the property of the Insured or for which they are
                    responsible and any insurance required by the Building Act
                    1993) concerning loss or destruction of or damage to the
                    property insured (whether caused by the Developer, PTC or
<PAGE>
 
                                       31

                    any other person) for its full reinstatement and replacement
                    cost;
            (b)     public liability insurance for liability to all persons
                    (including PTC) for a sum of not less than $ 20,000,000 for
                    any one event concerning personal injury to or death arising
                    by accident of any person (not being a person who at the
                    time of the accident is defined as a worker of the Insured
                    under any law concerning workers' compensation insurance)
                    and concerning any injury, loss or damage to any property
                    (real or personal) caused (directly or indirectly) by the
                    execution of the Works (whether by the Developer, PTC, a
                    Subcontractor, PTC's Representative or any other person);
            (c)     insurance for an unlimited sum against any loss, cost,
                    damage, liability or other detriment (whether arising under
                    a law concerning workers' compensation or employer's
                    liability or at common law) suffered or incurred by any of
                    its employees in or about the execution of the Works; and
            (d)     products liability insurance and professional indemnity
                    insurance for liability to all persons (including PTC)
                    concerning loss, costs, damage, liability or other detriment
                    suffered or incurred (directly or indirectly) in connection
                    with the execution of the Works.

 15.3  INSURANCE REQUIREMENTS
            All insurances required under CLAUSE 15 must:
            (a)     be effected with an insurance office or company approved by
                    PTC; and
            (b)     provide for payment of such amounts, cover such risks and
                    contain such conditions, endorsements and exclusions as are
                    acceptable to or required by PTC, acting reasonably; and
            (c)     contain a requirement that no exclusions, endorsements or
                    alterations may be made in or to that insurance, unless
                    first approved in writing by PTC; and
            (d)     be endorsed (to the extent permitted by Law) with a waiver
                    by the insurer of its right to avoid the policy or any
                    liability under that policy by reason of any non-disclosure
                    or any inaccurate disclosure relating to that policy.
<PAGE>
 
                                       32

 15.4  INSURANCE CONDITIONS FOR JOINT POLICIES
            The policies for the insurance required under this CLAUSE 15 which
            are effected in joint names must provide that:
            (a)     all insuring agreements and endorsements (excluding limits
                    of liability) operate in the same manner as if there was a
                    separate policy of insurance covering each Insured;
            (b)     the insurer waives all rights and remedies to which it may
                    become entitled by subrogation against any one or more of
                    the Insured; and
            (c)     failure by an Insured to observe and fulfil the terms of the
                    policy will not prejudice the insurance for any other
                    Insured.
 15.5  COPIES OF POLICIES

            The Developer must on or before the Construction Commencement Date
            deliver certified copies of all insurance policies required under
            THIS CLAUSE 15 and all renewal certificates, cover notes,
            certificates of insurance, premiums and endorsement slips to PTC's
            Representative.

 15.6  PAYMENT OF PREMIUMS

            The Developer must punctually pay (or cause to be punctually paid)
            all premiums and other sums payable concerning the insurance
            required under this CLAUSE 15 on or before the due date for payment
            and produce to PTC receipts or other proof of payment to PTC's
            satisfaction of those sums upon request by PTC.

 15.7  CERTIFICATES OF CURRENCY

            The Developer must deliver to PTC's Representative certificates of
            currency for the insurances required under this CLAUSE 15, promptly
            after receipt of a request from PTC's representative.

16.   BANK GUARANTEE
 16.1  DEVELOPER TO PROVIDE BANK GUARANTEE

            The Developer must deliver to the PTC, on or before the Construction
            Commencement Date, as security for the Developer's obligations to
            construct the Works in the manner prescribed by this Agreement, an
            irrevocable bank guarantee (BANK GUARANTEE) for the amount specified
            in ITEM 8 in a form approved by the PTC.

 16.2  TERMINATION OF CONTRACT

            If the Developer does not deliver the Bank Guarantee to PTC in
            accordance with CLAUSE 16.1, PTC may immediately terminate this
            Agreement without prejudice to any of its other remedies under this
            Agreement.
<PAGE>
 
                                       33

 16.3  RELEASE OF BANK GUARANTEE

            PTC must release the Bank Guarantee (to the extent it is not drawn
            down) to the Developer or make it available for collection by the
            Developer in exchange for an irrevocable bank guarantee in a sum
            equal to the amount specified in ITEM 10 (DEFECTS GUARANTEE) in the
            form and from a Bank agreed to by PTC immediately after the Date of
            Practical Completion of the whole of the Works.
 
            If the parties are in dispute as to whether the whole of the Works
            have reached Practical Completion, they must negotiate in good faith
            for the substitution of the Bank Guarantee with a bank guarantee for
            the value of the Works in dispute.

 16.4          RELEASE OF DEFECTS GUARANTEE

            PTC must release the Defects Guarantee to the Developer or make it
            available for collection by the Developer within five business days
            after the expiry of the Defects Liability Period (as it may be
            extended).

 16.5  DRAWDOWN
            PTC is authorised and may draw down the whole or any part of the
            Bank Guarantee whenever;
            (a)     expressly provided by this Agreement;
            (b)     either of the events described in CLAUSE 17.5(B) occur ; or
            (c)     PTC is entitled to reimbursement of money paid by it to
                    others and for which the Developer is primarily liable under
                    this Agreement and in all such cases as if the Bank
                    Guarantee were a sum of money due to PTC by the Developer.

 16.6  PTC'S OTHER RIGHTS NOT PREJUDICED

            A drawdown by PTC under the Bank Guarantee will not prevent PTC from
            seeking alternative or additional remedies or from claiming from the
            Developer losses, expenses, costs or damages in excess of the amount
            drawn down.

 16.7  REPLACEMENT BANK GUARANTEE OR DEFECTS GUARANTEE

            If PTC calls on the Bank Guarantee or Defects Guarantee, then, no
            later than seven business days after PTC gives the Developer a
            notice asking for it, the Developer must deliver to the PTC a
            replacement or additional Bank Guarantee or Defects Guarantee so
            that the amount available under the Bank Guarantee or Defects
            Guarantee is equal or greater than specified in ITEMS 8 OR 10
            (whichever is relevant).
<PAGE>
 
                                       34

17.   DEFAULT AND TERMINATION
 17.1  DEFAULT EVENTS
            A Default Event occurs if:
            (a)     there is a substantial or material breach of any of the
                    Developer's obligations under this Agreement;
            (b)     the Developer fails to remedy any breach of this Agreement
                    within 28 days after receiving written notice from PTC or
                    PTC's Representative specifying the breach;
            (c)     an Insolvency Event occurs in relation to the Developer; or
            (d)     the Developer wholly suspends the carrying out of the Works
                    before Practical Completion.

 17.2  OCCURRENCE OF DEFAULT EVENT
            If a Default Event occurs, PTC may give the Developer a notice in
            writing specifying :
            (a)     that the Default Event has occurred;
            (b)     reasonable details of the event or circumstance constituting
                    the Default Event; and
            (c)     the Cure Period.

 17.3  CURE PERIOD
            Upon receipt of a Default Event Notice, the Developer will be
            permitted to cure that Default Event within the Cure Period.

 17.4  EXTENSION TO CURE PERIOD
            (a)     If the Developer requires an extension to the Cure Period
                    (other than for a failure to pay money) it must, as soon as
                    possible (but no later than the expiration of the current
                    Cure Period) provide to PTC:
                    (i)     a Cure Plan or revised Cure Plan, as applicable; and
                    (ii)    evidence that:
                            (A)       the Developer has diligently pursued and
                                      is continuing to diligently pursue a
                                      feasible and practicable programme of
                                      rectification; and
                            (B)       the Default Event cannot, with reasonable
                                      diligence, be cured within the current
                                      Cure Period.
            (b)     PTC must not unreasonably refuse to grant an extension of
                    the Cure Period where the Developer has satisfied the
                    requirements of this CLAUSE 17.4.
<PAGE>
 
                                       35

            (c)     Irrespective of whether PTC grants any request by the
                    Developer for an extension of a Cure Period, the Developer
                    must diligently pursue implementation of each Cure Plan.
            (d)     The Developer is not entitled to apply for an extension to
                    the Cure Period for a failure to pay money.

 17.5  REMEDIES FOR DEFAULT EVENTS
            (a)     If a Default Event occurs and the Default Event is not
                    capable of being cured, the Developer must:
                    (i)     within the Cure Period, comply with any reasonable
                            requirements of PTC; and
                    (ii)    reimburse PTC for any loss or damage suffered or
                            incurred arising out of the Default Event within ten
                            Business Days of service on the Developer of the
                            Default Event Notice specifying the Default Event
                            and reasonable details of the reasonable
                            requirements of PTC.
            (b)     If a Default Event occurs and the Default Event is:
                    (i)     capable of being cured but is not cured in
                            accordance with the Cure Plan for that Default
                            Event, or, if there is no Cure Plan, to PTC's
                            reasonable satisfaction (which may include the
                            payment of compensation) within the Cure Period; or
                    (ii)    not capable of being cured and the Developer fails
                            to comply with CLAUSE 17.5(A),
                    PTC may (without prejudice to any other rights under this
                    Agreement) take one or any number of the following actions:
                    A       sue the Developer for compensation;
                    B       have recourse to any security for performance of the
                            Developer's obligations under this Agreement held by
                            PTC;
                    C       seek other available legal and equitable remedies
                            except termination, cancellation, rescission or
                            repudiation of this Agreement; or
                    D       by notice in writing, terminate this Agreement (but
                            without prejudice to any other rights under this
                            Agreement).
<PAGE>
 
                                       36

 17.6  RIGHTS AND LIABILITIES OF THE PARTIES FOLLOWING TERMINATION BY PTC
            (a)     If PTC terminates this Agreement in accordance with CLAUSE
                    17.5 the PTC may:
 
                    (i)     require the Developer to cease works immediately;
                    (ii)    have recourse to any security for performance of the
                            Developer's obligations under this Agreement;
                    (iii)   exercise all legal and equitable rights available to
                            PTC;
                    (iv)    require the Developer to:
                            (A)       novate or assign to PTC or its nominee
                                      without payment any agreement or the
                                      benefit of any agreement for the supply of
                                      materials or goods or for the execution of
                                      any Works; and
                            (B)       deliver all documentation necessary to
                                      enable PTC to bring the Works to Practical
                                      Completion.
            (b)     The Developer, for the purposes of any transfer or
                    assignment under this CLAUSE 17.6, irrevocably appoints PTC
                    as its attorney with full power and authority to execute
                    that transfer or assignment on behalf of the Developer.
            (c)     If this Agreement is terminated in accordance with CLAUSE
                    17.5, the rights and liabilities of the parties are the same
                    as at common law if the Developer had wrongfully repudiated
                    this Agreement and PTC had elected to treat this Agreement
                    as at an end and recover damages.
            (d)     All costs, loss, damage, liability or other detriment
                    suffered or incurred by PTC in or in relation to causing the
                    Works to reach Practical Completion is a debt due and
                    payable to PTC which may be deducted from the proceeds of
                    any security for performance of the Developer's obligations
                    under this Agreement.
<PAGE>
 
                                       37

 17.7  WAIVER
       If this Agreement between PTC and the Developer is terminated due to the
       Default Event, the Developer waives any rights it may have to pursue a
       claim of restitution of any kind, including without limitation, a claim
       of unjust enrichment.

18.   ASSIGNMENT OF INTEREST BY MACKIE
 18.1  Mackie hereby assigns all of its right title and interest in and to the
       PFFA the Heads of Agreement and this Agreement to the Developer.

 18.2  The Developer hereby indemnifies Mackie against all claims and
       liabilities which may be imposed on Mackie as Developer under the PFFA,
       the Heads of Agreement or this Agreement.

 18.3  PTC consents to the assignment of rights from Mackie to the Developer.

19.   CONSENT BY PTC
 19.1  In the event that the consent approval or satisfaction of PTC (whether
       acting directly or through PTC's Representative) is required for any
       reason whatsoever under any provision of this Agreement, such consent
       approval or satisfaction will be not unreasonably withheld and will be
       given taking into account the provisions of CLAUSE 2.2(C).

 19.2  Where action is required of PTC (whether acting directly or through PTC's
       Representative) such action will, unless some other time period is
       specifically provided for elsewhere in this Agreement, be taken within 15
       business days except in respect of resubmissions of requests where
       consent has been refused in which case it will be taken within 7 business
       days.

 19.3  In all cases PTC will use all reasonable endeavours to act as quickly as
       possible and the Developer will use all reasonable endeavours to make any
       requests for approval of plans and specifications on a staged basis.

 19.4  In the event that consent approval or notice of satisfaction is not given
       or refused within the respective periods referred to in CLAUSE 19.2, it
       will be deemed to have been given.

20.   DISPUTE RESOLUTION
 20.1  Except as otherwise provided in this Agreement should any dispute or
       difference arise between the parties either during the term of this
       Agreement or after the termination or breach of this Agreement as to the
       construction of this Agreement or as to any other matter arising under
<PAGE>
 
                                       38

       this Agreement the parties must prior to issuing legal proceedings send a
       notice and a copy of this Agreement to the President of the Law Institute
       of Victoria or his or her nominee.

 20.2  The notice shall:
       (a)     specify the nature of the dispute or the difference;
       (b)     request that a mediator be appointed promptly; and
       (c)     state that if the dispute or difference is not resolved
               within 28 days of the mediator's written confirmation of
               appointment, the dispute or difference shall be referred to
               a court of competent jurisdiction.

 20.3  A mediator shall endeavour to resolve the dispute or difference within 28
       days of his or her nomination.

 20.4  If the mediator is able to assist the parties in reaching an agreement,
       the agreement shall be embodied in writing, signed by the parties and
       shall be binding on them.

20.5  If the mediator is unable to resolve the dispute or difference within the
      prescribed period, or within any extended period agreed to in writing by
      the parties, the dispute shall be referred to a court of competent
      jurisdiction.

20.6  The costs of the mediator shall be shared by the parties to the dispute.

20.7  The parties may engage solicitors or consultants to assist with the
      preparation of their presentations for the mediation conference and may
      engage those persons to appear on their behalf at the mediation.

21.   NOTICES
 21.1  NOTICE REQUIREMENTS
       A notice, approval, consent or other communication concerning this
       Agreement:
       (a)     may be given by a party or its Authorised Officer; and
       (b)     must be in writing; and
       (c)     must be left at the address of the addressee or sent by prepaid
               ordinary post (airmail if posted to or from a place outside
               Australia) to the address of the addressee or sent by facsimile
               to the facsimile number of the addressee which is set out in ITEM
               9 or if the addressee notifies another address or facsimile
               number then to that address or facsimile number.
<PAGE>
 
                                       39

 21.2  NOTICES ON PTC'S REPRESENTATIVE
       The Developer must serve PTC's Representative with a copy of any notice
       to PTC on the same day or as close as reasonably possible to the day on
       which the notice is served on PTC.

21.3   TIME OF EFFECT OF NOTICE
       A notice, approval, consent or other communication takes effect from the
       time it is received, unless a later time is specified in it.

 21.4  RECEIPT OF NOTICE
       A letter or facsimile is taken to be received:
       (a)     in the case of a posted letter, on the third day after
               posting; and
       (b)     in the case of a facsimile, on production of a transmission
               report by the machine from which the facsimile was sent which
               indicates that the facsimile was sent in its entirety to the
               facsimile number of the recipient.

 21.5  NOTICES TO US PARENT
       PTC agrees to use its best endeavours to deliver a copy of any notice it
       issues under CLAUSE 17 to Reading Entertainment Inc at the address
       specified in ITEM 9 or such other address as is notified to PTC in
       writing. PTC will use its best endeavours to confirm by telephone service
       of any such notice.

 21.6  FAILURE TO SERVE NOTICE
       Neither the failure by PTC to deliver a copy of a notice in accordance
       with CLAUSE 21.5 nor failing to contact Reading Entertainment Inc by
       telephone will constitute a breach of this Agreement or operate to delay
       or prolong any time period specified in this Agreement.

22.   COSTS
 22.1  LEGAL COSTS
       Each party must bear its own legal costs of and incidental to the
       preparation negotiation and execution of this Agreement and the Developer
       must pay any stamp duty payable on this Agreement.

 22.2  COSTS ON DEFAULT
       Either party must pay or reimburse the other on request all costs
       incurred or payable by the other in connection with the contemplated or
       actual enforcement or preservation of any rights under this Agreement
       including, without limitation, legal costs and disbursements on a
       solicitor and client basis.
<PAGE>
 
                                       40

23.   MISCELLANEOUS
 23.1  CERTIFICATE
       A certificate signed by PTC or PTC's Representative about a matter
       concerning this Agreement is sufficient evidence of the matter stated in
       the certificate, unless the matter is proved to be false.

 23.2  EXERCISE OF RIGHTS
       Either party may exercise a right, power or remedy at its discretion
       and separately or concurrently with another right, power or remedy.
 
 23.3  SINGLE OR PARTIAL EXERCISE
       A single or partial exercise of a right, power or remedy by either party
       does not prevent a further exercise of that or an exercise of any other
       right, power or remedy.

 23.4  FAILURE OR DELAY IN EXERCISE
       Failure by either party to exercise or delay in exercising a right,
       power or remedy does not prevent its exercise.
 
 23.5  NO LIABILITY
       PTC is not liable for any loss caused by the exercise, attempted
       exercise, failure to exercise or delay in exercising a right, power
       or remedy.

 23.6  WAIVER AND VARIATION
       A provision of or a right created under this Agreement may not be
       waived or varied except in writing signed by the party to be bound.

 23.7  WAIVER DOES NOT EXTEND TO ANOTHER
       If any party waives a provision of or a right created under or
       implied in this Agreement, that waiver does not extend to:
       (a)     a breach by any other party of the same or any other
               provision; or
       (b)     the future exercise by such party of that right.

 23.8  ACCEPTANCE OF PAYMENT
       The acceptance of a payment under this Agreement will not be taken
       to constitute a waiver of any provision of or a right created under
       or implied in this Agreement, except the right to demand that
       payment.

 23.9  SUPERVENING LEGISLATION
       Any present or future legislation which operates to:
       (a)     vary the obligations of any party under this Agreement; or
       (b)     adversely affect any party's rights, powers or remedies
       (including, without limitation, by way of delay or postponement) is
       excluded, except to the extent that its exclusion is prohibited or
       rendered ineffective by law.
<PAGE>
 
                                       41

 23.10 REMEDIES CUMULATIVE
       The rights, powers and remedies provided in this Agreement are cumulative
       with and not exclusive of the rights, powers or remedies provided by law
       independently of this Agreement.

 23.11 SET-OFF
       PTC may apply (without notice) any credit balance in any currency in
       any account of the Developer with PTC towards satisfaction of any
       amount then payable by the Developer to PTC under this Agreement.

 23.12 REDUCTION OF AMOUNT PAYABLE
       PTC may by notice to the Developer reduce the amount payable at any
       time by PTC to the Developer by the amount payable at that time by
       the Developer to PTC under this Agreement.  The Developer is taken
       to have paid PTC that part of the amount then payable by the
       Developer equal to the amount of the reduction.

 23.13 INDEMNITIES
       Each indemnity in this Agreement is a continuing obligation,
       separate and independent from the other obligations of either party
       and survives expiry or termination of this Agreement.

 23.14 ENFORCEMENT OF INDEMNITY
       No party need incur expense or make payment before enforcing a right
       of indemnity under this Agreement.

 23.15 FURTHER ASSURANCES
       If PTC requests, the Developer must execute and cause its successors
       to execute documents and do everything else necessary or appropriate
       to bind the Developer and its successors under this Agreement.

 23.16 ANTECEDENT BREACHES AND OBLIGATIONS
       The expiry or termination of this Agreement does not affect:
       (a)     any party's rights for a breach of this Agreement by another
               party before the expiry or termination; or
       (b)     any party's obligation to make a payment under this
               Agreement for periods before the expiry or termination.

23.17 ENTIRE AGREEMENT
      The Developer acknowledges:
      (a)      no information, representation or warranty by or on behalf
               of PTC was supplied or made concerning this transaction,
               in relation to the Developer's taxation liability or
               any other matter, with the intention or knowledge that it
               would be relied upon by the Developer; and
      (b)      no information, representation or warranty has been relied
               upon; and
<PAGE>
 
                                       42

      (c)      this Agreement and all documents mentioned or contemplated
               by this Agreement constitute the entire agreement between
               the parties concerning the Works and supersedes all previous
               negotiations and agreements concerning this transaction.

 24.   SEVERABILITY
       If the whole or any part of a provision of this Agreement is void,
       unenforceable or illegal in a jurisdiction it is severed for that
       jurisdiction. The remainder of this Agreement has full force and effect
       and the validity or enforceability of that provision in any other
       jurisdiction is not affected. This clause has no effect if the severance
       alters the basic nature of this Agreement or is contrary to public
       policy.

25.   GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS
 25.1  GOVERNING LAW
       This Agreement is governed by the law of Victoria.

 25.2  JURISDICTION
       Each party irrevocably and unconditionally submits to the exclusive
       jurisdiction of the courts of Victoria and courts of appeal from them.
       Each party waives any right it has to object to an action being brought
       in those courts including, without limitation, by claiming that the
       action has been brought in an inconvenient forum or that those courts do
       not have jurisdiction.

 25.3  SERVICE OF PROCESS
       Without preventing any other mode of service, any document in an
       action (including, without limitation, any writ of summons or other
       originating process or any third or other party notice) may be
       served on any party by being delivered to or left for that party at
       its address for service of notices under this Agreement.
 
 26.   GOOD FAITH
       The parties will act in good faith to ensure that they effect the intent
       of the parties evidenced by this deed.
<PAGE>
 
                                       43


EXECUTION PAGE


EXECUTED as a deed                                        (SEAL)



THE OFFICIAL SEAL of the PUBLIC TRANSPORT     )
CORPORATION was hereunto affixed in           )
the presence of:                              )

/s/ Geralding Sharman                           /s/ Tony Sabatino     
 .....................................         ..................................
Authorised signatory                          Authorised signatory


 .....................................
Secretary


THE COMMON SEAL of READING PROPERTIES         )
PTY LTD ACN 071 195 429 is affixed in         )
accordance with its Articles of Association   )
in the presence of:                           )

 /s/ B. John Rochester
 ......................................                    (SEAL)
Director
 
 /s/ Jonathan Altson
 ......................................
Secretary

 
THE COMMON SEAL of MACKIE GROUP PTY           )
LTD ACN 006 524 456 is affixed in accordance  )
with its Articles of Association in           )
the presence of:                              )


 /s/ Ralph Mackie
 ......................................                    (SEAL)
Director
 
 /s/ Graham Duckitt
 ......................................
Secretary