Document:

Exhibit 10.31

 

Corporate Letter of Offer

 

 

“CHANNELL BUSHMAN GROUP”

 

26 April 2006

 

 

	
  National
  Australia Bank Limited ABN 12 004 044 937

  	
   

  	
  

  

 

 

Customers and Facility
Summary

 

We
offer to provide the facilities
detailed within this Letter of Offer
to “CHANNELL BUSHMAN GROUP”. A summary of these facilities is set out below. Facilities marked with a + (if any) are subject to the
relevant Multi Option Facility set out in Part 1 of the Letter of Offer.

 

FACILITY
SUMMARY

 

	
  Customer:

  	
   

  	
  Channell
  Bushman Pty Limited

  
	
  ABN:

  	
   

  	
  ABN 99
  109 821 614

  
	
   

  	
   

  	
   

  
	
  Facility Type:

  	
   

  	
  Bill - Floating
  Rate

  
	
  Facility Limit:

  	
   

  	
  $5,600,000

  
	
   

  	
   

  	
   

  
	
  Facility Type:

  	
   

  	
  Bill - Floating
  Rate

  
	
  Facility Limit:

  	
   

  	
  $750,000

  
	
   

  	
   

  	
   

  
	
  Facility Type:

  	
   

  	
  Bill - Floating
  Rate

  
	
  Facility Limit:

  	
   

  	
  $2,500,000

  
	
   

  	
   

  	
   

  
	
  Customer Total:

  	
   

  	
  $8,850,000

  
	
   

  	
   

  	
   

  
	
  Customer:

  	
   

  	
  Bushmans
  Group Pty Limited

  
	
  ABN:

  	
   

  	
  ABN 90
  090 744 022

  
	
   

  	
   

  	
   

  
	
  Facility Type:

  	
   

  	
  Bill - Floating
  Rate

  
	
  Facility Limit:

  	
   

  	
  $3,200,000

  
	
   

  	
   

  	
   

  
	
  Facility Type:

  	
   

  	
  Master Asset
  Finance Agreement

  
	
  Facility Limit:

  	
   

  	
  $1,000,000

  
	
   

  	
   

  	
   

  
	
  Facility Type:

  	
   

  	
  Business Credit
  Card

  
	
  Facility Limit:

  	
   

  	
  $300,000

  
	
   

  	
   

  	
   

  
	
  Facility Type:

  	
   

  	
  Bank Guarantee

  
	
  Facility Limit:

  	
   

  	
  $100,000

  
	
   

  	
   

  	
   

  
	
  Customer Total:

  	
   

  	
  $4,600,000

  
	
   

  	
   

  	
   

  
	
  Customer:

  	
   

  	
  Channell
  Pty Limited

  
	
  ABN:

  	
   

  	
  ABN 29
  002 735 622

  
	
   

  	
   

  	
   

  
	
  Facility Type:

  	
   

  	
  Master Asset
  Finance Agreement

  
	
  Facility Limit:

  	
   

  	
  $250,000

  
	
   

  	
   

  	
   

  
	
  Facility Type:

  	
   

  	
  Bank Guarantee

  
	
  Facility Limit:

  	
   

  	
  $375,000

  
	
   

  	
   

  	
   

  
	
  Customer Total:

  	
   

  	
  $625,000

  
	
   

  	
   

  	
   

  
	
  Group
  Total:

  	
   

  	
  $14,075,000

  

 

If there is any
inconsistency between the information set out here and that set out in the
Details of Facilities sections of this Letter
of Offer, then unless specifically provided the Details of
Facilities sections prevail to the extent of that inconsistency.

 

 

Relationship Management

 

The banking needs of “CHANNELL BUSHMAN GROUP” will be met by a specialist
team located at the National’s NAB House Sydney location.

 

Through our strong focus on actively managing our relationship with the
group we will be able to offer a number of benefits through our NAB House
Sydney location:

 

•                       A dedicated Relationship Manager
who your team will be able to deal directly with at times and who will be
working hard to add value to your business and respond quickly to your needs.

 

•                       Your dedicated Relationship
Manager will be a central point of contact to access the complete suite of
the National’s specialised services including Interest Rate Risk Management,
Trade Solutions, Leasing and Fleet Services and Wealth Creation.

 

The dedicated team at the NAB House Sydney location is
led by:

 

	
  •

  	
  Associate
  Director

  	
   

  	
  Graeme L Johnson

  
	
   

  	
  Direct Telephone Number

  	
   

  	
  02 9237-9731

  
	
   

  	
  Facsimile Number

  	
   

  	
  02 9237-9752

  
	
   

  	
  Email

  	
   

  	
  graeme_l_johnson@nab.com.au

  

 

	
  •

  	
  Account Manager

  	
   

  	
  Christine Tsang

  
	
   

  	
  Direct Telephone Number

  	
   

  	
  02 9237-1917

  
	
   

  	
  Facsimile Number

  	
   

  	
  02 9237-9752

  
	
   

  	
  Email

  	
   

  	
  christine.tsang@nab.com.au

  

 

This Letter of Offer remains available for
acceptance until 15th May 2006 after which time it will, at our option, lapse.

 

Thank you for the
opportunity to provide the enclosed Letter
of Offer to the group for its consideration.

 

Yours
sincerely,

 

	
  /s/ Graeme L Johnson

  	
   

  
	
  Graeme
  L Johnson

  
	
  Senior
  Relationship Manager

  

 

 

Table of Contents

 

	
  1

  	
   

  	
  DETAILS OF
  FACILITIES – NEW FACILITIES GENERALLY SUBJECT TO THIS LETTER OF OFFER

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  DETAILS OF
  FACILITIES – NEW FACILITIES GENERALLY SUBJECT TO OTHER CONTRACTUAL
  DOCUMENTATION

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  DETAILS OF
  FACILITIES – EXISTING FACILITIES GENERALLY SUBJECT TO OTHER CONTRACTUAL
  DOCUMENTATION

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  SECURITY

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  ESTABLISHMENT
  FEES AND CHARGES

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  CONDITIONS
  PRECEDENT AND OTHER INFORMATION

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  COVENANTS AND
  UNDERTAKINGS

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
  GENERAL TERMS
  AND CONDITIONS

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
  SPECIFIC
  CONDITIONS - BILL FACILITY

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
  SPECIFIC
  CONDITIONS – BANK GUARANTEE FACILITY

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  ACCEPTANCE OF
  LETTER OF OFFER

  	
   

  	
  43

  
					

 

1

 

1                                         Details of Facilities – New facilities generally
subject to this Letter of Offer

 

New
facilities are detailed below.

 

Customer: 
Channell Bushman Pty Limited

 

Bill
Acceptance/Discount Facility – Floating Rate

 

	
  Purpose/Utilisation:

  	
   

  	
  Acquisition Finance

  
	
   

  	
   

  	
   

  
	
  Facility limit:

  	
   

  	
  $

  	
  5,600,000 (five
  million six hundred thousand dollars)

  
	
   

  	
   

  	
   

  
	
  Expiry Date:

  	
   

  	
  31st July 2009

  
	
   

  	
   

  	
   

  
	
  The Facility is:

  	
   

  	
  an amortising facility

  
	
   

  	
   

  	
   

  
	
  Amortisation
  Details of Facilities if the Facility is an Amortising Facility:

  	
   

  	
  $200,000 per
  quarter, commencing on 30th June 2006, then increasing to $400,000 per
  quarter from 30th June 2007 until expiry

  
	
   

  	
   

  	
   

  
	
  Drawdown Periods:

  	
   

  	
  Approximate
  period between each drawdown date:

  

  90 days

  
	
   

  	
   

  	
   

  
	
  Yield Rate:

  	
   

  	
  Floating
  rate.

  
	
   

  	
   

  	
   

  
	
  Floating Rate:

  	
   

  	
  the rate
  (expressed as a percentage yield to maturity and rounded upwards to the
  nearest two decimal places) which is the bid rate shown at approximately
  10.10 am (Sydney time) on page BBSY
  on the Reuters Monitor System on the day the bills
  are to be discounted for bills
  of like amounts and tenors. If such rate is not available or if, in our reasonable opinion, the rate becomes
  inappropriate, the floating rate
  will be the rate reasonably determined by us
  to be the appropriate equivalent rate, having regard to prevailing
  market conditions.

  

  The rate as a percentage per annum will be advised following a drawing under the facility.

  
	
   

  	
   

  	
   

  
	
  Facility Fee:

  	
   

  	
  0.50% per annum
  of the facility limit, payable
  by you on a half yearly basis
  in advance from the date of acceptance of the facility.

  
	
   

  	
   

  	
   

  
	
  Activation Fee:

  	
   

  	
  1.40% per annum
  of the face value of each bill,
  calculated from and including the date we
  accept the bill to the maturity date of the bill, payable by you upon acceptance of each bill.

  
	
   

  	
   

  	
   

  
	
  Bill Drawdown
  Fee:

  	
   

  	
  $150 payable by
  you each time we accept bills on a drawdown date.

  
	
   

  	
   

  	
   

  
	
  Late
  Presentation Fee:

  	
   

  	
  Not
  ascertainable - see Special Conditions - Bill Facility

  
	
   

  	
   

  	
   

  
	
  Default
  Interest Rate:

  	
   

  	
  The
  total of the National’s Base
  Lending Indicator Rate, currently 9.85%, plus a customer margin of 1.90% plus
  a default margin of 4.00%.

  

  Currently
  15.75% per annum

  
	
   

  	
   

  	
   

  
	
  Nominated
  Account: :

  	
   

  	
  Channell bushman
  Pty Limited

  

  082-057 #57189-3025

  

  for the purposes of debiting amounts under this Agreement (including the amount of each matured bill, interest, fees, charges, taxes,
  premiums, economic costs and
  enforcement expenses.)

  
	
   

  	
   

  	
   

  
	
  Securities:

  	
   

  	
  All securities detailed in Part 4 with
  the exception of the securities numbered
  8,9&10.

  
	
   

  	
   

  	
   

  
	
  Specific
  Conditions:

  	
   

  	
  Specific
  Conditions – Bill Facility

  

 

2

 

Customer: 
Channell Bushman Pty Limited

 

Bill
Acceptance/Discount Facility – Floating Rate

 

	
  Purpose/Utilisation:

  	
   

  	
  Fund ‘Earn-Out’ associated with the
  acquisition.

  
	
   

  	
   

  	
   

  
	
  Facility
  limit:

  	
   

  	
  $750,000
  (seven hundred and fifty thousand dollars)

  
	
   

  	
   

  	
   

  
	
  Expiry Date:

  	
   

  	
  31st July 2008

  
	
   

  	
   

  	
   

  
	
  Last Date for Drawdown:

  	
   

  	
  31st July 2006

  
	
   

  	
   

  	
   

  
	
  The Facility is:

  	
   

  	
  an amortising facility

  
	
   

  	
   

  	
   

  
	
  Amortisation
  Details of Facilities if the Facility is an Amortising Facility:

  	
   

  	
  $63,000 per
  quarter, commencing 30th June 2006.

  
	
   

  	
   

  	
   

  
	
  Drawdown Periods:

  	
   

  	
  Approximate
  period between each drawdown date:

  

  90 days

  
	
   

  	
   

  	
   

  
	
  Yield Rate:

  	
   

  	
  Floating
  rate.

  
	
   

  	
   

  	
   

  
	
  Floating Rate:

  	
   

  	
  the rate
  (expressed as a percentage yield to maturity and rounded upwards to the
  nearest two decimal places) which is the bid rate shown at approximately
  10.10 am (Sydney time) on page BBSY
  on the Reuters Monitor System on the day the bills
  are to be discounted for bills
  of like amounts and tenors. If such rate is not available or if, in our reasonable opinion, the rate becomes
  inappropriate, the floating rate
  will be the rate reasonably determined by us
  to be the appropriate equivalent rate, having regard to prevailing
  market conditions.

  

  The rate as a percentage per annum will be advised following a drawing under the facility.

  
	
   

  	
   

  	
   

  
	
  Facility Fee:

  	
   

  	
  0.50% per annum
  of the facility limit, payable
  by you on a half yearly basis
  in advance from the date of acceptance of the facility.

  
	
   

  	
   

  	
   

  
	
  Activation Fee:

  	
   

  	
  1.40% per annum
  of the face value of each bill,
  calculated from and including the date we
  accept the bill to the maturity date of the bill, payable by you upon acceptance of each bill.

  
	
   

  	
   

  	
   

  
	
  Bill Drawdown
  Fee:

  	
   

  	
  $150 payable by
  you each time we accept bills on a drawdown date.

  
	
   

  	
   

  	
   

  
	
  Late
  Presentation Fee:

  	
   

  	
  Not
  ascertainable - see Special Conditions - Bill Facility

  
	
   

  	
   

  	
   

  
	
  Default
  Interest Rate:

  	
   

  	
  The
  total of the National’s Base
  Lending Indicator Rate, currently 9.85%, plus a customer margin of 1.90% plus
  a default margin of 4.00%.

  

  Currently
  15.75% per annum

  
	
   

  	
   

  	
   

  
	
  Nominated
  Account:

  	
   

  	
  Channell bushman
  Pty Limited

  

  082-057 #57189-3025

  

  for the purposes of debiting amounts under this Agreement (including the amount of each matured bill, interest, fees, charges, taxes,
  premiums, economic costs and
  enforcement expenses.)

  
	
   

  	
   

  	
   

  
	
  Securities:

  	
   

  	
  All securities detailed in Part 4 with
  the exception of the securities numbered
  8, 9&10.

  
	
   

  	
   

  	
   

  
	
  Specific
  Conditions:

  	
   

  	
  Specific
  Conditions – Bill Facility

  

 

3

 

Customer: 
Channell Bushman Pty Limited

 

Bill
Acceptance/Discount Facility – Floating Rate

 

	
  Purpose/Utilisation:

  	
   

  	
  Capital Expenditure for the Group

  
	
   

  	
   

  	
   

  
	
  Facility
  limit:

  	
   

  	
  $2,500,000
  (two million five hundred thousand dollars)

  
	
   

  	
   

  	
   

  
	
  Expiry Date:

  	
   

  	
  31st July 2009

  
	
   

  	
   

  	
   

  
	
  The Facility is:

  	
   

  	
  an amortising facility

  
	
   

  	
   

  	
   

  
	
  Amortisation
  Details of Facilities if the Facility is an Amortising Facility:

  	
   

  	
  Subject to cash
  flows, but with view of amortising each drawing over a maximum term of four
  years. Noting current drawing the facility should amortise by $20,000 per
  quarter commencing on 30th June 2006.

  
	
   

  	
   

  	
   

  
	
  Drawdown Periods:

  	
   

  	
  Approximate
  period between each drawdown date:
  90 days

  
	
   

  	
   

  	
   

  
	
  Yield Rate:

  	
   

  	
  Floating
  rate.

  
	
   

  	
   

  	
   

  
	
  Floating Rate:

  	
   

  	
  the rate
  (expressed as a percentage yield to maturity and rounded upwards to the
  nearest two decimal places) which is the bid rate shown at approximately
  10.10 am (Sydney time) on page BBSY
  on the Reuters Monitor System on the day the bills
  are to be discounted for bills
  of like amounts and tenors. If such rate is not available or if, in our reasonable opinion, the rate becomes
  inappropriate, the floating rate
  will be the rate reasonably determined by us
  to be the appropriate equivalent rate, having regard to prevailing
  market conditions.

  

  The rate as a percentage per annum will be advised following a drawing under the facility.

  
	
   

  	
   

  	
   

  
	
  Facility Fee:

  	
   

  	
  0.50% per annum
  of the facility limit, payable
  by you on a half yearly basis
  in advance from the date of acceptance of the facility.

  
	
   

  	
   

  	
   

  
	
  Activation Fee:

  	
   

  	
  1.40% per annum
  of the face value of each bill,
  calculated from and including the date we
  accept the bill to the maturity date of the bill, payable by you upon acceptance of each bill.

  
	
   

  	
   

  	
   

  
	
  Bill Drawdown
  Fee:

  	
   

  	
  $150 payable by you each time we accept bills
  on a drawdown date.

  
	
   

  	
   

  	
   

  
	
  Late
  Presentation Fee:

  	
   

  	
  Not
  ascertainable - see Special Conditions - Bill Facility

  
	
   

  	
   

  	
   

  
	
  Default
  Interest Rate:

  	
   

  	
  The
  total of the National’s Base
  Lending Indicator Rate, currently 9.85%, plus a customer margin of 1.90% plus
  a default margin of 4.00%. Currently 15.75% per annum

  
	
   

  	
   

  	
   

  
	
  Nominated
  Account:

  	
   

  	
  Channell bushman
  Pty Limited

  

  082-057 #57189-3025 

  

  for the purposes of debiting amounts under this Agreement (including the amount of each matured bill, interest, fees, charges, taxes,
  premiums, economic costs and
  enforcement expenses.)

  
	
   

  	
   

  	
   

  
	
  Securities:

  	
   

  	
  All securities detailed in Part 4 with
  the exception of the securities numbered
  8, 9&10.

  
	
   

  	
   

  	
   

  
	
  Specific
  Conditions:

  	
   

  	
  Specific
  Conditions — Bill Facility

  

 

4

 

Customer: 
Bushmans Group Pty Limited

 

Bill
Acceptance/Discount Facility – Floating Rate

 

	
  Purpose/Utilisation:

  	
   

  	
  Working Capital

  
	
   

  	
   

  	
   

  
	
  Facility limit:

  	
   

  	
  $3,200,000
  (three million two hundred thousand dollars)

  
	
   

  	
   

  	
   

  
	
  Expiry Date:

  	
   

  	
  30th November 2006

  
	
   

  	
   

  	
   

  
	
  The Facility is:

  	
   

  	
  a non-amortising  facility

  
	
   

  	
   

  	
   

  
	
  Drawdown Periods:

  	
   

  	
  Approximate
  period between each drawdown date:
  30 days

  
	
   

  	
   

  	
   

  
	
  Yield Rate:

  	
   

  	
  Floating
  rate.

  
	
   

  	
   

  	
   

  
	
  Floating Rate:

  	
   

  	
  the rate
  (expressed as a percentage yield to maturity and rounded upwards to the
  nearest two decimal places) which is the bid rate shown at approximately
  10.10 am (Sydney time) on page BBSY
  on the Reuters Monitor System on the day the bills
  are to be discounted for bills
  of like amounts and tenors. If such rate is not available or if, in our reasonable opinion, the rate becomes
  inappropriate, the floating rate
  will be the rate reasonably determined by us
  to be the appropriate equivalent rate, having regard to prevailing
  market conditions.

  

  The rate as a percentage per annum will be advised following a drawing under the facility.

  
	
   

  	
   

  	
   

  
	
  Facility Fee:

  	
   

  	
  0.50% per annum
  of the facility limit, payable
  by you on a half yearly basis
  in advance from the date of acceptance of the facility.

  
	
   

  	
   

  	
   

  
	
  Activation Fee:

  	
   

  	
  1.40% per annum
  of the face value of each bill,
  calculated from and including the date we
  accept the bill to the maturity date of the bill, payable by you upon acceptance of each bill.

  
	
   

  	
   

  	
   

  
	
  Bill Drawdown
  Fee:

  	
   

  	
  $150 payable by you each time we accept bills
  on a drawdown date.

  
	
   

  	
   

  	
   

  
	
  Late
  Presentation Fee:

  	
   

  	
  Not
  ascertainable - see Special Conditions - Bill Facility

  
	
   

  	
   

  	
   

  
	
  Default
  Interest Rate:

  	
   

  	
  The
  total of the National’s Base
  Lending Indicator Rate, currently 9.85%, plus a customer margin of 1.90% plus
  a default margin of 4.00%.

  

  Currently
  15.75% per annum

  
	
   

  	
   

  	
   

  
	
  Nominated
  Account:

  	
   

  	
  Bushmans Group
  Pty Limited

  

  082-057 #57132-0868

  

  for the purposes of debiting amounts under this Agreement (including the amount of each matured bill, interest, fees, charges, taxes,
  premiums, economic costs and
  enforcement expenses.)

  
	
   

  	
   

  	
   

  
	
  Securities:

  	
   

  	
  All securities detailed in Part 4 with
  the exception of the securities numbered
  7, 9&10.

  
	
   

  	
   

  	
   

  
	
  Specific
  Conditions:

  	
   

  	
  Specific
  Conditions – Bill Facility

  

 

5

 

Customer: 
Bushmans Group Pty Limited

 

Bank Guarantee Facility

 

	
  Purpose/Utilisation:

  	
   

  	
  Performance
  Guarantee

  
	
   

  	
   

  	
   

  
	
  Facility limit:

  	
   

  	
  $100,000 (one
  hundred thousand dollars0

  
	
   

  	
   

  	
   

  
	
  Expiry Date:

  	
   

  	
  30th November 2006

  
	
   

  	
   

  	
   

  
	
  Issuing Fee:

  	
   

  	
  1.80% of the
  face value of each bank guarantee
  payable on issue

  
	
   

  	
   

  	
   

  
	
  Half Yearly Fee:

  	
   

  	
  3.60% of the
  face value of each bank guarantee,
  payable half yearly in arrears from issue

  
	
   

  	
   

  	
   

  
	
  Securities:

  	
   

  	
  All securities detailed in Part 4 with
  the exception of the securities numbered
  1,3,4,5,6,7,8,9&10.

  
	
   

  	
   

  	
   

  
	
  Specific
  Conditions:

  	
   

  	
  Specific
  Conditions – Bank Guarantee Facility

  

 

Customer: 
Channell Pty Limited

 

Bank Guarantee Facility

 

	
  Purpose/Utilisation:

  	
   

  	
  Performance
  Guarantee

  
	
   

  	
   

  	
   

  
	
  Facility limit:

  	
   

  	
  $100,000 (one
  hundred thousand dollars0

  
	
   

  	
   

  	
   

  
	
  Expiry Date:

  	
   

  	
  30th November 2006

  
	
   

  	
   

  	
   

  
	
  Issuing Fee:

  	
   

  	
  1.80% of the
  face value of each bank guarantee
  payable on issue

  
	
   

  	
   

  	
   

  
	
  Half Yearly Fee:

  	
   

  	
  3.60% of the
  face value of each bank guarantee,
  payable half yearly in arrears from issue

  
	
   

  	
   

  	
   

  
	
  Securities:

  	
   

  	
  All securities detailed in Part 4 with
  the exception of the securities numbered
  1,2,4,5,6,7,8,9&10.

  
	
   

  	
   

  	
   

  
	
  Specific
  Conditions:

  	
   

  	
  Specific
  Conditions – Bank Guarantee Facility

  

 

6

 

2                                         Details of Facilities – New facilities generally
subject to other contractual documentation

 

New
facilities generally subject to
other contractual documentation are summarised below. Refer to Section B1
of the General Terms and Conditions for how this Letter of Offer applies to them.

 

Not Applicable

 

7

 

3                                         Details of Facilities – Existing facilities generally
subject to other contractual documentation

 

Existing facilities generally subject to other
contractual documentation are summarised below. Refer to Section B1 of the General Terms and Conditions for how
this Letter of Offer applies to
them.

 

Customer: Bushmans Group Pty Limited

 

Master
Asset Finance Agreement Facility

 

	
  Purpose/Utilisation:

  	
   

  	
  Capital
  Expenditure – Motor Vehicles

  
	
   

  	
   

  	
   

  
	
  Facility limit:

  	
   

  	
  $

  	
  1,000,000

  
	
   

  	
   

  	
   

  
	
  Expiry Date:

  	
   

  	
  30th November 2006

  
	
   

  	
   

  	
   

  
	
  Repayments:

  	
   

  	
  Subject to
  negotiation at time of drawing.

  
	
   

  	
   

  	
   

  
	
  Residual:

  	
   

  	
  Subject to
  negotiation at time of drawing.

  
	
   

  	
   

  	
   

  
	
  Securities:

  	
   

  	
  All securities detailed in Part 4 with
  the exception of securities
  numbered 1,3,4,5,6,7,8&10.

  

 

Customer: Bushmans Group Pty Limited

 

Business
Credit Card Facility

 

	
  Purpose/Utilisation:

  	
   

  	
  Business Credit
  Cards

  
	
   

  	
   

  	
   

  
	
  Facility limit:

  	
   

  	
  $300,000)three
  hundred thousand dollars)

  
	
   

  	
   

  	
   

  
	
  Expiry Date:

  	
   

  	
  30th November 2006

  
	
   

  	
   

  	
   

  
	
  Repayments:

  	
   

  	
  Cleared to
  working account monthly.

  
	
   

  	
   

  	
   

  
	
  Securities:

  	
   

  	
  All securities detailed in Part 4 with
  the exception of securities
  numbered 1,3,4,5,6,7,8,9&10.

  

 

Customer: Channell Pty Limited

 

Master
Asset Finance Agreement Facility

 

	
  Purpose/Utilisation:

  	
   

  	
  Capital Expenditure

  
	
   

  	
   

  	
   

  
	
  Facility limit:

  	
   

  	
  $250,000 (two
  hundred and fifty thousand dollars)

  
	
   

  	
   

  	
   

  
	
  Expiry Date:

  	
   

  	
  30th November 2006

  
	
   

  	
   

  	
   

  
	
  Repayments:

  	
   

  	
  Subject to
  negotiation at time of drawing.

  
	
   

  	
   

  	
   

  
	
  Residual:

  	
   

  	
  Subject to
  negotiation at time of drawing.

  
	
   

  	
   

  	
   

  
	
  Securities:

  	
   

  	
  All securities detailed in Part 4 with
  the exception of securities
  numbered 1,2,4,5,6,7,8&9.

  

 

8

 

4                                         Security

 

The Customer must provide, and must ensure
that each security provider
provides, all the following securities
in a form and substance satisfactory to us
(if the Customer or the security provider has not already done
so). The taking of any new securities
detailed below does not prejudice or waive our right to rely upon, and enforce,
earlier securities.

 

Registered Mortgage Debentures

 

Over the whole of the
company assets including goodwill and uncalled capital and called but unpaid
capital together with relative insurance policy assigned to the National
Australia Bank Limited given by.

 

1.               Channell
Bushman Pty Limited ABN 99 109 821 614

2.               Bushmans
Group Pty
Limited ABN 90 090 744 022

3.               Channell
Pty Limited ABN 29 002 735 622

4.               Bushmans
Engineering Pty Limited ABN 49 074 185 461

5.               Polyrib
Tanks Pty Limited ABN 49 062 942 661

6.               Australian
Bushman Tanks Pty Limited ABN 21 058 504 108

 

Guarantees and Indemnities

 

7.               In
support of Channell Bushman Pty Limited for $8,850,000 and other liabilities
given by:- Bushmans Group Pty Limited, Channell Pty Limited, Bushmans
Engineering Pty Limited, Polyrib Tanks Pty Limited and Australia Bushman Tanks
Pty Limited

 

8.               In
support of Bushmans Group Pty Limited for $3,200,000 and other liabilities given
by:- Channell Bushman Pty Limited, Channell Pty Limited, Bushmans Engineering
Pty Limited, Polyrib Tanks Pty Limited and Australian Bushman Tanks Pty Limited

 

9.               Master
Asset Finance Agreement for $1,000,000 on account of Bushmans Group Pty
Limited.

 

10.         Master
Asset Finance Agreement for $250,000 on account of Channell Pty Limited

 

9

 

5                                         Establishment Fees and Charges

 

The
Customer agrees to pay the
following fees and charges immediately on acceptance of this Letter of Offer or as otherwise agreed in
writing:

 

Not Applicable

 

Any additional cost
incurred for the use of external solicitors and consultants will be borne by
the Customer.

 

These fees and charges
are in addition to any fees set out in the Details of Facilities or Specific
Conditions, and any fees listed in the National’s
“A Guide to Fees and Charges” (Business) book and the National’s “A Guide to Fees and Charges
for International Trade Services” as amended from time to time.

 

Other fees and
charges may be payable as set out in this Agreement.

 

10

 

6                                         Conditions Precedent and other information

 

11

 

7                                         Covenants and Undertakings

 

Financial Covenants

 

You undertake
to comply with the following financial covenants at all times.

 

These financial
covenants are to be assessed and reported as detailed below.

 

Interest Cover

 

Minimum interest cover of
5 times as measured for the three-month period ending on 30/06/2006 and
thereafter quarterly for Channel Bushman Pty Ltd (Consolidated) and Channell
Pty Ltd - consolidated.

 

Gearing/Leverage

 

Debt to EBIT: Outstanding balance of Bank Bills
and Leasing (but excluding subordinated or related party debt) is not to exceed
three times EBIT for Channell Bushman Pty Ltd (Consolidated)
and Channell Pty Ltd - consolidated. Measured quarterly and based on a three-month
period only with EBIT annualised, commencing 30th June 2006.

 

Reporting Covenants

 

You undertake
to comply with the following reporting covenants at all times.

 

These reporting
covenants are to be assessed and reported as detailed below.

 

Annual Accounts (Audited - Excluding Cashflow)

 

Within 120 days of
the close of each financial year, a copy of the audited annual report or
balance sheet and profit & loss account for Channell Bushman Pty Ltd
(Consolidated) and Channell Pty Ltd.

 

Interim Accounts (Including Cashflow)

 

Within 30 days of
the close of each quarter, a copy of your quarterly management
accounts including balance sheet, profit & loss account and cashflow
statement for Channell Bushman Pty Ltd (Consolidated) and Channell Pty Ltd.
Commentary is to be provided on any negative variance greater than 10% on
sales, gross profit, operational expenses and EBIT, negative variances greater
than 15% will constitute a right of review.

 

Interim Compliance Certificate

 

Within 30 days of
the close of each quarter a compliance certificate for Channell Bushman Pty Ltd
(Consolidated) and Channell Pty Ltd signed by one or two of your directors
or authorised representatives as appropriate, detailing as at the end of each
quarter compliance with the covenants and undertakings detailed in this Agreement for
Channell Bushman Pty Ltd (Consolidated) and Channell Pty Ltd.

 

Actual to projected cash flow variance

 

Within 30 days of
the close of each quarter, a copy of your quarterly actual to
projected cashflow reports to be provided with commentary on all variances
greater than 10% for Channell Bushman Pty Ltd (Consolidated) and Channell Pty
Ltd.

 

Specific Reporting Covenants

 

Annual three-way
forecast (incorporating balance sheet, profit & loss and cash flow)
are to be provided prior to commencement of each financial year on account of
Channell Bushman Pty Ltd (Consolidated) and Channell Pty Ltd.

 

12

 

8                                         General Terms and Conditions 

 

Section A: New Facilities

 

The following General
Terms and Conditions apply to facilities detailed
in Part 1 of this Letter of Offer.

 

A1                      Using a
facility

 

A1.1            General

 

We agree to make each facility available to you in accordance with this Agreement.

 

A1.2            Conditions of use of a
facility

 

(a)                        You do not need to use any facility but if you wish to do so, unless we
otherwise agree, you may only
use a facility if you comply with:

 

(i)                          the
conditions precedent and financial, reporting and other covenants in this Agreement which apply generally or in
relation to that facility (if
any); and

 

(ii)                       any
conditions we impose on making facilities or the particular facility available.

 

(b)                       In
addition, if the Specific Conditions say so, we
may approve or reject each drawing
or other use of a facility in
our discretion.

 

A2                      Payment
obligations

 

A2.1            Your Repayments

 

Without limiting clause A2.2, you must pay to us the facility
amount owing for each facility,
including, without limitation, all drawings and
any other amounts you receive
from us under a facility, and any interest charges as set out in this Agreement, including, without limitation:

 

(a)                        any
amount drawn on a facility in
excess of its facility limit,
immediately, unless we otherwise
agree in writing; and

 

(b)                       the facility amount owing on
the expiry date of that facility, unless we otherwise agree in writing; and

 

(ci)                     the facility amount owing for
that facility, if a facility is cancelled by you or by us
pursuant to this Agreement,
subject to the Specific Conditions for that facility.

 

A2.2            What the Customer must pay

 

Without limiting clause A2.1, the Customer must pay the total amount owing as provided in this Agreement.

 

A2.3            Fees charges and other
premiums

 

(a)                        The
Customer agrees to pay to us (unless we otherwise agree in writing) and in relation to third
parties, the Customer agrees to
indemnify us against, all fees
and charges and premiums, set out or provided for in this Agreement in accordance with this Agreement.

 

(b)                       Fees
and charges, unless otherwise agreed, are not charged on a pro-rata basis and,
once paid, are not refundable in whole or in part.

 

(c)                        Without
limiting clause A2.3(a) of these General Terms and Conditions, the Customer must (when we specify) pay us and, in relation to payments to third parties, the Customer agrees to indemnify us against:

 

(i)                          an
amount equal to any Taxes and
fees (including registration fees) which becomes payable, or that we reasonably believe are payable, in
connection with, this Agreement,
(including, without limitation, on any document issued under or in connection
with this Agreement such as a bank guarantee and any securities), calculated in accordance with
the relevant legislation. These are payable whether or not the Customer is primarily liable for such Taxes and fees; and

 

(ii)                       if
we are liable to pay GST on a supply (as defined in relevant
legislation) (“the supply”) made in connection with this Agreement, an additional amount equal to
the consideration payable for the supply multiplied by the prevailing GST rate; and

 

(iii)                    when we ask, our  costs and remuneration or any receiver’s costs and remuneration; and

 

(iv)                   any
reasonable costs  we reasonably incur in connection with or
arising out of or contemplated by this Agreement,
such as:

 

(A)                    preparing,
negotiating, executing, accepting, arranging, administering, enforcing or
terminating a facility or this Agreement including all costs incurred;

 

13

 

(B)                      exercising,
enforcing or preserving rights (or considering or attempting to do so) in connection
with this Agreement or a security.

 

(d)                       For
the avoidance of doubt, references to costs in
clause A2.3 of these General Terms and Conditions includes a reference to all costs incurred:

 

(i)                          in
respect of all transactions (including, without limitation all payments,
receipts and the banking thereof); or

 

(ii)                       in
connection with any finance under a facility
which the Customer requested not
being provided in accordance with the Customer’s
request for any reason (other than our
default); or

 

(iii)                    in connection with any bank guarantee, letter of credit or bill or any claim by a beneficiary under a bank guarantee or letter of credit or in connection with a bill; or

 

(iv)                   if
the Customer is insolvent (including the amount of all
moneys we are liable to pay under
a bank guarantee or letter of credit); or

 

(v)                      if
the Customer or a security provider is in default under a facility;

 

(vi)                   in
connection with any person (such as any receiver
or attorney) exercising or not exercising rights under this Agreement; or

 

(vii)                under any indemnity we give a receiver
appointed under any security in
relation to this Agreement; or

 

(viii)             as a result of anything that the Customer has agreed to do or that we require the Customer to do in relation to a facility.

 

A2.4            Default Interest and
Irregular Account Fees

 

If any amount is not paid to us
when it is due (including if you
overdraw a facility, with or
without our prior agreement, and you do not immediately repay the amount
overdrawn, or if the Customer is
in default and the total amount owing
is immediately due and payable and the Customer
does not immediately pay that amount):

 

(a)                                  we may in our absolute discretion charge the Customer and the Customer will be liable to pay default
interest on that amount until it is paid or the amount is otherwise no longer
outstanding.

 

Default
interest is calculated daily at the default
interest rate (if any) and is due and payable monthly, on closure of
any account relating to the facility, when the facility amount owing is paid or otherwise
on demand.

 

The default interest rate for a facility is a variable rate and may change
during the term of the facility.
The current default interest rate
for a facility is detailed in
Details of Facilities sections of this Agreement,
or is as notified by us to the Customer from time to time. If no such
rate is detailed or notified, the Customer
agrees to pay whichever is the higher of the interest rate payable under the facility on that amount or the interest
rate or the default interest rate
on the account to which that
overdue amount is debited under this Agreement.

 

The Customer will be notified of any changes
to the default interest rate in
accordance with clause A5.2 of these General Terms and Conditions.

 

(b)                                 The
Customer authorises us to, and we may either;

 

(i)                                     debit
any default interest payable by you or
the Customer as and when it is
due and payable to (in our
discretion) the nominated account,
or another account in the name of
the Customer whether opened by you or us;
or

 

(ii)                                  otherwise
capitalize any default interest payable by you
or the Customer as and
when it is due and payable (in our
discretion).

 

You will then be
liable for interest under this clause on that debited or capitalized amount.

 

(c)                                  An
Irregular Account Fee may be payable as detailed in the National’s “A Guide to Fees and Charges”
(Business) book (as amended from time to time). If the fee applies, it is
payable immediately.

 

Nothing
in this clause A2.4 relieves the Customer
of its obligation to make payments as and when due.

 

A2.5            Establishing accounts
and accounting for transactions

 

(a)                        You authorise us to open any accounts as
required in connection with a facility and
debit amounts to them in accordance with this Agreement.

 

14

 

(b)                       Unless
otherwise specifically provided we
may debit any amounts payable in connection with this Agreement or the facilities to any account of yours  we
decide or apply any payment in connection with this Agreement towards satisfying obligations under this Agreement as we see fit.

 

(c)                        If
the Agreement states that amounts
will be debited to a nominated account
or any account  you have with us, then you
irrevocably authorise us to debit
these amounts to the relevant account
even if it causes the account to become overdrawn. Alternatively, if a nominated account has insufficient cleared
funds, we may debit those
amounts to any account of yours  we
decide.

 

(d)                       Where
we debit amounts pursuant to this
clause to an account (including a
nominated account) you have with us, opened by:

 

(i)                          you, then, to the extent that account is or becomes overdrawn because of
amounts debited under this clause, you
must pay us interest (including
default interest if applicable) on the overdrawn amount in accordance with the
terms of that account; or

 

(ii)                       us, you
must pay us interest charges on
the overdrawn balance of that account
at the default interest rate or,
if there is none, the interest rate on that account.

 

(e)                        We generally give you statements for each account under a facility which is an overdraft, at least every three months unless otherwise agreed. If we are not required by law or under the
Code of Banking Practice to give you
a statement, we may choose
not to.

 

A2.6            How to pay amounts

 

(a)                        The
Customer authorises us to debit to the nominated account, or if no such account is nominated or if there are
insufficient cleared funds in the nominated
account, to debit to any other account
the Customer has with us:

 

(i)                          any
fees, charges or premiums payable under this Agreement
and any other standard service fees (the amount and nature of which are
detailed in the National’s “A
Guide to Fees and Charges” (Business) book and in the National’s “A Guide to Fees and Charges
for International Trade Services” (as amended from time to time)) on or after
the date they become due; and

 

(ii)                       any
amounts payable under clause A2.3(c) of these General Terms and Conditions
on or after the date we pay them
or the date they become due or payable by the Customer
or us (whichever is earlier).

 

(b)                       The Customer undertakes that it will pay us
all amounts payable under this Agreement
in Australian dollars and in immediately available funds unless otherwise
agreed.

 

(c)                        If
a payment is due on a day which is not a banking
day, the Customer may make
the payment on the next banking day,
unless the payment is due in advance in which case the Customer must make the payment on the
preceding banking day.

 

(d)                       The
Customer must make all payments
without set-off or counter-claim, and be free and clear of any withholding or
deduction for taxes, levies, imposts or government charges of any kind unless
prohibited by law. You agree that
if a law requires you to withhold
or deduct any withholding tax from a payment relating to a facility so that we would not actually receive for our own benefit on the due date the full
amount provided for under the facility,
then:

 

(i)                          the
amount payable by you is
increased so that, after making that deduction and deductions applicable to
additional amounts payable under this clause, we
are entitled to receive the amount we
would have received if no deductions had been required; and

 

(ii)                       you must make the deductions; and

 

(iii)                    you
must pay the full amount deducted to the relevant authority in accordance with
applicable law and deliver the original receipts to us.

 

A3                      Economic
costs

 

Warning: economic
costs can be high and will increase the amount you owe us.
You can obtain an estimate of
applicable economic costs at any
time by contacting us.

 

A3.1            When economic costs
are payable

 

(a)                        You must pay to us economic costs whenever an economic event occurs in relation to a facility.

 

(b)                       You must pay us the amount of any economic
costs notified to you when
we specify.

 

15

 

A3.2            Economic events

 

(a)                        An
economic event is taken to have
occurred in relation to a facility if:

 

(i)                          the
facility is cancelled for any
reason, or the facility limit is
reduced for any reason other than on its expiry
date (if any); or

 

(ii)                       you change the facility from a fixed interest
rate or to a variable interest
rate before the end of a fixed
rate period; or

 

(iii)                    you
are in default, or the total
amount owing becomes repayable and we
elect to treat it as an economic event;
or

 

(iv)                   the
aggregate face value of bills
outstanding under the facility at
any time for any reason is less than the facility
limit prevailing at the time; or

 

(v)                      we are for any reason no longer obliged to
accept, discount or endorse bills
under the facility;

 

(vi)                   any
payment is made or required to be made under the facility in respect of any bill
for any reason other than on its maturity
date.

 

A3.3            Calculation of
economic costs

 

(a)                        We determine any economic costs arising under the facility by determining our reasonable estimate of the costs and losses incurred by us (including, without limitation, loss of
profits, fees, charges and premiums) in connection with an economic event including, without
limitation, any amount determined by us
to have been suffered or incurred by us
by reason of:

 

(i)                          in
relation to a facility other than
a bill  facility, a loss or reduction of profits or return or other costs, (representing the difference
between our cost of funds at the
start of the relevant fixed rate
period) and our cost of funds at
the date of the economic event
over the remainder of that period. This is then discounted back to the net
present value at the rate equivalent to our
cost of funds at that date; or

 

(ii)                       in
relation to a bill  facility, a loss or reduction of profits
or return or other costs associated
with the difference between the rates applicable to bills under the facility
and the rates applicable to bills
we would offer to enter into a
specified new transaction when the economic
event occurs. The new specified transaction is a transaction:

 

(A)                    with
a customer equivalent to you;

 

(B)                      for
an amount of approximately the same amount as you
pay, fail to pay or draw or are required to pay and;

 

(C)                      for
a term approximately equal to the period from when the economic event occurs to the date we assumed that amount would otherwise be
due for payment,

 

(assuming, where appropriate, that replacement
bills are drawn and accepted,
discounted or endorsed by us in
respect of that amount); or

 

(iii)                    the liquidation of deposits or
other funds, or the termination or reversing of any swap or option agreement or
other agreement or arrangement entered into by us
(either generally in the course of our
business or specifically in connection with this Agreement) to fund or maintain the facility or to hedge, fix or limit our effective cost of funding in relation
to the facility.

 

A4                      Top up
security and other co-operation

 

The Customer must:

 

(a)                        provide
us with any additional security  interest
we reasonably request (including
without limitation a guarantee and indemnity or a mortgage of additional
property) if we determine that
the value of the security
materially decreases (as determined by us):

 

(b)                       give
us promptly any information or
documents we reasonably ask for
in connection with this Agreement
(including about the Customer’s or
any security provider’s financial
position) in any form we
specify;

 

(c)                        do
anything (such as producing and signing documents) we reasonably require to give full effect to this Agreement and the securities; and

 

(d)                       notify
us promptly if the Customer changes its address.

 

A5                      Variations

 

A5.1            What we can change

 

We can, at any time:

 

16

 

(a)                        introduce
a new fee, charge or premium;

 

(b)                       vary
the amount of a fee, charge or premium, the way in which it is calculated or
when it is charged;

 

(c)                        vary
the interest rate or the default interest
rate (except a fixed interest rate during a fixed rate period) including by changing
the relevant indicator rate, Customer Margin or Default Margin (including by
making the margin positive or negative) or by substituting a different
indicator rate for the relevant indicator rate, or by introducing or varying
any conditions to which the application of the interest
rate or the default interest rate
or any margin included in any of them is or may become subject or
suspending, withdrawing or re-introducing its application to the interest rate;

 

(d)                       change
the way in which interest, or default interest, is calculated and when it is
debited; and

 

(e)                        change
any of the other provisions of this Agreement
as a result of a change to any law affecting this Agreement.

 

A5.2            How we will notify you
of changes

 

We will notify the Customer of any changes we make under clause A5.1 of these General
Terms and Conditions as follows:

 

(a)                        we will give the Customer at least 30 days’ prior written
notice if we introduce a fee,
charge (other than a government charge) or premium, vary the method by which
interest is calculated or vary the frequency with which interest is debited,
unless we cannot reasonably
locate the Customer;

 

(b)                       we will notify the Customer of the introduction of, or any
change to, a government charge payable by writing to the Customer or by advertisement in the
national or local media, unless the government has publicised the introduction
or change;

 

(c)                        rates
for bills and trade finance facilities are notified as a
set out in the Details of Facilities for that facility.

 

(d)                       we will notify the Customer of any change that relates to a
change in an interest rate that is not set by us
(such as a money market rate or some other external reference rate) by the Customer by writing to the Customer or by advertisement in the
national or local media within a reasonable period of the change being made,
unless another entity has publicised the change; and

 

(e)                        we will notify the Customer of any other variation, by
writing to the Customer or by
advertisement in the national or local media no later than the date the
variation takes effect.

 

A6                      Change of
Circumstances - Illegality

 

If as a result of a change
in relevant regulation, we
determine that it is, or has become apparent that it will become, contrary to
that relevant regulation for:

 

(a)                        us to fund, provide or maintain a facility or otherwise observe or give
effect to our obligations under a
facility; or

 

(b)                       a
person from whom we have raised
or propose to raise money in connection with a facility
to fund, provide or maintain that money,

 

then:

 

(c)                        we are no longer obliged to provide any drawing or other financial accommodation under
a facility;

 

(d)                       all
amounts payable under each facility,
including an amount equal to the total face value of all bills accepted, discounted or endorsed by us and the face value of each letter of credit issued by us which remain outstanding, are due and
payable by you to us on demand; and

 

(e)                        we may debit any of your  accounts
(including in the case of a bill  facility the nominated account) with the facility
amount owing under a facility.

 

A7                      Change of
Circumstances – Increased Costs

 

(a)                        This
clause applies if we determine
that in our opinion any order of
any court or change in relevant regulation
will:

 

(i)                          subject
us to any taxes or duties with
respect to any facility or any part thereof
or change the basis of taxation of us
for payments hereunder (except for taxes or a change in the rate of tax on our overall net income imposed by any
taxing authority having the power to levy taxes on us); or

 

(ii)                       impose,
modify or deem applicable any reserve, capital
adequacy and/or liquidity adequacy requirements against any of our assets, deposits with us or our
account, or loans by us; or

 

17

 

(iii)                    impose on us any other condition with respect to
this Agreement or the obligations
assumed by us under it; and

 

as a result
there is:

 

(iv)                   an
increase in the cost to us of
making available or maintaining the facility;
or

 

(v)                      a
reduction in the amounts receivable or permitted to be received in respect of
any facility or any other payment
due to us in connection with any facility,

 

by an amount
which we consider to be material.

 

(b)                       If
this clause applies:

 

(i)                          we will use our best efforts to promptly notify you in writing of the happening of such
event;

 

(ii)                       we will use reasonable endeavours to
eliminate or at least mitigate the foregoing adverse consequences in a manner
which does not give rise to costs or other adverse consequences for you or us;
and

 

(iii)                    you
will indemnify us for any loss
suffered by us as a result of the
increase in cost or reduction in the amounts received or permitted to be
received, and will pay to us on
demand such amount as we require
to compensate us in respect of
such additional cost or reduced receipts.

 

A8                      Events of
Default

 

A8.1            When are you in
default?

 

The Customer is in default if:

 

(a)                        the
Customer does not pay on time any
amount due under this Agreement
or another financial accommodation
agreement it has with us or any
other person who provides financial accommodation to it; or

 

(b)                       the
Customer does something it agrees
not to do, or does not do something it agrees to do under this Agreement or another agreement it has with
us (including if an amount is or
is to be debited under this Agreement
to an account nominated for any
purpose under this Agreement and
there are insufficient cleared funds in that nominated
account to meet that debit); or

 

(c)                        an
event occurs which would allow us
to terminate any other agreement, or terminate a transaction under any other
agreement, the Customer has with us; or

 

(d)                       the
Customer is in breach of a covenant
or undertaking set out in this Agreement; or

 

(e)                        the
Customer or another person gives us information, or makes a representation
or warranty, which we reasonably
believe to be incorrect or misleading in a material respect when made or deemed
to be repeated in connection with this Agreement
or another agreement it has with us, or
any of the Customer’s
representations and warranties in Part B5 of the General Terms and
Conditions are not true and correct; or

 

(f)                          we reasonably believe the Customer has acted fraudulently in connection with this Agreement or another agreement with us; or

 

(g)                       the
Customer becomes insolvent or steps are taken to make it
so; or

 

(h)                       (being
an individual), the Customer no
longer has legal capacity or becomes a person protected by the State; or

 

(i)                           the
Customer is in default under a security or withdraws from it or breaches
its terms, or a security is or may be
unenforceable; or

 

(j)                           the
Customer stops payment or ceases
to carry on its business or threatens to cease to carry on its business; or

 

(k)                        the
Customer breaches any law or
obligation by entering transactions or performing obligations under this Agreement or another agreement it has with
us; or

 

(l)                           this
Agreement is, becomes, or is
claimed to be, void or unenforceable; or

 

(m)                     a
change in your financial
circumstances occurs which, in our
opinion, may have a material adverse effect on the Customer’s ability to meet its obligations
under any agreement it has with us;
or

 

(n)                       an
order for payment is made, or a judgment is entered or signed, against the Customer, and it is not satisfied within 5
banking days after that event
unless the order or judgment is the subject of an appeal by the Customer within such period and we are satisfied that there is reasonable
likelihood of success; or

 

(o)                       the
Customer is a trustee of a trust
and:

 

18

 

(i)                          a
new trustee is appointed or any of the trust fund is resettled or set aside, in
either case without our prior
consent; or

 

(ii)                       the
Customer’s right to be
indemnified out of the trust assets is restricted in any way; or

 

(q)                       the
Customer is a partnership and any
of the things in paragraphs (a) to (o) above occurs in relation to one or
more of the partners, in which case, the thing is deemed to have occurred in
relation to the Customer; or

 

(r)                          any
of the things referred to in paragraphs (b) to (o) above occurs in
connection with a security provider
(where each of those paragraphs is to be interpreted as if the Customer meant the security provider and “the Customer’s” applied to the security provider).

 

A8.2            What can happen then?

 

(a)                        If
the Customer is in default, we may give the Customer a notice stating that the Customer is in default.

 

(b)                       If
the Customer does not, or cannot,
correct the default:

 

(i)                          if
a grace period is given in the default notice or required by law, within that
period, or

 

(ii)                       if
no grace period is given in the default notice or required by law, immediately,

 

then, subject to any applicable law, without further notice to the Customer the total amount owing becomes immediately due for payment (to
the extent it is not already due for payment), and if the Customer does not pay it immediately, we may sue the Customer for that amount, or enforce any security, or do both.

 

A8.3            How we may exercise our rights

 

(a)                        We may exercise a right or remedy, or
give or refuse our consent or
agreement to any request the Customer
makes, in any way we consider
appropriate including by imposing conditions.

 

(b)                       We may defer or waive any right or
remedy (including the implementation of any fee or charge) without varying this
Agreement or creating a new
contract.

 

(c)                        If
we do not exercise a right or
remedy fully or at a given time, we
can still exercise it later.

 

(d)                       Our rights and remedies under this Agreement are in addition to other rights
and remedies provided by law independently of it.

 

(e)                        Our rights and remedies may be
exercised by any of our employees
or any other person we authorise.

 

(f)                          We are not liable for loss caused by the
exercise or attempted exercise of, failure to exercise, or delay in exercising,
a right or remedy.

 

A9                      Partnerships

 

If the
Customer is a partnership, the Agreement will continue to bind each
person who is a partner of that partnership at the date of this Agreement and each person who becomes a
partner whilst this Agreement (as
amended from time to time) remains in force and effect:

 

(a)                        despite
any changes which may from time to time take place in the partners, or any
reconstitution of the partnership, whether by the death, incapacity, or
retirement of any partner or the admission of any new partner or otherwise;

 

(b)                       despite
the fact that the partnership no longer carries on business; and

 

(c)                        despite the fact that the person or
any of his or her partners are no longer members of the partnership,

 

and
the Customer agrees to procure
the execution of any documents we
reasonably require to give full effect to this provision.

 

A10               Appointment of
Consultants

 

(a)                        We may at any reasonable time appoint
accounting, legal, financial management and other consultants to examine the
affairs of the Customer and any security provider and to make
recommendations relating to the manner in which it carries on its business.

 

(b)                       The
Customer will provide (and ensure
each security provider provides)
all assistance considered necessary or desirable by the consultant to enable
the consultant to conduct a proper examination of the Customer’s and any security provider’s affairs. This
includes, without limitation, making the relevant financial records available
to the consultant.

 

(c)                        The
Customer will pay the fees of the
consultant.

 

19

 

A11               Class Order

 

(a)                        The
Customer must notify us in writing before you seek approval by the Australian Securities
and Investments Commission (“ASIC”) of, or execute any, Deed of Cross
Guarantee.

 

(b)                       We may, at our complete discretion, amend or terminate any or all of
the facilities if the Customer enters into a Deed of Cross
Guarantee or amends or terminates an existing Deed of Cross Guarantee.

 

(c)                        In
this clause “Deed of Cross Guarantee” refers to a deed substantially in the form of
a pro-forma deed issued or otherwise approved by ASIC in order to satisfy ASIC class order
eligibility requirements for relief from certain Corporations Act 2001
financial reporting obligations.

 

A12               Confidentiality

 

(a)                        The
Customer and we agree, subject to clause A12(b) of
these General Terms and Conditions, to keep the terms of the Agreement and the securities, and any information which
either may provide to the other in relation to the Agreement or the securities, confidential.

 

(b)                       Clause
A12(a) of these General Terms and Conditions does not prevent disclosure:

 

(i)                          if
allowed or required by law, or if required by the Australian Stock Exchange
Limited; or

 

(ii)                       in
connection with legal proceedings relating to the Agreement or the securities;
or

 

(iii)                    if the information is generally and
publicly available; or

 

(iv)                   to
any Customer of the terms of the Agreement or the securities (as amended from time to time)
as they relate to a facility
provided to you; or

 

(v)                      by
us to our  subsidiaries,
in which case this clause A12 of these General Terms and Conditions, will apply
to the subsidiary; or

 

(vi)                   by
us to an assignee of our rights under this Agreement pursuant to clause A16(a) of
these General Terms and Conditions; or

 

(vii)                by us
to any of our agents,
consultant or adviser engaged by us for
the purposes of this Agreement;
or

 

(viii)             to any guarantor or proposed guarantor; or

 

(ix)                     by
the Customer to any consultant
engaged for the purposes of complying with our
requirements under the facility
necessary to enable the consultant to comply with those requirements.

 

A13               Setting off money

 

We may set off against amounts the Customer owes us any money we
owe the Customer.

 

A14               Code of Banking
Practice

 

We have adopted the Code of Banking Practice and relevant provisions
of the Code apply to these facilities,
if the Customer is an individual
or a small business customer (as defined by the Code). The Customer can obtain from us upon request:

 

(a)                        information
on our current interest rates and
standard fees and charges relating to these facilities
if any;

 

(b)                       general
descriptive information concerning our
banking services including:

 

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

 

(ii)                       account
opening procedures;

 

(iii)                    our
obligations regarding the confidentiality of the Customer’s information;

 

(iv)                   complaint
handling procedures;

 

(v)                      bank
cheques;

 

(vi)                   the
advisability of you informing us promptly when the Customer is in financial difficulty; and

 

(vii)                the advisability of the Customer reading the terms and conditions
applying to each banking service we
provide to the Customer ;

 

(c)                        general
descriptive information about:

 

(i)                          the
identification requirements of the Financial Transactions Reports Act 1988
(Cth);

 

(ii)                       the
options available to you under
the tax file number legislation; and

 

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

 

20

 

A15               Our certificates

 

(a)                        We may give the Customer a certificate or formal statement
about a matter or about an amount (including economic
costs, where applicable) which is payable in connection with this Agreement. This is sufficient evidence of
the matter or amount, unless it is proved to be incorrect.

 

(b)                       We may rely on certificates provided
by any other person with a security
as to the amount owed to them.

 

A16               Assignment

 

(a)                        We may assign or otherwise deal with our rights under this Agreement in any way we consider appropriate. If we do this, the Customer may not claim against any assignee (or any
other person who has an interest in a facility)
any right of set-off or other rights the Customer
may have against us. The Customer agrees that we may disclose any information or
documents we consider desirable
to help us exercise this right.
The Customer also agrees that we may disclose information or
documents at any time to a person to whom we
assign or propose to assign our
rights under this Agreement.

 

(b)                       The
Customer’s rights are specific to
you and may not be assigned.

 

A17               Holding Over

 

If we
continue to make a facility
available to you after its expiry date or the end of its term, and
this Agreement has not been
extended, amended or replaced, then the terms of this Agreement will continue to apply to the facility unless and until we otherwise notify you. The previous sentence if applied
shall not be construed as a waiver of any event
of default, or a waiver of any of our
rights under this Agreement or as
any agreement or undertaking (implied or otherwise) to grant any extension.

 

A18               Notices, other
communications and service of documents

 

A18.1     Form

 

(a)                        Notices,
certificates, consents, approvals and other communications in connection with
this Agreement must be in writing
or in any other form permitted by it. When they are for us, they must be in a form satisfactory
to us.

 

(b)                       Communications
from us may be signed by any
employee of ours. If the Customer is a company, communications from
the Customer must be signed by a
director or secretary or an authorised representative.

 

A18.2     Delivery

 

Communications to the Customer
may be:

 

(a)                        given
personally (if the Customer is a
company, to one of your
directors); or

 

(b)                       left
at, or sent by post or fax to, an address notified by the Customer to us in writing; or

 

(c)                        if
the Customer does not nominate an
address to us in writing, left at
or sent by post or fax to the Customer’s
address last known to us; or

 

(d)                       sent
by any other electronic means of which the Customer
has given us
particulars; or

 

(e)                        given
by advertising the notice in a newspaper circulating throughout the Customer’s country, state or territory; or

 

(f)                          given
in any other way permitted by law.

 

If
there is more than one Customer, we may provide any communication
under this Agreement jointly to
the Customer at the address for
service set out in the acceptance clause of this Letter of Offer.

 

A18.3     Communications for us

 

(a)                        Communications
for us must be:

 

(i)                          given
personally to one of our
employees at:

 

(A)                our address stated in this Agreement; or

 

(B)                  any
other address we tell you; or

 

(C)               our registered office; or

 

(ii)                       sent
by prepaid post or electronically (such as by fax or telex) to any of those
places; or

 

(iii)                    given in any other way permitted by
law.

 

(b)                       We may specify from time to time how
and in what form any notice under this Agreement
must be given to us.

 

21

 

A18.4     Dating

 

A communication is
taken to be given:

 

(a)                        in the case of a communication given
personally - on the date it bears or the date it is received by the person to
whom it is addressed, whichever is the later; or

 

(b)                       in the case of a communication sent
by post - on the date it bears or the date when it would have been delivered in
the ordinary course of post, whichever is the later; or

 

(c)                        in the case of a communication sent
by fax or some other form of electronic transmission - on the date it
bears or the date on which the machine from which it was sent produces a report
indicating that the communication was sent to the fax (or other) number or
other electronic address of the person to whom it is addressed, whichever is
the later; or

 

(d)                       in the case of a communication given
by newspaper advertisement - the date it is first published.

 

A18.5     Service

 

We may serve any document in a court
action (including a writ of summons, other originating process or third or
other party notice) on the Customer by
delivering it to the Customer’s address
last notified to us or by leaving
it there. This does not prevent any other method of service.

 

A19               Governing Law and
Jurisdiction

 

This Agreement
is governed by the laws of the state or territory where your relationship management team is
located, as set out in the Relationship Management section preceding the Letter of Offer. Each party submits to the
jurisdiction of the laws of that state, including appeal courts.

 

A20               Consents and
Conditions

 

The Customer must
comply with all conditions and requirements in any consent we give, or agreement to any request the Customer makes.

 

A21               Telephone recording

 

The Customer consents
to us recording our telephone conversations with the Customer in relation to the facility and such recordings being used in
any arbitral or legal proceedings between us.
Telephone recordings remain our sole
property at all times.

 

A22               Valuations are for our benefit

 

Any
property valuation is for our use only. We accept no responsibility for any reliance on a property valuation by any other person.

 

A23               Time for repayment

 

For
the purposes of payments under this Agreement,
a day ends at 4 pm in the State where the relationship
management team is located.

 

A24               Indemnities

 

The
indemnities in this Agreement are
non-revocable and continuing obligations, independent of the Customer’s other obligations under this Agreement. It is not necessary for us to incur expense or make payment before
enforcing a right of indemnity conferred by this Agreement.

 

A25               Total Amount Owing

 

In
this Section A, total amount owing
means, at any time, the total of every facility
amount owing in respect of the facilities
detailed in Part 1 of this Letter of
Offer and any other amounts which are then due for payment, or which
will or may become due for payment, in connection with this Agreement.

 

A26               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.

 

A27               Exclusion of
liability in relation to trade finance
facilities and bank guarantee
facilities

 

The Customer agrees that in connection with
our provision of services to the Customer in relation to bank guarantee  facilities and trade
finance  facilities
(including, without limitation, the making or receiving of a payment on behalf
of the Customer) (“Services”), one or more of our branches and
other financial services providers (“Other
Banks”) may be involved. Those branches and Other Banks may in each case be local
or overseas and the Other Banks may or
may not be appointed by us. The Customer
agrees that, to the maximum extent permitted by applicable law, the involvement
of those branches or Other Banks
in

 

22

 

 

connection
with the Services is entirely at
risk of the Customer and that we
are not liable for loss of any kind arising in connection with the involvement
of any branch or Other Bank or
their acts or omissions, whether or not the Other
Bank is appointed by us.

 

Any Service we provide to the Customer may be affected directly or
indirectly by laws including, without limitation, any subordinate instrument
and the acts, practices and policies of local or foreign governments and their
instrumentalities (a “Regulatory Authority”)
whether or not having the force of law (“Regulations”).
Regulations may be those of
any place where we or any Other Bank
operates, or with which the Services
have some direct or indirect connection, or to which or from which a payment or
instruction is made or received or in which some other thing is done, or may be
the Regulations of or applicable
to the currency of any payment. Regulations
include, but are not limited to, those which affect, restrict, prohibit or
otherwise render unlawful transactions, payments or dealings with assets, any
person, group or entity which may or may not include those having a
connection with certain countries, areas, individuals, groups, bodies,
entities, materials, items, substances, political or religious systems, beliefs
or convictions. The Services may be
interrupted, prevented, delayed or otherwise adversely affected, either in
whole or in part, by reason of a Regulation
including, but not limited to, where we consider, or any Other Bank considers, or a Regulatory Authority asserts, that a Regulation may apply (each an “Adverse Effect”). It is entirely the Customer’s risk if any Adverse Effect occurs and we have no
obligation to contest any act of any Regulatory
Authority.

 

To the
maximum extent permitted by applicable law, we, and any Other Banks, are not liable for any loss
of any kind arising directly or indirectly from or in connection with any Service including, without limitation, any
Adverse Effect, whether or not we
are, or any Other Bank is, negligent
or in breach of any duty to the Customer
or to any other person.

 

To the
maximum extent permitted by applicable law, our liability for loss of any kind
which cannot be excluded by reason of applicable law is limited to the cost of
having the services supplied again.

 

The Customer agrees that we may use or
disclose any information about the Customer
or the Services or any person
connected in any way with the Services
to any Other Bank or Regulatory Authority for any purpose which
we consider, or any Other Bank
considers, necessary or desirable in connection with any Regulation or the Services. The Customer agrees to provide any such information to us if we
ask the Customer to.

 

23

 

Section B: All Facilities

 

This section B
applies to all the facilities detailed
in this Letter of Offer.

 

B1                      How this Letter of Offer applies to facilities

 

B1.1            Applicable provisions

 

The
applicable terms and conditions in relation to the facilities are set out in the following contract documents
as amended from time to time:

 

(a)                        for
new facilities detailed in Part 1
of this Letter of Offer:

 

(i)                          the
applicable Details of Facilities in this Letter
of Offer;

 

(ii)                       the
Specific Conditions (if any) referred to in the Details of Facilities in this Letter of Offer;

 

(iii)                    any additional documentation
referred to in the Details of Facilities in this Letter of Offer;

 

(iv)                   Parts
4 to 7 (inclusive) of this Letter of Offer;

 

(v)                      the
General Terms and Conditions in this Letter
of Offer; and

 

(vi)                   the
National’s “A Guide to Fees and
Charges” (Business) book and the National’s
“A Guide to Fees and Charges for International Trade Services” as amended from
time to time (“the Guides”),

 

(b)                       for
new facilities detailed in Part 2
of this Letter of Offer:

 

(i)                          the
separate contractual documentation between us
and the Customer
relating to those facilities;

 

(ii)                       the
applicable Details of Facilities in this Letter
of Offer;

 

(iii)                    the Specific Conditions (if any)
referred to in the Details of Facilities in this Letter of Offer;

 

(iv)                   any
additional documentation referred to in the Details of Facilities in this Letter of Offer;

 

(v)                      Parts
4 to 7 (inclusive) of this Letter of Offer;

 

(vi)                   Section B
of the General Terms and Conditions in this Letter
of Offer; and

 

(vii)                the Guides,

 

(c)                        for
existing facilities detailed in Part 3
of this Letter of Offer:

 

(i)                          the
separate contractual documentation between us
and the Customer relating
to those facilities (the “existing contracts”);

 

(ii)                       the
applicable Details of Facilities in this Letter
of Offer;

 

(iii)                    the Specific Conditions (if any)
referred to in the Details of Facilities in this Letter of Offer;

 

(iv)                   any
additional documentation referred to in the Details of Facilities;

 

(v)                      Parts
4, 6 and 7 of this Letter of Offer;

 

(vi)                   Section B
of the General Terms and Conditions in this Letter
of Offer; and

 

(vii)                the Guides.

 

By
signing this Letter of Offer  you agree that the existing contracts are varied accordingly
and now comprise the applicable provisions.

 

B1.2                      Applicable
provisions

 

If
there is any inconsistency between any applicable term or condition in
different contract documents relating to a facility
(to the extent that it is impossible to comply with both), the term or
condition prevails to the extent of that inconsistency in the order of priority
set out above. “Applicable provisions”
means for a facility the terms
and conditions applicable to each facility
after resolving any inconsistency as set out in this clause.

 

B1.3                      Meaning of
Agreement and applicable provisions

 

For
the purposes of the applicable provisions,
the “Agreement” means the agreement of the parties constituted by the applicable provisions for each of the facilities detailed in Parts 1, 2 and 3 of
this Letter of Offer.

 

24

 

B2.                             Multi
Option Facility

 

This
clause B2 applies while you have
a multi option facility. At any
time while you have a multi
option facility:

 

(a)                                  you may request a switch between
funding options. If your request is
approved, the switch will take effect on the date and on the terms agreed by you and us.
Switching between the facilities
to which the multi option facility
applies may result in fees, charges, premiums and costs being incurred in
accordance with the specific terms and conditions of the relevant facility;

 

(b)                                 the
total of all facility limits must
not, at any time, exceed the multi option facility
limit set out in the Details of Facilities or as varied from time to
time; and

 

(c)                                  the
aggregate amount of drawings
under the multi option facility
must not exceed the multi option facility
limit set out in the Details of Facilities or as varied from time to
time, and the total amount of drawings
under a facility which is part of
a multi option facility must not
exceed the facility limit for
that facility as set out in the
Details of Facilities or as varied from time to time.

 

B3                                Conditions
precedent

 

(a)                                  We do not need to provide any drawing under any facility unless:

 

(i)                          the
Customer has accepted this Letter of Offer or has indicated that the Customer intends to be bound by it in a
manner satisfactory to us;

 

(ii)                       you have accepted facilities which are subject to separate
contractual documentation as referred to in Part 2 of this Agreement (if any) in relation to which you are the Customer or have indicated that you intend to be bound by those documents in a manner
satisfactory to us;

 

(iii)                    the amount of financial
accommodation complies with any minimum, maximum or multiple requirements
determined by us and advised to you from time to time in relation to that facility;

 

(iv)                   we have received any valuation  we
require, satisfactory to us;

 

(v)                      the
results of all our inquiries and
searches are satisfactory to us;

 

(vi)                   we have received each security, related acknowledgment or
acceptance and title documents, which are satisfactory to us;

 

(vii)                any insurance we require to be obtained by you has been obtained, by the Customer or the relevant security provider and we have received evidence satisfactory to us (which may include receiving the
policy document) that any such insurance is current, that the insurer, the
amount insured and the policy terms are satisfactory to us, and that our interest is noted;

 

(viii)             we
have received all the documents set out in Part 6 of this Letter of Offer and any other document we reasonably require by written notice to
you (including corporate or
trustee authorisations), satisfactory to us;

 

(ix)                     each
security remains enforceable and
no-one who provides a security is
in default under or has withdrawn from or terminated that security (unless this occurs with our consent);

 

(x)                        the
Customer complies, or in our opinion will be able to comply, with
all other reasonable requirements we
set, including any additional conditions, conditions precedent, and financial,
reporting or other covenants set out in Part 7 of this Letter of Offer, the Details of
Facilities, the General Terms and Conditions or any relevant Specific
Conditions, or otherwise agreed.

 

(b)                       In
addition to paragraph (a), we are
not obliged to provide any financial accommodation under any facility if:

 

(i)                          something
has happened since the Customer
applied for a facility which has
led to a material adverse change in the financial circumstances of the Customer or any security provider or which we
reasonably believe could lead to this; or

 

(ii)                       any
insurer has refused to insure a facility
for us; or

 

(iii)                    the Customer is, or in our
opinion is likely to become, in default under a facility (for example, the Customer
has not paid all relevant fees and interest charges or the Customer has given us misleading financial or other
information).

 

25

 

B4                      General
undertakings and covenants

 

B4.1            Negative Pledge and
other covenants

 

(a)                        The
Customer undertakes to us that it will, and will ensure that each
security provider will, except
with our prior written consent:

 

(i)                          promptly
advise us of any event of default or potential event of default or any event of default under any applicable provision however defined;

 

(ii)                       maintain
all risks insurance over all its physical assets;

 

(iii)                    comply with all applicable laws and
pay all obligations that if unpaid might result in a lien or claim against any
of its assets;

 

(iv)                   maintain
its plant and machinery in a state of good repair, fair wear and tear excepted;

 

(v)                      not
raise any financial accommodation from any other party, or give any security  interest
in relation to it;

 

(vi)                   not
engage in any other business other than that in which it is presently operating;

 

(vii)                not merge with or acquire another
company or entity;

 

(viii)             not dispose of any of its subsidiaries; and

 

(ix)                     not
give any security  interest over its assets.

 

B4.2            Change of Shareholding

 

(a)                         If
the Customer or any security provider is listed on a stock
exchange the Customer will, and
will ensure that the relevant security
provider will:

 

(i)                          promptly
notify us if a majority of its
shares become held by a person who did not hold a majority of the shares as at
the date of this Agreement. For
this purpose, associates shall be treated as the one person.

 

(ii)                       deliver
to us a copy of all material
notices issued by it to the exchange, promptly after that notice is given to
the exchange.

 

(b)                       If
the Customer or any security provider is a company which is
not listed on a stock exchange, the Customer
will ensure that no transfer of shares (or issue of shares) in the Customer or the relevant security provider is made, without our prior written consent. If the Customer consists of more than one entity,
that consent will not apply to a transfer or issue of shares in any one of
those entities or any security provider
to another of those entities or security
providers.

 

B4.3            Breach of Covenants

 

(a)                        For
the avoidance of doubt, a breach of any covenant or undertaking in this Agreement is an event of default, howsoever worded, for the purposes of this
Agreement, including without
limitation clause A8 of these General Terms and Conditions.

 

(b)                       We may conduct a review of the facilities and the financial position of the Customer if any of the covenants or
undertakings set out in this Agreement
are not complied with to our satisfaction.

 

B4.4            Review of Customer and
security providers

 

(a)                        We may at any reasonable time appoint
accounting, legal, financial management and other consultants to examine the
affairs of the Customer and any security provider and to make
recommendations relating to the manner in which it carries on its business.

 

(b)                       The
Customer will provide (and ensure
each security provider provides)
all assistance considered necessary or desirable by the consultant to enable
the consultant to conduct a proper examination of the Customer’s and any security provider’s affairs. This
includes, without limitation, making the relevant financial records available
to the consultant.

 

(c)                        The
Customer will pay the fees of the
consultant.

 

B5                      Representations
and warranties

 

B5.1            Representations and
Warranties

 

(a)                        The
Customer represents and warrants
to us that as at the date of this
Agreement and at all times
thereafter:

 

(i)                          if
the Customer is a company, it is
duly incorporated and validly existing under the laws of its place of
incorporation;

 

26

 

(ii)                       the
Customer has full capacity and
power to enter into and comply with, and has taken all necessary action to
authorise the entry into and compliance with, each facility, this Agreement and
any other documentation detailing the terms of each facility, and to make a drawing
under a facility;

 

(iii)                    the Customer has full power and authority and legal right to
carry on its business as presently conducted;

 

(iv)                   all
financial accounts, reports and factual information furnished to us at any time by the Customer or a security provider:

 

(A)                    are
true and accurate and not misleading in any material respect,

 

(B)                      are
(unless we agree otherwise)
prepared in accordance with applicable law and generally applicable Australian
Accounting Standards current at the time of preparation, and

 

(C)                      give
a true and fair view of your
state of affairs and the result of its operations at the date, and for the
period ending on the date, to which those statements are prepared,

 

and no material change has
taken place in respect to any of them since the date they were presented to us;

 

(v)                      the
Customer is not in material
default of any law or any agreement, security
or instrument with us or any
other financial institution, and it is not in default in respect of any
material monetary obligation contracted by or imposed upon it;

 

(vi)                   no
litigation, arbitration or administrative proceedings are current or pending
or, to the Customer’s knowledge,
threatened against it before any
court or governmental agency;

 

(vii)                the Customer
is not insolvent;

 

(viii)             no potential
event of default has occurred which by the giving of notice, lapse
of time or both would constitute a default under or in respect of this Agreement, a security or instrument and the Customer is not in default in respect to any material
monetary obligation contracted by or imposed upon it;

 

(ix)                     except
as disclosed to and agreed to by us
in writing, the Customer is not
trustee of any trust;

 

(x)                        the
Customer will comply with all
applicable laws and pay all obligations that if unpaid might result in a lien
or claim against any of its assets;

 

(xi)                     the
Customer will not breach any law
or obligation to any person by the execution and performance of this Agreement or of a drawdown notice (including a drawdown
under a facility or other use of
a facility) and the payment of
any amount due under a facility or
in respect of any bill under a bill facility or in respect of any bank guarantee or letter of credit;

 

(xii)                  the security
is in full force and effect; and

 

(xiii)               a legal, valid and binding obligation on
the Customer enforceable in
accordance with its terms and conditions arises when the Customer enters into this Agreement or delivers a drawdown notice and whenever a drawing is made, or a bill is accepted, discounted or endorsed
by us or a bank guarantee or a letter of credit is issued.

 

(b)                       The
Customer also gives the above
representations and warranties in respect of any security provider which is not the Customer.

 

(c)                        These
representations and warranties are deemed to be repeated with reference to the
facts and circumstances then existing at each date of utilisation of any
financial accommodation, rollover of any bills
or notes, and at the date of execution of each new document under which credit
or financial accommodation is granted by us.

 

B5.2            Additional
representations and warranties from a trustee

 

(a)                        This
clause applies if the Customer or
a security provider enters into
this Agreement or any security as the trustee of a trust or
settlement (the relevant party is called “the trustee” and the relevant trust
is called “the trust” in this clause).

 

(b)                       If
this clause applies, the trustee (or, the Customer
where the trustee is a security provider
who is not a Customer) makes the
following representations and gives the following warranties:

 

(i)                          the
trustee is the only trustee of the trust; and

 

(ii)                       the
trustee will provide to us on
request with a certified copy of the deed of trust creating the trust (“the
trust deed”) and all other documents relating to the trust; and

 

27

 

(iii)                    the trust deed and the documents
referred to in paragraph (b)(ii) disclose all the terms of the trust; and

 

(iv)                   the
trustee has the power under the trust deed to enter into and observe the
trustee’s obligations under this Letter of
Offer, this Agreement
(and any document or notice under or in connection with them (including,
without limitation, any security);
and

 

(v)                      the
trustee has in full force and effect the authorisation necessary to enter the
relevant documents, to perform the trustee’s obligations under the
relevant documents and allow them to be enforced (including, without
limitation, under the trust deed and the trustee’s memorandum and articles of
association or constitution (if any)); and

 

(vi)                   the
trustee has a right to be fully indemnified out of the property held on trust
by the trustee under the trust deed (“the trust fund”) in respect of
obligations incurred by the trustee and has a right to be indemnified out of
the trust fund; and

 

(vii)                the trust fund is sufficient to satisfy
that right of indemnity and all other obligations in respect of which the
trustee has a right to be indemnified out of the trust fund; and

 

(viii)             the trustee is not in default under the
trust deed; and

 

(ix)                     no
action has been taken or proposed to terminate the trust; and

 

(x)                        the
trustee and the trustee’s directors and other officers (if any) have complied
with their obligations in connection with the trust; and

 

(xi)                     our rights under this Agreement rank in priority to the
interests of the beneficiaries of the trust.

 

(c)                        If
this clause applies, the trustee (or, the Customer
where the trustee is a security provider
who is not a Customer) undertakes
that, except with our prior
written consent, none of the following will occur:

 

(i)                          re-settlement,
vesting or distribution of capital of the trust; or

 

(ii)                       retirement
or replacement of the trustee, or the appointment of a new trustee; or

 

(iii)                    amendment of the deed establishing
the trust; or

 

(iv)                   encumbrance
of the assets of the trust; or

 

(v)                      breach
of the provisions of the deed establishing the trust.

 

(d)                       In
this clause B5.2, “relevant documents” means:

 

(i)                          this
Agreement;

 

(ii)                       this
Letter of Offer;

 

(iii)                    any security; and

 

(iv)                   any
document or notice required under this Agreement.

 

(e)                        The trustee enters (or, where the
trustee is a security provider
who is not a Customer the Customer will ensure that the trustee
enters) into this Agreement and
any security (and provides any
document or notice under this Agreement)
in the trustee’s personal capacity and as trustee of the trust and for the
benefit of the beneficiaries of the trust.

 

B6                      Definitions
and interpretation

 

(a)                        These
meanings apply to this Agreement,
unless otherwise stated:

 

account means where relevant an account we establish or have already established
in your name for recording transactions,
but does not include an internal suspense account maintained by us for the purposes of any facility.

 

Agreement has the meaning described in
clause B1.3 of these General Terms and Conditions.

 

applicable provisions has the meaning
described in clause B1.2 of these General Terms and Conditions.

 

Australian Trade Refinance rate means the
rate advised by us as such at the
commencement of the relevant term, details of which can be obtained from us.

 

balance owing means, for an account, at any time, the difference
between all amounts credited and all amounts debited to it at that time. When
this amount is to be calculated for the end of a day, it includes all debits
and credits assigned to that day.

 

bank guarantee means a bank guarantee
provided or to be provided by us to a beneficiary
on the date issued in our standard form of bank guarantee
from time to time.

 

28

 

banking day means a day other than a
Saturday or Sunday, or a day gazetted as a public holiday throughout Australia.

 

beneficiary means, in relation to a bank guarantee or a letter of credit, a person to whom the bank guarantee or letter of credit is to be, or already has
been issued.

 

bill means a bill of exchange in accordance
with the Bills of Exchange Act 1909 (Cwlth) (including any bill accepted or
drawn by means of facsimile signature or by electronic or other means and any
equivalent obligation which is a dematerialised security as this term is
defined in the Austraclear System Regulations (as determined by Austraclear
Limited (or its successor or assignee) from time to time) or anything we deem to be a “bill” for the purposes of
this Agreement.

 

bill facility means a facility which is described in the Details
of Facilities as a Bill Facility.

 

capital adequacy means tangible
net worth divided by total
tangible assets.

 

change in relevant regulation means any
change in any relevant regulation
(including the introduction of a new relevant
regulation), or any change in the interpretation or administration
of any relevant regulation after
the date of this Letter of Offer.

 

costs means any costs, charges, expenses
and other outgoings (including in connection with legal and other advisers on a
full indemnity basis), and by the use of our
employees and facilities and, in
the case of a mortgage, where applicable, in preserving and maintaining the
property the subject of the mortgage (such as by paying insurance, rates and
taxes for the property), interest, penalties and fines.

 

current ratio means Current Assets divided by Current
Liabilities.

 

Customer means each customer named in the
Details of Facilities sections of this Letter
of Offer. If there is more than one person named as Customer, Customer
means each of them separately and every two or more of them jointly.
Customer includes the customer’s
successors.

 

date issued means, in relation to a bank guarantee, the date specified in the
Details of Facilities section of this Letter
of Offer or otherwise
agreed as the date on or before which a bank
guarantee is to be, or
has already been, issued by us to
the beneficiary.

 

default interest rate has the meaning
described in clause A2.4(a) of these General Terms and Conditions.

 

Details of Facilities means, in relation to a facility, the facility details in relation
to that facility in Part 1,
2 or 3 of this Letter of Offer.

 

dividend payout amount means the amount of
dividend payments plus increased loans to shareholders, expressed as a
percentage of Net Profit after Tax.

 

drawdown date means:

 

(a)                       for
a facility other than a bill  facility,
each date on which a facility (or
part thereof) is drawn; and

 

(b)                      for
a bill  facility, the date on which a bill is accepted, discounted or endorsed under a facility, as specified in the Details of
Facilities.

 

drawdown notice means:

 

(a)                       where
the facility is a bill facility, a notice requesting us to accept a bill in accordance with this Agreement in the form required by us; and

 

(b)                      where
the facility is a facility other than a bill facility, a notice in a form acceptable
to us requesting a drawing under the facility.

 

drawing means each financial accommodation
actually provided under a facility
(including our acceptance,
discount or endorsement of a bill
drawn by you under a bill  facility
and the issue of bank guarantees or
letters of credit).

 

economic costs and economic event each has the meaning
described in clause A3 of these General Terms and Conditions.

 

29

 

Effective
Interest Rate means a
per annum rate of interest, calculated as at the date of this Agreement, using the following formula:

 

e = [(1 + r)n
- 1] x 100

 

where:

 

•                               e is the Effective Interest Rate;

 

•                               r is the relevant interest rate divided by
n, divided by 100;

 

•                               n is the number of interest compounding periods
per annum (eg if interest is compounded monthly, n = 12)

 

In
calculating the Effective Interest Rate we
have assumed that the interest compounding periods are of equal length.

 

event of default means an event so
described in clause A8.1 of these General Terms and Conditions.

 

expiry date means for a facility, the date specified as such in
the Details of Facilities, or otherwise agreed between us from time to time.

 

facility means financial accommodation
(including the acceptance, discounting and endorsement of bills and the issue of bank guarantees or a letter of credit drawing or any drawing which refinances a letter of credit drawing) provided to you under this Agreement or as otherwise agreed.

 

facility amount owing means at any time,
the total of all amounts which are then due for payment, or which will or may become
due for payment to us under this Agreement in relation to a particular facility and which has not then been fully
and finally paid, and includes, without limitation, the face value of any bill drawn by you under a bill
facility, the guaranteed amount of any bank guarantee issued by us
and the total face value of any letter of
credit.

 

the facility limit for a facility is at any time the amount
described as such in the Details of Facilities for that facility as reduced or increased in
accordance with this Agreement.

 

facility limit deduction means the total
face value of any bank guarantee
or letter of credit or similar instrument issued by us under any other agreement with you which have not been cancelled to our satisfaction.

 

finance charges means operating lease rental expense.

 

financial accommodation means
any financial accommodation and includes the acceptance, discounting and
endorsement of bills and the
issue of bank guarantees.

 

financial charges cover means Earnings Before Interest and Tax plus finance charges divided by interest plus finance charges.

 

gearing / leverage ratio means Total Liabilities divided by tangible net worth.

 

General Terms and Conditions, when used in other Parts of this Letter of Offer, means this Part 8 of
this Letter of Offer.

 

Group Member or Group means
the Customer and each corporation
which is a related entity as that term is defined the Corporations Act 2001
(Cth).

 

GST means goods and services tax or any
similar tax.

 

guaranteed amount means, in relation to a bank guarantee, the amount specified as
the Guaranteed Amount in the bank guarantee.

 

insolvent means being an insolvent under
administration, being insolvent, having a controller appointed (each as defined
in the Corporations Act 2001 (Cth)), being in receivership, receivership and
management, liquidation, provisional liquidation, under administration, wound
up, subject to any arrangement, assignment or composition, protected from
creditors under any statute, dissolved (other than to carry out a
reconstruction while solvent) or otherwise unable to pay debts when they fall
due, if a person is appointed under legislation to investigate or manage any part of
the Customer’s or any security provider’s affairs.

 

intangible assets means deferred development expenses, deferred
foreign exchange gains, organisational or experimental expenses, research and
development expenses, intellectual property, future income tax benefits,
goodwill, patents, trademarks, service marks, design rights, franchises,
copyrights, licences, underwriting and formation expenses and other items of a
like nature which, according to current accounting practice, are regarded as
intangible assets.

 

interest for the purpose of financial reporting covenants
means gross interest expense (including finance lease, other external debt and
subordinated debt interest).

 

30

 

interest cover means Earnings Before Interest and Tax divided by
interest (including finance lease, other external debt and subordinated debt
interest).

 

Interest
Rate per Interest Period means a per annum rate of interest, calculated as at the date of
this Agreement, using the
following formula:

 

interest rate

n

 

where n is the number of interest compounding
periods per annum (eg if interest compounds monthly, n = 12)

 

In
calculating the Interest Rate per Interest Period we have assumed
that the interest compounding periods are
of equal length.

 

inventory and debtors to working capital debt ratio means
inventory and debtors divided by working
capital debt.

 

letter of credit means a documentary letter
of credit or a standby letter of credit issued by us pursuant to a facility.

 

letter of credit drawing means the issue of
a letter of credit provided to you under this Agreement as described in Part 1 of this Agreement or as otherwise agreed.

 

letter of credit documentation means any
application, schedule, letter, advice or invoice setting out or amending the
terms on which any letter of credit
or proposed letter of credit is
to be or has been issued or any drawing
is to be or has been made under any trade
finance facility.

 

Letter of Offer means this Letter of Offer
executed by us.

 

maturing bill means a bill maturing on a maturity date.

 

maturity date means the date on which a bill is due to mature or a lease is due to expire.

 

nominated account means:

 

(a)                       for
a facility other than a bill facility, an account for debiting amounts agreed to be
debited to the nominated account;
or

 

(b)                      for
a bill facility, an account for debiting and crediting any
amounts under this Agreement,
being the account specified as
such in the Details of Facilities for that facility,
or any other account which:

 

(i)                           we agree is the nominated account for that facility
from time to time; or

 

(ii)                        you advise us in a drawdown notice
issued either after the date of this Agreement
is to be the nominated account.

 

occupancy (Accommodation) means actual
level of rooms occupied of the motel/hotel divided by the total number of
rooms.

 

occupancy (Commercial) means total occupied
space, at any given time, divided by the total lettable space as determined by us at our
discretion.

 

potential  event
of default means an event which, with the giving of notice, lapse of
time or fulfilment of any condition, would be likely to become an event of default.

 

presales/debt cover  ratio means net acceptable presales (pre
GST and selling and legal costs), as determined by us at our
discretion, divided by total level of property finance debt limits.

 

property finance interest cover ratio means
net rental (total passing rental income stream (exclusive of GST) after
deduction of all outgoings and other property related non-recoverable costs, as
determined by us at our discretion) divided by interest
expense as assessed against the tenancy schedule provided by you to us.
We reserve the right to verify,
amend and/or test the tenancy information provided.

 

property finance loan to value ratio means
total property finance debt limits divided by the current value we ascribe at our discretion of the freehold security.

 

receiver includes any receiver, receiver
and manager, controller, liquidator, provisional liquidator, mortgagee,
administrator or other like official.

 

relevant regulation
means any law, regulation or an official policy, directive or guideline, which
has the force of law, or compliance with which is in accordance with normal
banking practice in the jurisdiction concerned.

 

replacement bill means a bill replacing a maturing  bill.

 

31

 

security means each security interest described in Part 4
of this Letter of Offer and any
substitute or additional security interest
applicable to this Agreement. Security also includes any priority
agreement relating to any security.

 

security interest means any security for the payment of money or
performance of obligations including a mortgage, charge, lien, pledge, trust or
power. Security  interest also includes a guarantee,
indemnity or a guarantee and indemnity.

 

security provider means, in relation to a facility, each person (other than the Customer for that facility) who gives a security.

 

subsidiary has the same meaning as under
the Corporations Act 2001 (Cth).

 

tangible net worth means total
tangible assets minus Total Liabilities.

 

Taxes means taxes, levies, imposts, charges and duties
(including stamp and transaction duties) imposed by any authority together with
any related interest, penalties, fines and expenses in connection with them,
except if imposed on, or calculated having regard to, our net income.

 

total amount owing means,
at any time, the total of every facility
amount owing and any other amounts which are then due for payment,
or which will or may become due for payment, in connection with this Agreement.

 

total tangible assets means all assets other than intangible assets.

 

trade finance facility means a documents
surrendered facility, a trade refinance facility or an overseas documents
surrendered facility.

 

we, us,
ourselves or the National
means National Australia Bank Limited ABN 12 004 044 937 and its successors and
assigns.

 

working capital debt means current finance
facilities including an overdraft facility, trade finance facility or bill
facility.

 

you or your
means, in relation to a facility,
the person or persons named as Customer
in the Details of Facilities for that facility.
If there is more than one person named as Customer,
you  means
each of them separately and every two or more of them jointly. You or your includes your successors.

 

(b)                       Where
a term is defined or otherwise described in the Details of Facilities in
relation to a facility (for
example, expiry date or facility limit), a reference in the
General Terms and Conditions or Specific Conditions or other parts of this Letter of Offer to that term is a
reference to that term as so defined or described.

 

(c)                        Terms
used in this Agreement have the
meaning given to them in generally accepted accounting principles and standards
in Australia unless otherwise expressly defined.

 

(d)                       A
reference to:

 

(i)                          a
month means a calendar month unless otherwise stated;

 

(ii)                       any
thing includes the whole and each part of it;

 

(iii)                    a document includes any variation
or replacement of it;

 

(iv)                   law
means common law, principles of equity, and laws made by parliament (and laws
made by parliament include regulations and other instruments under them, and
consolidations, amendments, re-enactments or replacements of them);

 

(v)                      the
words including, such as or for example when introducing an example do not
limit the meaning of the words to which the example relates to that example or
examples of a similar kind;

 

(vi)                   the
word person includes an individual, a partnership, a body corporate, an
unincorporated association or an authority; and

 

(vii)                interest rate means a rate per cent per
annum.

 

(e)                        If
something is to be “satisfactory to us”,
it must be satisfactory in both form and substance to us, and, if we require, to our legal
advisers.

 

(f)                          The
singular includes the plural and vice versa.

 

(g)                       Headings
are for convenience only and do not affect the interpretation of this Agreement.

 

32

 

9                                         Specific Conditions - Bill Facility

 

1                               Application of Part

 

Clauses
1 to 23 (inclusive) of these Specific Conditions - Bill Facility apply to any facility which is a bill facility.

 

2                               Facility operation

 

(a)                        Provided
you have met all the conditions
precedent and all financial, reporting or other covenants applicable to the facility  you
may use a facility by
obtaining a drawing under the facility on each drawdown date.

 

(b)                       If
the Details of Facilities or these Specific Conditions specify that certain
details are to be confirmed in a Bill
Facility Record or Drawdown Schedule and
you think that a Bill Facility Record or Drawdown Schedule contains any error,
then you must tell us within 5 banking days of you
receiving it.

 

3                               Procedure for drawdown

 

(a)                        Each
time that you wish to request a drawing, you
must give to us, at least 5 banking days prior, a duly completed drawdown notice. You cannot revoke a drawdown notice once it is given under
this clause unless we agree.

 

(b)                       If
a drawdown notice provides that we are to draw bills under a power of attorney, then you agree that the drawdown notice is the instruction to us to draw the bills and clause 6 of these Specific Conditions – Bill
Facility will apply for replacement
bills.

 

(c)                        If
you are to draw bills prepared by us, then you
must include with each drawdown notice
the bills referred to in it and
clause 5 of these Specific Conditions – Bill Facility will apply for replacement  bills.

 

(d)                       Each
bill must be drawn:

 

(i)                          in
accordance with this Agreement;
and

 

(ii)                       in
accordance with the Bills of Exchange Act 1909 (Cwlth) so that it is valid and
attracts the benefit of any provision of that Act in relation to that bill.

 

(e)                        A
bill drawn under the facility must:

 

(i)                          be
drawn no earlier than the commencement date;

 

(ii)                       have
a maturity date which is no later
than the expiry date for the facility; and

 

(iii)                    have a face value and maturity date which is such that if the bill were drawn, accepted or discounted:

 

(A)                    the
total facility amount owing would
not exceed the facility limit at
any time until the maturity date
of the bill; and

 

(B)                      if
the facility is described as a
Bill Facility - Acceptance and Discount – National Flexible Rate in the Details
of Facilities, the aggregate face value of the bills
allocated to a bill facility component,
when taking into account the maturity date
of any other bills allocated to
that bill facility component,
would not be greater than the amount of the bill
facility component at any time until the maturity date of the bill;
and

 

(C)                      if
the facility is described as a
Bill Facility - Acceptance and Discount - Flexible Drawdown Fixed Rate in the
Details of Facilities, the facility amount
owing would be at least equal to the facility floor.

 

(f)                          We may, in our discretion, require that any bills drawn under the facility
have a face value of no less than a minimum amount.

 

4                               Replacement bills

 

During
the term of the facility and
subject to this Agreement, on the
maturity date of each bill accepted, discounted or endorsed
under the facility  you may draw a replacement bill having a face value
specified in accordance with clause 8 of these Specific Conditions – Bill
Facility.

 

5                               Replacement bills - not automatic

 

If you are to draw a replacement  bill prepared by us
(that is, bills are not drawn
under a power of attorney given by you
to us), then you must deliver, except with our consent, the drawdown notice for the replacement bill (and the replacement bill) to us at least 5 banking days prior to the drawdown
date.

 

6                               Replacement bills - automatic

 

If we are to draw bills under a power of attorney given to us by you
then, subject to clause 7 of these Specific Conditions – Bill Facility, on the maturity date of each bill accepted, discounted or endorsed
under the

 

33

 

facility, you
will be taken to have delivered a drawdown
notice to us for a replacement bill on the same terms as the maturing bill (including, if the facility is described as a Bill Facility -
Acceptance and Discount – National Flexible Rate in the Details of Facilities,
that the replacement bill be
allocated to the same bill facility
component as the maturing bill),
except that:

 

(a)                        the
face value of the replacement bill
will be determined in accordance with clause 8 of these Specific Conditions –
Bill Facility;

 

(b)                       the
maturity date of the replacement  bill will be the date that occurs at the end of a period of
the same length as the period between the drawdown
date and the maturity date of
the maturing bill. However:

 

(i)                          if
this means that a replacement bill
would have a maturity date that
is not a banking day, then the replacement bill will be drawn to have a maturity date that is the next banking day after that day. Any days that
are added to such a period because the day at the end of the period is not a banking day, will be disregarded for the
purpose of calculating the next subsequent maturity
date (For example, if a 90 day bill
would mature on a Saturday, then the maturity
date for the purposes of this clause will be the next banking day. However, a replacement  bill subsequently drawn to replace that bill will be for 90 days, again unless the
maturity date for that bill would not be a banking day, in which case it matures on
the next banking day); and

 

(ii)                       if
this means that the maturity date of
the replacement bill would occur
after the expiry date, then
paragraph (i) above does not apply and the maturity date of the replacement
bill will be:

 

(A)                    the
expiry date, if the expiry date is a banking day; or

 

(B)                      the
last banking day before the expiry date, if the expiry date is not a banking day;

 

(c)                        if
the maturity date of the replacement bill determined in accordance
with (b) above may result in the facility
amount owing exceeding the facility
limit at any time until the maturity
date of the bill, then
(b) above does not apply and the maturity
date of the replacement bill will
be determined by us in our discretion to ensure that the facility limit is not so exceeded;

 

(d)                       if
the facility is described as a
Bill Facility - Acceptance and Discount – National Flexible Rate in the Details
of Facilities and the maturity date of
the replacement bill determined
in accordance with (b) above may result in the aggregate face value
of the bills allocated to a bill facility component being greater than
the relevant bill facility component
at any time before until the maturity date of
the bill, then paragraph (b) above
does not apply and the maturity date of
the replacement bill will be
determined by us in our discretion to ensure that the relevant
bill facility component is not so
exceeded;

 

(e)                        if
this clause applies, for the avoidance of doubt you acknowledge that any action we take pursuant to your
instructions under this clause is not intended to be and should not be taken to
be a waiver of any right or remedy that we
have in connection with this Agreement.

 

7                               Replacement bills - stopping automatic replacement

 

If clause
6 of these Specific Conditions – Bill Facility applies, you may subsequently notify us that you
do not want the procedure in that clause to apply to the facility for a specified period or until
the expiry date of the facility, by providing us with written notice to this effect, in
a form acceptable to us. If
such notice is received by us at
least 5 banking days before the maturity date of a bill, then clause 6 of these Specific
Conditions – Bill Facility will not apply to the bill on that maturity date.

 

8                               Face value of replacement
bills

 

(a)                        You may draw replacement bills on a maturity date in accordance with clauses 4
to 7 of these Specific Conditions – Bill Facility, which have an aggregate face
value:

 

(i)                          up
to the facility limit prevailing
at the time of the maturity date (after
such maturing bills mature); and

 

(ii)                       if
the facility is described as a
Bill Facility - Acceptance and Discount - Flexible Drawdown Fixed Rate in the
Details of Facilities, such that the facility
amount owing would be at least equal to the facility floor.

 

However, if clause 6 of these Specific Conditions -
Bill Facility applies:

 

(iii)                    the replacement bills will have an aggregate face value equal to
the lower of the aggregate face value of the maturing
bills and the amount up to the facility
limit prevailing at the time of the maturity
date (after such maturing bills mature);
and

 

(iv)                   if
the facility is described as a
Bill Facility - Acceptance and Discount – National Flexible Rate in the Details
of Facilities we will allocate
any replacement bills to the same
bill facility component as the
corresponding maturing bill. Any replacement  bills allocated to a bill
facility component under this clause will have an aggregate face value
equal to the lower of the aggregate face value of the maturing bills allocated to that bill facility component and the amount up
to the bill facility component
amount prevailing at the time of the maturity
date (after such maturing bills mature).

 

34

 

(b)                       If
you do not draw replacement bills on the maturity date in accordance with clauses 4
to 7 of these Specific Conditions – Bill Facility, subject to this Agreement  you
may subsequently re-draw bills under
the facility which have an
aggregate face value equal to the maximum amount possible such that the facility limit prevailing at the time of
the re-draw is not exceeded (taking into account any other bills drawn under the facility that do not have a maturity date on the day that the relevant
bills are re-drawn); or

 

(c)                        If
you draw replacement bills on the maturity date and we do not accept, discount or endorse the replacement bills pursuant to clause 2 of
these Specific Conditions – Bill Facility, we
are no longer obliged to accept any bill
under the facility and we may reduce the facility limit to zero.

 

9                               Amortising facilities

 

If the facility is an amortising facility then:

 

(a)                        the
facility limit reduces:

 

(i)                          on
the dates or per the periods, and by the amounts, specified in the amortisation schedule; and

 

(ii)                       in
accordance with clauses 8(b) and (c) of these Specific Conditions –
Bill Facility; and

 

(b)                       if
the facility is described as a
Bill Facility - Acceptance and Discount – National Flexible Rate in the Details
of Facilities, the fixed amount, the
floor/cap amount and the floating amount reduce in accordance with
the Details of Facilities or as otherwise provided under this Agreement;

 

(c)                        if
the facility is described as a
Bill Facility - Acceptance and Discount - Flexible Drawdown Fixed Rate in the
Details of Facilities, the facility floor
reduces in accordance with the Details of Facilities or as otherwise provided
under this Agreement.

 

10                        Non-amortising facilities

 

If the facility is a non amortising facility then the facility limit reduces in accordance with
clauses 8(b) and (c) of these Specific Conditions – Bill Facility.

 

11                        Discounting of bills

 

(a)                        Where
bills are drawn for discounting:

 

(i)                          the
face value of each bill must be
acceptable to us; and

 

(ii)                       the
aggregate face value of all bills in
a single drawdown must be in accordance with the Details of Facilities or
otherwise acceptable to us; and

 

(iii)                    the term of each bill must be acceptable to us and except as otherwise agreed by us must not be less than 30 days nor more
than 180 days and must not have a maturity
date later than the expiry date;
and

 

(iv)                   each
bill must be payable on such
days, to such persons and at such places in Australia as we agree.

 

(b)                       We agree to purchase bills referred to in paragraph (a) above
on the relevant drawdown date at
the yield rate prevailing on that
drawdown date. We agree to pay the proceeds of discount of such bills to the nominated account.

 

(c)                        Proceeds of discount in relation to a bill discounted by us under a bill  facility
are the amount derived by application of the formula:

 

Proceeds of discount
=

(FV x 36,500) / ((DM x R) + 36,500)

where:

 

FV is the face value of the bill;

 

DM is the number of days to maturity of the bill (being the number of days from and
including the issue date of the bill
to but excluding the maturity date of
the bill); and

 

R is:

 

(a)                       for
a bill  facility other than a bill
facility described as a Bill
Facility - Acceptance and Discount – National Flexible Rate Facility in the
Details of Facilities, the yield rate
expressed as a percentage per annum; or

 

35

 

(b)                      for
a bill  facility described as a Bill Facility - Acceptance and
Discount – National Flexible Rate Facility in the Details of Facilities, the yield rate for the bill facility component to which the bill is allocated.

 

12                        Discounting and replacement of bills

 

(a)                        If
we have agreed in accordance with
this Agreement to accept a replacement bill, your obligation to pay us the face value of the maturing bill may be satisfied by us:

 

(i)                          debiting
the face value of the maturing bill
to the nominated account; and

 

(ii)                       accepting
the replacement bill; and

 

(iii)                    crediting the proceeds of discount of the replacement bill to the nominated account; and

 

(iv)                   debiting
any applicable fees, charges or premiums payable in respect of the replacement  bill under clause A2.3 of the General Terms and Conditions
to the nominated account.

 

(b)                       As
an alternative to the procedure outlined in paragraph (a) above, at our discretion, if we have agreed to accept a replacement  bill  your
obligation to pay us the face
value of the maturing  bill may be satisfied by us:

 

(i)                          debiting
the face value of the maturing  bill to an internal suspense account
maintained by us; and

 

(ii)                       accepting
the replacement  bill; and

 

(iii)                    crediting the proceeds of discount of the replacement  bill to an internal suspense account maintained by us;

 

(iv)                   debiting
the nominated account with the
amount of the remaining balance of the suspense account maintained by us; and

 

(v)                      debiting
any applicable fees, charges or premiums payable in respect of that replacement  bill under clause A2.3 of the General Terms and Conditions
to the nominated account.

 

13                        Payment of bills

 

(a)                        You must pay to us the face value of a bill
accepted, discounted or endorsed by us
under the facility on its maturity date.

 

(b)                       Your obligations in relation to a bill so drawn and accepted, discounted or
endorsed continue despite the fact that we
are or become the holder of the bill
in our own right on or after its maturity date.

 

(c)                        We may pay a bill on its maturity date without enquiring as to the title of the
person presenting the bill for
payment.

 

(d)                       You agree to indemnify us against any liability, loss or costs
(including consequential or economic loss) we
may incur on or in connection with:

 

(i)                          your or a security
provider’s default under the facility;

 

(ii)                       us exercising, enforcing or preserving
rights (or considering or attempting to do so) in connection with the facility or a bill.

 

You agree to pay us the amount of our liability, loss or costs when we specify. This indemnity is in addition
to any other indemnity or obligation in our
favour contained in this Agreement
or given by law.

 

(e)                        You may not prepay any bill accepted, discounted or endorsed by us under the facility unless we
agree.

 

14                        Power of attorney

 

(a)                        If
a drawdown notice in relation to
the facility provides that we are to draw bills under a power of attorney, you irrevocably appoint us
to be your attorney on your behalf and in your name to draw, make, deliver, sign,
endorse or negotiate any bill
drawn or which may be drawn under the facility
in accordance with this clause.

 

(b)                       You agree that:

 

(i)                          we may act on instructions oral or in
writing (including by facsimile) received from you
concerning whether or not to draw bills
and the aggregate face value and term of bills
to be drawn, but we are not
obliged to act on those instructions, and we
may require your
instructions to be in writing; and

 

(ii)                       this
power of attorney may be exercised under hand or by facsimile signature of
any two of our officers acting
jointly who, at the time of exercise of power under this power of attorney, are
authorised by us to sign, accept
or endorse bills on our behalf; and

 

36

 

(iii)                    this power of attorney is granted
to secure the performance of your
obligations under the facility,
is irrevocable and remains in full force and effect until your obligations under the facility and any bills are discharged; and

 

(iv)                   you will indemnify us and our
officers against any liability, loss or costs
(including consequential or economic loss) we
may incur out of the exercise of any of the powers and authorities
contained in this power of attorney; and

 

(v)                      no
person dealing with us need be
concerned to see or enquire as to the propriety or expediency of anything which
we may do, purport to do or
perform in your name by
virtue of this power of attorney; and

 

(vi)                   you will ratify and confirm all that we lawfully do or cause to be done by
virtue of this power of attorney.

 

15                        Cancellation by you

 

(a)                        You may cancel the facility, with effect on the last maturity date of the bills outstanding under the facility, by giving us at least 30 banking days’ notice before the maturity date of each of those bills. You
cannot revoke a notice once it is given under this clause unless we agree.

 

(b)                       If
you give a notice under this
clause then:

 

(i)                          we are no longer obliged to accept,
discount or endorse bills under
the facility; and

 

(ii)                       on
the maturity date  you must pay us the face value of the maturing
bills accepted, discounted or endorsed under the facility.

 

16                        Economic costs and economic benefits

 

(a)                        Economic benefits or economic costs may arise under the facility if an economic event occurs.

 

(b)                       We will determine the amount of any economic benefits and notify you of that amount (if any). We will pay you the amount of any economic
benefits so notified within 7 banking
days of such notification.

 

(c)                        We determine any “economic benefits” arising under the facility by determining the net amount of
returns and gains obtained by us
in connection with an economic event
including, without limitation, any amount determined by us to have been gained by us by reason of:

 

(i)                          increases
of profits or returns or other gains associated with changes in the rates
applicable to bills under the facility and the rates applicable to bills  we
would offer to enter into a new transaction when the event occurs, which
transaction is with a customer equivalent to you
for an amount of approximately the same amount as you pay, fail to pay or draw or are required to pay and for
a term approximately equal to the period from when the event occurs to the date
we assumed that amount would
otherwise be due for payment (assuming, where appropriate, that replacement  bills are drawn and accepted, discounted or endorsed by us in respect of that amount); or

 

(ii)                       the
liquidation of deposits or other funds, or the termination or reversing of any
swap or option agreement or other agreement or arrangement entered into by us (either generally in the course of our business or specifically in connection
with this Agreement) to fund or
maintain the facility or to
hedge, fix or limit our effective
cost of funding in relation to the facility.

 

(d)                       Economic costs will be determined and
become payable under clause A3 of the General Terms and Conditions.

 

17                        How we assign debits

 

Except as otherwise provided in these Specific Conditions, and subject
to this Agreement, we may debit all amounts, fees,
charges or premiums payable by you
in connection with the facility
to the nominated account.

 

18                        Additional consequences if you are in default

 

If you are in default under this Agreement then, in addition to clause A8.2
of the General Terms and Conditions:

 

(a)                        if
on the day when you make a
payment required under clause A8.2 of the General Terms and Conditions there
are any bills which have not been
presented for payment, and a portion of that payment is not yet required to
meet payment of those bills, then
we agree to deposit that portion
in an interest bearing deposit account on terms which we think fit. The deposit may be made
with any person we decide on
(including, without limitation, ourselves);
and

 

(b)                       when
a bill is subsequently presented
for payment, we agree to apply
the portion referred to in paragraph (a) above towards paying the holder
of that bill. We agree to pay to you the amount which we certify to be that part of the
portion, and any interest earnings (net of our
income tax liability in connection with those earnings) on that part of
the portion, remaining after satisfaction of all your obligations (contingent or otherwise) under this Agreement and any facility.

 

37

 

19                        Rate advice

 

(a)                        The
yield rate applying on a drawdown date under the facility will be confirmed in the Bill Facility Record which we will forward to you within 7 banking days after the drawdown
date, except as set out in paragraph (b) below.

 

(b)                       Where
the facility is described as a
Bill Facility – Acceptance/Discount – National Flexible Rate Facility in the
Details of Facilities, the weighted average of all yield rates applying to the bill
components on a drawdown date
under the facility will be
confirmed in the Bill Facility Record which
we will forward to you within 7 banking days after the drawdown
date. Details of Facilities of individual yield rates are available on request.

 

(c)                        If
these Specific Conditions provide that we
are to advise you of a rate
applying to your  facility, you
may contact us before the
first drawing is made under the facility to ascertain the rate that will
apply to your  facility. The rate we quote will apply to your  facility
if you make your first drawing by 4.30pm on the date we quote the rate. If this condition is not satisfied, the
quote lapses and the quoted rate does not apply.

 

20                        Bill Facility - Option - Acceptance and Discount - Fixed Rate

 

(a)                        You have the option to enter into a fixed rate  bill  facility
having the characteristics set out in the Details of Facilities.

 

(b)                       To
exercise the option, you must
send us before 3.00 pm (Melbourne
time) on the exercise date a
notice in a form acceptable to us
in our discretion. Once given,
this notice is irrevocable unless we
in our discretion agree otherwise.

 

(c)                        We are not obliged to act in accordance
with a notice given by you under
paragraph (b) above if we
consider that any of the conditions precedent set out in this Agreement are not satisfied.

 

(d)                       We are not obliged to enter into a fixed rate  bill  facility
with you on any date other than
the exercise date. If you do not exercise the option on or
before 3.00 pm (Melbourne time) on the exercise
date, the option lapses. We
are not obliged to remind you or
warn you that this time is
approaching or has arrived.

 

(e)                        You may give us notice offering to surrender all or part of
the option. Unless otherwise confirmed by you,
an offer to surrender will be taken as an offer to surrender the whole of the
option. We may reject an
offer to surrender in our discretion.
A surrender of the option will be effective only when the terms of the
surrender are agreed or, if an amount is payable to you in respect of the surrender, when such amount is paid. You will then be taken to have surrendered
your rights in respect of the
option (or, if a partial surrender, the agreed part) and to have released us from any further obligation in respect
of the option (or, if a partial surrender, the agreed part). Any notice given
by us confirming a surrender of
the option will constitute conclusive evidence of the terms of the surrender
unless it is proved to be incorrect.

 

21                        Bill Facility - Acceptance and Discount – National Flexible Rate

 

(a)                        Each
bill drawn under the facility must be allocated to a bill facility component either:

 

(i)                          by
you in accordance with paragraphs
(b)-(c) below at the time you
provide us with a drawdown notice for that bill; or

 

(ii)                       by
us in accordance with clause 8 of
these Specific Conditions – Bill Facility.

 

(b)                       If
we agree that bills may be allocated to a bill facility component progressively
then, subject to this Agreement:

 

(i)                          you must allocate bills in accordance with that agreement
until the aggregate face value of the bills
allocated to the relevant bill facility
component is equivalent to the amount of the bill facility component; and

 

(ii)                       you must thereafter ensure that, until the
expiry date, bills are allocated to the relevant bill facility component having an
aggregate face value equivalent to the amount of the bill facility component.

 

(c)                        If
paragraph (b) above does not apply, subject to this Agreement, on the first drawdown date you must allocate bills to each of the fixed amount and the floor/cap amount having an aggregate face
value equivalent to the amount of the relevant bill
facility component, and must ensure that, until the expiry date, bills are allocated to the relevant bill facility component having an
aggregate face value equivalent to the amount of the bill facility component.

 

38

 

22                        Bill Facility - Acceptance / Endorsement

 

(a)                        Where
bills are not to be discounted by
us, we agree to make available to you bills accepted or endorsed under the facility by the time and in the place
specified in the Details of Facilities.

 

(b)                       If
we are specified as a paying
agent in the Details of Facilities, you
authorise us to pay the face
value of a bill drawn under the facility in accordance with its terms and
conditions on your behalf to the
person presenting the bill for
payment.

 

23                        Late Presentation Fee

 

A Late Presentation Fee is payable by you
when a drawdown notice (together
with any accompanying bills as may be
required under this Agreement) is
not received by the date, or in the form, required under this Agreement. The Late Presentation Fee is an
amount we determine by reference
to any agreed rates in relation to the facility,
the aggregate face value of bills
to be drawn on the drawdown date,
the number of days between the relevant drawdown
date and the next drawdown date
and the market rates for bank accepted bills
previously on the relevant drawdown date.

 

24                        Definitions

 

For the purposes of these Specific Conditions and the Details of
Facilities – Bill Acceptance/Discount Facility:

 

amortising facility means a bill facility described in the Details of
Facilities as an Amortising Facility.

 

amortisation schedule means, for a facility, the Amortisation Details
specified in the Details of Facilities for the facility
or any amortisation schedule provided
to you by us as a replacement, in accordance with
this Agreement.

 

bill facility component means each of the fixed amount, the floating amount and the floor/cap amount.

 

Bill Facility Record means a document by
that name issued by us.

 

cap rate means the rate specified as such in the
Details of Facilities for the facility,
or if the rate is not specified in the Details of Facilities, the rate advised
to you as such before the first drawing under the facility and confirmed in the first Bill Facility Record  we provide to you.

 

commencement date means, for a bill facility, the date specified as such
in the Details of Facilities for the facility.

 

conversion rate means the rate specified as such in the
Details of Facilities for the facility,
or if the rate is not specified in the Details of Facilities, the rate advised
to you as such before the first drawing under the facility and confirmed in the first Bill Facility Record  we provide to you.

 

down and out rate means the rate specified as such in the
Details of Facilities for the facility,
or if the rate is not specified in the Details of Facilities, the rate advised
to you as such before the first drawing under the facility and confirmed in the first Bill Facility Record  we provide to you.

 

Drawdown Schedule means a document by
that name issued by us.

 

economic benefits is the amount determined in accordance
with clause 16 of these Specific Conditions – Bill Facility.

 

exercise date means for a facility described as a Bill Facility -
Option - Acceptance and Discount - Fixed Rate the date specified as such in the
Details of Facilities.

 

facility floor means the amount specified as such in the
Details of Facilities of the facility as
reduced or increased in accordance with this Agreement.

 

fixed amount means the amount specified as such in the
Details of Facilities for the facility as
reduced or increased in accordance with this
Agreement.

 

fixed rate means the rate specified as such in the
Details of Facilities for the facility,
or if the rate is not specified in the Details of Facilities, the rate advised
to you as such before the first drawing under the facility and confirmed in the first Bill Facility Record  we provide to you.

 

floating amount means the amount specified as such in the
Details of Facilities for the facility as
reduced or increased in accordance with this Agreement.

 

floating rate means on a drawdown date the rate at which we are prepared to purchase bills
accepted, discounted or endorsed by us
for persons of similar creditworthiness for a similar amount and duration on
that drawdown date. The floating rate is a rate (expressed as a
per centum per annum yield to maturity) that varies from time to time.

 

floor rate means the rate specified as such in the
Details of Facilities for the facility,
or if the rate is not specified in the Details of Facilities, the rate advised
to you as such before the first drawing under the facility and confirmed in the first Bill Facility Record  we provide to you. floor/cap amount
means the amount specified as such in the Details of Facilities for the facility as reduced or increased in
accordance with this Agreement.

 

39

 

floor/cap rate means on a drawdown
date:

 

(a)                        the
floor rate, if the floating rate on that drawdown date is less than or equal to the
floor rate;

 

(b)                       the
cap rate, if the floating rate on that drawdown date is greater than or equal to
the cap rate; or

 

(c)                        the
floating rate on that drawdown date, in any other case.

 

non amortising facility means a bill facility described as such in the
Details of Facilities for the facility.

 

participation rate means the rate specified as such in the
Details of Facilities for the facility,
or if the rate is not specified in the Details of Facilities, the rate advised
to you as such before the first drawing under the facility and confirmed in the first Bill Facility Record  we provide to you.

 

proceeds of discount has the meaning
described in these Specific Conditions.

 

rebate rate means the rate specified as such in the
Details of Facilities for the facility,
or if a rate is not specified in the Details of Facilities, the rate advised to
you as such before the first drawing under the facility and confirmed in the first Bill Facility Record  we provide to you.

 

trigger rate means the rate specified as such in the
Details of Facilities for the facility,
or if the rate is not specified in the Details of Facilities, the rate advised
to you as such before the first drawing under the facility and confirmed in the first Bill Facility Record  we provide to you.

 

yield
rate, in relation to a facility,
has the meaning described in the Details of Facilities for that facility.

 

The
definitions of other terms used in these Specific Conditions may be found
in clause B6 of the General Terms and Conditions.

 

40

 

10                                  Specific Conditions – Bank Guarantee Facility

 

1                               Application of Part

 

Clauses
2 to 14 (inclusive) of these Specific Conditions - Bank Guarantee Facility
apply to any bank guarantee facility.

 

2                               Issue of Bank Guarantees

 

(a)                        Provided
you have met all the conditions
precedent and all financial, reporting or other covenants applicable to the facility, you
may apply for us to issue a bank guarantee to a beneficiary on or before the date issued, but only if:

 

(i)                          the
facility  amount owing for the bank guarantee  facility does not and, after the bank guarantee is issued, will not exceed the facility limit less any facility limit  deduction; and

 

(ii)                       you have submitted a complete and properly
authorised bank guarantee request
in the form required by us
from time to time.

 

(b)                       We may accept or reject your application for a bank guarantee in our discretion.

 

3                               Payment of Bank Guarantee

 

(a)                        In
addition to any indemnity obligations in the General Terms and Conditions, you indemnify us in respect of any amount we
pay to a beneficiary under a bank guarantee. Any amount you must pay us under this clause is payable in Australian dollars and
becomes due and payable upon the earlier of:

 

(i)                          our making payment under a bank guarantee; or

 

(ii)                       our incurring an obligation to make
payment under a bank guarantee,
or

 

(iii)                    your
default under this Letter of Offer.

 

4                               We may end
our obligation

 

We may, at any time, end our obligations under a bank guarantee by paying to the beneficiary the guaranteed amount (or the balance of the guaranteed amount remaining after any part payment
of the guaranteed amount) we are, or may be, liable to pay to
that beneficiary under the bank guarantee (or such lesser amount as
the beneficiary requires), even
though no demand is made on us by
that beneficiary.

 

5                               Partial payments

 

You agree that if a demand is made by a beneficiary for a partial payment of the guaranteed amount, we may at our discretion and without further reference to you, pay the amount demanded and issue to
the beneficiary a replacement bank guarantee for the balance of the guaranteed amount. This procedure may be
repeated at our discretion. You agree that the terms and conditions of
this Letter of Offer apply to any
replacement bank guarantee issued
under this clause as if details of that bank
guarantee were included in the Details of Facilities.

 

6                               No obligations to enquire

 

(a)                        You irrevocably authorise us to immediately pay any amount demanded
at any time under a bank guarantee.

 

(b)                       You agree that we:

 

(i)                          need
not first refer to you or obtain your authority for the payment;

 

(ii)                       need
not enquire into the correctness or validity of any demand made on us under a bank guarantee; and

 

(iii)                    may meet any demand even
though you dispute the validity
of the demand.

 

7                               Return of Bank Guarantees

 

You are to return to us a bank
guarantee if it is ever given to you
by the beneficiary on production
of a bill of lading or otherwise.

 

8                               Foreign currency conversion

 

If we pay any amount to a beneficiary in a foreign currency, for the
purposes of calculating the amount in Australian Dollars for which you indemnify us under clause 3 of these Specific Conditions – Bank
Guarantee Facility, the foreign currency amount is to be converted to
Australian Dollars at the spot rate of exchange quoted by us on the day we make the payment to the beneficiary.

 

41

 

9                               Additional consequences if you
are in default

 

(a)                        If
you are in default under this Letter of Offer then, in addition to
clause 8 of the General Terms and Conditions, the following provisions will
apply.

 

(b)                       If,
on a day when you make a payment
required under clause A8.2 of the General Terms and Conditions, there are any bank guarantees in respect of which
payment of the whole or part of the guaranteed
amount has not yet been demanded by the beneficiary, and a portion of that payment represents those
undemanded guaranteed amounts,
then we agree:

 

(i)                          to
deposit that portion in an interest bearing deposit account on terms which we consider appropriate (which may include
making the deposit with ourselves);

 

(ii)                       to
use the deposited amount towards paying a beneficiary
of a bank guarantee when the beneficiary demands payment of moneys we are liable to pay under the bank guarantee; and

 

(iii)                    to pay to you the amount which we certify is that part of the
deposited amount and the interest earned on it (net of our income tax liability in connection
with those earnings) which remains after all of your obligations (contingent or otherwise) under this Agreement and any facility have been satisfied.

 

10                        Indemnity by you

 

As a
separate obligation, you
indemnify us against all actions,
proceedings, claims and demands brought or made against us and against all losses, costs, charges,
damages and expenses which we
incur or sustain or for which we
become liable, directly or indirectly, because of the issue of any bank guarantee.

 

11                        Preservation of your liability

 

Your liabilities and our rights under these Specific Conditions
are not affected by anything which might otherwise have that effect at law or
in equity including, without limitation, one or more of the following (whether
occurring with or without the consent of a person):

 

(a)                        any
inaccuracy, insufficiency or forgery or in any certificate or other instrument
which purports to be made, issued or delivered under this Agreement or under any bank guarantee; or

 

(b)                       our or another person granting time or
other indulgence (with or without the imposition of an additional burden) to,
compounding or compromising with or wholly or partially releasing you or another person in any way; or

 

(c)                        laches,
acquiescence, delay, acts, omissions or mistakes on our part or on that of another person; or

 

(d)                       any
variation or novation of a right of ours or that of another person, or
alteration of a document, in respect of you
or another person including, without limitation, an increase in the maximum
liability of or other variation in connection with a bank guarantee; or

 

(e)                        the
invalidity or unenforceability of an obligation or liability of a person other
than you; or

 

(f)                          invalidity
or irregularity in the execution of this Agreement
by you or any deficiency in your powers to enter into or observe your obligations under this Agreement.

 

12                        Late Payments

 

If a
payment is made under a bank guarantee
and is not promptly reimbursed to us
by you:

 

(a)                        you authorise us to debit the amount of the drawing (less any reimbursements in relation to that drawing) to any account  you have
with us (even if this would cause
the account to become overdrawn
or for any applicable overdraft limit to be exceeded); and

 

(b)                       default
interest shall apply to the amount of the drawing
that is not reimbursed, in accordance with clause A2.4 of the General Terms and
Conditions.

 

13                        How we assign debits

 

We may debit any account  you
have with us, with any amount you owe us
under or in connection with the facility.

 

14                        Definitions

 

For the purposes of these Specific Conditions and the Details of
Facilities – Bank Guarantee Facility:

 

bank guarantee facility means a facility which is described in the Details
of Facilities as a Bank Guarantee Facility.

 

guaranteed amount means, in relation to a bank guarantee, the amount specified as
the Guaranteed Amount in the bank guarantee.
The definitions of other terms used in these Specific Conditions may be
found in clause B6 of the General Terms and Conditions.

 

42

 

Acceptance of Letter of
Offer

 

To accept this Letter of Offer, each Customer must sign
the duplicate and return it to us before
the lapse date set out at the beginning of this document.

 

By executing this
document below, the Customer;

 

1.                                      accepts
the Letter of Offer;

 

2.                                      declares
that all the information the Customer
has given us is accurate and not
misleading and it is aware that we
are relying on it; and

 

3.                                      acknowledges
that before indicating that the Customer
intends to be bound, the Customer
has;

 

(i)                                     read
the Details of Facilities, Parts 4 to 7 (inclusive), any Specific Conditions
and the General Terms and Conditions; and

 

(ii)                                  received
and read a copy of each other contract documentation described within the Letter of Offer; and

 

4.                                      acknowledges
that, except to the extent that a security’s application is excluded in
relation to a facility as set out
in the Details of Facilities, every security
held by us (including the securities) extends to the agreement
between the Customer and us which results from the Customer’s acceptance of this Letter of Offer, in addition to all other
liabilities secured by those securities;
and

 

5.                                      acknowledges
and agrees that any existing
contractual documentation detailed in Part 3 of this Letter of Offer is varied as set out in
that Part 3; and

 

6.                                      declares
that the Customer understands
that any mortgaged or secured property will be at risk if the Customer or any security provider defaults; and

 

7.                                      nominates
the following address for service of notices for the purposes of the Agreement

 

3/391
Park Rd, Regents Park NSW 2143; and

 

8.                                      acknowledges
that we may pay a commission
for the introduction of credit business where the Customer has been introduced to us by a third party.

 

	
  Yours sincerely,

  
	
   

  
	
  /s/ Graeme Johnson

  	
   

  
	
  Graeme Johnson

  
	
  Associate Director

  

 

 

43

 

Incorporated
Customers sign
the duplicate copy of this Letter of Offer where indicated as an acceptance of these
arrangements and return to us. The original may be retained for the Customer’s records.

 

Companies Executing without using a Common Seal

 

 

Executed
By

 

Channell
Bushman Pty Limited

 

By
being signed by:

 

 

	
  /s/ JERRY
  COLLAZO

  	
   

  	
   

  	
  /s/ N.J.
  MORGANTI

  	
   

  
	
  Signature of authorised person

  	
   

  	
   

  	
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46Exhibit 10.3

EXCLUSIVE
SUBLICENSE AGREEMENT

This
Exclusive Sublicense Agreement (“Agreement”) is made and entered into as of March 29,
2006 (the “Effective Date”), by and between TranXenoGen, Inc., a Delaware
corporation with offices located at 800 Boston Turnpike Rd, Shrewsbury,
Massachusetts 01545 (“TXG”), and Advanced Cell Technology, Inc., a
Delaware corporation with offices located at 1201 Harbor Bay Parkway, Suite 120,
Alameda, California 94502 (“Licensee” or “ACT”) (TXG and Licensee sometimes
hereinafter referred to as the “parties”, or individually as a “party”). As set
forth below, Brandeis University (the “University”) agrees to be bound by
certain provisions of this Agreement.

WITNESSETH

WHEREAS,
TXG owns, or has licensed with a sublicensable interest, the Patent Rights (as
defined below); and

WHEREAS,
TXG is in a business synergistic with the business of ACT; and

WHEREAS,
the Patent Rights are of strategic importance to the business of ACT; and

WHEREAS,
TXG and ACT previously entered into an Option Agreement, dated May 3,
2005, pursuant to which TXG granted to ACT an option to acquire an exclusive
license to the Patent Rights; and

WHEREAS,
ACT desires to obtain an exclusive sublicense from TXG under the Patent Rights
upon the terms and conditions hereinafter set forth below; and

WHEREAS,
TXG is willing to grant such a sublicense to ACT upon the terms and conditions
set forth below;

NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the parties hereto agree as follows:

ARTICLE
1 - DEFINITIONS

For
the purposes of this Agreement, the following words and phrases shall have the
following meanings:

1.1           “Affiliate” means any
corporation, partnership or other legal entity other than a party, in whatever
country organized, controlling, controlled by or under common control with a
party, but only so long as such control continues to exist. For purposes of
this Section 1.1, “control” (a) means possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of an entity, whether through ownership of voting securities, by
contract or otherwise and (b) “control” shall be assumed if a party owns,
directly or indirectly

 

through one or more Affiliates, of fifty percent (50%)
or more of the shares of stock entitled to vote for the election of directors,
in the case of a corporation, or fifty percent (50%) or more of the equity
interests in the case of any other type of legal entity.

1.2           “Brandeis License” means the
License Agreement between TXG and the University, effective as of November 24,
1998, as it may be amended from time to time after the Effective Date.

1.3           “Brandeis Patent Rights” means
Patent Rights licensed by TXG from the University under the Brandeis License.

1.4           Collective Terms. For purposes
of this Agreement, except as otherwise expressly provided herein or unless the
context otherwise requires:  (a) the
use herein of the plural shall include the single and vice versa
and the use of the masculine shall include the feminine; (b) unless
otherwise set forth herein, the use of the term “including” or “includes” means
“including [includes] but [is] not limited to”; and (c) the words “herein,”
“hereof,” “hereunder” and other words of similar import refer to this Agreement
as a whole and not to any particular provision. Additional terms may be defined
throughout this Agreement.

1.5           “Combination Product” means a
product that contains a Licensed Product component and at least one other
component that has independent therapeutic or diagnostic utility, could
reasonably be sold separately and has economic value on its own.

1.6           “Control” or “Controlled”
means, with respect to any Patent Rights, TXG Technology or Confidential
Information of TXG, the possession by TXG of the ability to grant a license or
sublicense of such Patent Rights or TXG Technology or disclose such
Confidential Information as provided for herein without the payment of
additional consideration to, and without violating the terms of any agreement
or arrangement with, any Third Party.

1.7           “Field of Use” means

(a)           non-human cells,
embryos, organs, organisms;

(b)           any of (a) above
as cloned, transgenic, or cloned transgenic forms;

(c)           any protein products
and other biological molecules produced by, or prepared from, (a) and (b) above;

(d)           any methods,
technologies, or processes for the creation of (a) through (c) above;

(e)           therapeutic and
diagnostics (including products, devices, or processes) of (a) through (d) above;

(f)            cloned, transgenic,
or cloned transgenic human cells, tissues and organs

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not derived by Human
Cloning (as defined below).

The Field of Use shall under no circumstances include

(i)            the use of Human Reproductive Cells
(“Human Reproductive Cells” are defined herein as human meiotic or post-meiotic
germ cells, human gametes, human fertilized eggs, or human pre-implantation
embryos) for any purpose;

(ii)           Human Cloning (wherein “Human Cloning”
is defined as any action combining a human egg or any part thereof, with the
nucleus or any nuclear material from any human cell);

(iii)          human embryos, cloned embryos, human
tissue derived by Human Cloning; or

(iv)          transgenic human embryos, transgenic
cloned human embryos, transgenic human cells, or transgenic human tissues
derived by Human Cloning.

1.8           “Improvement Patents” means
any inventions, invention disclosures, patents and patent applications (other
than the Patent Rights) (a) Controlled by, TXG, and (b) (i) relating
to the specification or claims of the Patent Rights, or (ii) useful,
necessary or required to develop or manufacture Licensed Products or to provide
Licensed Services within the Field of Use (including, without limitation,
improvements relating to the Patent Rights in Exhibit A), together
in each case with all related continuation, continuation-in-part, divisional,
reissue, revision, extension, substitution and reexamination patents and patent
applications, and all corresponding foreign patents and patent applications and
other counterparts of the patents described herein.

1.9           “Licensed Product” means any
product:

(a)           the
manufacture, use, selling or offering for sale of which would infringe one or
more Valid Claims of the Patent Rights, but for the licenses granted herein; or

(b)           which
is developed through the use of, or manufactured by using, a process or method
that would infringe one or more Valid Claims of the Patent Rights, but for the
licenses granted herein.

Without limiting the
generality of the foregoing, and by way of illustration but not limitation,
Licensed Products may include any organism that is described by clause (a) or
(b) above or that was made by a process that is described by clause (a) or
(b) above, as well as any product (e.g., a protein, cell, tissue or organ)
described by clause (a) or (b) above that is produced by or obtained
from such an organism.

1.10         “Licensed Service” means any
service the performance of which would infringe one or more Valid Claims under
the Patent Rights, but for the licenses granted hereunder.

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1.11         “Licensee” means Advanced Cell
Technology, Inc., a Delaware corporation with offices located at
1201 Harbor Bay Parkway, Suite 120, Alameda, California 94502.

1.12         “Net Sales” means the invoiced
amount earned on sales by Licensee or its Affiliates of Licensed Products and
Licensed Services to any third person or entity (except for an Affiliate of
Licensee), less, to the extent applicable, the following:

(a)           discounts
actually allowed and taken;

(b)           sales,
tariff and import duties, use and other taxes or governmental charges directly
imposed with reference to particular sales;

(c)           packaging,
transportation and insurance prepaid or allowed to the extent included in the
gross invoiced sales price; and

(d)           amounts
repaid, allowed or credited on returns or rejection.

In the case of
Combination Products, Net Sales means the total invoice amount earned on sales
by Licensee or its Affiliates of Combination Products to any third person or
entity (except for an Affiliate of Licensee), less, to the extent applicable,
the deductions set forth above, multiplied by a proration factor that is
determined as follows:

(i)            If all components of the Combination
Product were sold separately during the same or immediately preceding calendar
quarter, the proration factor shall be determined by the formula [A/(A+B)],
where A is the average invoice amount earned on the Licensed Product during
such period when sold separately in finished form, and B is the average invoice
amount earned on all other active components of the Combination Product during
such period when sold separately in finished form; or

(ii)           if all components of the Combination
Product were not sold separately during the same or immediately preceding
calendar quarter, the proration factor shall be determined by the formula
[C/(C+D)], where C is the average fully absorbed cost of the Licensed Product
component during the prior quarter and D is the average fully absorbed cost of
all other active components of the Combination Product during the prior
quarter.

1.13         “Patent Rights” means (a) the
inventions, invention disclosures, patent applications and patents listed in Exhibit A
(“Inventions”); (b) any patents or patent applications claiming inventions
disclosed in the Inventions; (c) any continuations,
continuations-in-parts, or divisionals of, or other patent applications claiming
priority to, patent applications identified in the preceding subsections (a) or
(b) and patents issuing therefrom; (d) any extension, renewal,
reexamination, substitution, or reissue of a patent identified in subsections
(a), (b), or (c); and (e) all foreign equivalents of subsections (a), (b),
(c) and (d).

1.14         “Sublicense Income” means all
consideration that Licensee receives for granting a sublicense pursuant to Section 2.2
of this Agreement to any third party that is not an Affiliate of

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Licensee, including
without limitation license fees, royalties, milestone payments, equity,
up-front fees, success fees and license maintenance fees, but excluding
payments specifically committed to the development of Licensed Products or
Licensed Services to be undertaken by Licensee based on full-time equivalent or
other cost-accounting methodologies that are consistent with then current
industry practices. For the avoidance of doubt, “Sublicense Income” excludes
payments made in consideration for the issuance of equity or debt securities of
Licensee up to fair market value.

1.15         “Territory” means the world.

1.16         “TXG Technology” means know-how,
technical information, research and development information, research data,
test results, knowledge, inventions, discoveries, developments, methods,
formulas, techniques, improvements, process information, designs, drawings,
specifications, schematics and other documentation, data, databases, processes,
methods of production and other information and materials, whether tangible or
intangible, that (a) is Controlled by TXG during the term of this
Agreement, (b) relates to the Patent Rights, and (c) is necessary or
useful for Licensee to practice the license granted to it hereunder. For the
avoidance of doubt, it is the parties’ intention that TXG Technology covers
unpatented items of the type articulated above, and that in appropriate
circumstances, certain TXG Technology may in the future become included within
the Patent Rights (as defined below).

1.17         “Valid Claim” means (a) a
claim of any issued and unexpired United States or foreign patent within the
Patent Rights which has not lapsed or become abandoned or been declared invalid
or unenforceable by a court of competent jurisdiction or an administrative
agency from which no appeal can be or has been taken within the time allowed
for such appeal and which has not been disclaimed or admitted to be invalid or
unenforceable through reissue, disclaimer or otherwise, or (b) to the
extent rights are granted by a governmental patent authority thereunder (i.e.,
to the extent that the owner would be able to enforce a right to a patent
royalty thereunder under applicable patent law), a claim of a pending patent
application within the Patent Rights.

ARTICLE 2 - GRANT

2.1           (a)           Sublicense
Grant. Subject to the terms and conditions of this Agreement, TXG hereby
grants to Licensee and its Affiliates a royalty-bearing, exclusive (even as to
TXG, except for the retained rights described in Section 2.1(b) below),
transferable (solely in accordance with Section 11.1), sublicensable
(solely in accordance with Section 2.2) license or sublicense, as the case
may be, under its rights in the Patent Rights and TXG Technology, to develop,
make, have made, use, sell, have sold, offer to sell, import, export,
reproduce, distribute, perform and display, and otherwise dispose of Licensed
Products, and to develop and perform Licensed Services, and to use and practice
in products and services any process, art or method, included in the TXG
Technology, in the Territory in the Field of Use. This Agreement is subject to
the relevant terms of the Brandeis License applicable to sublicensees as such
terms have been incorporated herein, as the Brandeis License may be amended
from time to time, provided, that (i) as provided in Section 2.1(c) below,
the Brandeis License may not be amended in a manner

 5
 

 

that materially and
adversely affects the rights and benefits extended to Licensee hereunder
without the prior written consent of Licensee, and (ii) in the event of
any inconsistency between the Brandeis License and Section 2.1(c) hereof,
Section 2.1(c) hereof shall govern. TXG agrees to provide Licensee
with prior written notice of any amendments to the Brandeis License and provide
Licensee with the opportunity to consent to such amendments, in whole or part,
in which case this Agreement will be subject to such amendments to the extent
consented to by Licensee.

(b)           Retained
Rights of TXG. Subject to the other terms of this Agreement, TXG hereby
retains the right to use and practice the Patent Rights and TXG Technology to
develop, make, have made, use, sell, have sold, offer to sell, import, export,
reproduce, distribute, perform and display, and otherwise dispose of products,
and to develop and perform services, for the development of laboratory animal
models, specifically limited to models based on rats, rabbits, and guinea pigs,
for use in the study of human disease and testing of pharmaceuticals.

(c)           The Brandeis License. Licensee
acknowledges that the Brandeis Patent Rights licensed to Licensee hereunder are
owned by the University and are licensed to TXG under the Brandeis License. TXG,
the University and Licensee agree that, in the event the Brandeis License is
terminated prior to its natural date of expiration for any reason (or this
Agreement is rejected by TXG in bankruptcy or terminated by Licensee pursuant
to Section 7.2 or 7.7), (i) promptly following such termination (or
rejection) of the Brandeis License, the University shall, if Licensee is a
sublicensee in good standing and there are no outstanding legal claims asserted
by TXG against Licensee relative to the terms of this Agreement, directly
license the Brandeis Patent Rights to Licensee in a mutually-agreeable license
agreement with the terms of such license agreement no less favorable than the
Brandeis License and Licensee will thereafter make any payments due to TXG
directly to the University during the term of this Agreement; and (ii) Licensee
shall not be liable for any payments that may be due and payable to the
University by TXG. TXG AND THE UNIVERSITY ACKNOWLEDGE AND AGREE THAT LICENSEE
SHALL BE ENTITLED TO SPECIFIC PERFORMANCE OF THE UNIVERSITY’S OBLIGATIONS UNDER
THIS SECTION 2.1(c) to the extent not inconsistent with
then-prevailing laws and regulations to which the University may be subject. For
the avoidance of doubt, TXG and the University agree that Section 9.4 of
the Brandeis License shall not apply to Licensee on any expiration or
termination of the Brandeis License and shall not be construed as vitiating the
provisions of this Agreement (including Sections 2.1(a) and this Section 2.1(c)).
However, nothing in this Section 2.1(c) shall be construed as
prohibiting the subsequent negotiation between University and Licensee of any
of the terms contained in Section 9.4 of the Brandeis License. TXG and the
University agree that the provisions of this Section 2.1(b) shall
govern in the event that the Brandeis License is terminated. TXG and the
University agree that Licensee will not be bound by any amendment to the
Brandeis License that adversely affects Licensee’s rights or obligations under
this Agreement in any material respect, unless Licensee agrees in writing to
such amendment. For the avoidance of doubt, TXG and the University agree that
Licensee has no obligations to the University under the Brandeis License,
including without limitation any obligation to make any payments to the
University thereunder.

(d)           Diligence. Licensee will
exercise commercially reasonable efforts and diligence in developing and commercializing
Licensed Products and Licensed Services in the Field of Use,

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such reasonable efforts
and diligence to be in accordance with the efforts and resources Licensee would
use for a product candidate owned by it or to which it has rights, which is of
similar market potential as the applicable Licensed Product or Licensed
Service, taking into account the competitiveness of the marketplace, the
proprietary position of the Licensed Product or Licensed Service, the relative
potential safety and efficacy of the Licensed Product or Licensed Service and
the cost of goods and availability of capacity to manufacture and supply the
Licensed Product or Licensed Service at commercial scale.

2.2           Sublicenses to Patent Rights. Licensee
shall have the right to grant further sublicenses to or under the Patent Rights.
Licensee shall provide TXG with a copy of all sublicense agreements of the
Patent Rights prior to execution, which shall be deemed Licensee’s
Confidential Information subject to the provisions of Article 8 of this
Agreement.

2.3           Technology Transfer. Promptly
upon execution of this Agreement TXG shall provide Licensee with all existing
TXG Technology (including without limitation Confidential Information and
materials Controlled by TXG as may be reasonably necessary to allow Licensee to
fully exploit the licenses granted hereunder, including any such Confidential
Information obtained from the University). From time to time thereafter during
the term of the Agreement, TXG shall provide Licensee with any additional TXG
Technology and such technical assistance as Licensee reasonably shall request,
provided that such requests do not unreasonably interfere with the regular
business operations of TXG.

2.4           Right of First Negotiation. Notwithstanding
anything to the contrary in this Agreement, in the event that TXG Controls any
Improvement Patents during the term of this Agreement, Licensee shall have a
right of first negotiation to obtain an exclusive or, at Licensee’s option,
non-exclusive right and license to such Improvement Patents and all related
intellectual property rights in the Field of Use to the maximum extent of TXG’s
rights to grant such a license. TXG shall promptly notify Licensee upon
Controlling any such rights and shall, prior to any discussion with any third
party, present to Licensee, a proposal of terms and conditions both to obtain
an (x) exclusive or (y) nonexclusive right and license to such
Improvement Patents and all related intellectual property rights in the Field
of Use. In the event that Licensee and TXG have not agreed upon the terms and
conditions pursuant to which Licensee would receive such a right and license
within 120 days after Licensee’s receipt of TXG’s proposal, TXG shall be free
to discuss terms and conditions for granting of rights and license with respect
to such specific Improvement Patent(s) with any third party without
further obligation to Licensee; provided, however, that no right or license
with respect to any such Improvement Patent will be granted to a third party in
the Field of Use within 12 months of the later of (i) termination of
negotiations between Licensee and TXG, or (ii) the expiration of the above
mentioned 120 days, under terms and conditions more favorable to the third
party than the terms and conditions last discussed with Licensee without first
offering such more favorable terms and conditions to Licensee for Licensee’s
consideration and possible acceptance.

ARTICLE 3 - CONSIDERATION

3.1           Initial Payment. In partial
consideration of the rights and licenses granted to

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Licensee by TXG in this
Agreement, Licensee agrees to pay to TXG a license fee (the “License Fee”)
equal to $400,000 on the Effective Date, payable through the payment of
$150,000 in cash and the issuance of shares of common stock of Licensee within
a fair market value on the Effective Date of $250,000, pursuant to the terms
of, and subject to the conditions set forth in, the Subscription Agreement to
be executed by the parties substantially in the form attached hereto as Exhibit B.

The License Fee is not
refundable and is not creditable against other payments due to TXG under this
Agreement.

3.2           Royalties.

(a)           In
partial consideration of the license rights and licenses granted by TXG to
Licensee in this Agreement, Licensee agrees to pay to TXG the following
royalties:

(1) 
three percent (3%) of the Net Sales of all Licensed Products and Licensed
Services that are Cell-Based Applications;

(2) 
two percent (2%) of the Net Sales of all Licensed Products and Licensed
Services that are Animal Applications; and

(3) 
two percent (2%) of the Net Sales of all Licensed Products not covered by (1) and
(2) above.

For the avoidance of
doubt, no multiple royalties shall be payable because any Licensed Product or
Licensed Service is covered by more than one patent or patent application
within the Patent Rights. For purposes of this Section 3.2, Cell-Based
Applications shall mean Licensed Products or Licensed Services that are
principally based on cloned, transgenic, or cloned transgenic human cells,
tissues and organs not derived by Human Cloning (as defined above), and Animal
Applications shall mean all other Licensed Products or Licensed Services (i.e.,
Licensed Products or Licensed Services not principally based cloned,
transgenic, or cloned transgenic human cells, tissues and organs not derived by
Human Cloning (as defined above).

(b)           The
obligation of Licensee to pay royalties on sales of Licensed Products or
Licensed Services covered by a Valid Claim of the Patent Rights shall terminate
on a country-by-country basis concurrently with the expiration or termination
of the last applicable Valid Claim within the Patent Rights in the country in
the Territory in which the Licensed Product or Licensed Service is sold.

3.3           License Maintenance Fee.

(a)           Subject
to the terms and conditions of this Agreement (including without limitation
subsections (b) and (c) of this Section 3.3), on January 1,
2007, and on each January 1 thereafter during the term of this Agreement,
Licensee shall pay TXG an annual maintenance fee of $25,000 (the “Maintenance
Fee Period”).

 8
 

 

(b)           The
maintenance fee payments shall be considered an advance against royalties and
Sublicense Income payable to TXG hereunder and shall be fully creditable
against any royalties and Sublicense Income payable to TXG hereunder in the
same twelve (12) month period in which such maintenance fee is paid.
Accordingly, Licensee shall not be obligated to pay TXG any royalties or
Sublicense Income otherwise payable hereunder to the extent that the total
accrued royalties and Sublicense Income otherwise payable in the same twelve
(12) month period in which such maintenance fee is paid do not exceed the
maintenance fee paid at the beginning of such twelve (12) month period. Waiver
of any payment of the annual maintenance fee by TXG shall not be construed as a
waiver of any subsequent payment of the annual maintenance fee.

(c)           The
obligation of Licensee to pay maintenance fees shall terminate concurrently
with the expiration or termination of the last applicable Valid Claim within
the Patent Rights in the Territory.

(d)           TXG
acknowledges the receipt of $20,000 paid by Licensee as an option fee. TXG
agrees that Licensee may credit $10,000 of the $20,000 option fee against the
initial payment made under Section 3.1 of this Agreement.

3.4           Third Party Royalties. In the
event that Licensee is required to make and actually does make royalty payments
to one or more third parties for a license to an issued patent or patents (“Third
Party Payments”) in order to develop, make, have made, use, import, export,
sell, offer for sale or otherwise exploit Licensed Products or to perform
Licensed Services for a Cell-Based Application, in the absence of which such
Licensed Product or Licensed Service could not legally be used or sold or
performed in such country, then, Licensee may offset the royalties otherwise
due pursuant to Section 3.2(a) above for such Licensed Product or
Licensed Service in the same royalty period by fifty percent (50%) of such
Third Party Payments. However, the royalty payments under Section 3.2 may
never be reduced by more than fifty percent (50%) in any royalty period.

3.5           Milestone Payment. Licensee
shall pay TXG a milestone payment of $100,000 within thirty (30) days after the
issuance of claims in a U.S. Patent substantially similar to those set forth in
the Preliminary Amendment submitted on March 10, 2004 in U.S. Patent
Application No. 10/798,061.

3.6           Sublicense Income. Licensee
shall pay to TXG a total of ten percent (10%) of all Sublicense Income for
Cell-Based Applications, and fifty percent (50%) of all Sublicense Income for
Animal Applications. For Sublicense Income comprising equity, Licensee shall
have the option, upon not less than ten (10) days’ written notice to TXG,
of (a) transferring (or otherwise arranging the issuance) to TXG up to ten
percent (10%) and/or fifty percent (50%) of the shares of capital stock (or
other form of equity interest) received by Licensee as Sublicense Income for
Cell-Based Applications, or Animal Applications, as applicable, provided such
shares (or other equity interest) are valued at their applicable fair market
value as determined by the board of directors of the issuing entity in good
faith at the time of issuance to Licensee (or if not so determined, as
determined by the most recent per-share price at which such same class of
shares

 9
 

 

(or other equity) were
sold to unaffiliated third parties by the issuing entity on comparable terms)
or (b) paying TXG cash in an amount equal to the fair market value of such
shares (or other forms of equity interest), determined as provided in
subsection (a) of this Section 3.6.

3.7           Payment Method. All payments
due under this Agreement shall be paid to TXG in Grafton, Massachusetts,
U.S.A., and shall be made in United States currency without deduction for
taxes, assessments, exchanges, collection or other charges of any kind;
provided, however, that any withholding tax required to be withheld by Licensee
on royalty or Sublicense Income payments under the laws of any country in the
Territory for the account of TXG will be promptly paid by Licensee for and on
behalf of TXG to the appropriate governmental authority, and Licensee will
furnish TXG with proof of payment of such tax. Any such tax actually paid on
behalf of TXG may be deducted from royalty payments or Sublicense Income due
TXG. Conversion of foreign currency to U.S. dollars shall be made at the
conversion rate reported in The Wall Street Journal on the last working day of
the calendar quarter to which the payment relates.

3.8           Late Fee. Licensee shall pay
TXG interest on any overdue amounts at the rate of one percent (1%) per month
and twelve percent (12%) per annum, from the date when such payment should have
been made pursuant to Section 3.1, 3.2, 3.3 and/or 3.6, as applicable.

ARTICLE 4 - REPORTS AND RECORDS

4.1           TXG Audit Rights.
Licensee shall keep full, true and accurate books of account containing all
particulars necessary for the purpose of showing the amounts payable to TXG
hereunder. Said books of account shall be kept at Licensee’s principal place of
business for three (3) years following the end of the calendar year to
which they pertain. Said books and the supporting data shall be open upon
reasonable advance notice during Licensee’s normal business hours (and no more
frequently than once per calendar year) for three (3) years following the
end of the calendar year to which they pertain, to the inspection of an
independent auditor reasonably acceptable to Licensee for the purpose of
verifying Licensee’s royalty statement or compliance with payment obligations
under this Agreement. If any such audit determines that the reported payments
to TXG were less than ninety five percent (95%) of the actual amount due to TXG
for the calendar year in question, Licensee shall bear the reasonable cost of such
auditor’s inspection and pay any undisputed deficit amounts within 30 days. In
all other cases, TXG shall pay the costs of the audit. All information
disclosed pursuant to an audit shall be treated as Licensee’s Confidential
Information and, other than the amount of any shortfall, which may be disclosed
to TXG, shall not be disclosed to any third party or used for any purpose other
than to determine the correctness of Licensee’s royalty statement or payment
obligations under this Agreement.

4.2           Licensee Reports. After the
first commercial sale of a Licensed Product or Licensed Service, Licensee,
within forty-five (45) days after June 30 and December 31, of each
year, shall deliver to TXG a true and accurate report, giving such particulars
of the business conducted by Licensee during the preceding six-month
period under this Agreement necessary for the purpose of accounting hereunder. Without
limiting the generality of the foregoing, these reports shall include the
following:

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(a)           number
of Licensed Products manufactured by Licensee and its Affiliates or by any
third party on Licensee’s behalf;

(b)           number
of Licensed Products sold by Licensee and its Affiliates;

(c)           total
receipts for Licensed Products sold by Licensee and its Affiliates;

(d)           total
receipts for all Licensed Services sold by Licensee and its Affiliates;

(e)           deductions
applicable as provided in Section 1.11; and

(f)                                    the
amount of Sublicense Income due to TXG for the applicable royalty period from
each sublicensee.

4.3           Royalty Report. With each such
report submitted, Licensee shall pay to TXG the royalties due and payable under
this Agreement. If no royalties shall be due, Licensee shall so report. All
information disclosed in such report shall be Licensee’s Confidential
Information.

4.4           TXG Reports. Within
sixty (60) days after each anniversary of the Effective Date of this Agreement,
TXG shall furnish Licensee with a written report on its use of the Patent
Rights and the TXG Technology with the retained rights described in Section 2.1(b) above,
including without limitation a description of research and development efforts,
efforts to obtain regulatory approval, marketing efforts, and products and
services offered for sale. All information disclosed pursuant to such reports
shall be treated as TXG’s Confidential Information.

ARTICLE 5 - PATENT RIGHTS

5.1           Responsibility for the Patent
Rights. Subject to the terms of this Agreement, TXG shall be solely
responsible for the preparation, filing, prosecution and maintenance of the
Patent Right listed on Exhibit A. The costs of such filing,
prosecution and maintenance (including without limitation the payment of all
government fees in any given country required to maintain the Patent Rights)
shall be borne by TXG, but Licensee will reimburse TXG for one hundred percent
(100%) of all such costs incurred by TXG that are attributable to maintenance,
annuity fees and translation and grant validation costs incurred by TXG with
respect to such Patent Rights. Either Party may, at its sole expense, prepare,
file, prosecute and maintain any Patent Rights not listed on Exhibit A;
provided, that, (a) such Party provides the non-filing Party with written
notice and an opportunity to comment on all Filings and Responses (as defined
in Section 5.2) with respect thereto and (b) the non-filing Party
provides the filing Party with such reasonable assistance as may be requested
by the filing Party in connection with such Filings and Responses, at the
filing Party’s sole expense.

5.2           Licensee’s Participation. Licensee’s
patent counsel shall be given a reasonable opportunity to comment, at Licensee’s
expense, on all proposed patent filings (“Filings”) and responses (“Responses”)
to patent office actions or other patent office communications that may

 11
 

 

affect the Patent Rights
or Licensee’s rights and obligations hereunder either directly or in
combination with any response thereto (collectively, “Office Communications”)
with respect to the Patent Rights. In the case of Filings, and in the case of
Office Communications to which TXG must respond in a period of time equal to or
exceeding sixty (60) days (excluding extensions), TXG shall deliver copies of
its proposed Filings or Response to Licensee not later than fifteen (15)
business days prior to the patent office deadline (excluding extensions) for
such Filing or Response. TXG will not unreasonably refuse to accept any
suggestions of Licensee’s patent counsel regarding such Filing or Response,
provided that Licensee’s patent counsel provides such comments to TXG’s patent
counsel not less than five (5) days prior to the patent office deadline
(excluding extensions) for such Filing or Response; provided, however,
that TXG will have the final decision on the incorporation of any comments in
such Filing or Response. In the case of Office Communications to which TXG must
respond in less than sixty (60) days (including any extensions), TXG shall
deliver copies of its proposed Response to Licensee not later than ten (10) days
prior to the patent office deadline, and TXG will not unreasonably refuse to
accept any suggestions of Licensee’s patent counsel regarding such Response,
provided that Licensee’s patent counsel provides such comments to TXG’s patent
counsel not less than five (5) days prior to the final patent office
deadline for such Response. In any event, TXG will provide Licensee with copies
of all Office Communications relating to the Patent Rights reasonably promptly
after TXG’s receipt thereof, but in any event within five (5) business
days of receipt. Where TXG fails to forward Office Communications within the
time frame indicated, TXG shall use reasonable commercial best efforts and own
expense to obtain an extension of time to file the Office Communication so as
to provide Licensee fifteen (15) business days to review and comment on such
Office Communication prior to filing. TXG agrees to use reasonable commercial
efforts to prosecute U.S. patents covering the inventions disclosed in
10/798,061 and 10/969,646 and, if Licensee requests, to consult closely with
Licensee’s patent counsel in these efforts.

5.3           Abandonment. TXG will not
allow any patent or patent application within the Patent Rights to become
expired or abandoned, or fail to diligently pursue patent protection for any
invention within the Patent Rights, without giving (a) written notice to
Licensee and the University at least thirty (30) business days prior to the
next due date for any required communication, response to office action,
filing, or payment, failure to meet which would result in expiration or
abandonment, including but not limited to provisional abandonment, of the
patent or patent application, and (b) Licensee or the University the right
to assume responsibility for such patent or patent application. If Licensee or
the University so elects, (i) TXG will execute such documents and
otherwise perform such acts and make all filings as may be reasonably required
to permit Licensee’s or the University’s designees to prosecute and maintain
such patent or application in such jurisdiction(s) and transact all matters
connected therewith (including, as necessary, appointing Licensee or the
University as TXG’s delegatee or agent, as applicable, for the purpose of
continuing to exercise Licensee’s prosecution and maintenance rights under the
Brandeis License, appointing Licensee’s or the University’s patent counsel as
associate attorneys of record, and changing address of the patent attorney of
record with the appropriate patent authorities), and (ii) Licensee or the
University will thereafter assume control thereof and all expenses (arising
thereafter) for such prosecution and maintenance by Licensee or the University.

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5.4           Enforcement of the Patent Rights.
The parties agree to notify each other in writing of any actual or threatened
infringement by a third party of the Patent Rights or of any third-party claim
of invalidity or unenforceability of the Patent Rights. Licensee shall have the
first right to prosecute and defend such claims under its sole control and at
its sole expense. If Licensee does proceed with such prosecution or defense,
TXG shall provide reasonable assistance to Licensee at Licensee’s request,
provided Licensee pays TXG for the reasonable out-of-pockets costs incurred by
TXG in such assistance. Any recovery obtained in an action under this Section 5.4
shall be distributed as follows, in this order: (i) Licensee shall be
reimbursed for any expenses incurred in the action; and (ii) Licensee
shall receive the remaining recovery, less a reasonable approximation of the
royalties that Licensee would have paid to TXG if Licensee had received the
amount awarded as ordinary damages as Net Sales of Licensed Products sold by
Licensee. Licensee may, after written notice to TXG, offset 100% of any
unreimbursed expenses incurred by it in prosecuting or defending claims under
this Section 5.4 against any royalty or maintenance fee due to TXG under
this Agreement; provided, that, such offset shall in no event
reduce the royalty or maintenance fee otherwise due to TXG in any calendar
quarter by more than twenty-five percent (25%). Licensee’s rights under this Section 5.4
shall be subject to the rights of the University under the Brandeis License
(i.e. Section 7 thereof), provided that the University agrees to permit
Licensee to assume control of and responsibility for such infringement action
or defense in accordance with this Section 5.4 provided Licensee consults
and cooperates with the University in accordance with Section 7 of the
Brandeis License. TXG will otherwise perform all acts and effect all filings
reasonably necessary to permit Licensee to exercise its rights under this Section 5.4
at Licensee’s sole expense.

5.5           TXG Rights to Enforce. In the
event that Licensee fails to initiate an infringement action within a
reasonable time (but no more than one hundred eighty (180) days) after Licensee
becomes aware of the basis for such action (e.g., the actual or threatened
infringement) or fails to answer a declaratory judgment action within a
reasonable time (but no more than ninety (90) days) after Licensee receives or
becomes aware of such infringement or action, TXG shall have the right, after
notifying Licensee and the University in writing, to prosecute such
infringement or answer such declaratory judgment action, under its sole control
and at its sole expense. If TXG does proceed with such prosecution or defense,
Licensee shall provide reasonable assistance to TXG at TXG’s request, provided
TXG pays Licensee for its reasonable out-of-pockets costs incurred in such
assistance. Any recovery obtained in an action under this Section 5.5
shall be distributed as follows, in this order: (i) TXG shall be
reimbursed for any expenses incurred in the action; (ii) as to ordinary
damages, Licensee shall receive an amount equal to lost profits or a reasonable
royalty on the infringing sales (whichever measure the court applied), less a
reasonable approximation of the royalties that Licensee would have paid to TXG
if Licensee had received such amount as Net Sales of Licensed Products sold by
Licensee; and (iii) as to any additional damages, 100% to TXG, unless
Licensee joins TXG in the prosecution at its own expense at which point the
parties will share equally in any award. TXG’s rights under this Section 5.5
shall be subject to the rights of the University under the Brandeis License
(i.e. Section 7 thereof), provided that the University agrees to permit
TXG to assume control of and responsibility for such infringement action or
defense in accordance with this Section 5.5 provided TXG consults and
cooperates with the University in accordance with Section 7 of the
Brandeis License.

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5.6.          Cooperation.
TXG and Licensee agree to reasonably cooperate in connection with the
preparation, filing, prosecution, and maintenance of the Patent Rights. Cooperation
includes, without limitation, (a) promptly executing all papers and
instruments or requiring employees of the University or TXG to execute papers
and instruments as reasonably appropriate to enable Licensee to file,
prosecute, and maintain Patent Rights in any country; and (b) promptly informing
Licensee of matters that may affect preparation, filing, prosecution, or
maintenance of Patent Rights (such as becoming aware of an additional inventor
who is not listed as an inventor in a patent application). Additionally, in the
event either party exercises its rights hereunder to proceed with any
prosecution of infringement or defense of the Patent Rights, such party shall
consult with the other party regarding the course of such proceedings and shall
not enter into any settlement, consent judgment, or other voluntary final
disposition of any infringement action that admits the invalidity or
unenforceability of any Patent Rights or that would adversely affect the rights
of the other party without the prior written consent of the other party, which
consent may not be unreasonably withheld, conditioned or delayed.

ARTICLE 6 — INDEMNIFICATION; LIMITATION OF
LIABILITY

6.1           Indemnification by TXG. TXG
shall defend, indemnify and hold harmless Licensee, the University, and their
Affiliates, sublicensees, successors and assigns, and their respective
trustees, agents, directors, officers, shareholders, partners and employees
(each, an “Indemnified Party”), at TXG’s cost and expense, from and against any
and all losses, costs, liabilities, licensing fees, damages, fees and expenses,
including reasonable attorneys’ fees and expenses (“Losses”) incurred or
imposed upon any of the indemnified parties in connection with any claims
(including third party claims), suits, actions, demands or judgments (“Claims”):

(a) arising out of any breach by TXG of any representation or
warranty of TXG hereunder; or

(b) arising out of the negligence or willful misconduct of TXG.

6.2           Indemnification by Licensee. Licensee
shall defend, indemnify and hold harmless TXG, the University and their
Affiliates, successors and assigns, and their respective trustees, agents,
directors, officers, shareholders, partners and employees, at Licensee’s cost
and expense, from and against any and all losses, costs, liabilities, damages,
fees and expenses, including reasonable attorneys’ fees and expenses incurred
or imposed upon any of the indemnified parties in connection with any claims
(including third party claims), suits, actions, demands or judgments:

(a)           arising out of any breach by Licensee
of any representation or warranty of Licensee hereunder, or

(b)           arising out of the death or injury to
any person or persons or out of any damage to tangible property resulting from,
or otherwise attributable to, the making, using, development, and/or sale by
Licensee of any Licensed Products or Licensed Services under this Agreement.

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6.3           Indemnification Claims. Each
party shall give the other party prompt notice of any claim for which
indemnification under this Section 6 is or may be applicable and will cooperate
with the indemnifying party in the defense or settlement of such claim at the
indemnifying party’s expense. The indemnifying party shall be required to
provide and be entitled to control the defense of any claim covered hereunder
(including the right to control settlement discussions) with counsel reasonably
satisfactory to the other party, which other party may, at its own expense,
participate in the defense of any claim after the indemnifying party assumes
control of the defense thereof. No claim that is subject to indemnification
under this Article 6 shall be settled or otherwise compromised other than
by the party defending such claim, and then only with the prior written consent
of the other party, which shall not be unreasonably withheld or delayed; it
shall not be unreasonable to withhold consent if the settlement or compromise
either (a) imposes on the indemnified party any liability or obligation
which cannot be assumed and performed in full by the indemnifying party, or (b) materially
adversely affects the indemnified party or its rights hereunder. The failure of
the indemnified party to deliver notice to the indemnifying party promptly
after the commencement of any such action shall not release the indemnifying
party from any liability to the indemnified party under this Section 6
other than any liabilities directly attributable to such failure. Any amounts
for which TXG is liable under Section 6.1 may be offset by Licensee
against any payments required hereunder.

6.4           LIMITATION
OF LIABILITY. EXCEPT WITH RESPECT TO LIABILITY ARISING AS A RESULT OF A
THIRD PARTY CLAIM REFERRED TO IN AND COVERED BY SECTIONS 6.1 OR 6.2
(INDEMNIFICATION), IN NO EVENT SHALL EITHER PARTY (OR ITS DIRECTORS, OFFICERS,
EMPLOYEES, OR AGENTS) BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL,
EXEMPLARY, OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATED TO THIS
AGREEMENT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, REGARDLESS OF THE THEORY OF LIABILITY.

6.5           Insurance. Each party shall
obtain and maintain, at all times during the term of this Agreement, general
liability insurance with appropriate bodily injury, death and property damage
limits. Upon request, a party shall furnish a certificate of insurance signed
by an authorized representative of its insurance underwriter evidencing such
coverage and providing for at least thirty (30) days’ prior written notice of
any cancellation, termination or reduction of coverage.

6.6           Patent Interference Proceeding.
In the event that TXG or any of its Affiliates or the University enters into
any settlement agreements, consent orders or compromises arising out of any
patent interference or opposition proceedings pending before the U.S. Patent
and Trademark Office or similar authorities in the Territory or any court of
competent jurisdiction involving the Patent Rights, TXG and the University
shall ensure that Licensee and its Affiliates and sublicensees will obtain the
benefits of such settlements, orders or compromises. Any out-of-pocket expenses
incurred by Licensee in assisting with or participating in any such proceedings
at the request of TXG may be deducted from any amounts owed by Licensee to TXG
under this Agreement.

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ARTICLE 7 —
TERMINATION

7.1           Term. The term of this
Agreement shall commence on the Effective Date and shall remain in effect until
the expiration of the last Valid Claim under the Patent Rights unless sooner
terminated as provided herein.

7.2           Termination for Cause. If
either party materially breaches any material provision of this Agreement and
if such breach is not cured within ninety (90) days (the “Cure Period”) after
receiving written notice from the other party specifying such breach in
reasonable detail, the non-breaching party shall have the right to terminate
this Agreement by giving written notice thereof to the party in breach, which
termination shall go into effect immediately on receipt unless the allegedly
breaching party delivers a Resolution Notice (pursuant to Section 11.8;
provided that the Negotiation Period shall be reduced to ten (10) business
days) to the other party within five (5) days of such second notice (in
which event, such termination shall not be effective unless and until there has
been a final mutually agreed resolution by the parties to terminate or a final
decision of the arbitrator that the allegedly breaching party has materially
breached a material provision hereof and that the Agreement should be
terminated as a result thereof).

7.3           Termination for Convenience.
Licensee shall have the right to terminate this Agreement at any time without
cause on ninety (90) days’ prior notice to TXG.

7.4           Existing Stock. In the event
that this Agreement terminates or expires, Licensee and its sublicensees
hereunder shall retain limited rights to sell any Licensed Products existing or
under production (e.g., a cloned animal in utero or a cloned embryo) and to
perform Licensed Services related to such Licensed Products, subject to the
terms of this Agreement (including without limitation the obligation to pay
royalties under Article 3 to the extent not creditable or offsetable
against maintenance fees), but Licensee shall have no obligation to pay any
annual maintenance fees or portion thereof, except for any such payment due and
payable prior to the effective termination date.

7.5           Survival. Upon any termination
or expiration of this Agreement:  nothing
herein shall be construed to release either party from any obligation incurred
prior to the effective date of such termination (except as set forth below);
Articles/Sections 1, 6, 7, 8, 10, 11.7 through 11.13, and (only with respect to
any action already commenced as of the date of termination notice) the
provisions allocating recoveries in 5.4 and 5.5, shall survive and continue in
full force and effect; any sublicensee shall have the option to retain its
license rights in accordance with the terms of its sublicense granted by
Licensee prior to the effective termination date of this Agreement, provided
such sublicensee agrees to remit to TXG all amounts owing thereunder after the effective
termination date that are attributable to its sublicense of the Patent Rights. Upon
any termination or expiration of this Agreement, each party shall promptly
return to the other party, or destroy, all written Confidential Information of
the other party, and all copies, notes or extracts thereof (except to the
extent reasonably necessary to exercise the license in the following sentence,
if applicable). Upon the expiration, determination, disclaimer or admission of
invalidity or unenforceability of the last Valid Claim within the Licensed
Patents, the license to TXG Technology granted under Section 2.1 shall
become irrevocable, non-exclusive, fully

 16
 

 

 

paid up and royalty-free.
Upon any rejection of this Agreement by TXG in bankruptcy or termination of
this Agreement by Licensee pursuant to Section 7.2 or 7.7, Section 2.1(b) shall
survive and continue in full force and effect.

7.6           Termination for Change in Law.
Licensee may immediately terminate this Agreement on written notice to TXG in
the event that there are any changes in law that may have material adverse
effect on Licensee’s right to develop, make, have made, import, export, use,
sell or otherwise exploit or perform Licensed Products or Licensed Services.

7.7           Termination of Brandeis License.
Licensee may immediately terminate this Agreement effective on written notice
to TXG in the event that the Brandeis License terminates or expires for any
reason.

ARTICLE 8 — CONFIDENTIALITY AND NON-DISCLOSURE

8.1           Confidential
Information; Non-Disclosure. “Confidential Information” shall mean any
technical, business, financial, customer or other information disclosed by one
party (“Disclosing Party”) to the other party (“Receiving Party”) pursuant to
this Agreement which, if disclosed in written form, is marked “Confidential” or
“Proprietary” or by a similar legend or which, if disclosed orally or visually,
is identified as confidential information at the time of disclosure and
confirmed by written outline mailed to the other party within thirty (30) days
of the original disclosure. Licensee’s Confidential Information specifically
includes the terms of this Agreement and any sublicense agreements and all
information, data, reports and statements relating to Licensed Products and
Licensed Services. Except to the extent authorized by this Agreement or by
other prior written consent by the Disclosing Party, each party shall during
the term of this Agreement and for five (5) years after its termination: (i) not
use Confidential Information of the Disclosing Party except for the purposes of
fulfilling its obligations or exercising or enforcing its rights under this
Agreement, or as otherwise authorized herein or in writing by the Disclosing
Party, (ii) disclose the Confidential Information of the Disclosing Party
only to those of its employees, directors, and consultants who have need to
know or use such Confidential Information for the foregoing purposes or as
authorized by the Disclosing Party, provided that the Receiving Party will
ensure such disclosees are bound by obligations of confidentiality at least as
restrictive as those set forth in this Section 8.1. In addition, Licensee
may disclose Confidential Information of TXG to its Affiliates (and their
employees, directors and consultants) or permitted sublicensees or distributors
for the foregoing purposes or as authorized by TXG, provided such disclosees
are bound by obligations of confidentiality at least as restrictive as those
set forth in this Section 8.1. Each of the parties shall protect the
Confidential Information of the Disclosing Party using at least the same
procedures and degree of care that it uses to prevent the disclosure of its own
confidential information of like importance, but in no event less than
reasonable care. Except as expressly provided in this Agreement, no ownership
right is granted in any Confidential Information.

8.2           Exclusions. Notwithstanding Section 8.1,
Confidential Information excludes information that: (i) was publicly known
or available at the time it was disclosed or becomes publicly known or
available through no fault, action, or inaction of the Receiving Party; (ii) was

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known to the Receiving
Party at the time of disclosure; (iii) is disclosed with the prior
written approval of the Disclosing Party; (iv) was independently developed
by the Receiving Party without any use of the Confidential Information; or (v) is
provided to the recipient by an independent third party having no fiduciary
relationship with the Disclosing Party and having no obligation to keep the
information secret.

8.3           Permitted
Disclosures. Notwithstanding any other provision of this Agreement, each
party may disclose Confidential Information of the other party: (i) to the
extent and to the persons and entities required to comply with an applicable
governmental law, rule or regulation or court or administrative order;
provided, however, that the party required to disclose Confidential Information
shall first have given prompt notice to the other party hereto to enable it to
seek any available exemptions from or limitations on such disclosure
requirement and shall reasonably cooperate in such efforts by the other party;
or (ii) as necessary to file or prosecute patent applications, enforce
patents, prosecute or defend litigation, or otherwise establish or enforce rights
or obligations under this Agreement, but only to the extent that any such
disclosure is reasonably necessary.

8.4           Financial
Disclosure. The parties agree not to disclose the economic terms of this
Agreement to any third party other than their Affiliates without the prior
written consent of the other party hereto except (a) as required by
applicable securities laws or the requirements of any applicable stock
exchange, including, without limitation, requirements to file a copy of this
Agreement (redacted to the extent reasonably permitted by applicable law); (b) in
confidence, to legal counsel; (c) in confidence, to accountants, banks,
and financing sources and their advisors; and (d) to the extent necessary
to enforce this Agreement or any rights or obligations hereunder.

8.5           Injunctive Relief. TXG and
Licensee acknowledge and agree that any breach of the confidentiality
obligations imposed by this Section 8 may constitute immediate and
irreparable harm to the party disclosing the Confidential Information and/or
its successors and assigns, which cannot adequately and fully be compensated by
money damages and may warrant, in addition to all other rights and remedies
afforded by law, injunctive relief, specific performance, and/or other
equitable relief.

8.6           Survival. The obligations of
TXG and Licensee under this Article 8 shall survive for five (5) years
after the expiration or termination of this Agreement.

ARTICLE 9 - PAYMENTS, NOTICES, AND OTHER
COMMUNICATIONS

Any
payment, notice or other communication pursuant to this Agreement shall be in
writing and sent by certified first class mail, postage prepaid, return receipt
requested, or by nationally recognized overnight carrier addressed to the
parties at the following addresses or such other addresses as such party
furnishes to the other party in accordance with this paragraph. Such notices,
payments, or other communications shall be effective upon receipt.

 18
 

 

 

	
  In the case of Licensee:

  	
  Advanced Cell Technology, Inc.

  
	
   

  	
  1201 Harbor Bay Parkway, Suite 120

  
	
   

  	
  Alameda, CA 94502

  
	
   

  	
  Attention: Jonathan Atzen,

  
	
   

  	
                  
  Senior Vice President and General Counsel

  
	
   

  	
   

  
	
  With a copy to:

  	
  Pierce Atwood

  
	
   

  	
  One Monument Square

  
	
   

  	
  Portland, ME 04101

  
	
   

  	
  Attention: William L. Worden, Esq.

  
	
   

  	
   

  
	
  In the case of
  TXG:

  	
  TranXenoGen, Inc.

  
	
   

  	
  800 Boston Turnpike Road

  
	
   

  	
  Shrewsbury, MA 01545

  
	
   

  	
  Attention: Paul DiTullio, President

  
	
   

  	
   

  
	
  With a copy to:

  	
  Mintz, Levin, Cohen, Ferris, Glovsky, and Popeo PC

  
	
   

  	
  One Financial Center

  
	
   

  	
  Boston, MA 02111

  
	
   

  	
  Attention: Ingrid Beattie

  

 

ARTICLE 10 - REPRESENTATIONS AND WARRANTIES

10.1         Representations and Warranties by
TXG. TXG represents and warrants that:

(a)           TXG has the full
legal right and power to grant to Licensee the licenses granted herein;

(b)           the execution,
delivery and performance of this Agreement by TXG (i) are within its
corporate powers, (ii) have been duly authorized by all necessary
corporate action on TXG’s part, and (iii) have been approved by the TXG
Board of Directors;

(c)           the execution,
delivery and performance of this Agreement by TXG, including the grant of
rights and licenses herein, do not and will not contravene, conflict,
constitute or result in a default under or breach of, and are not and will not
be inconsistent with, any law or regulation, any judgment, decree or order, or
any term, condition or provision of any contract, agreement (including without
limitation the Brandeis License) or other undertaking applicable to TXG or the
Patent Rights or the TXG Technology and the intellectual property rights
thereto;

(d)           TXG has obtained all
necessary consents to grant to Licensee the rights and licenses granted herein;

 19
 

 

 

(e)           TXG has provided to
Licensee a copy of the Brandeis License in effect as of the Effective Date, and
TXG represents and warrants that said copy is a true and complete copy of the
Brandeis License (including without limitation any amendments, schedules,
exhibits, or addenda thereto) as of the Effective Date;

(f)            Neither TXG nor any
of its Affiliates is a party of any agreement with the University governing the
license of, or option to license, any intellectual property rights other than
the Brandeis License;

(g)           to the best
knowledge of TXG, the exercise of the rights and licenses granted to Licensee
under this Agreement, including the development, manufacture, use or sale of
the Licensed Products or Licensed Services, shall not infringe or
misappropriate the intellectual property or other rights (excluding patent
rights) of any third party;

(h)           To the best
knowledge of TXG, TXG’s rights and interests in the Patent Rights are free and
clear of all liens, encumbrances and security interests of every kind;

(i)            TXG has received no
written communication claiming (or threatening to claim), and to the best
knowledge of TXG there is no pending claim, that the practice of the inventions
described in the Patent Rights or any use of the TXG Technology infringes any
patents or patent applications or other rights of any third party, and, to the
knowledge of TXG, there is no basis for any such claim, and no other party has
any rights with respect to any inventions or discoveries described in the
Patent Rights or in the TXG Technology, other than TXG and the University;

(j)            the practice of the
inventions described in the Patent Rights does not infringe, violate or misappropriate,
and will not require any payment to TXG or any of its Affiliates (other than
the payments set forth in this Agreement and/or in the Brandeis License) with
respect to any other technology, intellectual property rights, or patents owned
or Controlled by TXG or any of its Affiliates as of the Effective Date, or
claims of patent applications that TXG or its Affiliates have made or
contemplate making (collectively, “Other Rights”). To the extent, if any, there
is a breach of the representations and warranties set forth in this Section 10.2(k),
and, as a result of such breach, Licensee or an Affiliate, in practicing an
invention described in the Patent Rights, infringes any Other Rights, Licensee
and its Affiliates (and the users and purchasers of products and services
infringing such Other Rights made or sold by Licensee and its Affiliates and
sublicensees) shall be immunized and indemnified by TXG from liability, suit or
other claims (by TXG, the University, and any of their licensees, successors
and assignees) under such Other Rights;

(k)           (i) the
Brandeis License is valid, binding and enforceable, and to the best knowledge
of TXG, neither TXG nor the University is in default in complying with any
provision thereof and no condition or event or facts exist which, with notice
or lapse of time or both, would constitute a default thereunder; (ii) TXG
will comply with all terms of the Brandeis License, and will be responsible for
making all payments due under the Brandeis License; (iii) TXG will notify
Licensee promptly if TXG receives any notice or written communication

 20
 

 

 

threatening or stating
that the University intends to terminate the Brandeis License or modify, assign
or amend such agreement in any way that adversely affects this Agreement or
Licensee’s rights hereunder; (iv) TXG will provide Licensee with copies of
all communications regarding any alleged or actual breach of the Brandeis
License; and

(l)            TXG has disclosed
to Licensee all inventions, disclosures, patent applications and patents owned
or Controlled by TXG, that are relevant to the Field of Use.

10.2         Representations and Warranties by
Licensee. Licensee represents and warrants that:

(a)           the execution, delivery and
performance of this Agreement by Licensee (i) are within its corporate
powers, and (ii) have been duly authorized by all necessary corporate
action on Licensee’s part; and

(b)           the execution, delivery and
performance of this Agreement by Licensee do not and will not contravene,
conflict, constitute or result in a default under or breach of, and are not and
will not be inconsistent with, any judgment, decree or order, or any term,
condition or provision of any contract, agreement or other undertaking
applicable to Licensee.

10.3         Disclaimer. EXCEPT AS OTHERWISE
SET FORTH IN SECTION 10 OF THIS AGREEMENT, NEITHER TXG NOR LICENSEE, NOR
THEIR DIRECTORS, OFFICERS, EMPLOYEES, AND AFFILIATES, MAKE ANY REPRESENTATIONS
OR EXTEND ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT
NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
AND VALIDITY OF THE PATENT RIGHTS CLAIMS, ISSUED OR PENDING.

ARTICLE 11 - MISCELLANEOUS PROVISIONS

11.1         Assignment. This Agreement, and
the rights and obligations hereunder, may not be assigned or transferred, in
whole or in part, voluntarily, by operation of law or otherwise, by either
party without the prior written approval of the other party; provided that, TXG
hereby provides such prior written approval in advance to any such assignment
or transfer by Licensee in the following circumstances:  (a) to an Affiliate of Licensee, (b) to
any entity established to serve as a holding company for cloning patent rights,
or (c) to any third party that acquires all or substantially all of the
assets of Licensee or its animal cloning business, or that is the surviving
person in a merger or consolidation with Licensee, provided that such assignee
agrees to accept and assume any and all obligations and liabilities of the
assignee arising thereafter under this Agreement. Any assignment or transfer in
violation of this Section 11.1 shall be null and void.

 21
 

 

 

11.2         Compliance with Law. Licensee
shall comply in all material respects with all local, state, federal and
international laws and regulations relating to the development, manufacture,
use, provision, and sale of Licensed Products and Licensed Services. Without
limiting the generality of the foregoing, Licensee agrees to comply with the
following:

(a)           Licensee shall obtain all necessary
approvals from the US Department of Agriculture (USDA) and any similar
governmental authorities of any foreign jurisdiction in the Territory in which
Licensee intends to make, use, or sell Licensed Products or to perform Licensed
Services.

(b)           Licensee shall comply in all material
respects with any and all material applicable local, state, federal and
international laws and regulations relating to the Licensed Products and
Licensed Services, and the Patent Rights, in the Territory, including without
limitation all material export or import regulations and rules now in
effect or as may be issued from time to time by any governmental authority
which has jurisdiction relating to the export of Licensed Products or Licensed
Services and any technology relating thereto.

(c)           To the extent that any invention
claimed in the Patent Rights has been partially funded by the United States
Government, and only to the extent required by applicable laws and regulations,
Licensee agrees that any Licensed Products used or sold in the United States
will be manufactured substantially in the United States or its territories,
unless a waiver is obtained in accordance with applicable law. Current law
provides that if domestic manufacture is not commercially feasible under the
circumstances, a waiver of this requirement may be sought from the relevant
federal agency; upon Licensee’s request, TXG and the University shall cooperate
in all respects with Licensee in seeking such a waiver and TXG shall use its
best efforts to obtain the University’s cooperation.

11.3         Encumbrances. TXG shall not
create or incur or cause to be incurred or to exist any lien, encumbrance,
pledge, charge, restriction or other security interest of any kind directly
upon the Patent Rights without the prior written consent of Licensee.

11.4         Publicity. Neither party shall
originate or issue any publicity, news release or other public announcement (“Announcements”),
written or oral, relating to this Agreement or the existence of an arrangement
between the parties, without the prior written approval of the other party,
which approval shall not be unreasonably withheld, except as otherwise required
by law. Any references to the University in such Announcements shall be subject
to section 10.6 of the Brandeis License. The foregoing and Section 8.1
notwithstanding, TXG and Licensee shall have the right to make such
Announcements without the consent of the other party in any prospectus,
offering memorandum, or other document or filing required by applicable
securities laws or other applicable law or regulation, provided that such party
shall have given the other party at least ten (10) days prior written
notice of the proposed text for the purpose of giving the other party the
opportunity to comment on such text.

11.5         No Implied Licenses. No implied
licenses are granted pursuant to the terms of

 22
 

 

this Agreement.

11.6         No Agency. Nothing herein shall
be deemed to constitute either party as the agent or representative of the
party, or both parties as joint venturers or partners for any purpose. Each
party shall be an independent contractor, not an employee or partner of the
other party, and the manner in which each party renders its services under this
Agreement shall be within its sole discretion. Neither party shall be
responsible for the acts or omissions of the other party, nor shall either
party have authority to speak for, represent or obligate the other party in any
way without prior written authority from the other party.

11.7         Choice of Law; Submission to
Jurisdiction. This Agreement shall be construed, governed, interpreted and applied
in accordance with the laws of the Commonwealth of Massachusetts, U.S.A.
without regard to principles of conflicts of law thereof, except that questions
affecting the construction and effect of any patent included in the Patent
Rights shall be determined by the law of the country in which the patent was
granted.

11.8         Dispute Resolution.

(a)           Informal Resolution. The
parties agree to follow the procedures set forth in this Section 11.8 to
resolve any dispute, controversy or claim arising out of or relating to this
Agreement or the breach, termination or invalidity thereof (each, a “Dispute”).
Prior to engaging in any formal dispute resolution with respect to any Dispute,
the president or CEO of each party, or their respective designees, shall, if
either party provides written notice to the other party requesting resolution
of such Dispute (“Resolution Notice”), attempt to resolve such Dispute through
good faith negotiations. If any Dispute cannot be settled by agreement of the
parties pursuant to the preceding sentence within sixty (60) days of receipt of
the Resolution Notice (“Negotiation Period”), then either party may, by written
notice to the other requesting resolution by arbitration (“Arbitration Notice”),
invoke the dispute resolution provisions of Section 11.8(b).

(b)           Arbitration. In the event that
the dispute resolution provisions of Section 11.8(a) do not result in
a mutually agreed resolution of the Dispute, then the parties agree to submit
to confidential arbitration, which shall be commenced as soon as practicable
following the receipt by one party of the other party’s Arbitration Notice. Any
arbitration proceeding relating to the Agreement shall be presided over by a
single independent arbitrator experienced in the biopharmaceutical industry and
having relevant and significant experience relating to the subject matter of
the dispute, who shall be agreed to by the parties, provided, that,
if the parties are unable to agree on an arbitrator, then each party shall name
one (1) such arbitrator (whose sole role shall be to select an
impartial arbitrator) and the two (2) arbitrators will together
designate an impartial, independent arbitrator experienced in the
biopharmaceutical industry to preside over the arbitration proceeding. Each of
the parties agrees to use its reasonable best efforts to cause the arbitrator
to be selected by the thirtieth (30th) day after the receipt of the
Arbitration Notice. The arbitration shall be held in the City of Boston,
Massachusetts in accordance with the rules of the American Arbitration
Association then in force (as modified herein), and shall be held on an
expedited basis and in confidence. The arbitrator shall not have the power to
award exemplary or punitive damages. Each party agrees that the final
determination/decision of the arbitrator presiding over the proceeding shall be
binding on it.

 23
 

 

 

Notwithstanding the
foregoing or anything in this Section 11.8, the parties may apply to any
court of competent jurisdiction for preliminary or interim equitable relief, including such
relief for compelling the commencement of the dispute resolution provisions in
accordance with Section 11.8, without breach of this arbitration
provision. The prevailing party in any dispute related hereto, whether in a
court of law or in arbitration, shall have its reasonable costs and expenses
related to such dispute reimbursed by the non-prevailing party; provided, however, that if the arbitrator rules in
favor of one party on some issues and the other party on other issues, the
arbitrator shall allocate such costs and expenses between the parties in a
manner that bears a reasonable relationship to the outcome of the arbitration. The
rulings of the arbitrator and the allocation of fees and expenses shall be
binding, non-reviewable, and non-appealable, except as permitted by law, and
may be entered as a final judgment in any court having jurisdiction.

11.9         Binding Effect. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns.

11.10       Entire Agreement. The parties
hereto acknowledge that this Agreement sets forth the entire Agreement and
understanding of the parties hereto as to the subject matter hereof.

11.11       Severability. The provisions of
this Agreement are severable, and in the event that any provisions of this
Agreement shall be determined to be invalid or unenforceable under any
controlling body of the law, such invalidity or unenforceability shall not in
any way affect the validity or enforceability of the remaining provisions
hereof.

11.12       Amendment and Waiver. This
Agreement may be amended, supplemented, or otherwise modified only by means of
a written instrument signed by both parties. The failure of either party to
assert a right hereunder or to insist upon compliance with any term or
condition of this Agreement shall not constitute a waiver of that right or
excuse a similar subsequent failure to perform any such term or condition by
the other party.

11.13       Effect of Bankruptcy Filing. The
parties agree and acknowledge that this Agreement is a contract under which TXG
is a licensor to Licensee of rights with respect to intellectual property
(including without limitation, “intellectual property” within the meaning of Section 101
of the Bankruptcy Code of the United States (“Bankruptcy Code”)). All rights,
licenses, immunities and other rights granted under or pursuant to or otherwise
described in this Agreement are, and shall be deemed to be, for purposes of Section 365(n) of
the Bankruptcy Code, licenses of rights to “intellectual property” within the
meaning of Section 101 of the Bankruptcy Code. The parties agree that
Licensee and its sublicensees, as licensees of such rights under this
Agreement, shall retain and may fully exercise all of their rights and elections
under the Bankruptcy Code. The parties further agree that, in the event of the
commencement of a bankruptcy proceeding by or against TXG including under the
Bankruptcy Code, Licensee shall be entitled to a complete duplicate of (or
complete access to, as appropriate) any such intellectual property and all
embodiments of such intellectual property, including without limitation copies
of invention disclosures and filings and communications relating to the Patent
Rights, and the same, if not already in Licensee’s possession, shall be
promptly delivered to Licensee upon any such commencement of a bankruptcy
proceeding upon written request by Licensee.

 24
 

 

 

11.14       Immunity. The rights and license
granted to Licensee pursuant to Section 2.1 shall inure to the benefit of,
and include an immunity from suit against, any direct or indirect distributor,
reseller, customer or other user of Licensed Products and Licensed Services
sold by or for Licensee, any Affiliate and/or any sublicense of Licensee under
this Agreement, whether such Licensed Products or Licensed Services (or results
thereof) are used, imported, sold, offered for sale, leased or otherwise
disposed of alone or in combination with other products or services, although
such immunity will not extend to any such combinations.

[Remainder
of page intentionally left blank.]

 25
 

 

 

IN
WITNESS WHEREOF, the parties have duly executed this Agreement the day and year
first set forth above.

	
  ADVANCED CELL TECHNOLOGY,
  INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/ James G. Stewart

  	
   

  
	
  Name: James G.
  Stewart

  	
   

  
	
  Title: CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  TRANXENOGEN,
  INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/ Paul A. DiTullis

  	
   

  
	
  Name: Paul A.
  DiTullis

  	
   

  
	
  Title: President
  and CEO

  	
   

  

 

CONSENT
AND AGREEMENT

For value
received, Brandeis University hereby (a) consents to the sublicense by
TranXenoGen to Advanced Cell, Inc. of the Brandeis Patent Rights under
this Agreement, and (b) agrees to be bound by the applicable provisions
hereof.

BRANDEIS UNIVERSITY

	
  By:

  	
   /s/ Larry R. Steranka

  	
   

  	
   

  
	
  Name: Larry R.
  Steranka

  	
   

  	
   

  
	
  Title: Executive
  Director, OTL

  	
   

  	
   

  

 

 26

 

EXHIBIT A

Patent
Rights

U.S.
Patents

5,480,772

5,651,992

5,773,217

6,245,567

6,753,457

6,878,546

U.S.
Patent Applications

10/798,061

10/969,646

Foreign Patent Applications

WO9418344

EP154931

EP0686202

CA2155309

 A-1

 

EXHIBIT B

SUBSCRIPTION
AGREEMENT

This
Subscription Agreement has been executed by the undersigned in connection with
the issuance to the undersigned’s of 163,339 shares of common stock of Advanced
Cell Technology, Inc., a Delaware corporation (the “Company”) (“Common
Stock”) pursuant to that certain Exclusive License Agreement dated March 29,
2006 by and between the Company and TranXenoGen, Inc. (the “License
Agreement”). The undersigned (sometimes herein referred to as the “Investor”)
hereby represents and warrants to, and agrees with, the Company as follows:

1.             Agreement
to Subscribe; Payment; Subscription Irrevocable.

The undersigned
hereby agrees, subject to and in accordance with the terms, provisions and
conditions set forth herein, to acquire an aggregate of
[         ] shares (the “Shares”)
of Common Stock pursuant to the terms and conditions of the License Agreement.

2.             Qualifications
of Investor.

(a)           The undersigned hereby represents and
warrants to the Company that the Investor is an “accredited investor” as
defined in Section 501 of Regulation D of the Securities Act of 1933.

(b)           The undersigned further hereby
represents and warrants to the Company that the Investor (1) has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the Company; and (2) can
afford to bear the economic risk of this investment for an indefinite period of
time and has no need for liquidity in this investment.

(c)           The undersigned further hereby
represents and warrants to the Company that the Investor (1) is acquiring
the Shares for his or her own account, for investment, and not with a view to
resale or distribution; and (2) is aware that the right to transfer the
Shares is restricted by the Securities Act of 1933 and applicable state
securities laws, and that there is no market for the Shares.

(d)           The undersigned is an “accredited
investor” as such term is defined in Rule 501 of Regulation D on the basis
of the following facts (please
check at least one):

	
  

  	
  o

  	
  (i)   If the Undersigned is a natural person,
  his/her net worth (jointly with a spouse, if any), including homes, home
  furnishings and automobiles, exceeds $1,000,000 (valuing assets on the basis
  of their current fair market value).

  
	
   

  	
   

  	
   

  
	
   

  	
  o

  	
  (ii)   If the undersigned is a natural person,
  his/her individual income for each of

  

 

 B-1
 

 

 

	
  

  	
   

  	
  the years 2003 and 2004, and his/her anticipated
  individual income for 2005,
  exceeds $200,000

  
	
   

  	
   

  	
   

  
	
   

  	
  o

  	
  (iii)   If the undersigned is a natural person,
  his/her joint income with a spouse for each of the years 2003 and 2004, and
  the undersigned’s anticipated joint income with his/her spouse for 2005,
  exceeds $300,000.

  
	
   

  	
   

  	
   

  
	
   

  	
  o

  	
  (iv)   If the undersigned is a corporation, an
  organization described in Section 501(c)(3) of the Internal Revenue
  Code, a Massachusetts or similar business trust, a partnership or limited
  liability company, it was not formed for the specific purpose of acquiring
  the Shares offered and its total assets exceed $5,000,000.

  
	
   

  	
   

  	
   

  
	
   

  	
  o

  	
  (v)   If the Undersigned is an employee benefit
  plan, within the meaning of the Employee Retirement Income Security Act of
  1974 (“ERISA”), (i) its investment decisions are made by a bank, savings
  and loan association, insurance company or registered investment advisor
  acting as a plan fiduciary, as defined in Section 3(21) of ERISA,
  (ii) its total plan assets exceed $5,000,000, or (iii) if a self-directed
  plan, its investment decisions are made solely by persons that are
  “accredited investors” as described in this Paragraph 3(i).

  
	
   

  	
   

  	
   

  
	
   

  	
  o

  	
  (vi)   If the undersigned is a trust other than
  a trust described in Paragraph 3(i)(iv) above, it has total assets that
  exceed $5,000,000 and was not formed for the specific purpose of acquiring
  the Shares offered, and its purchase was directed by a sophisticated person
  as defined in the Regulations.

  
	
   

  	
   

  	
   

  
	
   

  	
  o

  	
  (vii)   If the undersigned is an entity, each
  equity owner is an “accredited investor” as described in this Paragraph 3(i).

  

 

In furtherance of
the foregoing (and not in limitation thereof), the undersigned has answered the
following questions regarding the undersigned’s net worth and net income and
acknowledges that the Company may rely on such responses.

3.             Access
to Information; Independent Investigation.

(a)           The undersigned, in making the
decision to purchase the Shares subscribed for, has relied upon independent
investigations made by it, and the undersigned has conducted its own due
diligence investigation and  been given
access and the opportunity review all information it deemed relevant to its
investment decision in connection with the commercial transaction of which this
investment is a part, as well as an opportunity to ask questions of, and to
receive answers from, the Company or any person acting on behalf of it
concerning the terms and conditions of this investment. The undersigned and the
undersigned’s advisors, if any, have been furnished with all materials relating
to the business, finances, operations and prospects of the Company and
materials relating to the offer and sale of the Shares that have been
requested. The undersigned and the undersigned’s advisors, if any, have
received complete and satisfactory answers to any such inquiries.

(b)           No Other Representations.
Except as otherwise specifically provided in this Agreement, no representations
have been made to the undersigned or such purchaser representative,

 B-2
 

 

 

if any, concerning the
Shares, the business or prospects of the Company or other matters.

(c)           Adequacy of Investigation. The
undersigned acknowledges that the undersigned is subscribing for the Shares
after what the undersigned deems to be adequate investigation of the business,
finances and prospects of the Company by the undersigned and the undersigned’s
advisors, if any.

(d)           No Governmental Recommendation or
Approval. The undersigned understands that no federal or state agency has
passed on or made any recommendation or endorsement of the Shares.

4.             Investment
Representations.

(a)           Shares Not Registered; Indefinite
Holding. The undersigned has been advised by the Company, and understands, that
the undersigned must bear the economic risk of an investment in the Shares for
an indefinite period of time because the Shares have not been registered under
the Securities Act of 1933, as amended (the “Securities Act”), and the Company
is under no obligation to register the Shares. Therefore, the Shares must be
held by the undersigned unless they are subsequently registered under the
Securities Act or an exemption from such registration is available for the
transfer of the Shares. The undersigned acknowledges that there is no market
presently available on which the Shares may be sold, and that no such market is
expected to develop.

(b)           No Disposition of Shares Without
Securities Law Compliance. The undersigned agrees not to subdivide the
Shares or to offer, sell, pledge, hypothecate or otherwise transfer or dispose
of any of the Shares in the absence of an effective registration statement
under the Securities Act covering such disposition, or an opinion of counsel,
satisfactory to the Company and its counsel, to the effect that registration
under the Securities Act is not required in respect of such transfer or
disposition.

(c)           “Private Offering” Exemption;
Reliance on Representations. The undersigned understands that the offer and
sale of the Shares are not being registered under the Securities Act in
reliance on (i) Securities and Exchange Commission Rule 506 of
Regulation D; and (ii) the “private offering” exemption provided by Section 4(2) of
the Securities Act of 1933 and/or Regulation D promulgated pursuant to the
Securities Act of 1933, and that the Company is basing its reliance on the
exemption in part on the representations, warranties, statements and agreements
contained herein and those of other investors contained in similar subscription
agreements.

The
undersigned further understands that other investors are making their
investment in reliance on the representations, warranties, statements and
agreements contained herein (as the undersigned is making this investment in
reliance on theirs) and the undersigned invites both the Company and other
investors so to rely.

5.             Indemnity.

The
undersigned shall indemnify and hold harmless the Company and any of its
directors, officers, employees, and representatives who is, has been, or
becomes a party or is threatened to be made a party to any threatened, pending,
or contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of or arising from any actual or
alleged

 B-3
 

 

 

misrepresentation or
misstatement of facts or omission to represent or state facts made by the
Investor to the Company, in connection with the sale of the Shares.

6.             Confidentiality.

The
undersigned acknowledges that the information provided by the Company to the
Investor is confidential and non-public and agrees that all such information
shall be kept in confidence and not disclosed to any third party for any
reason; provided, that this obligation shall not apply to any such information
that (i) is part of the public knowledge or literature and readily
accessible at the date hereof; (ii) becomes part of the public knowledge
or literature and readily accessible by the public (except as a result of a
breach of these provisions); or (iii) is received from third parties
(except third parties who disclose such information in violation of any
confidentiality agreements, including without limitation, any subscription
agreement they may have with the Company).

7.             Closing.

The
date of the closing of the sale of the Shares (the “Closing”) shall be the date
hereof.

8.             Governing
Law.

This
Agreement shall be governed by and interpreted in accordance with the laws of
the state of California, without giving effect to its conflicts of laws
principles.

[signature page to follow]

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IN
WITNESS WHEREOF, this Subscription Agreement was duly executed on the 29th day
of March, 2006.

WITNESS:

	
  

  	
  TRANXENOGEN, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Larry R.
  Steranka

  	
   

  	
  By:

  	
  /s/ Paul A. DiTullis

  	
   

  
	
  Larry R. Steranka

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  President and CEO

  	
   

  

 

 B-5
 

 

 

ACCEPTANCE

The
foregoing Subscription Agreement is hereby accepted to the extent of 163,339
shares of common stock of Advanced Cell Technology, Inc., a Delaware
corporation (the “Company”), this 29th day of March, 2006. The subscription
represented by this Agreement will not be deemed accepted by the Company until
and unless signed on its behalf by its duly authorized officer. Upon acceptance
of this subscription by the Company, the Company shall be deemed to have agreed
to perform all of its obligations herein set forth.

	
  

  	
  Advanced Cell
  Technology, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James G. Stewart

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Chief Financial Officer

  

 

 

 B-6

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