Document:

Exhibit 10.1

 

 

Corporate Letter of Offer

“Channell Bushman Group”

16 May 2007

Relationship Management

The banking needs of “Channell
Bushman Group” will be met by a specialist team located at the NAB’s 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 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 NAB’s specialised services including Interest Rate Risk
Management, Trade Solutions, Leasing and Fleet Services and Wealth Creation.

The dedicated team at the
Sydney location is led by:

	
  ·

  	
  Director

  	
  Patrick Ying

  
	
   

  	
  Direct Telephone
  Number

  	
  (02) 9237 9756

  
	
   

  	
  Facsimile Number

  	
  (02) 9237 9752

  
	
   

  	
  Email

  	
  Patrick.Ying@nab.com.au

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ·

  	
  Associate Director

  	
  Graeme 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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Other important members of the team will include:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ·

  	
  Credit Analyst

  	
  Joseph Ritchie

  
	
   

  	
  Direct Telephone
  Number

  	
  (02) 9237 9735

  
	
   

  	
  Facsimile Number

  	
  (02) 9237 9752

  
	
   

  	
  Email

  	
  Joseph.H.Ritchie@nab.com.au

  

 

 

	
  ·

  	
  Business Banking Assistant

  	
  Steven Wu

  
	
   

  	
  Direct Telephone
  Number

  	
  (02) 9237 9253

  
	
   

  	
  Facsimile Number

  	
  (02) 9237 9752

  
	
   

  	
  Email

  	
  Steven.Wu@nab.com.au

  

 

Offer Period

This Letter of Offer  remains available for acceptance until 30th May 2007.

We may withdraw our offer
at any time before it is accepted by each Borrower
if we become aware of anything which, in our opinion, adversely
alters the basis on which we made our offer.

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

	
  Yours sincerely,

  	
   

  
	
  /s/ Graeme
  Johnson

  	
   

  
	
  Graeme
  Johnson

  	
   

  
	
  Associate
  Director

  	
   

  

 

Table of Contents

	
  Part 1

  	
  Details
  of Facilities

  	
  7

  
	
   

  	
   

  	
   

  
	
   

  	
  1

  	
  Facility Summary

  	
  7

  
	
   

  	
  2

  	
  New facilities
  in this Letter of Offer

  	
  9

  
	
   

  	
  3

  	
  Other facilities

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  Part 2

  	
  Security

  	
  18

  
	
   

  	
   

  	
   

  
	
  Part 3

  	
  Establishment
  Fees and Charges

  	
  19

  
	
   

  	
   

  	
   

  
	
  Part 4

  	
  Conditions
  Precedent and other information

  	
  20

  
	
   

  	
   

  	
   

  
	
  Part 5

  	
  Covenants
  and Undertakings

  	
  22

  
	
   

  	
   

  	
   

  
	
  Part 6

  	
  Property
  Conditions

  	
  26

  
	
   

  	
   

  	
   

  
	
  Part 7

  	
  General
  Conditions

  	
  27

  
	
   

  	
   

  	
   

  
	
   

  	
  1

  	
  Conditions
  precedent

  	
  27

  
	
   

  	
  2

  	
  Review

  	
  28

  
	
   

  	
   

  	
  2.1

  	
  Scope and
  frequency

  	
  28

  
	
   

  	
   

  	
  2.2

  	
  Assistance

  	
  28

  
	
   

  	
  3

  	
  Payment
  obligations

  	
  28

  
	
   

  	
   

  	
  3.1

  	
  General
  repayment obligations

  	
  28

  
	
   

  	
   

  	
  3.2

  	
  Fees charges and
  other premiums

  	
  28

  
	
   

  	
   

  	
  3.3

  	
  Calculation and
  payment of interest

  	
  29

  
	
   

  	
   

  	
  3.4

  	
  Setting of
  interest rates

  	
  29

  
	
   

  	
   

  	
  3.5

  	
  Pricing Review

  	
  29

  
	
   

  	
   

  	
  3.6

  	
  Accounting for
  transactions

  	
  29

  
	
   

  	
   

  	
  3.7

  	
  Payment in
  Australian Dollars

  	
  30

  
	
   

  	
   

  	
  3.8

  	
  Payment in
  cleared funds

  	
  30

  
	
   

  	
   

  	
  3.9

  	
  Payments due on
  non-banking days

  	
  30

  
	
   

  	
   

  	
  3.10

  	
  No set off or
  deduction

  	
  30

  
	
   

  	
  4

  	
  Economic costs

  	
  30

  
	
   

  	
   

  	
  4.1

  	
  Payment of
  economic costs

  	
  30

  
	
   

  	
   

  	
  4.2

  	
  Economic events

  	
  31

  
	
   

  	
   

  	
  4.3

  	
  Calculation of
  economic costs

  	
  31

  
	
   

  	
  5

  	
  Representations
  and warranties

  	
  31

  
	
   

  	
   

  	
  5.1

  	
  Representations
  and Warranties

  	
  31

  
	
   

  	
   

  	
  5.2

  	
  Additional
  representations and warranties from a trustee

  	
  33

  
	
   

  	
  6

  	
  General
  undertakings and covenants

  	
  33

  
	
   

  	
   

  	
  6.1

  	
  Negative Pledge

  	
  33

  
	
   

  	
   

  	
  6.2

  	
  General
  covenants

  	
  34

  
	
   

  	
   

  	
  6.3

  	
  Additional
  covenants from a trustee

  	
  34

  
	
   

  	
   

  	
  6.4

  	
  Change of
  Shareholding

  	
  34

  
	
   

  	
   

  	
  6.5

  	
  Partnerships

  	
  35

  
	
   

  	
   

  	
  6.6

  	
  Co-operation

  	
  35

  
	
   

  	
   

  	
  6.7

  	
  Class Order

  	
  35

  
	
   

  	
   

  	
  6.8

  	
  Changes to
  Accounting Standards

  	
  36

  
	
   

  	
   

  	
  6.9

  	
  Appointment of
  Consultants

  	
  36

  
	
   

  	
  7

  	
  Default

  	
  36

  
	
   

  	
   

  	
  7.1

  	
  General Events
  of Default

  	
  36

  
	
   

  	
   

  	
  7.2

  	
  Additional
  Events of Default

  	
  38

  
	
   

  	
   

  	
  7.3

  	
  Consequences of
  default

  	
  38

  
	
   

  	
   

  	
  7.4

  	
  Default Interest

  	
  39

  
	
   

  	
   

  	
  7.5

  	
  Capitalising
  default interest

  	
  39

  
	
   

  	
   

  	
  7.6

  	
  Fees

  	
  39

  
	
   

  	
   

  	
  7.7

  	
  Additional
  review rights

  	
  39

  
	
   

  	
   

  	
  7.8

  	
  Obligations not
  affected

  	
  39

  
	
   

  	
  8

  	
  Change of
  Circumstances

  	
  39

  
	
   

  	
   

  	
  8.1

  	
  Illegality

  	
  39

  
	
   

  	
   

  	
  8.2

  	
  Increased Costs

  	
  40

  
	
   

  	
  9

  	
  Liability for
  regulatory events

  	
  40

  

 

 5
 

 

	
  

  	
  10

  	
  Confidentiality

  	
  41

  
	
   

  	
  11

  	
  Setting off
  money

  	
  41

  
	
   

  	
  12

  	
  Holding Over

  	
  42

  
	
   

  	
  13

  	
  Telephone
  recording

  	
  42

  
	
   

  	
  14

  	
  Code of Banking
  Practice

  	
  42

  
	
   

  	
  15

  	
  Notices, other
  communications and service of documents

  	
  42

  
	
   

  	
   

  	
  15.1

  	
  Service

  	
  42

  
	
   

  	
   

  	
  15.2

  	
  Effective on
  receipt

  	
  43

  
	
   

  	
   

  	
  15.3

  	
  Validity

  	
  43

  
	
   

  	
   

  	
  15.4

  	
  Other methods

  	
  43

  
	
   

  	
  16

  	
  General

  	
  43

  
	
   

  	
   

  	
  16.1

  	
  Statements of
  Account

  	
  43

  
	
   

  	
   

  	
  16.2

  	
  The Bank’s
  certificates

  	
  43

  
	
   

  	
   

  	
  16.3

  	
  How the Bank may exercise its rights

  	
  43

  
	
   

  	
   

  	
  16.4

  	
  Preservation of
  the Borrowers’ liability

  	
  44

  
	
   

  	
   

  	
  16.5

  	
  Consents and
  Conditions

  	
  44

  
	
   

  	
   

  	
  16.6

  	
  Variation

  	
  44

  
	
   

  	
   

  	
  16.7

  	
  GST

  	
  44

  
	
   

  	
   

  	
  16.8

  	
  Valuations are
  for the Bank benefit

  	
  45

  
	
   

  	
   

  	
  16.9

  	
  Time for
  repayment

  	
  45

  
	
   

  	
   

  	
  16.10

  	
  Indemnities

  	
  45

  
	
   

  	
   

  	
  16.11

  	
  Severability

  	
  45

  
	
   

  	
  17

  	
  Assignment

  	
  45

  
	
   

  	
  18

  	
  Governing Law
  and Jurisdiction

  	
  45

  
	
   

  	
  19

  	
  Definitions and
  interpretation

  	
  45

  
	
   

  	
  20

  	
  Inconsistency

  	
  54

  
	
   

  	
   

  	
  20.1

  	
  Precedence of
  this clause

  	
  54

  
	
   

  	
   

  	
  20.2

  	
  Transaction
  documents

  	
  54

  
	
   

  	
   

  	
  20.3

  	
  Facilities

  	
  54

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Part 8

  	
  Bill
  Facility Specific Conditions

  	
  55

  
	
   

  	
   

  	
   

  
	
  Part 9

  	
  Bank
  Guarantee Facility Specific Conditions

  	
  64

  

 

 6
 

Part 1                                          Details of Facilities

1          Facility Summary

The Bank offers 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
part of a Multi Option Facility.

FACILITY
SUMMARY

	
  Borrower:

  	
  Channell Bushmans Pty Ltd

  
	
  ABN:

  	
  99 109 821 614

  
	
   

  	
   

  
	
  Facility Type:

  	
  Bill - Floating/Fixed/Capped/RangeRate

  
	
  Facility Limit:

  	
  $4,400,000.00

  
	
   

  	
   

  
	
  Facility Type:

  	
  Bill - Floating/Fixed/Capped/RangeRate

  
	
  Facility Limit:

  	
  $448,000.00

  
	
   

  	
   

  
	
  Facility Type:

  	
  Bill - Floating/Fixed/Capped/RangeRate

  
	
  Facility Limit:

  	
  $2,245,500.00

  
	
   

  	
   

  
	
  Borrower Total:

  	
  $7,093,500.00

  
	
   

  	
   

  
	
  Borrower:

  	
  Bushmans Group Pty Ltd

  
	
  ABN:

  	
  90 090 744 022

  
	
   

  	
   

  
	
  Facility Type:

  	
  Bill - Floating/Fixed/Capped/RangeRate

  
	
  Facility Limit:

  	
  $3,200,000.00

  
	
   

  	
   

  
	
  Facility Type:

  	
  Master Asset Finance Facility

  
	
  Facility Limit:

  	
  $1,000,000.00

  
	
   

  	
   

  
	
  Facility Type:

  	
  Business Credit Cards

  
	
  Facility Limit:

  	
  $300,000.00

  
	
   

  	
   

  
	
  Facility Type:

  	
  Bank Guarantee

  
	
  Facility Limit:

  	
  $50,000.00

  
	
   

  	
   

  
	
  Facility Type:

  	
  Documentary Letter of Credit

  
	
  Facility Limit:

  	
  $50,000.00

  

 

 7
 

 

	
  Facility Type:

  	
  Transaction Negotiation Authority

  
	
  Facility Limit:

  	
  $275,000.00

  
	
   

  	
   

  
	
   

  	
   

  
	
  Borrower Total:

  	
  $4,875,000.00

  
	
   

  	
   

  
	
   

  	
   

  
	
  Borrower:

  	
  Channell Pty Limited

  
	
  ABN:

  	
  29 002 735 622

  
	
   

  	
   

  
	
  Facility Type:

  	
  Bank Guarantee

  
	
  Facility Limit:

  	
  $375,000.00

  
	
   

  	
   

  
	
  Facility Type:

  	
  Master Asset Finance Facility

  
	
  Facility Limit:

  	
  $250,000.00

  
	
   

  	
   

  
	
  Facility Type:

  	
  Business Credit Card

  
	
  Facility Limit:

  	
  $100,000.00

  
	
   

  	
   

  
	
  Facility Type:

  	
  Transaction Negotiation Authority

  
	
  Facility Limit:

  	
  $200,000.00

  
	
   

  	
   

  
	
  Borrower Total:

  	
  $925,000.00

  
	
   

  	
   

  
	
  Group Total:

  	
  $12,893,500.00 (Australian dollar facilities
  only)

  

 

This Facility Summary is
provided for information purposes only and does not form part of, or vary, the
terms of any of the facilities referred
to in it.

 8
 

2          New facilities in this
Letter of Offer

New facilities are detailed below.

Borrower: 
Channell Bushman Pty Limited

Bill
Acceptance/Discount Facility — Floating Rate 

	
  Purpose/Utilisation:

  	
  Acquisition Finance

  
	
   

  	
   

  
	
  Facility limit:

  	
  $4,400,000 (four million four 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:

  	
  $400,000 per quarter from 30/06/2007 until expiry

  
	
   

  	
   

  
	
  Drawdown Periods:

  	
  Approximate period between each  drawdown date:

   

  90days

  
	
   

  	
   

  
	
  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 the Bank’s reasonable opinion, the rate becomes inappropriate, the floating rate will be the rate
  reasonably determined by the Bank 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 the Borrower 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 the Bank accepts the bill to the maturity date of the bill,
  payable by the Borrower upon acceptance of each bill.

  
	
   

  	
   

  
	
  Bill Drawdown Fee:

  	
  $150 payable by the Borrower each time the Bank accepts bills
  on a drawdown date.

  
	
   

  	
   

  
	
  Late Presentation Fee:

  	
  Not ascertainable - see the Bill Facility Special
  Conditions

  
	
   

  	
   

  
	
  Default Interest Rate:

  	
  The total of the Bank’s [Base] Indicator Rate, currently 10.60%, plus a
  customer margin of 1.90% plus a default margin of 6.50%.

   

  Currently 19.00% per annum

  
	
   

  	
   

  
	
  Nominated Account: :

  	
  Channell Bushman Pty Limited

   

  082-057 57-189-3025

   

  for the purposes of debiting and crediting amounts
  in relation to this facility under this Letter of Offer.

  
	
   

  	
   

  
	
  Securities:

  	
  All securities
  detailed in Part 2 with the exception of the securities numbered 8, 9 and 10

  
	
   

  	
   

  
	
  Specific Conditions:

  	
  Bill Facility Specific Conditions

   

  The Borrower must nominate, no later than the
  time the Borrower gives to the Bank its initial drawdown
  notice, whether the facility will be a Floating Rate, Fixed Rate,
  Cap Rate or Range Rate.

  

 

 9
 

 

	
  Purpose/Utilisation:

  	
  Fund ‘ Earn Out’ associated with the acquisition

  
	
   

  	
   

  
	
  Facility limit:

  	
  $448,000 (four hundred and forty eight thousand
  dollars)

  
	
   

  	
   

  
	
  Expiry Date:

  	
  31st July 2008

  
	
   

  	
   

  
	
  The Facility is:

  	
  an amortising
  facility

  
	
   

  	
   

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

  	
  $63,000 per quarter

  
	
   

  	
   

  
	
  Drawdown Periods:

  	
  Approximate period between each drawdown date:

   

  90days

  
	
   

  	
   

  
	
  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 the Bank’s reasonable opinion, the rate
  becomes inappropriate, the floating rate
  will be the rate reasonably determined by the Bank 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 the Borrower 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 the Bank accepts the bill to the maturity date of the bill,
  payable by the Borrower upon
  acceptance of each bill.

  
	
   

  	
   

  
	
  Bill Drawdown Fee:

  	
  $150 payable by the Borrower
  each time the Bank accepts
  bills on a drawdown date.

  
	
   

  	
   

  
	
  Late Presentation Fee:

  	
  Not ascertainable - see the Bill Facility Special
  Conditions 

  
	
   

  	
   

  
	
  Default Interest Rate:

  	
  The total of the Bank’s
  [Base] Indicator Rate, currently 10.60%, plus a customer margin of 1.90% plus
  a default margin of 6.50%.

   

  Currently 19.00% per annum

  
	
   

  	
   

  
	
  Nominated Account: :

  	
  Channell Bushman Pty Limited

   

  082-057 57-189-3025

   

  for the purposes of debiting and crediting amounts
  in relation to this facility under
  this Letter of Offer.

  
	
   

  	
   

  
	
  Securities:

  	
  All securities
  detailed in Part 2 with the exception of the securities
  numbered 8, 9 and 10

  
	
   

  	
   

  
	
  Specific Conditions:

  	
  Bill Facility Specific Conditions

   

  The Borrower must
  nominate, no later than the time the Borrower
  gives to the Bank its
  initial drawdown notice,
  whether the facility will be a Floating Rate, Fixed Rate, Cap Rate or Range
  Rate.

  

 

 10
 

 

	
  Purpose/Utilisation:

  	
  Capital Expenditure for the Group

  
	
   

  	
   

  
	
  Facility limit:

  	
  $2,245,500 (two million two hundred and forty five
  thousand five hundred dollars)

  
	
   

  	
   

  
	
  Expiry Date:

  	
  31st July 2008

  
	
   

  	
   

  
	
  The Facility is:

  	
  an amortising
  facility

  
	
   

  	
   

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

  	
  Subject to cash flows, but with the view of
  amortising each drawing over a maximum term of four years.

  
	
   

  	
   

  
	
  Drawdown Periods:

  	
  Approximate period between each drawdown date:

  90days

  
	
   

  	
   

  
	
  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 the Bank’s reasonable opinion, the rate
  becomes inappropriate, the floating rate
  will be the rate reasonably determined by the Bank 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 the Borrower 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 the Bank accepts the bill to the maturity date of the bill,
  payable by the Borrower upon
  acceptance of each bill.

  
	
   

  	
   

  
	
  Bill Drawdown Fee:

  	
  $150 payable by the Borrower
  each time the Bank accepts
  bills on a drawdown date.

  
	
   

  	
   

  
	
  Late Presentation Fee:

  	
  Not ascertainable - see the Bill Facility Special
  Conditions 

  
	
   

  	
   

  
	
  Default Interest Rate:

  	
  The total of the Bank’s
  [Base] Indicator Rate, currently 10.60%, plus a customer margin of 1.90% plus
  a default margin of 6.50%.

   

  Currently 19.00% per annum

  
	
   

  	
   

  
	
  Nominated Account: :

  	
  Channell Bushman Pty Limited

   

  082-057 57-189-3025

   

  for the purposes of debiting and crediting amounts
  in relation to this facility under
  this Letter of Offer.

  
	
   

  	
   

  
	
  Securities:

  	
  All securities
  detailed in Part 2 with the exception of the securities
  numbered 8, 9 and 10

  
	
   

  	
   

  
	
  Specific Conditions:

  	
  Bill Facility Specific Conditions

   

  The Borrower must
  nominate, no later than the time the Borrower
  gives to the Bank its
  initial drawdown notice,
  whether the facility will be a Floating Rate, Fixed Rate, Cap Rate or Range
  Rate.

  

 

 11
 

 

	
  Purpose/Utilisation:

  	
  Working Capital

  
	
   

  	
   

  
	
  Facility limit:

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

  
	
   

  	
   

  
	
  Expiry Date:

  	
  31st July 2007 

  
	
   

  	
   

  
	
  The Facility is:

  	
  an non-amortising
  facility

  
	
   

  	
   

  
	
  Drawdown Periods:

  	
  Approximate period between each drawdown date:

   

  30days

  
	
   

  	
   

  
	
  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 the Bank’s reasonable opinion, the rate
  becomes inappropriate, the floating rate
  will be the rate reasonably determined by the Bank 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 the Borrower 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 the Bank accepts the bill to the maturity date of the bill,
  payable by the Borrower upon
  acceptance of each bill.

  
	
   

  	
   

  
	
  Bill Drawdown Fee:

  	
  $150 payable by the Borrower
  each time the Bank accepts
  bills on a drawdown date.

  
	
   

  	
   

  
	
  Late Presentation Fee:

  	
  Not ascertainable - see the Bill Facility Special
  Conditions 

  
	
   

  	
   

  
	
  Default Interest Rate:

  	
  The total of the Bank’s
  [Base] Indicator Rate, currently 10.60%, plus a customer margin of 1.90% plus
  a default margin of 6.50%.

   

  Currently 19.00% per annum

  
	
   

  	
   

  
	
  Nominated Account: :

  	
  Bushmans Group Pty Limited

   

  082-057 57-132-0868

   

  for the purposes of debiting and crediting amounts
  in relation to this facility under
  this Letter of Offer.

  
	
   

  	
   

  
	
  Securities:

  	
  All securities
  detailed in Part 2 with the exception of the securities
  numbered 7, 9 and 10

  
	
   

  	
   

  
	
  Specific Conditions:

  	
  Bill Facility Specific Conditions

   

  The Borrower must
  nominate, no later than the time the Borrower
  gives to the Bank its
  initial drawdown notice,
  whether the facility will be a Floating Rate, Fixed Rate, Cap Rate or Range
  Rate.

  

 

 12
 

Borrower: Bushmans Group Pty Limited

Bank
Guarantee Facility

	
  Purpose/Utilisation:

  	
  Performance Guarantee

  
	
   

  	
   

  
	
  Facility limit:

  	
  $50,000 (fifty thousand dollars)

  
	
   

  	
   

  
	
  Expiry Date:

  	
  31st July 2007 

  
	
   

  	
   

  
	
  Issuing Fee:

  	
  1.80% of the face value of each bank guarantee payable on issue, subject
  to a minimum fee of $500 for each bank
  guarantee.  

  
	
   

  	
   

  
	
  Half Yearly Fee:

  	
  3.60% of the face value of each bank guarantee per year.

   

  Payable in arrears, on a pro-rata basis, half yearly
  from the issue date and on cancellation of the Bank guarantee.

   

  Minimum (total) fee of $500 for each bank guarantee.

  
	
   

  	
   

  
	
  Securities:

  	
  All securities
  detailed in Part 2 with the exception of the securities
  numbered 1,3,4,5,6,7,8,9 and 10 

  
	
   

  	
   

  
	
  Specific Conditions:

  	
  Bank Guarantee Facility Specific Conditions 

  

 

Borrower: Channell Pty Limited

Bank Guarantee Facility

 

	
  Purpose/Utilisation:

  	
  Performance Guarantee

  
	
   

  	
   

  
	
  Facility limit:

  	
  $375,000 (three hundred and seventy five thousand
  dollars)

  
	
   

  	
   

  
	
  Expiry Date:

  	
  31st July 2007 

  
	
   

  	
   

  
	
  Issuing Fee:

  	
  1.80% of the face value of each bank guarantee payable on issue, subject
  to a minimum fee of $500 for each bank
  guarantee.  

  
	
   

  	
   

  
	
  Half Yearly Fee:

  	
  3.60% of the face value of each bank guarantee per year.

   

  Payable in arrears, on a pro-rata basis, half yearly
  from the issue date and on cancellation of the Bank guarantee.

   

  Minimum (total) fee of $500 for each bank guarantee.

  
	
   

  	
   

  
	
  Securities:

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

  
	
   

  	
   

  
	
  Specific Conditions:

  	
  Bank Guarantee Facility Specific Conditions 

  

 

Borrower: Channell Pty Limited

Transaction Negotiation Authorities
Facility

 

	
  Purpose/Utilisation:

  	
  Automation of Payroll

  
	
   

  	
   

  
	
  Facility limit:

  	
  $200,000 (two hundred thousand dollars)

  
	
   

  	
   

  
	
  Expiry Date:

  	
  31st July 2007 

  
	
   

  	
   

  
	
  Securities: 

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

  
	
   

  	
   

  
	
  Specific Conditions:

  	
  Those contained in original facility documentation.

  

 

 13
 

Borrower: Bushmans Group Pty Limited

Transaction Negotiation Authorities
Facility

 

	
  Purpose/Utilisation:

  	
  Automation of Payroll

  
	
   

  	
   

  
	
  Facility limit:

  	
  $275,000 (two hundred and seventy five thousand
  dollars)

  
	
   

  	
   

  
	
  Expiry Date:

  	
  31st July 2007 

  
	
   

  	
   

  
	
  Securities: 

  	
  All securities
  detailed in Part 2 with the exception of the securities
  numbered 1,3,4,5,6,7,8,9 and 10

  
	
   

  	
   

  
	
  Specific Conditions:

  	
  Those contained in original facility documentation.

  

 

 14
 

3          Other facilities

Any existing facilities
held by a Borrower, and any new
facilities provided to a Borrower
that are not documented in this Letter of Offer, are listed out below.

This Facility Summary is
provided for information purposes only and does not form part of, or vary, the
terms of any of the facilities referred
to in it.

Important:
Variation to certain other facilities

Variation

By signing this Letter of
Offer:

·                                the
terms and conditions of other facilities
listed below are varied to include the Letter
of Offer Terms. The Letter of
Offer Terms will then form part of the terms and conditions of those
other facilities in addition to
the terms and conditions that already apply to those other facilities (‘Existing
Terms’); and

·                                other
than as described above, the terms and conditions of the other facilities listed below are not
affected by this Letter of Offer and remain in full force and effect.

Letter of Offer Terms

The following sections of
this Letter of Offer are the ‘Letter of
Offer Terms’ referred to above:

·                                Establishment Costs — Part 3 (Establishment
Fees and Charges), but only in relation to other
facilities that are shown below as being new facilities (if any).

·                                Conditions Precedent — Part 4 (Conditions
Precedent and other information) and clause 1 of the General Conditions
(Conditions precedent).

·                                Covenants and Undertakings — Part 5
(Covenants and Undertakings) and clause 6 of the General Conditions (General
undertakings and covenants).

·                                Representations and Warranties — clause 5
of the General Conditions (Representations and warranties).

·                                Default — clause 7 of the General
Conditions (Default).

·                                Securities — Part 2 (Securities), except as
set out below.

Definitions

Defined terms used in the
Letter of Offer Terms have the
meanings set out below in relation to each other
facility to which the Letter of
Offer Terms apply:

·                                Agreement  means the separate contract documents
applicable to the other facility as
amended by this Letter of Offer; and

·                                otherwise,
defined terms used in the Letter of Offer
Terms have the meaning given to those terms in the General
Conditions.

Inconsistency

If there is any inconsistency
between the Existing Terms and
the Letter of Offer Terms, to the
extent it is not possible to comply with those inconsistent terms,  the Letter
of Offer Terms prevail.

In there is any
inconsistency between different provisions within the Letter of Offer Terms, to the extent it is
not possible to comply with those inconsistent terms,  that inconsistency will be resolved in accordance with
clause 20.3 of the General Conditions.

 15
 

Customer:
Bushmans Group Pty Limited

Master Asset Finance Facility

 

	
  Purpose/Utilisation:

  	
  Capital Expenditure — Motor Vehicles

  
	
   

  	
   

  
	
  Facility limit:

  	
  $1,000,000 (one million dollars)

  
	
   

  	
   

  
	
  Expiry :

  	
  31st July 2007

  
	
   

  	
   

  
	
  Securities:

  	
  All securities
  detailed in Part 2 with the exception of securities
  numbered 1,3,4,5,6,7,8 and 10

  
	
   

  	
   

  
	
  Specific Conditions:

  	
  The Bank may
  decline any request to utilise the facility
  at its discretion.

  

 

Customer:
Channell Pty Limited

Master
Asset Finance Facility

	
  Purpose/Utilisation:

  	
  Capital Expenditure

  
	
   

  	
   

  
	
  Facility limit:

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

  
	
   

  	
   

  
	
  Expiry:

  	
  31st July 2007

  
	
   

  	
   

  
	
  Securities:

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

  
	
   

  	
   

  
	
  Specific Conditions:

  	
  The Bank may
  decline any request to utilise the facility
  at its discretion.

  

 

Customer:
Bushmans Group Pty Limited

Business
Credit Card Facility

	
  Purpose/Utilisation:

  	
  Purchasing

  
	
   

  	
   

  
	
  Facility limit:

  	
  $300,000 (three hundred thousand dollars)

  
	
   

  	
   

  
	
  Expiry:

  	
  31st July 2007

  
	
   

  	
   

  
	
  Securities:

  	
  All securities
  detailed in Part 2 with the exception of securities
  numbered 1,3,4,5,6,7,8,9 and 10

  
	
   

  	
   

  
	
  Specific Conditions:

  	
  The Bank may
  decline any request to utilise the facility
  at its discretion.

  

 

 16
 

Customer:
Channell Pty Limited

Business
Credit Card Facility

	
  Purpose/Utilisation:

  	
  Purchasing

  
	
   

  	
   

  
	
  Facility limit:

  	
  $100,000 (one hundred thousand dollars)

  
	
   

  	
   

  
	
  Expiry:

  	
  31st July 2007

  
	
   

  	
   

  
	
  Securities: 

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

  
	
   

  	
   

  
	
  Specific Conditions:

  	
  The Bank may
  decline any request to utilise the facility
  at its discretion.

  

 

Customer:
Bushmans Group Pty Limited

Documentary
Letter of Credit

	
  Purpose/Utilisation:

  	
  Importation of goods

  
	
   

  	
   

  
	
  Facility limit:

  	
  $50,000 (fifty thousand dollars)

  
	
   

  	
   

  
	
  Expiry:

  	
  31st July 2007

  
	
   

  	
   

  
	
  Securities:

  	
  All securities
  detailed in Part 2 with the exception of securities
  numbered 1,3,4,5,6,7,8,9 and 10

  
	
   

  	
   

  
	
  Specific Conditions:

  	
  The Bank may
  decline any request to utilise the facility
  at its discretion.

  

 

 17
 

Part 2                                          Security

Unless the Bank specifies in writing to the contrary,
the securities listed below,
together with any additional or replacement securities
provided  by a Borrower or a security provider, secure all facilities.

Each Borrower must provide, and must ensure
that each security provider
provides, all the following securities
in a form and substance satisfactory to the Bank
(if the Borrower or
the security provider has not
already done so).

The grant of any new securities detailed below does not
prejudice or waive the Bank’s
right to rely upon, and enforce, earlier securities,
unless otherwise specified.

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
$8,850,000.00 and other liabilities given by:-    Bushmans Group Pty Limited, Channell Pty
Limited, Bushmans Engineering Pty Limited, Polyrib Tanks Pty Limited and
Bushman Tanks Pty Limited

8. In support of Bushmans
Group Pty Limited for $3,200,000.00 and other liabilities given by:- Channell
Bushmans Pty Limited, Channell Pty Limited, Bushmans Engineering Pty Limited,
Polyrib Tanks Pty Limited and 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

 18

Part 3                                          Establishment Fees and
Charges

The Borrower 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 the Banks’
internal legal department, external
solicitors and consultants will be borne by the Borrower. (or if there is more than one Borrower, jointly and severally by all Borrowers).

These fees and charges
are in addition to any fees set out in the Details, the Specific Conditions,
and in A Guide to Fees and Charges
as amended from time to time.

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

 19
 

Part 4                                          Conditions Precedent and
other information

1                 General

In addition to the conditions precedent in clause 1 (Conditions
precedent) of the General Conditions and any other conditions precedent that
may be set out in the Specific Conditions for a facility or the Property Conditions (if any), the Bank does not need to provide any financial accommodation under any facility unless the Bank has received the following documents,
satisfactory to it:

Authorisations

A certified copy of an extract of the resolutions of directors of each Borrower resolving:

to approve the terms of
this Letter of Offer, any other documents that include the terms of any facility and each security to which it is a party,

that the entry into, and
performance of its obligations under, this Letter of Offer, any other documents
that include the terms of any facility and
each security to which it is a
party is in its best interests and for its benefit;

to authorise the Borrower to enter into, sign, deliver and
perform this Letter of Offer, any other documents that include the terms of any
facility and each security to which it is a party;

to appoint the authorised
representative(s) of the Borrower;

authorise either (where
the Borrower is a company), two
directors or a director and a secretary or (if the Borrower is not a company) a person or persons named or
identified therein to execute and deliver this Letter of Offer, any other
documents that include the terms of any facility
and each security to
which it is a party.

A certified copy of an extract of the resolutions of directors of each security provider resolving:

to approve the terms of
this Letter of Offer, any other documents that include the terms of any facility and each security to which it is a party,

that the entry into, and
performance of its obligations under, each security
to which it is a party is in its best interests and for its benefit;

to authorise the security provider to enter into, sign,
deliver and perform each security to
which it is a party;

to appoint the authorised
representative(s) of the security provider;

 20
 

authorise either (where
the security provider is a
company), two directors or a director and a secretary or (if the security provider is not a company) a
person or persons named or identified therein to execute and deliver each security to which it is a party.

A certified specimen signature of each authorised representative of
each Borrower and each security provider.

Should further deterioration occur the Bank
will seek from Channell Commercial Corporation Incorporated either
A) Corporate Guarantee to support borrowings or B) Provide additional paid up
capital support to cover trading losses

 21
 

Part 5                                          Covenants and Undertakings

Additional
Covenants and Undertakings

Each Borrower undertakes to comply with the
following covenants and undertakings at all times.

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

Specific Undertakings

Extension of facilities until the 31st July 2007 has been granted on the basis that:

·                  The
bank being provided with evidence of unconditional refinance approval and/or
evidence of equity raising by 31st July 2007, the Bank will agree to a further 30
day extension to 30th August 2007 to enable settlement to be
concluded.

·                  The
initial 90 day extension will attract an extension fee of $24,596 being 3% p.a.
(pro rata) of the expired (funded) lines. The fee will be payable in advance
and on acceptance of the Letter of Offer.

·                  An
additional 3% will be payable in advance if the Group requires the additional
30 day extension.

·                  These
fees is/are not refundable in the event of early settlement.

Reporting
Covenants

Each Borrower undertakes 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.

Interims Accounts (Including
Cashflow)

Within 30 days of the close of each month, a copy of the Borrower’s monthly management accounts
including balance sheet, profit & loss account and cashflow statement for
Channell Bushman Pty Ltd (consolidated) and Channell Pty Ltd.

 22
 

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 the Borrower’s 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 month, a copy of the Borrowers monthly 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 and 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.

Definitions

For the purposes of these
Covenants and Undertakings:

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

current ratio  means Current Assets divided by Current
Liabilities.

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

finance charges
means operating lease rental expense.

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.

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).

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

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

 23
 

net property income  means, in respect of the relevant period:

(i)                                     the
aggregate income actually received by the Borrower
during that relevant period from any valid and binding lease or agreement
to lease, licence or other agreement entered into by the Borrower;

(ii)                                  if
approved by the Bank, any other
income actually received from the ownership or use of the assets that relate to
the project received by the Borrower during that relevant period; and

(iii)                               outgoing recoveries received by the Borrower during that relevant period,

less

(iv)                              the
aggregate amount of outgoings
incurred or paid by the Borrower during
that relevant period

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 the Bank at the Bank’s discretion.

outgoing recoveries
means amounts that the Borrower
actually recovers or is reimbursed for under any lease or agreement for
lease in relation to outgoings
incurred or paid by the Borrower.

outgoings
means in relation to so much of the project which is the subject of a lease or agreement
to lease:

(i)                           municipal
rates;

(ii)                        water
& sewerage rates;

(iii)                     land tax;

(iv)                    all insurance
expenses;

(v)                       electricity;

(vi)                    common area
cleaning;

(vii)                 property/centre
management including salaries and all office administration expenses;

(viii)              advertising &
promotion costs;

(ix)                      air
conditioning & ventilation maintenance;

(x)                         building
cleaning & maintenance;

(xi)                      lift &
escalator operation & maintenance;

(xii)                   general repairs
& maintenance;

(xiii)                fire protection
expenses;

(xiv)               public address
expenses;

(xv)                  gas & oil
expenses;

(xvi)               pest control;

(xvii)            security;

(xviii)         building management
system expenses;

(xix)                 energy management
systems;

(xx)                    sewage
disposal;

(xxi)                 telephones;

(xxii)              gardening/landscaping;

(xxiii)           signage expenses;

 24
 

(xxiv)          lease commissions; and

(xxv)             other sundry expenses
incurred in relation to ownership of the funded property.

presales/debt cover  ratio
means the ratio of acceptable presales (as advised by the Bank), less GST and all selling and legal
costs, to the facility limit (or
total facility limits) for the
relevant facility or facilities.

property finance
interest cover ratio means the ratio of net property income received during the
testing period to the aggregate amount of interest payable during the same testing
period.

property finance
loan to value ratio  means the ratio of debt outstanding
divided by the current market value as reported in the most recent valuation,
expressed as a percentage.

tangible net worth
means total tangible assets minus
total liabilities.

total tangible
assets  means all assets other than intangible assets.

 25
 

Part 6                                          Property Conditions

Not Applicable.

 26
 

Part 7                                          General Conditions

1                               Conditions precedent

(a)                        The Bank does not need to provide the initial
utilisation of any financial accommodation under
a facility unless all of the
following conditions precedent are met to the Bank’s
satisfaction:

(i)                                     the
Bank has received every valuation
the Bank requires;

(ii)                                  the
Bank has received originals of
each transaction document,
related acknowledgment or acceptance and title documents, duly executed by all
parties to them where relevant and where applicable:

(i)                                         in
registrable form, together with all executed documents necessary to register
them in each relevant jurisdiction; and

(ii)                                      having
had all taxes paid on it or, if
not already paid, sufficient same day funds to enable the payment of any taxes chargeable on it, together with all
executed documents necessary to effect payment of those taxes;

(iii)                               in
respect of all insurance policies that the Bank
requires, the Bank has
received evidence that each insurance policy:

(i)                                         has
been obtained, remains current, and the Bank’s
interest is noted; and

(ii)                                      is
with an insurer, for an amount, and otherwise on terms acceptable to the Bank;

(iv)                              all
conditions precedent set out in Part 4 of this Letter of Offer; and

(v)                                 evidence
that each security remains
enforceable, free from all prior security
interests and third party rights and interests.

(b)                       In addition
to paragraph (a), the Bank does
not need to provide any financial
accommodation under a facility
if:

(i)                                     the
Borrower’s request for the financial accommodation is not made in
accordance with any requirements set out in this Agreement;

(ii)                                  the
amount of financial accommodation
requested, if provided, would result in the facility
limit (or the adjusted facility
limit in relation to a bank
guarantee facility or a facility
pursuant to which a letter of credit
is or will be issued) being exceeded;

(iii)                               at
the time of the Borrower’s
request for the financial accommodation,  something has happened which, in the Bank’s reasonable opinion  has led, or could lead, to a material
adverse change in the financial circumstances of any of the Borrowers or the security providers;

(iv)                              the
results of any of the Bank’s inquiries
or searches are not to the Bank’s satisfaction;

(v)                                 the
Bank is not satisfied that each
representation and warranty by each Borrower
and security provider in the transaction documents are true and not
misleading as at the date of the utilisation of the financial accommodation with reference to the facts and
circumstances then existing;

(vi)                              an event of default or a potential  event
of default exists at the date of the relevant drawdown notice or the date of drawing or will result from utilisation of
the facility; or

(vii)                           any
other conditions the Bank
requires as a pre-requisite on making facilities,
or the particular facility,
available are not, or have not been, complied with.

 27
 

2                               Review

2.1                     Scope and frequency

The Bank may
review each Borrower’s compliance
with this Agreement,  each security
provider’s compliance with the security
granted by it and the financial position of any of the Borrowers or security providers:

(a)                                            at
least annually; or

(b)                                           if
the Bank has a reasonable opinion
that something has happened which has led, or could lead, to the occurrence of
a potential event of default or event of default.

2.2                     Assistance

Each Borrower must
provide, and must procure that each security
provider provides, the Bank with
all information, documents, consents and assistance the Bank requires in connection with a review,
within any time period the Bank specifies,
including by:

(a)                        providing
financial information (such as accountant’s reports, tax returns, balance
sheets, profit and loss statements, business forecasts and cash flow
projections) and other requested information and documentation (such as
evidence of currency of insurances); and

(b)                       ensuring
that any valuer the Bank nominates
is granted access to any property or assets the subject of any security to enable them to conduct any
valuation of the property or assets the Bank
requires. Any such valuation will be at the Borrowers’ cost.

3                               Payment obligations

3.1                     General repayment obligations

The Borrower
must pay:

(a)                        any amount
drawn on a facility in excess of
its facility limit immediately
upon the excess occurring; and

(b)                       the facility amount owing on the earlier of
the expiry date (if any) and the
date the facility is cancelled,
terminated or otherwise ends.

3.2                     Fees charges and other premiums

(a)                        All Borrowers are liable, jointly and
severally, to pay to the Bank and
indemnify the Bank for:

(i)                                     all
fees, charges and premiums set out or provided for in this Agreement in accordance with this Agreement (including the Guide to Fees and Charges);

(ii)                                  an
amount equal to any costs or taxes the Bank
reasonably  incurs in connection
with the transaction documents, the
facilities or any transactions
under or in relation to them, including:

(A)                         the
negotiation, review, preparation, execution, delivery, variation, stamping,
registration or discharge of a transaction
document; and

(B)                           arranging,
conducting, administering or processing a transaction, or giving a consent or
approval or waiving any requirement, under any transaction
document or a facility;

(iii)                               an
amount equal to any costs or taxes the Bank
incurs in connection with the Bank
exercising, enforcing or preserving rights, powers or remedies (or considering
or attempting to do so) in connection with any transaction
document, facility or any transactions under or in relation to any
of them; and

(iv)                              any external administrator’s  costs and remuneration.

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

 28
 

3.3                     Calculation and payment of
interest

(a)                        Interest
for each interest period or pricing period accrues and is calculated
daily by applying the daily interest rate to
the balance owing at the end of
that day (unless otherwise stated in the Specific Conditions for a facility).

(b)                       Interest
charges are capitalised, or otherwise due and payable, in accordance with the
Specific Conditions. Where interest charges are debited to the relevant account, they will be deemed to be part of
the balance owing from the date
they are debited.

3.4                     Setting of interest rates

(a)                        If a facility has a variable interest rate or a variable default interest rate, each Borrower acknowledges that:

(i)                                     those
rates include an indicator rate and may include one or more margins;

(ii)                                  the
indicator rates that apply to a facility are
set out in the Details;

(iii)                               the
amount of an indicator rate on any day will be that last published or otherwise
advised by the Bank on www.national.com.au
and/or in the local or national press; and

(iv)                              if
the Details state that a variable
interest rate applies, the
variable interest rate stated in the Details
is the rate applying at or about the date of this Letter of Offer  and is indicative only.

(b)                       During a fixed rate period or pricing period, the relevant interest rate remains fixed. The Specific
Conditions for a facility set out
any applicable rules regarding the quotation and acceptance of fixed rates, and
how fixed rates are set.

3.5                     Pricing Review

(a)                        Other than
pricing changes which occur automatically under this Agreement, on or about each anniversary of this Agreement, or such other dates as are
agreed, the Bank may review the
pricing applicable to a facility and
may, on written notice to the relevant Borrower:

(i)                                     introduce
a new fee, charge or premium or change an existing fee, charge or premium
(including its amount, the way in which it is calculated and when it is
charged); and

(ii)                                  change
the interest rate or yield rate applicable to a facility including by changing or
introducing a margin (including by making the margin positive or negative), or
substituting a different indicator rate for the relevant indicator rate (except
where the rate is a fixed rate).

(b)                       In
addition, unless specifically stated otherwise, the Bank may, at any time, change the pricing applicable to a facility to the extent necessary to
reflect changes to prevailing market conditions or the Bank’s general pricing for facilities of
that type.  Except in relation to
pricing changes which occur automatically under this Agreement, the Bank will
give the Borrower notice of any
such change in writing and/or by way of advertisement in the local or national
press. Where the Bank gives the Borrower notice under this clause by way
of advertisement in the local or national press, the Bank will also endeavour to directly notify the Borrower of the change, however should the
Bank not do so for any reason,
this will not preclude the Bank from
charging the new or adjusted pricing.

3.6                     Accounting for transactions

(a)                        Each Borrower irrevocably authorises the Bank to open such accounts as the Bank requires in connection with a facility and to debit and credit amounts to those accounts in accordance with this Agreement.

(b)                       If the Bank is authorised to debit an amount to a
nominated account, the relevant Borrower authorises the Bank to debit that amount to the nominated account even if it causes the
account to become overdrawn. If a nominated
account has insufficient

 29
 

cleared funds, or if a valid account is not nominated
when the debit is to be made, the relevant Borrower
irrevocably authorises the Bank to
debit that amount to any account
of the Borrower the Bank decides at its discretion.

(c)                        If this Agreement does not specify where an amount
payable may be debited, each Borrower
irrevocably authorises the Bank to
debit that amount to any account
of the Borrower the Bank may decide in its discretion, or to
apply any payment in connection with this Agreement
towards satisfying the Borrower’s
obligations under this Agreement
as the Bank sees fit.

(d)                       Where the Bank debits amounts pursuant to this Agreement to an account (including a nominated
account), opened by:

(i)                                     a
Borrower, then the Borrower must pay the Bank interest (including default interest
if applicable) on any debit balance  in
accordance with the terms of that account;

(ii)                                  the
Bank, then the Borrower for which the account has been opened must pay the Bank interest charges on the overdrawn
balance of that account at the default interest rate applying to the
relevant facility or, if there is
none, in accordance with the terms normally applied by the Bank to accounts of that type; or

(iii)                               either
a Borrower or the Bank, the overdrawn balance of the account
in excess of the applicable facility limit
is immediately payable without further notice.

(e)                        The
relevant Borrower must ensure
that there are sufficient cleared funds in the nominated
account (including any available
credit limit applicable to that account) to meet all amounts the Bank is authorised to debit to that
account.

3.7                     Payment in Australian Dollars

All amounts payable by a Borrower under this Agreement
are payable in Australian dollars except to the extent that this Agreement states that the amount is
payable in another currency.

3.8                     Payment in cleared funds

All amounts payable by a Borrower under this Agreement
are payable in immediately available cleared funds.

3.9                     Payments due on non-banking days

Subject to the Specific Conditions for a facility, if a payment is due under the facility on a day that is not a banking day, that payment may be made on
the next banking day.

3.10              No set off or deduction

All payments by a Borrower
under any transaction document,
whether of principal, interest or other amounts due under this Agreement, will be:

(a)                        free of
any set-off (whether at law or in equity) or counterclaim or condition;
and

(b)                       without
deduction or withholding for any present or future taxes, unless the Borrower
is required by law to deduct or withhold an amount or the Bank is required to pay any taxes on the payments it receives from the
Borrower, in which case the Borrower must pay to the Bank any additional amount necessary to
enable the Bank to receive and
retain, after all required deductions and withholdings  and after payment of any taxes in respect of the additional amount,
a net amount equal to the full amount which would otherwise have been payable
had no such deduction or withholding or payment of taxes been required to be made.

4                               Economic costs

4.1                     Payment of economic costs

Economic costs are
payable whenever an economic event occurs
in relation to a facility. The Borrower must pay the Bank the amount of any economic costs on demand.

 30
 

4.2                     Economic events

Unless otherwise agreed by the Bank in writing, an economic event is taken to have occurred
if, at any time while a fixed rate (whether a fixed interest rate or a yield
rate) applies to a facility,
a bill facility component, an account or a drawing:

(a)                        all or
part of that facility,  bill facility component, account or drawing is repaid early (even if the Bank agrees to the early repayment being
made);

(b)                       that facility, bill
facility component, account or drawing,
is re-priced by agreement from one fixed rate to another fixed rate or to
another type of rate (such as a variable rate);

(c)                        that facility, facility limit or bill facility component is cancelled,
reduced or not fully drawn for any reason at any time before the expiry date;

(d)                       the Bank is for any reason no longer obliged
to accept, discount or endorse bills
under the facility or a bill is cancelled before its maturity date; or

(e)                        if an event of default has occurred, or the facility amount owing becomes repayable,
and the Bank elects to treat it
as an economic event;

except to the extent that this occurs:

(f)                          in
relation to a market rate facility, term loan
facility or global trade finance
facility on the repricing date applicable
to the facility or account (as the case may be), or if that
day is not a banking day, on the
next banking day;

(g)                       in relation
to a bill facility, at the end of
a fixed rate period or where a fixed rate period does not apply, on the
applicable maturity date;

(h)                       on the expiry date; or

(i)                           in
order to comply with the amortisation
schedule (if any).

4.3                     Calculation of economic costs

(a)                        The Bank determines any economic costs arising under a facility by determining the Bank’s reasonable estimate of the costs and losses incurred by it
(including, without limitation, loss of profits, fees, charges and premiums) in
connection with an economic event
including, without limitation, any amount determined by the Bank to have been paid, suffered or
incurred by it or for which it is liable 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
the Bank’s cost of funds at the
start of the relevant fixed rate period
and the Bank’s 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 the Bank’s
cost of funds at the date of the economic
event;

(ii)                       in
relation to a bill  facility, a loss or reduction of profits
or return or other costs
representing the difference between the yield
rate applicable to the bills
when they are drawn and the interest rate the Bank
is able to receive in the interest rate market by reference to the Interbank Swap Curve at the date of the economic event for the remaining term to
maturity of the facility.  This is then discounted back to the net
present value at the rate equivalent to the Bank’s
cost of funds at that date; or

(iii)                    the
liquidation or re-employment of deposits or other funds acquired or contracted
by the Bank to fund or maintain
the facility or the termination
or reversing of any swap or option agreement or other agreement or arrangement
entered into by the Bank (either
generally in the course of its business or specifically in connection with this
Agreement) to fund or maintain
the facility or to hedge, fix or
limit the Bank’s effective cost
of funding or maintaining the facility.

5                               Representations and warranties

5.1                     Representations and Warranties

(a)                        Each
Borrower represents and warrants
to the Bank that, at the date of
this Agreement and at all times
thereafter:

 31
 

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

(ii)                       it
has full capacity and power to enter into and comply with, and has taken all
necessary action to authorise it to enter into and comply with, each facility, the transaction documents, and to make a drawing under, or otherwise utilise, a facility;

(iii)                    it has full power and authority and
legal right to own its assets and to carry on its business as presently
conducted;

(iv)                   neither
it nor any of its assets are immune from the jurisdiction of a court or from
legal process;

(v)                      the
transaction documents to which it
is expressed to be a party constitute its legal, valid and binding obligations
and, subject to any necessary stamping and registration, are enforceable in
accordance with their terms subject to law generally affecting creditors’
rights and to principles of equity;

(vi)                   the
most recent financial accounts, reports and factual information provided to the
Bank by it at any time:

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

(B)                      are
(unless the Bank agrees
otherwise) prepared in accordance with applicable law and any accounting
standards generally applicable in Australia at the time of preparation; and

(C)                      give
a true and fair view of its 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 provided to the Bank;

(vii)                it is not in breach of any law or any
agreement, deed, security or instrument binding on it or its assets, and it is
not in default in respect of any material monetary obligation contracted by or
imposed upon it;

(viii)             no material litigation, arbitration or
administrative proceedings are current or pending or, to its knowledge,
threatened against it  before any
court or governmental agency;

(ix)                     complying
with the transaction documents to
which it is expressed to be a party is for its commercial benefit and is in its
commercial interests;

(x)                        it
is not insolvent;

(xi)                     no
potential event of default or event of default has occurred under or in
respect of any transaction document
and remains unremedied;

(xii)                  except as disclosed to and agreed to
by the Bank in writing, it is not
a trustee of any trust;

(xiii)               it has obtained and maintained in full
force and effect all material authorisations, consents, filings, registrations
and permits applicable to it or its business;

(xiv)              the execution, delivery and performance
of the transaction documents to
which it is expressed to be a party will not:

(A)             breach
or contravene any law or regulation or a judgment, order, ruling or decree of a
governmental agency;

(B)               conflict
with its constituent documents or any agreement binding on it or any obligation
to any person;

(C)               create,
impose or crystallise any security interest
on any of its assets (other than contemplated under any transaction document); or

 32
 

(D)            cause
or result in the acceleration of the date of payment of any obligation under an
agreement that is binding on it;

(xv)                 the
security is in full force and
effect and has the priority contemplated in it.

(b)                       These
representations and warranties (and the representations and warranties in
clause 5.2) 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, each day on which interest
is capitalised or otherwise due and payable and at the date of execution of
each new document under which credit or financial
accommodation is granted by the Bank.

5.2                     Additional representations and
warranties from a trustee

(a)                        This
clause applies where a Borrower enters
into a transaction document as
the trustee of a trust.

(b)                       The
Borrower enters into each transaction document in its personal
capacity and as trustee of the trust
and for the benefit of the beneficiaries of the trust.

(c)                        The Borrower makes the following
representations and give the following warranties to the Bank:

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

(ii)                       the
trust documents disclose all the
terms of the trust;

(iii)                    it has the power under the trust deed to enter into and observe the
trustee’s obligations under each transaction
document;

(iv)                   it
has the authorisation necessary to enter into the transaction documents, to perform the trustee’s obligations under the transaction documents and to allow them to
be enforced (including, without limitation, under the trust deed and the trustee’s constitution
(if any));

(v)                      it
has a right to be fully indemnified out of the assets of the trust (“trust
fund”) in respect of obligations incurred by it and it has no
liability which may be set off against that right of indemnity;

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

(vii)                it is not in default under the trust deed;

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

(ix)                     the
Borrower, and its directors and
other officers (if any) have complied with their obligations in connection with
the trust; and

(x)                        the
Bank’s rights under the transaction documents to which the Borrower is expressed to be a party rank
in priority to the interests of the beneficiaries of the trust.

6                               General undertakings and
covenants

6.1                     Negative Pledge

Each Borrower undertakes
to the Bank that it will not,
without the Bank’s prior written
consent:

(a)                        raise
any financial accommodation from
any other party;

(b)                       engage
in any other business other than that in which it is presently operating;

(c)                        merge
with or acquire another company or entity;

(d)                       dispose
of any of its subsidiaries;

(e)                        dispose
or part with possession any of its assets (or attempt to do so) except:

(i)                                     in
the ordinary course of its business, on arm’s length terms and for market
consideration;

(ii)                                  where
the asset is no longer required for its business, on arm’s length terms; or

 33

(iii)                               in
exchange for other assets of comparable type and value; or

(f)                          create
or allow to exist any security  interest over its assets other than:

(i)                                     under
the transaction documents; or

(ii)                                  a
lien arising by operation of law in the ordinary course of day-to-day trading
that does not secure financial accommodation
provided to it.

6.2                     General covenants

Each Borrower undertakes
to the Bank that it will:

(a)                        promptly
advise the Bank of any event of default,  potential event of default or other event
of default (however defined) under any transaction
document;

(b)                       take
out and keep in full force and effect insurance over all of its physical assets
and premises for such amounts and against such risks as a reasonably prudent
person in its position would take out, and promptly comply with any request by
the Bank to take out such further
insurance cover as the Bank may
reasonably require;

(c)                        provide
the Bank with evidence of the
currency of all insurances referred to in paragraph (b) above at each annual
review, or upon the Bank’s
request, whichever is the earlier;

(d)                       not
do or omit to do, or suffer or permit to be done or not done, anything which
may materially prejudice any insurance policy or vary, rescind, terminate or
cancel any insurance policy without the Bank’s
written consent;

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

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

6.3                     Additional covenants from a
trustee

(a)                        This
clause applies where a Borrower enters
into a transaction document as
the trustee of a trust.

(b)                       The
Borrower undertakes:

(i)                                     to
provide to the Bank on request
certified copies of the trust documents;

(i)                                     to
ensure that it has a right to be indemnified out of the assets of the trust for all liabilities incurred by it
under the transaction documents;

(ii)                                  to
ensure that there is no restriction or limitation on or derogation from its
right of subrogation or indemnity, other than on the grounds of fraud or gross
negligence (whether or not arising under the trust
documents); and

(iii)                               its
lien over the assets of the trust
at all times for liabilities incurred has priority over the rights of the
beneficiaries of the trust.

(c)                        The
Borrower undertakes that, except
with the Bank’s prior written
consent, none of the following will occur:

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

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

(iii)                               amendment,
or revocation of any terms, of the trust
deed;

(iv)                              a security interest arises over any asset of
the trust;

(v)                                 if
a unit trust, not issue any
further units in the trust to any
person other than a unitholder as at the date of this Letter of Offer; or

(vi)                              breach
of any provision of the trust deed.

6.4                     Change of Shareholding

(a)                         If
a Borrower is listed on a stock
exchange it  will:

 34
 

(i)                          promptly
notify the Bank 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 Letter of Offer. For this purpose, associates (as defined
by the Corporations Act) shall be
treated as the one person; and

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

(b)                       If
a Borrower is a company which is
not listed on a stock exchange, it must ensure that no transfer of shares (or
issue of shares) in it will be effected without the Bank’s prior written consent. If the Borrower consists of more than one entity,
the Bank’s consent will not be
required for a transfer or issue of shares in any one of those entities to
another of those entities.

6.5                     Partnerships

If a Borrower is
a partnership:

(a)                         each person
who is a member of the partnership or a partner (however described) is liable
separately, and together with other members or partners, are liable jointly,
for the obligations of the Borrower
under the transaction documents
to which the Borrower is expressed
to be a party;

(b)                        it agrees
to promptly notify the Bank if a
person becomes, or ceases to be, a partner at any time whilst any transaction document remains in full force
and effect.

(c)                         each transaction document will continue to bind
each person who is a partner of that partnership at the date of this Letter of
Offer and each person who becomes a partner whilst a transaction document remains in force and effect:

(i)                           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;

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

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

and the Borrower agrees
to procure the execution of any documents the Bank
reasonably requires to give full effect to this provision.

6.6                     Co-operation

Each Borrower must:

(a)                        promptly
give the Bank any information or
documents the Bank reasonably
asks for in connection with this Agreement
(including about its financial position) in any form the Bank specifies;

(b)                       do anything
(such as producing and signing documents) the Bank
reasonably requires to give full effect to the transaction documents; and

(c)                        promptly
notify the Bank if the Borrower changes its address.

6.7                     Class Order

(a)                        In this
clause 6.7, “Deed of Cross Guarantee”
refers to a deed substantially in the form of a pro-forma deed issued or
otherwise approved by the ASIC in
order to satisfy ASIC class order
eligibility requirements for relief from certain Corporations Act financial reporting obligations.

(b)                       Each Borrower must notify the Bank in writing:

(i)                                     before
it seeks the approval of ASIC in
respect of, or executes, any Deed of Cross
Guarantee; or

(ii)                                  amends
or terminates a Deed of Cross Guarantee.

(c)                        It
will be an event of default if
the Bank does not receive the
notice referred to in paragraph (b).

 35
 

6.8                     Changes to Accounting Standards

(a)                        If as a
result of a change in the accounting standards generally applicable in
Australia:

(i)                                     a
Borrower is of the reasonable
opinion that it is no longer able to comply with the financial covenants,
reporting covenants or other covenants and undertakings set out in this Agreement, and it gives the Bank written notice advising the Bank of this; or

(ii)                                  the
Bank is of the reasonable opinion
that the financial covenants, reporting covenants or other covenants and
undertakings set out in this Agreement
no longer satisfy the Bank’s requirements,

the Bank will
review the affected covenants or undertakings in consultation with the Borrower, to determine whether any
amendment of this Agreement is
required to take into account the change in accounting standards. The Borrower acknowledges that the Bank may determine, in the Bank’s discretion, that the relevant
covenants or undertakings remain applicable without amendment despite the
change in accounting standards.

(b)                       Paragraph
(a) above shall not be construed as a waiver of any event of default, or waiver of any of the Bank’s rights under this Agreement.

6.9                     Appointment of Consultants

(a)                        On the
occurrence of an event of default or
a potential event of default, the
Bank may, or at the Bank’s request each Borrower will, engage , such accountancy,
financial management and other consultants as the Bank may nominate to investigate the Borrower’s and the security providers’ business affairs and
whether the Borrowers and the security providers have complied with the transaction documents, and to make
recommendations relating to the manner in which the Borrowers and security
providers carry on their business. Any such engagement (whether by
the Bank or a Borrower) will be at the Borrowers’ cost.

(b)                       Each Borrower agrees to provide, and to ensure
each security provider provides,
all assistance and information required by the consultants (including making
all financial records available and giving access to all premises and records)
to enable the consultants to conduct their examination promptly, completely and
accurately.

(c)                        No Borrower or security provider is obliged to accept the recommendations
of any consultant, and the Bank will
assume no liability with respect to any actions a Borrower or security provider
takes, or does not take, as a result of those recommendations.

(d)                       The costs
of the consultants shall be debited by the Bank
to any account of the Borrower as
the Bank may nominate.

7                               Default

7.1                     General Events of Default

It is an event of
default  (whether or not
within a Borrower’s control) if:

(a)                        in the
case of:

(i)                                     the
total amount owing, any Borrower or any security provider does not pay all or any part of the total amount owing when due and payable by
it; or

(ii)                                  any
other financial accommodation
agreement it has with the Bank:

(A)                              any Borrower or any security provider does not pay on time any amount due and
payable by it; or

(B)                                any
actual or contingent indebtedness in respect of the financial accommodation becomes due and payable, or becomes
capable of being declared due and payable,  before
its stated maturity or expiry;

(b)                       any Borrower or security provider fails to comply with or perform any
undertaking, covenant or obligation of it under a transaction document to which it is expressed to be a party
or, in the case of the Borrower,
another agreement it has with the Bank
where:

(i)                                     that
failure is not in the opinion of the Bank
remediable; or

 36
 

(ii)                                  that
failure is, in the opinion of the Bank
remediable, and the Borrower or,
as the case may be, the security provider
does not remedy the failure within the period in the notice from the Bank specifying the failure or, if there
is no such period, within 5 banking days;

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

(d)                       any actual
or contingent indebtedness in respect of money borrowed or raised or other financial accommodation of the Borrower or a security provider (other than financial accommodation with the Bank) totalling at least the threshold debt amount or its equivalent:

(i)                                     is
not paid when due or within any applicable grace period; or

(ii)                              becomes
due and payable, or becomes capable of being declared due and payable, before
its stated maturity or expiry;

(e)                        any Borrower or security provider gives the Bank
information, or makes a representation or warranty, which the Bank reasonably believes to be untrue or
incorrect, or misleading in a material respect when made, or deemed to be
repeated, in connection with the transaction
document to which it is expressed to be a party or, in the case of
the Borrower, another agreement
it has with the Bank;

(f)                          any security interest is enforced, or becomes
capable of being enforced, or  the value
of any security, as assessed by
the Bank, materially decreases;

(g)                       the Bank reasonably believes any Borrower has acted fraudulently in
connection with this Agreement, a
transaction document or another
agreement with the Bank;

(h)                       an insolvency event occurs;

(i)                           any Borrower or security provider that is an individual no longer has legal
capacity or becomes a person protected by the state;

(j)                           all or
part of a transaction document is
or becomes illegal, void, voidable, unenforceable or otherwise of limited
force, priority or effect or claimed to be so, or a person seeks to or becomes
entitled to terminate, rescind or avoid all or a material part or material
provision of a transaction document;

(k)                        any Borrower or security provider takes any action to:

(i)                                     reduce
or attempt to reduce its capital other than by redemption of redeemable
preference shares; or

(ii)                                  pass
a resolution referred to in section 254N of the Corporations Act,

in either case without the prior written consent of the Bank;

(l)                           distress,
attachment or other execution for at least the threshold
litigation amount or its equivalent, is levied upon or issued
against any asset or undertaking of a Borrower
or a security provider and it is
not satisfied or stayed within 5 banking
days;

(m)                     any Borrower or security provider breaches any law or obligation by entering
transactions or performing obligations under a transaction
document to which it is expressed to be a party or, in the case of a
Borrower, another agreement it
has with the Bank;

(n)                       an
investigation by any regulatory authority into all or part of the affairs of a Borrower or a security provider commences in circumstances material to its
financial condition;

(o)                       a change in
any Borrower’s or security provider’s financial
circumstances occurs which, in the Bank’s opinion,
may have a material adverse effect on a Borrower’s
or, as the case may be, a security provider’s
ability to meet its obligations under any agreement it has with the Bank;

(p)                       an order
for payment is made, or a judgment is entered or signed, against any Borrower or any security provider for at least the threshold litigation amount or its
equivalent, and it is not satisfied or stayed within 5 banking days after that event (unless the
order or

 37
 

judgment is the subject of an appeal by the Borrower within such period and the Bank is satisfied that there is reasonable
likelihood of success);

(q)                       any other
event occurs that is described in this Letter of Offer as an event of default;

(r)                          any Borrower or security provider is a trustee of a trust and:

(i)                                     a
new trustee is appointed or the trust vests or terminates or any part of the
trust fund is resettled or set aside, in any of these cases without the Bank’s prior written consent; or

(ii)                                  the
Borrower’s or, as the case may
be, the security provider’s right
to be indemnified out of the trust assets is restricted in any way; or

(s)                        any Borrower or security provider is a partnership and any of the events in
paragraphs (a) to (r) above occurs in relation to one or more of the partners,
in which case, the event is deemed to have occurred in relation to the Borrower or, as the case may be, the security provider.

7.2                     Additional Events of Default

In addition to clause 7.1, it will also be an event of default if, in relation to any facility to which the Property Conditions
apply, during the property development
period:

(a)                        the
builder is, in the Bank’s opinion,
unable to complete the project;

(b)                       the contracts of sale or agreements to lease become void or
voidable;

(c)                        the building works do not proceed according to
the development and construction  budget or the development and construction program provided to the Bank;

(d)                       there are
unfunded cost overruns in respect
to a project;

(e)                        a design
variation is made otherwise than in accordance with this Agreement; or

(f)                          any
change, which in the opinion of the Bank is
material, is made to the project,
including to any plans or specifications in relation to it, without the Bank’s consent.

7.3                     Consequences of default

(a)                        Upon the
occurrence of an event of default,
the Bank may at its option
exercisable without the need to give any notice to the Borrower other than that required by law,
treat the total amount owing as
payable immediately and may immediately or at any later time enforce any security.

(b)                       If the Bank gives the Borrower a notice stating that an event of default has occurred and the Borrower does not, or cannot,  rectify the event
of 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 and in addition to any other rights,
powers and remedies the Bank may
have (including under a security)
the Bank may:

(iii)                               cancel
all or any part of the facility limit
for all or any facilities with
immediate effect; and

(iv)                              declare
that all or part of the total amount owing
are immediately due and payable (to the extent it is not already due for
payment), and if the Borrower does
not pay it immediately, the Bank may
terminate the facilities and/or
sue the Borrower for the total amount owing and/or enforce any security.

(c)                        If the Bank terminates a facility following the occurrence of an event of default, and at that time there
are any treasury related transactions in existence between the Bank and the Borrower (which include, but are not limited to, borrowings
and financial accommodation,
foreign exchange, money market and derivative transactions or general banking
facilities) (“open positions”)
then:

 38
 

(i)                                     the
Bank may close out the open positions, by entering into opposite
positions for the balance of the unexpired term, or by such other means as may
be usual in the relevant market and any such close out shall be at the then
current market rates;

(ii)                                  any
costs incurred by the Bank in closing out open positions under paragraph (i) above
will be paid by the Borrower on
demand, and any gain derived from the closing out of the open positions will be credited to the Borrower and set off against the total amount owing; and

(iii)                               the
Bank will give the Borrower reasonable particulars of the
manner of close out of the open positions, and
the basis of calculation of any amounts payable by or to the Borrower arising from that close out.

7.4                     Default Interest

(a)                        For a facility other than a bill facility, if a default interest rate applies to that facility, the Borrower must pay the Bank
interest charges on any part of the balance
owing which is overdue, or in excess of the facility limit. Interest charges payable
under this paragraph are calculated daily by applying the daily default interest rate to the overdue
amount or the amount in excess of the facility
limit.

(b)                       For a bill facility, if the Borrower fails to pay the face value of
any bill on its maturity date or any other amount is
overdue for payment, the Bank may
debit an account in the Borrower’s name
(whether opened by the Borrower or
the Bank) with the face value of
any such bill and with any
overdue costs, taxes, expenses, fees, charges, premiums
and outgoings. Clause 3.6(d) applies to any such debits.

7.5                     Capitalising default interest

Default interest charges are:

(a)                        for facilities where interest charges are
ordinarily debited to an account
or accounts under the facility, added to the relevant balance owing for the facility on each date on which interest is
next debited for that facility;
or

(b)                       for other facilities, at the Bank’s discretion, added to the overdue
amount monthly and when the overdue amount is paid, or debited to the nominated account for that facility (or, if permitted by this Agreement, any other account held by the Borrower) on each date on which interest
is next debited for that facility,
unless the Bank otherwise
specifies.

 The Borrower will then be liable for interest
under this clause on that increased amount.

7.6                     Fees

If the Borrower does
not pay on time any amount due under this Agreement,
or if it exceeds a facility limit,
a fee may apply as detailed in the relevant Guide
to Fees and Charges.  If the
fee applies, it is payable immediately and the fee shall be debited by the Bank to any account of the Borrower as the Bank may nominate.

7.7                     Additional review rights

If an event of
default has occurred, irrespective of whether or not the Bank has exercised, or waived, any other
rights that arise upon the occurrence of that event
of default, the Bank may review
the pricing applicable to each of the facilities
held by the Borrower and
shall have the right, on written notice, to vary that pricing as set out in
clause 3.5(a).

7.8                     Obligations not affected

A Borrower’s obligation
to pay on time is not cancelled by this clause.

8                               Change of Circumstances

8.1                     Illegality

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

 39
 

(a)                        the Bank to fund, provide or maintain a facility or otherwise observe or give
effect to the Bank’s obligations
under a facility; or

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

then:

(c)                        the Bank is 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
the Bank and the face value of
each bank guarantee and letter of credit issued by the Bank which remain outstanding, are due and
payable by the Borrower on
demand; and

(e)                        the Bank may debit any of the Borrower’s accounts (including in the case
of a bill  facility the nominated account) with the facility
amount owing under a facility.

8.2                     Increased Costs

(a)                        This
clause 8.2 applies if the Bank determines
that in its opinion any order of any court or change
in relevant regulation will:

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

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

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

and as a result there is:

(iv)                              an
increase in the cost to the Bank of
making available or maintaining any 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 the Bank in connection
with any facility,

by an amount which the Bank considers
to be material.

(b)                       If this
clause applies:

(i)                                     the
Bank will use its best efforts to
promptly notify the Borrower in
writing of the happening of such event;

(ii)                                  the
Bank 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
the Borrower or the Bank; and

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

(c)                        Nothing in
this clause 8.2 adversely affects the Borrower’s
right to cancel the affected facility
and to repay the facility amount
owing in accordance with this Agreement.

9                               Liability for regulatory events

(a)                        Each Borrower acknowledges that the services may be interrupted, prevented,
delayed or otherwise adversely affected by a regulatory
event.

(b)                       Each Borrower agrees that, to the extent
permitted by law:

 40
 

(i)                                     the
Bank is not liable for any loss
incurred by the Borrower or any
other person if an event described in clause 9(a) occurs, irrespective of the
nature or cause of that loss, and the Bank has
no obligation to contest any regulatory
event or to mitigate its impact on a Borrower or the Bank.
Each Borrower releases the Bank from all liability accordingly; and

(ii)                                  to
the extent that the Bank’s liability
cannot be excluded, the Bank’s
liability is limited to the cost of having the service
supplied again.

(c)                        Each Borrower agrees that the Bank may use and disclose to an other financial institution or regulatory authority, any information
about the Borrower, the services or any person connected with the Borrower or the services, for any purpose which the Bank, or an other financial institution, considers appropriate or
necessary in connection with any regulatory
event or the services.  This may result in information being
transmitted overseas. Each Borrower agrees
to provide information to the Bank about
the Borrower, the services or any person connected with the Borrower or the services on request, and to promptly
procure any consents the Bank requires
to give effect to this clause.

10                        Confidentiality

(a)                        Each Borrower and the Bank agrees, subject to clause10(b), to
keep the terms of the transaction documents,
and any information which either may provide to the other under or in relation
to the transaction documents,
confidential.

(b)                       Clause
10(a) does not prevent disclosure:

(i)                                     if
allowed or required by law, or if required by a stock exchange;

(ii)                                  in
connection with legal proceedings relating to the transaction documents;

(iii)                               as
described in clause 9(c);

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

(v)                                 of
the terms of the transaction documents to
any Borrower or security provider;

(vi)                              by
the Bank to the Bank’s subsidiaries, in which case this
clause 10 will apply to the subsidiary;
or

(vii)                           pursuant
to clause 17;

(viii)                        by the Bank to any of the Bank’s agents, consultant or adviser
engaged by the Bank for the
purposes of this Agreement;

(ix)                                to
any guarantor or proposed guarantor; or

(x)                                   by
any Borrower to any consultant
engaged by the Borrower for the
purposes of complying with the Bank’s
requirements under the facility
to the extent that the disclosure is necessary to enable the consultant to
comply with those requirements.

11                        Setting off money

(a)                        The Bank may at any time without notice to the
Borrower:

(i)                                     debit
and charge an account of the Borrower
(or an account conducted by the Bank
in the name of the Borrower) with
any amounts a Borrower owes to
the Bank or with any amounts that
the Bank is contingently or
prospectively liable to pay in respect of a facility;
and

(ii)                                  combine
and amalgamate any two or more accounts of the Borrower
with the Bank; and

(iii)                               set
off or transfer any credit balance on any account of the Borrower with the Bank in or towards satisfaction of  any amounts a Borrower owes to the Bank;
and

(iv)                              make
any currency conversion the Bank
considers necessary or desirable to enable a set-off using the spot rate of
exchange quoted by it on the day of conversion.

 41
 

(b)                       The Bank’s rights under paragraph (a) above
exist and are exercisable:

(i)                                     whether
or not the Bank has agreed to
permit any set-off for the purpose of calculation of interest between any two
or more accounts; and

(ii)                                  even
though:

(A)                        the
amounts a Borrower owes to the Bank may be or may be expressed to be
advanced on any specified account or on two or more accounts, or

(B)                          the
accounts are with any other person as well as the Borrower or are conducted by the Bank in the name of the Borrower
or are with different places of business of the Bank, or

(C)                          any one
or more accounts stand in credit.

12                        Holding Over

If the Bank
continues to make a facility
available to the Borrower after
its expiry date or the end of its
term, and the Agreement has not
been extended, amended or replaced, then the terms of the Agreement will continue to apply to the facility unless otherwise advised by the Bank. The continuation of a facility under this clause shall not be
construed as a waiver of any event of
default, nor as a waiver of any of the Bank’s rights under any transaction
document, nor as any agreement or undertaking (implied or otherwise)
to grant any extension.

13                        Telephone recording

Each Borrower consents
to the Bank recording any
telephone conversations between the Bank
and the Borrower in relation to
the facilities that are
customarily recorded in the finance industry or where the Borrower is notified prior to the
commencement of the telephone conversation and such recordings being used in
any arbitral or legal proceedings. Telephone recordings remain the Bank’s sole property at all times.

14                        Code of Banking Practice

The Bank
has adopted the Code of Banking Practice (“Code”)
and relevant provisions of the Code apply
to these facilities if the Borrower is an individual or a small
business customer (as defined by the Code).
The Borrower can obtain from the Bank upon request:

(a)                        information
on the Bank’s current interest
rates and standard fees and charges relating to these facilities (if any);

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

(i)                                     bank
cheques, and for accounts with cheque access, about cheques;

(ii)                                  account
opening and complaint handling procedures;

(iii)                               the
Bank’s obligations regarding the
confidentiality of customer information; and

(iv)                              the
advisability of the Borrower reading
the terms and conditions applying to each banking service the Bank provides to it, and informing the Bank promptly when the Borrower is in financial difficulty;

(c)                        general
descriptive information about the identification requirements of the Financial
Transactions Reports Act 1988 (Cth) and the options available under the tax
file number legislation; and

(d)                       a copy of
the Code.

15                        Notices, other communications and
service of documents

15.1              Service

A notice, demand, consent, approval or communication (‘notice’) given by a party in connection
with this Agreement must be:

(a)                        in writing
or in any other form permitted by it, in English and signed on behalf of the
party;

(b)                       hand
delivered, sent by prepaid post (or airmail if applicable) to the recipient’s address, sent by facsimile or
other form of electronic communication to the recipient’s
address, or, where the following methods of the Bank giving notice to the Borrower are expressly contemplated in
this Letter of Offer, by placing the notice on
www.national.com.au or by publishing the notice
in a newspaper circulating throughout the Borrower’s country, state or territory.

 42
 

15.2              Effective on receipt

A notice
given in accordance with clause 15.1 takes effect when received (or at a
later time specified in it), and is taken to be received:

(a)                        if hand
delivered, on delivery;

(b)                       if sent by
prepaid post, on the second business day after
the date of posting (or on the seventh business
day after the date of posting if posted to or from a place outside
Australia); or

(c)                        if sent by
facsimile or other form of electronic communication, when the sender’s system
generates a message confirming successful transmission of the entire notice unless, within eight hours after
the transmission (being counted as hours from 9.00am to 5.00pm on a banking day), the recipient informs the
sender that it has not received the entire notice,

but if the delivery, receipt or transmission is not on a business day or is after 5.00pm (addressee’s
time) on a business day, the notice is taken to be received at 9.00am
(addressee’s time) on the next business day.

A notice given by way of
newspaper advertisement or by placing information on www.national.com.au takes
effect when received (or at a later time specified in it) and is taken to be
received on the date it is first published.

15.3              Validity

A notice
is validly given by the Bank even
if returned unclaimed or if the recipient has been wound up or is absent from
the place the notice is delivered
or sent to.

15.4              Other methods

This clause does not limit any provision for giving notice in another transaction document, or limit any other
method for giving notice or
serving demands provided for by law.

16                        General

16.1              Statements of Account

The Bank
will generally give the Borrower
statements for any overdraft facility, nab
business plus facility, or foreign
currency overdraft  facility at
least every three months, and for term loan facilities
at least every six months. If the Bank
is not required by law or under the Code of Banking Practice to give a
statement, it may choose not to.

16.2              The Bank’s certificates

(a)                        The Bank may give a Borrower 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 conclusive evidence of
the matter or amount, unless it is proved to be incorrect.

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

16.3              How the Bank may exercise its rights

(a)                        The Bank may exercise a right or remedy, or
give or refuse its consent or agreement to any request a Borrower makes, in any way the Bank considers appropriate including by
imposing conditions.

(b)                       The Bank 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 the Bank does not exercise a right or remedy
fully or at a given time, it can still exercise it later.

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

 43
 

(e)                        The Bank’s rights and remedies may be
exercised by any of its employees or any other person it authorises.

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

16.4              Preservation of the Borrowers’ liability

The Borrower’s
liabilities and the Bank’s rights
under in or relation to a transaction
document, a facility or
a transaction under them  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 a transaction document, a facility or a transaction under them; or

(b)                       the Bank 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 the Borrower or another person in any way; or

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

(d)                       any
variation or novation of a right of the Bank
or another person, or alteration of a document, in respect of the Borrower or another person including,
without limitation, an increase in the maximum liability of or other variation
in connection with a drawing; or

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

(f)                          invalidity
or irregularity in the execution of a transaction
document by the Borrower
or any deficiency in the Borrower’s
powers to enter into or observe its obligations under a transaction document, a facility or a transaction under them.

16.5              Consents and Conditions

A Borrower
must comply with all conditions and requirements in any consent the Bank gives, or agreement to any request a Borrower makes.

16.6              Variation

(a)                        The Bank may vary the terms of this Agreement by giving written notice to  the relevant Borrower at any time to the extent the Bank considers necessary to ensure
compliance with relevant regulation or
to reflect the Bank’s systems
capabilities, provided such
variation does not, in the reasonable opinion of the Bank, result in a material change to the nature of the facilities.

(b)                       Except to
the extent that this Agreement expressly
contemplates or permits the terms of this Agreement
to be varied unilaterally, the terms of this Agreement
may only be varied by the written agreement of the parties.

16.7              GST

(a)                        Unless
otherwise specified, all amounts referred to in this Agreement are exclusive of GST.

(b)                       If GST is imposed on any supply made by one
party (“supplier”) under or in
connection with this Agreement to
the other party (“recipient”),
where any amount or consideration (“consideration”)
payable or to be provided by the recipient
under this Agreement in relation
to that supply is exclusive of GST (“GST-exclusive
consideration”), the supplier
may, in addition to and at the same time as that GST-exclusive consideration is due, recover from the recipient an additional amount on account
of GST. This additional amount is
to be calculated by multiplying the GST-exclusive
consideration for the relevant taxable supply by the GST rate prevailing at the time of the
taxable supply.

 44
 

16.8              Valuations are for the Bank benefit

Any property valuation obtained by or for the Bank is for the Bank’s use only. The Bank
accepts no responsibility for any reliance on a property valuation by any other
person.

16.9              Time for repayment

For the purposes of payments under this Agreement, a day ends at 4 pm in the state
or territory where the  relationship
management team is located, as set out in the Relationship Management section
preceding the Letter of Offer.

16.10       Indemnities

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

16.11       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.

17                        Assignment

(a)                        The Bank may assign or otherwise deal with its
rights under this Agreement in
any way it considers appropriate. If the Bank
does this, no Borrower may claim
against any assignee (or any other person who has an interest in a facility) any right of set-off or other
rights the Borrower may have
against the Bank. The Borrower agrees that the Bank may disclose any information or
documents the Bank considers
desirable to help the Bank
exercise this right. The Borrower
also agrees that the Bank may
disclose information or documents at any time to a person to whom the Bank assigns or proposes to assign the Bank’s rights under this Agreement.

(b)                       Each Borrower’s rights are specific to it and
may not be assigned without the Bank’s prior
written consent.

18                        Governing Law and Jurisdiction

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

19                        Definitions and interpretation

(a)                        Where a
term is defined or otherwise described in:

(i)                                     the
Details in relation to a facility (for example, expiry date, customer margin or facility limit); or

(ii)                                  a
Part, these General Conditions, any Specific Conditions or any Property
Conditions,

a reference in this Letter of Offer to that term is a reference to that
term as so defined or described (as amended from time to time in accordance
with this Letter of Offer).

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

account
means an account the Bank establishes
or has already established in the name of one or more Borrowers for recording transactions, but
does not include any internal suspense account maintained by the Bank for the purposes of any facility.

adjusted facility
limit  means the facility
limit less the facility limit
deduction.

Agreement:

(i)                                     in
relation to each facility that is
described as a ‘New Facility in this Letter of Offer’, means the terms of that facility as set out in this Letter of
Offer, the Guide to Fees and Charges and
any other contract documents described in the Details
or the Specific Conditions for that facility;
and

(ii)                                  in
relation to the other facilities,
has the meaning given to it in Part 1 of this Letter of Offer.

 45
 

agreement to lease
means an agreement between the Borrower
and a prospective tenant to lease space in the project
following practical completion on
terms and conditions detailed in a lease document
attached to the agreement to lease.

amortisation
schedule means, for a facility,
the Amortisation Details or Amortisation Schedule specified in the Details or any Amortisation Schedule
provided to the Borrower by the Bank as a replacement, in accordance with
this Agreement.

ASIC
means the Australian Securities and Investments Commission.

attachment notice
means a notice pursuant to Section 218 of the Income Tax Assessment Act 1936
(Cth) or any analogous notice, procedure or process under any Statute in
respect of unpaid taxes of any Borrower or any security provider.

available funds
means, in relation to a facility to
which the Property Conditions apply, the funds not drawn under the facility at the time the drawdown notice, calculated as the facility limit less the balance owing less the unallocated project contingency for that facility.

balance owing
means:

(i)                                     for
an account, at any time, the
difference between all amounts credited and all amounts debited to that account at that time;

(ii)                                  for
a bill facility, at any time, the
difference between the facility limit and
the aggregate face value of the outstanding bills
under that facility;
and

(iii)                               for
any other facility, at any time,
the difference between all amounts credited and all amounts debited to that facility (including to any accounts maintained solely for the
purposes of recording transactions on the facility).

When this amount is to be calculated for the end of a day, it includes
all debits and credits assigned to that day.

Bank
means National Australia Bank Limited ABN 12 004 044 937 and its successors and
assigns.

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

bank guarantee  facility  means a facility
described as such in the Details.

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
(Cth) (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 the Bank
deems to be a “bill” for the purposes of this Agreement.

bill facility
means a facility described as
such in the Details.

bill facility
component, in relation to a bill facility, has the same meaning as set out in the Bill
Facility Specific Conditions.

Borrower
means, in relation to a facility,
the person or persons named as ‘Borrower’ in the Details. If there is more than one person named as, or if
more than one person comprises, a ‘Borrower’, Borrower  means each of them separately
and every two or more of them jointly. “All Borrowers”  means all persons named as ‘Borrower’ in the Details for all facilities.

 46
 

building
means, in relation to a property,
the building described in relation to that property
in the Property Conditions.

building
contract means
the agreement/s (including subcontracts) that relate to the development,
construction and completion of the building and
which are in a form acceptable to the Bank.

building cost means
the total consideration under the building
contract/s and, where not included in those building contracts, any on-site holding
costs, including for plant and equipment and site amenities.

building
works means
all of the works to be undertaken under the building
contract.

business day means
a day that is not a Saturday, Sunday or gazetted public holiday in the state or
territory in which the recipient’s address is
located.

business plus
facility  means a facility
described as such in the Details.

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.

Certificate of
Classification/Occupancy means a document issued by the
relevant regulatory authority giving approval for occupancy of the completed project.

Certificate of
Practical Completion  means an unconditional and
unqualified certificate from the Quantity
Surveyor or another person acceptable to the Bank confirming that, subject only to the
delivery of the certificate, practical
completion has occurred.

contract of sale means,
in relation to a project, a
contract between the Borrower and
a purchaser for all or part of the property.

Corporations Act
means the Corporations Act 2001 (Cth).

cost to complete
means, in relation to a project,
the amount which will be required to be expended by the Borrower at any time in relation to the project in accordance with the development
and construction budget and the development and construction program  provided to the Bank under the relevant Property
Conditions to achieve practical completion including,
but not limited to:

(i)                          the
cost to complete  construction;

(ii)                       all
other costs relevant to the development and construction of the project; and

(iii)                    all interest and other financing
costs to be paid during the period to the practical
completion date having regard to the proposed schedule of drawings to be made.

cost overrun
means, in relation to a project,
at any time, and from time to time, the amount by which the cost to complete exceeds the available funds.

costs
means any costs, charges, expenses and other outgoings (including legal
costs and expenses on a full indemnity basis, any advisers or professional
consultant fees and the costs calculated on a time employed basis or otherwise
of the Bank’s employees and
in-house legal counsel) and, in the case of securities
such as a mortgage, where applicable, in preserving and maintaining the assets
and property the subject of the securities
(such as by paying insurance, rates and taxes for the asset or property),
interest, penalties and fines.

daily default
interest rate  means, for any day, the default interest rate applying to the facility for that day divided by 365.

daily interest rate
means, for any day:

(i)                                     in
relation to a global trade finance facility,
the interest rate applying to the
facility or drawing (as the case may be) for that day
divided by 365 where the currency is Australian Dollars (AUD), Fiji Dollars
(FJD), Pounds Sterling (GBP) or Hong Kong Dollars (HKD) and 360 in all other
cases.

(ii)                                  otherwise,
the interest rate applying to the
facility for that day divided by
365.

 47
 

date issued
means, in relation to a bank guarantee
facility, the date specified in the Details
or otherwise agreed as the date on or before which a bank guarantee is to be, or has already been, issued by the Bank to the beneficiary.

Details
means, in relation to a facility,
the Details in relation to that facility in
Part 1 of this Letter of Offer.

development
approval means, in relation to a project, all regulatory approvals,
permits, authorisations and any other form of unconditional documentation as
required to be issued by the necessary approval authorities prior to the project commencing.

development and
construction budget means an estimate of all costs
necessary to complete the project as
agreed in writing between the Borrower and
the Bank, including, but not
limited to:

(i)                                     land
acquisition costs and associated expenses;

(ii)                                  building cost with provisional cost items
clearly identified;

(iii)                               finance
costs and interest expenses;

(iv)                              rates,
taxes and all site holding costs;

(v)                                 projected
allowance for escalation of costs both within the overall development and construction budget and
within the building contract;

(vi)                              provision
of contingency sums in respect of potential construction delays, variations and
budget increases;

(vii)                           design
consultancy, professional and supervisory fees;

(viii)                        any other
development costs including, but not limited to, legal fees, holding costs,
marketing costs and selling costs; and

(ix)                                cash
flow analysis outlining the proposed drawings
required to complete the project
based upon the development and construction
program.

development and
construction program means a document comprised of all
critical activities under each stage of the project,
their duration and relationship necessary to establish a critical path and
target completion date for the project including
an adequate provision of a delay allowance.

drawdown
date  means:

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

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

drawdown notice
means:

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

(ii)                                  where
the facility is not a bill facility, a notice in a form
acceptable to the Bank requesting
a drawing under the facility.

drawing
means each financial accommodation
actually provided under a facility.

economic costs
and  economic
event  each has the meaning described in clause 4.

event of default
means an event so described in clause 7.1 or clause 7.2.

expiry date
means for a facility, either
the date specified as such in the Details
or the last day of the term of
the facility (as the case may
be), or otherwise agreed from time to time.

 48

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

external
administrator’s costs means any costs, charges, expenses
and other outgoings (including legal costs and expenses on a full indemnity
basis) incurred by any external
administrator appointed by the Bank.

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

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

facility limit
deduction  means the guaranteed
amount of any bank guarantee
or the total face value of any letter of
credit or similar instrument issued by the Bank under any other agreement with the Borrower which has not been cancelled to
the Bank’s satisfaction.

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

fixed rate period
means, in relation to a facility
or drawing, the period during
which a specific interest rate or yield rate
will apply and will not change.

foreign currency
overdraft facility  means a facility described as such in the Details.

funded property means
in relation to a facility, each
property  identified in the
Property Conditions applicable to that facility.

funding table
means, in relation to a project,
the Funding Table (if any) in the relevant Property Conditions.

global trade
finance facility  means any facility to which the Global Trade Finance Specific
Conditions apply, as stated in the Details.

gross realisations
means the aggregate of all sales contracts in relation to the project, or, in the Bank’s discretion, an estimate of the
aggregate of all sales contracts in relation to the project.

GST
means goods and services tax or any similar tax.

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

Guide to Fees and
Charges  means, at any time and from time to time, the
then most current version of the Bank’s “A
Guide to Fees and Charges (Business)” booklet and/or “A Guide to Fees and
Charges (International Trade Services)” booklet, as the case may be.

insolvency event
means:

(i)                                     if
an application is lodged or made, or an order is made, for the appointment of a
liquidator or provisional liquidator to any Borrower
or security provider;

(ii)                                  if
an effective resolution is passed for the winding up of any Borrower or security provider or if a meeting is convened for the
purpose of considering any such resolution;

(iii)                               if
a notice is published for the dissolution without winding up of any Borrower or security provider, or any Borrower
or security provider
is dissolved;

 49
 

(iv)                              if
the any Borrower or security provider is placed under any
formal or informal kind of insolvency administration or if a meeting is
convened for the purpose of considering the appointment of an insolvency
administrator to any Borrower or security provider;

(v)                                 if
a receiver or receiver and manager is appointed to the whole or any property
assets or undertaking of any Borrower or
security provider or if any step
is taken for the appointment of such a receiver or receiver and manager or if
execution or distress or any other process is
levied or attempted or imposed against or over any undertaking, property or
assets of any Borrower or security provider;

(vi)                              if
any Borrower or any security provider stops payment or in the
opinion of the Bank stops payment
of its debts generally or ceases to carry on the whole or any material part of
the business of the Borrower or
any security provider, or
threatens to do so;

(vii)                           if any Borrower or any security provider becomes, or states that it is, insolvent
or unable to pay its debts or (if the Corporations Act applied to determine the
matter) would be deemed to be unable to pay its debts, or action is taken which
could result in any of the same occurring or events occur which lead the Bank to form the opinion that it is likely
that the Borrower or any security provider will become insolvent at some future time;

(viii)                        except to
reconstruct or amalgamate while solvent on terms approved by the Bank, any Borrower
or any security provider
enters into, or resolves to enter into, a scheme of arrangement, deed of
company arrangement or composition with, or assignment for the benefit of, all
or any class of its creditors, or it proposes a reorganisation, moratorium or
other administration involving any of them;

(ix)                                if
a person is appointed under any statute to investigate or manage any of the
affairs of any Borrower or any security provider;

(x)                                   as
a result of the operation of section 459F(1) of the Corporations Act, any Borrower or any security provider is taken to have failed to comply with a
statutory demand;

(xi)                                any
Borrower or any security provider is, or makes a
statement from which it may be reasonably deduced by the Bank that the body corporate is, the
subject of an event described in section 459C(2)(b) of the Corporations Act;

(xii)                             any Borrower or any security provider takes any step to obtain protection or is
granted protection from its creditors, under any applicable legislation or an
administrator is appointed to a body corporate;

(xiii)                          if a security provider who is a natural person
becomes a bankrupt as defined in the Bankruptcy Act 1966 (Cth) or dies or
commits an act of bankruptcy within the meaning of the Bankruptcy Act 1966
(Cth);

(xiv)                         action is
taken which could result in the any Borrower
or any security provider
becoming an insolvent; or

(xv)                            anything
analogous or having a substantially similar effect to any of the events
specified above happens under the law of any applicable jurisdiction.

insolvent  has the meaning given to it in the Corporations Act.

Interbank Swap
Curve  means the benchmark interest rates used by banks to
swap their types of borrowings (that is, fixed rate for floating rate) with no
exchange of principal amounts for terms greater than 12 months.

interest debit date
means, in relation to a facility,
the date on which interest charges are to be debited as set out in the Specific
Conditions for that facility.

interest period means,
in relation to a facility, the
period for which interest is calculated and charged as stated, or selected if
provided for, in this Letter of Offer or as otherwise agreed.

 50
 

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

market rate facility
means a facility described as
such in the Details.

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

nominated account
means in relation to a facility,
the account described in the Details
as such, or such other account  acceptable
to the Bank as the Borrower nominates for the purposes of
debiting and crediting amounts in relation to this Agreement.

other facility
that are described as ‘Other Facilities’ in Part 1 of this Letter of Offer.

other financial
institution  means such other financial institutions, or
other offices of the Bank,
locally and overseas, that are involved in providing a service to a Borrower under or in relation to a facility (whether appointed by the Bank or not, and whether their involvement
is known to the Borrower or not).

overdraft facility
means a facility described as
such in the Details other than a foreign currency overdraft facility.

potential  event of default
means an event which, with the giving of notice (whether or not notice is
actually given), lapse of time, fulfilment or non-fulfilment of any condition
or any combination of the above, would, in the Bank’s
opinion, be likely to become an event
of default.

practical
completion, in relation to a project,  has
the same meaning as in the relevant building contract, and any agreement to
lease or lease, or as advised by the relevant architect, as determined by the Bank in its absolute discretion.

practical
completion date, in relation to a project, means the date on which the Bank receives the Certificate of Practical Completion.

process
means any process issued by a court or other tribunal or authority by which a
person is empowered or required to take possession of or to hold, sell or
otherwise deal with any property, asset or undertaking of any Borrower or any security provider, including but not limited to an attachment notice.

pricing period
has the meaning given to that term in the Market Rate Facility Specific
Conditions.

project  means the development of the site and the construction, development,
commissioning, operation and maintenance of the building(s).

project consultants  means all development and construction
consultants appointed to the project including,
but not limited to, the architect, structural engineer, mechanical and
electrical engineer and any other such consultants as the Bank deems necessary in its discretion.

project
documentation means all documentation, whether in
written, electronic or other form, that relates to the construction and
development of project, including
all plans, designs, specifications and drawings.

property
development and investment facility means  a facility which has property development
and investment as its purpose, as stated in the Details.

property
development period means, in relation to a facility to which the Property Conditions
apply, the period described as such in those Property Conditions.

property investment
period means, in relation to a facility to which the Property Conditions apply, the period
described as such in those Property Conditions.

Quantity Surveyor,
in relation to a property, means
a quantity surveyor, appointed on terms acceptable to the Bank, in respect of the project.

recipient’s address
means:

(i)                                     where
the recipient is the Bank, the Bank’s address stated in this Letter of
Offer, any other address the Bank advises
in writing for the purpose of receiving notices
in relation to this Letter of Offer or the Bank’s registered office; and

 51
 

(ii)                                  where
the recipient is the Borrower,
the address nominated by the Borrower in
writing for the purposes of receiving notices
in relation to this Letter of Offer or, if no such address is
nominated, the Borrower’s address
last known to the Bank.

regulatory
authority  means any local or foreign government or their
instrumentalities.

regulatory event means
any:

(i)                                     law
or other form of regulation;

(ii)                                  practices
or policies of regulatory authority;

(iii)                               investigation
into the Borrower or any related
entity of the Borrower by a regulatory authority;

(iv)                              application
for or grant of an injunction or order in respect of any security, facility
or account held with the Bank made
by a regulatory authority, or

(v)                                 code
of practice or custom relating to the provision of those services which a
reasonable and prudent banker would comply with,

whether in Australia or elsewhere, that, in the Bank’s good faith opinion, or that of another financial institution, applies in
any way to a Borrower or a security provider, or the service.

related entity
means any entity that is related to the first within the meaning of section
50 of the Corporations Act or any
economic entity (as defined in any approved accounting standard) which
describes the first.

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.

repricing date
means:

(i)                          for a market rate facility, the first day of any
pricing period under that facility;
and

(ii)                       for a term loan facility, the first day after
the end of a fixed rate period;
and

(iii)                    in relation to
a drawing under a global trade finance facility, the last
day of the term of that drawing.

security
means each security interest
described in Part 2 of this Letter of Offer and any substitute or additional security interest applicable to the facilities provided under 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 Borrower
for that facility) who gives a security.

service
means any service the Bank
provides to a Borrower under or
in relation to a facility
including making or processing any payment or issuing any document.

site,
in relation to a property, means
the land described by reference to the property address in the relevant
Property Conditions.

Specific Conditions
means, in relation to a facility,
the particular set of provisions referred to in the Details as applicable to the facility and contained in this Letter of Offer after these
General Conditions.

subsidiary
has the same meaning as under the Corporations
Act.

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

 52
 

threshold debt
amount means the amount advised by the Bank in writing as the ‘threshold debt
amount’. If no such figure is advised in writing, the ‘threshold debt amount’
is $zero.

threshold
litigation amount means the amount advised by the Bank in writing as the ‘threshold
litigation amount’. If no such figure is advised in writing, the ‘threshold
litigation amount’ is $zero.

transaction
documents  means this Letter of Offer, the Agreement for each facility, the security, any other documents that include (by variation or
novation or otherwise) the terms of any facility
or transaction under them and any other document that the Bank and a Borrower agree is a transaction
document.

term loan facility means
any facility to which the Term
Loan Facility Specific Conditions apply, as stated in the Details.

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 the transaction documents.

trust
means a trust or a settlement.

trust deed
means, in relation to a trust,
the trust deed creating or constituting the trust.

trust documents
means, in relation to a trust,
the trust deed and all other
documents relating to the trust.

unallocated project
contingency means the amount of the ‘project contingency’
as detailed in the development and
construction budget (as amended from time to time with the Bank’s approval) which remains unallocated
at the time of the relevant drawdown notice.

yield rate
has the meaning set out in the Bill Facility Specific Conditions.

(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:

(i)                                     to
a month means a calendar month, and a reference to a quarter means a calendar
quarter, unless otherwise stated;

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

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

(iv)                              to
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)                                 to
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)                              to
the word person includes an individual, a partnership, a joint venture, a body
corporate, a corporation, an association or an authority;

(vii)                           to a
party includes that person’s successors and permitted substitutes or assigns;

(viii)                        to an
asset includes all property of any nature, present or future, tangible or
intangible, such as intellectual property rights, a business and all rights,
revenues and benefits in, under or derived from it;

(ix)                                to
an interest rate means a rate per cent per annum;

 53
 

(x)                                   to
an amount is a reference to an amount in Australian Dollars unless another
currency is specified, in which case it is a reference to an amount in that
specified currency;

(xi)                                in
the General Conditions, Property Conditions or any Specific Conditions to a
clause is a reference to a clause in those General Conditions, Property
Conditions or Specific Conditions (as the case may be) unless otherwise stated.

(e)                        If
something is to be “to the Bank’s satisfaction”,
it must be satisfactory in both form and substance to the Bank, and, if the Bank requires, to the Bank’s legal and financial advisers.

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

(g)                       Nothing in
the Agreement is to be
interpreted against a party solely on the ground that the party put it forward.

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

(i)                           A
director or other person acceptable to the Bank
must certify a document that is given to the Bank to satisfy a condition precedent to
be a true and complete copy of the original document.

20                        Inconsistency

20.1              Precedence of this clause

For the avoidance of doubt, this clause takes
precedence over all transaction documents
in relation to resolving any inconsistencies provided for in the sub-clauses
below.

20.2              Transaction documents

Unless expressly stated, if there is any inconsistency
between any term in this Letter of Offer (in this case, as amended) and a
provision in:

(a)                        a security; or

(b)                       any other transaction document,

the term in this Letter of Offer takes precedence to
the extent of the inconsistency.

20.3              Facilities

Any inconsistency as between the terms of a facility will be resolved, to the extent that it is impossible to
comply with those inconsistent terms, as follows:

(a)                        the Details take precedence over all of the
following;

(b)                       the
Property Conditions take precedence over all of the following;

(c)                        the
Specific Conditions take precedence over all of the following;

(d)                       any
additional documentation referred to in the Special Conditions section of the Details takes precedence over all of the
following;

(e)                        Parts 2 to
5 (inclusive) of this Letter of Offer take precedence over all of the
following;

(f)                          these
General Conditions take precedence over all of the following; and

(g)                       the Guide
to Fees and Charges.

 54
 

Part 8                                          Bill Facility Specific
Conditions

1                               Facility
operation

Subject to all conditions precedent being met, the Borrower may use the facility by obtaining a drawing on each drawdown date.

2                               Procedure
for drawdown

(a)                        Each
time that the Borrower wishes to
request a drawing, the Borrower must give to the Bank, at least 5 banking days prior, a duly completed drawdown notice.  A drawdown
notice, once it is given under this clause, cannot be revoked
without the Bank’s consent.

(b)                       If
a drawdown notice provides that
the Bank is to draw bills under a power of attorney, then the Borrower agrees that the drawdown notice is the instruction to the Bank to draw the bills and clause 5 of these Specific
Conditions will apply for replacement
bills.

(c)                        If
the Borrower is to draw bills prepared by the Bank, then the Borrower must include with each drawdown notice the bills
referred to in it and clause 4 of these Specific Conditions 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 (Cth) 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
facility amount owing would not
exceed the facility limit at any
time; and

(B)                      in
relation to a Bill Facility - Acceptance and Discount – National Flexible Rate
facility, 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; and

(C)                      in
relation to a Bill Facility - Acceptance and Discount - Flexible Drawdown Fixed
Rate facility, the facility amount owing would be at least
equal to the facility floor.

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

3                               Replacement bills

During the term of the facility, provided the Borrower
is not in default and otherwise subject to this Agreement, on the maturity
date of each bill
accepted, discounted or endorsed under the facility
the Borrower may draw a replacement bill having a face value
specified in accordance with clause 6 of these Specific Conditions.

4                               Replacement  bills - not automatic

If the Borrower is to
draw a replacement  bill prepared by the Bank (that is, bills are not drawn by the Bank
under power of attorney), then the Borrower
must deliver to the Bank,
unless otherwise agreed, the drawdown notice
for the replacement bill (and the
replacement bill) at least 5 banking days prior to the drawdown date.

 55
 

5                               Replacement bills - automatic

If the Bank is to
draw bills under power of
attorney then, subject to clause 6 of these Specific Conditions, on the maturity date of each bill accepted, discounted or endorsed
under the facility, the Borrower will be taken to have delivered a
drawdown notice to the Bank for a replacement bill on the same terms as the maturing bill (including, if relevant,
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 7 of these Specific Conditions;

(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 so that its
maturity date is extended to the
next banking day. Any adjustment
to the term of a replacement bill under
this clause will be disregarded for the purpose of calculating the maturity date of subsequent bills; 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 paragraph (b) above may result in the facility
amount owing exceeding the facility
limit at any time, then paragraph (b) above does not apply and the maturity date of the replacement bill will be determined by the
Bank in its discretion to ensure
that the facility limit is not so
exceeded;

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

(e)                        if
this clause applies, for the avoidance of doubt, the Borrower acknowledges that any action the Bank takes pursuant to the Borrower’s instructions under this clause
is not intended to be, and should not be, taken to be a waiver of any right or
remedy that the Bank has in
connection with this Agreement.

6                               Replacement  bills - stopping automatic replacement

If clause 5 of these Specific Conditions applies, the Borrower may subsequently notify the Bank that it does 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 the Bank with
written notice to this effect, in a form acceptable to the Bank. If such notice is received by the Bank at least 5 banking days before the maturity
date of a bill, then
clause 5 of these Specific Conditions will not apply to the bill on that maturity date.

7                               Face
value of replacement  bills

(a)                        The
Borrower may draw replacement bills on a maturity date in accordance with clauses 3
to 6 of these Specific Conditions, 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

 56
 

(ii)                       in
relation to a Bill Facility - Acceptance and Discount - Flexible Drawdown Fixed
Rate facility, such that the facility amount
owing would be at least equal to the facility floor.

However, if clause 5 of these Specific Conditions
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)                   in
relation to a Bill Facility - Acceptance and Discount - National Flexible Rate
facility, the Bank 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).

(b)                       If
the Borrower does not draw replacement bills on the maturity date in accordance with clauses 3
to 6 of these Specific Conditions, subject to this Agreement, the Borrower 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).

(c)                        If
the Borrower draws replacement bills on the maturity date and the Bank does not accept, discount or endorse
the replacement bills pursuant to
clause 1 of these Specific Conditions, the Bank
is no longer obliged to accept any bill
under the facility and the Bank may reduce the facility limit to zero.

8                               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 7(b) and (c) of these Specific Conditions; and

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

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

9                               Non-amortising
facilities

If the facility
is a non amortising facility then
the facility limit reduces in
accordance with clauses 7(b) and (c) of these Specific Conditions.

10                        Discounting
of bills

(a)                        Where
bills are drawn for discounting:

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

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

(iii)                    the term of each bill must be acceptable to the Bank and except as otherwise agreed by the
Bank 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 the Bank agrees.

 57
 

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

(c)                        Proceeds of discount in relation to a bill discounted by the Bank 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 (from and including the issue date of
the bill but excluding the maturity date of the bill); and

R is:

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

(b)                      for
a Bill Facility - Acceptance and Discount - National Flexible Rate facility,
the yield rate for the bill facility component to which the bill is allocated.

11                        Discounting
and replacement of bills

(a)                        If
the Bank has agreed in accordance
with this Agreement to accept a replacement bill, the Borrower’s obligation to pay the Bank the face value of the maturing bill may be satisfied by the Bank:

(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 to the nominated
account.

(b)                       As
an alternative to the procedure outlined in paragraph (a) above, at the Bank’s discretion, if the Bank has agreed to accept a replacement  bill, the Borrower’s
obligation to pay the Bank the
face value of the maturing  bill may be satisfied by the Bank:

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

(ii)                       accepting
the replacement  bill; and

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

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

(v)                      debiting
any applicable fees, charges or premiums payable in respect of that replacement  bill to the nominated
account.

12                        Payment of
bills

(a)                        The
Borrower must pay to the Bank the face value of a bill accepted, discounted or endorsed by
the Bank on its maturity date.

(b)                       The
Borrower’s obligations in
relation to a bill so drawn and
accepted, discounted or endorsed continue despite the fact that the Bank is or becomes the holder of the bill in its own right on or after the bill’s maturity date.

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

 58

(d)                       The
Borrower may not prepay any bill accepted, discounted or endorsed by
the Bank under the facility without the prior written
agreement of the Bank.

13                        Power of
attorney

(a)                        If
a drawdown notice in relation to
the facility provides that the Bank is to draw bills under a power of attorney, the Borrower irrevocably appoints the Bank to be its attorney on its behalf and
in its 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)                       The
Borrower agrees that:

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

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

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

(iv)                   the
Borrower indemnifies the Bank and the Bank’s officers against any liability, loss or costs (including consequential or economic
loss) the Bank 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 the Bank need
be concerned to see or enquire as to the propriety or expediency of anything
which the Bank may do, purport to
do or perform in the Borrower’s name
by virtue of this power of attorney; and

(vi)                   the
Borrower will ratify and confirm
all that the Bank lawfully does
or causes to be done by virtue of this power of attorney.

14                        Cancellation
by the Borrower

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

(b)                       If
the Borrower gives notice under
this clause then:

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

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

15                        Economic
costs and economic benefits

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

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

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

 59
 

(i)                          increases
of profits or returns or other gains associated with an early termination of a bill under the bill facility, calculated by reference to the date of the economic event and the remainder of the
term to maturity of the bill; 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 the Bank (either generally in the course of
the Bank’s business or
specifically in connection with this
Agreement) to fund or maintain the facility
or to hedge, fix or limit the Bank’s
effective cost of funding in relation to the facility.

(d)                       Economic costs will be determined and
become payable under clause 4 of the General Conditions.

16                        Additional
consequences on default

If the Borrower is
in default under this Agreement
then, in addition to any other rights and obligations under the General
Conditions:

(a)                        the
Bank can immediately cancel or
otherwise terminate the facility;

(b)                       if
on the day when the Borrower makes
a payment required under clause 7 of the General 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 the Bank agrees to deposit that portion in an
interest bearing deposit account on terms which the Bank thinks fit. The deposit may be made with any person the
Bank decides (including, without
limitation, the Bank);

(c)                        when a bill is subsequently presented for payment,
the Bank agrees to apply the
portion referred to in paragraph (b) above towards paying the holder of that bill; and

(d)                     after
all of the Borrower’s and the Bank’s obligations (contingent or
otherwise) under any bill have
been satisfied, the Bank will pay
to the Borrower the amount which
the Bank certifies is that part
of the deposited amount which remains and the interest earned on it (net of the
Bank’s income tax liability in
connection with those earnings).

17                        Rate
advice

(a)                        The yield rate applying on a drawdown date under the facility will be confirmed in writing
within 7 banking days after the drawdown date, except as set out in
paragraph (b) below.

(b)                       For
a Bill Facility - Acceptance and Discount - National Flexible Rate facility,
the weighted average of all yield rates
applying to the bill components
on a drawdown date under the facility will be confirmed in writing
within 7 banking days after the drawdown date. Details of individual yield
rates are available on request.

(c)                        If
these Specific Conditions provide that the Bank
is to advise the Borrower of
a rate, the Borrower may contact
the Bank before the first drawing is made under the facility to ascertain the rate that will
apply. The rate quoted by the Bank
will apply if the Borrower makes
its first drawing by 4.30pm on
the day of the quote. If this condition is not satisfied, the quote lapses and
the quoted rate does not apply.

(d)                       If
a rate for a bill facility is
stated in the Details to be ‘indicative
only’, that rate is an indication of the rate which may apply and is only a
guide - the actual rate may have changed by the time a rate is quoted or
otherwise calculated in accordance with the
Agreement.

18                        Confirmations
/ Drawdown Schedules

If this Agreement specifies
that certain Details are to be
confirmed in writing or set out in a Drawdown
Schedule and the Borrower
believes that the relevant confirmation or Drawdown
Schedule contains any error, then the Borrower must tell the Bank
within 5 banking days of the Borrower receiving it.

19                        Debiting
and crediting amounts

Except as otherwise provided in these Specific
Conditions, and subject to this Agreement,
the Bank may:

 60
 

(a)                        credit any
amount payable to the Borrower in
relation to the facility; and

(b)                       debit all
amounts payable by the Borrower in
relation to the facility,
including fees, charges or premiums, taxes, enforcement expenses and any amount
payable under an indemnity,

to the nominated
account.

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

(a)                        The
Borrower has the option to enter
into a fixed rate bill  facility having the characteristics set
out in the Details.

(b)                       To
exercise the option, the Borrower must
send the Bank, before 3.00 pm
(Melbourne time) on the exercise date,
a notice in a form acceptable to the Bank in
the Bank’s discretion. Once
given, this notice is irrevocable unless the Bank
otherwise agrees in its discretion.

(c)                        The
Bank is not obliged to act in
accordance with a notice given by the Borrower
under paragraph (b) above if the Bank
considers that any of the conditions precedent set out in this Agreement are not satisfied.

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

(e)                        The
Borrower may give the Bank notice offering to surrender all or
part of the option. Unless otherwise confirmed by the Borrower, an offer to surrender will be
taken as an offer to surrender the whole of the option. The Bank may reject an offer to surrender in
its 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 the Borrower in respect of the surrender, when
such amount is paid. The Borrower will
then be taken to have surrendered its rights in respect of the option (or, if a
partial surrender, the agreed part) and to have released the Bank from any further obligation in
respect of the option (or, if a partial surrender, the agreed part). Any notice
given by the Bank 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
the Borrower in accordance with
paragraphs (b)-(c) below at the time the Borrower
provides the Bank with
a drawdown notice for that bill; or

(ii)                       by
the Bank in accordance with
clause 7 of these Specific Conditions.

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

(i)                          the
Borrower 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)                       the
Borrower 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 the Borrower 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.

 61
 

22                        Bill
Facility - Acceptance / Endorsement

(a)                        Where
bills are not to be discounted by
the Bank, the Bank agrees to make available to the Borrower bills accepted or endorsed under
the facility by the time and in
the place specified in the Details.

(b)                       If
the Bank is specified as a paying
agent in the Details, the Borrower authorises the Bank to pay the face value of a bill drawn under the facility in accordance with its terms and
conditions on the Borrower’s behalf
to the person presenting the bill for
payment.

23                        Late
Presentation Fee

A Late Presentation Fee is payable by the Borrower 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 the Bank
determines 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

(a)                        For the
purposes of these Specific Conditions:

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

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

cap rate means the
rate specified as such in the Details,
or if the rate is not specified in the Details
or if it is specified as being indicative only, the rate advised to
the Borrower as such before the
first drawing under the facility and later confirmed in writing.

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

conversion rate
means the rate specified as such in the Details,
or if the rate is not specified in the Details
or if it is specified as being indicative only, the rate advised to the Borrower as such before the first drawing under the facility and later confirmed in writing.

down and out rate means
the rate specified as such in the Details,
or if the rate is not specified in the Details
or if it is specified as being indicative only, the rate advised to the Borrower as such before the first drawing under the facility and later confirmed in writing.

Drawdown Schedule
means a document by that name issued by the Bank.

economic benefits
is the amount determined in accordance with clause 15 of these Specific
Conditions.

exercise date means
the date, if any, specified as such in the Details.

fixed rate means
the rate specified as such in the Details,
or if the rate is not specified in the Details
or if it is specified as being indicative only, the rate advised to the Borrower as such before the first drawing under the facility and later confirmed in writing.

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

floating rate means
on a drawdown date the rate at
which the Bank is prepared to
purchase bills accepted,
discounted or endorsed by the Bank 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, but
which is fixed during the term of the bills to
which it applies.

floor rate means
the rate specified as such in the Details,
or if the rate is not specified in the Details
or if it is specified as being indicative only, the rate advised to the Borrower as such before the first drawing under the facility and later confirmed in writing.

floor/cap rate means
on a drawdown date:

 62
 

(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.

maturing bill means
a bill maturing on a maturity date.

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

participation rate
means the rate specified as such in the Details,
or if the rate is not specified in the Details
or if it is specified as being indicative only, the rate advised to the Borrower as such before the first drawing under the facility and later confirmed in writing.

proceeds of discount has
the meaning given to it in clause 10 of these Specific Conditions.

rebate rate means
the rate specified as such in the Details,
or if a rate is not specified in the Details
or if it is specified as being indicative only, the rate advised to the Borrower as such before the first drawing under the facility and later confirmed in writing.

replacement bill means
a bill replacing a maturing  bill.

trigger rate means
the rate specified as such in the Details,
or if the rate is not specified in the Details
or if it is specified as being indicative only, the rate advised to the Borrower as such before the first drawing under the facility and later confirmed in writing.

yield rate, in
relation to a facility, has the
meaning described in the Details.

(b)                       The
definitions of other terms used in these Specific Conditions are in the General
Conditions.

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Part 9                                          Bank Guarantee Facility
Specific Conditions

1                               Issue
of Bank Guarantees

(a)                        Subject
to all conditions precedent being met, the Borrower
may apply for the Bank to
issue a bank guarantee to a beneficiary on or before the date issued, but only if the Borrower has submitted a complete and
properly authorised bank guarantee
request in the form required by the Bank from
time to time.

(b)                       The
Bank may accept or reject an
application for a bank guarantee
in its discretion.

2                               Nominated
account

The Bank may
debit the nominated account with
any amounts payable by the Borrower in
relation to the facility including
any amounts paid by the Bank under
a bank guarantee, interest, fees
and charges, taxes, enforcement expenses, economic costs and amounts payable by
the Borrower under an indemnity.

3                               Indemnity

(a)                        In
addition to any other indemnity obligations in this Agreement, the Borrower indemnifies
the Bank in respect of any amount
the Bank pays to a beneficiary under a bank guarantee. Any amount the Borrower must pay the Bank under this clause is payable in
Australian dollars and becomes due and payable upon the earlier of:

(i)                          the
Bank making payment under a bank guarantee; or

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

(iii)                    an event
of default occurring under this Letter of Offer.

(b)                     If
the Bank pays any amount to a beneficiary in a foreign currency, for the
purposes of calculating the amount the Borrower
must pay the Bank under
this clause, the foreign currency amount will be converted to Australian
Dollars at the spot rate of exchange quoted by the Bank on the day the Bank makes
the payment to the beneficiary.

4                               Payment
of Bank Guarantee without demand

The Bank may,
at any time, end its 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) the Bank is,
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 the Bank by that beneficiary.

5                               Partial
payments

The Borrower agrees
that if a demand is made by a beneficiary
for a partial payment of the guaranteed
amount, the Bank may
at its discretion and without further reference to the Borrower, 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 the Bank’s
discretion. The Borrower agrees
that this Agreement applies to
any replacement bank guarantee
issued under this clause.

6                               No
obligation to enquire

The Borrower irrevocably
authorises the Bank to
immediately pay any amount demanded at any time under a bank guarantee.  The Borrower
agrees that the Bank:

(a)                        need
not first refer to the Borrower or
obtain the Borrower’s authority
for the payment;

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

(c)                        may
meet any demand even though the Borrower disputes
the validity of the demand.

7                               Return
of Bank Guarantees

The Borrower must
return to the Bank a bank guarantee if it is given to the Borrower by the beneficiary on production of a bill of lading or otherwise.

 64
 

8                               Amounts
paid on default

(a)                        If,
on a day when the Borrower makes
a payment required under clause 7 of the General 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 the Bank agrees to deposit
that portion in an interest bearing deposit account on terms which the Bank considers appropriate (which may
include making the deposit with the Bank).

(b)                       The
Bank agrees:

(i)                                     to
use the amount deposited under paragraph (b) above towards paying a beneficiary of a bank guarantee when the beneficiary demands payment of moneys the Bank is liable to pay under the bank guarantee; and

(ii)                                  after
all of the Borrower’s and the Bank’s obligations (contingent or
otherwise) under any bank guarantee
have been satisfied, to pay to the Borrower the
amount which the Bank certifies
is that part of the deposited amount which remains and the interest earned on
it (net of the Bank’s income tax
liability in connection with those earnings).

 65
 

Acceptance of Letter of Offer

To accept this Letter of
Offer, each Borrower must sign
the duplicate and return it to the Bank before
the deadline for acceptance set out in the section titled “Offer Period” at the
beginning of this Letter of Offer.

If provision is made for security provider/s to sign this letter of
offer, then each security provider
must also sign the duplicate and return it to the Bank before the deadline for acceptance set out in the
section titled “Offer Period” at the beginning of this Letter of Offer.

In accepting this Letter
of Offer by executing this document, the Borrower:

1.                                      accepts
the Bank’s offer set out in this
Letter of Offer; and

2.                                      acknowledges
and confirms that before indicating that the Borrower
intends to be bound, the Borrower
has;

(i)                                     read
this Letter of Offer; and

(ii)                                  received
and read a copy of each document that forms part of each Agreement; and

3.                                      acknowledges
and agrees that the other facilities
are varied as contemplated in Part 1 of this Letter of Offer; and

4.                                      acknowledges
and agrees that each security provided
by the Borrower to support any of
the facilities provided by the Bank is, and remains in full force and
effect, and continues to secure all present and future obligations of the Borrowers, and the security providers to the Bank including obligations in respect of  those facilities
and the other facilities as
amended by this Letter of Offer; and

5.                                      declares
that it understands and agrees that any mortgaged or secured property will be
at risk if any Borrower or any security provider defaults; and

6.                                      declares
that all information given by it to the Bank
is accurate and not misleading (by omission or otherwise), and the Borrower acknowledges that the Bank is relying on that information; and

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

3 Healey Circuit, Huntingwood NSW
2148; and

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

 

	
  Yours sincerely,

  	
   

  
	
  /s/ Graeme
  Johnson

  	
   

  
	
  Graeme
  Johnson

  	
   

  
	
  Associate
  Director

  	
   

  

 

 66
 

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

Companies Executing without using a Common Seal

	
  Executed By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Channell Bushman Pty Limited ABN 99 109 821 614

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By being signed
  by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ N. J.
  Morganti

  	
   

  	
  /s/ Amar Kulkarni

  
	
  Signature of
  Director

  	
   

  	
  Signature of Director/Secretary

  
	
   

  	
   

  	
   

  
	
  Nick J. Morganti

  	
   

  	
  Amar Kulkarni

  
	
  Name of Director

  	
   

  	
  Name of Director/Secretary

  
	
   

  	
   

  	
   

  
	
  16

  	
  /

  	
  05

  	
  /

  	
  2007

  	
   

  	
   

  	
  16

  	
  /

  	
  05

  	
  /

  	
  2007

  	
   

  
	
  Date

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Executed By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Bushmans Group Pty Limited ABN 90 090 744 022

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By being signed
  by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ N. J.
  Morganti

  	
   

  	
  /s/ Amar Kulkarni

  
	
  Signature of
  Director

  	
   

  	
  Signature of Director/Secretary

  
	
   

  	
   

  	
   

  
	
  Nick J. Morganti

  	
   

  	
  Amar Kulkarni

  
	
  Name of Director

  	
   

  	
  Name of Director/Secretary

  
	
   

  	
   

  	
   

  
	
  16

  	
  /

  	
  05

  	
  /

  	
  2007

  	
   

  	
   

  	
  16

  	
  /

  	
  05

  	
  /

  	
  2007

  	
   

  
	
  Date

  	
   

  	
  Date

  

 

 67
 

 

	
  Executed By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Channell Pty Limited ABN 29 002 735 622

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By being signed
  by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ N. J.
  Morganti

  	
   

  	
  /s/ Amar Kulkarni

  
	
  Signature of
  Director

  	
   

  	
  Signature of Director/Secretary

  
	
   

  	
   

  	
   

  
	
  Nick J. Morganti

  	
   

  	
  Amar Kulkarni

  
	
  Name of Director

  	
   

  	
  Name of Director/Secretary

  
	
   

  	
   

  	
   

  
	
  16

  	
  /

  	
  05

  	
  /

  	
  2007

  	
   

  	
   

  	
  16

  	
  /

  	
  05

  	
  /

  	
  2007

  	
   

  
	
  Date

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Executed By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Bushmans Engineering Pty Limited ABN 49 074 185
  461

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By being signed
  by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ N. J.
  Morganti

  	
   

  	
  /s/ Amar Kulkarni

  
	
  Signature of
  Director

  	
   

  	
  Signature of Director/Secretary

  
	
   

  	
   

  	
   

  
	
  Nick J. Morganti

  	
   

  	
  Amar Kulkarni

  
	
  Name of Director

  	
   

  	
  Name of Director/Secretary

  
	
   

  	
   

  	
   

  
	
  16

  	
  /

  	
  05

  	
  /

  	
  2007

  	
   

  	
   

  	
  16

  	
  /

  	
  05

  	
  /

  	
  2007

  	
   

  
	
  Date

  	
   

  	
  Date

  

 

 68
 

 

	
  Executed By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Polyrib Tanks Pty Limited ABN 49 062 942 661

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By being signed
  by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ N. J.
  Morganti

  	
   

  	
  /s/ Amar Kulkarni

  
	
  Signature of
  Director

  	
   

  	
  Signature of Director/Secretary

  
	
   

  	
   

  	
   

  
	
  Nick J. Morganti

  	
   

  	
  Amar Kulkarni

  
	
  Name of Director

  	
   

  	
  Name of Director/Secretary

  
	
   

  	
   

  	
   

  
	
  16

  	
  /

  	
  05

  	
  /

  	
  2007

  	
   

  	
   

  	
  16

  	
  /

  	
  05

  	
  /

  	
  2007

  	
   

  
	
  Date

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Executed By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Australian Bushman Tanks Pty Limited ABN 21 058
  504 108

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By being signed
  by:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ N. J.
  Morganti

  	
   

  	
  /s/ Amar Kulkarni

  
	
  Signature of
  Director

  	
   

  	
  Signature of Director/Secretary

  
	
   

  	
   

  	
   

  
	
  Nick J. Morganti

  	
   

  	
  Amar Kulkarni

  
	
  Name of Director

  	
   

  	
  Name of Director/Secretary

  
	
   

  	
   

  	
   

  
	
  16

  	
  /

  	
  05

  	
  /

  	
  2007

  	
   

  	
   

  	
  16

  	
  /

  	
  05

  	
  /

  	
  2007

  	
   

  
	
  Date

  	
   

  	
  Date

  

 

 69Exhibit
4.1

 

QWEST CORPORATION

6.5% Notes due 2017

 

Fifth Supplemental Indenture

Dated as of May 16, 2007

 

 

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

 

TABLE OF CONTENTS

	
  

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE ONE

  
	
   

  	
   

  
	
  THE NOTES

  
	
   

  
	
  Section 1.01

  	
  Designation of Notes

  	
  2

  
	
  Section 1.02

  	
  Other Terms of the Notes

  	
  3

  
	
   

  	
   

  
	
  ARTICLE TWO

  
	
   

  	
   

  
	
  MISCELLANEOUS

  
	
   

  
	
  Section 2.01

  	
  Amendment and Supplement

  	
  3

  
	
  Section 2.02

  	
  Indenture

  	
  3

  
	
  Section 2.03

  	
  Governing Law

  	
  3

  
	
  Section 2.04

  	
  No Adverse Interpretation of Other Agreements

  	
  3

  
	
  Section 2.05

  	
  Successors and Assigns

  	
  3

  
	
  Section 2.06

  	
  Duplicate Originals

  	
  3

  
	
  Section 2.07

  	
  Severability

  	
  4

  
	
   

  	
   

  
	
  Exhibits

  	
   

  
	
   

  	
   

  
	
  Exhibit A

  	
  -

  	
  Form of Note

  	
   

  
	
  Exhibit A-1

  	
  -

  	
  Form of Certificate to be delivered in connection
  with transfers pursuant to Temporary Regulation S Global Note

  	
   

  
	
  Exhibit A-2

  	
  -

  	
  Form of Certificate to be delivered in connection
  with transfers pursuant to Regulation S

  	
   

  
					

 

 i

FIFTH SUPPLEMENTAL INDENTURE dated as of May 16, 2007
(this “Supplemental Indenture”) by and between
QWEST CORPORATION, a Colorado corporation (formerly known as U S WEST
Communications, Inc.) (the “Company”), and
U.S. BANK NATIONAL ASSOCIATION, as trustee under the Indenture (as defined
below) with respect to the Notes (as defined below) (the “Trustee”),
as supplemented by the First Supplemental Indenture (as defined below), the
Second Supplemental Indenture (as defined below), the Third Supplemental Indenture
(as defined below) and the Fourth Supplemental Indenture (as defined below). The
Trustee, and each other trustee appointed as such with respect to the
Securities of any series issued under the Indenture (as defined below), shall
be the “Trustee” (as defined in the Indenture, as supplemented hereby) for all
purposes under the Indenture with respect to the applicable series of
Securities but, for the avoidance of doubt, not with respect to any series of
Securities for which such Trustee has not been appointed trustee under the
terms of the Indenture and/or any supplement thereto).

Each party agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the holders of Notes:

WHEREAS, the Company and Bank of New York Trust Company,
National Association (as successor in interest to Bank One Trust Company,
National Association), are parties to that certain Indenture dated as of
October 15, 1999 (the “Base Indenture,”
and as supplemented by the First Supplemental Indenture, the Second
Supplemental Indenture, the Third Supplemental Indenture, the Fourth
Supplemental Indenture and this Fifth Supplemental Indenture, the “Indenture”) providing for the issuance from time to time of
senior debt securities (“Securities”) to
be issued in one or more series;

WHEREAS, the Company and the Trustee are parties to
the First Supplemental Indenture (the “First Supplemental
Indenture”) dated as of August 19, 2004, providing for the issuance
by the Company of a series of Securities, designated as its 7.875% Notes due
2011, in an aggregate principal amount of $575,000,000.

WHEREAS, the Company and the Trustee are parties to
the Second Supplemental Indenture (the “Second Supplemental
Indenture”) dated as of November 23, 2004, providing for the issuance
by the Company of Additional Notes of its series of Securities designated as
its 7.875% Notes due 2011, in an aggregate principal amount of $250,000,000.

WHEREAS, the Company and the Trustee are parties to
the Third Supplemental Indenture (the “Third Supplemental
Indenture”) dated as of June 17, 2005, providing for the issuance by
the Company of a series of Securities designated as its 7.625% Notes due 2015,
in an aggregate principal amount of $400,000,000 and a series of Securities
designated as its Floating Rate Notes due 2013, in an aggregate principal
amount of $750,000,000.

WHEREAS, the Company and the Trustee are parties to
the Fourth Supplemental Indenture (the “Fourth Supplemental
Indenture”) dated as of August 8, 2006, providing for the issuance
by the Company of a series of Securities designated as its 7.5% Notes due 2014,
in an aggregate principal amount of $600,000,000.

WHEREAS, the Company desires and has requested the
Trustee to join it in the execution and delivery of this Supplemental Indenture
in order to establish and provide for the issuance by the Company of a series
of Securities, designated as its 6.5% Notes due 2017 (the “Notes”)
in an initial aggregate principal amount of $500,000,000. The Notes shall be
substantially in the form attached hereto as Exhibit A.

WHEREAS, Section 9.01 of the Base Indenture
provides that a supplemental indenture may be entered into by the Company and
the Trustee without the consent of any Holders to establish the form or terms
of Securities of any Series as permitted by Section 2.02 of the Base Indenture;

WHEREAS, the conditions set forth in the Indenture for
the execution and delivery of this Supplemental Indenture have been complied
with; and

WHEREAS, all things necessary to make this
Supplemental Indenture a valid agreement of the Company and the Trustee, in
accordance with its terms, and a valid amendment of, and supplement to, the
Indenture have been done.

NOW, THEREFORE, in consideration of the premises and
the purchase and acceptance of the Notes by the holders thereof, the Company
covenants and agrees with the Trustee, for the equal and ratable benefit of the
Holders, that the Indenture is supplemented and amended, to the extent
expressed herein, as follows:

ARTICLE
ONE

THE NOTES

Section 1.01                                                   Designation
of Notes.

The changes, modifications and supplements to the
Indenture effected by this Supplemental Indenture shall be applicable only with
respect to, and govern the terms of the Notes, which shall not be limited in
aggregate principal amount, and shall not apply to any other Securities that
have been or may be issued under the Indenture unless a supplemental indenture
with respect to such other Securities specifically incorporates such changes,
modifications and supplements. Pursuant to this Supplemental Indenture, there
is hereby created and designated a series of Securities under the Indenture
entitled “6.5% Notes due June 1, 2017.” The Notes shall be in the form of Exhibit
A hereto. The Notes may bear an appropriate legend regarding original issue
discount for federal income tax purposes. Subject to the terms in the
Indenture, as supplemented by this Supplemental Indenture, the Company may, at
its option, without consent from the Holders, issue additional Notes from time
to time. For all purposes under the Indenture, the term “Notes” shall include
the Notes initially issued on the date of original issuance of the Notes and
any other Notes issued after such date under the Indenture, as supplemented
hereby.

 2
 

Section 1.02                                                   Other
Terms of the Notes.

Without limiting the foregoing provisions of this
Article One, the terms of the Notes shall be as set forth in the form of Note
set forth in Exhibit A hereto and as provided in the Indenture.

The Notes shall be payable and may be presented for
payment, purchase, conversion, registration of transfer and exchange, without
service charge, at the office of the Company maintained for such purpose in New
York, New York, which shall initially be the office or agency of the Trustee.

ARTICLE
TWO

MISCELLANEOUS

Section 2.01                                                   Amendment
and Supplement.

This Supplemental Indenture or the Notes may be
amended or supplemented as provided for in the Indenture.

Section 2.02                                                   Indenture.

In the event of any conflict between this Supplemental
Indenture and the Indenture, the provisions of this Supplemental Indenture
shall prevail.

Section 2.03                                                   Governing
Law.

The laws of the State of New York shall govern this
Supplemental Indenture and the Securities of the Series created hereby.

Section 2.04                                                   No
Adverse Interpretation of Other Agreements.

This Supplemental Indenture may not be used to
interpret another indenture, loan or debt agreement of the Company or a
Subsidiary. Any such indenture, loan or debt agreement may not be used to
interpret this Supplemental Indenture.

Section 2.05                                                   Successors
and Assigns.

All covenants and agreements of the Company in this
Supplemental Indenture and the Notes shall bind its successors and assigns. All
agreements of the Trustee in this Supplemental Indenture shall bind its
successors and assigns.

Section 2.06                                                   Duplicate
Originals.

This Supplemental Indenture may be executed in
counterparts, each of which shall be an original, but such counterparts shall
together constitute but one instrument.

 3
 

Section 2.07                                                   Severability.

In case any one or more of the provisions contained in
this Supplemental Indenture or in the Notes shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Supplemental
Indenture or of the Notes.

[Signature Pages
Follow]

 4

SIGNATURES

IN WITNESS WHEREOF, the parties have caused this
Supplemental Indenture to be duly executed, all as of the date first above
written.

	
  

  	
  QWEST CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Janet K. Cooper

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President - Finance and

  
	
   

  	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

 S-1

Exhibit A

[THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE
FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS
NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO
TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY
TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE
DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”),
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

EXCEPT AS OTHERWISE PROVIDED IN SECTION 2.15 OF THE
INDENTURE, TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.08 OF THE INDENTURE.](1)

THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933 (THE ‘‘SECURITIES ACT’’) AND MAY NOT
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING
WITH

(1)                                  This
legend to appear only on Global Notes.

 A-1
 

RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTIONAL
ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS.

[THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR
PURPOSES OF REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”). NEITHER THIS TEMPORARY GLOBAL NOTE NOR ANY
INTEREST HEREIN MAY BE OFFERED, SOLD OR DELIVERED, EXCEPT AS PERMITTED UNDER
THE INDENTURE REFERRED TO BELOW.

NO BENEFICIAL OWNERS OF
THIS TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF PRINCIPAL OR
INTEREST HEREON UNLESS THE REQUIRED CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT
TO THE TERMS OF THE INDENTURE.](2)

(2)                                  This
legend to appear only on Temporary Regulation S Global Notes.

 A-2
 

 

	
  No.

  	
  PRINCIPAL AMOUNT

  
	
  CUSIP No.

  	
   

  

 

QWEST CORPORATION

6.5% Note due 2017

QWEST CORPORATION, a corporation duly organized and
existing under the laws of the State of Colorado (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being
herein called the “Company”), for
value received, hereby promises to pay to Cede & Co., or registered
assigns, the principal sum of [               ]
DOLLARS ($[            ])
(or such lesser amount as shall be listed on the Schedule of Increases or Decreases
in Global Note attached hereto) on June 1, 2017 (the “Maturity
Date”), unless previously redeemed on any redemption date, by wire
transfer of immediately available funds of such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts and to pay interest thereon semiannually on
each June 1 and December 1, commencing December 1, 2007 (each, an “Interest Payment Date”), and on the Maturity Date at the
rate per annum specified in the title of this Note, from May 16, 2007 (or
from the most recent Interest Payment Date to which interest has been paid or duly
provided for) until payment of said principal sum has been made or duly
provided for. Notwithstanding the foregoing, if the Company shall default in
the payment of interest due on any Interest Payment Date, then this Note shall
bear interest from the most recent Interest Payment Date to which interest has
been paid or duly provided for or, if no interest has been paid on this Note or
duly provided for, from May 16, 2007. The interest so payable on any
Interest Payment Date, subject to certain exceptions provided in the Indenture
referred to herein, will be paid to the person in whose name this Note shall be
registered at the close of business on each May 15 and November 15 immediately
prior to such Interest Payment Date, Maturity Date or redemption date. If any
Interest Payment Date, Maturity Date or redemption date is a Legal Holiday (as
defined in the Indenture) in New York, New York, the required payment shall be
made on the next succeeding day that is not a Legal Holiday as if it was made
on the date such payment was due and no interest will accrue on the amount so
payable for the period from and after such Interest Payment Date or Maturity
Date, as the case may be, to such next succeeding day. Interest will be computed
on the basis of a 360-day year consisting of twelve 30-day months.

This Note is one of the duly authorized series of
Securities of the Company, designated as the Company’s “6.5% Notes due 2017”
(the “Notes”), initially limited to the aggregate
principal amount of $500,000,000 all issued or to be issued under and pursuant
to an Indenture dated as of October 15, 1999 between the Company and The Bank
of New York Trust Company, N.A., as trustee (as successor in interest to Bank
One Trust Company, N.A.), as supplemented by the First Supplemental Indenture
dated as of August 19, 2004 by and between the Company and U.S. Bank
National Association, as trustee (the “Trustee”), the
Second Supplemental Indenture dated as of November 23, 2004 between the Company
and the Trustee, the Third Supplemental Indenture dated as of June 17, 2005
between the Company and the Trustee, the Fourth Supplemental Indenture dated as
of August 8, 2006 between the Company and the Trustee and the Fifth
Supplemental Indenture dated as of May 16, 2007 between the Company and the
Trustee as such

 A-3
 

may be amended, modified or supplemented from time to
time (as so amended, modified or supplemented, the “Indenture”),
to which Indenture and all Indentures supplemental thereto reference is hereby
made for a description of the rights, limitation of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the Holders (the
words “Holders” or “Holder”
meaning the registered holders or registered holder of the Notes). Exchange
Notes (as such term is defined in the Registration Rights Agreement referred to
below) shall be deemed to be of the same series as the Notes for purposes of
the Indenture.

Pursuant to, but subject to the exceptions in, the
Registration Rights Agreement dated as of May 16, 2007 among the Company and
the Initial Purchasers named therein (as the same may be amended from time to
time, the “Registration Rights Agreement”), the
Company shall be obligated to use its commercially reasonable efforts to
consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for a 6.5% Note due June 1, 2017 of the
Company which shall have been registered under the Securities Act of 1933, as
amended, in like principal amount and having terms identical in all material respects
to this Note (except that such Note shall not be entitled to Additional
Interest (as defined in the Registration Rights Agreement) and shall not
contain terms with respect to transfer restrictions). Holders shall be entitled
to receive certain Additional Interest in the event of a Registration Default
(as defined in the Registration Rights Agreement) pursuant to and in accordance
with the terms of the Registration Rights Agreement. Any Additional Interest
due will be payable in cash on the next succeeding June 1 or December 1, as the
case may be, to Holders on the relevant regular record dates for the payment of
interest. The Company shall promptly provide the Trustee with notice of any
change in the interest rate borne by this Note.(3)

The Notes shall be redeemable at the option of the
Company in whole at any time or in part from time to time, at a redemption
price equal to the greater of (i) 100% of the principal amount of the
Notes to be redeemed or (ii) the sum, as determined by the Quotation Agent
(as defined below), of the present values of the principal amount of the Note
to be redeemed and the remaining scheduled payments of interest on the
principal amount of this Note to be redeemed from the redemption date to June
1, 2017 (excluding interest accrued to the redemption date) (the “Remaining Life”), discounted from their respective scheduled
payment dates to the redemption date on a semiannual basis (assuming a 360-day
year consisting of 30-day months) at the Treasury Rate (as defined below) plus
50 basis points, plus, in either case, accrued interest thereon to the date of
redemption.

If money sufficient to pay the redemption price of and
accrued interest on all of the Notes (or portions thereof) to be redeemed on
the redemption date is deposited with the Trustee or paying agent on or before
the redemption date and certain other conditions specified in the Indenture are
satisfied, then on and after such redemption date, interest will cease to
accrue on such Notes (or such portion thereof) called for redemption.

(3)                                  This
paragraph not to appear on Exchange Notes.

 A-4
 

“Comparable Treasury Issue”
means the United States Treasury security selected by the Quotation Agent as having
a maturity comparable to the Remaining Life that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing
new issues of corporate debt securities of comparable maturity with the Remaining
Life as of the applicable redemption date. “Comparable Treasury Price” means,
with respect to any redemption date, the average of two Reference Treasury
Dealer Quotations for such redemption date.

“Quotation Agent”
means the Reference Treasury Dealer appointed by the Company.

“Reference Treasury Dealer”
means each of J.P. Morgan Securities Inc., Banc of America Securities LLC and
Merrill Lynch, Pierce, Fenner & Smith Incorporated and their successors;
provided, however, that if any of the foregoing ceases to be a primary U.S.
Government securities dealer in New York City, the Company will substitute
therefor another primary U.S. Government securities dealer.

“Reference Treasury Dealer
Quotations” means, with respect to each Reference Treasury Dealer
and any redemption date, the average, as determined by the Trustee, of the bid
and asked prices for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the Trustee by such
Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
business day preceding such redemption date.

“Treasury Rate”
means, with respect to any redemption date, the rate per annum equal to the
semiannual yield to maturity of the Comparable Treasury Issue, calculated on
the third business day preceding such redemption date using a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such redemption date.

Notice of any redemption will be mailed not less than
15 nor more than 60 calendar days before the redemption date to the Holder
hereof at its registered address. Unless the Company defaults in payment of the
redemption price, on and after the redemption date interest will cease on the
principal amount of this Note.

In case an Event of Default shall occur and be continuing,
the principal hereof may be declared, and upon such declaration shall become,
due and payable in the manner, with the effect and subject to the conditions
provided in the Indenture.

The Indenture contains provisions permitting the
Company and the Trustee, with the written consent of the Holders of a majority
in principal amount of the outstanding Securities of each series affected by a
supplemental indenture (with each series voting as a class), to enter into a
supplemental indenture to add any provisions to or to change or eliminate any
provisions of the Indenture or of any supplemental indenture or to modify, in
each case in any manner not covered by provisions in the Indenture relating to
amendments and waivers without the consent of Holders, the rights of the
Holders of each such series. The Holders of a majority in principal amount of
the outstanding Securities of each series affected by such waiver (with each
series voting as a class), by notice to the Trustee may waive compliance by the
Company with any

 A-5
 

provision of the Indenture, any supplemental indenture
or the Securities of any such series, except a Default in payment of the
principal of or interest on any Security. However, without the consent of each
Holder affected, an amendment or waiver may not: (1) reduce the amount of
Notes whose Holders must consent to an amendment or waiver; (2) change the
rate or the time for payment of interest on any Security; (3) change the
principal or the fixed maturity of any Security; (4) waive a Default in
the payment of principal, premium, if any, or interest on any Security;
(5) make any Security payable in money other than that stated in the
Security; or (6) make any change in the provisions of the Indenture
(i) with respect to the rights of the Holders of a majority in principal
amount of any series of Securities, by notice to the Trustee, to waive an
existing Default with respect to that series and its consequences;
(ii) with respect to the right of any Holder of a Security to receive
payment of principal of and interest on the Security, on or after the
respective due dates expressed in the Security, the right of any Holder of a
coupon to receive payment of interest due as provided in such coupon, or the
right to bring suit for enforcement of any such payments on or after their
respective dates; and (iii) described in this sentence.

No reference herein to the Indenture and no provision
of this Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, premium,
if any, and interest on this Note at the place, at the respective times, at the
rate, and in the coin or currency herein prescribed.

No director, officer, employee or stockholder, as
such, of the Company shall have any liability for any obligations of the
Company under this Note or the Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. Each Holder, by
accepting this Note, waives and releases all such liability. The waiver and
release are part of the consideration for the issue of this Note.

The laws of the State of New York shall govern the
Indenture and this Note.

Ownership of this Note shall be proved by the register
for the Notes kept by the Registrar. The Company, the Trustee and any agent of
the Company may treat the person in whose name a Note is registered as the
absolute owner thereof for all purposes.

Terms used herein without definition that are defined
in the Indenture shall have the meanings assigned to them in the Indenture.

Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entirety), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).

Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.

 A-6
 

Unless the Certificate of Authentication hereon has
been executed by the Trustee under the Indenture referred to herein by the
manual or facsimile signature of one of its authorized officers, or on behalf
of the Trustee by the manual or facsimile signature of an authorized officer of
the Trustee’s authenticating agent, this Note shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.

 A-7
 

IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed, manually or by facsimile, and its corporate
seal or a facsimile of its corporate seal to be imprinted herein.

	
  Date: May 16, 2007

  	
   

  
	
   

  	
   

  
	
   

  	
  QWEST CORPORATION

  
	
  (SEAL)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 A-8
 

CERTIFICATE OF
AUTHENTICATION

This is one of the Notes of the series designated
herein, issued under the Indenture described herein.

	
  

  	
  U.S. BANK NATIONAL ASSOCIATION,

  
	
   

  	
  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  	
   

  

 

 A-9
 

ASSIGNMENT FORM

	
  FOR VALUE RECEIVED, the undersigned hereby
  sell(s), assign(s) and transfer(s) unto

  
	
   

  	
   

  
	
   

  
	
  Please insert social security number or other
  identifying number of assignee:

  
	
   

  
	
   

  	
   

  
	
  Please print or type name and address (including zip
  code) of assignee:

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  
	
  the within Note and all rights thereunder, hereby
  irrevocably constituting and appointing                                              attorney
  to transfer said Note of Qwest Corporation on the books of   Qwest Corporation, with full power of
  substitution in the premises. 

  
	
   

  
	
   

  	
   

  
	
   

  
	
  Dated:

  	
   

  	
   

  
				

 

NOTICE: The signature to this assignment must
correspond with the name as written upon the face of this Note in every
particular without alteration or enlargement or any change whatsoever.

 A-10
 

CERTIFICATE TO BE
DELIVERED UPON EXCHANGE

OR REGISTRATION OF TRANSFER

This certificate relates to $             
principal amount of Notes held in (check applicable space)             
book-entry or                 
definitive form by the undersigned.

The undersigned (Check one box below);

o
has requested the Trustee by written order to deliver in exchange for its beneficial
interest in the Note held by the Depository a Note or Notes in definitive,
registered form of authorized denominations and an aggregate principal amount
equal to its beneficial interest in such Note (or the portion thereof indicated
above); or

o
has requested the Trustee by written order to exchange or register the transfer
of a Note or Notes.

In connection with any transfer of any of the Notes
evidenced by this certificate occurring prior to the expiration of the period
referred to in Rule 144(k) under the Securities Act, the undersigned
confirms that such Notes are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

o                                    (1)                                  to
the Company; or

o                                    (2)                                  inside
the United States to a “qualified institutional buyer” (as defined in Rule 144A
under the Securities Act) that purchases for its own account or for the account
of a qualified institutional buyer in a transaction meeting the requirements of
Rule 144A; or

o                                    (3)                                  outside
the United States to a foreign person in a transaction meeting the requirements
of Rule 903 or Rule 904 of Regulation S under the Securities Act; or

o                                    (4)                                  pursuant
to an exemption from registration under the Securities Act provided by Rule 144
thereunder (if available), or

o                                    (5)                                  to
an institutional accredited investor in a transaction exempt from the registration
requirements of the Securities Act, or

o                                    (6)                                  pursuant
to an effective registration statement under the Securities Act.

Unless one of the boxes is checked, the Trustee will
refuse to register any of the Notes evidenced by this certificate in the name
of any person other than the registered holder thereof; provided, however, that
if box (4) or (5) is checked, the Trustee may require, prior to registering any
such transfer of the Notes, such legal opinions, certifications and other
information as the Company and the Trustee has reasonably requested to confirm
that such transfer is

 A-11
 

being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act.

	
  Date:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SIGNATURE OR SIGNATURE GUARANTEE:

  
	
   

  	
  NOTICE: Signature must be guaranteed by a participant

  in a recognized signature guaranty medallion program

  or other signature guarantor acceptable to the

  Trustee.

  

 

 A-12
 

TO BE COMPLETED BY
PURCHASER IF BOX (2) ABOVE IS CHECKED.

The undersigned represents and warrants that it is
purchasing the Notes for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a “qualified
institutional buyer” within the meaning of Rule 144A under the Securities
Act, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned’s foregoing representations in order
to claim this exemption from registration provided by Rule 144A.

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  NOTICE: To be executed by an executive officer

  	
   

  	
   

  

 

 A-13
 

SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL NOTE

The following increases or decreases in this Global
Note have been made:

	
  Principal amount

  of this Global Note

  as of [           ]

  	
   

  	
  Date Exchange

  Made

  	
   

  	
  Change in

  Principal Amount

  of this Global Note

  due to Exchange

  	
   

  	
  Principal Amount

  of this Global Note

  Following such

  Exchange

  	
   

  	
  Notation made by

  or on behalf of the

  Company

  
	
    

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
    

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
    

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 A-14

Exhibit
A-1

Form of
Certificate To Be Delivered

in Connection with Transfers

of Temporary Regulation S Global Notes

[                ],
[    ]

U.S. Bank National
Association

950 17th Street, Suite 300

Denver, Colorado 80202

Attention: Corporate Trust Department

Re:                              Qwest
Corporation (the “Issuer”)

6.5% Notes due 2017 (the “Notes”)

Dear Sirs:

This letter relates to U.S.
$[           ] aggregate
principal amount of Notes represented by a certificate (the “Legended Certificate”) which bears a legend outlining restrictions
upon transfer of such Legended Certificate. Pursuant to Section 3.03(b) of
the First Supplemental Indenture (the “Supplemental Indenture”)
dated as of August 19, 2004 relating to the Notes, we hereby certify that
we are (or we will hold such securities on behalf of) a person outside the
United States (or to an Initial Purchaser (as defined in the Supplemental
Indenture)) to whom the Notes could be transferred in accordance with
Rule 904 of Regulation S promulgated under the U.S. Securities Act of
1933, as amended.

You, as Trustee, the Company, counsel for the Company
and others are entitled to rely upon this letter and are irrevocably authorized
to produce this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Capitalized terms used but not independently defined in
this letter have the meanings set forth in Regulation S.

	
  

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [Name of Holder]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signature

  	
   

  

 

 A-1-1

Exhibit
A-2

Form of
Certificate To Be Delivered

in Connection with Transfers

Pursuant to Regulation S

[                ],
[   ]

U.S. Bank National
Association

950 17th Street, Suite 300

Denver, Colorado 80202

Attention: Corporate Trust Department

Re:                              Qwest
Corporation (the “Issuer”)

6.5% Notes due 2017 (the “Notes”)

Ladies and Gentlemen:

In connection with our proposed sale of
$[            ]
aggregate principal amount of the Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the U.S.
Securities Act of 1933, as amended (the “Securities  Act”), and, accordingly, we represent that:

(1)                                  the
offer of the Notes was not made to a person in the United States;

(2)                                  either
(a) at the time the buy offer was originated, the transferee was outside the
United States or we and any person acting on our behalf reasonably believed
that the transferee was outside the United States, or (b) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither we nor any person acting on our behalf knows that the
transaction has been prearranged with a buyer in the United States;

(3)                                  no
directed selling efforts have been made in the United States in contravention
of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable;

(4)                                  the
transaction is not part of a plan or scheme to evade the registration requirements
of the Securities Act; and

(5)                                  we
have advised the transferee of the transfer restrictions applicable to the
Notes.

 A-2-1
 

You, as Trustee, the Issuer, counsel for the Issuer
and others are entitled to rely upon this letter and are irrevocably authorized
to produce this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with respect to the matters
covered hereby. Terms used in this certificate have the meanings set forth in
Regulation S.

	
  

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [Name of Transferor]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  	
   

  

 

 A-2-2

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