Document:

Exhibit
4(c).12

Rules of the

Westpac Banking Corporation

Performance Plan

 

 

Table
of Contents

 

	
  1.

  	
  Purpose

  	
  1

  
	
  2.

  	
  Definitions and interpretations

  	
  1

  
	
  3.

  	
  Interpretation

  	
  7

  
	
  4.

  	
  Invitation to acquire Securities

  	
  8

  
	
   

  	
  4.1

  	
  Issue

  	
  8

  
	
   

  	
  4.2

  	
  Form

  	
  8

  
	
   

  	
  4.3

  	
  Security price

  	
  8

  
	
  5.

  	
  Application for Securities

  	
  9

  
	
   

  	
  5.1

  	
  Application procedure

  	
  9

  
	
   

  	
  5.2

  	
  Application in whole or in part

  	
  9

  
	
  6.

  	
  Grant of Securities

  	
  9

  
	
   

  	
  6.1

  	
  Creation of Securities

  	
  9

  
	
   

  	
  6.2

  	
  Non-acceptance of Application

  	
  10

  
	
  7.

  	
  Lapse of Securities

  	
  10

  
	
   

  	
  7.1

  	
  Time of lapse

  	
  10

  
	
   

  	
  7.2

  	
  Breach, fraud or dishonesty

  	
  10

  
	
   

  	
  7.3

  	
  Rights following lapse

  	
  10

  
	
  8.

  	
  Exercise of Securities

  	
  10

  
	
   

  	
  8.1

  	
  Vested Securities

  	
  10

  
	
   

  	
  8.2

  	
  Exercise Period

  	
  11

  
	
   

  	
  8.3

  	
  Exercise of Securities in part

  	
  13

  
	
   

  	
  8.4

  	
  Exercise procedure

  	
  13

  
	
  9.

  	
  Performance Hurdles and Vested Securities

  	
  13

  
	
   

  	
  9.1

  	
  Performance criteria

  	
  13

  
	
   

  	
  9.2

  	
  Performance Hurdles

  	
  14

  
	
   

  	
  9.3

  	
  Determination of number of Vested Securities

  	
  14

  
	
   

  	
  9.4

  	
  Performance Election Rights

  	
  16

  
	
   

  	
  9.5

  	
  Rounding of fractions

  	
  17

  
	
  10.

  	
  Allocation of Shares

  	
  17

  
	
   

  	
  10.1

  	
  Allotment of Shares

  	
  17

  
	
   

  	
  10.2

  	
  Purchase of Shares

  	
  17

  
	
  11.

  	
  Change in Control

  	
  18

  
	
  12.

  	
  Capital Event

  	
  19

  
	
  13.

  	
  New issues

  	
  19

  
	
  14.

  	
  Securities not transferable

  	
  20

  
	
  15.

  	
  Security Interest

  	
  20

  
	
  16.

  	
  Ranking and listing

  	
  20

  
	
  17.

  	
  Issue limitations

  	
  20

  

 

 

 

	
  18.

  	
  No interest in Shares until exercise

  	
  20

  
	
  19.

  	
  Commencement and termination

  	
  21

  
	
   

  	
  19.1

  	
  Commencement

  	
  21

  
	
   

  	
  19.2

  	
  Termination and Suspension

  	
  21

  
	
  20.

  	
  Administration of the Plan

  	
  21

  
	
  21.

  	
  Amendment of the Plan

  	
  21

  
	
   

  	
  21.1

  	
  By the Board

  	
  21

  
	
   

  	
  21.2

  	
  Listing Rules

  	
  22

  
	
  22.

  	
  Law, Listing Rules and the Constitution

  	
  22

  
	
  23.

  	
  Rights of Participants

  	
  22

  
	
  24.

  	
  General

  	
  23

  
	
   

  	
  24.1

  	
  Advice

  	
  23

  
	
   

  	
  24.2

  	
  Costs and Expenses

  	
  23

  
	
   

  	
  24.3

  	
  Dispute

  	
  23

  
	
   

  	
  24.4

  	
  Notices

  	
  23

  
	
   

  	
  24.5

  	
  Error Correction

  	
  24

  
	
   

  	
  24.6

  	
  Governing Law

  	
  24

  

 

 

WESTPAC
BANKING CORPORATION (ABN 33 007 457 141)

PERFORMANCE
PLAN

RULES

1.            Purpose

The Westpac
Banking Corporation Performance Plan has been established as an initiative for
creating a stronger link between employee performance and reward and increasing
shareholder value by enabling Participants to have a greater involvement with,
and share in the future growth and profitability of the Bank.

2.            Definitions
and interpretations

In this document
the following terms have the following meanings:

Application means an application on an
Application Form by an Eligible Employee to acquire Securities under the Plan.

Application Form means the application
form in such form as the Board may approve from time to time.

ASIC means the Australian Securities
and Investments Commission.

ASIC Act means the Australian
Securities and Investments Commission Act 2001 (Cth).

ASX means Australian Stock Exchange
Limited (ABN 98 008 624 691).

Award means, in relation to a
Participant, the number of Securities created in favour of that Participant
pursuant to clause 6, having the same Issue Date and, if those Securities are
Performance Securities, the same Performance Period during which the
performance criteria applicable to those Performance Securities are to be
determined by reference to the same TSR Ranking Group.  If those Securities consist of both Options
and Share Rights, the creation of those Options and those Share Rights shall
each be taken to be separate awards.

Bank means Westpac Banking Corporation
(ABN 33 007 457 141) or any company that becomes a holding company of Westpac
Banking Corporation.

Board means the board of directors of
the Bank from time to time.

Business Day means any day other than
a Saturday, Sunday or other day on which commercial banking institutions in
Sydney are authorised or required by law to be closed.

Capital Event means any of the
following:

(a)                                  any
event affecting the number or type of securities on issue in the capital of the
Bank, including a subdivision, consolidation, reduction, redemption or further
issue of securities whether by way of rights issue, bonus issue or otherwise;
and

(b)                                 any
other event which the Board in its discretion reasonably considers should be a
Capital Event.

 

Change in Control occurs when a person’s
voting power is more than (or will become more than) 35% in relation to the
Bank (excluding any voting power held by virtue of acceptances under an
off-market bid unless or until the bid is or becomes unconditional).

Class Order means an instrument made
by ASIC that exempts each person in a class of persons from the Corporations
Act, the ASIC Act or any part of either or both, or that modifies the
application of the Corporations Act, the ASIC Act or any part of either or both
in particular circumstances.

Condition means, in respect of any
Security, one or more conditions (if any) determined by the Board in its
absolute discretion to apply to that Security including, without limitation,
Performance Hurdles, First Exercise Date and Last Exercise Date, as specified
in an Invitation made to the relevant Eligible Employee under clause 4.

Conditionally Vested Securities means,
the number of Performance Securities that would become Vested Securities if the
only Condition to be satisfied on the Test Date is the Performance Hurdles
applicable to those Performance Securities.

Constitution means the Bank’s
constitution as amended from time to time.

Corporations Act means the
Corporations Act 2001 (Cth).

Determination Date means the Trading
Day immediately preceding the date of an Invitation.

Dual Listed Company Structure means an
arrangement whereby, among other things, two corporations have a unified
management structure, but where each of the two corporations retains its
separate legal identity and existing stock exchange listing.

Eligible Employee means an Employee
whom the Board determines is to receive an Invitation under the Plan.  The Board may also determine at any time that
an Employee who is located in a jurisdiction where it is, in the opinion of the
Board, not reasonably practicable to invite participation in the Plan, is not
an Eligible Employee and that, until the Board determines otherwise, such
Employee shall not receive an Invitation under the Plan.

Employee means any person who is in
full-time or part-time employment of a Group Company.

Exercisable Security means an Unvested
Security which becomes a Vested Security pursuant to a determination made under
clause 9.3(b)(iv), such determination to be made on the basis that the Test
Date applicable to that Security:

(a)                                  will
be the Monthly TSR Test Date immediately preceding the Last Employment Date of
the Participant holding that Security; or

(b)                                 if
no Monthly TSR Test Date has occurred since the Issue Date of that Security,
will be taken to be the Last Employment Date of that Participant.

Exercise Price means the amount
payable per Share, if any, on the exercise of a Vested Security or an
Exercisable Security calculated as follows:

(a)                                  the
Market Price; or

(b)                                 any
other amount (which may be nil) specified by the Board in the Invitation,

in each case making appropriate adjustment, if any, in
respect of Capital Events in accordance with clause 12.

 

First Exercise Date means the earliest
date that a Participant may give Notice of Exercise under clause 8.2(a), such
date to be determined by the Board in its absolute discretion and, once
determined, specified in that Participant’s Invitation.

First Peer Group means the 100
entities comprised in the S&P/ASX 200 Index (excluding the Bank, all
entities comprising the Second Peer Group, all entities in the property trusts
sector of that Index and such other entity or entities as the Board may from
time to time determine) at the commencement of a Performance Period, having the
highest market capitalisation at that time and ranked in descending order, from
highest to lowest, according to their market capitalisation.

First Test Date means, in respect of a
Performance Security having a Performance Period of:

(a)                                  4
years, the second anniversary (or such other date as may be determined from
time to time by the Board and specified in an Invitation made under clause 4);
or

(b)                                 5
years, the third anniversary (or such other date as may be determined from time
to time by the Board and specified in an Invitation made under clause 4,

of the
commencement date of that Performance Period.

First Test Date Notice means the
written notification provided to a Participant under clause 9.3(c) in respect
of the Board’s determination made as of the First Test Date.

First TSR Ranking means the percentage
ranking of the Bank relative to each entity comprising the First TSR Ranking
Group.  To obtain the Bank’s percentage
ranking at each applicable Test Date:

(a)                                  the
TSR of each entity comprising the First TSR Ranking Group and of the Bank shall
be ranked in descending order from highest to lowest;

(b)                                 the
number of entities in the First TSR Ranking Group with a lower TSR than the
Bank shall be calculated (the Numerator); and

(c)                                  the
Numerator shall be divided by the number of entities then in the First TSR
Ranking Group and the result of that equation, expressed as a percentage, shall
be the Bank’s First TSR Ranking.

First TSR Ranking Group means, on any
Test Date, the first 50 entities (or such other number as the Board may from
time to time determine) in the First Peer Group that remain listed on the ASX
and which have published sufficient data to enable each entity’s respective TSR
to be determined for the purposes of this Plan.

Group Company means the Bank and any
of its subsidiaries.

Invitation means an invitation to
apply to acquire either Options, Share Rights or both under the Plan, subject
always to compliance with any Law.

Issue Date means the date on which a
Security is created under clause 6.1 by being inscribed on the Register.

Last Employment Date means, with
respect to a particular Participant, the date on which:

(a)                                  that
Participant ceases to be an Employee for whatever reason; or

(b)                                 that
Participant’s employer (being a company other than the Bank) ceases to be a
Group Company.

 

Last Exercise Date means the day
ending at 5.00 pm Sydney time on the date 10 years after the Issue Date or such
other earlier date as is determined by the Board and specified in an Invitation
to an Eligible Employee.

Law means the applicable law of the
jurisdiction in which an Eligible Employee is located at the time of receipt of
an Invitation.

Listing Rules means the listing rules
of the ASX as amended from time to time.

Market Price means the weighted
average market price per Share of all Shares traded on the ASX during the one
week period up to and including the Determination Date.  The Board may exercise a discretion to
include or exclude particular transactions from this calculation (e.g. “specials”)
as it thinks fit.  If no Shares are
traded on the ASX during that one week period, the price as determined by the
Board.

Maximum TSR Ranking means the TSR
Ranking equal to 75% or such other percentage as determined by the Board at the
time of determination of the Performance Hurdles applicable to the relevant
Securities.

Minimum Parcel means the minimum
number of Shares determined by the Board from time to time, which need not be
the same number for all purposes of the Plan.

Minimum TSR Ranking means the TSR
Ranking equal to 50% or such other percentage as determined by the Board at the
time of determination of the Performance Hurdles applicable to the relevant
Securities.

Monthly TSR Test Date means, in
respect of any Performance Security, the last Business Day of each calendar
month during the Performance Period applicable to that Performance Security.

Notice of Exercise means a duly
completed notice of exercise of a Vested Security or an Exercisable Security
signed by the Participant, in a form approved by the Board from time to time,
and lodged in accordance with clause 8.4.

Option means a right to subscribe for
one Share under the Plan, or such number of Shares as determined under clause
12, for monetary consideration exceeding $1.00 per Share.

Participant means:

(a)                                  an
Eligible Employee who returns a duly completed Application Form in accordance
with clause 5.1(a);

(b)                                 the
legal personal representative of that Eligible Employee where that legal
personal representative’s name has been entered on the Register as the holder
of the Securities; or

(c)                                  if,
because of the Bankruptcy Act 1966 (Cth) or equivalent legislation in any other
jurisdiction, Securities (or the rights under those Securities) held under the
Plan that form part of the property of an Eligible Employee, vest in the
trustee of that Eligible Employee’s estate, that trustee, whether or not the
name of that trustee has been entered in the Register.

Performance Hurdles means performance
criteria as set out or referred to in the relevant Invitation, being the
criteria set out in clause 9.2 and clause 9.3 unless the Board determines
alternative, additional or modified performance criteria under clause 9.1.

Performance Option means an Option
that at the time of grant was subject to Performance Hurdles.

 

Performance Period means, in respect
of any Performance Security, the period commencing and ending on dates as
determined by the Board for the purposes of determining the extent (if any) to
which the Performance Hurdles have been satisfied.

Performance Security means a
Performance Option or a Performance Share Right.

Performance Share Right means a Share
Right that at the time of grant was subject to Performance Hurdles.

Plan means the Westpac Banking
Corporation Performance Plan.

Register means the register created
and maintained by or on behalf of the Bank under and in accordance with section
170 of the Corporations Act.

Retirement means the voluntary
cessation of employment of a Participant with a Group Company solely by reason
of that Participant having notified that Group Company of his or her intention
to permanently leave the workforce.

Rules means the rules of the Plan as
set out in this document.

Satisfaction Date means the date that
is specified in an Invitation to an Eligible Employee as the last possible date
on which Conditions must be and remain satisfied.

Second Peer Group means those entities
(being at least 13 in number) as determined by the Board from time to time for
the purposes of constituting such a group.

Second Test Date means, in respect of
a Performance Security having a Performance Period of:

(a)                                  4
years, the third anniversary (or such other date as may be determined from time
to time by the Board and specified in an Invitation made under clause 4); or

(b)                                 5
years, the fourth anniversary (or such other date as may be determined from
time to time by the Board and specified in an Invitation made under clause 4),

of the commencement date of that Performance Period.

Second Test Date Notice means the
written notification provided to a Participant under clause 9.3(c) in respect
of the Board’s determination made as of the Second Test Date.

Second TSR Ranking means the
percentage ranking of the Bank relative to each entity comprising the Second
TSR Ranking Group.  To obtain the Bank’s
percentage ranking at each applicable Test Date:

(a)                                  the
TSR of each entity comprising the Second TSR Ranking Group and of the Bank
shall be ranked in descending order from highest to lowest;

(b)                                 the
number of entities in the Second TSR Ranking Group with a lower TSR than the
Bank shall be calculated (the Numerator); and

(c)                                  the
Numerator shall be divided by the number of entities then in the Second TSR
Ranking Group and the result of that equation, expressed as a percentage, shall
be the Bank’s Second TSR Ranking.

Second TSR Ranking Group means, on any
Test Date, the 10 entities (or such other number as the Board may from time to time
determine) in the Second Peer Group, having the largest market capitalisation
on that Test Date, that remain listed on the ASX and which have published
sufficient data to enable each entity’s respective TSR to be determined for the
purposes of this Plan.

 

Security means an Option or a Share
Right.

Security Interest means a mortgage,
charge, pledge, lien or other encumbrance of any nature.

Share Right means, the right to
subscribe for or acquire one Share, or such other number of Shares as
determined under clause 12, for either nil or monetary consideration not
exceeding $1.00 per Share or such other amount as determined by the Board from
time to time.

Shares means fully paid ordinary
shares in the capital of the Bank.

Tax includes any tax, levy, impost,
deduction, charge, rate, contribution, duty or withholding which is assessed
(or deemed to be assessed), levied, imposed or made by any government or any
governmental, semi-governmental or judicial entity or authority together with
any interest, penalty, fine, charge, fee or other amount assessed (or deemed to
be assessed), levied, imposed or made on or in respect of any or all of the
foregoing.

Tax Act means the Income Tax
Assessment Act 1936 (Cth) or the Income Tax Assessment Act 1997 (Cth) or both,
as the context requires.

Test Date means, in respect of each
Performance Period, each of:

(a)                                  the
First Test Date;

(b)                                 the
Second Test Date;

(c)                                  the
Third Test Date; and

(d)                                 in
any case where a determination of the Board is required under:

(i)                                     clause
8.2(d)(vi) or clause 8.2(e)(iv), the date (being either a Monthly TSR Test Date
or the Last Employment Date of the relevant Participant); or

(ii)                                  clause
11, the date (being either a Monthly TSR Test Date, a Test Date or the Notice
Date),

on or
as at which such a determination is required to be made.

Third Test Date means, in respect of a
Performance Security having a Performance Period of:

(a)                                  4
years, the fourth anniversary (or such other date as may be determined from
time to time by the Board and specified in an Invitation made under clause 4;
or

(b)                                 5
years, the fifth anniversary (or such other date as may be determined from time
to time by the Board and specified in an Invitation made under clause 4),

of the
commencement date of that Performance Period.

Third Test Date Notice means the
written notification provided to a Participant under clause 9.3(c) in respect
of the Board’s determination made as of the Third Test Date.

Total and Permanent Disablement, in
relation to a Participant, means that that Participant has, in the opinion of
the Board, after considering such medical and other evidence as it sees fit,
become incapacitated to such an extent as to render the Participant unlikely
ever to engage in any occupation with the Bank or any other Group Company for which
he or she is reasonably qualified by education, training or experience.

Total Exercise Price means the number
of Vested Securities or Exercisable Securities to be exercised in a particular
case multiplied by the Exercise Price.

 

Trading Day means a day on which
Shares are traded on the ASX.

TSR means, in respect of an entity,
the total shareholder return (including dividends) of that entity being the
amount calculated on a basis, rounded to not less than 3 decimal places, to be
determined from time to time by the Board.

TSR Ranking means either the First TSR
Ranking or the Second TSR Ranking of the Bank, as the case may be.

TSR Ranking Group means either the
First TSR Ranking Group or the Second TSR Ranking Group, as the case may be.

Unhurdled Security means an Option
that is not a Performance Option or a Share Right that is not a Performance
Share Right.

Unvested Security means an Option or a
Share Right that is neither a Vested Security nor a Security that has lapsed
under clause 7.

Vested Security has the meaning given
in clause 8.1, and the expression Vested Securities shall be construed
accordingly.

Vesting Date means, unless an
Invitation to an Eligible Employee specifies otherwise, in respect of each
Performance Period, the first to occur:

(a)                                  the
date on which a Participant makes an election under clause 9.4(a);

(b)                                 the
Third Test Date; and

(c)                                  the
Test Date on which the Board is required to make a determination under clause
8.2(d)(vi), clause 8.2(e)(iv) or clause 11.

3.            Interpretation

In this document
unless the contrary intention appears:

(a)                                  a
gender includes all genders;

(b)                                 the
singular includes the plural and vice versa;

(c)                                  a
reference to any legislation or to a provision of any legislation includes any
modification or re-enactment of it, any legislative provision substituted for
it and all regulations and statutory instruments issued under it;

(d)                                 headings
are for convenience only and do not affect the interpretation of these Rules;

(e)                                  reference
to a clause or paragraph is a reference to a clause or paragraph of these
Rules, or the corresponding Rule or Rules of this Plan as amended from time to
time;

(f)                                    where
any word or phrase is given a definite meaning in these Rules, any part of
speech or other grammatical form of that word or phrase has a corresponding
meaning;

(g)                                 where
the time for doing any act, matter or thing under these Rules falls on a day
which is not a Business Day, it shall be done on the next succeeding Business
Day; and

(h)                                 terms
which are defined in the Corporations Act bear the same meaning when used in
this document.

 

4.            Invitation
to acquire Securities

4.1                              Issue

In its absolute
discretion and subject to these Rules, the Board may from time to time issue or
cause to be issued Invitations on behalf of the Bank to Eligible Employees in
respect of that number or value of Securities as the Board in its discretion
determines.  In determining the number or
value of Securities to be the subject of individual Invitations, the Board may
determine that those Invitations be made on a differential basis to Eligible
Employees, different classes of Eligible Employees or to Eligible Employees
within the same class, as the case may be.

4.2                              Form

An Invitation may
take any form determined by the Board from time to time and will:

(a)                                specify
or include the following information:

(i)                                     the
date of the Invitation;

(ii)                                  the
name of the Eligible Employee to whom the Invitation is made;

(iii)                               the maximum number or
value of Options, Share Rights or both in respect of which the Eligible
Employee is being invited to apply;

(iv)                              the
First Exercise Date of the Securities;

(v)                                 the
Last Exercise Date of the Securities;

(vi)                              the
Exercise Price;

(vii)                           the time period in which an
Application shall be made; and

(viii)                        any other material terms and
conditions required by any Law and any relevant Class Order and any other terms
and conditions applicable to the Invitation including the requirement that the
Eligible Employee must continue and remain an Eligible Employee on the date
that the Securities are to be granted in accordance with clause 6.1, and where
Conditions (such as Performance Hurdles to be satisfied) have been determined
to apply by the Board, details of those Conditions and any Satisfaction Date;
and

(b)                               be
issued with an Application Form and such explanatory or other material in
respect of the Plan as the Board considers appropriate, or as is required by
Law and any relevant Class Order.

4.3                              Security
price

Securities granted
by the Bank under the Plan will be granted free of charge to Participants,
unless otherwise determined by the Board.

 

5.                                     Application
for Securities

5.1                              Application
procedure

(a)                                  An
Eligible Employee who receives an Invitation may only make an Application by
returning the duly completed Application Form within the time period and as otherwise
specified in the Invitation.

(b)                                 If,
on returning the duly completed Application Form in accordance with paragraph
(a) of this clause 5.1, the Eligible Employee’s employment or appointment with
a Group Company has not ceased, he or she:

(i)                                     becomes
a Participant;

(ii)                                  irrevocably
offers to acquire Securities under the Plan in accordance with the terms of the
Invitation; and

(iii)                               agrees to be bound by
the terms of the Invitation and by these Rules or any modification of these
Rules for the purposes of clause 9.1(b) as set out in any relevant schedule to
these Rules.

5.2                              Application
in whole or in part

An Eligible
Employee who receives an Invitation may make an Application in respect of all
or part of the maximum number of Options, Share Rights or both specified in the
Invitation.  If an Application is made
for only part of the Options or Share Rights, then the Eligible Employee may
only do so in respect of that number of Options or Share Rights which, if
exercised, would result in the Eligible Employee acquiring a number of Shares
that is not less than the Minimum Parcel. 
No further Application may be made in respect of that Invitation.

6.                                     Grant
of Securities

6.1                              Creation
of Securities

(a)                                Securities
granted under the Plan shall be created, and a Participant’s title to those
Securities will, subject to clause 24.5, conclusively be evidenced for all
purposes of the Plan by being inscribed on the Register.  No certificate or other evidence of title to
a Security will be issued unless required under any applicable law or the Board
in its sole discretion determines otherwise.

(b)                               Within
28 days after the end of the period for making an Application, as specified in
the Invitation, and except as provided in clause 6.2, the Board will, in
respect of each Eligible Employee who has become a Participant in accordance
with clause 5.1(b):

(i)                                     inscribe
or cause to be inscribed in the Register the name of that Participant and the
number of Securities (with separate entries being made for each Award of
Options and Share Rights) applied for by that Participant; and

(ii)                                  notify
that Participant of the Issue Date and that the Securities have been so
inscribed.

 

6.2                              Non-acceptance
of Application

(a)                                 In
the event that the Board does not grant Securities in favour of any Participant
under clause 6.1(a), the Board shall:

(i)                                     provide
notification to that Participant that it does not wish to accept that
Participant’s Application;

(ii)                                  refund
the moneys (if any) provided by that Participant as consideration to apply for
Securities under the Plan; and

(iii)                               undertake any other
action as it sees fit.

(b)                                 If
paragraph (a) of this clause 6.2 applies to a Participant, the Invitation to
that Participant, and the Application by that Participant in relation to that
Invitation, shall be deemed never to have been made.

7.            Lapse
of Securities

7.1                              Time
of lapse

A Security lapses,
to the extent it has not been exercised, on the earlier to occur of:

(a)                                  the
date of lapse under clause 7.2, clause 9.4(a) or clause 11;

(b)                                 the
last day of any period specified in clauses 8.2(b) to 8.2(f) (inclusive) in
which a Participant may exercise a Security;

(c)                                  where
Conditions have not been satisfied and remain unsatisfied on the Satisfaction
Date, the Satisfaction Date; and

(d)                                 the
Last Exercise Date.

7.2                              Breach,
fraud or dishonesty

If in the
reasonable opinion of the Board a Participant acts fraudulently or dishonestly
or is in material breach of his or her obligations to the Bank or any other
Group Company then the Board may in its absolute discretion determine that any
Unvested Securities of the Participant have lapsed and the Board’s decision
will be final and binding.

7.3                              Rights
following lapse

Upon the lapse of
a Security, all rights of the Participant in respect of that Security cease.

8.                                     Exercise
of Securities

8.1                              Vested
Securities

(a)                                  A
Security granted to a Participant that is a Performance Security will become a
Vested Security on a Vesting Date only if all Conditions (including any
Performance Hurdles) applicable to that Security have been satisfied on or
before that Vesting Date unless, prior to that date, that Security has lapsed
under clause 7.

 

(b)                                 A
Security granted to a Participant that is not a Performance Security becomes a
Vested Security on the Satisfaction Date if all Conditions have been satisfied
or waived by the Board in its absolute discretion unless, prior to that date,
that Security has lapsed under clause 7.

(c)                                  A
Security granted to a Participant will also be treated for all purposes under
these Rules as a Vested Security if a determination is made under clause
8.2(c), clause 8.2(f), clause 9.3(b)(iii) or clause 9.3(b)(iv) that the
Security is to become a Vested Security, from the date of the determination.

8.2                              Exercise
Period

(a)                                 Except
as provided in clauses 8.2(b) to 8.2(f) (inclusive), a Security that is a
Vested Security may only be exercised during the period commencing on the First
Exercise Date and ending on the Last Exercise Date.  Except as provided in clauses 8.2(b) to
8.2(f) (inclusive) or clause 11, an Unvested Security may not be
exercised.  Notwithstanding any provision
in this clause 8, no Security may be exercised after the Last Exercise Date.

(b)                                Death or Total and Permanent
Disablement

If a Participant
ceases to be an Employee as a result of his or her death or Total and Permanent
Disablement, that Participant may, at any time prior to the first to occur of
the Last Exercise Date and the first anniversary of the Last Employment Date,
exercise:

(i)                                     in
the case of Performance Securities and where that Participant’s Last Employment
Date occurs on or after the Vesting Date, only those Securities (if any) that
are Vested Securities at the Last Employment Date, with all Unvested Securities
lapsing on that Participant’s Last Employment Date; and

(ii)                                  in
any other case, all Securities (whether or not they are Unvested Securities).

(c)                                  Resignation

If a Participant
ceases to be an Employee as a result of his or her resignation, that
Participant may, at any time prior to the first to occur of the Last Exercise
Date and the date that is 3 months after the Last Employment Date, exercise
only those Securities (if any) that are Vested Securities at the Last
Employment Date unless the Board in its absolute discretion determines that
such Participant is entitled to have some Unvested Securities treated as Vested
Securities, in which event those Unvested Securities will become Vested
Securities.  All Unvested Securities will
lapse on the Last Employment Date.

(d)                                 Retrenchment or cessation of
Participant’s employer as a Group Company

If:

(i)                                     a
Participant ceases to be an Employee as a result of the retrenchment of that
Participant; or

(ii)                                  that
Participant’s employer (being a company other than the Bank) ceases to be a
Group Company,

that Participant may:

(iii)                               at any time prior to the
first to occur of the Last Exercise Date and the first anniversary of the Last
Employment Date; or

 

(iv)                              in
the case of cessation as a result of retrenchment only, if the Participant, in
any jurisdiction approved by the Board from time to time,, has provided notice
of their election prior to the Last Employment Date to extend the period in
which they may exercise Securities beyond the first anniversary of the Last
Employment Date, at any time prior to the Last Exercise Date,

                                                exercise:

(v)                                 in
the case of Performance Securities and where that Participant’s Last Employment
Date occurs on or after the Vesting Date, only those Securities (if any) that
are Vested Securities at the Last Employment Date, with all Unvested Securities
lapsing on that Participant’s Last Employment Date; or

(vi)                              in
the case of Performance Securities and where that Participant’s Last Employment
Date occurs prior to the Vesting Date, only that number of Unvested Securities
(if any) that have become Vested Securities, pursuant to a determination made
under clause 9.3(b)(iii), with all other Unvested Securities lapsing on that
Participant’s Last Employment Date; or

(vii)                           in the case of Unhurdled
Securities and where that Participant’s Last Employment Date occurs:

(A)                              on
or after the First Exercise Date of those Securities, all Vested Securities; or

(B)                                prior
to the First Exercise Date of those Securities, only that number of Securities
calculated in accordance with the following formula:

	
  X =

  	
  A x B

  
	
   

  	
  C

  

 

where:

X
is the number of Securities that will be exercisable;

A
is the number of Securities comprised in an Award;

B
is the number of days from and excluding the Issue Date up to and including the
Last Employment Date; and

C
is the number of days from and excluding the Issue Date up to and including the
First Exercise Date,

with all other
Securities lapsing on that Participant’s Last Employment Date.

(e)                                  Retirement

If a Participant
ceases to be an Employee as a result of the Retirement of that Participant,
that Participant may:

(i)                                     at
any time prior to the first to occur of the Last Exercise Date and the first
anniversary of the Last Employment Date; or

(ii)                                  if
the Participant, in any jurisdiction approved by the Board from time to time,
has provided notice of their election prior to the Last Employment Date to
extend the period in which they may exercise Securities beyond the first
anniversary of the Last Employment Date, at any time prior to the Last Exercise
Date,

exercise:

 

(iii)                               in
the case of Performance Securities and where that Participant’s Last Employment
Date occurs on or after the Vesting Date, only those Securities (if any) that
are Vested Securities at the Last Employment Date, with all Unvested Securities
lapsing on that Participant’s Last Employment Date;

(iv)                              in
the case of Performance Securities and where that Participant’s Last Employment
Date occurs prior to the Vesting Date, only that number of Unvested Securities
(if any) that become Exercisable Securities, pursuant to a determination made
under clause 9.3(b)(iv), with all other Unvested Securities lapsing on that
Participant’s Last Employment Date; or

(v)                                 in
any other case, all Securities (whether or not they are Unvested Securities).

(f)                                    Other circumstances

If a Participant
ceases to be an Employee for any reason other than those set out in clauses
8.2(b) to 8.2(e), all of the Participant’s Securities (whether they are Vested
Securities that have not been exercised or Unvested Securities) shall lapse on
the Last Employment Date unless the Board in its absolute discretion determines
that such Participant is entitled to have some Unvested Securities treated as
Vested Securities, in which event those Unvested Securities will become Vested
Securities and the Participant may, at any time prior to the first to occur of
the Last Exercise Date and the date that is 3 months after the Last Employment
Date, exercise those Vested Securities.

8.3                              Exercise
of Securities in part

If a Participant
elects to exercise part of his or her Securities comprised in an Award, the
Notice of Exercise must be in respect of:

(a)                                 that
number of Shares which is not less than the Minimum Parcel;

(b)                                multiples
of a Minimum Parcel;  and

(c)                                 that
number of Shares which will not leave any unexercised Securities comprised in
that Award to that Participant totalling less than a Minimum Parcel.

8.4                              Exercise
procedure

A Participant may
exercise any of his or her Securities by lodging a Notice of Exercise and a
cheque payable to the Bank for the Total Exercise Price (if any) applicable to
those Securities, or by such other means of payment as may be approved by the
Board, at the head office of the Bank for the time being or other place
nominated by the Board for this purpose.

9.                                     Performance
Hurdles and Vested Securities

9.1                              Performance
criteria

(a)                                  The
performance criteria applicable to any Performance Securities shall be as
specified in clause 9.2 and clause 9.3 unless the Board determines otherwise.

(b)                                 If
the Board determines that alternative, additional or modified performance
criteria are to apply to any Performance Security in lieu of the performance
criteria specified in clause 9.2 and clause 9.3, the Board shall as part of
that determination approve a schedule, to be

 

attached to and
form part of these Rules, which contains replacement clauses setting out those
alternative, additional or modified performance criteria (including any
modification, if necessary, to cross referencing within these Rules) applicable
to that Performance Security.

9.2                              Performance
Hurdles

Subject to clause
9.1, the Performance Hurdles applicable to any Performance Period relating to
any Performance Security comprised in an Award shall be as follows:

(a)                                 where
as at any Test Date, for Performance Hurdles that are determined by reference
to the First TSR Ranking Group, the First TSR Ranking of the Bank is:

(i)                                     less
than the Minimum TSR Ranking, the number of Securities that shall become
Conditionally Vested Securities as at that Test Date shall be zero;

(ii)                                  equal
to the Minimum TSR Ranking, the number of Securities that shall become
Conditionally Vested Securities as at that Test Date is the number equal to 50%
of the total number of Securities comprised in that Award;

(iii)                               equal to or greater than
the Maximum TSR Ranking, the number of Securities that shall become
Conditionally Vested Securities as at that Test Date is the number equal to
100% of the total number of Securities comprised in that Award; and

(iv)                              greater
than the Minimum TSR Ranking and less than the Maximum TSR Ranking, the number
of Securities that shall become Conditionally Vested Securities as at that Test
Date increases on a straight line basis from 50% to 100% of the total number of
Securities comprised in that Award.

(b)                                where
as at any Test Date, for Performance Hurdles that are determined by reference
to the Second TSR Ranking Group, the Second TSR Ranking of the Bank is:

(i)                                     less
than the Minimum TSR Ranking, the number of Securities that shall become
Conditionally Vested Securities as at that Test Date shall be zero;

(ii)                                  equal
to the Minimum TSR Ranking, the number of Securities that shall become
Conditionally Vested Securities as at that Test Date is the number equal to 50%
of the total number of Securities comprised in that Award;

(iii)                               equal to or greater than
the Maximum TSR Ranking, the number of Securities that shall become
Conditionally Vested Securities as at that Test Date is the number equal to
100% of the total number of Securities comprised in that Award; and

(iv)                              greater
than the Minimum TSR Ranking and less than the Maximum TSR Ranking, the number
of Securities that shall become Conditionally Vested Securities as at that Test
Date increases on a straight line basis from 50% to 100% of the total number of
Securities comprised in that Award.

9.3                              Determination
of number of Vested Securities

(a)                                 As
soon as practicable after each Test Date applicable to any Performance Period,
the Board shall determine:

(i)                                   each
TSR Ranking Group; and

 

(ii)                                  the
TSR Ranking of the Bank and of each entity comprising that TSR Ranking Group,

as at that Test Date.

(b)                               As
soon as practicable after each Test Date applicable to any Performance Period,
the Board shall determine in respect of each Participant as at that Test Date:

(i)                                     whether,
and to what extent, the Performance Hurdles and all other Conditions (if any)
applicable to that Performance Period up to that Test Date have been satisfied;

(ii)                                  the
number of Conditionally Vested Securities (if any) that will, subject to clause
9.4(a), become Vested Securities;

(iii)                               in the case of a
determination made for the purposes of clause 8.2(d)(vi), the number of
Unvested Securities (if any) that have become Vested Securities, calculated in
accordance with the following formula:

	
  A= W x

  	
  [50 + 2 (X – 50)]

  	
  x Y

  
	
   

  	
  100

  	
    Z

  

 

where:

A
is the number of Unvested Securities that will become Vested Securities.  If the Bank’s TSR Ranking as at the Test Date
is less than 50%, A shall be
taken to be nil;

W
is the number of Securities comprised in an Award;

X
is the Bank’s TSR Ranking determined on or as at:

(i)                                     the
most recent of a Monthly TSR Test Date and a Test Date to have occurred
immediately preceding the Last Employment Date of the relevant Participant; or

(ii)                                  if
no Monthly TSR Test Date or Test Date has occurred since the Issue Date of that
Participant’s Securities, the Last Employment Date of that Participant,

PROVIDED THAT if
the Bank’s TSR Ranking so determined is greater than 75%, X shall for the purposes of this
calculation be taken to be 75% (in each case X
will be expressed as a whole number);

Y
is the number of days from and excluding the date (Start Date) on which
the relevant Performance Period commenced up to and including the Last
Employment Date but only if that Participant’s Last Employment Date occurs
before the First Test Date; and

Z
is the number of days from and excluding the Start Date up to and including the
First Test Date but only if that Participant’s Last Employment Date occurs
before the First Test Date.

 

(iv)                              in
the case of a determination made for the purposes of clause 8.2(e)(iv), the
number of Unvested Securities (if any) that have become Exercisable Securities;

(v)                                 whether
any Capital Event has occurred during the Performance Period up to that Vesting
Date;

(vi)                              the
Exercise Price (if any);

(vii)                           in the case of the First
Test Date and the Second Test Date of an applicable Performance Period, the
number of Conditionally Vested Securities that will become Unvested Securities
and which will lapse if, under clause 9.4(a), that Participant accepts the
Board’s determination; and

(viii)                        in the case of the Third Test
Date of that Performance Period, the number of Unvested Securities that will
automatically lapse on that day.

The Board shall be required to make a determination on
each of the Second Test Date and the Third Test Date, as the case may be, only
if, in relation to the First Test Date Notice or the Second Test Date Notice,
as the case may be, a Participant has elected not to accept the Board’s
determination made under this paragraph (b) on the First Test Date or the
Second Test Date, as the case may be.

(c)                                Following
each determination made by the Board under clause 9.3(b), the Board shall
provide a written notification to each Participant:

(i)                                     as
to whether or not the Performance Hurdles and other Conditions (if applicable)
have been met;

(ii)                                  the
number of Conditionally Vested Securities (if any) that will become Vested
Securities and which that Participant will, if, under clause 9.4(a), that
Participant accepts the Board’s determination, be entitled to exercise;

(iii)                               in the case of
determinations made under clause 9.3(b)(iii) and (iv), the number of Unvested
Securities (if any) that have become Vested Securities or, as the case may be,
Exercisable Securities;

(iv)                              whether
a Capital Event has occurred;

(v)                                 the
Exercise Price; and

(vi)                              in
the case of a determination made under clause 9.3(b)(ii), on the First Test
Date and the Second Test Date, of that Participant’s rights under clause 9.4,
if applicable.

9.4                              Performance
Election Rights

Within 60 days of
the date of the First Test Date Notice or the Second Test Date Notice, as the
case may be, a Participant may by notice in writing elect:

(a)                                 to
accept the determination made by the Board under clause 9.3(b), in which case
that determination becomes immediately and irrevocably binding and all Unvested
Securities the subject of that determination shall immediately lapse; or

(b)                                not
to accept that determination, in which case that election becomes immediately
and irrevocably binding and the Board’s determination will be of no effect in
relation to that

 

Participant and no
Unvested Securities held by that Participant, the subject of that
determination, will become Vested Securities or lapse as a result of that
determination.

If, by the end of
that 60 day period, that Participant has not made an election under paragraph
(a) or paragraph (b) of this clause 9.4, that Participant will be taken to have
made an election under paragraph (b) of this clause 9.4.

9.5                              Rounding
of fractions

If any
determination made under clause 9.2 or clause 9.3, results in there being a
fraction of a Vested Security, the aggregate number of Vested Securities shall
be rounded, as follows:

(a)                                 upwards
to the nearest whole number, if the fraction is a value of 0.5 or more; and

(b)                                downwards
to the nearest whole number, if the fraction is a value less than 0.5.

10.          Allocation
of Shares

10.1        Allotment
of Shares

Subject to clause
10.2, the Bank must within 28 days after receipt of a Notice of Exercise and
the Total Exercise Price (if any) in respect of Securities, allot and issue to
the Participant that number of Shares nominated by the Participant in the
Notice of Exercise under these Rules.

10.2        Purchase
of Shares

(a)                                 The
Bank may, at the Board’s discretion, determine to apply the Total Exercise
Price together with, to the extent permitted by Law, moneys provided by the
Bank, in purchasing Shares instead of making an allotment and issue of Shares
for the purpose of the Notice of Exercise. 
The relevant Shares will be purchased in the name of the Participant
within 28 days after receipt of the Notice of Exercise and Total Exercise Price
(if any).

(b)                                If
the Board so determines, the Board shall at the time of that determination
appoint an entity that is unrelated to any Group Company (Entity) for the sole
purpose of purchasing the relevant number of Shares and, for that purpose, the
Bank shall pay or cause to be paid to that Entity an amount equal to the costs
and expenses of the acquisition of those Shares.

(c)                                 The
Entity so appointed shall acquire the number of Shares as directed by the Board
and immediately allocate and cause those Shares to immediately be registered in
the name of the relevant Participant, as directed by the Board.

(d)                                In
acquiring those Shares, but not otherwise, the Entity acts as trustee for the
relevant Participant until such time as those Shares have been acquired,
allocated and registered in the name of that Participant.  All other fiduciary obligations and duties of
that Entity to that Participant that might otherwise be implied or imposed by
law or equity are expressly excluded to the extent permitted by law, including
without limitation any such obligation or duty arising under any statute.

(e)                                  The
Entity is not an agent or trustee for the Bank or, except as provided by
paragraph (d) of this clause 10.2, any Participant.

 

11.          Change
in Control

(a)                                 Where
there is publicly announced any proposal (whether by takeover bid, scheme of
arrangement or otherwise but excluding a proposal for a Dual Listed Company
Structure) in relation to the Bank which the Board reasonably believes may lead
to a Change in Control, the Board shall, notwithstanding any other provisions
of these Rules or the Securities held by each Participant, promptly notify (the
date of such notice being the Notice Date) each Participant in writing that he or she
may, within a period specified in the notice (which period must be not less
than 14 days from the Notice Date) (the Change in Control Notice Period), exercise:

(i)                                   in
the case of Unvested Securities comprised in an Award that are Unhurdled
Securities, and where the Notice Date is prior to the Satisfaction Date of
those Securities, only that number of Securities (if any) calculated in
accordance with the following formula:

	
  X =

  	
  A x B

  
	
   

  	
  C

  

 

where:

X
is the number of Securities that will be exercisable by the Participant;

A
is the number of Unvested Securities comprised in an Award
and held by the Participant on the Notice Date;

B
is the number of days from and excluding the Issue Date of
those Unvested Securities up to and including the Notice Date; and

C
is the number of days from and excluding that Issue Date of
those Unvested Securities up to and including the Satisfaction Date.

(ii)                                  in
the case of Unhurdled Securities comprised in an Award and where the Notice
Date is on or after the Satisfaction Date, only those Securities (if any) that
are Vested Securities held by the Participant on the Notice Date;

(iii)                               in the case of
Performance Securities comprised in an Award and where the Notice Date is on or
after the Satisfaction Date, only those Securities (if any) that are Vested
Securities held by the Participant at the Notice Date; and

(iv)                              in
the case of Performance Securities comprised in an Award and where the Notice
Date is prior to the Satisfaction Date, only that number of Securities (if any)
calculated in accordance with the following formula:

	
  A= W x

  	
  [50 + 2 (X – 50)]

  	
  x Y

  
	
   

  	
  100

  	
    Z

  

 

where:

A
is the number of Unvested Securities that will become Vested Securities.  If the Bank’s TSR Ranking as at the Test Date
is less than 50%, A shall be
taken to be nil;

W
is the number of Securities comprised in an Award;

X
is the Bank’s TSR Ranking determined on or as at:

 

(i)                                     the
most recent of a Monthly TSR Test Date and a Test Date to have occurred immediately
preceding the Notice Date; or

(ii)                                  if
no Monthly TSR Test Date or Test Date has occurred since the Issue Date of that
Participant’s Securities, the Notice Date,

PROVIDED THAT if
the Bank’s TSR Ranking so determined is greater than 75%,

X
shall for the purposes of this calculation be taken to be 75% (in each case X will be expressed as a whole number);

Y
is the number of days from and excluding the date (Start Date) on which
the Performance Period commenced up to and including the Notice Date but only
if the Notice Date occurs before the First Test Date,; and

Z
is the number of days from and excluding the Start Date up to and including the
First Test Date but only if the Notice Date occurs before the First Test Date.

(b)                                 All
Securities held by the Participant which:

(i)                                     are
not the subject of notice under paragraphs (a)(i), (a)(ii), (a)(iii) or
(a)(iv); or

(ii)                                  are
the subject of a notice under paragraphs (a)(i), (a)(ii), (a)(iii) or (a)(iv)
and have not been exercised by the Participant by the end of the Change of
Control Notice Period,

shall lapse.

12.          Capital
Event

(a)                                 If
a Capital Event occurs before the lodgement of a Notice of Exercise, the Board
shall determine in respect of each Security:

(i)                                   the
number of underlying Shares; and

(ii)                                the
Exercise Price,

by taking into
account the Capital Event in a manner which is fair and equitable to the
Participants and which is consistent with the relevant provisions of the
Listing Rules.  Securities shall be
reconstructed in a manner which will not result in any additional benefits
being conferred on Participants which are not conferred on persons holding
Shares or vice versa.

(b)                                 The
Board may inform each Participant of these decisions or shall otherwise inform
each Participant on request.

13.          New
issues

A Security does
not confer on a Participant the right to participate in new issues of Shares by
the Bank, including by way of bonus issue, rights issue or otherwise.

 

14.          Securities
not transferable

Securities may not
be transferred, assigned or novated without the approval of the Board, except
that a legal personal representative of a Participant who has died or whose
estate is liable to be dealt with under laws relating to mental health or
bankruptcy will be entitled to be registered as the holder of those Securities
after the production to the Board of such documents or other evidence as the
Board may reasonably require to establish that entitlement.

15.          Security
Interest

Participants shall
not grant any Security Interest in or over or otherwise dispose of or deal with
any Securities or any interest therein, and any such Security Interest or
disposal or dealing will not be recognised in any manner by the Bank.

16.          Ranking
and listing

(a)                                  Shares
allotted as a consequence of the exercise of Securities will, from the date of
allotment, rank equally with all other issued Shares.

(b)                                 The
Bank will apply for official quotation of those Shares on each stock exchange
on which Shares are quoted in accordance with the Listing Rules.

(c)                                  The
Securities will not be listed for quotation on any stock exchange.

17.          Issue
limitations

(a)                                 The
total number of unissued Shares, the subject of Securities, which may be
offered at any time to Eligible Employees under the Plan shall not exceed the
maximum permitted under any Class Order providing relief from the prospectus
regime of the Corporations Act to ensure compliance with such Class Order.

(b)                                Securities
may not be granted under the Plan to an Eligible Employee to the extent that if
all of the Securities granted would be immediately exercisable from the Issue
Date and are exercised on the Issue Date, the Eligible Employee would, on the
Issue Date:

(i)                                     hold
a legal or beneficial interest in more than five percent (5%) of the Shares; or

(ii)                                  be
in a position to cast, or control the casting of, more than five percent (5%)
of the maximum number of votes that might be cast at a general meeting of the
Bank.

18.          No
interest in Shares until exercise

A Participant has
no interest in any Share unless and until the related Security is exercised and
Shares are either allotted and issued to, or purchased in the name of, that
Participant as a result of that exercise.

 

19.          Commencement
and termination

19.1        Commencement

The Plan takes
effect from the date of resolution by the Board adopting the Plan or as such
later date as may be specified by the Board in that resolution.

19.2        Termination
and Suspension

The Board may
terminate or suspend the operation of the Plan at any time by resolution of the
Board.  For the avoidance of doubt, any
termination of the Plan pursuant to this clause will not affect any Securities
that are outstanding.

20.          Administration
of the Plan

(a)                                 The
Plan shall be administered by the Board which shall have power to delegate to
any one or more persons (including, but not restricted to, a committee of the
Board) for such period and on such conditions as the Board may determine the
exercise of its powers or discretions arising under the Plan.

(b)                                The
Board may at any time and from time to time:

(i)                                     give
directions to any person or persons appointed under paragraph (a) of this
clause 20 as to the manner of the exercise by the Board of any of its
discretions under these Rules or the Plan; and

(ii)                                  amend
any of those directions,

and
where the Board has given such a direction, the person or persons (as the case
may be) must exercise the relevant discretion in accordance with that
direction.

(c)                                  The
Board shall have power to:

(i)                                     determine
appropriate procedures for administration of the Plan consistent with the
provisions of these Rules; and

(ii)                                  resolve
conclusively all questions of fact or interpretation and all calculations
arising in connection with the Plan.

(d)                               The
Board may at any time appoint or engage specialist service providers for the
operation and administration of the Plan.

(e)                                The
Board shall ensure a complete register of Participants is maintained to
facilitate efficient management and administration, and to comply with
regulatory reporting requirements.

21.          Amendment
of the Plan

21.1        By
the Board

Subject to clause
21.2, the Board may at any time and from time to time by resolution:

(a)                                 amend
all or any of these Rules or all or any of the rights or obligations of the
Participants or any of them; and

 

(b)                                formulate
(and subsequently amend) special terms and conditions, in addition to those set
out in these Rules, to apply to Eligible Employees employed in, resident in, or
who are citizens of, countries other than Australia.  Each of such sets of special terms and
conditions shall be restricted in its application to those Eligible Employees
employed in, resident in, or who are citizens of the foreign country or
countries specified by the Board, and may be revoked, added to or varied in
accordance with paragraph (a) of this clause 21.1.

21.2        Listing
Rules

The exercise of
any powers under these Rules by the Board is subject to any restrictions or
procedural requirements relating to the amendment of the rules of an employee
incentive scheme or of issued options imposed by any Law or by the Listing
Rules and applicable to the Plan or the Securities, as the case may be, unless
those restrictions, conditions or requirements are relaxed or waived by the ASX
or any of its delegates either generally or in a particular case or class of
cases and either expressly or by implication.

22.          Law,
Listing Rules and the Constitution

The Rules and all
offers and issues of Securities and Shares under the Plan are subject to any
Law, the Listing Rules and the Bank’s Constitution, each as in force from time
to time.

23.          Rights
of Participants

Nothing in these
Rules:

(a)                                  confers
on any Eligible Employee or Participant the right to continue as an Employee of
any Group Company;

(b)                                 confers
on any Employee the right to become or remain an Eligible Employee or to
participate under the Plan;

(c)                                  affects
any rights which a Group Company may have to terminate the employment of an
Eligible Employee or Participant;

(d)                                 may
be used to increase damages in any action brought against any Group Company in
respect of any such termination and a Participant shall waive any and all
rights to compensation or damages in consequence of any such termination
insofar as those rights arise or may arise from that Participant ceasing to
have rights under or entitled to exercise any Security under the Plan as a
result of such termination; and

(e)                                  confers
any responsibility or liability on any Group Company or its directors,
officers, employees, representatives or agents in respect of any taxation
liabilities of the Eligible Employees or Participants.

 

24.          General

24.1        Advice

Eligible Employees
should obtain their own independent advice on the financial, taxation and other
consequences to them of or relating to participation in the Plan including in
relation to exercising Securities and disposing of any or all Shares acquired
as a result of exercising Securities.

24.2        Costs
and Expenses

With the exception
of Taxes (excluding any Taxes payable on brokerage) which are payable by a
Participant, a Participant will not be liable for any costs associated with the
implementation and administration of the Plan unless the Board in its
discretion determines otherwise.  If the
Board so determines, the Board must inform the Participant prior to allocating
any such expense to a Participant.

Subject to the
preceding paragraph, the Bank will pay all expenses, costs and charges in
relation to the establishment, implementation and administration of the Plan,
including all costs incurred in or associated with the allotment and issue or
purchase of Shares (except for Taxes which are payable by Participants) for the
purposes of the Plan.

24.3        Dispute

Any disputes or
differences of any nature arising under the Plan shall be referred to the Board
and its decision shall be final and binding in all respects.

24.4        Notices

Any notice,
instruction or direction given under or pursuant to these Rules:

(a)                                is
validly given if it is handed to the addressee, faxed to the addressee at the
fax number last notified by that person or posted ordinary prepaid post (first
class air-mail if to an overseas address) to the last known address of the
addressee;

(b)                               must
be signed by the sending or a person duly authorised by the sender;

(c)                                except
as provided in paragraph (d), will be taken to have been given:

(i)                                     in
the case of personal delivery, when personally received;

(ii)                                  in
the case of post to a domestic address, three Business Days after posting;

(iii)                               in the case of post to
an overseas address, seven Business Days after posting; or

(iv)                              in
the case of a fax, on production of a transmission report by the machine from
which the fax was sent that indicates that the fax was transmitted in its
entirety to the fax number of the addressee,

unless it is
personally received or faxed after 5.00 pm on the day, in which case it shall
be deemed to be received or faxed on the next succeeding Business Day;

(d)                               in
the case of a notice of election under clause 8.2(d), clause 8.2(e) or clause
9.4, an Application Form or a Notice of Exercise, that election, application or
notice will not be taken to have been received by or on behalf of the Bank until
it is actually received by the Bank at the address nominated from time to time
by the Board.

 

24.5        Error
Correction

(a)                                 In
the event that any error or mistake has been made in relation to the number of
Securities the subject of:

(i)                                   an
Invitation under clause 4.2;

(ii)                                an
inscription in the Register pursuant to clause 6.1; or

(iii)                             any notification made
under clause 9.3(c),

that Invitation, inscription or notification, as the
case may be, shall be null and void and of no effect to the extent of any such
error or mistake and the Board may in its absolute discretion, correct such
error or mistake, without the need to obtain consent from the relevant Eligible
Employee or relevant Participant, by notice to the Eligible Employee or that
Participant and, where appropriate, may issue an amended Invitation or
notification or correct the Register.

(b)                                The
Board will notify the relevant Participant within a reasonable period after
discovering and correcting the error or mistake.

24.6        Governing
Law

This Plan and the
rights of Participants under its Rules are governed by the laws in force in New
South Wales.Exhibit
10.1

MEMORANDUM OF AGREEMENT

Between John L. Cutter and Friendly Ice Cream Corporation

This acknowledges and documents our mutual agreement concerning your
separation from Friendly Ice Cream Corporation (“Friendly’s”) effective
September 28, 2006 (“Separation
Date”).  This Agreement will confirm
various matters concerning your separation from employment so that no
misunderstanding exists between you and Friendly’s.

I.              SALARY
CONTINUATION

Friendly’s will continue to pay you semi-monthly from
the Separation Date until March 14, 2007 at your current base rate of pay (plus
executive match and automobile allowance) (“Semi-Monthly Payments”).  On or before March 15, 2007, Friendly’s will
pay you a lump sum payment equal to the semi-monthly pay you would have
received between March 15, 2007 and September 27, 2007, at your current base
rate of pay (plus executive match and automobile allowance) (“Lump Sum Payment”).  Both the Semi-Monthly Payments and the Lump
Sum Payment you receive will be subject to appropriate statutory deductions and
such other deductions normally made for employees of Friendly’s.

From time to time
after your separation, you may be contacted with questions relating to matters
you have been involved with while employed by Friendly’s.  You agree to provide your complete
cooperation and make all pertinent information regarding these matters
available upon request, as well as be personally available upon reasonable
advance notice, at mutually convenient times, on an as-needed basis.

You will be eligible, regardless of the dates of your employment or
termination, to receive a bonus for 2006. 
A bonus, if any is paid to you, 1) will be paid at the time that a bonus
for 2006 is paid to officers of Friendly’s (Friendly’s will use its best
efforts to pay any bonus to you on or before March 15, 2007), and 2) will be
determined by the provisions of, and in a manner consistent with, the current
bonus plan approved by the Board of Directors. 
Attached hereto as Exhibit A is the outline of your potential 2006
AIP bonus award, a copy of which has already been provided to you.

II.            BENEFIT/RETIREMENT
PLANS

Your group medical/dental insurance and other such benefits, if enrolled,
end on your last day of active work.  To
continue medical/dental coverage beyond your Separation Date, you must complete
a continuation of coverage (COBRA) application, which will be provided to
you.  It is your responsibility to make
all payments to the COBRA carrier. 
Friendly’s will reimburse you for COBRA payments made by you for periods
through December 31, 2007.

Your group life insurance ends on your Separation Date, but if your life
insurance is provided through Pacific Mutual Life Insurance Company, it is
unaffected by your leaving employment because it is your own personal policy.  Payments by Friendly’s on your behalf will
cease as of your Separation Date. 
Questions about coverage thereafter or about other matters related to
this policy should be referred to Ms. Karen Socola of the AYCO Corporation at
(518) 373-7725.

 

Reimbursement by Friendly’s of costs related to all club memberships,
including membership in the Wilbraham Country Club, shall cease as of December
31, 2006.  The benefit of financial
services and planning provided by AYCO Corporation, and paid for by Friendly’s,
will cease as of June 1, 2007.

To assist you in securing a new position, Friendly’s will pay to you
$10,000, less applicable deductions, which sum may be used by you to engage the
services of an outplacement firm.

Friendly’s will reimburse you for reasonable costs and fees associated
with your participation, if called as a witness by or on the behalf of Friendly’s,
in any litigation matter existing as of the date hereof.  Reasonable costs and fees for legal
representation will be reimbursed; costs and fees relating to your time will
not be reimbursed.

IIII.          COVENANTS

In consideration of the terms set forth in this letter, you agree to the
following:

1.         You will turn over to
Friendly’s Vice President, Human Resources all confidential information and,
whether or not confidential, all originals and copies of any documents,
manuals, plans, equipment, business papers, computer diskettes or other
materials relating to Friendly’s and its subsidiaries, divisions, parents and
affiliates, their agents, employees, directors and officers which are in your
control or possession within two days of the Separation Date.

2.         You, on
behalf of yourself, your spouse, heirs, agents, attorneys, representatives and
assigns, hereby release and discharge forever all claims and causes of action
of every name and nature that have arisen or might have arisen at any time up
to and including the date on which you sign this Agreement (whether known or
unknown, accrued, contingent, or liquidated) that you now have or may have
against Friendly’s, any of its subsidiaries, divisions, parents and affiliates,
or any of the aforementioned entities’ agents, employees, directors, and
officers, including but not limited to, any claims relating to your employment
with Friendly’s and the termination thereof; any claims based on statute,
regulation, ordinance, contract or tort; any claims arising under the Age
Discrimination in Employment Act of 1967, as amended (the “ADEA”), or any other
federal, state, or local law relating to employment discrimination, harassment,
or retaliation; any claims relating to wages, compensation, or benefits; and
any related claims for attorney’s fees, except that you do not release Friendly’s
from claims for payments and other benefits related to this Agreement.

3.         You agree not
to file a lawsuit in any court of the United States or any State thereof
concerning any matter released in this Agreement or from participating in any
investigation or proceeding conducted by any state or federal agency regarding
any released claim.  By signing this
Agreement, you acknowledge that you are waiving your right to money damages and
any other relief should any agency pursue claims on your behalf arising out of
or relating to your employment with and/or separation from Friendly’s.

4.         The parties agree to
forever refrain from taking any action or making any statement which brings
discredit upon or disparages the other party (including, with respect to
Friendly’s, its services or products, or any of its directors, officers,
employees, or agents).

 2
 

 

5.         If either party breaches
any of the terms of this Agreement, the non-breaching party may be entitled to
recover from the breaching party all costs, fees, and expenses (including
attorney’s fees) as may be awarded by a court of competent jurisdiction under
applicable law and if Friendly’s prevails as a non-breaching party, it will be
entitled to recover what it has paid you under this Agreement.

6.         You acknowledge
that in the course of your employment by and service to Friendly’s, you have
had, and may continue to have, access to confidential information of Friendly’s
and related or affiliated entities (collectively referred to herein as “the
Companies”), including without limitation to, financial statements; sales
figures; projections; estimates; promotions; contracts; pricing; purchasing
methods and sources; marketing methods; sales sheets; customer lists; employee
lists; literature; catalogues; designs; specifications; bills of material;
processes; software; the Companies’ operational policies, procedures, or
practices; any documents utilized in the administration or operation of the
Companies including contracts, agreements, memorandums of understanding or
policies; any conversations within or among the Companies or between employees
not explicitly intended for public knowledge, and all other information
furnished by the Companies or acquired by you during the term of your
employment with Friendly’s (hereinafter “Confidential Information”). You
acknowledge that such Confidential Information is a valuable and unique asset
of the Companies and agree that you will not disclose any such Confidential
Information to any person for any reason whatsoever without the prior written
authorization of any of the Companies unless such information is in the public domain
through no fault of yours, or except as may be required by law or in the event
that you are compelled to testify under oath. 
You also acknowledge that the Companies may have received, and may
receive in the future, proprietary information from third parties (“Third-Party
Confidential Information”) subject to the provisions of various confidentiality
agreements, and you have had, and may continue to have, access to such
Third-Party Confidential Information. 
You agree that you will continue to be subject to the provisions of such
confidentiality agreements.

7.           You agree
that for a period of one (1) year following the Separation Date, you will not
directly or indirectly, for your own account or for any other person, as agent,
employee, officer, director, trustee, consultant, owner, partner or
shareholder, or in any other capacity:

(i)                         hire or
attempt to hire or assist any other person in hiring or attempting to hire any
employee of Friendly’s; or

(ii)                      encourage or
assist any other person in encouraging any director, officer, employee, agent,
consultant or any other person affiliated with Friendly’s to terminate or alter
his or her or its relationship with Friendly’s; or

(iii)                   encourage or
assist any other person in encouraging any customer or supplier of Friendly’s
to terminate or alter its relationship with Friendly’s; or

(iv)                  sell or market
or assist any other person in selling or marketing any product or service that
competes, directly or indirectly with any product or service manufactured, sold
or under development by Friendly’s at the time your employment with Friendly’s
is terminated; or

 3
 

 

(v)                     research,
develop or manufacture or assist any other person in researching, developing or
manufacturing any product or service that competes with any product or service
conceived, manufactured, sold or under development by Friendly’s at the time your
employment with Friendly’s is terminated.

V.            OTHER

This is the entire agreement between us and any prior agreements or
understandings, whether oral or written, are entirely superseded by this
Agreement and you have not relied upon any other agreement or representation
not found in this Agreement.  We each
have voluntarily accepted the terms as sufficient without reservation.  This Agreement may only be modified by a written
agreement signed by you and an officer of Friendly’s.

Pursuant to its obligations under the ADEA, Friendly’s advises you to
consult with an attorney prior to executing this Agreement.  You have 21 days from the date of receipt of
this document in which to consider this Agreement.  In addition, you may revoke this Agreement
within seven days following its execution, but only by delivering a written
revocation notice to Friendly’s Vice President of Human Resources within such
timeframe.  This Agreement shall not
become effective or enforceable until the seven-day revocation period has
expired.

By signing this Agreement, you acknowledge that you have read and fully
understand all of its provisions and that you are signing it voluntarily.  You also acknowledge that you are not relying
on any representations by any representative of Friendly’s concerning the
meaning of any aspect of this Agreement.

In the event,
after the execution of this Agreement but before all payments to you have been
made, Friendly’s determines that you have engaged in any fraudulent or illegal
activity related to Friendly’s not actually known to Friendly’s prior to the
execution of this Agreement, Friendly’s shall have the right to terminate its
remaining obligations under this Agreement, declaring it null and void.

Each party hereto
agrees that they are fully authorized and have all of the requisite right,
power, and authority to enter into this Agreement, which is fully binding upon
and enforceable against the respective parties hereto in accordance with its
terms.

This Agreement is
made and entered into in the Commonwealth of Massachusetts and shall in all
respects be interpreted, enforced, and governed by the laws of the Commonwealth
of Massachusetts.  You consent to the
exclusive jurisdiction of the courts of the Commonwealth of Massachusetts for
any litigation concerning the terms of this Agreement.

If the above is in agreement with your understanding, please sign and
keep one copy of this document for your records and return one copy to me.

 4
 

 

ACCEPTED AND AGREED TO AS OF THIS 6th DAY
OF  NOVEMBER, 2006.

	
  FRIENDLY ICE CREAM CORPORATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Garrett J. Ulrich

  	
   

  	
   

  
	
   

  	
   

  	
  Garrett J. Ulrich

  	
   

  	
   

  
	
   

  	
   

  	
  Vice President, Human
  Resources

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ John L. Cutter

  	
   

  	
   

  
	
   

  	
   

  	
  John L. Cutter

  	
   

  	
   

  

 

 5

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