Document:

Exhibit 10.2

 

LEASE

 

THIS LEASE (this “Lease”) is entered into as of October 1,
2006 between DFA, LLC (“Lessor”)
and AHERN RENTALS, INC. (“Lessee”).

 

RECITALS

 

A.            Lessee wishes to
lease from Lessor that certain real property and the building(s) and other improvements
located at 28261 Highway 74, Romoland, CA 92585, consisting of approximately 11.05
acres, as more particularly described on the attached Exhibit A (the “Premises”).

 

B.            Lessor hereby leases
the Premises to Lessee, and Lessee hereby leases the Premises from Lessor, on
the terms and conditions set forth in this Lease.

 

TERMS AND CONDITIONS

 

Term.

 

1(a)         The term of this
Lease shall commence on October 1, 2006 and continue through October 27, 2014,
unless sooner terminated.

 

Rental.

 

1(b)(1)    Lessee shall pay to
Lessor as rent for the Premises the sum of $24,562.50 per month during the
first year of the lease term.

 

1(b)(2)    Commencing on November 1,
2006 and on each November 1st (each, an “Annual Rent Adjustment Date”) during the remainder of the
lease term, the monthly rent payment shall be increased by an amount equal to
the greater of (i) three percent (3%) of the monthly rental rate paid for the
prior year, or (ii) the same percentage as the percentage increase in the Consumer Price Index comparing the figure
for the month prior to the month in which the adjustment is to occur with the
figure for the same month in the preceding year, except that if the rent is
adjusted pursuant to Section 1(b)(3) the percentage under this clause (ii) to
be used for calculating the applicable increase in rent to commence on the next
Annual Rent Adjustment Date following a Major Improvement Rent Adjustment Date
(as defined in Section 1(b)(3) below) shall mean the same percentage as the
percentage increase in the Consumer Price
Index comparing the figure for the month prior to the month in which
the adjustment is to occur with the figure for the month prior to the preceding
Major Improvement Rent Adjustment Date. Comparisons shall be made using the Index for the U.S. City Average — All Urban Wage
Earners published by the U.S. Department of Labor, Bureau of Labor
Statistics. If that Index is discontinued, the parties shall use the nearest
comparable index measuring changes in the cost of living during the period
involved. The initial rental increase effective November 1, 2006 shall be
calculated at 1/12 of the annual rate.

 

1(b)(3)    In the event during the
term of this Lease, Lessor constructs any Major Improvement (defined below) on
the Premises for Lessee’s benefit, beginning on the first day of the second
calendar month following the date of completion of the Major Improvement (a 

 

1

 

“Major Improvement Rent Adjustment
Date”) the monthly rent shall be adjusted to be the fair market
rental value of the Premises as of the completion of the Major Improvement,
provided in no event shall the monthly rent be less than the monthly rent in
effect immediately prior to the construction of the Major Improvement. Upon
completion of the Major Improvement, the parties shall discuss and attempt to
determine by mutual agreement the monthly rent to be paid beginning on the
Major Improvement Rent Adjustment Date. If the parties are unable to reach
agreement before the 30th day following the completion of the Major
Improvement, the matter shall be determined by appraisal.

 

If an appraiser is required under this Section 1(b)(3), the monthly
rent shall be determined by a qualified, independent real property appraiser
familiar with commercial rental values in the area. The appraiser shall be
selected by Lessee from a list of not fewer than three such individuals
submitted by Lessor. If Lessee does not make the selection within ten days
after submission of the list, Lessor may do so. If Lessor does not submit such
a list within ten (10) days after written request from Lessee to do so, Lessee
may name as an appraiser any individual with such qualifications. Within thirty
(30) days after appointment, the appraiser shall furnish to both parties an
appraisal of the fair market rental value of the Premises, which shall be final
and binding on the parties. The cost of the appraisal shall be borne equally by
the parties.

 

For purpose of this Lease “Major
Improvement” shall mean a structure erected at the request of the
Lessee as a permanent improvement on the Premises that is intended to enhance
the value of the Premises or an addition made at the request of the Lessee that
increases the size of a building on the Premises or the size of the Premises.

 

1(b)(4)    Rent will be paid in
advance on the first day of each month to Lessor at the address for Lessor set
forth in this Lease, or at such other address as Lessor may designate in
writing to Lessee. Rent is uniformly apportionable day to day.

 

Use of Premises.

 

(2a)         The Lessee shall use
the Premises during the term of this lease for the conduct of the following
business: operations of an equipment rental company and for no other purpose
whatsoever without Lessor’s written consent.

 

(2b)         The Lessee will not
make any unlawful, improper or offensive use of the Premises; the Lessee will
not suffer any strip or waste thereof; the Lessee will not permit any
objectionable noise or odor to escape or to be emitted from the Premises or do
anything or permit anything to be done upon or about the Premises in any way
tending to create a nuisance; the Lessee will not sell or permit to be sold any
product, substance or service upon or about the Premises, excepting in the
ordinary course of Lessee’s business or such as Lessee may be licensed by law
to sell and as may be herein expressly permitted.

 

(2c)         The Lessee will not
cause the Premises at any time to fall into such a state of repair or disorder
as to increase the fire hazard thereon; the Lessee will not install any power
machinery on the Premises except in the ordinary course of Lessee’s business or
under the supervision and with written consent of the Lessor; the Lessee will
not store gasoline or other highly combustible materials on the Premises at any
time except in the ordinary course of 

 

2

 

Lessee’s business; the Lessee will not use the Premises in such a way
or for such a purpose that the fire insurance on the improvements on the
Premises is thereby cancelled.

 

(2d)         The Lessee shall
comply at Lessee’s own expense with all laws and regulations of any municipal,
county, state, federal or other public authority respecting the use of the
Premises. These include, without limitation, all laws, regulations and
ordinances pertaining to air and water quality, Hazardous Materials as herein
defined, waste disposal, air emissions, and other environmental matters. As
used herein, Hazardous Material means any hazardous or toxic substance,
material, or waste, including but not limited to those substances, materials,
and waste listed in the U.S. Department of Transportation Hazardous Materials
Table or by the U.S. Environmental Protection Agency as hazardous substances
and amendments thereto, petroleum products, or such other substances, materials,
and waste that are or become regulated under any applicable local, state, or
federal law. Neither Lessee nor Lessor is required to make any alterations to
comply with the Americans with Disabilities Act.

 

(2e)         The Lessee shall
regularly occupy and use the Premises for the conduct of Lessee’s business, and
shall not abandon or vacate the Premises for more than ten days without written
approval of Lessor.

 

(2f)          Except in the
ordinary course of Lessee’s business, Lessee shall not cause or permit any
Hazardous Material to be brought upon, kept or used in or about the Premises by
Lessee, its agents, employees, contractors, or invitees without the prior
written consent of Lessor, which consent will not be unreasonably withheld so
long as Lessee demonstrates to Lessor’s reasonable satisfaction that such
Hazardous Material is necessary or useful to Lessee’s business and will be
used, kept, and stored in a manner that will comply at all times with all laws
regulating any such Hazardous Material so brought upon or used or kept on or
about the Premises.

 

Utilities.

 

(3)           The Lessee shall pay
for all heat, light, water, power, and other services or utilities used in the
Premises during the term of this lease.

 

Repairs and Improvements.

 

(4a)         The Lessor shall not
be required to make any repairs, alterations, additions or improvements to or
upon the Premises during the term of this lease, except only those hereinafter
specifically provided for; the Lessee hereby agrees to maintain and keep the
Premises, including all interior and exterior walls and doors, ordinary
maintenance of heating, ventilating and cooling systems, interior wiring,
plumbing and drain pipes to sewers or septic tank, in good order and repair
during the entire term of this lease, at Lessee’s own cost and expense, and to
replace all glass which may be broken or damaged during the term hereof in the
windows and doors of the Premises with glass of as good or better quality as
that now in use; it is further agreed that the Lessee may make alterations,
additions or improvements to or upon the Premises without first obtaining the
consent of the Lessor.

 

(4b)         The Lessor agrees to
make all necessary structural repairs to the building, including exterior
walls, foundation, roof, gutters and downspouts, and the abutting sidewalks. 

 

3

 

Lessor shall also make all capital repairs and replacements to the
Premises unless such is necessitated solely by Lessee’s failure to maintain in
accordance with subsection 4(a). The Lessor reserves and at any and all times
shall have the right to alter, repair or improve the building of which the
Premises are a part, or to add thereto, and for that purpose at any time may
erect scaffolding and all other necessary structures about and upon the
Premises and Lessor and Lessor’s representatives, contractors and workers for
that purpose may enter in or about the Premises with such materials as Lessor
may deem necessary therefor, and Lessee waives any claim to damages, including
loss of business resulting therefrom, provided Lessor gives Lessee not less
than 48 hours’ advance notice and such activities are conducted without
material interference with Lessee’s use of the Premises.

 

Lessor’s Right of Entry.

 

(5)           It shall be lawful
for the Lessor, the Lessor’s agents and representatives, at any reasonable time
upon 48 hours’ advance notice to enter into or upon the Premises for the
purpose of examining into the condition thereof, or for any other lawful
purpose.

 

Right of Assignment.

 

(6)           The Lessee will not
assign, transfer, pledge, hypothecate, surrender or dispose of this lease, or
any interest herein, sublet, or permit any other person or persons whomsoever
to occupy the Premises without the written consent of the Lessor being first
obtained in writing; this lease is personal to Lessee; Lessee’s interests, in
whole or in part, cannot be sold, assigned, transferred, seized or taken by
operation at law, or under or by virtue of any execution or legal process,
attachment or proceedings instituted against the Lessee, or under or by virtue
of any bankruptcy or insolvency proceedings had in regard to the Lessee, or in
any other manner, except as above mentioned. Notwithstanding any provision in
this Lease, Lessee may, without Lessor consent, execute and deliver one or more
leasehold mortgages (or leasehold trust deeds) to any lender to Lessee with
respect hereto.

 

Liens.

 

(7)           The Lessee will not
permit any lien of any kind, type or description to be placed or imposed upon
the Lessee’s interest in improvements in which the Premises are situated, or
any part thereof, or Lessee’s interest in the land on which they stand.

 

Ice, Snow, Debris

 

(8)           If the Premises are
located at street level, then at all times Lessee shall keep the sidewalks in
front of the Premises free and clear of ice, snow, rubbish, debris and
obstruction; and if the Lessee occupies the entire building, the Lessee will
not permit rubbish, debris, ice or snow to accumulate on the roof of the
building so as to stop up or obstruct gutters or downspouts or cause damage to
the roof, and will save harmless and protect the Lessor against any injury
whether to Lessor or to Lessor’s property or to any other person or property
caused by Lessee’s failure in that regard.

 

4

 

Overloading of Floors.

 

(9)           The Lessee will not
overload the floors of the Premises in such a way as to cause any undue or
serious stress or strain upon the building in which the Premises are located,
or any part thereof, and the Lessor shall have the right, at any time, to call
upon any competent engineer or architect whom the Lessor may choose, to decide
whether or not the floors of the Premises, or any part thereof, are being
overloaded so as to cause any undue or serious stress or strain on the
building, or any part thereof, and the decision of the engineer or architect
shall be final and binding upon the Lessee; and in the event that it is the
opinion of the engineer or architect that the stress or strain is such as to
endanger or injure the building, or any part thereof, then and in that event
the Lessee agrees immediately to relieve the stress or strain, either by
reinforcing the building or by lightening the load which causes such stress or
strain, in a manner satisfactory to the Lessor.

 

(10)         Intentionally Blank.

 

Liability Insurance.

 

(11)         At all times during
the term hereof, the Lessee will, at the Lessee’s own expense, keep in effect
and deliver to the Lessor liability insurance policies in form, and with an
insurer, satisfactory to the Lessor. Such policies shall insure both the Lessor
and the Lessee against all liability for damage to persons or property in,
upon, or about the Premises. It shall be the responsibility of the Lessee to
purchase casualty insurance with extended coverage so as to insure any
structure on the Premises against damage caused by fire or the effects of fire
(smoke, heat, means of extinguishment, etc.), or any other means of loss and to
insure all of the Lessee’s belongings upon the Premises, of whatsoever nature,
against the same. With respect to these policies, Lessee shall cause the Lessor
to be named as an additional insured party. Lessee agrees to and shall
indemnify and hold Lessor harmless against any and all claims and demands
arising from the negligence of the Lessee, Lessee’s officers, agents, invitees
and/or employees, as well as those arising from Lessee’s failure to comply with
any covenant of this lease on Lessee’s part to be performed, and shall at
Lessee’s own expense defend the Lessor against any and all suits or actions
arising out of such negligence, actual or alleged, and all appeals therefrom
and shall satisfy and discharge any judgment which may be awarded against
Lessor in any such suit or action.

 

Fixtures.

 

(12)         All partitions,
plumbing, electrical wiring, additions to or improvements upon the Premises,
whether installed by the Lessor or Lessee, shall be and become a part of the
building in which the Premises are located as soon as installed and the
property of the Lessor unless otherwise herein provided. Notwithstanding any
other provisions of this Lease, Lessee’s furniture, trade fixtures, equipment
and personal property shall at all times remain the property of Lessee.

 

Light and Air.

 

(13)         This lease does not
grant any rights of access to light and air over the Premises or any adjacent
property.

 

5

 

Damage by Casualty, Fire and Duty to Repair.

 

(14)         In the event of the
destruction of the improvements in which the Premises are located by fire or
other casualty, either party hereto may terminate this lease as of the date of
fire or casualty, provided, however, that in the event of damage to the
improvements by fire or other casualty to the extent of twenty-five (25) percent
or more of the sound value thereof, Lessor or Lessee may elect to terminate the
lease as of the date of such damage by written notice thereof to the other
party. Absent such termination by either party or if the improvements in which
the Premises are located be but partially destroyed and the damage so
occasioned shall not amount to the extent indicated above, then the Lessor
shall repair the same with all convenient speed and shall have the right to
take possession of and occupy, to the exclusion of the Lessee, all or any part
thereof in order to make the necessary repairs, and the Lessee hereby agrees to
vacate upon request, all or any part thereof which the Lessor may require for
the purpose of making necessary repairs, and for the period of time between the
day of such damage and until such repairs have been substantially completed
there shall be such an abatement of rent as the nature of the injury or damage
and its interference with the occupancy of the Premises by the Lessee shall
warrant; however, if the Premises be but slightly injured and the damage so
occasioned shall not cause any material interference with the occupation of the
Premises by Lessee, then there shall be no abatement of rent and the Lessor
shall repair the damage with all convenient speed.

 

Waiver of Subrogation Rights.

 

(15)         Neither the Lessor
nor the Lessee shall be liable to the other for loss arising out of damage to
or destruction of the Premises, or the building or improvement of which the
Premises are a part or with which they are connected, or the contents of any
thereof, when such loss is caused by any of the perils which are or could be
included within or insured against by a standard form of fire insurance with
extended coverage, including sprinkler leakage insurance, if any. All such
claims for any and all loss, however caused, hereby are waived. Such absence of
liability shall exist whether or not the damage or destruction is caused by the
negligence of either Lessor or Lessee or by any of their respective agents,
servants or employees. It is the intention and agreement of the Lessor and the
Lessee that the rentals reserved by this lease have been fixed in contemplation
that both parties shall fully provide their own insurance protection at their
own expense, and that both parties shall look to their respective insurance
carriers for reimbursement of any such loss, and further, that the insurance
carriers involved shall not be entitled to subrogation under any circumstances
against any party to this lease. Neither the Lessor nor the Lessee shall have
any interest or claim in the other’s insurance policy or policies, or the
proceeds thereof, unless specifically covered therein as a joint insured.

 

Eminent Domain.

 

(16)         In case of the
condemnation or purchase of all or any substantial part of the Premises by any
public or private corporation with the power of condemnation this lease may be
terminated, effective on the date possession is taken or title is transferred,
by either party hereto on written notice to the other and in that case the
Lessee shall not be liable for any rent after the termination date.

 

(17)         Intentionally blank.

 

6

 

Delivering Up Premises on Termination.

 

(18)         At the expiration of
the lease term or upon any sooner termination thereof, the Lessee will quit and
deliver up the Premises and all future erections or additions to or upon the
same, broom-clean, to the Lessor or those having Lessor’s estate in the
Premises, peaceably, quietly, and in as good order and condition as when received,
reasonable use and wear thereof, damage by fire, unavoidable casualty and the
elements alone and other events not required hereunder to be repaired by Lessee
excepted, as the same are now in or hereafter may be put in by the Lessor.

 

Additional Covenants or Exceptions.

 

(19)         Intentionally blank.

 

(20)         Intentionally blank.

 

(21)         Lessee shall pay when
due all taxes, assessments and public charges on the Premises.

 

Attachment Bankrupt Default.

 

PROVIDED, ALWAYS,
and these presents are upon these conditions, that (1) if the Lessee shall be
in arrears in the payment of rent for a period of ten days after the same
becomes due, or (2) if the Lessee shall fail or neglect to perform or observe
any of the covenants and agreements contained herein on Lessee’s part to be
done, kept, performed and observed and such default shall continue for twenty
days or more after written notice of such failure or neglect shall be given to
Lessee, except that if the failure is of such a nature that it cannot be
remedied fully within the 20-day period, this requirement shall be satisfied if
Lessee begins correction of the failure within the 20-day period and thereafter
proceeds with reasonable diligence and in good faith to effect the remedy as
soon as practicable, or (3) if the Lessee shall be declared bankrupt or
insolvent according to law, or (4) if any assignment of all or substantially
all of Lessee’s property shall be made for the benefit of creditors, or (5) if
on the expiration of this lease Lessee fails to surrender possession of the
Premises, the Lessor or those having Lessor’s estate in the Premises, may
terminate this lease and, lawfully, at Lessor’s option immediately or at any
time thereafter, without demand or notice, enter into and upon the Premises and
every part thereof and repossess the same, and expel Lessee and those claiming
by, through and under Lessee and remove Lessee’s effects at Lessee’s expense,
forcibly if necessary and store the same, all without being deemed guilty of
trespass and without prejudice to any remedy which otherwise might be used for
arrears of rent or preceding breach of covenant.

 

Neither the termination of this lease by forfeiture nor the taking or
recovery of possession of the Premises shall deprive Lessor of any other
action, right, or remedy against Lessee for possession, rent or damages, nor
shall any omission by Lessor to enforce any forfeiture, right or remedy to
which Lessor may be entitled be deemed a waiver by Lessor of the right to
enforce the performance of all terms and conditions of this lease by Lessee.

 

In the event of any re-entry by Lessor, Lessor may lease or relet the
Premises in whole or in part to any tenant or tenants who may be satisfactory
to Lessor, for any duration, and for the best rent, terms and conditions as
Lessor may reasonably obtain. Lessor shall apply the rent received from any
such tenant first to the cost of retaking and reletting the Premises, including

 

7

 

remodeling required to obtain any such tenant, and then to any arrears
of rent and future rent payable under this lease and any other damages to which
Lessor may be entitled hereunder.

 

Any property which Lessee leaves on the Premises more than ten (10)
days after abandonment or expiration of the lease, or for more than ten days
after any termination of the lease by Lessor, shall be deemed to have been
abandoned, and Lessor may remove and sell the property at public or private
sale as Lessor sees fit, without being liable for any prosecution therefor or
for damages by reason thereof, and the net proceeds of any such sale shall be
applied toward the expenses of Lessor and rent as aforesaid, and the balance of
such amounts, if any, shall be held for and paid to the Lessee.

 

Holding Over.

 

In the event the Lessee for any reason shall hold over after the
expiration of this lease, such holding over shall not be deemed to operate as a
renewal or extension of this lease, but shall only create a tenancy at
sufferance which may be terminated at will at any time by the Lessor.

 

Attorney Fees and Court Costs.

 

In case suit or action is instituted to enforce compliance with any of
the terms, covenants or conditions of this lease, or to collect the rental
which may become due hereunder, or any portion thereof, the losing party agrees
to pay the prevailing party’s reasonable attorney fees incurred throughout such
proceeding, including at trial, on appeal, and for post-judgment collection.
The Lessee agrees to pay and discharge all Lessor’s costs and expenses,
including Lessor’s reasonable attorney’s fees that shall arise from enforcing
any provision or covenants of this lease even though no suit or action is
instituted.

 

Should the Lessee be or become the debtor in any bankruptcy proceeding,
voluntarily, involuntarily or otherwise, either during the period this lease is
in effect or while there exists any outstanding obligation of the Lessee
created by this lease in favor of the Lessor, the Lessee agrees to pay the
Lessor’s reasonable attorney fees and costs which the Lessor may incur as the
result of Lessor’s participation in such bankruptcy proceedings. It is
understood and agreed by both parties that applicable federal bankruptcy law or
rules of procedure may affect, alter, reduce or nullify the attorney fee and
cost awards mentioned in the preceding sentence.

 

Waiver.

 

Any waiver by the Lessor of any breach of any covenant herein contained
to be kept and performed by the Lessee shall not be deemed or considered as a
continuing waiver, and shall not operate to bar or prevent the Lessor from
declaring a forfeiture for any succeeding breach, either of the same condition
or covenant or otherwise.

 

8

 

Recitals.

 

The recitals of this Lease are hereby incorporated in to this Lease and
made a part hereof.

 

Notices.

 

Any notice required by the terms of this lease to be given by one party
hereto to the other or desired so to be given, shall be sufficient if in
writing, contained in a sealed envelope, and sent first class mail, with
postage fully prepaid, and if intended for the Lessor herein, then if addressed
to the Lessor at DFA, LLC c/o Ahern Rentals, Inc., 4241 S. Arville Street, Las
Vegas, Nevada 89103 and if intended for the Lessee, then if addressed to the
Lessee at Ahern Rentals, Inc., 4241 S. Arville Street, Las Vegas, Nevada 89103.
Any such notice shall be deemed conclusively to have been delivered to the
addressee forty-eight hours after the deposit thereof in the U.S. Mail.

 

Heirs and Assigns.

 

All rights, remedies and liabilities herein given to or imposed upon
either of the parties hereto shall extend to, inure to the benefit of and bind,
as the circumstances may require, the heirs, successors, personal
representatives and so far as this lease is assignable by the terms hereof, to
the assigns of such parties.

 

In construing this lease, it is understood that the Lessor or the
Lessee may be more than one person; that if the context so requires, the
singular pronoun shall be taken to mean and include the plural, and that
generally all grammatical changes shall be made, assumed and implied to make
the provisions hereof apply equally to corporations and to individuals.

 

9

 

IN WITNESS WHEREOF,
the parties have executed this Lease on the day and year first hereinabove
written, any corporate signature of Lessee being by due authority of its Board
of Directors and any signature of Lessor being by due authority of its managing
member.

 

	
  Lessor:

  	
   

  	
  Lessee:

  
	
   

  	
   

  	
   

  
	
  DFA, LLC

  	
   

  	
  AHERN RENTALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Don F. Ahern, Manager

  	
   

  	
  By:

  	
  /s/ Don F. Ahern, President

  
	
   

  	
  Don F. Ahern, Manager

  	
   

  	
   

  	
  Don F. Ahern, President

  

 

10

 

EXHIBIT A

 

LEGAL DESCRIPTION

 

(To be attached)

 

Assessor’s Parcel No. 331-190-034Exhibit
4(c).3

WESTPAC GENERAL MANAGEMENT SHARE OPTION PLAN

RULES

1.Application

These Rules shall apply to Options issued by
Westpac pursuant to the Plan.

2.Definitions

In these Rules unless the context otherwise
requires:

Award means,
in relation to a Participant for a Performance Period, the number of Options
which the Directors in their discretion determine to grant to that Participant
pursuant to the Plan;

ASX means
Australian Stock Exchange Limited or any successor body;

Base Number means
the number of such Shares or other securities comprised in an Option, as
applicable, as adjusted for any preceding Capital Event;

Bonus Security means a security in the capital of Westpac which a holder of securities
in the capital of Westpac is entitled to be issued under any bonus issue by way
of capitalisation of profits or any other way;

Business Day has the meaning given in the Listing Rules;

Capital Event means any of the following:

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

(b)                                 any other event which the Directors in their
discretion reasonably consider should be a Capital Event;

Change in Control means:

(a)                                  a person becomes entitled (as understood
under the Corporations Act 2001 (Cth)
as in force as at the date of adoption of this Plan) to at least 35% of the
voting shares of Westpac on issue pursuant to a takeover bid for all of the
voting shares of Westpac which is or becomes unconditional;

(b)                                 a scheme of arrangement or other merger
proposal in relation to Westpac becomes binding on the holders of all of the
voting shares of Westpac and by reason of such scheme or proposal a person
becomes entitled (as understood under the Corporations
Act 2001 (Cth) as in force as at the date of adoption of this Plan)
to 35% of the voting shares of Westpac; or

(c)                                  a person becomes the beneficial owner of at
least 35% of the voting shares of Westpac on issue other than pursuant to
paragraph (a) or (b);

Closely-held Subsidiary has the meaning given in section 243M(3) of the Corporations Act 2001 (Cth) as in force at
the date of adoption of this Plan;

 

Directors means
the directors of Westpac from time to time or a majority of them;

Executive means
a senior employee of Westpac or one of its Closely-held Subsidiaries (other
than a non-executive Director) who is a member of the group of employees whom
the Directors determine from time to time are to be eligible for nomination
under the Plan;

Exercise Notice means a written notice in a form acceptable to Westpac given by a
Participant to the Directors requesting delivery of Shares and any other
securities comprising an Option to the Participant in accordance with an Award
previously made to that Participant pursuant to the Plan;

Exercise Price means the amount payable on the exercise of one Option in respect of
each underlying Share calculated as follows:

(a)           by
attributing the Last Sale Price to the Shares;

(b)                                 by attributing to each Bonus Security
notionally added to the Option after the grant of the Award a price of zero;
and

(c)                                  by attributing to each Rights Issue Security
notionally added to the Option after the grant of the Award a price equal to
the full amount payable by a subscriber to take up one right in respect of the
Rights Issue Security,

and by making any further adjustments,
including in respect of the Shares, in the event of any Capital Event (as
determined in accordance with Rule 8.2 or 8.9);

Group Company means Westpac and any of its subsidiaries.

Last Exercise Date means, in respect of an Option which has not lapsed, the earlier of the
following:

(a)           the date 10 years after the date of grant of the Option;

(b)                                 the date 12 months after the day on which the
Participant ceases to be employed by Westpac or any subsidiary of Westpac by
reason of:

(i)            ill health, injury, disability or death;

(ii)           retirement; or

(iii)                               their employing company, which was a
Closely-held Subsidiary of Westpac at the date of grant of the Award, ceasing
to be a subsidiary of Westpac; and

(c)                                  the date determined by the Directors where
the Participant ceases to be employed by Westpac or any subsidiary of Westpac
(other than as set out in paragraph (b)), if so determined by the Directors;

Last Sale Price means the average closing price quoted by ASX of the Shares during the
five (5) Business Days on which Shares were traded preceding the commencement
of the Performance Period;

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

Maximum TSR Ranking means the TSR Ranking equal to 75% or such other percentage as
determined by the Directors at the time of determination of the Performance
Requirements;

Mid-Range TSR Ranking means the TSR Ranking equal to 50% or such other percentage as
determined by the Directors at the time of determination of the Performance
Requirements;

Minimum TSR Ranking means the TSR Ranking equal to 25% or such other percentage as
determined by the Directors at the time of determination of the Performance
Requirements;

Option means
a right, exercisable by a Participant, to subscribe for or acquire one Share,
unless adjusted for any Capital Event as follows:

 2
 

 

(a)                                  in the event of a subdivision, by multiplying
the Base Number by the Reconstruction Factor;

(b)                                 in the event of a consolidation, by dividing
the Base Number by the Reconstruction Factor;

(c)                                  in the event of a bonus issue, by adding to
the Option that number of Bonus Securities which the Participant would have
been entitled to receive if, on the record date for the determination of Bonus
Security entitlements, the Participant had held the relevant Shares or other
securities equal to the Base Number;

(d)                                 in the event of a rights issue, by adding to
the Option that number of Rights Issue Securities for which the Participant
would have been entitled to subscribe if, on the record date for the
determination of Rights Issue Securities, the Participant had held the relevant
Shares or other securities equal to the Base Number; and

(e)                                  in the event of any other Capital Event, by
such appropriate adjustment as determined by the Directors in accordance with
Rule 8.2 or 8.9;

Participant means
each employee who receives and accepts an invitation under Rule 5.2;

Peer Group means
the 50 bodies corporate other than Westpac comprised in the ASX All Industrials
Index and which have the highest market capitalisation recorded by ASX at the
commencement of the Performance Period provided that if during the Performance
Period any of those bodies corporate cease to comprise that index for any
reason the Peer Group will consist of the remainder of those bodies corporate,
or such other bodies corporate and in such number as the Directors determine
should comprise the Peer Group;

Performance Requirements means the requirement(s) determined by the Directors from time to time
for assessing the performance of Westpac and which shall be based in whole or
in part on the provisions of Rule 6.2;

Performance Period means, subject to Rules 8.3, 8.7 and 11.2, a period of three full
years, or such other length of time as the Directors in their discretion
determine, commencing on the date of issue of an invitation under Rule 5.2;

Plan means
the Westpac General Management Share Option Plan established and operated in
accordance with these Rules;

Reconstruction Factor means the number of the relevant securities on issue after the Capital
Event divided by the number of such securities on issue before the Capital
Event;

Rights Issue Securities means fully paid securities in the capital of Westpac in respect of
which a holder of securities in the capital of Westpac is given a right by
Westpac to subscribe pro rata according to their holding;

Rules means
the rules of the Plan as set out in this document as amended from time to time;

Shares means
fully paid ordinary shares in the capital of Westpac;

TSR means,
in respect of a body corporate, the total shareholder return (including
dividends) of the body corporate being the amount calculated on the following
basis.

Step 1 - Calculate the average daily closing price
quoted by ASX of an ordinary share of the body corporate over the three months
immediately preceding the end of the Performance Period.

Step 2 - Add the amount calculated in Step 1 and
any cash distribution under a return of capital of the body corporate to the
ordinary shareholders generally during the Performance Period.

Step 3 - Calculate the average daily closing price
quoted by ASX of an ordinary share of the same body corporate over the three
months immediately preceding the start of the Performance Period.

 3
 

 

Step 4 - Divide the result from Step 2 by the
result from Step 3.

Step 5 - Divide the amount of each dividend paid on
an ordinary share of the same body corporate during the Performance Period by
the closing price quoted by ASX of the ordinary share of the same body
corporate on the date of payment of the respective dividend. Each of these
amounts is a dividend yield. Add each of the dividend yields for a Performance
Period together.

Step 6 - Add together one (1) and the result from
Step 5.

Step 7 - Multiply the result from Step 4 with the
result from Step 6.

Step 8 - Subtract one (1) from the result from Step
7. This amount is the TSR for that body corporate,

subject to the right of the Directors to make
adjustments as they think necessary for any Capital Event of the body corporate
during the Performance Period;

TSR Ranking means
the percentage ranking of Westpac or a body corporate amongst the group
comprising the Peer Group and Westpac, ranked in ascending order according to
their TSRs; and

Westpac means
Westpac Banking Corporation.

3.Interpretation

In these Rules, the following rules of
interpretation apply, unless the context requires otherwise:

(a)                                  words denoting the singular shall include the
plural and vice versa;

(b)                                 words denoting the masculine gender shall
include the feminine gender;

(c)                                  a reference to a person includes the legal
personal representatives, successors and permitted assigns of that person;

(d)                                 a reference to a Rule is to a rule of this Plan;

(e)                                  a reference to number shall include fractions;

(f)                                    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

(g)                                 words which are not defined in these Rules
shall have the meaning given in the Corporations
Act 2001 (Cth) as amended.

4.Headings

Headings
are for ease of reference only and shall not affect the interpretation of these
Rules.

5.Participation

5.1                                 Subject to Rules 5.3 and 20.2, the Directors
may nominate any Executive to participate in the Plan in relation to a
Performance Period.

5.2                                 The Executives nominated under Rule 5.1 will
be invited by the Directors to participate in the Plan in relation to a
Performance Period. The date of issue of the invitation shall be determined by
the Directors. The invitation will set out the Performance Requirements as
determined under Rule 6. An acceptance of an invitation by an Executive must be
notified to the Directors in writing.

5.3                                 An Executive who resides or is domiciled in a
country other than Australia may not participate under Rule 5.2 unless:

 4
 

 

(a)                                  the Directors have determined that they
should participate; and

(b)                                 neither the laws of Australia nor the country
of residence or domicile or any other matter or thing, in the opinion of the
Directors, makes their participation illegal or impracticable.

5.4                                 The Directors may nominate under Rule 5.1 an
Executive who becomes an employee of Westpac or one of its Closely-held Subsidiaries
before the end of the first year of a Performance Period to participate in the
Plan in respect of that Performance Period.

6.Determination
of Performance Requirements

6.1                                 Before the commencement of each Performance
Period the Directors will in their discretion determine the Performance
Requirements applicable to that Performance Period.

6.2                                 For the purposes of Rule 6.1, the Directors,
unless they determine otherwise, shall establish performance requirements on
the following basis:

(a)                                  where the TSR Ranking of Westpac is less than
the Minimum TSR Ranking, the number of Options which shall become exercisable
under Rule 8.1(b) shall be zero;

(b)                                 where the TSR Ranking of Westpac is equal to
the Minimum TSR Ranking, the number of Options which shall become exercisable
under Rule 8.1(b) shall be the number equal to 25% of the Options comprising
the Award;

(c)                                  where the TSR Ranking of Westpac is equal to
or greater than the Maximum TSR Ranking, the number of Options which shall
become exercisable under Rule 8.1(b) shall be the number equal to 100% of the
Options comprising the Award;

(d)                                 where the TSR Ranking of Westpac is greater
than the Minimum TSR Ranking and less than the Maximum TSR Ranking, the number
of Options which shall become exercisable under Rule 8.1(b):

(i)                                     shall increase on a straight line basis from
the percentage of Options comprising the Award set out in paragraph (b) to 50%
of the Options comprising the Award where the TSR Ranking of Westpac is less
than or equal to the Mid-Range TSR Ranking; and

(ii)                                  shall, where the TSR Ranking of Westpac is
greater than the Mid-Range TSR Ranking, further increase on a straight line
basis to 100% of the number of Options comprising the Award as contemplated in
paragraph (c).

6.3                                 The Directors may declare one or more
Performance Periods in any year.

 5
 

 

7.Awards of Options

7.1           At the commencement of each
Performance Period the Directors will allot to each Participant their Award.

7.2                                 The
allotment of an Award to a Participant under Rule 7.1 does not confer on the
Participant any right or interest in or any right to subscribe for any Shares
or any other securities comprising the Award until the end of the Performance
Period.

8.Award

8.1                                 At the end of each Performance Period the
Directors will:

(a)                                  determine whether and, if so, the extent to
which the Performance Requirements applicable to that Performance Period have
been met; and

(b)                                 subject to Rules 8.2, 8.3, 8.4, 8.5, 8.7 and
19, determine the number of the Options granted to each Participant under an
Award which are to be exercisable, but only to the extent to which the
Performance Requirements have been met for that Performance Period, with the
remainder to lapse.

8.2                                 When the Directors in relation to any
Performance Period:

(a)                                  apply the Performance Requirements;

(b)                                 determine the number of Shares and other
securities (if any) which comprise an Option; and

(c)                                  determine the Exercise Price of the Option,

the Directors must have regard to any Capital
Event which has occurred during the Performance Period and ensure that the
Capital Event is taken into account in applying the Performance Requirements,
in determining the number of Shares and other securities which comprise an
Option and in determining the Exercise Price, in a manner which is fair and
equitable to the Participants and which is consistent with the relevant
provisions of the Listing Rules.

8.3                                 After
making a determination under Rule 8.1(b), the Directors will offer, in
accordance with Rule 8.4, each of the Participants the option to extend the
Performance Period by one year and, if an offer is accepted in writing within
30 days, the provisions of Rule 8.1 will be reapplied 12 months later in
respect of that Participant by reference to the longer period. This offer will
be repeated 12 months later to any Participant who elected to extend the
Performance Period in the previous year.

8.4                                 Following
the determination made by the Directors under Rule 8.1 the Directors shall
inform each Participant:

(a)                                  as
to whether or not the Performance Requirements have been met;

(b)                                 of
the number of Options they are entitled to exercise, if any;

(c)                                  of
the Exercise Price of an Option;

(d)                                 of
the number of Shares and any other securities which comprise an Option;

(e)                                  of
their extension right under Rule 8.3,

and, if applicable as determined by the
Directors, may inform each Participant:

(f)                                    of
the time or times at which each Participant may elect to exercise their
Options;

 6
 

 

(g)                                 of
the availability, if any, of any loan facility available to each Participant in
respect of the exercise of their Options.

8.5                                 The
determination of the Directors under Rule 8.1(b) shall become final and binding
30 days after a notice under Rule 8.4 is issued, unless a Participant exercises
his or her right under Rule 8.3 before such time in which event that
determination is of no effect.

8.6                                 In
this Plan:

(a)                                  all
calculations shall be done to not less than 3 decimal places;

(b)                                 no
rounding shall occur in respect of calculating the number of Options
exercisable by each Participant until the Directors make a determination under
Rule 8.1 and any such rounding shall be rounded up, if the resulting fraction
(if any) is a value of 0.5 or more, and shall be rounded down, if the resulting
fraction (if any) is a value of less than 0.5;

(c)                                  no
rounding shall occur in respect of calculating the Exercise Price until a
Participant lodges an Exercise Notice and any such rounding:

(i)                                     shall
be calculated only in respect of the aggregate number of Options exercised; and

(ii)                                  shall
be rounded up to the nearest cent, if the resulting fraction (if any) is a
value of $0.005 or more, and shall be rounded down to the nearest cent, if the
resulting fraction (if any) is a value of less than $0.005; and

(d)                                 no rounding shall occur in respect of
calculating the number of Shares or other securities comprising an Option until
a Participant lodges an Exercise Notice and any such rounding:

(i)                                     shall
be calculated only in respect of the aggregate number of Options exercised; and

(ii)           shall be rounded up, if the resulting
fraction (if any) is a value of 0.5 or more, and shall be rounded down, if the
resulting fraction (if any) is a value of less than 0.5.

8.7                                If:

(a)                                  Change in Control occurs, the end of a
Performance Period may be brought forward to a date determined by the
Directors; or

(b)                                 there
is publicly announced a merger proposal (whether by takeover bid, scheme of
arrangement or otherwise) in relation to Westpac which the Directors believe
may lead to a Change in Control, the Directors may in their sole discretion
bring forward the end of a Performance Period to a date determined by the
Directors,

and the Directors may in their discretion
vary or waive the Performance Requirements in determining the number of Options
granted to each Participant under an Award which are to be exercisable.

8.8                                Any
Options allotted under the Plan may not be assigned, disposed, pledged or
otherwise be held subject to a security or third party interest.

8.9                                If
a Capital Event occurs after the end of a Performance Period and before the
lodgment of an Exercise Notice the Directors shall determine in respect of each
Option:

(a)                                  the number of Shares and other securities (if any) which comprise the
Option; and

(b)                                 the Exercise Price of the Option,

 7
 

 

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 and the Directors may inform
each Participant of these decisions or shall otherwise inform each Participant
on request.

9.Exercise and Lapse of Options

9.1                                A Participant may exercise their Options received under the Plan in whole
or in part (in parcels of 1000 Options), subject to Rules 8.4(f) and 9.7, by
giving an Exercise Notice to the Directors at any time after the end of a
Performance Period and before the Last Exercise Date.

9.2                                A Participant may exercise any of his or her Options by lodging an Exercise
Notice and a cheque payable to Westpac for the Exercise Price applicable to
those Options or by such other means of payment as may be approved by the
Directors, at the head office of Westpac, for the time being or other place
nominated by the Directors for this purpose.

9.3                                If
the amount provided by a Participant is greater than the aggregate Exercise
Price of the Options being exercised, Westpac shall promptly refund an amount
equal to the excess. If the amount provided by a Participant is less than the
aggregate Exercise Price of the Options being exercised, the Exercise Notice
shall not be treated as duly completed until Westpac receives an amount equal
to the difference.

9.4                                Within
30 days of the receipt of a duly completed Exercise Notice, the Directors shall
cause the Shares or other securities comprising an Option to be issued to or
acquired on the stock market of ASX in the name of the Participant in the
number to which the Options the subject of the Exercise Notice relate.

9.5                                If the Directors determine under Rule 9.4 that the Shares are to be
acquired on the stock market of ASX, this Rule 9.5 shall apply.

(a)                                  The
Directors shall 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 Directors shall pay or
cause to be paid to that Entity an amount equal to the costs and expenses of
the acquisition of those Shares.

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

(c)                                  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, allotted 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.

(d)                                 The Entity is not an agent or trustee for
Westpac or, except as provided by paragraph (c) of this Rule 9.5, any
Participant.

9.6                                Any Shares or other securities issued on the
exercise of an Option shall, for as long as required by Westpac’s constituent
legislation or Deed of Settlement, be issued paid up or credited as paid up in
an amount not less than the par value of Shares or such security.

9.7                                Options comprising an Award shall lapse on
the earlier of:

(a)                                  the date of lapse under Rule 11.1;

(b)                                 the date that a determination of lapse under
Rule 8.1(b) is final and binding under Rule 8.5;

 8
 

 

(c)                                  5.00
pm (Sydney time) on the Last Exercise Date; and

(d)                                 the
date on which a Participant ceases to be employed by Westpac or any subsidiary
of Westpac by reason of:

(i)                                     dismissal
for fraud, misconduct or poor performance; or

(ii)                                  resignation,
unless otherwise determined by the Directors.

10.Dividends and Listing

(a)                                  The
Shares and any other security comprising an Option, from the date of allotment
of the Share or security, shall rank equally with all other existing Shares or
securities, as applicable.

(b)                                 When
Shares or other securities become presently liable to become registered in the
name of a Participant, Westpac shall apply as soon as possible for official
quotation of those Shares or other securities on each stock exchange on which
Shares or such securities are listed, unless Westpac has already made such
application by such time.

11.Executives leaving Westpac before
the end of a Performance Period

11.1                          Subject to Rule 11.2, if a Participant ceases
to be employed by Westpac or any subsidiary of Westpac during a Performance
Period, all Options allotted in respect of that Performance Period shall lapse
on the last day of such employment, unless the Directors in their discretion
decide otherwise.

11.2                          If a Participant ceases to be employed by
Westpac or any subsidiary of Westpac during a Performance Period by reason of:

(a)                                 ill health, injury, disability or death;

(b)                                retirement;

(c)                                 their employing company, which was a Closely-held
Subsidiary of Westpac at the date of grant of the Award, ceasing to be a
subsidiary of Westpac; or

(d)                                any other reason which the Directors in their
discretion determine,

the Directors may deem the Performance Period
in respect of the Participant to be at an end at a date they deem appropriate.
The Directors will then determine the number of Options that will be
exercisable and that will lapse taking into account, to the extent they deem
appropriate, the extent to which the Performance Requirements have been met for
that Performance Period and, at their discretion, the portion of the
Performance Period that has elapsed.

12.Rights of Employees

The Plan shall not form part of any contract
of employment between Westpac or any subsidiary of Westpac and any of their
respective employees and shall not confer directly or indirectly on any
employee any legal or equitable right whatsoever (other than rights as
shareholders of Westpac under any Shares or other securities received under the
Plan) against Westpac.

13.Powers of the Directors

The Plan shall be administered by the
Directors who shall have power to:

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

 9
 

 

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

(c)                                  delegate to any one or more persons
(including, but not restricted to a committee of Directors) for such period and
on such conditions as they may determine the exercise of any of their powers or
discretions arising under the Plan; and

(d)                                 subject to Rule 16, change or add to these
Rules.

14.Costs

Westpac will pay all
expenses, costs and charges in relation to the establishment and operation of
the Plan, including all costs incurred in or associated with an issue of
Options or an issue or purchase of Shares or other securities for the purposes
of the Plan.

15.Notices

Any notice, instruction or
direction given under these Rules:

(a)                                  is validly given if it is handed to the
person concerned, faxed to the person concerned at the fax number last notified
by that person or posted by ordinary prepaid post to the last known address of
the person concerned;

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

(c)                                  will be taken to have been given:

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

(ii)                                  in the case of a posted letter, on the third
Business Day after posting; or

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

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

16.Restrictions on Alterations to
Plan

16.1                          Subject to the Listing Rules, the Directors
may by resolution vary any of these Rules at any time.

16.2                          If a variation under Rule 16.1 reduces the
rights of Participants the Directors must obtain the written consent of at
least three-quarters of the Participants.

17.Commencement, Termination and
Suspension of the Plan

17.1                          Subject to obtaining the approval of
shareholders of Westpac, the Plan will commence on a date determined by the
Directors.

17.2                          The Directors may terminate or suspend the
operation of the Plan at any time.

18.Taxation

Neither Westpac nor any of its subsidiaries
or any of their respective Directors, officers, employees, representatives or
agents accept any responsibility or assume any liability for any taxation
liabilities incurred by or imposed on any Participant as a consequence of
participating in the Plan.

 10
 

 

19.Limitations on Number of Options
Issued

The total number of Shares
the subject of Awards shall not exceed the maximum permitted under any class
order of the Australian Securities and Investments Commission providing relief
from the prospectus regime of the Corporations Act 2001 (Cth)
to ensure compliance with such class order.

20.Connection with other Plans

20.1                          Subject to Rule 20.2, participation in the
Plan does not affect, and is not affected by, participation in any other
incentive or other plan or scheme operated by Westpac unless the terms of that
other plan or scheme provide otherwise.

20.2                          A person who receives an offer of shares or
options under the Senior Officers’ Share Purchase Scheme in a particular
financial year of Westpac shall not be eligible to receive an Award under this
Plan in that same financial year.

21.General

The Rules are to apply subject to the Corporations Act 2001 (Cth) (to the extent
applicable to Westpac), the Listing Rules (subject to any waiver(s) granted by
ASX) and Westpac’s Deed of Settlement as amended from time to time.

22.Governing Law

The terms and conditions of
this Plan shall be governed by and construed in accordance with the laws for
the time being in force in the State of New South Wales, Australia.

 11

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