COMMERCIAL LEASE AGREEMENT 17/100 Railway Road, Subiaco BETWEEN UNIBELLE PTY LTD (ACN 079 813 531) As Security Trustee For ITA MANAGEMENT SERVICES PTY LTD (ACN 142 806 280) As Trustee For THE SUNSET FUND (“Lessor”) AND PENINSULA ENERGY LTD (ACN 062...

DEFINITIONS AND INTERPRETATION

Definitions

Terms

Joint and several liability

Statutes

Covenants implied by statute

Contra proferentem

GRANT AND TERM OF THIS LEASE

Rights and entitlements granted to Lessee

The term of this Lease

Holding over after expiry of this Lease

OPTIONS FOR RENEWAL

Option to renew

Binding Lessor’s successors and assigns

Parties who may renew

Conditions for exercise of option

Guarantee of Lease for option period

Bank Guarantee of Lease for option period

Conditions of renewal

Payment of rent and outgoings while rent determined

RENT PAYMENTS

Rent payments

Outgoings contributions

Accrual and prepayment basis

Apportionment of Outgoings

RENT REVIEW: GENERALLY

Review dates

Late rent reviews

Rent payments pending determination

Rent not to decrease

RENT REVIEW METHODS

Annual rent determination

Lessor’s assessment of market rent

Lessee’s entitlement to have market rent reviewed

Acceptance of Lessor’s assessment

Determination of Current Market Rent

Meaning of Current Market Rent

Appointment of nominee

Conduct of market rent review

Appointment of another nominee

Costs of rent determination of Market Review

CPI rent reviews:

Lessor’s Notice binding in absence of manifest error

Fixed Percentage Increase

SERVICES

Lessee’s liability for services

Installation of meters

COSTS, INTEREST AND SET-OFF

Costs of preparation of lease

Renewal or extension of Lease

Consents, transactions and default

Costs on full indemnity basis

Lessor’s internal costs

Lessee’s obligation to pay costs

Interest on overdue payments

Recovery of interest

Preclusion of set-off

MEASUREMENT OF LETTABLE AREA

Use of Property Council of Australia method

Alteration in method

Prima facie evidence

GUARANTEE AND SECURITY

Entering into the Guarantee

Scope of Guarantee

Liability of several Guarantors

Guarantee not discharged

Security deposit or bank guarantee

INDEMNITY AND ASSUMPTION OF RISK

Lessee’s indemnities to Lessor

Conditions and limitations

Enforcement of indemnities

Assumption of risk by Lessee

ASSIGNMENT AND SUBLETTING

Prohibition of dealings without consent

Consent to assignment

No release to Lessee and Guarantor

Change in control of Lessee

Consent to subletting

Exclusion of Property Law ▇▇▇ ▇▇▇▇ provisions

USE OF LEASED PREMISES AND BUILDING

Use of Leased Premises

Change of use

No warranty of suitability or adequacy

Lessee’s responsibility for approvals

Requiring Lessee to continue trading

Extended hours

Signs on exterior of Leased Premises

No alterations to Leased Premises

Minor alterations to Leased Premises

Lessee’s obligation to comply with regulations

Compliance with notices

Lessee’s prohibitions with reference to use of Leased Premises

Mode of conducting Lessee’s business

Inflammable substances

Cleaning and hygiene

Disposal of rubbish

Use of toilets and drainage

Pest control

Infectious illness

Overloading electrical supply

Lessee’s liability for electrical overloading

Securing Leased Premises

Lessee’s obligations regarding alarm

Lessor to provide keys

Lessee’s obligation regarding keys

REPAIRS AND MAINTENANCE

Lessee’s general repair obligations

Lessee’s specific repair obligations

Lessee’s additional specific repair obligations

Lessee carrying out repairs

Lessor’s right of inspection

Lessor’s obligation to give prior notice

Lessor’s right to repair Leased Premises

Lessee to Redecorate

INSURANCE

Lessor’s insurances

Lessee’s insurances

Insurer and conditions

LESSOR’S COVENANTS, OBLIGATIONS AND RESERVATIONS

Lessor’s covenant for quiet enjoyment

Lessor’s entitlement to alter Leased Premises

Additions to building and New Buildings

Lessor’s dealing with title

Miscellaneous reservations

DEFAULT AND TERMINATION

Lessee’s obligation to yield up Leased Premises

Essential terms of Lease

Lessor’s entitlements after Lessee vacates during lease term

Power of attorney by Lessee to Lessor

Termination of Lease for default

Lessor’s entitlement to damages

Reinstatement and Removal of Lessee’s property

Lessee’s obligation to remove property

The Lessee will reinstate:

Lessee’s failure to remove property

Lessee’s failure to remove property

Lessee’s responsibility for damages and costs

REDEVELOPMENT

Right to redevelop

Termination of Lease

Offer of New Premises

Lease of Alternate Premises

Lessee's Acknowledgements

DAMAGE OR DESTRUCTION AND RENT ABATEMENT

Definitions

Abatement

Lessor’s entitlement to terminate Lease

Lessee’s entitlement to terminate Lease

Exceptions

Antecedent Rights

Dispute

Lessor Not Obligated to Reinstate

Proceeds of Insurance

ENVIRONMENTAL CONTAMINATION

Definitions

Compliance with Legislation and Contamination

Indemnity

Notification

Enforcement of Rights Against Third Parties

Clean Up of Leased Premises

Waste

Costs

MISCELLANEOUS

Service of notices

Trustee provisions

No absolute caveat

Waiver

Severance and Read Down

Governing Law

Lease comprises entire agreement

Goods & Services Tax (GST)

Lessor as trustee

Liability of Lessor

Strata Title Lot

Strata Title Consents

Car Parking

SPECIAL CONDITIONS

Application of special conditions

DEFINITIONS AND INTERPRETATION

Definitions

in the case of a corporation:

(i)

the corporation is dissolved or wound up;

(ii)

a liquidator or provisional liquidator is appointed in respect of that corporation;

(iii)

except to reconstruct or amalgamate while solvent on terms approved by the Landlord, the corporation enters into a scheme of arrangement or composition with, or assignment for the benefit of, all or any class of its creditors;

(iv)

the corporation is or becomes insolvent or any of the events mentioned in paragraphs (a) to (f) inclusive of section 459C(2) of the Corporations Act occurs in respect of the corporation;

(v)

an administrator or a receiver, manager or receiver and manager or other controller is appointed in respect of the corporation or any of its assets and undertaking; or

(vi)

anything analogous or having a substantially similar effect to any of the events specified above happens;

in the case of an individual:

(i)

the individual enters into a scheme of arrangement, composition with or an assignment for the benefit of any of his creditors or any class of creditors;

(ii)

the individual commits an act of bankruptcy; or

(iii)

anything analogous or having a substantially similar effect to any events specified above happens.

the premises described in Item 4 of the Reference Schedule and includes, with reference to those premises:

(i)

the Building and all improvements erected on the premises;

(ii)

the lawns, grounds, gardens and driveways of the premises;

(iii)

the fences and boundary guides separating the premises from adjoining properties;

the Lessor’s Fixtures and any chattels provided by the Lessor for the Lessee within the Leased Premises at any time during the lease term, including those listed in Item 5 of the Reference Schedule;

pipes and connections to water, sewerage, electricity, gas, telecommunications, air conditioning and other services situated within, above or under the Leased Premises which connect those services to the Leased Premises.

when an individual, the Lessee’s legal personal representatives;

when several individuals, the Lessee’s jointly and their respective legal personal representatives;

the Lessee’s assigns;

when a company or corporation, its successors and assigns.

(i)

when an individual, the Lessor’s legal personal representative;

(ii)

when several individuals, the Lessors jointly and their respective legal personal representatives;

(iii)

the Lessor’s assigns;

(iv)

when a company or corporation, its successors and assigns;

(v)

a person who has a reversionary interest in the Leased Premises.

Terms

the singular includes the plural and vice versa;

the use of one gender includes all other genders;

representations, agreements, covenants, obligations or warranties, express or implied, by more than one person will include those persons jointly and each of them severally;

every provision, express or implied, that applies to more than one person will apply to those persons jointly and each of them severally.

If there are two or more lessors or two or more lessees under this Lease (including while the Lease or the reversion is held by legal personal representatives, successors or assigns) each of them is jointly and severally liable to perform covenants and obligations under this Lease.

When there are two or more lessors or lessees, any conduct under or in respect of this Lease, including the exercise of any entitlement or taking any action under this Lease, must be undertaken by all of the lessors or all of the lessees jointly, unless this Lease expressly provides otherwise.

Statutes

Covenants implied by statute

Covenants and powers implied by statute are excluded from this Lease, unless those covenants or powers cannot be excluded by force of statute or are expressly incorporated in this Lease.

When any provision contained in this Lease requires the Lessor’s consent or approval, then unless the provision expressly provides otherwise, the Lessor’s consent:

(i)

shall not be unreasonably withheld by the Lessor; and

(ii)

is only effective when given in writing and signed by or on behalf of the Lessor.

When a covenant contained in this Lease prohibits the Lessee from doing anything, it also prohibits the Lessee from authorising, allowing or encouraging it to be done by any other person.

Contra proferentem

GRANT AND TERM OF THIS LEASE

Rights and entitlements granted to Lessee

exclusive possession of the Leased Premises;

use and enjoyment of the Lessor’s Fixtures and the chattels listed in Item 5 of the Reference Schedule.

The term of this Lease

Holding over after expiry of this Lease

commencing on the day immediately following the last day of the term of this Lease;

with the rent being payable monthly in advance, being the rent payable immediately before the end of this Lease increased by an amount of five percent (5%), plus the Lessee’s contributions to operating expenses, calculated and payable from time to time in accordance with this Lease;

on the terms contained in this Lease, except those terms which are inapplicable to a monthly tenancy;

the tenancy being terminable by either party on thirty (30) days written notice, expiring at any time.

OPTIONS FOR RENEWAL

Option to renew

Binding Lessor’s successors and assigns

Parties who may renew

the Lessee or by the Lessee’s successors and assigns, being the lessee for the time being of the Leased Premises;

in the event of there being two or more persons holding as lessees as joint Lessees, upon the death of any of them, by their survivors.

Conditions for exercise of option

the Lessee has not been served with three (3) notices of breach of the Lease during the Term; and,

there is no subsisting breach of any Lease covenants by the Lessee:

(i)

at the date of serving notice of the exercise of the Option; and

(ii)

at the date of expiry of this Lease; and

the Lessee has served on the Lessor notice of exercise of this Option not more than six (6) calendar months and not less than three (3) calendar months prior to the expiration of the Term provided always that the exercise of the Option on a day exactly three (3) calendar months prior to the expiration of the term or on the day exactly six (6) calendar months prior to the expiration of the term shall be sufficient for the purposes of this clause.

If this Lease is guaranteed by the Guarantor, then the renewal of this Lease is conditional on the Guarantor of the Lease entering into a guarantee in the form contained in clause 10 of this Lease, in respect of the Option term.

If the Guarantor or any of the guarantors, under this Lease is or are unable or unwilling to enter into a guarantee in respect of the Option term, the Lessee may:

(i)

provide a guarantee by another person who is an acceptable new guarantor; or,

(ii)

provide a Bank Guarantee in accordance with clause 10.5; and,

(iii)

if the Lease is secured by a Bank Guarantee and a Personal Guarantee, the amount of the Bank Guarantee shall be increased by a sum reflecting five (5) months’ rent plus GST for each outgoing Guarantor.

(i)

(A)

at least as financially secure as the Guarantor; or

(B)

is an adequately financial Guarantor; and

(C)

is an Australian resident or has substantial assets located in Australia.

(ii)

A person is an adequately financial Guarantor if that person’s net asset worth, after deducting secured and unsecured liabilities, exceeds the amount indicated in Item 3.2 of the Reference Schedule.

The Lessor will consider the Lessee’s request to provide an acceptable new guarantor for the renewal of this Lease promptly and will not unreasonably refuse, withhold or delay its consent to the substitution of that person as guarantor.

If the Lessee is unable to provide a guarantee in respect of the Lease for the relevant Option term either by the Guarantor or by an acceptable new guarantor, or provide an acceptable Bank Guarantee, the Lessee has failed to effectively exercise the option for renewal of this Lease and the Lessee is not entitled to a renewal of this Lease for the Option term.

Bank Guarantee of Lease for option period

Conditions of renewal

at a rent which will be determined in accordance with clause 6 of this Lease; and

containing the further options for renewal as are specified in Item 7 of the Reference Schedule.

Payment of rent and outgoings while rent determined

After the exercise of the Option, until the rent for the Option term is determined, the Lessee will continue to pay the rent and outgoings at the rate at which they were payable and at the times at which they were payable, during the last year of the Lease Term.

Within twenty one (21) days of the rent for the Option term being determined, the parties will adjust and pay any shortfall in the rent paid for the period from the commencement of the Option term up to the last day for rent payment before the rent determination.

RENT PAYMENTS

Rent payments

by calendar monthly payments in advance on the first day of each calendar month, each payment being one twelfth (1/12th) of the annual rent then due as fixed or varied under this Lease;

without demand by the Lessor;

by cheque or by depositing or transferring the payments into an account as directed by the Lessor; and

to the Lessor or the Lessor’s agent, as advised by the Lessor in writing to the Lessee.

Outgoings contributions

The Lessee covenants to pay the outgoings as specified in Item 9 of the Reference Schedule:

(i)

within the time stipulated by the supplier (creditor), which may be on demand, and if no time is stipulated or if the supplier is the Lessor then within twenty eight (28) days of receiving an account from the Lessor detailing any outgoings that are payable;

(ii)

by cheque or by depositing or transferring the payments into an account as directed by the Lessor; and

(iii)

to the Lessor or the Lessor’s agent, as advised by the Lessor in writing to the Lessee.

If GST is applicable then the Lessee must pay the Outgoing plus any applicable GST. The Lessor must provide a tax invoice to the Lessee.

Accrual and prepayment basis

the Lessor’s obligation arises on the date when it is under legal liability to pay for an outgoing; and

when an outgoing relates to a particular annual or other period, the proportion attributed to the annual period will be included, apportioned on a daily basis, whether payment is required before, during or after the annual period.

Apportionment of Outgoings

RENT REVIEW: GENERALLY

Review dates

set pursuant to Current Market Rent (as provided for in subclauses 6.2 to 6.10) as the case may be; or,

the CPI Formula (as set out in subclause 6.11 or 6.12); or,

calculated pursuant to the Fixed Percentage Increase Formula (as set out in subclause 6.13); or,

set to such other method as specified in item 13 of the Reference Schedule or the Special Conditions or in this Lease.

Late rent reviews

Except as provided in subclause (b) of this clause, if the parties have failed to institute a rent review to determine the rent from a Review Date then the reviewed annual rent is to apply from the Review Date.

If the parties have failed to institute a rent review to determine the rent from a Review Date before the happening of any of the situations specified in this subclause, then the existing rent will continue to be the rent for that review period, and from then on, neither party may have the annual rent reviewed for that period.

(i)

a later Review Date occurs; or

(ii)

the expiry of the Lease term, (provided that no option to renew the Lease is exercised).

Rent payments pending determination

the Lessee will continue to pay the current instalments of rent due until the new rent is determined.

when the rent is determined, the Lessee will pay the additional amount (if any) due for rent from the relevant rent Review Date until the date on which the rent is actually reviewed, in three (3) equal monthly instalments on the first day of each calendar month following the date on which the reviewed rent is determined.

Rent not to decrease

RENT REVIEW METHODS

Annual rent determination

Lessor’s assessment of market rent

Lessee’s entitlement to have market rent reviewed

Acceptance of Lessor’s assessment

The Lessee may accept the Lessor’s assessment and in that event the assessed amount shall be the rent from the Market Review Date.

Deemed acceptance

The Lessee has thirty (30) days from receipt of the Lessor’s assessment notice to give written notice to the Lessor that the Lessee does not accept the Lessor’s assessment (the “Refusal Notice”). If the Lessee fails to give this Refusal Notice by the deadline then the Lessee is deemed to have accepted the Lessor’s assessment of market rent.

Determination of Current Market Rent

Meaning of Current Market Rent

on the basis that the premises are available for leasing with vacant possession by a willing lessor to a willing lessee for a term equal to the whole term of this Lease and any additional option for renewal;

having regard to the permitted use of the Leased Premises;

on the basis of the terms and conditions contained in this Lease (other than the amount of rent reserved in this Lease, but including the provisions for rent review);

on the basis that:

(i)

the Leased Premises are fit for immediate occupation and use by the Lessee;

(ii)

the Lessee’s lease covenants and obligations shall have been fully performed at the Market Review Date;

without taking into account:

any improvements or fixtures erected or installed at the Lessee’s expense which the Lessee is permitted or required to remove at the termination of this Lease, except for permanent structural improvements to the Leased Premises installed at the Lessee’s expense which the Lessee is not permitted to remove at the termination of this Lease, which shall be taken into account;

any goodwill attributable to the Leased Premises through the Lessee’s business activity;

that the Lessee has been in occupation of the Leased Premises;

any relocation costs which would be incurred by the Lessee when moving to other premises; and

having regard to the rental values of comparable premises.

Appointment of nominee

has practised as a valuer for not less than five (5) years;

is a member of the Australian Property Institute (Inc) (or if it does not exist an association with substantially similar objects); and

is licensed to practise as a valuer of the kind of premises whose rent review is required under this Lease (called “nominee’’) to determine the Current Market Rent at the Market Review Date.

Conduct of market rent review

The nominee shall act as an expert and not as an arbitrator.

Each party may submit to the nominee written valuations and submissions within twenty one (21) days after the nominee has accepted the nomination to act, but may not make oral submissions or adduce any evidence.

At the time of making any written submissions or forwarding to the nominee any written valuation, that party shall forward to the other party a copy of all written material submitted to the nominee.

Within thirty five (35) days after the nominee has accepted the nomination to act, each party may forward to the nominee written comments on the other party’s written valuations and submissions.

The nominee shall take into consideration any written submissions received within those periods, but is not fettered by them and shall determine the Current Market Rent in accordance with his own judgment.

The nominee’s determination is final and is binding on the parties.

The nominees shall conclude the determination and shall inform the parties of it within sixty (60) days after having accepted the nomination to act and shall provide detailed written reasons for the determination.

Appointment of another nominee

fails to accept the nomination to act; or

fails to determine the Current Market Rent within the number of days in clause 6.8(g) after accepting the nomination to act; or

becomes incapacitated or dies; or

resigns as the nominee,

Costs of rent determination of Market Review

CPI rent reviews:

R

= CR * (CCPI / PCPI) + N

Where:

R

= the adjusted Rent payable from and including the relevant Rent Review Date;

CR

= the Rent payable during the period from the immediately preceding rent Review Date to the rent Review Date in question or, where the rent Review Date is the first occurring under this lease, then the Rent payable during the period from the Commencement Date to the rent Review Date in question;

CCPI

= the CPI as last published by the Australian Statistician prior to the relevant rent Review Date;

PCPI

= the CPI as last published by the Australian Statistician prior to the immediately preceding rent Review Date or, where the rent Review Date is the first occurring under this lease, then as last published prior to the Commencement Date.

N

= the numeral specified of the Reference Schedule as numeral “N” expressed as a percentage.

Lessor’s Notice binding in absence of manifest error

On or before the last time proved in clause 5.2 (Late Rent Review) the Lessor is to notify the Lessee in writing ("Lessor's Notice") of the amount which the Lessor considers to be the new Rent of the Leased Premises as at the relevant CPI Review Date as determined by the CPI Formula and the amount specified in the Lessor's Notice is to be the new Rent save and except in the case of manifest error on the part of the Lessor.

Should the Lessee notify the Lessor in writing ("Lessee's Notice") of the Lessee's opinion as to manifest error in the calculation as aforesaid then the matter shall be referred to a Valuer to be appointed by the Lessor which Valuer shall act as an expert and not as an arbitrator in determining the new Rent calculated pursuant to the CPI Formula.

Any adjustment between the parties as to overpaid or underpaid rental shall be made at the time of the calendar monthly instalment for rental next following the Valuer providing the details of his determination in writing.

Fixed Percentage Increase

SERVICES

Lessee’s liability for services

Installation of meters

COSTS, INTEREST AND SET-OFF

Costs of preparation of lease

The Lessee will pay the stamp duty on this Lease, if any.

The Lessee will pay the Lessor’s reasonable legal costs of the negotiation, preparation and execution of this Lease.

Renewal or extension of Lease

Consents, transactions and default

The Lessee agrees to pay the Lessor’s costs, charges and expenses which are incurred reasonably, properly and in good faith, in connection with:

(i)

the obtaining or consideration of any consent from the Lessor, and from any head lessor, mortgagee or other person, which is required by the Lessee under this Lease;

(ii)

the negotiation and preparation of all documents relating to any consent required by the Lessee, and all costs incurred by the Lessor and by any other party whose consent is required, whether a consent is given, refused, or the application for consent is withdrawn;

(iii)

any breach or default by the Lessee under this Lease;

(iv)

the exercise or attempted exercise by the Lessor of any right, power, privilege, authority or remedy, against the Lessee or against any Guarantor, to enforce the Lessee’s obligations under this Lease, or to terminate this Lease for the Lessee’s breach or default

Prior to contemplating any consent, assignment, novation or variation of this Lease the Lessor is entitled to require the Lessee to deposit a sum of money to the trust account of the Lessor’s solicitors (or managing real estate agent) as specific security for the Lessor’s costs of considering and investigating the consent or matter requested by the tenant. Any such requested amount shall be based on the reasonable assessment by the professional (whether solicitor, architect, engineer or other such person) as to the cost to the Lessor of considering and implementing the Lessee’s request.

Costs on full indemnity basis

Lessor’s internal costs

the Lessor’s reasonable administrative costs and expenses of considering any application for consent, of considering and managing and breach or default under this Lease and attendances by the Lessor’s officers, employees or agents, including attendances on the Lessor’s legal advisers and in court;

the fees of professional consultants reasonably and properly incurred by the Lessor.

Lessee’s obligation to pay costs

The Lessor is entitled to render to the Lessee an itemised statement of any costs, charges and expenses for which the Lessee is liable in accordance with clause 8.3 at any time after they have been incurred.

In respect of any such statement, the Lessee shall pay the amount claimed:

(i)

when the Lessor’s consent is provided to the Lessee;

(ii)

in any other case, within thirty (30) days after service of the statement on the Lessee.

the Lessee’s liability shall incur interest on the basis specified in clauses 8.6 and 8.7 from the thirty-first (31^st ) day after the date of service of the statement until the day of payment, calculated on a daily rate.

Interest on overdue payments

interest is computed from the day immediately following the day on which each liability is due for payment, at a daily rate, until the liability is discharged by payment;

interest is computed at the rate of interest indicated in Item 14 of the Reference Schedule;

in respect of amounts remaining unpaid, the Lessor at its option may capitalise interest calculated up to the end of each calendar month while there are any outstanding liabilities in accordance with this clause from the Lessee.

Recovery of interest

Preclusion of set-off

MEASUREMENT OF LETTABLE AREA

Use of Property Council of Australia method

The lettable area of the whole or part of the Leased Premises or of any other area is to be determined in accordance with the “Property Council of Australia Method of Measurement”, published or used by the Property Council of Australia in respect of buildings such as the building.

For clarity, the “lettable area” is not restricted to Net Lettable Area only (as defined by the Property Council of Australia Method of Measurement) although a valuer may determine different rates per square for different parts of the land comprising the Leased Premises such as (without limitation): office; showroom; warehouse; storage; cold storage; hardstand; or, vehicle parking.

Alteration in method

Prima facie evidence

GUARANTEE AND SECURITY

Entering into the Guarantee

Scope of Guarantee

The Guarantor agrees to guarantee:

the payment of rent, operating expenses and any other payment due under this Lease; and

the observance and performance of all the Lessee’s obligations as specified in this Lease

The Guarantor agrees to indemnify and keep indemnified the Lessor for any loss or damage it suffers as a result of the Lessee:

failing to pay rent, operating expenses or any other payment due under this Lease;

failing to observe and perform all of its obligations as specified in this Lease throughout the Lease Term and throughout any renewed terms or terms, including during holding over as a periodical Lessee after the expiry of the Lease Term or any renewed terms of terms, by the Lessee.

This Guarantee covers the whole period whilst the Lessee occupies or is entitled to occupy the Leased Premises under this Lease as the lessee, or while holding an equitable interest over the Leased Premises under an agreement for lease or as a periodical Lessee.

This Guarantee extends to claims by the Lessor:

for damages for breaches of lease covenants;

(ii)

for breaches of any essential terms of this Lease;

(iii)

for repudiation of this Lease;

(iv)

for the Lessor’s loss or damage in the event of the Lessee abandoning or vacating the Leased Premises;

(v)

in the event of the Lessor electing to re-enter or to terminate this Lease;

(vi)

for the Lessor’s reasonable legal and other expenses of seeking to enforce those obligations against the Lessee and the Guarantor, recovering possession and terminating this Lease, on the basis specified in clause 8;

(vii)

for loss or damage consequent on disclaimer of this Lease on the Lessee’s insolvency, as if this Lease had not been disclaimed.

This Guarantee is in favour of the Lessor and its successors and assigns being the owner of the Leased Premises from time to time during the continuance of this Guarantee.

Liability of several Guarantors

the term Guarantor in this clause refers to each of the Guarantors and to all of them;

their obligations as Guarantor are joint and several;

the Lessor may enforce this Guarantee against all or any of them;

any notice or demand may be served on all of them by serving any one of them;

this Guarantee remains binding on the other Guarantors, even if:

any Guarantor fails to execute this Lease or to enter into this Guarantee;

this Guarantee is not binding on any Guarantor;

the Lessor releases any Guarantor from liability under this Guarantee.

Guarantee not discharged

the granting of any indulgence or extension of time by the Lessor to the Lessee or to the Guarantor;

the Lessor’s neglect or failure to enforce lease covenants against the Lessee or the Lessor’s waiver of any breaches or defaults under this Lease;

the total or partial release of liability of the Lessee or of a Guarantor by the Lessor;

the entry into any arrangement, composition or compromise relating to this Lease between the Lessor and the Lessee or any other person;

the variation of any provision of this Lease between the Lessor and the Lessee without the Guarantor’s consent but only if they are minor and are not prejudicial to the Guarantor;

the death or bankruptcy or winding up of the Lessee or the Guarantor; or

the disclaimer of this Lease following the Lessee’s insolvency.

Security deposit or bank guarantee

In order to secure due and punctual observance and performance by the Lessee of the Lessee’s covenants to be observed and performed under this Lease, on or prior to the execution of this Lease the Lessee at the Lessee’s option covenants to either:

(i)

pay to the Lessor the security deposit specified in Item 3 of the Reference Schedule (the “Security Deposit”); OR,

(ii)

provide at the Lessee’s cost in favour of the Lessor for the duration of the Term and any renewal or extension thereof an unconditional bank guarantee (the “Bank Guarantee”) in a form and issued by a bank approved by the Lessor (which approval shall not be unreasonably withheld) to pay the Lessor on demand without deduction and cause the amount payable pursuant to the Bank Guarantee to be increased to the amount specified in Item 3 of the Reference Schedule.

The Lessor shall deposit the Security Deposit in an account in the Lessor’s name for the duration of this Lease. The Lessor will not be obliged to deposit the Security Deposit into an interest bearing account. If interest does accrue, it shall be accumulated and added to the amount held as a Security Deposit and credited to the Lessee as income of the Lessee.

IF:

(i)

the Lessee defaults in the payment of Rent, or any other money due and owing under this Lease or if the Lessee defaults in performing any other obligations under this Lease; and,

(ii)

a notice of default has been served on the Lessee and has not been complied with by the Lessee or the Lessee vacates the Leased Premises;

The Lessor shall notify the Lessee that the Security Deposit and interest or the Bank Guarantee as the case may be have been applied in full or in partial satisfaction of the Lessor’s claim and shall itemise the Lessor’s claim giving credit for the Security Deposit and for interest or the amount claimed pursuant to the Bank Guarantee respectively.

If this Lease not expired or been determined at the time of the Lessor’s notice under subclause 10.5(d) above, the Lessee shall with seven (7) days of receipt of the Lessor’s notice pay to the Lessor the amount of the Security Deposit which has been applied by the Lessor so that the Security Deposit is reinstated to the amount specified of the Reference Schedule.

The Lessor is entitled to recover the Rent and any other money due and owing under this Lease and damages for breach of covenant without being limited to the Security Deposit or the Bank Guarantee.

The Lessor shall repay to the Lessee the Security Deposit and interest on the expiration or earlier determination of this Lease unless the provisions of subclause 10.5(c) have come into operation

PROVIDED THAT if any proposed assignee pays to the Lessor the Security Deposit on the terms and conditions of this clause 10.5 the Security Deposit and interest (subject to subclause 10.5(c) will be repaid to the Lessee upon the date of receipt by the Lessor of the Security Deposit from the proposed assignee.

If this Lease is assigned and the Security Deposit is not repaid to the Lessee under the proviso to subclause 10.5(g) the Security Deposit shall be held on behalf of the assignee and the Security Deposit and interest shall be deemed to have been assigned to the assignee subject to the terms of this clause.

Sale of Property

For clarity where the legal identity of the Lessor lawfully changes (for example on a sale of the Leased Premises or a change of trustee of Lessee whom is a trustee then the Lessor may require the Lessee to amend or replace the bank guarantee or the Security Deposit documentation to reflect the change in the legal entity comprising the Lessor to ensure to the extent practicable that the Lessor for the time being can draw upon that bank guarantee or security deposit.

INDEMNITY AND ASSUMPTION OF RISK

Lessee’s indemnities to Lessor

loss, damage or injury to property or person occurring within the Leased Premises caused or contributed to by the Lessee’s failure (including through the Lessee’s agents or employees) to comply with the obligations imposed under this Lease.

the negligent use or misuse by the Lessee (and by its agents or employees) of any Services in the Leased Premises.

the overflow, leakage or escape of water, gas, electricity, fire, or other materials or substances in or from the Leased Premises, caused or contributed to by the Lessee’s (and its agents’ or employees’) negligence.

loss, damage or injury to property or person caused or contributed to by the Lessee’s negligence, arising out of use of the Leased Premises.

loss, damage or injury to property or persons caused or contributed to by the defective installation of plant, fixtures and equipment in the Leased Premises by or on behalf of the Lessee.

the Lessee’s failure to notify the Lessor regarding any defect in the Services in the Leased Premises.

Conditions and limitations

include penalties, fines, legal and other costs incurred by the Lessor;

do not apply when the Lessor is indemnified for the loss or damage from moneys paid or recovered from insurances effected by the Lessor.

Enforcement of indemnities

Each indemnity in this agreement is a continuing obligation, separate and independent from the other obligations of the parties and survives termination of this agreement and remains enforceable in full by the parties.

It is not necessary for a party to incur an expense or make a payment before enforcing a right of indemnity conferred by this agreement.

Assumption of risk by Lessee

ASSIGNMENT AND SUBLETTING

Prohibition of dealings without consent

assign, transfer, sublet, deal with, or grant any interest in, this Lease;

mortgage, charge or encumber this Lease;

grant any licence, or share the right of occupation or possession, in respect of whole or part of the Leased Premises;

part with possession of whole or any part of the Leased Premises;

grant any franchise or concession over the Lessee’s business conducted at the leased premises that would entitle any other person to use, occupy or trade from whole or part of the Leased Premises.

Consent to assignment

the Lessee has made written application to the Lessor for consent and furnished complete copies of all written documents entered into between the Lessee and the proposed assignee relating to the Leased Premises, along with written personal and business references and financial statements relating to the assignee and any proposed guarantors;

the Lessee will be required to establish to the reasonable satisfaction of the Lessor that:

(i)

the proposed assignee is respectable, responsible and solvent;

(ii)

in respect of the business or profession intended to be conducted by the assignee at the Leased Premises, the assignee has sufficient financial resources and business experience to be capable of adequately complying with the Lessee’s obligations under this Lease and of efficiently conducting the assignee’s business at the Leased Premises;

the Lessee must have paid to the Lessor all money due under this Lease up to the date of assignment;

there are no unremedied breaches of the Lessee’s obligations under this Lease at the date of the assignment;

any other consent that is required to the assignment, by head lessors, mortgagees or others, are obtained before the assignment;

when the assignees is a company, other than a company whose shares are listed on an Australian Stock Exchange, personal guarantees and indemnities for performance of lease covenants for the duration of the lease term by the assignee be provided, in a form reasonably acceptable to the Lessor and prepared on behalf of the Lessor at the Lessee’s expense, by two of the assignee’s directors or principal shareholders chosen by the Lessor, where those guarantors have between them a net worth of no less than the amount specified in Item 3.2 of the Reference Schedule;

the execution by the Lessee and the assignee of a transfer of this Lease, which must be duly stamped;

the execution of a deed in a form reasonably required by and prepared on behalf of the Lessor, by which the Lessor, Lessee, assignee and new guarantors, agree:

the Lessee confirms its liability under this Lease for the balance of the current lease term or any term of extension or renewal of the current lease term;

the Lessor is released from liability to the Lessee under this lease;

the assignee covenants to observe the Lessee’s obligations under this lease during the duration of this Lease;

the Guarantor or Guarantors confirm their consent and their continuing liability, unless that is adequately covered in their guarantee;

new guarantors execute guarantees under this Lease for the assignee.

the payment by the Lessee to the Lessor of the Lessor’s reasonable costs and disbursements in accordance with clause 8 (Costs, Interest and Set Off).

the Lessor may at its absolute discretion require the assignee to provide a bank guarantee or increase such bank guarantee at Item 3.3 of the Reference Schedule to an amount not more than five (5) months rental plus GST.

Nothing in this clause (or this Lease) acts to release the Lessee from its continuing liability to the Lessor for the term of this Lease or for any term of extension or renewal of the current Lease Term.

Nothing in this clause (or this Lease) acts to release the Guarantor from its continuing liability to the Lessor for the term of this Lease or for any term of extension or renewal of the current Lease Term.

For the purposes of this clause 12, any change in the effective control of the Lessee (being a corporation other than a public company listed on the main board of the Australian Stock Exchange) or its holding company (within the meaning of the Corporations Act) or of any Trust (of which the Lessee is trustee) is deemed to be an assignment by the Lessee of its interest in the Leased Premises and requires the Lessor’s consent in accordance with clause 12.2.

For this purpose "effective control" means control of the composition of the board of directors (defined as “control” in the Corporations Act) or control of at least one half of the voting power PROVIDED THAT the issue, transfer or transmission of shares to (or to a trustee for) any relative by blood or marriage of the shareholders at the Commencement Date (or the beneficiaries under any trust in the case of shares held by a trustee) or to (or to a trustee for) any employees of the Lessee employed at the date of this Lease is not to be regarded as effecting any change in effective control.

Consent to subletting

the Lessee is required to make a written application to the Lessor for consent, and furnish a copy of the proposed sublease, along with written personal and business references and financial statements relating to the proposed sublessee and any guarantors for the sublease;

the terms and conditions of the sublease must be reasonably acceptable to the Lessor and must:

require the sublessee to comply with the Lessee’s obligations under this Lease as far as they govern the conduct of the sublessee as occupant of the subleased premises;

prohibit the sublessee from doing or permitting some act in relation to the subleased premises, which is inconsistent with or would constitute a breach of this Lease;

contain similar provisions relating to rent review, including review dates, as are contained in this Lease;

prohibit further subletting of the subleased premises by the sublessee,

the Lessee is required to establish to the reasonable satisfaction of the Lessor that:

the proposed sublessee is respectable, responsible and solvent;

in respect of the business or profession intended to be conducted by the sublessee at the Leased Premises the sublessee has sufficient financial resources and business experience to be capable of adequately complying with the Lessee’s obligations under this Lease and of efficiently conducting the sublessee’s business at the Leased Premises;

the Lessee must have paid to the Lessor all money due under this Lease up to the date of sublease;

there are no unremedied breaches of the Lessee’s obligations under this Lease at the date of the sublease;

any other consent that is required to the assignment, mortgagees or others, is obtained before the sublease;

the execution of a deed of consent in a form reasonably required by and prepared on behalf of the Lessor, by the Lessor, Lessee and sublessee;

the payment by the Lessee to the Lessor of the Lessor’s reasonable costs and disbursements in accordance with clause 8 (Costs, Interest and Set Off);

the Lessor may at its absolute discretion require the Lessee or the Sub-Lessee provide a bank guarantee or increase such bank guarantee at Item 3.3 of the Reference Schedule to an amount not more than five (5) months rental plus outgoings.

The Lessor and Lessee acknowledge that at the time of entering this lease it is the intent of the Lessee to sublet a portion of the Leased Premises that is surplus to the Lessee’s needs.

Exclusion of Property Law ▇▇▇ ▇▇▇▇ provisions

USE OF LEASED PREMISES AND BUILDING

Use of Leased Premises

Change of use

any other use must be for the range of uses described in the Reference Schedule;

the Lessee first obtains all planning and other approvals to the use of the Leased Premises for that purpose and subsequently complies with the conditions of approval at the Lessee’s expense;

there are no unremedied breaches of the Lessee’s obligations under this Lease at the date of the Lessee’s application for consent to change of user or while that application is considered by the Lessor;

any other consents which are required to the change of use, by head lessors, mortgagees, guarantors under this Lease, or others, are obtained before the change of use;

the execution of a deed in a form reasonably required by and prepared on behalf of the Lessor, by the Lessor, Lessee, and Guarantor;

the execution by the Lessor and the Lessee of an appropriate instrument varying the lease covenant relating to use, which shall be duly stamped and registered;

the payment by the Lessee to the Lessor of the Lessor’s reasonable costs and disbursements, in accordance with clause 8.

No warranty of suitability or adequacy

the Lessee acknowledges that no promise, representation or warranty was given by or on behalf of the Lessor to or on behalf of the Lessee;

the Lessor makes no warranty;

any warranties implied under the general law or by statute are excluded under this Lease and negatived to the extent permitted by law.

Lessee’s responsibility for approvals

The Lessee has satisfied itself, before entering into this Lease, regarding the need for the availability and existence of all approvals, consents and licences required for use of the Leased Premises by the Lessee for its business and for the intended and permitted use of the Leased Premises.

The Lessee has full responsibility, at its expense, to ensure that all approvals, consents and licences required by the Lessee for the conduct of the business and use of the Leased Premises are obtained and maintained throughout the term of this Lease and that all their conditions are observed.

Requiring Lessee to continue trading

when the Lessee is prevented from trading in the Leased Premises in Lessee’s control;

when the business is closed for annual holidays.

Extended hours

Deleted by mutual agreement.

Signs on exterior of Leased Premises

The Lessee may install a sign or signs on the exterior of the Leased Premises to appropriately advertise the Lessee’s business, so long as the sign or signs are in keeping with the standard of other signs in the area and are not offensive or likely to cause damage to the Lessor’s reputation.

The Lessee is responsible for obtaining all necessary permits and approvals for any signs and ensuring that any signs comply with all relevant laws and regulations.

Any signs or notices installed by the Lessee are to be maintained by the Lessee in good repair and condition throughout the term of this Lease.

It is acknowledged by the Lessor and the Lessee that the Lessee has already installed a sign on the exterior of the Leased Premises. The Lessee will at its own cost and expense remove the sign upon termination or expiry of the Lease.

No alterations to Leased Premises

make or permit to be made any alterations or additions in or to the Leased Premises;

install, or make any additions or alterations to, any electrical, gas, water, plumbing and other services, fixtures, or appliances, or any other equipment or appliances for heating, cooling, ventilating or air conditioning the Leased Premises;

▇▇▇▇, paint, damage, deface, drive nails or screws into, any walls, floors, ceilings, partitions, or any wood, stone or metal surface of the Leased Premises or the building, except in accordance with clause 13.9.

Minor alterations to Leased Premises

Lessee’s obligation to comply with regulations

the Lessee’s use and occupation of the Leased Premises for the use permitted in this Lease;

the Leased Premises and facilities by reason of the number, the sex or disability of the Lessee’s employees and other persons working in or entering the Leased Premises;

the fixtures, fittings, machinery, plant and equipment in the Leased Premises;

occupational health, safety and environmental matters.

Compliance with notices

Lessee’s prohibitions with reference to use of Leased Premises

allow the Leased Premises to be used for any illegal, immoral, noxious, dangerous or offensive purpose, activity or occupation.

use or permit any part of the Leased Premises to be used as sleeping quarters or for residence.

keep any animals in the Leased Premises.

hold or permit any auction in the Leased Premises, except in the normal course of the Lessee’s business.

use or permit the use of any sound producing equipment in the Leased Premises at a volume that may be heard outside the Leased Premises.

use the Leased Premises in a noisy or in any other manner which would cause damage, nuisance or disturbance to the Lessor, or to the owners or occupiers of adjoining properties.

trade or display merchandise outside the Leased Premises.

use the Leased Premises in an excessively noisy or noxious or offensive manner.

use plant or machinery in the Leased Premises so as to constitute a nuisance or disturbance to the Lessor or to the owners or occupiers of adjoining properties, due to noise, vibration, odours or otherwise.

Mode of conducting Lessee’s business

Inflammable substances

like acetylene, industrial alcohol, burning fluids and chemicals, including in heating or lighting the Leased Premises;

unless the sale or use of such substances constitutes proper conduct of the Lessee’s business for the permitted use of the Leased Premises and the particular substances are stored and used only while taking all necessary safety precautions and in compliance with all fire and safety regulations relating to such substances.

Cleaning and hygiene

to have the floor and the interior of the Leased Premises cleaned;

to have the surfaces of windows and the entrances to the Leased Premises cleaned;

to have the fittings, equipment and furnishings cleaned as frequently as required to maintain them in a clean condition;

not allow the accumulation of useless property or rubbish in the Leased Premises.

Disposal of rubbish

Use of toilets and drainage

not use the toilets, sinks, drainage and plumbing in the Leased Premises or in the building for purposes other than those for which they were designed;

not place in any of those facilities rubbish, chemicals, contaminated and other substances, which they are not designed to receive or which would infringe health or environmental regulations;

repair any damage caused to any of those facilities by a breach of subclause (a) or (b) of this clause.

Pest control

Infectious illness

notify the relevant authorities that are required to be advised by law of that occurrence;

provide a copy of the notification to and inform the Lessor;

at the Lessee’s expense fumigate and disinfect the Leased Premises, as required by the relevant authorities, and comply with their other requirements in respect of the Leased Premises.

Overloading electrical supply

Lessee’s liability for electrical overloading

for the costs of repairing any damage;

for ensuring that the Lessor’s equipment is repaired and restored to working order;

if necessary, to disconnect the Lessee’s installations or alter or upgrade the electrical supply system at the Lessee’s cost, in order that it will suffice for the additional load imposed by the Lessee’s installations.

Securing Leased Premises

take reasonable action to secure the Leased Premises against unauthorised entry while the premises are unoccupied;

securely lock and fasten external doors and windows in the Leased Premises while the premises are unoccupied.

Lessee’s obligations regarding alarm

service, maintain and repair, when required, any intruder alarm installed in the Leased Premises by the Lessee;

ensure that any intruder alarm installed by the Lessee is not incompatible with, or does not adversely affect the performance of, any intruder alarm installed by the Lessor;

allow reasonable access to the Leased Premises to persons nominated by the Lessor, for the purpose of testing, servicing, maintaining and repairing any intruder alarm to the Leased Premises installed by the Lessor.

Lessor to provide keys

Lessee’s obligation regarding keys

provide keys only to the Lessee’s employees;

keep a permanent record of who is provided with keys, including their issue and return, and allow the Lessor to inspect that record on reasonable notice;

notify the Lessor promptly if any keys are reported to the Lessee to have been lost, destroyed or stolen;

pay the Lessor for the cost of supplying any replacement or additional keys;

return to the Lessor all keys on termination of the Lessee’s tenancy of the Leased Premises.

REPAIRS AND MAINTENANCE

Lessee’s general repair obligations

Lessee’s specific repair obligations

The Lessee must:

take reasonable action to prevent the entry of water into the Leased Premises and to keep the Leased Premises watertight and weatherproof;

keep and maintain Services to the Leased Premises in good working condition and repair;

deleted by mutual agreement;

comply with the requirements of statutory and local government authorities relating to the Leased Premises that are imposed on the Lessor as owner of the Leased Premises.

The Lessee will maintain the Leased Premises in a standard of repair having regard to its standard, quality, nature, character, situation and age, in keeping with comparable commercial buildings of similar nature and quality.

The Lessee is responsible, in respect of the Leased Premises, for:

structural repair necessitated by the actions of the Lessee;

latent defects caused by the actions of the Lessee.

Lessee’s additional specific repair obligations

promptly repair or replace all broken, cracked or damaged glass in the Leased Premises, with glass of the same or similar gauge and quality, unless the damage was caused by the Lessor or the Lessor’s trades persons or results from latent defects in the structure of the Leased Premises;

promptly repair or replace all damaged, broken or faulty light globes, fluorescent lights, power points, light switches, heating (excluding repair and replacement of units), lighting and electrical appliances, services and wiring in the Leased Premises;

promptly repair and keep in proper working order and free from blockage plumbing fittings, drains, water pipes, sewerage pipes, toilets and sinks, to the extent to which they are situated in or under the Leased Premises and provide Services to the Leased Premises;

maintain and repair all door and window locks and fittings in the Leased Premises;

repair any damage or breakage to the Leased Premises, to the Lessor’s Fixtures and property in the Leased Premises, and to Services in the Leased Premises, caused by lack of care or misuse by the Lessee or by its employees or agents.

Without limiting clause 14.1, the Lessee must at its expense return the Lessor’s Fixtures specified of the Reference Schedule to the Lessor in the Condition they were in at the Commencement Date having allowed for reasonable wear and tear. If necessary, the Lessee must have these fixtures serviced and repaired.

Lessee carrying out repairs

appropriately licensed and qualified trades’ persons carry out the work;

the work is carried out promptly;

the work is completed in high-class workmanship and with good quality materials;

fittings and materials of similar style and quality are used to the items being repaired or replaced;

the required consent or approval or any statutory authority is obtained to carry out the work and the conditions of approval are observed;

the work is carried out without creating undue noise, nuisance or interference with the use and enjoyment of nearby properties.

Lessor’s right of inspection

to inspect the condition and state of repair of the Leased Premises and Services;

to ascertain that the Lessee complies with the Lessee’s obligations under this Lease.

Lessor’s obligation to give prior notice

at reasonable times during business hours on a Business Day;

after giving not less than seven (7) days prior written notice to the Lessee of the intended time of the inspection, except in an emergency when the Lessor has an additional right to enter the Leased Premises and prior notice is not required before entry and generally in a manner so as to cause a minimum of disruption to the Lessee’s business as is practical in the circumstances.

Lessor’s right to repair Leased Premises

The Lessor and persons authorised by the Lessor, including consultants and contractors, may enter the Leased Premises, together with tools, equipment and materials, and remain on the Leased Premises, at and for such reasonable times as is necessary for the purpose of carrying out repairs and other work, in accordance with this clause.

Before entering the Leased Premises the Lessor is to give to the Lessee not less than seven (7) days prior notice of the intended date and time of entry, its purpose and the likely duration of the intended work, except in an emergency, when prior notice before entry is not required.

The Lessor may carry out repairs, including maintenance, installations, alterations, replacement or renewal, in respect of the building, the Leased Premises and Services to or situated in the Leased Premises, in order:

to undertake work which the Lessor is required or desires to carry out in accordance with this Lease;

to comply with the requirements of any authority;

to undertake work which the Lessee:

failed to carry out, in breach of its obligations under this Lease, or following notice from the Lessor;

failed to complete in a workmanlike manner;

to remove unauthorised work, alterations or signs, undertaken or installed by the Lessee in breach of its obligations under this Lease;

to restore or rebuild the Leased Premises following damage or destruction.

deleted by mutual agreement;

replacement of carpets with new carpets. This requirement is only necessary if there has been a significant deterioration in the condition of the carpets since the commencement of the Lease; and

treatment as previously treated of all external and internal surfaces of the building as to a specification previously approved by the Lessor.

The Lessee will redecorate the building to reasonable standards determined by the Lessor prior to the Lessee vacating the Leased Premises or prior to the expiration of each period of ten (10) years calculated from the Commencement Date, whichever event occurs first.

Lessor’s Approval Required

The Lessee must obtain the Lessor’s approval prior to carrying out any redecoration.

The Lessor may specify the type and colour of paint, material and treatment to be used in connection with the redecoration.

Failure to Redecorate

If the Lessee fails to redecorate the building prior to vacating them, the Lessor may redecorate the building at the Lessee’s expense.

The Lessor will be entitled to recover from the Lessee:

the reasonable Cost of redecoration; and

if the Lessor redecorates the building as soon as practicable after the Lessee vacates, a sum equal to the Rent and any other money being paid by the Lessee at the time it vacated the Premises calculated from the date it vacated the Leased Premises to the date the Lessor completes the redecoration.

The Lessee will pay interest in accordance with Item 14 of the Reference Schedule on any money payable by the Lessee under this clause 14.8(d).

Disputes

Any disagreement between the Lessor and the Lessee concerning the standard to which the building are to be redecorated will be referred to an independent architect nominated by the president of the Royal Australian Institute of Architects (Western Australian Division) at the request of either party.

The nominated architect will determine the disagreement as an expert and not as an arbitrator and his decision will be final and binding on the Lessor and the Lessee.

The costs of the nominated architect will be paid equally by the Lessor and the Lessee.

New Condition

If the Lessee is required to redecorate the building, remove any partitions not existing as at the commencement of the Lease, fittings or fixtures, replace or repair any carpet or do any other work, the Lessee will, at its expense, restore the Leased Premises to a new condition regardless of their condition at the commencement of the Lessee’s occupation.

For the purpose of clause 14.8(f), “new condition” means replacing with new parts any parts of the Leased Premises which have been lost, are missing or, in the Lessor’s reasonable opinion, have been damaged and need to be replaced.

INSURANCE

Lessor’s insurances

The Lessor is to effect and maintain throughout the term of this Lease a comprehensive insurance policy:

for the full insurable and replacement value of the Leased Premises and the Lessor’s plant, equipment and property in the Leased Premises;

including for the costs of demolition, site clearance, removal of debris, professional and other costs of planning and other approvals and for reinstating or replacing the Leased Premises and Services;

against loss or damage to the Leased Premises by fire, ▇▇▇▇▇, ▇▇▇▇▇▇▇, earthquake, lightning, explosion, and other risks usually covered under a comprehensive insurance policy for fire and related risks.

In the event of loss or damage to the Lessor’s property covered by the insurance under clause 15.1(a) the Lessor will promptly replace, repair or reinstate the damaged or destroyed property and utilise the insurance proceeds.

The Lessor is not required to repair, replace or reinstate the Lessor’s property, when the following conditions are satisfied:

the Leased Premises has been seriously damaged and is required to be substantially rebuilt or replaced; and

the Lessor is unable:

to obtain planning or building consents to a reinstatement of a building of substantially similar size and lettable space;

to obtain consents without the imposition of conditions which would render compliance by the Lessor unreasonable or not financially viable as a property investment;

to reinstate the Leased Premises due to circumstances beyond the Lessor’s control.

Lessee’s insurances

a public risk insurance policy:

in the form of a standard public risk policy or in the form commonly used by the Lessee’s insurer and by some other reputable insurers;

(A)

or for such higher amount as the Lessor, acting reasonably and prudently, may require, during any year of the term of this Lease or any term of extension or renewal after the first year of the Term of this Lease;

relating to the Lessee’s liability for death, personal injuries and property damage arising from the Lessee’s occupancy of the Leased Premises, whilst entering, leaving, using and being in the Leased Premises, in circumstances in which the Lessee may incur liability for the injury, loss or damage;

and extended to include claims, risks and events covered under indemnities provided by the Lessee to the Lessor under this Lease.

for the full replacement value, through breakage or damage from any cause:

of all plate and other glass in windows, doors, shop front, display cases and other fixed glass in the Leased Premises;

of any doors, windows or other frames containing the glass;

a comprehensive insurance policy:

for the full insurable and replacement value of the Lessee’s fixtures, fittings, plant, equipment and stock in trade in the Leased Premises;

against loss or damage by fire, ▇▇▇▇▇, ▇▇▇▇▇▇▇, earthquake, lightning, explosion, burglary and other risks usually covered under a comprehensive insurance policy for fire and related risks.

a workers’ compensation insurance policy, providing the necessary prescribed cover in respect of the Lessee’s employees for workers’ compensation, as required by law.

Insurer and conditions

the Lessee’s insurances are to be effected with one or more insurance companies that are respectable, reputable and financially sound.

the Lessee’s insurances relating to public risk, plate glass and the Lessee’s property (in order to cover fixtures):

is to be in the joint names of the Lessor and the Lessee; or

are to expressly cover the Lessor and Lessee’s interests;

Payment of premium

(i)

the Lessee is to pay punctually when due the insurance premiums and other moneys payable to effect and maintain the insurances required under this clause.

(ii)

if the Lessee fails to pay an insurance premium when due, the Lessor may make that payment, which will become due and payable by the Lessee to the Lessor, together with interest, within seven (7) days after service of written notice by the Lessor on the Lessee requiring payment.

Replacement of property

(i)

in the event of loss or damage to the Lessor’s or Lessee’s property which is covered by insurance effected by the Lessee, the Lessee with promptly replace, repair or reinstate the damaged or destroyed property, utilising the proceeds from the insurance.

(ii)

the Lessee will pay any additional costs of replacement, repair or reinstatement not covered by the proceeds from the insurance, unless the Leased Premises is seriously damaged or destroyed and is not repaired or reinstated by the Lessor or this Lease is terminated as a consequence of the damage or destruction.

(iii)

in the events under subclause (d)(ii), the proceeds from any insurance effected by the Lessee in respect of damage or loss to the Lessor’s property is to be remitted to the Lessor as compensation for its loss.

The Lessee shall provide to the Lessor promptly and without demand:

(i)

copies of its policies of insurance including the application, policy and schedule

(ii)

copies of its Certificates of Insurance showing the insurance as current; and;

(iii)

a copy of the last receipt for the payment of the Premium as proof of currency of those insurance.

LESSOR’S COVENANTS, OBLIGATIONS AND RESERVATIONS

Lessor’s covenant for quiet enjoyment

Lessor’s entitlement to alter Leased Premises

The Lessor may carry out any building work in the Leased Premises, but without that work altering or interfering unduly with the Leased Premises.

The Lessor is entitled to:

(i)

repair, renovate or refurbish the Leased Premises;

(ii)

alter the grounds and gardens of the Leased Premises, including their size, nature and arrangement;

(iii)

extend or alter the Leased Premises;

(iv)

add to and alter the car parking facilities, alter their location and the direction and access to those facilities;

(v)

alter the access to the Leased Premises, including for pedestrians or for vehicles.

Additions to building and New Buildings

The Lessor reserves the right to renovate, re-model, extend, add to, alter and/or build additional storeys on the building of which the Leased Premises are part and no such additions or additional storeys shall form part of the Leased Premises PROVIDED however that the Lessor shall give three (3) months’ notice in writing to the Lessee of any proposed works and shall ensure that any such works are carried out in such manner as to cause a minimum of inconvenience to the Lessee.

The Lessor also reserves the right to construct other buildings or improvements on the Common Areas (if any) including multideck parking facilities and in so doing the Lessor shall endeavour to leave adequate space in the Common Areas for the purpose for which the Common Areas are designed without any obligation however to do so.

The Lessor also reserves the right to add to, alter and do such buildings and works as may be required in order to strata title the property of which the Leased Premises forms a part (the “Property”) inclusive of but not limited to the extending of walls from the ceiling height to and/or through the roofed area, the inclusion of any additional toilets or other facilities and generally to meet any proper requirements of the Local Authority, Planning Commission and other such parties whose permission may be required to strata title the Property to the intent that the various shops therein shall each become a strata title lot on a strata plan PROVIDED however that the Lessor shall give three (3) months’ notice in writing to the Lessee of any proposed works and shall ensure that any such works are carried out in such manner as to cause a minimum of inconvenience to the Lessee.

The Lessee acknowledges that the terms of this Lease have been negotiated and the Lessee has entered into this Lease with full knowledge that the Lessor may during the Term carry out or is in the process of carrying out renovations and in particular such works as may be required to enable the Property to be strata titled and the Lessee hereby covenants and agrees that it will consent to and where necessary give such reasonable assistance as may be required to effect both such renovations and alterations for the purpose of strata titling and will sign such documents and do such things as may be required for application for and completion of a strata plan.

Lessor’s dealing with title

The Lessor expressly reserves to itself the right to deal with the titles that the Leased Premises are contained within (“the titles”), whether that be for purpose of sale, amalgamation, subdivision, refinancing or whatever BUT so that no dealing with the title interferes with the Lessee’s rights under this Lease to continued occupation of the Leased Premises.

The Lessee agrees that it will not object to any action by the Lessor in dealing with the titles pursuant to clause 16.4(a).

In the event that the Lessee has registered a lease, or a caveat over the titles, then the Lessee will at the Lessor’s request sign a withdrawal of caveat (or deregister that lease) to allow any dealing with the titles BUT the Lessor expressly agrees that the Landgate filing fee of any such withdrawal or deregistration will be the cost of the Lessor and that the Lessee may lodge a replacement caveat to ensure that the interest of the Lessee protected by the caveat is not materially diminished. The replacement registration of caveat or lease will be at the Lessee’s cost except that the Lessor shall reimburse the Lessee for the Landgate registration fee for the replacement caveat or lease.

Miscellaneous reservations

The Lessor may install on the external walls of the Leased Premises for sale signs if the Leased Premises are offered for sale or for lease signs during the last four (4) months of a lease term.

Right to inspect Leased Premises for sale or reletting

the Lessor, its employees, agents and persons authorised by the Lessor, may, upon giving reasonable notice prior to entry, enter and remain on the Leased Premises, for reasonably short periods of time, for the purpose of inspecting the Leased Premises, with a prospective purchaser or mortgagee of the Leased Premises or with a prospective lessee of the Leased Premises.

the right to enter and inspect the Leased Premises shall be exercised:

during the last four (4) months of the lease term, with prospective lessees;

during four (4) hours in any week, to be nominated by the Lessor, with prospective purchasers or mortgagees of the Leased Premises.

The Lessor reserves the right to maintain Services to the Leased Premises, by having those Services pass through or under the Leased Premises, and to have access to those Services for the purpose of maintenance, repair or replacement, or to provide additional Services through or under the Leased Premises.

DEFAULT AND TERMINATION

Lessee’s obligation to yield up Leased Premises

Essential terms of Lease

the covenant to pay rent throughout the Lease term at the due date for the payment of each monthly instalment of rent (clause 4);

the covenant to pay outgoings throughout the Lease term at the due date for the payment of outgoings (clause 4.2);

the covenants dealing with guarantee and security (clause 10);

the covenants dealing with assignment and subletting (clause 12);

the covenants dealing with the use of the Leased Premises (clause 13);

the covenants dealing with repairs and maintenance (clause 14);

the covenants dealing with insurance (clause 15)

Lessor’s entitlements after Lessee vacates during lease term

If the Lessee vacates or abandons the Leased Premises during the lease term in breach of the Lessee’s obligations under this Lease, the Lessor may:

(i)

accept the keys to the Leased Premises from the Lessee;

(ii)

renovate, restore and clean the Leased Premises;

(iii)

change the locks and secure the Leased Premises;

(iv)

permit prospective Lessees to inspect the Leased Premises.

If the Lessor takes any action in subclause (a) of this clause the parties agree that the Lessor’s conduct shall not constitute:

a re-entry or termination of this Lease;

the acceptance of a surrender of this Lease.

Power of attorney by Lessee to Lessor

The Lessee appoints the Lessor (and its successors and assigns, being the owner of the property for the time being) the Lessee’s attorney with the powers contained in this clause.

This power of attorney is:

irrevocable by the Lessee,

granted by the Lessee for valuable consideration (the grant of this Lease by the Lessor), to secure the performance of the Lessee’s obligations and the Lessor’s proprietary interest over the Leased Premises.

The Lessor as the Lessee’s attorney and in the name and on behalf of the Lessee may:

(i)

remove from the Leased Premises, store and sell, any plant, equipment, chattels and other property left on the Leased Premises by the Lessee, after the Lessee has vacated the premises and this Lease is terminated or has expired;

(ii)

surrender this Lease, after:

(A)

the Lessor has become entitled to terminate this Lease; and

(B)

the Lessee vacates or abandons the Leased Premises; or

(C)

the Lessor terminates this Lease by serving notice of termination;

withdraw any caveat lodged by the Lessee in respect of this Lease, after the Lessor effectively terminates this Lease.

The Lessor may:

act as attorney under this clause during the continuance of this Lease and during the period of three (3) months after the termination of this Lease;

register this Lease (or lease provision) as a power of attorney, at any time including after the termination of this Lease, if that is required for the exercise of any power;

ratify and confirm any power when exercised under this clause, as attorney and agent for the Lessee.

(i)

the failure to pay to the Lessor rent or comply with any other financial obligation under this Lease, including the payment of outgoings, for a period in excess of fourteen (14) days after the due date for payment, whether a formal demand for payment has or has not been made;

(ii)

the failure to comply with an essential term of this Lease;

(iii)

any serious, persistent and continuing breach by the Lessee of its covenants and obligations under this Lease;

(iv)

the Lessee abandons, vacates or otherwise surrenders the Leased Premises or assigns, sublets or otherwise ceases to be in possession or control of the Leased Premises without the prior written consent of the Lessor; or,

(v)

an Insolvency Event occurs in respect of the Lessee or the Guarantor.

The Lessor may terminate this Lease, after default by the Lessee in accordance with clause 17.5 and continuance of the default, after the Lessor shall have served a legally effective notice of breach of covenant (if required) by:

re-entering and taking possession of the Leased Premises, using reasonable force to secure possession;

serving on the Lessee written notice terminating this Lease;

instituting proceedings for the possession against the Lessee;

taking the actions in both (i) and (ii) or in (ii) and (iii).

in the event that the Lessee’s conduct (whether acts or omissions) constitutes:

a repudiation of this Lease (or of the Lessee’s obligations under this Lease);

a breach of any Lease covenants;

a breach of an essential term of this Lease;

the Lessor’s entitlement to damages is in addition to any other remedy or entitlement, including termination of this Lease.

the Lessor is entitled to recover damages against the Lessee in respect of the repudiation or breach of covenant or essential term for the loss suffered by the Lessor during the term of this Lease, including the periods before and after termination of this Lease.

the Lessor’s entitlement to recover damages is not affected or limited by any of the following:

if the Lessee abandons or vacates the Leased Premises;

if the Lessor elects to re-enter or to terminate the Lease;

if the Lessor accepts the Lessee’s repudiation;

if the parties’ conduct constitutes a surrender by operation of law.

The Lessor’s entitlement to damages is in addition to:

the entitlement to recover rent, rates, taxes, outgoings and operating expenses until the date of expiry or termination of this Lease;

interest on late payments in accordance with this Lease;

costs of any breach or default, including the costs of termination.

Reinstatement and Removal of Lessee’s property

Lessee’s obligation to remove property

The Lessee is to remove all its property, including furniture, plant, equipment and stock in trade, from the Leased Premises, before the expiry or termination of this Lease or, if it is terminated by the Lessor, within fourteen (14) days after this Lease is terminated.

The Lessee will also remove:

any alterations, additions, fixtures, partitions and fittings made or installed by the Lessee in the Leased Premises during this Lease;

all signs and notices erected or affixed by the Lessee to the Leased Premises;

all nails and screws inserted by the Lessee into any part of the Leased Premises;

The provisions of this clause 17.8 do not apply to any alterations, additions, fixtures, partitions, fittings, signs, notices, nails or screws, that the Lessor has advised the Lessee in writing are not required to be removed or reinstated.

The Lessee will reinstate:

the Leased Premises to their condition before any alterations, additions, installations and partitions were made or installed by the Lessee; and

make good, in a proper and workmanlike manner, any damage caused to the Leased Premises by the installations and their removal.

Lessee’s failure to remove property

before the expiry or termination of this Lease;

if this Lease is terminated suddenly or unexpectedly, by forfeiture, destruction or other event, within fourteen (14) days after the termination of this Lease.

Lessee’s failure to remove property

cause the removal, reinstatement and repairs to be carried out, but being exempted from any liability to the Lessee for loss or damage to any of its property except through the gross negligence of the Lessor, its employees or agents;

have that property removed from the Leased Premises and stored, using reasonable care in removing and storing the property,

sell or otherwise dispose of all or any of the Lessee’s property, with or without removing them from the Leased Premises, in the name of and as agent for the Lessee.

In respect of all or any of the Lessee’s property that the Lessee has failed to remove from the Leased Premises, the Lessee is deemed to have abandoned the property and title to it and the Lessor at its option acquired title to that property through abandonment.

The Lessor is not obliged to account to the Lessee for the value of any property whose title vests in the Lessor by abandonment.

if the Lessor incurs further loss in reletting the Leased Premises by reason of the Lessee’s failure, the Lessor may recover from the Lessee the loss of rent and operating expenses which would have been received from a prospective Lessee.

Lessee’s responsibility for damages and costs

The Lessee is not to cause any damage to the Leased Premises while removing its property, is to leave the Leased Premises clean and tidy after the removal and is to be liable for the cost of repair of the damage caused by or during the removal.

The Lessee is responsible for and indemnifies the Lessor in respect of:

any loss or damage caused by the Lessee, its employees or agents during the removal of the Lessee’s property from the Leased Premises;

the costs of removal, storage and sale of any of the Lessee’s property.

REDEVELOPMENT

Right to redevelop

requires the whole or any part of the Leased Premises for the purposes of the Redevelopment; or

the Lessor considers that the Redevelopment would be likely to render the Leased Premises unsafe or substantially inaccessible, whether temporarily or permanently;

Termination of Lease

Subject to the remaining provisions of this clause 18, if the conditions in either clause 18.1(a) or 18.1(b) is satisfied, Lessor is entitled to terminate this Lease by notice in writing to the Lessee (the “Termination Notice”).

This Lease will terminate upon the expiry of six (6) months after the service of the Termination Notice on the Lessee, or such longer period as is set out in the Termination Notice. The date of the expiry of the Termination Notice shall be in this clause 18, referred to as “the Expiry Date”.

On the Expiry Date, the Lessee will deliver up vacant possession of the Leased Premises to the Lessor and this Lease will be deemed surrendered, so that the leasehold estate of the Lessee merges with the freehold estate of the Lessor.

The termination and deemed surrender of this Lease does not release the Lessee or Lessor from any antecedent liability to each other for a breach of this Lease.

Offer of New Premises

As soon as is reasonably practicable after the service of the Termination Notice, the Lessor must serve on the Lessee an offer to (“the Offer”) lease for alternate premises (“the Alternate Premises”) in the redeveloped Building, which must contain the following:

premises of substantially the same size as the existing Leased Premises;

premises with substantially the same linear street frontage as the existing Leased Premises;

premises with substantially the same traffic flow and trade prospects as the existing Leased Premises;

premises with substantially the same facilities as the existing Leased Premises;

premises with substantially the same parking facilities as the existing Leased Premises;

rent at substantially the same rate per square metre as was being charged at the termination of this Lease;

a clause requiring the Lessor to pay the reasonable costs of the new lease (except stamp duty);

a clause requiring the new lease to be on reasonably equivalent terms to this Lease;

that the lease of the Alternate Premises will be for such period as the Lessor and the Lessee shall agree, but in any event shall not be shorter than the balance of the unexpired term of this Lease or any renewed term, with any unused options of renewal also included; and

Unless the Lessor complies with clause 18.3(a) any Termination Notice will be ineffective and the six (6) month time period will not run, until such time as the Lessor has complied with clause 18.3(a).

Lease of Alternate Premises

commence on the later of:

the day following the Expiry Date; and

the day which is fourteen (14) days after the date on which the Alternative Premises are ready for the Lessee to commence its fitout.

contain substantially the same terms as this Lease and in particular shall reflect the matters set out in clause 18.3(a) above.

Lessee's Acknowledgements

the Lessee may be required to vacate the Leased Premises before the Alternate Premises are available for occupation and the Lessor does not represent or warrant that there shall not be any interruption to the continuity of the operation of the Lessee's business; and the Lessee shall not be entitled to any compensation from the Lessor in respect of any matter arising out of any break in continuity;

the Lessee shall be in all respects responsible for fitting out the Alternate Premises and shall not be entitled to any contribution to its costs from the Lessor;

the Lessee will execute all documents necessary to give effect to the granting to the Lessee of a tenancy in the Alternate Premises, within fourteen (14) days of their presentation to the Lessee by the Lessor.

DAMAGE OR DESTRUCTION AND RENT ABATEMENT

Definitions

“reinstatement notice” means a notice given by the Lessor to the Lessee of the Lessor’s intention to carry out the reinstatement works; and

“reinstatement works” means the work necessary to reinstate the Building; or make the Leased Premises fit for occupation and use or accessible by the Lessee.

Abatement

If for a period exceeding twenty one (21) days the Leased Premises are damaged or destroyed so as to render any part of the Leased Premises wholly or substantially:

unfit for occupation and use by the Lessee; or

inaccessible having regard to the nature and location of the Leased Premises and the normal means of access to them;

If clause 19.2(a) applies, the remedies for:

recovery of the Rent and any other money or a proportionate part falling due after the damage or destruction; or,

enforcement of the covenant to repair and maintain;

restored;

made fit for the Lessee’s occupation and use; or

made accessible.

Lessor’s entitlement to terminate Lease

The Lessor may terminate this Lease when the Leased Premises are seriously damaged by fire, ▇▇▇▇▇, ▇▇▇▇▇▇▇, earthquake, lightning, explosion, or other similar event, in any of the following circumstances:

when the Leased Premises are required to be demolished and wholly replaced;

when the serious damage or destruction extends to more than fifty per cent (50%) of the Leased Premises;

when the Lessor is not required to repair, replace or reinstate the Leased Premises under this Lease;

when the Leased Premises cannot be repaired or reinstated by the Lessor, acting reasonably and promptly, within six (6) months after the damage;

when the Leased Premises are incapable of being used and occupied due to the damage; or

when the decision as to whether to restore, reinstate or rebuild is properly that of a strata company and the strata company elects not to do so or does not do so within the time frames allowed in this clause 19.

In any of the circumstances specified in sub clause (a) of this clause, the Lessor may give written notice at any time terminating this Lease on thirty (30) days’ notice.

Lessee’s entitlement to terminate Lease

when the Lessor takes no action to repair or reinstate the Leased Premises for a consecutive period of three (3) months, at any time after the date of the damage.

when the Leased Premises will not be capable of being used and occupied for a period in excess of six (6) months from the date of the damage.

Exceptions

Antecedent Rights

Dispute

If the parties have any dispute regarding the Lessee’s entitlement to abatement, its period or amount, a loss assessor shall determine the dispute:

(i)

who is a then a member of the Insurance Council of Australia Ltd and is experienced in assessing premises of the nature of the Leased Premises and is nominated by the President for the time being or senior officer of that Council on the application of either party;

(ii)

acting as an expert;

(iii)

who is entitled to accept written submissions and expert reports from either party;

(iv)

whose costs shall be borne equally by the parties;

(v)

whose decision is final and binding on the parties.

If the loss assessor nominated under subclause (a) fails to proceed or to determine the dispute, either party may seek the nomination of another loss assessor in accordance with subclause (a).

Lessor Not Obligated to Reinstate

Proceeds of Insurance

ENVIRONMENTAL CONTAMINATION

Definitions

“Contaminant” means a solid, liquid, gas, radiation or substance which makes or may make the condition of the Leased Premises or groundwater beneath or part of the surrounding environment:

unsafe, unfit or harmful for habitation or occupation by persons or animals or the growth of plants;

such that it does not satisfy the contamination criteria or standards published or adopted by EPA from time to time; or

unfit for any use permitted under the planning scheme as amended from time to time,

“Environmental Laws” means all laws (including common law, Acts of Parliament, regulations, policies and by-laws and all licences, permits, notices and consents or approvals made pursuant to such laws) which regulate the environment including, but not limited to laws relating to planning, pollution, chemicals, waste and the use, handling, storage or transport of dangerous goods or substances or any other aspect of protection of the environment or person or property.

“Environmental Loss” means any loss incurred by the Lessor as a result of or in connection with its occupation of the Leased Premises which relates to:

any Contaminant present at or emanating from the Leased Premises; or

any breach of any Environmental Laws; or

any requirement by the EPA or any other person who is entitled to take any action with respect to the Leased Premises which is enforceable under any Environmental Law; or

any breach of a warranty in this clause.

“EPA” means the Environment Protection Authority or its successor or other organisation replacing it and includes any other statutory body authorised to enforce Environmental Laws.

“Loss” means any loss, damage, cost, interest, expense, fee, penalty, fine, forfeiture, assessment, demand, action, suit, claim, proceeding, cause of action, liability or damages incurred by a person and includes:

the cost of any action taken by the person to protect itself against any such losses or to preserve any right it has;

any taxes or duties payable by the person; and

where applicable, legal costs on an indemnity basis or solicitor and own client basis, whichever is the higher.

“Waste” means any discarded, rejected, unwanted or surplus matter resulting from the Lessee’s use of the Leased Premises and in particular from the grit blasting process, whether or not that matter is intended for use, recycling, reprocessing, recovery or purification by a third party.

Compliance with Legislation and Contamination

Indemnity

Subject to clause 20.3(b), the Lessee must indemnify the Lessor against any Environmental Loss incurred by the Lessor as a result of or in connection with the Lessee’s occupation of the Leased Premises.

The Lessee is not obliged to indemnify the Lessor under clause 20.3(a) to the extent that the Environmental Loss was caused by the Lessor. In resolving any dispute as to whether Environmental Loss was caused by the Lessor, the onus will be on the Lessee to prove on the balance of probabilities that the Environmental Loss was caused by the Lessor. In the absence of proof that the Lessor caused the Contamination, it will be presumed that the Contamination was caused by the Lessee.

Notification

any accident, spillage or other events causing Contamination;

any material breach of an Environmental Law on or in relation to the Leased Premises or this Lease;

any material alteration of the Leased Premises by the Lessee in order to comply with or relating in any way to any Environmental Law;