Service Agreement Mayne Group Limited ABN 56 004 073 410 and Stuart Bruce James [FREEHILLS LOGO] Telephone 61 3 9288 1234 Facsimile 61 3 9288 1567 SYDNEY MELBOURNE PERTH CANBERRA BRISBANE HANOI HO CHI MINH CITY SINGAPORE Correspondent Offices JAKARTA...

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1.

Mayne Group Limited

ABN

56 004 073 410

2.

The person named in Item 1

A.

The Company and the Employee entered into a memorandum of record of service agreement on 24 June 2000 (Memorandum).

B.

This agreement sets out the new terms agreed between the Company and the Employee upon which the Employee agrees to act as Group Managing Director and Chief Executive Officer. This agreement, except to the extent expressly provided otherwise, replaces the terms and conditions of the Memorandum.

C.

The Company and the Employee record that they agreed the payment of the termination benefits set out in this agreement prior to and in part consideration of the Employee agreeing to hold office as Group Managing Director and Chief Executive Officer of the Company.

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1.1

Definitions

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1.2

Interpretation

(a)

words in the singular include the plural and the other way around;

(b)

words of one gender include any gender;

(c)

an expression indicating a natural person includes a partnership, joint venture, association, corporation or other body corporate;

(d)

a reference to a party includes that party’s successors and permitted assigns;

(e)

a reference to legislation includes any amendment to that legislation, any consolidation or replacement of it, and any subordinate legislation made under that legislation;

(f)

a reference to a document or agreement includes all amendments or supplements to, or replacements or novations of, that document or agreement; and

(g)

a reference to the Board’s appointee is to the Chairman or, if the Board appoints any other person for the relevant purpose, to that person.

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2.1

Duties of Position

(a)

During the Term the Employee must:

(1)

serve the Company in the Position; and

(2)

undertake the duties relating to the Group and its businesses assigned to the Employee at the date of this agreement, as varied consistently with the Position at any time by the Board or its appointee.

(b)

The principal duties assigned to the Employee at the date of this agreement are to:

(1)

be responsible to the Board for the management of the Group and its businesses;

(2)

implement successfully the broad strategy endorsed by the Board (as may be varied by the Board from time to time);

(3)

put in place an appropriate senior executive structure to facilitate the successful performance of the Group and its businesses; and

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(4)

ensure that viable internal options are available to the Board when considering who will succeed the Employee in the Position.

2.2

General duties

(a)

in carrying out his duties, comply with all reasonable and lawful resolutions, regulations and directions made or given by the Company;

(b)

faithfully and diligently carry out those duties with the degree of competence and efficiency appropriate for a person serving the Company in the Position, and in a way that is consistent at all times with furthering the Company’s best interests; and

(c)

devote himself to the business of the Group and personally attend to the business at all times during usual business hours (except for holidays, illness, accidents or other unavoidable circumstances). Subject to clause 6.2(b), the Employee is not entitled to receive any pay for work performed outside usual business hours.

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(a)

The Term starts on the Commencing Date and, subject to earlier termination under this agreement, continues until the Expiry Date.

(b)

At any time prior to expiry of the Term, the Company may offer in writing to extend the Term beyond the Expiry Date. If the Employee accepts the Company’s offer:

(1)

except as otherwise agreed in writing, his Employment will continue on the terms and conditions set out in this agreement; and

(2)

the Company may terminate his Employment by giving 6 months written notice to the Employee.

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4.1

Salary and other benefits

4.2

Reviews

(a)

During the Term, the Employee’s salary and benefits are subject to annual review with effect from 1 July in each year.

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(b)

The salary and levels of benefits (including the maximum amount of any short term incentive payment) in Schedule 2 as at the Commencing Date must not be reduced before the Expiry Date.

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(a)

is in addition to the usual public holidays; and

(b)

may be taken at the times agreed with the Board or its appointee.

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6.1

Sole employment

6.2

Other directorships

(a)

The Employee is not to act as a director of any Listed Company (other than the Company) during the Term, except with the consent of the Board which is not to be withheld unreasonably having regard, without limitation, to the current and anticipated demands of the Position at the time of the Employee requesting the Board’s consent.

(b)

The Employee is not entitled to retain any fees payable in relation to acting as a director of any Listed Company other than the Company during the Term and must make arrangements for those fees to be remitted to the Company.

6.3

Employee may hold listed shares

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7.1

Prohibition on use and disclosure

(a)

The Employee must not at any time either during the Term or after the termination of the Employment without the Company’s prior written consent make use of or publish or disclose to any person, and must use his best efforts to prevent the disclosure or publication of, any of the trade secrets, operations, processes, formulae or methods of the Group or any other information of a confidential nature concerning the businesses of the Group or of its customers (Confidential Information), and must keep secret all matters entrusted to him.

(b)

Clause 7.1(a) does not apply to disclosure to an officer or employee of the Company or of any Subsidiary who has the right to know the Confidential Information.

7.2

Property and return

(a)

on the termination of Employment; or

(b)

at any time during the Term at the Company’s request,

7.3

Survival of obligations

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8.1

Property in Inventions

(a)

The Employee must immediately inform the Company of any invention, design, improvement or idea connected with or relating to the business of the Group (Invention) that the Employee invents, makes, conceives or develops or on which he works in any capacity during the Term.

(b)

Any Invention is the sole property of the Company (or of any other company in the Group with whose business the Invention is primarily connected) and the Company has the exclusive right to use, adapt, patent and otherwise register the Invention, unless otherwise agreed.

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8.2

Employee’s obligations

(a)

supply all information, data and drawings required to enable the Company to exploit any Invention to the best advantage; and

(b)

execute any document and do any thing that is necessary or desirable to:

(1)

obtain patent or similar protection for the Invention in the parts of the world the Company specifies; and

(2)

vest the Invention in the Company or another company in the Group.

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9.1

Application of restraint

9.2

Scope of restraint

9.3

Survival of obligations

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11.1

Entitlement to payment

(a)

the Company terminates the Employment before the Expiry Date for any reason except under clauses 12.2 or 12.3; or

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(b)

the Employee resigns within 3 months after there is:

(1)

a reduction or foreshadowed reduction in breach of clause 4.2(b) which takes effect, or is to take effect, before the Expiry Date; or

(2)

an act or omission by the Company, or a combination of acts or omissions or both, which:

(A)

would constitute a common law repudiation of the Employment by the Company; or

(B)

materially diminish the status, functions or responsibilities of the Employee in the Position.

(a)

Where this clause 11 applies, the Company must, when the Employment ends, pay the Employee in a lump sum an amount (Separation Amount) equal to the amount expressed in dollars derived by applying the formula:

•

TC is the total of the amount of the Base Total Compensation applicable to the Employee at the termination date as shown in Schedule 2 or in the last applicable Compensation Review Worksheet replacing Schedule 2 and given to the Employee by the Company before the termination date; and

•

PM is the package multiple number derived in accordance with Item 6.

(b)

Clause 11.2(a) is subject to clauses 11.4 and 12.4(b)

(a)

Payment by the Company under clause 11.2 automatically releases the Company from any liability (whether then existing or yet to arise) to pay the Employee any other amount as compensation for the termination of the Employee’s employment, including, but not limited to, any amount that might otherwise be payable to the Employee as:

(1)

a severance payment;

(2)

an ex-gratia termination payment; or

(3)

a result of the Employee’s retrenchment or redundancy.

(b)

The Employee’s right to payment of accrued annual leave and long service leave or any other similar entitlements accrued under any legislation or

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any

payment by any superannuation fund is not affected by the release given in this clause 11.3

11.4

Limitation on amount

(a)

If the aggregate of:

(1)

the amount that would, but for this provision, be payable to the Employee under this clause 11; and

(2)

the value of all other payments made in connection with his retirement from board or managerial offices in the Company and related bodies corporate (excluding any benefits to which section 200F of the Corporations Act applies),

(b)

Expressions used in this clause 11.4 have their meanings as in Division 2 of Part 2D.2 of the Corporations Act.

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12.1

Termination by Employee

12.2

Amalgamation, reconstruction or transfer of business or activity

(a)

the Employment is terminated because:

(1)

the Company is liquidated for the purpose of amalgamation or reconstruction or as a part of any arrangement for the amalgamation of the undertaking of the Company or a wholly owned Subsidiary; and

(2)

the business or activity in which the Employee is employed ceases to be owned or operated by the Company or a wholly owned Subsidiary; and

(b)

the Employee is offered employment with the amalgamating or reconstructed company referred to in clause 12.2(a)(1), or with the party

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(1)

effective from the termination until at least the Expiry Date; and

(2)

on terms which in the aggregate are no less favourable to the Employee than the terms of the Employment and under which in particular the Employee is the Managing Director and Chief Executive Officer of, and reports directly to the board of directors, of a Listed Company of a size and standing not materially less than that of the Company at the date of this agreement.

12.3

Termination by Company for specified causes

(a)

The Company may terminate the Employment immediately if the Employee:

(1)

becomes bankrupt or suspends payment or compounds with or assigns his estate for the benefit of his creditors;

(2)

fails to comply with any of his Employment obligations in a material way and, where the failure is capable of being remedied, does not remedy it within 7 days after being given written notice by the Company specifying the failure and requiring the Employee to remedy it;

(3)

refuses or fails, after being informed in writing that the refusal or failure is one the Company regards as potentially triggering the Company’s right of termination, to comply with any reasonable and lawful direction given to him in writing by the Board or its appointee that is consistent with his duties under the Employment;

(4)

engages in any serious misconduct including, but not limited to, an act of dishonesty, fraud or wilful breach of duty; or

(5)

makes any personal profit at the expense of the Company or any Subsidiary to which the Employee is not legally entitled.

(b)

If the Employment is terminated under clause 12.3(a), the Employee has no claim against the Company in respect of the termination.

12.4

Termination by Company on Employee’s incapacity

(a)

If during the Term the Employee, in the opinion of the Board formed in good faith:

(1)

becomes unable to perform his duties owing to his becoming incapacitated by ill health (mental or physical) or accident; and

(2)

the incapacity continues for more than 3 consecutive months or for a period or periods totalling more than 90 days in any one period of 52 consecutive weeks,

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(b)

If the Company terminates the Employment under clause 12.4(a) before the Expiry Date, the Employee is entitled to receive the Separation Amount referred to in clause 11.2, subject to the Company’s right:

(1)

to pay the Separation Amount either in a lump sum or in monthly instalments or partly in one way and partly in the other; and

(2)

to recover from the Employee or his personal representatives the applicable Separation Amount or any part of it paid (whether in a lump sum or monthly instalments), and to withhold any monthly instalments or other part not yet paid, up to (but not exceeding) the total amount of any disablement or similar benefits received by the Employee or his personal representatives under a Company or Subsidiary sponsored superannuation or pension plan.

(c)

The Employee must:

(1)

use reasonable efforts to seek any disablement or similar benefit to which he is entitled under any Company or Subsidiary sponsored superannuation or pension plan; and

(2)

keep the Company informed as to progress.

(d)

Each party must do any thing and execute any document that is necessary or desirable to give effect to the provisions of clause 12.4(b).

12.5

Termination by Company for other reasons

12.6

Resignation as director

(a)

If, on termination of Employment, the Employee is a director of the Company, any Subsidiary or any other company in which the Company has an interest, the Employee agrees to immediately resign from that directorship.

(b)

The Employee hereby irrevocably appoints the Company Secretary, or any other employee of the Company, as the Employee’s attorney to sign the Employee’s resignation on behalf of the Employee if the Employee refuses to resign on termination of the Employment.

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(a)

The Employee and the Company agree that, subject to clause 13(b), on the Commencing Date the terms of the Memorandum will cease to apply to the Employment and:

(1)

except to the extent specifically provided for in this agreement, the Company and the Employee release each other from all obligations

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(including any liability to make a payment under clause 11 of the Memorandum as a result of termination of the Memorandum) as from 29 August 2002;

(2)

nothing in this agreement affects any right, power, authority, discretion or remedy arising under the Memorandum on or prior to 28 August 2002.

(b)

The parties agree that the provisions of Item 5 of Schedule 2 of the Memorandum remain in full force and effect, except that the Loan, which would be repayable no later than 31 July 2005, will, from the date of this agreement be repayable in full within one month of the Expiry Date (as defined in this agreement).

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This agreement and the Employment must be interpreted so that it complies with all legislation that applies to it. If a provision of this agreement and the Employment does not comply with any legislation, it must be read down to give it as much effect as possible. If it is not possible to give the provision any effect at all, the provision must be treated as deleted from this agreement. This does not affect the validity or enforceability of the remaining provisions.

A notice to be given by either party to the other under this agreement:

(a)    may be sent by registered post addressed to

(1)    the Company at its registered office; or

(2)    the Employee at his address set out in this agreement or any other address last known to the Company; and

(b)    is taken as received on the second day after it was posted, whether or not received on that date.

(a)    A party waives a right under this agreement only if it does so in writing.

(b)    A party does not waive a right simply because it:

(1)    fails to exercise the right;

(2)    delays exercising the right; or

(3)    only exercises part of the right.

(c)

A waiver of one breach of a provision of this agreement and the Employment does not operate as a waiver of another breach of the same provision or of any other provision.

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(a)

The Employment is governed by and must be construed according to the law of Victoria.

(b)

Each party submits to the non-exclusive jurisdiction of the courts of Victoria in respect of any dispute arising out of or concerning the Employment.

This agreement replaces all previous documents relating to the Employment of the Employee, except:

(a)

that the provisions of the Memorandum expressly retained under this agreement remain of full force and effect; and

(b)

for the Deeds of Indemnity and Access,

and these documents together with the Company’s constitution contain the entire agreement between the parties.

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1

Base Total Compensation

2

Short Term Incentive Payments

(a)

50% of BTC if he achieves all his targets for that financial year as agreed with the Board or its appointee; or

(b)

up to 100% of BTC for significantly exceeding those targets.

3

Superannuation Contributions

4

Long Term Incentive

1.

commonly accepted valuation principles; and

2.

performance against an appropriate comparator group,

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5

Expenses

6

Travel

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