AGREEMENT

between

HER MAJESTY THE QUEEN IN RIGHT OF NEW ZEALAND

and

TOLL GROUP (NZ) LIMITED

and

TOLL HOLDINGS LIMITED

THIS AGREEMENT dated the day of July 2003

BETWEEN HER MAJESTY THE QUEEN IN RIGHT OF NEW ZEALAND (''Crown'')

AND TOLL GROUP (NZ) LIMITED (''Toll Group'')

AND TOLL HOLDINGS LIMITED (''Toll Holdings'')

BACKGROUND

A. The Crown has entered into a heads of agreement with Tranz Rail Holdings Limited ("TRH") and Tranz Rail Limited ("TR") dated 6 June 2003 ("June HOA").

B. Toll Group has made a takeover offer dated 23 June 2003 to purchase all of the equity securities in TRH ("June Takeover Offer").

C. The Crown and Toll Group have agreed certain matters as set out in the body of this agreement and Toll Holdings has agreed to procure that Toll Group meets its obligations under this agreement.

WITNESSES AS FOLLOWS:

1. BINDING NATURE
This agreement shall be binding on the parties in accordance with its terms immediately on signing. It is also agreed that neither party will until the July Takeover Offer is withdrawn or lapses, enter into any negotiations or arrangements which are inconsistent with the terms of this agreement, and in particular no alternative to the Replacement HOA (as defined in clause 5 below) will be negotiated or entered into by either of the parties.

2. JUNE HOA
Subject to and contemporaneous with Toll first complying with clause 3, the Crown agrees that it will not agree to a date for the TRH shareholders meeting to be called to approve the transactions set out in the June HOA until a date after the July Takeover Offer is withdrawn or lapses. If Toll Group declares the July Takeover Offer unconditional the Crown agrees to terminate the June HOA immediately upon TRH and TR entering into the Replacement HOA (as defined in clause 5 below) (or such other date as agreed by the parties), so that the June HOA is of no further force or effect.

3. JUNE TAKEOVER OFFER
Toll Group agrees to, with the approval of the Takeover Panel, withdraw the June Takeover Offer on 7 July 2003 or as soon thereafter as permitted by the Takeovers Panel.

4. JULY TAKEOVER OFFER
Toll Group agrees to make a new takeover offer ("July Takeover Offer") in respect of TRH as soon as practicable following the withdrawal of the June Takeover Offer. The terms of the July Takeover Offer (to be announced on 7 July 2003 or such other date as the parties agree) shall be substantively the same as the terms of the June Takeover Offer (with consequential changes given the changed timing of the new offer) except that the offer price shall be $0.95, the minimum level of acceptances required shall be 90% and the existing conditions in the July Takeover Offer will be amended as set out in Schedule 1 to this agreement. No other additional conditions will be added to the July Takeover Offer compared to those in the June Takeover Offer. Toll Group shall implement the July Takeover Offer (including waiving any remaining conditions other than OIC consent immediately upon achieving the required level of acceptances) and any subsequent compulsory acquisition and delisting of TRH so as to effect such takeover and completion of the Rail Network Transfer (as defined in the Replacement HOA) in the shortest period reasonably practicable. Until such time as the Rail Network Transfer has been completed, Toll Group agrees that (other than as regards clause 5 below) it will not allow any party outside of the Toll Holdings group of companies to hold or control (in this agreement “hold” and “control” having the meaning given in the Takeovers Code) any shares in TRH held or controlled by Toll Holdings or any other member of the Toll Holdings group of companies whether pursuant to the July Takeover Offer or otherwise nor will Toll Group transfer TRH shares to another member of the Toll Holdings group of companies if such transfer would have the effect of circumventing any provision in this agreement.

5. REPLACEMENT HOA
The parties have had discussions regarding the form of an agreement which could replace the June HOA ("Replacement HOA") and have agreed a form of agreement as set out in Schedule 2 to this agreement. The Crown agrees that in the event, and only in the event, that the July Takeover Offer becomes unconditional that it will enter into an agreement in the form of the Replacement HOA with TRH and TR. Toll Group agrees that in the event that the July Takeover Offer becomes unconditional, it will use its best endeavours to procure TRH and TR to enter into an agreement in the form of the Replacement HOA. The parties agree that execution of the Replacement HOA shall occur as soon as practicable following Toll Group declaring the July Takeover Offer unconditional and Toll Group further agrees to vote such number of TRH shares it holds or controls as represents 20% of the total voting rights in TRH (less the aggregate percentage of any voting rights in TRH held or controlled by the Crown and its associates (as defined in the Takeovers Code) at the time of such votes) in favour of any resolution required at a shareholders' meeting of TRH to implement the matters set out in the Replacement HOA should such a meeting be required. Notwithstanding anything in this agreement or otherwise, it is expressly agreed and acknowledged that Toll Group shall be free to vote the balance of its TRH shareholding in whatever manner it sees fit.

6. WAIVER
It is acknowledged that Toll Group has received a waiver from the New Zealand Exchange allowing it to vote in the manner set out in clause 5 above if such a vote is required.

7. NON-COMPLETION OF JULY HOA
Subject to Toll Group declaring the July Takeover Offer unconditional and the Crown terminating the June HOA, if the Rail Network Transfer (as defined in the Replacement HOA) is not settled in accordance with the Replacement HOA on or before 30 November 2003 other than as a result of default by the Crown or any other reason beyond the reasonable control of Toll Group (it being acknowledged that Toll Group shall not be required to expend any material financial amount to secure the Rail Network Transfer), then Toll Group agrees to pay to the Crown the sum of $5 million (plus GST, if any) on the next Business Day (as defined in the Replacement HOA). Toll Group agrees that such sum is not a penalty and constitutes a genuine pre-estimate of the Crown’s losses arising from the Rail Network Transfer not being settled.

8. TOLL HOLDINGS
Toll Holdings agrees to procure that Toll Group fully complies with its obligations under this agreement and Toll Holdings guarantees the due and punctual performance by Toll Group of all its obligations under this Agreement, such guarantee to remain in full force and effect notwithstanding any variation, waiver, or extension of time under this agreement.

9. COVENANTS
9.1 Toll Group covenants that, upon declaring its July Takeover Offer unconditional, it will ensure that TRH brings no action and makes no claim against the Crown in respect to the Crown’s termination of the June HOA pursuant to clause 2 of this agreement and will cause TRH to abandon any action or claim in respect of such termination that it may have commenced prior to Toll Group declaring its July Takeover Offer unconditional.

9.2 Toll Group and Toll Holdings confirm that in making the July Takeover Offer they are doing so solely on the basis of their own understanding of the business of TRH and are proceeding with the July Takeover Offer without advice or encouragement of the Crown. Toll Group and Toll Holdings irrevocably waive any action they have against the Crown pursuant to the Securities Markets Act 1988 and shall procure TRH not to bring any action against the Crown under the Securities Markets Act 1988.

9.3 Subject to clause 10.11 the Crown covenants to use its best endeavours to assist and support Toll in the making of the applications referred to in clauses 3 and 6.

9.4 The Crown confirms that on terminating the June HOA as contemplated by clause 2 above, it is doing so solely of its own volition and without taking account of the views of Toll Group or Toll Holdings.

9.5 The Crown and Toll Group shall jointly approach TRH’s New Zealand banks pending execution of the July HOA with a view to securing all necessary consents and approvals of such banks to the Rail Network Transfer (as defined in the July HOA) as soon as possible following execution of the July HOA.

10. MISCELLANEOUS
10.1 Variation: Any variation to this agreement must be recorded in writing and signed by the authorised representatives of each party.

10.2 No waiver or consent: No waiver of any breach, or failure to enforce any provision, of this agreement at any time by any party in any way affects, limits or waives the right of such party to later enforce and compel strict compliance with the provisions of this agreement. No consent under this agreement shall be valid unless it is in writing nor will it eliminate or modify the need for a specific consent in any other instance.

10.3 No implied waivers: A failure to exercise or delay in exercising any right under this agreement will not operate as a waiver of that right, nor will any single or partial exercise of any right preclude any other or further exercise of that right or the exercise of any other right.

10.4 Relationship of parties: Nothing in this agreement is deemed or construed to constitute any party a partner or agent of the other or to create any trust.

10.5 Governing law: This agreement is governed by, and construed in accordance with, the law of New Zealand, and the parties submit to the exclusive jurisdiction of the Courts of New Zealand.

10.6 Counterparts: This agreement may be executed in two or more counterparts, each of which is deemed an original and all of which constitute one and the same agreement. This agreement will be effective upon the exchange by facsimile of executed signature pages.

10.7 Further assurances: Each party must promptly do everything reasonably required to give effect to the terms of this agreement according to its spirit and intent.

10.8 Partial invalidity: The illegality, invalidity or unenforceability at any time of any provision of this agreement under any law, will not affect the legality, validity or enforceability of the remaining provisions of this agreement nor the legality, validity or enforceability of those provisions under any other law.

10.9 Assignment: No party may assign any of its rights or obligations under this agreement without the consent in writing of the other party.

10.10 Entire agreement: This Agreement records the entire agreement between the parties, in respect of its subject matter, and prevails over any earlier agreement.

10.11 Crown action: Notwithstanding anything to the contrary in this agreement, nothing in this agreement requires the Crown to exercise, or use, any regulatory or legislative powers in order to influence or affect an outcome.

10.12 Costs: Each party shall bear its own costs in relation to this agreement.

EXECUTION
SIGNED for and on behalf
of HER MAJESTY THE QUEEN IN
RIGHT OF NEW ZEALAND by her
MINISTER OF FINANCE: _____________________________

in the presence of:

_____________________________
Signature of witness

_____________________________
Full name of witness

_____________________________
Address

_____________________________
Occupation

SIGNED for and on behalf
of TOLL GROUP (NZ) LIMITED by: _____________________________ Signature of director

____________________________
Full name of director
in the presence of:

_____________________________
Signature of witness

_____________________________
Full name of witness

_____________________________
Address

_____________________________
Occupation

SIGNED for and on behalf
of TOLL HOLDINGS LIMITED by: _____________________________ Signature of director

____________________________
Full name of director
in the presence of:

_____________________________
Signature of witness

_____________________________
Full name of witness

_____________________________
Address

_____________________________
Occupation

SCHEDULE 1

July Takeover Offer Conditions

The conditions in the June Takeover Offer shall be amended as follows:

6.1.2(a) A materiality threshold of $50 million will be set and the date of 31 March will change to 6 July 2003.

6.1.2(c) Deleted.

6.1.2(f) Qualified to only those that are materially adverse to TRH.

6.1.2(h) Qualified to say any breach of the licences (as defined) must be a material breach.

6.1.2(j) Deleted.

6.1.2(k) Qualified to only those that are materially adverse to TRH.

6.1.2(i) Increase threshold to $5 million and delete reference to term of greater than 12 months.

6.1.2(m) Delete “and no action, suit, claim or proceeding is pending before any governmental authority which seeks to prohibit or enjoin the consummation of the Offer.”

6.1.4 Delete.

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