FEDERAL COURT OF AUSTRALIA Peter Hedge in his capacity as Administrator of Federation Health Ltd (Administrator Appointed) [2005] FCA 980 PETER HEDGE IN HIS CAPACITY AS ADMINISTRATOR OF FEDERATION HEALTH LTD (ADMINISTRATOR APPOINTED) ACD15 OF 2005 EMMETT J 23 JUNE 2005 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY ACD15 OF 2005 PETER HEDGE in his capacity as Administrator of Federation Health Ltd (Administrator Appointed) APPLICANT JUDGE: EMMETT J DATE OF ORDER: 23 JUNE 2005 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to section 82XZE of the National Health Act 1953 (the Act), a scheme of arrangement concerning the business of Federation Health Limited (Federation) be implemented in accordance with the terms of the Scheme of Arrangement Deed (the Deed) between Latrobe Health Services Incorporated (Latrobe), Federation and the Applicant in the form set out in the schedule to these orders (the Scheme). 2. Pursuant to section 447A of the Corporations Act 2001 (as applied by section 82XB of the Act), the operation of section 82XZJ(3)(e) of the Act be varied and Part IVA of the Act operates so that, notwithstanding the order in paragraph 1, the administration of Federation ends on the earlier of: (a) the day after the day on which the Scheme is implemented in full; and (b) 30 April 2006. 3. If at any time, but for this order, Federation would have no members eligible to vote then Scott Cameron Turner shall, by force of this order, be deemed to be a Full Member of Federation. 4. For the purposes of rule 4(c) of the rules of Latrobe, Scott Cameron Turner be authorised to sign an application for membership of Latrobe on behalf of each of the Transferring Contributors as referred to in clause 8.1(b)(i) of the Deed. 5. The costs of the Application be the costs and expenses of the administration of Federation. 6. The applicant has liberty to apply. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. SCHEDULE SCHEME OF ARRANGEMENT DEED 1. INTERPRETATION 1 2. STEPS 2 3. CONDITIONS PRECEDENT TO SCHEME 2 4. CONDUCT OF BUSINESS PRIOR TO SCHEME IMPLEMENTATION 2 5. MUTUAL OBLIGATIONS 2 6. SPECIFIC FEDERATION HEALTH OBLIGATIONS 2 7. SPECIFIC LATROBE OBLIGATIONS 2 8. THE SCHEME 2 9. TRANSFERS OF ASSETS AND LIABILITIES 2 10. EMPLOYEES2 11. SUPERANNUATION 2 12. LICENCES 2 13. REALISATION OF BALANCE ASSETS 20 14. RELEASE OF ADMINISTRATOR 2 15. PUBLIC STATEMENTS 2 16. TERMINATION 2 17. REPRESENTATIONS AND WARRANTIES 2 18. INDEMNITIES 25 19. OPERATIONAL ISSUES 2 20. COSTS AND STAMP DUTY 2 21. GST 2 22. AMENDMENT AND ASSIGNMENT 2 23. NOTICES 2 24. GENERAL 2 SCHEDULE 1 FEDERATION HEALTH ASSETS 31 SCHEDULE 2 FEDERATION HEALTH LIABILITIES 32 SCHEDULE 3 OPERATIONAL ISSUES 33 SCHEDULE 4 PROCEDURES FOR BALANCE OF LIABILITIES 36 SCHEDULE 5 NOTICE TO SUBMIT PARTICULARS OF DEBT OR CLAIM 40 SCHEME OF ARRANGEMENT DEED DATE May 2005 PARTIES Federation Health Limited (Administrator Appointed) ABN 47 004 155 622 of 46-48 Albert Street, Moe, Victoria, 3825 (Federation Health) Latrobe Health Services Incorporated ABN 95 159 348 533 of 32 McDonald Street, Morwell, Victoria, 3840 (Latrobe) Peter Hedge of c/- Hedge and Associates Pty Ltd, Level 7, 88 Pitt Street, Sydney, New South Wales, 2000,in his capacity as Administrator of Federation Health (Administrator) RECITALS 1. Federation Health is a registered organization for the purposes of the NH Act. It is a company limited by guarantee and registered in Victoria. 2. Latrobe is also a registered organization for the purposes of the NH Act. It is an association incorporated under the Associations Incorporation Act 1981 (Vic). 3. On 14 December 2004, the Administrator was appointed by the Private Health Insurance Administration Council (PHIAC) under s.82XD of the National Health Act 1953 (Cth) (the NH Act) to act as Administrator of Federation Health. 4. In the course of the administration and at the invitation of the Administrator, Latrobe submitted a merger proposal to the Administrator with respect to a merger with Federation Health (Merger Proposal). 5. The Administrator formed the view that a merger between Federation Health and Latrobe in the manner proposed in the Merger Proposal would be in the interests of the contributors to Federation Health. 6. On 2 March 2005, the Administrator recommended to PHIAC for the purposes of s.82XZC(8) of the NH Act that, subject to court approval, a scheme of arrangement be entered into which provides for the transfer to Latrobe of the health fund conducted by Federation Health. 7. Upon considering the Administrator's recommendation, PHIAC formed the view that the course of action proposed by the Administrator was in the best interests of the contributors of Federation Health and directed the Administrator to make an application to the Federal Court of Australia (Court) under s.82XZE(1) of the NH Act. 8. This deed sets out the terms on which, subject to the Court's approval, it is proposed that the transfer recited in paragraph F above should occur. OPERATIVE PROVISIONS 7. INTERPRETATION 7.1 Definitions The following definitions apply in this deed: Administration means the administration of Federation Health under s.82XD of the NH Act (including any extension of that administration under s.447A of the Corporations Act as applied by s.82XB of the NH Act). Announcement means a press release, announcement or other public statement. Authorisation means: (a) an authorisation, consent, declaration, exemption, notarisation, renewal, amendment, or waiver however it is described; and (b) in relation to anything that could be prohibited or restricted by law if a Government Agency acts in any way within a specified period - the expiry of that period without that action being taken. Balance Assets means the assets of Federation Health after: (a) payment or satisfaction of the Base Amount; and (b) the transfer to Latrobe of any assets of Federation Health agreed by the parties (whether agreed before or after the Effective Date); or as otherwise agreed by the parties. Base Amount means all assets of Federation Health as at 8.00am on the Effective Date, excluding the following: (a) Licences; (b) cash in the amount that the Administrator estimates is required to meet the liabilities of Federation Health contemplated in subclauses 13.2(a) to (d) of this deed; and (c) any other asset agreed by Latrobe and the Administrator prior to Court Approval. Business Day means a day that is not a Saturday, Sunday or public holiday in Victoria. Claim means any claim, notice, demand, action, proceeding, litigation, investigation or judgment whether based in contract, tort, or under statute or otherwise. Condition Precedent means a condition precedent in clause 3.1. Confidentiality Deed means any deed between Federation Health and Latrobe and any other agreement executed between the Scheme Parties concerning confidentiality of information disclosed for the purposes of Scheme discussions. Controller means, in relation to a person's property: (a) an administrator or administrator and manager of that property; or (b) anyone else who (whether or not as agent for the person) is in possession, or has control, of that property to enforce an encumbrance, and includes an administrator appointed pursuant to s.82XD of the NH Act. Corporations Act means the Corporations Act 2001 (Cth). Court means the Federal Court of Australia. Court Approval means the Court making orders the effect of which is to approve the Scheme. Court Approval Date means the latest of the dates on which each Court Approval is obtained. Effective Date means the last occurring of either: (a) 1 July 2005; or (b) 5 Business Days after the Court Approval Date or such further date as the parties may agree in writing. Federation Health Contributor means a contributor of Federation Health for the purposes of the NH Act. Federation Health Contributor Receivables means those receivables owed to Federation Health by the Transferring Contributors as at 8.00am on the Effective Date. Federation Health Fund means the superannuation fund nominated by Federation Health or the Administrator. Federation Health Material Adverse Change means one or more occurrences or matters individually or in aggregate that prevent Federation Health from performing its obligations under this deed (including payment or satisfaction of the Base Amount). Federation Health Premises means the locations from which Federation Health conducts its activities. Government Agency means: (a) a government or government department or other government body; (b) a governmental, semi-governmental or judicial person; or (c) a person (whether autonomous or not) who is charged with the administration of a law, and includes PHIAC. GST means: (a) the same as in the GST Law; and (b) any additional tax, penalty tax, fine, interest or other charge under a law for such a Tax. GST Law means the same as that phrase means in A New Tax System (Goods and Services Tax) Act 1999 (Cth). Intellectual Property includes all present and future rights conferred by statute, common law or equity (and all moral rights) in or in relation to business names, circuit layouts, computer software, confidential information, copyright, designs, domain names, formulas, inventions, know-how, patents, plant varieties, recipes, trademarks, and other results of intellectual activity in the industrial, commercial, scientific, literary or artistic field, the benefit of any application to register such a right and the benefit of any renewal or extension of such a right, including the information and documentation required for the continued service of Transferring Contributors by Latrobe after their transfer to Latrobe. IP means all that Intellectual Property owned by Federation Health and used by Federation Health with respect to its activities under the NH Act. Latrobe Material means such information regarding Latrobe as is required by the Administrator, the Court and under the NH Act to be included in the Scheme Booklet (if any). Latrobe Material Adverse Change means one or more occurrences or matters individually or in aggregate that: (a) have or could reasonably be expected to have a material adverse effect on the business, assets, financial condition, prospects or results of operations of Latrobe and its subsidiaries, taken as a whole; (b) result, or could reasonably be expected to result, in a diminution in the value of Latrobe's net assets which in aggregate exceeds $1,000,000; or (c) prevent Latrobe from performing its obligations under this deed, provided that no individual occurrence or matter that results, or could reasonably be expected to result, in a diminution in the value of Latrobe's net assets will be taken into account unless such occurrence or matter results, or could reasonably be expected to result in a diminution in the value of Latrobe's net assets of $50,000 or greater. Latrobe Prescribed Occurrence means any of the following: (a) Latrobe ceases to be a registered organisation for the purposes of the NH Act; (b) Latrobe or a subsidiary of Latrobe disposes, or agrees to dispose, of the whole, or a substantial part, of its business or property; (c) Latrobe or a subsidiary of Latrobe charges, or agrees to charge, the whole, or a substantial part, of its business or property; (d) Latrobe fails to comply with solvency standards or directions or capital adequacy standards or directions under the NH Act; (e) Latrobe or a subsidiary of Latrobe resolves to be wound up; (f) the appointment of a liquidator or provisional liquidator to Latrobe, or to a subsidiary of Latrobe; (g) a court makes an order for the winding up of Latrobe, or of a subsidiary of Latrobe; (h) an administrator of Latrobe, or of a subsidiary of Latrobe, is appointed under s.82XD of the NH Act; (i) Latrobe, or a subsidiary of Latrobe, executes a voluntary deed of arrangement; (j) An administrator, or an administrator and manager, is appointed in relation to the whole, or a substantial part, of the property of Latrobe, or to a subsidiary of Latrobe; (k) a member is called to pay an amount pursuant to the guarantee in Latrobe's constitution; or (l) a member fails to pay when due any amount payable by the member under Latrobe's constitution. Liabilities means all liabilities, losses, damages, outgoings, costs and expenses of whatever description. Licences means all licences (including licences with respect to IP) held by Federation Health with respect to its activities under the NH Act. Loss means any loss, liability, damage, cost (including legal costs on a full indemnity basis) or expense. Maryvale Private Hospital means the private hospital owned by Maryvale Private Hospital Pty Limited and located at McDonald Street, Morwell, Victoria, 3840. Maryvale Private Hospital Pty Limited means the private company (ABN 44 007 374 629) which is 50% owned by each of Federation Health and Latrobe and which owns and operates Maryvale Private Hospital. Medical Clinics means the medical clinics operated by Federation Health which are located at Moe, Yallourn South and Newborough. Outsourced Work means any work done under contract with Federation Health, including but not limited to, processing of accounts payable, payroll and marketing functions. Plant and Equipment means the plant and equipment including motor vehicles (wherever situated) of Federation Health as at 5.00pm on the Court Approval Date. Quit Date means 2.00pm on 31 December 2005 or such other date as agreed in accordance with clause 3.3. Realised Amount means the amount calculated under clause 13.2. Regulatory Approvals means such consents, approvals or other acts by a Regulatory Authority as are necessary or desirable to implement the Scheme, including: (a) approval by PHIAC pursuant to s.82XZD of the NH Act; (b) approval by the Court pursuant to s.82XZE of the NH Act; and (c) approval by the Court pursuant to s.447A of the Corporations Act as applied by s.82XB of the NH Act. Regulatory Authority includes: (d) a Government Agency; (e) any regulatory organisation established under statute; and (f) the Court. Relevant Date means, in relation to a Condition Precedent, the date specified in this deed for its fulfilment or, if no date is specified, the Court Approval Date. Scheme means the scheme of arrangement approved by PHIAC pursuant to s.82XZD of the NH Act and the Court pursuant to s.82XZE of the NH Act, as contemplated in clause 14 of this deed (including any restructure of the Scheme contemplated in clause 2.2). Scheme Booklet means information which may be required to be dispatched to Federation Health Contributors and includes the Scheme, an explanatory statement and, where Federation Health Contributor Approval is sought, relevant notices of meeting and proxy forms. Scheme Party means Federation Health, Latrobe or the Administrator as the context requires. Scheme Undertakings means the obligations of Latrobe pursuant to clause 7.2 of this deed. SGA Act means the Superannuation Guarantee (Administration) Act 1992 (Cth). SIS Act means the Superannuation Industry (Supervision) Act 1993 (Cth). Superannuation Commitment means every amount: (a) needed to satisfy any actual or contingent liability (including under the governing rules of a superannuation fund, a contract of employment, an industrial instrument such as an award or agreement, or any law) for any superannuation contribution; or (b) needed so that, on the date concerned, the employer is free of actual and contingent liability (making the assumption that the superannuation guarantee charge accrues from day to day during each contribution period) for the superannuation guarantee charge under the SGA Act for any contribution period under the SGA Act (or part period) up to that date. Takeover Proposal for Latrobe means: (a) any proposal for a takeover bid, change of membership, share purchase, scheme of arrangement, capital reconstruction, buy-back, merger, amalgamation, consolidation or other business combination involving Latrobe or any of its subsidiaries; or (b) any proposal which could result in a person having control of more than 20% of the voting power or board seats in Latrobe. Tax means a tax (for example, GST), levy, duty, charge, deduction or withholding, however it is described, that is imposed by law or by a Government Agency, together with any related interest, penalty, fine or other charge. Transferring Contributors means the Federation Health Contributors as at 5.00pm on the Court Approval Date. Transferring Employee Entitlements is as defined in clause 10.2. Transferring Employees means the employees of Federation Health who accept offers of employment from Latrobe pursuant to clause 10.1. 7.2 Rules for Interpreting this Deed (a) Headings are for convenience only, and do not affect interpretation. The following rules also apply in interpreting this deed, except where the context makes it clear that a rule is not intended to apply; (b) A reference to: (i) legislation (including subordinate legislation) is to that legislation as amended, re-enacted or replaced, and includes any subordinate legislation issued under it; (ii) a deed or agreement, or a provision of a deed or agreement, is to that deed, agreement or provision as amended, supplemented, replaced or novated; (iii) a party to this deed or to any other deed or agreement includes a permitted substitute or a permitted assign of that party; (iv) a person includes any type of entity or body of persons, whether or not it is incorporated or has a separate legal identity, and any executor, administrator or successor in law of the person; and (v) anything (including a right, obligation or concept) includes each part of it; (c) A singular word includes the plural, and vice versa; (d) A word which suggests one gender includes the other gender; (e) If a word is defined, another part of speech has a corresponding meaning; (f) A reference to "$" or "dollar" is to Australian currency; (g) If an example is given of anything (including a right, obligation or concept), such as by saying it includes something else, the example does not limit the scope of that thing; (h) The words and phrases subsidiary, holding company and related body corporate have the same meanings as in the Corporations Act; (i) If a word is defined in the Corporations Act, it has the same meaning in this deed, unless the context requires otherwise; and (j) A reference to time is to the time in Melbourne, Victoria. 7.3 Business Days If the day on or by which a person must do something under this deed is not a Business Day: (a) if the act involves a payment that is due on demand, the person must do it on or by the next Business Day; and (b) in any other case, the person must do it on or by the previous Business Day. 8. STEPS 8.1 Steps Subject to clause 2.2 and the other provisions of this deed, the Scheme Parties acknowledge and agree that the Scheme will be affected in accordance with clause 8. 8.2 Changes to Structure The Scheme Parties acknowledge that there may be a more appropriate manner in which part or all of the Scheme may take place and agree to act in good faith to negotiate to amend the Scheme in such circumstances, such negotiation and amendment being subject to any directions or resolutions of PHIAC and taking place prior to receipt of each Court Approval. 8.3 Obligations (a) Subject to receipt of PHIAC's Regulatory Approval, Federation Health will use its best endeavours to procure the Court Approvals in accordance with the terms of this deed or otherwise on terms acceptable to the Administrator and the Scheme Parties, acting reasonably; (b) Latrobe will take such steps to ensure its compliance with the Scheme Undertakings prior and consequent to the Effective Date (as appropriate); and (c) Latrobe will provide all assistance which the Administrator or Federation Health reasonably requires in connection with obtaining the Regulatory Approvals. 9. CONDITIONS PRECEDENT TO SCHEME 9.1 Conditions Precedent to Scheme The obligations of the Scheme Parties under clause 8 are subject to the fulfilment or waiver in accordance with this clause of each of the following Conditions Precedent: (a) prior to 8.00am on the Court Approval Date, no matter regarding Latrobe coming to the attention of the Administrator such that the Administrator in his absolute discretion forms the view that the Scheme is not in the best interests of Federation Health Contributors; (b) the Regulatory Approvals for the Scheme are obtained; (c) if required by the Administrator or the Court, Federation Health Contributor Approval is obtained; (d) from the date of this deed until 8.00am on the Court Approval Date, no Federation Health Material Adverse Change occurs; (e) from the date of this deed until 8.00am on the Court Approval Date, no Latrobe Material Adverse Change occurs; (f) from the date of this deed until 8.00am on the Court Approval Date, no Latrobe Prescribed Occurrence occurs; (g) from the date of this deed until 8.00am on the Court Approval Date, neither the Administrator nor PHIAC changes or withdraws its recommendation to implement the Scheme; (h) no Regulatory Authority order or decree which, as at 8.00am on the Court Approval Date, restrains or prohibits the implementation of the Scheme or any transaction contemplated by the Scheme or this deed; (i) representations and warranties given by Latrobe and set out in this deed being true and correct in all material respects, as at the date of this deed, and as at 8.00am on the Court Approval Date; (j) representations and warranties given by Federation Health and set out in this deed being true and correct in all material respects, as at the date of this deed, and as at 8.00am on the Court Approval Date; (k) prior to 8.00am on the Court Approval Date, no Takeover Proposal for Latrobe is made or announced; and (l) prior to 8.00am on the Court Approval Date, the Australian Competition and Consumer Commission has not indicated in writing to either of the Scheme Parties that it considers that the Scheme contravenes or may contravene s.50 of the Trade Practices Act 1974 (Cth) or that it intends to take any action to intervene in or oppose the Scheme. 9.2 Benefit of Conditions Precedent (a) The following Conditions Precedent are included for the benefit of the following Scheme Party or Scheme Parties: (i) the Conditions Precedent in subclauses 3.1(b), (g) and (h) for the benefit of each of Federation Health and Latrobe; (ii) the Conditions Precedent in subclauses 3.1(a), (e), (f), (i), (k), (l) and (m) for the benefit of Federation Health alone; (iii) the Conditions Precedent in subclauses 3.1(d) and (j), for the benefit of Latrobe alone; (iv) the Condition Precedent in subclause 3.1(c): (A) where the Court requires a meeting of Federation Health Contributors - is for the benefit of each of Federation Health and Latrobe; or (B) otherwise - is for the benefit of Federation Health alone; (b) Each of the Conditions Precedent in clause 3.1 will be deemed to be fulfilled on the Relevant Date unless the Scheme Party for whose benefit the relevant Condition Precedent has been included (or in the case of a Condition Precedent included for the benefit of both Scheme Parties, either the Administrator or Federation Health) gives notice to the other Scheme Party prior to the Relevant Date of the non-fulfilment of the Condition Precedent. The Administrator may give notice where the Condition Precedent is for the benefit of Federation Health; (c) If a Condition Precedent has been included for the benefit of one Scheme Party alone, that Scheme Party alone may, in its sole and absolute discretion, waive the breach or non-fulfilment of that Condition Precedent. The Administrator may waive the breach or non-fulfilment of any Condition Precedent for the benefit of Federation Health; (d) If a Condition Precedent has been included for the benefit of both Scheme Parties, the breach or non-fulfilment of that Condition Precedent may be waived only by the written consent of the Administrator and Latrobe; (e) Each Scheme Party must use its best endeavours to ensure that each of the Conditions Precedent is satisfied as soon as practicable after the date of this deed and that there is no occurrence which would prevent the Conditions Precedent being satisfied; and (f) Each Scheme Party must promptly notify the other of the fulfilment of a Condition Precedent and must keep the other informed of any material developments of which it becomes aware in relation to a Condition Precedent. 9.3 Failure to Satisfy Conditions Precedent by Specified Dates (a) If a Condition Precedent has not been fulfilled by the Relevant Date, or the Effective Date has not occurred by the Quit Date, the Administrator and Latrobe will consult in good faith to: (i) determine whether the Scheme may proceed on the basis set out in this deed or by way of alternative means or methods (as contemplated in clause 2.2); and (ii) extend the Relevant Date or the Quit Date as the case may be, subject to any directions or resolutions of PHIAC. (b) If the Administrator and Latrobe are unable to reach agreement under subclause 3.3(a) within 5 Business Days after the Relevant Date or the Quit Date (as the case may be) then, unless any unfulfilled Condition Precedent has been waived pursuant to subclause 3.2(c), either Scheme Party may terminate this deed without any liability to the other Scheme Party by reason of that termination apart from liability arising from an antecedent breach of this deed. 10. CONDUCT OF BUSINESS PRIOR TO SCHEME IMPLEMENTATION 10.1 Federation Health Business Between the time of signing this deed and the Effective Date, Federation Health will conduct its business in the ordinary and normal course of the Administration and except as required by this deed, will not, and will procure that its subsidiaries do not, without prior written consent of Latrobe (which shall not be unreasonably withheld): (a) enter into any joint venture, partnership or similar arrangement; (b) incur any debt or contingent liability in aggregate exceeding $500,000; or (c) incur any capital expenditure in respect of any single item which exceeds $20,000. 10.2 Latrobe Business Between the time of signing this deed and the Effective Date, Latrobe will conduct its business in the ordinary and normal course and except as required by this deed, will not, and will procure that its subsidiaries do not, without prior written consent of Federation Health and the Administrator (which shall not be unreasonably withheld): (a) enter into any joint venture, partnership or similar arrangement; (b) incur any debt or contingent liability in aggregate exceeding $500,000; (c) incur any capital expenditure in respect of any single item which exceeds $50,000; or (d) amend its constitution, except as consented to by the Administrator in order to give effect to the terms of this deed. 11. MUTUAL OBLIGATIONS Each Scheme Party must co-operate with the other Scheme Party, and provide all assistance, including the provision and collection of information, and attending any meetings, which the other Scheme Party reasonably requires in connection with the preparation of all documents, and obtaining all Regulatory Approvals, Court Approvals and other approvals, required in connection with the Scheme. 12. SPECIFIC FEDERATION HEALTH OBLIGATIONS Federation Health must: (a) prepare a Scheme Booklet, if required by the Administrator, PHIAC or by the Court; (b) consult with Latrobe about the form of the Scheme Booklet (if any) prepared pursuant to paragraph (a) and take into account any reasonable concerns raised by Latrobe; and (c) if required by an order of the Court, convene or procure the convening of a meeting or meetings (as appropriate) of the Federation Health Contributors. 13. SPECIFIC LATROBE OBLIGATIONS 13.1 General Obligations Latrobe must: (a) supply Latrobe Material to Federation Health for inclusion in the Scheme Booklet (if any) in reasonable time to allow Federation Health to prepare the Scheme Booklet in accordance with this deed; (b) provide any further or new information required prior to the Effective Date to ensure that the Latrobe Material in the Scheme Booklet is not misleading or deceptive and contains no material omissions; and (c) provide the Administrator with such assistance as the Administrator may reasonably request in relation to the seeking of PHIAC's approval under s.82XZD of the NH Act, and the application for Court approval under s.82XZE of the NH Act and under s.447A of the Corporations Act as applied by s.82XB of the NH Act. 13.2 Scheme Undertakings Latrobe undertakes to each of Federation Health, the Administrator and PHIAC that: (a) Regarding Federation Health Contributors (i) it will accept each Transferring Contributor on the Effective Date; (ii) premiums payable by and benefits offered to each Transferring Contributor under policies held as at the Effective Date will remain unchanged until 1 April 2006, unless such change is requested earlier by PHIAC for solvency or capital adequacy reasons; (iii) after 1 April 2006, and without limiting its capacity to seek an increase in the pricing of benefits presently offered by Federation Health, it will offer each Transferring Contributor who remains a contributor to the merged fund, a policy or policies on terms no less favourable than those offered by Federation Health; (iv) it will maintain, until 1 April 2006, the actual and proposed contribution rates in respect of Transferring Contributors as at the Effective Date; (v) each Transferring Contributor will be deemed to have a continuous period of membership with Latrobe which includes the continuous period for which the Transferring Contributor was a Federation Health Contributor prior to the Effective Date (including for the purposes of waiting periods); and (vi) it will maintain, for a minimum period of 12 months from the Effective Date, the service outlets and members webpage maintained by Federation Health as at the Effective Date. (b) Regarding Federation Health Employees/Operational Issues Offers will be made to all Federation Health employees no later than the date specified in clause 10.1(g) for their employment by Latrobe on terms no less favourable than their current employment terms, as contemplated by clauses 16 and 17. (c) Regarding Maryvale Private Hospital and Maryvale Private Hospital Pty Limited It will accept the transfer of the totality of Federation Health's shareholding in Maryvale Private Hospital Pty Limited. (d) Regarding the Medical Clinics It will ensure the continued operation, under the auspices of Maryvale Private Hospital, of the Medical Clinics until 31 March 2006. (e) Regarding Systems It will accept transfer of the Federation Health information technology and fund database to the Latrobe information technology and fund database such that the services to Federation Health Contributors are not adversely affected. 13.3 Acknowledgment of Reliance Latrobe acknowledges that Federation Health and the Administrator have executed this deed and agreed to take part in the transactions it contemplates and PHIAC has provided its Regulatory Approval in reliance upon the Scheme Undertakings and the representations and warranties that are made in this clause. 14. THE SCHEME 14.1 Scheme Steps Except where the Scheme is otherwise structured (as contemplated in clause 2.2) and approved by the Court, the Scheme shall be comprised of the following steps: (a) prior to the Effective Date, the offers to Transferring Employees shall be made as contemplated in clause 10; (b) upon the Effective Date: (i) the Transferring Contributors shall automatically become contributors of Latrobe with premiums and benefits remaining, unchanged until 1 April 2006; (ii) the Base Amount must be paid or satisfied by Federation Health to Latrobe as contemplated in clause 8.2; (iii) all liabilities of Federation Health to Transferring Contributors and Federation Health's liability for the Transferring Employee Entitlements are automatically transferred to Latrobe; (iv) Federation Health will automatically be released from the liabilities referred to in paragraph (iii) above; and (v) the Plant and Equipment as agreed shall be transferred to Latrobe; (c) on or after the Effective Date, the IP and Licences shall be transferred to Latrobe as contemplated by clause 18; (d) on or after the Effective Date, any assets or liabilities of Federation Health the subject of an agreement contemplated by clause 15 shall be transferred to Latrobe; and (e) on or after the Effective Date, the Balance Assets shall be realised and the Realised Amount remitted, in accordance with clause 19, and shall be otherwise comprised of and administered on the terms of this deed. 14.2 Payment of Base Amount The Base Amount may be paid or satisfied on the Effective Date by the transfer of non‑cash assets and/or cash to Latrobe. 15. TRANSFERS OF ASSETS AND LIABILITIES 15.1 Parties May Agree The Scheme Parties may agree the treatment of certain assets or liabilities of Federation Health as contemplated by the following: (a) transfers of assets or liabilities from Federation Health to Latrobe will be on the terms agreed by the Scheme Parties, including as to the time of transfer; (b) certain assets of Federation Health may be agreed to be excluded in determining the Base Amount, as contemplated in clause 15.2; (c) certain assets of Federation Health will be excluded in determining the Balance Assets and Realised Amount; (d) transfers of assets of Federation Health may include assignment or novation of contracts (including for outsourcing of operations, property leases and leases of plant and equipment); (e) The assets referred to in paragraph (a) above include, but are not limited to, the assets described in Schedule 1 to this deed; and (f) The liabilities referred to in paragraph (a) above include, but are not limited to, the liabilities described in Schedule 2 to this deed. 15.2 Effect on Base Amount Where agreed by the Scheme Parties, certain assets of Federation Health may be excluded in determining the Base Amount. Such exclusion must be agreed by the Scheme Parties prior to Court Approval. 15.3 Assets Necessary for Continued Operation Notwithstanding clauses 9.1 and 9.2, the Scheme Parties must: (a) pursuant to subclause 8.1(b)(iii) or clause 9.1, transfer those assets of Federation Health that are necessary for the continued operation of the business of Federation Health; and (b) only exclude assets under clause 9.2 if those assets are not necessary for the continued operation by Latrobe of the business of Federation Health. 15.4 Consideration The consideration for the transfer of the assets and business of Federation Health will be Latrobe's assumption of the liabilities of Federation Health as contemplated in this deed, including pursuant to clause 8.1(b)(iv). 15.5 No Warranties or Representations Latrobe acknowledges and agrees that Federation Health and the Administrator do not make any warranties or representations express or implied concerning any of the assets or liabilities of Federation Health (including the Plant and Equipment, the IP, the Federation Health Premises and the Licences), including concerning the following: (a) the quality, state of repair, maintenance, safety, serviceability or existence of any asset; (b) compliance with any requirements of applicable law or of any Government Agency, including the existence of any Authorisation; or (c) the financial return which may be obtained from their use or disposal. 15.6 Option to Purchase Subject to the NH Act and to any duties to which the Administrator is subject at law or in equity, the Administrator grants Latrobe a first right of refusal to purchase each of the Balance Assets at their respective values appearing in the most recent monthly PHIAC return lodged by Federation Health (or at any lower price he may determine to be appropriate)prior to the date of transfer of that asset, and otherwise the Administrator has absolute discretion as to the manner and conduct of the realisation of the Balance Assets. Such first right of refusal requires Latrobe to respond to the Administrator within 10 Business Days of the Administrator giving notice of intention to sell the particular asset. 16. EMPLOYEES 16.1 Offer of Employment Latrobe must offer each employee of Federation Health as at the date specified in clause 10.1(g) employment with Latrobe as follows: (a) The offer must be conditional on completion of the transfer to Latrobe of Transferring Contributors pursuant to the Scheme and on the employee being employed by Federation Health immediately prior to 8.00am on the Effective Date. The offer must be subject to no other condition; (b) The employment offered must commence at 8.00am on the Effective Date; (c) The offer must require the Transferring Employee to resign from employment with Federation Health if the Transferring Employee accepts employment with Latrobe; (d) The employment offered must be on at least the same terms as the Transferring Employee's employment by Federation Health as at the Effective Date; (e) The offer must provide for continuity for all purposes of employment and benefits (such as sick leave, rostered days off, annual leave, annual leave loading, long service leave, superannuation and benefits on termination) as if employment by Latrobe started on the date the Transferring Employee commenced employment with Federation Health (or with any predecessor of Federation Health); (f) The offer of employment must be in a form approved by the Administrator and Federation Health, which approval will not be unreasonably withheld or delayed; (g) Latrobe must make the offer within a reasonable time after lodgement of the first of the documents required in order to obtain Court Approval so that employees of Federation Health are afforded a reasonable opportunity to consider the offer of employment; and (h) Federation Health and Latrobe must each use reasonable endeavours to ensure that each employee accepts the offer. 16.2 Entitlements of Transferring Employees On the Effective Date, Federation Health must give Latrobe in writing details of all accrued entitlements as at the Effective Date of each Transferring Employee to sick leave, annual leave and long service leave together with a certificate from each Transferring Employee certifying that they agree with these written details (Transferring Employee Entitlements). 16.3 Latrobe responsible for Transferring Employees From the Effective Date Latrobe must: (a) treat each Transferring Employee as if the Transferring Employee had been continuously employed by Latrobe from the time of commencement of employment with Federation Health (or with any predecessor of Federation Health in any part of Federation Health's business); and (b) deal with all the entitlements of each Transferring Employee to sick leave, annual leave and long service leave as if each entitlement had been accrued by the Transferring Employee while in the employment of Latrobe. 16.4 Latrobe to Indemnify Federation Health in Respect of Transferring Employees Latrobe must indemnify Federation Health against, and pay Federation Health on demand the amount of, each Claim against Federation Health in respect of a Transferring Employee: (a) relating to the period after 8.00am on the Effective Date (including, for the avoidance of doubt, in respect of superannuation); or (b) arising out of a Transferring Employee's employment with Latrobe terminating for any reason. 17. SUPERANNUATION 17.1 Federation Health's Obligations at the Effective Date Federation Health must: (a) pay to Federation Health's Fund at the Effective Date an amount equal to any unpaid Superannuation Commitment of Federation Health in respect of the Transferring Employees (except for any amount payable to the Commissioner of Taxation under paragraph (b) below); and (b) pay to the Commissioner of Taxation on or before the Effective Date any amount which represents the liability of Federation Health at 8.00am on the Effective Date to the Commissioner under the SGA Act in relation to the Transferring Employees (except to the extent that amount represents penalties). 17.2 Substitution of Latrobe as the Employer Before the Effective Date, or within 5 Business Days of the Effective Date, Federation Health and Latrobe must execute all documents and do everything required by the governing rules of the Federation Health Fund or by law to substitute Latrobe as the employer of the Transferring Employees for the purposes of the Federation Health Fund, with effect from the Effective Date, or from such other date as Federation Health and Latrobe agree. 18. LICENCES 18.1 Transfer of Licences Except as otherwise agreed by Latrobe, Federation Health must use reasonable endeavours to assign or novate to Latrobe all of the Licences and obtain consents and approvals to such assignment or novation on or as soon as practicable after the Effective Date. Reasonable endeavours shall not require payment of money by Federation Health (or, for the avoidance of doubt, the Administrator) and Federation Health must be released by the licensor for any liability prior to the assignment or novation. If such assignments, novations, consents and approvals are not forthcoming, Latrobe acknowledges and agrees that it has no recourse to Federation Health or the Administrator for failure to obtain a consent, approval, assignment, novation or new equivalent arrangement. 18.2 Interim Period After the Effective Date, until such time as Latrobe obtains an assignment or novation of each Licence, or makes its own arrangements with each licensor and Federation Health is released, Latrobe must perform all of the obligations of Federation Health under each Licence. 18.3 Latrobe Indemnity Latrobe indemnifies each of Federation Health and the Administrator on a full indemnity basis against any Claims or Liabilities incurred by the Administrator or Federation Health arising from the Licences from the period commencing on the Effective Date. 18.4 No Warranty as to Transferability of Licences Latrobe acknowledges and agrees that the appointment of the Administrator may be a default under each Licence entitling the licensor to give notice of early termination of the Licences concerned. 19. REALISATION OF BALANCE ASSETS 19.1 Administrator to Realise Balance Assets Subject to clause 9.1, after the transfer to Latrobe of the Base Amount and the Federation Health Contributors as contemplated by clause 8, the Administrator will proceed to realise the Balance Assets. 19.2 Calculation of Realised Amount The Realised Amount shall be the amount which the Administrator realises for the Balance Assets, after undertaking or allowing for each of the following: (a) payment of all costs, expenses and fees incurred by Federation Health, the Administrator, the realisation of the Balance Assets and the Administration, including the Administrator's remuneration and legal costs and all Taxes; (b) satisfaction of all liabilities of Federation Health as determined in accordance with clause 13.4; (c) satisfaction of any net amounts owing to Federation Health by Latrobe after application of the provisions of paragraph 2 of Schedule 3; (d) payment of any amounts required to be paid by law; and (e) any distributions in specie to Latrobe. 19.3 Method of Realisation The parties acknowledge that: (a) subject to the NH Act and to any duties to which the Administrator is subject at law or in equity, the Administrator has absolute discretion as to the manner and conduct of the realisation of the Balance Assets; (b) the Administrator shall endeavour to complete the realisation of the Balance Assets as expeditiously as possible and without undue delay but otherwise has absolute discretion as to the timing of the realisation of the Balance Assets; (c) the Administrator may (in his absolute discretion), but is not obliged to, consult with Latrobe as to the manner and timing of the realisation of the Balance Assets; and (d) the operation of this deed is wholly subject to the NH Act and nothing in clause 19 or elsewhere in this deed shall be taken to restrict, diminish or alter the powers of the Administrator under the NH Act. 19.4 Procedures for Balance of Liabilities The procedures for the Administrator satisfying the outstanding liabilities of Federation Health are as set out in Schedule 4. 19.5 No Warranty as to Realised Amount Latrobe acknowledges and agrees that the Administrator, and Federation Health, do not undertake, warrant or represent: (a) the value of the Realised Amount; or (b) the time by which the realisation of the Balance Assets will be completed. 19.6 Payment of Realised Amount The Administrator will remit the Realised Amount to Latrobe and may remit the amount in one or more payments. The Realised Amount shall be remitted as soon as practicable after completion of realisation of the Balance Assets, subject to the Administrator retaining amounts in his absolute discretion for satisfaction of the liabilities of Federation Health including but not limited to amounts specified in clause 13.2 (such liabilities being actual, contingent or otherwise). Any balance of the Realised Amount outstanding after winding up of Federation Health and its deregistration under the Corporations Act will be remitted to Latrobe without delay. 19.7 Delay in Completion of Realisation In the event that the Administrator has not completed the realisation of the Balance Assets and the satisfaction of the liabilities of Federation Health in accordance with this clause within one month prior to expiry of the Administration: (a) The Administrator may apply to the Court to extend the Administration for a further period consented to by Latrobe and PHIAC. (b) If the consent of Latrobe and PHIAC is not provided or, if provided but further extension of the Administration is denied by the Court, the Administrator and Federation Health must, 5 Business Days prior to the expiry of the Administration, transfer and assign to Latrobe all remaining Balance Assets and unpaid liabilities (as determined under clause 13.4) of Federation Health less an amount necessary to meet the payments referred to in subclauses 13.2(a) and 13.2(d). 20. RELEASE OF ADMINISTRATOR 20.1 Not Personally Liable The Administrator is not personally liable under this deed. 20.2 Release and Indemnity Latrobe irrevocably: (a) releases and discharges the Administrator from and waives any Claim, however and whenever it arises, that it has (or, but for this clause, may have had) against the Administrator, arising from or in connection with any Loss Latrobe suffers, sustains or incurs arising from or in connection with this deed (including the warranties in clause 23) or the termination of this deed under clauses 3.3 or 16, other than a Claim in respect of gross negligence, wilful misconduct, fraud or dishonesty on the part of the Administrator; and (b) indemnifies the Administrator against any Claims, Losses or Liabilities incurred by the Administrator arising from or in connection with any action or omission by Federation Health under this deed (including the warranties in clause 17) or the termination of this deed under clauses 3.3 or 16, except to the extent that that Claim, Loss or Liability arises as a result of gross negligence, wilful misconduct, fraud or dishonesty on the part of the Administrator. 20.3 Acknowledgment in Relation to Administrator No provision of this deed entitles Latrobe to: (a) claim reimbursement in respect of, or require payment of, any outgoing or expense; or (b) claim or require anything whatever in relation to the performance or non-performance of a contract, or any other matter, arising occurring or relating to: (c) a time or period prior to the appointment of the Administrator; or (d) a contract entered into by Federation Health prior to the appointment of the Administrator which has not been adopted by the Administrator. 21. PUBLIC STATEMENTS (a) Each Scheme Party must not make an Announcement relating to the subject matter of this deed unless the Announcement: (i) has the prior approval of the other Scheme Party; or (ii) is required to be made by law, PHIAC or the NH Act; and (b) If a Scheme Party is required to make an Announcement pursuant to paragraph (a), it must give to the other Scheme Party: (i) such notice as is reasonable in the circumstances of its intention to make the Announcement; and (ii) a draft of the Announcement and an opportunity, which is reasonable in the circumstances, to comment on the contents of the draft Announcement. 22. TERMINATION (a) A Scheme Party may terminate this deed by giving notice in writing to the other Scheme Party: (i) prior to the Effective Date, if Federation Health or the Administrator is in material breach of this deed, Latrobe may terminate or if Latrobe is in material breach of this deed the Administrator or Federation Health may terminate; (ii) if the Effective Date has not occurred by the Quit Date; (iii) subject to clause 2.2, if the terms of the Regulatory Approvals differ in any material respect from the terms of the proposed Scheme set out in this deed; or (iv) the Effective Date has not occurred by 31 December 2005; (b) If a Scheme Party terminates this deed, all obligations of the Scheme Parties under this deed, other than this clause and clauses 7, 26, 27, 28, 29 and 30 shall immediately cease to be of further force or effect, but nothing in this clause releases any Scheme Party from any antecedent breach of this deed. 23. REPRESENTATIONS AND WARRANTIES 23.1 Mutual Representations and Warranties Each Scheme Party represents and warrants to the other that (subject to obtaining any relevant Regulatory Approvals): (a) (powers) it has full legal capacity and power: (i) to own its own property and assets and to carry on its business; and (ii) to enter into this deed and to carry out the transactions that it contemplates; (b) (Authorisations) it holds each Authorisation that is necessary or desirable to: (i) enable it to properly execute this deed and to carry out the transactions that it contemplates; (ii) ensure that this deed is legal, valid, binding and admissible in evidence; or (iii) enable it to properly carry on its business, and it is complying with any conditions to which any of those Authorisations is subject; (c) (agreement effective)this deed constitutes its legal, valid and binding obligations, enforceable against it in accordance with its terms, subject to any necessary stamping; (d) (no contravention) neither its execution of this deed nor the carrying out by it of the transactions that the deed contemplates, does or will: (i) contravene any law to which it or any of its property is subject or any order of any Government Agency that is binding on it or any of its properties; (ii) contravene any Authorisation; (iii) contravene any undertaking or instrument binding on it or any of its property; or (iv) except in respect of any contraventions effected by the provisions of the NH Act, contravene its constitution; (e) (no trust) it is not entering into this deed as trustee of any trust or settlement. 23.2 Federation Health Representations and Warranties Federation Health represents and warrants to Latrobe that upon receipt of the Regulatory Approvals, it will be duly authorised to effect the Scheme. 23.3 Latrobe Representations and Warranties Latrobe represents and warrants to each of the other Scheme Parties and to PHIAC that: (a) (no Controller) no Controller is currently appointed in relation to any of its property; (b) (accounts) the statements in relation to the financial position and financial performance of Latrobe provided in Latrobe's proposal to the Administrator dated February 2005 are true and correct and present a true and fair view of the assets and liabilities, profits and losses and financial position of Latrobe as at the date of the proposal and are not misleading or deceptive. Since the date of the proposal there has been no adverse change in the financial position or the profitability of Latrobe; (c) (information) to the best of Latrobe's knowledge all information concerning Latrobe which Latrobe or any of its representatives has furnished to Federation Health or the Administrator (including to their respective representatives) and the Latrobe Material is true and correct and is not misleading or deceptive and Latrobe has not withheld from Federation Health, the Administrator, PHIAC or the Court any information concerning Latrobe which might reasonably be supposed to be material to that Scheme Party in considering or proposing such an arrangement with Latrobe, in determining whether or not to enter into the Scheme or the terms on which a Scheme Party would be prepared to enter into the Scheme; (d) (Latrobe Material) the Latrobe Material is all the information required by Federation Health, the Administrator, PHIAC, the Court and the Federation Health Contributors in respect of Latrobe in relation to the Scheme; and (e) (merger proposal) the merger proposal has been undertaken by Latrobe to Federation Health, the Administrator and to PHIAC in the form disclosed to the Administrator prior to entry into this deed. 23.4 Reliance Each Scheme Party acknowledges that the other Scheme Parties have executed this deed and agreed to take part in the transactions that it contemplates in reliance on the representations and warranties that are made in this clause. 24. INDEMNITIES 24.1 Indemnity for General Obligations Latrobe indemnifies each of the Administrator, Federation Health and PHIAC on a full indemnity basis against any Claims or Liabilities incurred by that Scheme Party because of: (a) a breach by Latrobe of its obligations under this deed or in respect of the transactions contemplated by this deed; and (b) any failure to satisfy a liability of Federation Health transferred by this deed. 24.2 Indemnity for Surplus Assets Latrobe indemnifies each of the Administrator and Federation Health on a full indemnity basis against any Claims or Liabilities (including, for the avoidance of doubt, liabilities of Federation Health to be dealt with under clauses 13.2 and 13.4) incurred by or otherwise remaining outstanding to that Scheme Party because of payment or satisfaction of the Base Amount. This indemnity is limited in the amount indemnified to the value of the difference between the Base Amount and the liabilities transferred to Latrobe under subclause 8.1(b)(iv). 25. OPERATIONAL ISSUES The Scheme Parties agree that the provisions of Schedule 3 shall apply in relation to certain operational issues during the Administration (or as otherwise expressly set out) and will apply both prior to and after the Effective Date, including: (a) access to information of Latrobe and Federation Health; (b) access to premises of Latrobe and Federation Health Premises; (c) collection of Federation Health Contributor Receivables; (d) insurance of Balance Assets; and (e) debtors and creditors before and after 8.00am on the Effective Date. 26. COSTS AND STAMP DUTY 26.1 Stamp Duty (a) Federation Health will approach the Commissioner of Revenue to seek an exemption from, or reduction in, any stamp duty payable in respect of this deed and any other instrument or transaction contemplated in, or necessary to give effect to, this deed. (b) If stamp duty is payable on this deed, or any instrument or transaction contemplated in or necessary to give effect to this deed, Federation Health will bear the cost of and be responsible for that stamp duty. 26.2 Other Costs Each Scheme Party shall bear and be responsible for its own legal, accounting and advisory costs and expenses in connection with the negotiation, preparation, completion and carrying into effect of this deed and any instrument or transaction contemplated in or necessary to give effect to this deed. 27. GST 27.1 Definitions Words defined in the GST Law have the same meaning in this clause. 27.2 Supply of a Going Concern (a) Federation Health and Latrobe agree that the supply of the assets and business of Federation Health pursuant to the Scheme is a supply of a going concern; and (b) Latrobe represents and warrants to Federation Health and the Administrator that Latrobe is registered for GST and its Australian Business Number is as stated above. 27.3 Federation Health Responsible for GST Subject to clause 21.4, the consideration for any supply by Federation Health or the Administrator to Latrobe under or in connection with the Scheme includes any GST payable on that supply, and Federation Health (and not Latrobe or the Administrator) is responsible for payment of that GST. 27.4 Claims and Indemnities (a) If a payment to satisfy a Claim or a right to Claim under or in connection with this deed gives rise to a liability to pay GST, the payer must pay, and indemnify the payee against the amount of that GST; (b) If a Scheme Party has a Claim under or in connection with this deed for a cost on which that Scheme Party must pay GST, the Claim is for the cost plus all GST (except any GST for which that Scheme Party is entitled to an input tax credit); and (c) If a Scheme Party has a Claim under or in connection with this deed whose amount depends on actual or estimated revenue or which is for a loss of revenue, revenue must be calculated without including any amount received or receivable as reimbursement for GST (whether that amount is separate or included as part of a larger amount). 28. AMENDMENT AND ASSIGNMENT 28.1 Amendment This deed can only be amended, supplemented, replaced or novated by another agreement signed by the Scheme Parties. 28.2 Assignment A Scheme Party may only dispose of, declare a trust over, or otherwise create an interest in its rights under this deed with the consent of the other Scheme Parties. 29. NOTICES 29.1 How to Give a Notice A notice, consent or other communication under this deed is only effective if it is: (a) in writing, signed by or on behalf of the Scheme Party giving it; (b) addressed to the Scheme Party or other person to whom it is to be given; and either: (c) delivered or sent by pre-paid mail to that Scheme Party's or other person's address; or (d) sent by fax to that Scheme Party's or other person's fax number and the machine from which it is sent produces a report that states that it was sent in full. 29.2 When a Notice is Given A notice, consent or other communication that complies with this clause is regarded as given and received: (a) if it is delivered or sent by fax: (i) by 5.00pm (local time in the place of receipt) on a Business Day - on that day; or (ii) after 5.00pm (local time in the place of receipt) on a Business Day, or on a day that is not a Business Day - on the next Business Day; and (b) if it is sent by mail: (iii) within Australia - 3 Business Days after posting; or (iv) to or from a place outside Australia - 7 Business Days after posting. 29.3 Address for Notices A Scheme Party's address and fax number are those set out below, or as the Scheme Party otherwise notifies the sender: Administrator and Federation Health Address: Hedge and Associates Pty Ltd, Level 7, 88 Pitt Street, Sydney, New South Wales, 2000, Fax number: (02) 9412 2025 Attention: Mr Peter Hedge Latrobe Address: 32 McDonald Street, Morwell, Victoria, 3840 Fax number: (03) 5128 9289 Attention: Mr Bruce Beatson, Chief Executive 30. GENERAL 30.1 Governing Law (a) This deed is governed by the law in force in Victoria. (b) Each Scheme Party submits to the non-exclusive jurisdiction of the courts exercising jurisdiction in Victoria and any court that may hear appeals from any of those courts, for any proceedings in connection with this deed, and waives any right it might have to claim that those courts are an inconvenient forum. 30.2 Giving Effect to this Deed Each Scheme Party must do anything (including execute any deed) and must ensure that its employees and agents do anything (including execute any deed) that the other Scheme Party may reasonably require to give full effect to this deed. 30.3 Waiver of Rights A right may only be waived in writing, signed by the Scheme Party giving the waiver, and: (a) no other conduct of a Scheme Party (including a failure to exercise, or delay in exercising, the right) operates as a waiver of the right or otherwise prevents the exercise of the right; (b) a waiver of a right on one or more occasions does not operate as a waiver of that right if it arises again; and (c) the exercise of a right does not prevent any further exercise of that right or of any other right. 30.4 Operation of this Deed (a) This deed, any Confidentiality Deed and the merger proposal contain the entire agreement between the Scheme Parties about its subject matter, except as contemplated in this deed. Any previous understanding, agreement, representation or warranty relating to that subject matter is replaced by this deed and the Confidentiality Deed and has no further effect. (b) Any right that a Scheme Party may have under this deed is in addition to, and does not replace or limit, any other right that the Scheme Party may have. (c) Any provision of this deed which is unenforceable or partly unenforceable is, where possible, to be severed to the extent necessary to make this deed enforceable, unless this would materially change the intended effect of this deed. 30.5 Operation of Indemnities (a) Each indemnity in this deed survives the expiry or termination of this deed. (b) A Scheme Party may recover a payment under an indemnity in this deed before it makes the payment. 30.6 Consents Where this deed contemplates that a Scheme Party may agree or consent to something (however it is described), the Scheme Party may: (a) agree or consent, or not agree or consent, in its absolute discretion; and (b) agree or consent subject to conditions, unless this deed expressly contemplates otherwise. 30.7 No Merger Clauses 7, 26, 27, 28 and 29 of this deed do not merge on the Scheme being affected. 30.8 Inconsistency with Other Deeds If this deed is inconsistent with any other deed or agreement between the Scheme Parties, this deed prevails to the extent of the inconsistency. 30.9 Counterparts This deed may be executed in counterparts. 30.10 Attorneys Each person who executes this deed on behalf of a Scheme Party under a power of attorney declares that he or she is not aware of any fact or circumstance that might affect his or her authority to do so under that power of attorney. 30.11 Obligations for the benefit of PHIAC (a) The Scheme Parties acknowledge that PHIAC may enforce obligations set out in this deed which are expressed to be for its benefit, including any rights to indemnities; and (b) In addition to its rights under paragraph (a) above, PHIAC may enforce any obligations, (including representations or warranties) of Latrobe to any Scheme Party or respond to any breach of such obligations by proper exercise of its powers under the NH Act and such obligations are deemed to be obligations owed to PHIAC for this purpose. SCHEDULE 1 FEDERATION HEALTH ASSETS The assets of Federation Health to be transferred to Latrobe in accordance with clause 9.1 include, but are not limited to: (a) Land and Buildings: (i) 46 to 48 Albert Street, Moe, Victoria, 3825; (ii) 38 George Street, Moe, Victoria, 3825; (iii) 34 to 36 Darlimurla Avenue, Newborough, Victoria, 3825; and (iv) Reserve Road, Yallourn North, Victoria, 3825. (b) Plant and Equipment, furniture and fittings as detailed in an asset register to be provided to Latrobe by Federation Health prior to the Effective Date. (c) Cash investments held in agreed and identified accounts, net of repayment of secured bank loans and an agreed amount to be retained by the Administrator to facilitate the Administration and winding-up of Federation Health and to meet any member guarantee or other liability. (d) Agreed and identified managed investments and direct equity investments. (e) 50 percent shareholding in Maryvale Private Hospital Pty Limited. (f) All receivables owing to Federation Health including debtors, contributions in arrears, health insurance rebates receivable, accrued accounts and any GST receivable or owing. (g) The benefits of the health program grant from the Commonwealth Department of Health and Ageing in respect of the Medical Clinics, to the extent that that grant can be transferred. (h) The rights and Licenses to use the name and brand Federation Health together with existing Federation Health documents and marketing collateral as agreed as between the Scheme Parties. SCHEDULE 2 FEDERATION HEALTH LIABILITIES The liabilities of Federation Health to be transferred to Latrobe in accordance with clause 9.1 include, but are not limited to: (a) All agreed current payables including trade creditors, sundry creditors, accrued accounts, health insurance subscriptions in advance, and any other current payable relating to the operation of the business by Federation Health. (b) All agreed and identified current and non-current employee provisions relating to both annual and long-service leave. (c) All agreed unpresented and outstanding contribution claims on Federation Health. (d) All agreed and identified amounts owing to the reinsurance trustees by Federation Health as at the Effective Date. (e) The obligations under the health program grant from the Commonwealth Department of Health and Ageing in respect of the Medical Clinics, to the extent that that grant can be transferred. SCHEDULE 3 OPERATIONAL ISSUES The provisions of this Schedule apply to the period before and after the Effective Date for the purposes of the Administration and the proposed Scheme, unless otherwise agreed by Latrobe and the Administrator. 1. ACCESS TO INFORMATION AND PREMISES, INCLUDING FOR REALISATION OF BALANCE ASSETS 1.1.1 Availability of Information Latrobe will promptly make available all information reasonably requested by Federation Health or the Administrator in relation to Latrobe and each of its subsidiaries for the purposes of the Scheme. 1.1.2 Access to Officers Prior to the Effective Date, Latrobe will grant any reasonable request by Federation Health or the Administrator to interview any of Latrobe's personnel, directors, executive officers, external auditor or advisers for the purposes of the Scheme. 1.1.3 Access to Records of Federation Health After the Effective Date Subject to any applicable law, Latrobe must, for 7 years from the Effective Date, keep on behalf of Federation Health and the Administrator any original records of Federation Health which Federation Health has handed over to Latrobe or left upon the Federation Health Premises which are documents required by law to be retained in respect of Federation Health, and must: return any original documents of Federation Health promptly on demand by Federation Health or the Administrator (but Latrobe may retain a copy of any documents so returned); give Federation Health and the Administrator reasonable access to, and free copies of, any of those documents or any other original or copied documents of Federation Health; give Federation Health and the Administrator the use of any computer facilities included in the assets or other equipment needed to access any of those documents that are computerised; and do all that is needed on its part to ensure that Federation Health and the Administrator have information needed by them to comply with the reporting requirements of the Corporations Act, taxation law and any other statutory requirement or requirement of a Government Agency. 1.1.4 Access to Federation Health Premises Federation Health and the Administrator will be given reasonable access to the Federation Health Premises occupied or owned by Latrobe after the Effective Date upon reasonable notice for the purposes of the Administration and implementation of the Scheme, including by permitting Federation Health, the Administrator and their respective agents, employees, contractors and carriers, and any owners or prospective purchaser of the Balance Assets, access to the Federation Health Premises in relation to the Balance Assets at all reasonable times. 1.5 Realisation of Balance Assets After the Effective Date, so Federation Health and the Administrator can take any action each sees fit for realisation of the Balance Assets (including collection of the Federation Health Contributor Receivables), Latrobe must: (a) permit Federation Health and the Administrator full and free access to the records of Latrobe and its accounts systems; (b) at all times make its staff available to assist with that access; and (c) make available to Federation Health and the Administrator any staff whose knowledge or services Federation Health or the Administrator reasonably requires in connection with any proceedings in any court relating to the Balance Assets (including collection of any Federation Health Contributor Receivable). 1.6 Insurances Latrobe must not perform or permit any act or omission which may void or limit any insurance effected by Federation Health or the Administrator in respect of the Balance Assets (including the Federation Health Premises). 1.2 DEBTORS AND CREDITORS 1.2.1 Creditors for Which Federation Health is Responsible Federation Health is solely responsible for every debt or liability in respect of the business of Federation Health incurred before 8.00am on the Effective Date, except for: any debt or liability incurred by, or transferred to, Latrobe under this deed; any debt or liability in respect of which Latrobe must indemnify Federation Health or the Administrator under this deed; and any debt or liability which is an outgoing or expense in connection with the Federation Health business incurred after 8.00am on the Effective Date - to the extent that Latrobe has assumed liability for that debt or liability under this deed. 2.2 Creditors for Which Latrobe is Responsible Latrobe is solely responsible for, and must indemnify Federation Health and the Administrator against, any Claim or Liabilities in relation to any of the following: any debt or liability in respect of the Federation Health business as undertaken by Latrobe and incurred after 8.00am on the Effective Date (except any incurred by Federation Health); and any debt or liability incurred by Latrobe before 8.00am on the Effective Date. 2.3 Method of collection To the extent that the Federation Health Contributor Receivables are not transferred as part of the Base Amount, Latrobe must apply to payment of a Federation Health Contributor Receivable any amount received from any Transferring Contributor for a Federation Health Contributor Receivable until the full amount of that Transferring Contributor's Federation Health Contributor Receivable has been paid to Federation Health. Latrobe shall not be obliged to pay such amounts to Federation Health upon receipt but must, on the request of Federation Health or the Administrator from time to time, account to Federation Health and pay such amounts received and provide all supporting information reasonably requested in respect of such payment. SCHEDULE 4 PROCEDURES FOR BALANCE OF LIABILITIES 1. INTERPRETATION 1.2.2 Definitions In this Schedule, unless the context otherwise requires: Admitted Claim means a Claim that is admitted by the Administrator in accordance with paragraph 2 of this Schedule. Admitted Creditor means any Creditor who has an Admitted Claim. Admitted List means the list of Admitted Claims created by the Administrator in accordance with paragraph 0 of this Schedule. Asserted Claim means a claim asserted by any person to be a Claim and notified to the Administrator in accordance with this Schedule. Claim means a debt owing (whether now, in the future or contingent) by, or a claim (whether present, future or contingent) subsisting against or alleged to be subsisting against, Federation Health irrespective of whether the debt or claim arose by virtue of contract, at law, in equity or otherwise and including (without limitation) a claim sounding only in damages and a debt or a claim arising under any guarantee. Creditor means a person having a Claim against Federation Health. 2. ADMITTED LIST OF CLAIMS 1.2.3 Admitted List The Administrator must create and amend the Admitted List in the manner provided by this Schedule. 30.12 2.2 Advertising and Notice of Claims The Administrator must, within 1 month of the Effective Date: place an advertisement substantially in the form of that set out in Schedule 5 once in a newspaper or newspapers circulating generally in each State and Territory of Australia in which Federation Health conducts business; and send to each known Creditor at their last address a notice substantially in the form of that set out in Schedule 5, requiring each Creditor asserting a Claim to notify the Administrator in writing, within 28 days of the date of the advertisement, of the Asserted Claim. 2.3 Evidence of Claims Each Creditor who notifies an Asserted Claim to the Administrator must: (a) provide the Administrator with any further proof, evidence or information in support of its Asserted Claim as the Administrator may reasonably require; and (b) if so required by the Administrator, prove its Asserted Claim by delivering to the Administrator a statutory declaration verifying the Asserted Claim which statutory declaration must be in the form required by the Administrator. 2.4 Notice not required Despite paragraph 2.2 of this Schedule, the Administrator need not send a notice under subparagraph 2.2(b) to any Creditor who has already submitted a proof of his Claim. 2.5 Costs and Expenses Any costs and expenses incurred by a Creditor in complying with paragraphs 2.2 and 2.3 must be borne by that Creditor and will not form part of the Creditor's Asserted Claim. 2.6 Determination by Administrator The Administrator must as soon as practicable determine whether all or part of an Asserted Claim should be entered on the Admitted List. If: (a) the Administrator is satisfied that all or part of the Asserted Claim is a Claim, then the Administrator must inform the Creditor of that fact and must enter all or part of the Asserted Claim as the case may require on the Admitted List; or (b) the Administrator is satisfied that all or part of the Asserted Claim is not a Claim, then the Administrator must notify the person in accordance with paragraph 2.9. 2.7 Partial Admission of Claims If the Administrator enters only part of a Claim on the Admitted List, the Administrator must notify the Creditor in accordance with paragraph 2.9. 2.8 Correction of Errors If the Administrator considers that all or any part of an Admitted Claim has been incorrectly entered on the Admitted List then the Administrator must notify the relevant Admitted Creditor in accordance with paragraph 2.9. 2.9 Administrator's Notices Under this Paragraph Any notice by the Administrator under this paragraph must: (a) be in writing; (b) include an explanation of the Administrator's decision as reflected in the notice; (c) inform the recipient of its rights under paragraph 2.10. 2.10 Declaration of Court A Creditor who receives notice from the Administrator under paragraph 2.9 may, within 21 days of the date of the notice or any further time the Court allows, in a court of competent jurisdiction: (a) if s.1321 of the Corporations Act applies to the Scheme, appeal against the Administrator's decision under that section as applied; or (b) commence a proceeding disputing the Administrator's decision. Unless the Creditor commences a proceeding under this paragraph within that 21 day period, or any further period the Court allows, the Administrator's decision is final. 2.11 Entry on Admitted List after Court Order or Correction The Administrator must, on or after the later of: (a) the 21st day after the date of a notice served in accordance with paragraph 2.9; or (b) the date of the order of the court in a proceeding commenced under paragraph 2.10, enter a Claim on, or amend the Admitted List, as appropriate, in accordance with the notice or any order of the Court, as the case may require. 2.12 Payment after Court Order or Correction If, at the time of any entry on or amendment to the Admitted List under paragraph 2.11, any payment has been made to Admitted Creditors, the following provisions will apply: (a) if the effect of that entry or amendment is to extinguish the amount of a Creditor's Admitted Claim, that Creditor must at once repay to the Administrator, as a debt due to Federation Health, the total amount paid in respect of the Admitted Claim; (b) if the effect of that entry or amendment is to reduce the amount of a Creditor's Admitted Claim, that Creditor must at once repay to the Administrator, as a debt due to Federation Health, the amount paid that exceeds the amount the Creditor would have been entitled to receive if that Creditor's Claim had been originally admitted for the reduced amount; (c) if the effect of that entry or amendment is to cause a Creditor to become an Admitted Creditor, the Creditor is entitled to be paid, out of the balance of the proceeds of realisation of the Balance Assets, the payment that the Creditor would have been entitled to receive if the Creditor's Claim had been originally admitted; and (d) if the effect of that entry or amendment is to increase a Creditor's Admitted Claim, the Creditor is entitled to be paid, out of out of the balance of the proceeds of realisation of the Balance Assets, any additional payment the Creditor would have been entitled to receive if all of the Creditor's Claim had been originally admitted. In respect of subparagraphs (c) and (d) the Creditor is not entitled to disturb any payments to Admitted Creditors made before the relevant entry or amendment to the Admitted List is made by the Administrator. 2.13 Application of Corporations Regulations Regulations 5.6.40 to 5.6.47 and 5.6.49 of the Corporations Regulations will, except where inconsistent with the express terms of the Scheme, apply to the Scheme as if the references to the liquidator were references to the Administrator, references to winding up were references to the Scheme and with such other modifications as are necessary to give effect to the Scheme. 2.14 Application of Corporations Act provisions Subdivisions A, B, C and E of Division 6 of Part 5.6 of the Corporations Act apply to Claims made under the Scheme as if the references to the liquidator were references to the Administrator, references to winding up were references to the Scheme, and with such other modifications as are necessary to give effect to the Scheme. 2.15 No Entitlement to Interest Interest will not accrue, and will not be payable, in respect of any of the Admitted Claims. 1.3 PAYMENT OF ADMITTED CLAIMS The Administrator shall apply the proceeds of realisation of the Balance Assets in payment of the Admitted Claims. 4. CLAIMS EXTINGUISHED If a Creditor fails to notify the Administrator of any Asserted Claim within the 28 day period prescribed in paragraph 2.2 and otherwise in accordance with the terms of this Schedule, that Asserted Claim is forever extinguished and is precluded from being admitted by the Administrator as an Admitted Claim. 5. BAR TO CREDITORS' CLAIMS This Scheme may be pleaded by Federation Health against any Creditor in bar of any Claim that has, by reason of the operation of paragraph 4 of this Schedule, been extinguished. SCHEDULE 5 NOTICE TO SUBMIT PARTICULARS OF DEBT OR CLAIM FEDERATION HEALTH PTY LIMITED (ADMINISTRATOR APPOINTED) (ABN 47 004 155 622) (Federation Health) TAKE NOTICE that on [insert date], the Federal Court of Australia made orders under s.82XZE of the National Health Act 1953 (Cth) giving effect to the Scheme of Arrangement Deed executed by Federation Health, Latrobe Health Services Incorporated and Peter Hedge in his capacity as Administrator of Federation Health on [insert date] (the deed). Creditors of Federation Health are required, within 28 days of the date of publication of this notice, to submit particulars of their debts or claims, and of any security held by them, to me at the address shown below and, if subsequently required by notice in writing from me, must: (a) provide me with any further proof, evidence or information in support of the asserted debts or claims; and (b) prove the debts or claims by delivering to me a statutory declaration, in a form approved by me, verifying the asserted debts or claims. Any creditor of Federation Health that fails to comply with this notice within the 28 day period, or any further period a court allows, will be precluded from having its debts or claims determined (and, if appropriate, admitted) by the Administrator under the deed and the debts or claims will be forever extinguished. A copy of the deed and the form of proof, including the form of statutory declaration, may be obtained from me. Dated this day of 2005. ................................................................................................ Administrator Peter Hedge Level 7 88 Pitt Street SYDNEY NSW 2000 Telephone: (02) 9412 1879 Facsimile: (02) 9412 2025 EXECUTED asa deed. EXECUTED by Federation Health Limited (Administrator Appointed) by the Administrator in the presence of: Signature of witness Signature of Administrator Name Name THE COMMON SEAL of Latrobe Health Services Incorporated, the fixing of which was witnessed by: Signature of Board Member Signature of Board Member Name Name SIGNED, SEALED and DELIVERED bythe Administratorin the presence of: Signature of Administrator Signature of witness Name IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY ACD15 OF 2005 PETER HEDGE in his capacity as Administrator of Federation Health Ltd (Administrator Appointed) APPLICANT JUDGE: EMMETT J DATE: 23 JUNE 2005 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The applicant ('the Administrator') is the administrator of Federation Health Limited ('Federation'). The Administrator applied to the Court for orders under s 82XZE of the National Health Act 1953 (Cth) ('the Act') to give effect to the implementation of a scheme of arrangement concerning the business of Federation. On 23 June 2005, I made orders pursuant to s 82XZE. These are my reasons for doing so. 2 Federation is a company limited by guarantee. It conducts a health insurance business (as that term is defined in s 67(4) of the Act) in the Gippsland region in Victoria and its head office is located at Moe. It is a registered health benefits organisation under Part VI of the Act. On 14 December 2004, the Private Health Insurance Administration Council, established by s 82B of the Act ('the Council'), appointed the Administrator as administrator of Federation, pursuant to s 82XD of the Act. Section 82XD provides that 'Subject to sections 82XE and 82XF, the Council may, by written instrument, appoint a person as the administrator: (a) of the fund conducted by a registered organization; or (b) of a registered organization; with effect from a date specified in the instrument of appointment.' 3 Under s 82XZC(1) of the Act, as soon as practicable, but not more than three months after being appointed as administrator of a registered organisation, an administrator must conclude his examination of the business affairs and property of the organisation and make a final written report to the Council. Under s 82XZC(7), in the events that have happened, the Administrator was required, in his report to the Council, to recommend a course of action listed in s 82XZC(8) that, in his opinion, is, in the circumstances, in the best interest of contributors to Federation. The courses of action that an administrator may recommend that include that the registered organisation implement a scheme of arrangement concerning the business of the organisation. Such a scheme may, under s 82XZC(9), provide for the transfer to another registered organisation of the fund conducted by the organisation under administration. 4 Under s 82XZD(4)(b)(i) if, having regard to an administrator's report, the Council is satisfied that a course of action recommended under s 82XZC(7) will, in the circumstances, be in the best interests of the contributors to the Fund, the Council must inform the administrator to that effect and, relevantly, direct the administrator to make an application in accordance with s 82XZE(1) to give effect to the course of action. Under s 82XZE(1), if the Council informs an administrator that it is satisfied that a course of action is, in the circumstances, in the best interests of contributors to the fund concerned, that administrator must apply to the Federal Court of Australia for an order or orders to give effect to the course of action. 5 Under s 82XZE(2), on an application for such an order or orders, the Court may make such order or orders in respect of the course of action that is the subject of the application as it considers to be, in all the circumstances, in the interests of persons who are contributors to the fund concerned. An order under s 82XZE is binding on all persons and takes effect despite anything in the constitution or other rules of the registered organisation concerned. 6 On 2 March 2005, the Administrator provided the Council with a copy of his final report pursuant to s 82XZC of the Act. In the report, the Administrator recommended that the health insurance business conducted by Federation be merged with the health insurance business conducted by Latrobe Health Services Incorporated ('Latrobe'). The Administrator recommended that a scheme of arrangement be entered into between Federation and Latrobe which provides for the transfer to Latrobe of the health insurance business conducted by Federation. 7 Latrobe is an association incorporated under the Associations Incorporation Act 1981 (Vic) and is also a registered health benefits organisation under Part VI of the Act. Latrobe operates a health insurance business in the Gippsland region, where Federation primarily conducts its health insurance business. Federation and Latrobe are currently the joint owners of the issued capital of Maryvale Private Hospital Pty Ltd, which conducts the Maryvale Private Hospital located in Morwell, Victoria. 8 On 11 March 2005, the Council gave notice to the Administrator by which it stated that it was satisfied that the course of action recommended by him will, in the circumstances, be in the best interests of the contributors to the health benefits fund conducted by Federation. By the notice, the Council also directed the Administrator to make an application in accordance with s 82XZE(1) of the Act to give effect to the course of action concerned. 9 On 11 May 2005, Federation, Latrobe and the Administrator entered into a Scheme of Arrangement Deed ('the Deed'). By clause 2.1 of the Deed, the parties to the Deed agreed that a scheme of arrangement as contemplated by clause 8 of the Deed would be effected in accordance with clause 8 ('the Scheme'). Federation agreed to use its best endeavours to procure approval of the Scheme by the Court and Latrobe agreed to take steps to ensure compliance with undertakings given by it in the Deed to Federation, the Administrator and the Council. The undertakings are designed to achieve the implementation of the Scheme. 10 The essence of the Scheme is as follows: (a) Prior to the Effective Date, which, in essence, is five days after approval of the Scheme by the Court, Latrobe is required to offer to each employee of Federation employment on the terms specified in the Deed. (b) Upon the Effective Date: (i) the Contributors of Federation as at the Court Approval Date are to become contributors of Latrobe with premiums and benefits remaining unchanged until 1 April 2006; (ii) all cash of Federation as at the Effective Date is to be paid to Latrobe and all other assets as at that time are to be transferred to Latrobe; (iii) all liabilities of Federation to Transferring Contributors and for transferring employee entitlements are to be accepted by Latrobe and Federation is to be released from those liabilities; (iv) all plant and equipment of Federation as at the Court Approval Date are to be transferred to Latrobe. (c) On or after the Effective Date: (i) all intellectual property owned by Federation and used by it with respect to its activities under the Act and all licences held by Federation with respect to its activities under the Act are to be transferred to Latrobe in accordance with the provisions set out in the Deed; (ii) any assets or liabilities of Federation that are agreed to be treated specifically in accordance with the Deed are to be transferred to Latrobe; (iii) the remaining assets of Federation are to be realised and the balance of the proceeds after discharging all other liabilities of Federation are to be remitted to Latrobe. 11 The Deed provides that the parties must transfer those assets of Federation that are necessary for the continued operation of the business of Federation and that the consideration for transfer of the assets and business of Federation is to be Latrobe's assumption of the liabilities of Federation to Transferring Contributors. The Deed also provides a detailed mechanism for the determination and satisfaction of all outstanding liabilities of Federation. After those liabilities have been determined, and satisfied from the proceeds of the realisation of remaining assets, any balance, after payment of the expenses of the administration, is to be paid to Latrobe. It is contemplated that Federation will then be wound up and deregistered. 12 On 16 May 2005, Gyles J made orders in this proceeding as set out in Schedule 1 to these reasons. The orders, in essence, required the Administrator to give notice to contributors of Federation of the proposal to give effect to the Scheme. I am satisfied by the evidence consisting of affidavits sworn by Randall Scott Green, Jeremy Guy Redgrave, Scott Cameron Turner and Kiah Hamilton Wood that the orders made by Gyles J have been substantially complied with. Accordingly, I am satisfied that the Contributors to Federation have been adequately informed of the proposal to give effect to the Scheme. No Contributor has sought to be heard by the Court in opposition to the Scheme: nor has any creditor of Federation sought to be heard in opposition. 13 Ms Gayle Elizabeth Ginnane, the chief executive officer of the Council, has sworn an affidavit deposing to the fact that the Council considers that the Scheme is, in all the circumstances, in the best interests of the Contributors of the fund conducted by Federation. Ms Ginnane also deposes that she is concerned that, if the Scheme is not implemented in the near future, Federation could continue to trade in a way that would place it in breach of provisions of the Act and that it would act in a way that was inconsistent to the interests of contributors of Federation. Mr Bruce Joseph Beatson, the chief executive officer of Latrobe has sworn an affidavit in which he deposes to the fact that Latrobe fully supports the proposed merger of its business with the business of Federation and that Latrobe considers that the merger is in the best interests of its own contributors. 14 The returns required to be filed under the Act with the Council disclose that each of Federation and Latrobe is solvent. The statement of financial position in those returns shows that each has assets and liabilities as follows: Federation Latrobe Current assets $9,854,000 $47,661,000 Non current assets $5,164,000 $4,270,000 Total assets $15,018,000 $51,931,000 Current liabilities $4,444,000 $10,003,000 Non current liabilities $115,000 $311,000 Total liabilities $4,559,000 $10,314,000 Net assets $10,459,000 $41,617,000 15 The Administrator's report to the Council records that, as at 31 December 2004, the capital adequacy ratio of Federation was 1.56 and that of Latrobe was 3.45. The projected merged capital adequacy ratio would have been 2.9. In his report, the Administrator also identified the following benefits for contributors to both Federation and Latrobe from the proposed merger: · economies of scale resulting in lower management expenses per member; · lower expected claim volatility due to increased membership; · lower capital requirements per contributor due to increased membership; · increased membership within the region, thus lowering the cost per member of local initiatives; * 100 per cent ownership of the Maryvale Hospital. 16 Under the Constitution of Federation, the members of Federation are the contributors. A person ceases to be a contributor if the person ceases to be insured or any premium remains unpaid for a fixed period of time. The effect of the Scheme would be that all contributors would cease to be members and, accordingly, there would be no members of Federation. It is appropriate, therefore, to provide for such an eventuality in any orders made pursuant to s 82XZE. 17 The rules of Latrobe relevantly provide that members include all persons who apply for membership and are accepted. It would be impracticable to require all Transferring Contributors of Federation to complete an application form. Accordingly, it is appropriate to make an order, pursuant to s 82XZE, authorising an application to be signed on behalf of all Transferring Contributors. 18 Under s 82XZJ(3)(e), the administration of an organisation under administration ends when the Court makes an order or orders under s 82XZE. Having regard to the nature of the Scheme and the administrative obligations imposed upon the Administrator under the Scheme, which would require activity on his part after the making of the orders, it is appropriate to make a further order under s 82XZE varying the operation of s 82XZJ(3)(e), such that the administration does not end until the implementation of the Scheme in full. 19 I consider that it is in the interests of persons who are contributors to the fund operated by Federation that a scheme of arrangement be implemented in accordance with the Deed. Accordingly, I made orders pursuant to s 82XZE(1) to give effect to the course of action recommended by the Administrator, involving the implementation of the Scheme in accordance with the Deed. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 22 July 2005 Counsel for the Applicant: Mr D. Mossop Solicitor for the Applicant: Blake Dawson Waldron Date of Hearing: 23 June 2005 Date of Judgment: 23 June 2005 SCHEDULE 1 1. The Applicant shall by 23 May 2005 give notice to the contributors of Federation Health in the form of the draft letter and draft Explanatory Statement at Annexure PJH 5 to the affidavit of Peter James Hedge sworn on 11 May 2005. 2. For the purposes of clause 2.7 of the draft Explanatory Statement the date for appearances be specified as 6 June 2005 and the date for filing and service of affidavits be specified as 10 June 2005. 3. For the purposes of clause 3 and the definition of 'Second Court Hearing' in clause 6.1 of the Explanatory Statement, the date be fixed, and this application be adjourned to 20 June 2005. 4. The Applicant shall, as soon as practicable after the date of this order, give notice of this application in The Australian and the Latrobe Valley Examiner newspapers, including: (a) the date and time of the hearing of the application; (b) the manner in which a copy of the Explanatory Statement relating to the proposed merger can be obtained; (c) the requirement that any interested person wishing to be heard must file an appearance by no later than 10 June 2005; and (d) the further requirement that any interested person who has entered an appearance file and serve on the administrator at an address for service specified in the advertisement, by 14 June 2005, any affidavit setting out matters in respect of which that person wishes to be heard. 5. The Applicant shall provide, within 48 hours of a request from any interested person, a copy of the Explanatory Statement relating to the proposed merger free of charge. 6. The Applicant have liberty to file and serve any affidavit in reply by 17 June 2005. 7. The Applicant is not be required to hold a meeting or meetings of contributors of Federation Health. 8. The costs of this directions hearing be the costs and expenses of the administration. 9. There be liberty to apply, including liberty to apply to vary the order set out in paragraph 4 above.