FEDERAL COURT OF AUSTRALIA Macquarie Bank Limited ACN 008 583 542 No 2, in the matter of Macquarie Bank Limited ACN 008 583 542 [2007] FCA 1665 MACQUARIE BANK LIMITED ACN 008 583 542 IN THE MATTER OF MACQUARIE BANK LIMITED ACN 008 583 542 NSD1728 OF 2007 EMMETT J 29 OCTOBER 2007 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD1728 OF 2007 MACQUARIE BANK LIMITED Plaintiff JUDGE: EMMETT J DATE OF ORDER: 29 OCTOBER 2007 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The scheme of arrangement between the plaintiff and that class of its members holding ordinary shares, which is annexed hereto and marked "Appendix A - Share Scheme", be and is hereby approved. 2. The scheme of arrangement between the plaintiff and a class of creditors, being the grantees of options over ordinary shares in the capital of the plaintiff, which is annexed hereto and marked "Appendix B - Option Scheme", be and is hereby approved. 3. The plaintiff be exempt from compliance with section 411(11) of the Corporations Act 2001 (Cth) ("the Act") in respect of the schemes of arrangement referred to in Order 1 and Order 2. 4. These orders be entered forthwith. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. APPENDIX A – SHARE SCHEME Scheme of Arrangement pursuant to section 411 of the Corporations Act 2001 (Cwlth) between MACQUARIE BANK LIMITED (ABN 46 008 583 542) and EACH ORDINARY SHAREHOLDER OF MACQUARIE BANK LIMITED 1 Definitions and interpretation 1.1 Definitions In this Share Scheme, unless the context otherwise requires: APRA means the Australian Prudential Regulation Authority. ASIC means the Australian Securities and Investments Commission. ASX means ASX Limited (ACN 008 624 691) or the relevant securities market operated by it, as the context requires. Business Day means a business day as defined in the Listing Rules. CHESS means the clearing house electronic sub register system of share transfers operated by ASX Settlement and Transfer Corporation Pty Limited. Corporations Act means the Corporations Act 2001 (Cwlth). Court means the Federal Court of Australia. Court Order means an order of the Court under section 411 of the Corporations Act approving the Share Scheme. Custodian means Bond Street Custodians Limited (ACN 008 607 065). Effective Date means the date on which an office copy of the Court Order is lodged with ASIC. Implementation Date means the date one Business Day after the Record Date. Implementation Deed means the Implementation Deed dated 11 September 2007 between MBL and MGL relating to the implementation of this Share Scheme and the Option Scheme. Ineligible Foreign Shareholder means an MBL Shareholder shown in the register of MBL on the Record Date as having an address outside Australia, unless MBL is satisfied, in its absolute discretion, before the Effective Date that MGL is not precluded from lawfully issuing MGL Shares to the MBL Shareholder either unconditionally or after compliance with conditions MBL regards, in its absolute discretion, as acceptable and not unduly onerous where MBL is under no obligation to consider whether it is or ought to be satisfied. Listing Rules means the listing rules of ASX. MBL means Macquarie Bank Limited (ABN 46 008 583 542). MBL Option means an option to subscribe for an MBL Share granted under the Macquarie Bank Employee Share Option Plan. MBL Optionholder means a person on whose behalf the Custodian holds MBL Options as nominee and on whose behalf the Custodian is recorded in the Option Register as the nominee holder of MBL Options from time to time. MBL Share means an ordinary share in the capital of MBL. MBL Shareholder means a holder of an MBL Share. MGL means Macquarie Group Limited (ACN 122 169 279). MGL Constitution means the constitution of MGL from time to time. MGL Deed Poll means the deed poll in the form or substantially the form scheduled to the Implementation Deed by MGL under which MGL covenants in favour of the Scheme Shareholders to perform the acts attributed to it under this Share Scheme. MGL Share means an ordinary share in the capital of MGL. Option Register means the MGL register of optionholders. Option Scheme means the scheme of arrangement between MBL Optionholders and MBL for which approval is sought concurrently with this Share Scheme. Record Date means 7.00pm (Sydney time) on the fifth Business Day following the Trading Cessation Date. Regulatory Approval means a consent, approval or other act by a Regulatory Authority reasonably required for the implementation of the Share Scheme. Regulatory Authority includes: a) a government or governmental, semi-governmental or judicial entity or authority; b) a minister, department, office, commission, delegate, instrumentality, agency, board, authority or organisation of any government; c) any regulatory organisation established under statute; and d) ASIC, ASX, APRA and the Treasurer. Relevant Sale Facility Consideration means, in relation to each Ineligible Foreign Shareholder, an amount equal to the average price at which MGL Shares issued to the Sale Facility Agent under this Share Scheme are sold by the Sale Facility Agent, multiplied by the corresponding number of MBL Shares belonging to that Ineligible Foreign Shareholder which were transferred to the Sale Facility Agent under this Share Scheme. Sale Facility Agent means the entity appointed by MBL to act as the sale facility agent under the Share Scheme. Sale Facility Agent Deed Poll means the deed poll in the form or substantially the form scheduled to the Implementation Deed by the Sale Facility Agent under which the Sale Facility Agent covenants in favour of the Ineligible Foreign Shareholders to perform the acts attributed to it under this Share Scheme. Sale Facility Agent Transfer Form means the master transfer form executed by the Sale Facility Agent for the transfer of MBL Shares from Ineligible Foreign Shareholders to the Sale Facility Agent under this Share Scheme. Scheme Booklet means, in respect of the Share Scheme, the information to be despatched to the MBL Shareholders, which must include the Share Scheme, an explanatory statement complying with the requirements of the Corporations Act in relation to the Share Scheme and approved by the Court, an independent expert's report in relation to the Share Scheme and notice of meeting and proxy form in relation to the Share Scheme Meeting in such form as MBL and MGL may agree. Scheme Shareholder means a MBL Shareholder on the Record Date (other than an Ineligible Foreign Shareholder) and the Sale Facility Agent. Second Court Date means the date(s) on which the Second Court Hearing is held. Second Court Hearing means the second hearing of the application made to the Court for the Court Order. Share Scheme means this scheme of arrangement subject to any alterations or conditions made or imposed by the Court pursuant to section 411(6) of the Corporations Act. Share Scheme Consideration means one MGL Share for each MBL Share held by a Scheme Shareholder. Share Scheme Meeting means the meeting of MBL Shareholders convened by order of the Court pursuant to section 411(1) of the Corporations Act to consider, and if thought fit, agree to the Share Scheme. Share Scheme Transfer Form means the master share transfer form executed by MGL for the transfer of MBL Shares from Scheme Shareholders to MGL under this Share Scheme. Trading Cessation Date means the date which is announced on ASX to be the last day of trading in MBL Shares, expected to be the Effective Date. 1.2 Interpretation In this Share Scheme, headings and bold type are for convenience only and do not affect interpretation and, unless the context requires otherwise: a) words importing the singular include the plural and vice versa; b) words importing a gender include both genders; c) other parts of speech and grammatical forms of a word or phrase defined in this Share Scheme have a corresponding meaning; d) a reference to a person includes an individual, the estate of an individual, a corporation, an authority, an association or a joint venture, a partnership, a trust and any government agency; e) a reference to a clause, party, annexure or schedule is a reference to a clause of, and a party, annexure and schedule to this Share Scheme, and a reference to this Share Scheme includes any annexure and schedule; f) a reference to a statute, regulation, proclamation, ordinance or by-law includes all statutes, regulations, proclamations ordinances or by-laws amending, consolidating or replacing it, whether passed by the same or another government agency with legal power to do so, and a reference to a statute includes all regulations, proclamations, ordinances and by-laws issued under that statute; g) a reference to any document is to that document as varied, novated, ratified or replaced from time to time; h) a reference to a party to a document includes that party's successors and permitted assigns; i) the word 'includes' in any form is not a word of limitation; j) a reference to '$' or 'dollar' is to Australian currency; k) a reference to any time is a reference to that time in Sydney; and l) unless otherwise defined in this clause 1, a term defined in or for the purposes of the Corporations Act has the same meaning when used in this Share Scheme. 2 Preliminary 2.1 Incorporation of MBL MBL is a company registered in the Australian Capital Territory. It has its registered office at Level 3, 25 National Circuit, Forrest, ACT 2603. 2.2 Incorporation of MGL MGL is a company registered in Victoria. It has its registered office at Level 7, 1 Martin Place, Sydney NSW 2000. 2.3 Capital of MBL As at 1 September 2007: a) the issued capital of MBL is 271,086,657 MBL Shares; b) there are 39,831,964 MBL Options on issue (at various exercise prices); c) there are 4,000,000 preference shares in MBL on issue (which are stapled to unsecured debt obligations of Macquarie Finance Ltd (ACN 001 214 964) to form 'Macquarie Income Securities'); and d) there are 350,000 non-cumulative redeemable preference shares in MBL on issue which form part of the Macquarie Income Preferred Securities structure. 2.4 Agreement to implement Share Scheme MBL and MGL have agreed, by executing and delivering the Implementation Deed, to implement the terms of this Share Scheme and the steps contemplated to follow the implementation of this Share Scheme, insofar as they are required to be implemented by each of them. 2.5 Execution of deed polls MGL has executed the MGL Deed Poll and the Sale Facility Agent has executed the Sale Facility Agent Deed Poll. 3 Conditions precedent 3.1 Conditions precedent The conditions precedent to this Share Scheme are: a) the Implementation Deed not being terminated prior to the Second Court Hearing; b) the receipt of each Regulatory Approval on terms and conditions (if any) acceptable to any of MBL and MGL affected by it on or before 6.00am on the Second Court Date; c) ASX indicating in writing that it will grant permission for quotation of the MGL Shares (subject only to customary pre-quotation listing conditions); d) no Regulatory Authority taking any action or making any preliminary or final order or decree (or commencing or threatening to do so) which as at the Second Court Hearing restrains or prohibits the implementation of the Share Scheme or any transaction contemplated by the Share Scheme; e) MBL Shareholders agreeing to the Share Scheme in accordance with section 411 of the Corporations Act; f) the approval by the Court of the Share Scheme under section 411(4)(b) of the Corporations Act provided that, should the Court propose to approve this Share Scheme subject to any alterations or conditions, MBL may, on behalf of all parties concerned, by its counsel or solicitors, consent only to such of those alterations or conditions to this Share Scheme to which MGL has consented (such consent not to be unreasonably withheld or delayed); and g) all conditions precedent to the Option Scheme (other than the conditions precedent to this Share Scheme) having been satisfied. 3.2 Effect of conditions precedent The satisfaction of each condition precedent in clause 3.1 is a condition precedent to the operation of the provisions of clause 4. 3.3 Certificate At the Second Court Hearing, MBL will provide to the Court a certificate, or such other evidence as the Court requests, confirming whether or not all the conditions precedent to the Share Scheme set out in clause 3.1 (other than Court approval of the Share Scheme and Court approval of the Option Scheme) have been satisfied. 4 The Share Scheme 4.1 Court order MBL will lodge with ASIC an office copy of the Court Order within five Business Days of the making of that Court Order. 4.2 Sale facility a) All of the MBL Shares held by Ineligible Foreign Shareholders, together with all rights and entitlements attaching to those MBL Shares at the Record Date, will be transferred to the Sale Facility Agent on the Implementation Date without the need for any further action by any Ineligible Foreign Shareholder. The Sale Facility Agent will act as nominee of the Ineligible Foreign Shareholder in respect of those MBL Shares. b) MBL must procure that the Sale Facility Agent: (i) accepts the transfer of MBL Shares under clause 4.2(a); (ii) within 30 days after the Implementation Date, disposes of MGL Shares issued to the Sale Facility Agent under clause 4.3(d); and (iii) distributes the Relevant Sale Facility Consideration to the Ineligible Foreign Shareholders within 10 Business Days of the completion of the last disposal of the MGL Shares in accordance with clause 4.2(b)(ii). 4.3 Restructure a) MBL will give MGL the names and addresses of all Scheme Shareholders and the number of MBL Shares held by each of them and such other information as MGL may require to implement the Share Scheme. b) Following the completion of the transfer under clause 4.2(a), all MBL Shares, together with all rights and entitlements attaching to the MBL Shares at the Record Date, will be transferred to MGL on the Implementation Date without the need for any further action by any MBL Shareholder. c) MBL, as agent for each Scheme Shareholder, will apply for MGL Shares comprising the Share Scheme Consideration to be issued to that Scheme Shareholder. d) In consideration of the transfer of the MBL Shares to MGL, MGL will issue on the Implementation Date the Share Scheme Consideration to the Scheme Shareholders. 4.4 Transfers of MBL Shares To give effect to the transfers of MBL Shares under clauses 4.2(a) and 4.3(b), on the Implementation Date MBL will take the following actions in the order set out in this clause 4.4: a) as agent for the Ineligible Foreign Shareholders, execute the Sale Facility Transfer Form, which was previously duly completed and executed by the Sale Facility Agent, to transfer all MBL Shares held by Ineligible Foreign Shareholders to the Sale Facility Agent as nominee for the Ineligible Foreign Shareholders; b) register the transfer of MBL Shares and enter the name of the Sale Facility Agent in its register in respect of all MBL Shares transferred under clause 4.2(a); c) as agent for the Scheme Shareholders, execute the Share Scheme Transfer Form, which was previously duly completed and executed by MGL, to transfer all MBL Shares to MGL; and d) register the transfer of MBL Shares and enter the name of MGL in its register in respect of all MBL Shares. 4.5 Issue of MGL Shares a) To apply for the issue of MGL Shares under clause 4.3(c), MBL will on the Implementation Date and following the steps set out in clause 4.4 duly complete and execute a master subscription form in respect of the MGL Shares comprising the Share Scheme Consideration for each Scheme Shareholder. b) To reflect the issue of MGL Shares under clause 4.3(d), MBL will on the Implementation Date, and following the step set out in clause 4.5(a), procure MGL to enter the names of the Scheme Shareholders in its register in respect of all MGL Shares issued as Share Scheme Consideration. 4.6 Shareholders agreement to transfer a) The Ineligible Foreign Shareholders agree to the transfer of their MBL Shares to the Sale Facility Agent as their nominee in accordance with the terms of this Share Scheme. b) The Scheme Shareholders agree to the transfer of their MBL Shares to MGL in accordance with the terms of this Share Scheme. 4.7 Agreement to become a member of MGL Each Scheme Shareholder agrees to become a member of MGL, to have his or her name entered in any register of members of MGL, to accept the MGL Shares issued to him or her and to be bound by the MGL Constitution. 4.8 Warranty by each MBL Shareholder a) Each Ineligible Foreign Shareholder is deemed to have warranted to the Sale Facility Agent that all its MBL Shares (including any rights and entitlements attaching to those MBL Shares) which are transferred to the Sale Facility Agent under this Share Scheme will, at the date of the transfer of them to the Sale Facility Agent, be fully paid and free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind, whether legal or otherwise, and any restrictions on their transfer and that it has full power, capacity and authority to transfer its MBL Shares (including any rights and entitlements attaching to those MBL Shares) to the Sale Facility Agent under this Share Scheme. b) Each Scheme Shareholder is deemed to have warranted to MGL that all its MBL Shares (including any rights and entitlements attaching to those MBL Shares) which are transferred to MGL under this Share Scheme will, at the date of the transfer of them to MGL, be fully paid and free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind, whether legal or otherwise, and any restrictions on their transfer and that it has full power, capacity and authority to transfer its MBL Shares (including any rights and entitlements attaching to those MBL Shares) to MGL under this Share Scheme. 5 Dealings in MBL Shares 5.1 Recognised dealings For the purposes of determining who is an MBL Shareholder on the Record Date, dealings in MBL Shares on or before the close of business on the Trading Cessation Date will be recognised provided that: a) in the case of dealings of the type to be effected using CHESS, the transferee is registered as holder of the relevant MBL Shares by the Record Date; and b) in all other cases, registrable transmission applications or transfers in registrable form in respect of those dealings are received on or before 6.00pm (Sydney time) on the fifth Business Day following the Trading Cessation Date at the place where the register of MBL Shareholders is kept. 5.2 MBL's obligation to register MBL must register any transmission application and transfer received in accordance with clause 5.1(b) by the Record Date. 5.3 Transfer requests received after the Record Date MBL will not accept (and is not obliged to accept) for registration or recognise (and is not obliged to recognise) for any purpose any transmission application or transfer in respect of MBL Shares referred to in clause 5.1(b) received after 6.00pm (Sydney time) on the fifth Business Day following the Trading Cessation Date nor any transfer or transmission in respect of a dealing in MBL Shares that occurred after the close of business on the Trading Cessation Date. 5.4 Maintaining the register of MBL Shareholders For the purpose of determining entitlements to the Share Scheme Consideration, MBL will, until the Share Scheme Consideration has been issued, maintain the register of MBL Shareholders in accordance with the preceding provisions of this clause 5 and, following the registration of the transfer of the MBL Shares from Ineligible Foreign Shareholders to the Sale Facility Agent and the entry of the name of the Sale Facility Agent in the register referred to in clause 4.4(b) the register of MBL Shareholders in this form will solely determine entitlements to the Share Scheme Consideration. 5.5 Statements of holding cease to have any effect From the Record Date, any statement of holding in respect of MBL Shares will cease to have any effect as a document of title in respect of such shares. As from the Record Date, each entry on the register of MBL Shareholders will cease to be of any effect other than as evidence of entitlement to the Share Scheme Consideration pursuant to this Share Scheme in respect of the MBL Shares relating to that entry. 6 Quotation of MBL Shares 6.1 Suspension of trading Trading on ASX in MBL Shares will be suspended on the Trading Cessation Date which is expected to be the Effective Date. 6.2 Termination of quotation MBL will apply to ASX for termination of the quotation of MBL Shares after the Implementation Date. 7 General Share Scheme provisions 7.1 Alterations or conditions If the Court proposes to approve this Share Scheme subject to any alterations or conditions under section 411(6) of the Corporations Act, MBL may, by its counsel or solicitors but subject to the prior approval of MGL, consent on behalf of all parties concerned to any alterations or conditions. 7.2 Instructions, authorisations and notifications to MGL Except for a Scheme Shareholder's tax file number, each binding instruction, authorisation or notification between a Scheme Shareholder and MBL relating to the MBL Shares or a Scheme Shareholder's status as an MBL Shareholder including, without limitation: a) any election with respect to participation in the MBL Dividend Reinvestment Plan; b) any authorisations with respect to the making or receipt of payments; c) the notification of any personal details including addresses and bank accounts; and d) any instructions relating to communications from MBL, will, from the Record Date, be deemed, by reason of this Share Scheme, to be a similarly binding instruction, authorisation or notification to, and be accepted by, MGL in respect of the MGL Shares issued to Scheme Shareholders until that instruction or notification is revoked or amended in writing addressed to MGL. Any outstanding balances in a Scheme Shareholder's MBL DRP account will be transferred to that Scheme Shareholder's MGL DRP account under this Share Scheme. 7.3 Further assurances MBL will execute all documents and do all things necessary or expedient to implement, and perform its obligations under, this Share Scheme. 7.4 Authority of MBL Each MBL Shareholder consents to MBL doing all things necessary or expedient for or incidental to the implementation of this Share Scheme. 7.5 MBL to act on behalf of MBL Shareholders Each Ineligible Foreign Shareholder and each Scheme Shareholder, without the need for any further act, appoints MBL, and empowers MBL to appoint any of its directors or officers severally as its attorney and agent for the purposes of executing any document necessary or desirable to give effect to this Share Scheme, or doing any other act or thing necessary or desirable to give effect to this Share Scheme. 7.6 Stamp duty MBL will pay all stamp duties and any related fines, penalties and other costs in respect of this Share Scheme (including, without limitation, in connection with the issue of MGL Shares to Scheme Shareholders in accordance with the terms of this Share Scheme). 7.7 Scheme binding This Share Scheme binds MBL and all Ineligible Foreign Shareholders and all Scheme Shareholders (including those who do not attend or vote at the Share Scheme Meeting to approve this Share Scheme or vote against the resolution at the Share Scheme Meeting). 7.8 Notices If a notice, transfer, transmission application, direction or other communication referred to in this Share Scheme is sent by post to MBL, it will not be taken to be received in the ordinary course of post or on a date and time other than the date and time (if any) on which it is actually received at MBL's registered office or at the office of the registrar of Shares as the case may be. 7.9 No liability when acting in good faith Neither MBL nor MGL, nor any director, officer or employee of either of those companies, will be liable for anything done or omitted to be done in the performance or implementation of this Share Scheme in good faith. 7.10 Governing law This Share Scheme is governed by the laws of New South Wales. The parties irrevocably submit to the non-exclusive jurisdiction of the courts in New South Wales and the courts competent to determine appeals from those courts. APPENDIX B – OPTION SCHEME Scheme of Arrangement pursuant to section 411 of the Corporations Act 2001 (Cwlth) between MACQUARIE BANK LIMITED (ABN 46 008 583 542) and EACH OPTIONHOLDER 1. Definitions and interpretation 1.1 Definitions In this Option Scheme, unless the context requires otherwise: ASIC means the Australian Securities and Investments Commission. ASX means ASX Limited (ACN 008 624 691) or the relevant securities market operated by it, as the context requires. Business Day means a business day as defined in the Listing Rules. Corporations Act means the Corporations Act 2001 (Cwlth). Court means the Federal Court of Australia. Court Order means an order of the Court under section 411 of the Corporations Act approving the Option Scheme. Custodian means Bond Street Custodians Limited (ACN 008 607 065). Effective Date means the date on which an office copy of the Court Order is lodged with ASIC. Implementation Date means the date one Business Day after the Record Date. Implementation Deed means the Implementation Deed dated 11 September 2007 between MBL and MGL relating to the implementation of the Share Scheme and this Option Scheme. Listing Rules means the listing rules of ASX. MBL means Macquarie Bank Limited (ABN 46 008 583 542). MBL Option means an option to subscribe for an MBL Share granted under the MBL Option Plan. MBL Option Plan means the Macquarie Bank Employee Share Option Plan including any jurisdiction specific subplan. MBL Optionholder means a person on whose behalf the Custodian holds MBL Options as nominee and on whose behalf the Custodian is recorded in the Option Register as the nominee holder of MBL Options from time to time. MBL Share means an ordinary share in the capital of MBL. MBL Shareholder means each person who is registered in the Register as the holder of MBL Shares from time to time. MGL means Macquarie Group Limited (ACN 122 169 279). MGL Deed Poll means the deed poll in the form or substantially the form scheduled to the Implementation Deed by MGL under which MGL covenants in favour of the Scheme Optionholders to perform the acts attributed to it under this Option Scheme. MGL Option means an option to subscribe for an ordinary share in MGL granted under the MGL Option Plan. MGL Option Plan means the MGL Employee Share Option Plan, the rules of which are set out in a schedule to the Implementation Deed. MGL Option Register means the MGL register of optionholders. MGL Option South Africa Subplan Rules means the rules of the subplan of the MGL Option Plan titled 'Rules of the South Africa Subplan of the Macquarie Group Employee Share Option Plan' as set out in a schedule to the Implementation Deed. MGL Option United Kingdom Subplan Rules means the rules of the subplan of the MGL Option Plan titled 'Rules of the HMRC Approved Subplan of the Macquarie Group Employee Share Option Plan' as set out in a schedule to the Implementation Deed. MGL Optionholder means each person who is registered in the MGL Option Register as the holder of MGL Options from time to time. Option Scheme means this scheme of arrangement subject to any alterations or conditions made or imposed by the Court pursuant to section 411(6) of the Corporations Act. Option Scheme Consideration means one MGL Option in respect of each MBL Option held by Scheme Optionholders at the Record Date. Option Scheme Meeting means the meeting of MBL Optionholders convened by order of the Court pursuant to section 411(1) of the Corporations Act to consider and, if thought fit, agree to the Option Scheme. Option Register means MBL's option register and the documents maintained under section 170 of the Corporations Act. Record Date means 7:00 pm (Sydney time) on the fifth Business Day following the Trading Cessation Date. Register means MBL's register of members. Scheme Optionholder means each MBL Optionholder at the Record Date. Scheme Shareholder has the same meaning as in the Share Scheme. Second Court Hearing means the second hearing of the application made to the Court for the Court Order. Share Scheme means the scheme of arrangement pursuant to Part 5.1 of the Corporations Act made or to be made between MBL and each ordinary shareholder in MBL in respect of the MBL Shares subject to any alterations or conditions made or required by the Court pursuant to section 411(6) of the Corporations Act. Trading Cessation Date means the date which is announced on ASX to be the last day of trading in MBL Shares, expected to be the Effective Date. 1.2 Interpretation In this Option Scheme, headings and bold type are for convenience only and do not affect interpretation and, unless the context requires otherwise: a) words importing the singular include the plural and vice versa; b) words importing a gender include both genders; c) other parts of speech and grammatical forms of a word or phrase defined in this Option Scheme have a corresponding meaning; d) a reference to a person includes an individual, the estate of an individual, a corporation, an authority, an association or a joint venture, a partnership, a trust and any government agency; e) a reference to a clause, party, annexure or schedule is a reference to a clause of, and a party, annexure and schedule to this Option Scheme, and a reference to this Option Scheme includes any annexure and schedule; f) reference to a statute, regulation, proclamation, ordinance or by-law includes all statutes, regulations, proclamations ordinances or by-laws amending, consolidating or replacing it, whether passed by the same or another government agency with legal power to do so, and a reference to a statute includes all regulations, proclamations, ordinances and by-laws issued under that statute; g) a reference to any document (including this Option Scheme) is to that document as varied, novated, ratified or replaced from time to time; h) a reference to a party to a document includes that party's successors and permitted assigns; i) the word 'includes' in any form is not a word of limitation; j) a reference to '$' or 'dollar' is to Australian currency; k) a reference to any time is a reference to that time in Sydney; and l) unless otherwise defined in this clause 1, a term defined in or for the purposes of the Corporations Act has the same meaning when used in this Option Scheme. 2 Preliminary 2.1 MBL a) MBL is a public company registered in Australian Capital Territory and is a company limited by shares. It has its registered office at Level 3, 25 National Circuit, Forrest, ACT 2603. b) At 1 September 2007, 39,831,964 MBL Options were on issue. c) MBL is a company admitted to the official list of ASX and MBL Shares are officially quoted on ASX. 2.2 MGL a) MGL is a company registered in Victoria and is a company limited by shares. It has its registered office at Level 7, No.1 Martin Place, Sydney NSW 2000. b) At 13 September 2007, the issued share capital of MGL comprises two ordinary shares with no options over ordinary shares. 2.3 Agreement to implement Option Scheme MBL and MGL have agreed, by executing and delivering the Implementation Deed, to implement the terms of this Option Scheme and the steps contemplated to follow the implementation of this Option Scheme, insofar as they are required to be implemented by each of them. 2.4 Execution of MGL Deed Poll MGL has executed the MGL Deed Poll 3 Conditions precedent 3.1 Conditions precedent The conditions precedent to this Option Scheme are: a) all conditions precedent to the Share Scheme (other than the conditions precedent to this Option Scheme) having been satisfied; b) this Option Scheme being approved at the Option Scheme Meeting in accordance with section 411 of the Corporations Act; and c) the approval by the Court of this Option Scheme under section 411(4)(b) of the Corporations Act provided that, should the Court propose to approve this Option Scheme subject to any alterations or conditions, MBL may, on behalf of all parties concerned, by its counsel or solicitors, consent only to such of those alterations or conditions to this Option Scheme to which MGL has consented (such consent not to be unreasonably withheld or delayed). 3.2 Effect of conditions precedent The satisfaction of each condition precedent in clause 3.1 on or before the Court making the Court Order is a condition precedent to the operation of the provisions of this Option Scheme. 3.3 Certificate At the Second Court Hearing, MBL will provide to the Court a certificate, or such other evidence as the Court requests, confirming whether or not all of the conditions precedent to the Option Scheme set out in clause 3.1 (other than Court approval of the Share Scheme and Court approval of the Option Scheme) have been satisfied. 4 The Option Scheme 4.1 Lodgement of Court Orders with ASIC In accordance with Section 411(10) of the Corporations Act, MBL will lodge with ASIC an office copy of the Court Order approving this Option Scheme pursuant to section 411(4)(b) of the Corporations Act on the same date MBL lodges with ASIC the Court Order approving the Share Scheme pursuant to section 411(4)(b) of the Corporations Act. 4.2 Agreement to cancellation Each Scheme Optionholder agrees to the cancellation of their MBL Options (together with all rights and entitlements attached to their MBL Options) by this Option Scheme and will do all things necessary to facilitate cancellation of their MBL Options. 4.3 Cancellation of MBL Options On the Implementation Date, the MBL Options are cancelled and MBL will remove the name of the holder of any MBL Options from the Option Register and the MBL Option Plan is terminated. 4.4 Provision of Option Scheme Consideration In consideration for the cancellation of the MBL Options, MBL will procure MGL: a) on the Implementation Date, to issue the Option Scheme Consideration to each Scheme Optionholder, in respect of each MBL Option registered in the name of that Scheme Optionholder in the Option Register at the Record Date; b) on the Implementation Date, to enter the name of each Scheme Optionholder on the MGL Option Register; and c) no later than five Business Days after the Record Date, to despatch or procure the despatch to each Scheme Optionholder a statement representing the MGL Options held in the name of that Scheme Optionholder in accordance with this Option Scheme. 4.5 MGL Options All MGL Options issued pursuant to this Option Scheme will: a) be issued on the terms and conditions set out in the rules of the MGL Option Plan except that; i) MGL Options to be issued in consideration for the cancellation of those MBL Options held under the UK Inland Revenue approved subplan of the MBL Option Plan will be issued on the terms and conditions set out in the MGL Option United Kingdom Subplan Rules; and ii) MGL Options to be issued in consideration for the cancellation of those MBL Options of a Scheme Optionholder who is in South Africa will be issued on the terms and conditions set out in the MGL Option South Africa Subplan Rules; b) have a vesting period equal to the vesting period of the MBL Option which it replaces; c) have an exercise price equal to the exercise price per MBL Option of the MBL Option which it replaces; d) have an option period equal to the option period of the MBL Option which it replaces; and e) have the same exercise conditions as those of the MBL Option which it replaces, with such modifications as are necessary to reflect that the issuer of the MGL Options is MGL and that the MGL Options are held by, and registered in the name of, the MGL Optionholder and not the Custodian as nominee of the MGL Optionholder. Any performance hurdles applicable to an MBL Option that are measured by reference to the average annual return on ordinary equity are re-expressed as performance hurdles applicable to the MGL Option which replaces that MBL Option to be measured against the average annual return on ordinary equity of MBL for financial years ending before the Implementation Date and against the average annual return on ordinary equity of MGL for financial years ending after the Implementation Date. 4.6 Warranty by each MBL Optionholder Each Scheme Optionholder is deemed to have warranted to MGL that all its MBL Options (including any rights and entitlements attaching to those MBL Options) which are cancelled under this Option Scheme will, at the date of the cancellation, be free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind, whether legal or otherwise. 5 Exercise of MBL Options 5.1 Exercise of MBL Options a) MBL will not accept for registration or recognise for any purpose (nor will it be obliged to do so) any exercise or transfer of an MBL Option received on or after the Effective Date and, after such time, the MBL Option will not be capable of exercise notwithstanding any terms on which such MBL Option was granted. 5.2 Entitlements of MBL Optionholders a) For the purpose of determining entitlements to the Option Scheme Consideration, MBL must maintain the Option Register in accordance with clause 5.1 until the Option Scheme Consideration has been provided to the Scheme Optionholders. The Option Register in this form will solely determine entitlements to the Option Scheme Consideration. b) After the Record Date, each entry in the Option Register as at the Record Date will cease to have any effect, except as evidence of entitlement to the Option Scheme Consideration. 6 General Option Scheme provisions 6.1 Alterations or conditions If the Court proposes to approve this Option Scheme subject to any alterations or conditions under section 411(6) of the Corporations Act, MBL may, by its counsel or solicitors but subject to the prior approval of MGL, consent on behalf of all parties concerned to any alterations or conditions. 6.2 Instructions to MGL Except for a Scheme Optionholder's tax file number, any binding instructions or notifications between a Scheme Optionholder and MBL relating to the MBL Options or a Scheme Optionholder's status as an MBL Optionholder (including, without limitation, any instructions relating to communications from MBL) will, from the Record Date, be deemed, by reason of this Option Scheme, to be a similarly binding instruction or notification to, and be accepted by, MGL in respect of the MGL Options issued to Scheme Optionholders until that instruction or notification is revoked or amended in writing addressed to MGL. 6.3 Further assurances MBL will execute all documents and do all things necessary or expedient to implement, and perform its obligations under, this Option Scheme. 6.4 Authority of MBL Each Scheme Optionholder consents to MBL doing all things necessary or expedient for or incidental to the implementation of this Option Scheme. 6.5 MBL to act on behalf of Scheme Optionholders Each Scheme Optionholder, without the need for any further act, appoints MBL and empowers MBL to appoint any of its Directors or officers severally, as its attorney and agent: a) for the purposes of executing any document necessary or desirable to give effect to this Option Scheme, or doing any other act or thing necessary or desirable to give effect to this Option Scheme; and b) to execute a power of attorney in favour of the entity acting as 'Plan Company' under the MGL Option Plan and its officers severally in substantially the same form as the power of attorney granted by the Scheme Optionholder to the 'Plan Company' of the MBL Option Plan and its officers severally. 6.6 Stamp duty MBL will pay all stamp duties and any related fines, penalties and other costs in respect of this Option Scheme (including, without limitation, in connection with the issue of MGL Options to Scheme Optionholders in accordance with the terms of this Option Scheme). 6.7 Compensation to Scheme Optionholders If a Scheme Optionholder suffers one or more Tax Detriments as a direct consequence of: a) the cancellation of their MBL Options pursuant to this Option Scheme; and/or b) the issue of MGL Options pursuant to this Option Scheme; and/or c) a subsequent tax event in relation to their MGL Options issued pursuant to this Option Scheme, MBL will procure that MGL or a subsidiary of MGL (the 'relevant subsidiary') will offer the Scheme Optionholder Appropriate Compensation. MBL will procure that MGL or the relevant subsidiary will calculate or cause to be determined the nature and quantum of Appropriate Compensation which will be binding on the Scheme Optionholder. However should the Scheme Optionholder so request, the calculation by MGL or the relevant subsidiary will be reviewed by a major accounting or law firm practicing in the jurisdiction(s) relevant to the calculation of the Tax Detriment, at MGL's, or the relevant subsidiary's cost. For the purposes of this clause 6.7: 'Tax Detriment' means a reduction in the net after tax economic position of the relevant Scheme Optionholder and which, in the case of clause 6.7(c) only, is a reduction from the net after tax economic position of the relevant Scheme Optionholder which would have arisen had the Option Scheme not been implemented and a corresponding tax event occurred at that time in relation to the Scheme Optionholder's MBL Options. 'Appropriate Compensation' means: a) for a Tax Detriment of a permanent nature, a cash payment sufficient to place the Scheme Optionholder in the overall economic position after tax which would have applied had this Option Scheme not been implemented; and b) for a Tax Detriment of a timing nature, a loan to the Scheme Optionholder in the currency of the Tax Detriment, of an amount equal to the taxation liability relating to the Tax Detriment where the interest rate and payment terms applicable to the loan are at the discretion of MGL or the relevant subsidiary, as specified in each individual case, and, unless the loan period is extended by MGL or the relevant subsidiary, the loan is repayable at the earlier of: i) the taxation liability being refunded by the relevant taxation authority; ii) the cessation of the effect of the Tax Detriment; iii) the lapse, exercise or sale of the Option, or iv) the employee ceasing to be an employee of MGL or its subsidiaries, In each case grossed up for any tax payable by the Scheme Optionholder in respect of the amounts of the Appropriate Compensation. 6.8 Scheme binding This Option Scheme binds MBL and all Scheme Optionholders (including those who do not attend or vote at the Option Scheme Meeting to approve this Option Scheme or vote against the resolution at the Option Scheme Meeting). 6.9 Notices If a notice, transfer, transmission application, direction or other communication referred to in this Option Scheme is sent by post to MBL, it will not be taken to be received in the ordinary course of post or on a date and time other than the date and time (if any) on which it is actually received at MBL's registered office or at the office of the registrar of options as the case may be. 6.10 No liability when acting in good faith Neither MBL or MGL, nor any Director, officer or employee of either of those companies, will be liable for anything done or omitted to be done in the performance or implementation of this Option Scheme in good faith. 6.11 Governing law This Option Scheme is governed by the laws of New South Wales. The parties irrevocably submit to the non-exclusive jurisdiction of the courts in New South Wales and the courts competent to determine appeals from those courts. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD1728 OF 2007 MACQUARIE BANK LIMITED Plaintiff JUDGE: EMMETT J DATE: 29 OCTOBER 2007 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 13 September 2007, the Court ordered that the plaintiff, Macquarie Bank Limited (the Company), convene meetings of its members and of a class of creditors who are optionholders for the purpose of considering and, if thought fit, agreeing to schemes of arrangement between the Company, on the one hand, and its members and that class of creditors, on the other. Meetings as contemplated by those orders were held on 25 October 2007 and the Company has now applied to the Court pursuant to s 411 of the Corporations Act 2001 (Cth) (the Act) for the approval of the schemes. 2 In addition to the evidence that was before the Court on 13 September 2007, I have considered affidavits read today sworn by David Stuart Clark on 28 October 2007, Michael David O'Hara sworn 28 September 2007, Paul Graeme Rowell Pirie sworn on 26 October 2007, William Martin Mrongovius sworn on 28 October 2007, Iain Edward Bruce Read sworn 26 October 2007, Richard John Nelson sworn 28 October 2007, Wallace Richard Sheppard sworn 26 October 2007, David Geoffrey Healey sworn 23 October 2007, Genevieve Nicole Bruce sworn 29 October 2007 and Ashley John Black sworn 29 October 2007. When the matter was called, there was no appearance except for senior counsel on behalf of the Company. No person gave notice to the Company's solicitors of any intention to appear at this hearing, which was duly advertised in accordance with the orders that were made by the Court on 13 September 2007. 3 I have seen evidence in the form of a letter of 25 October 2007 to the Company's solicitors that the Australian Securities and Investments Commission (the Commission) is satisfied that the schemes of arrangement have not been proposed for the purpose of enabling any person to avoid the operation of any of the provisions of Chapter 6 of the Corporations Act. The Commission has also granted certain relief under the Corporations Act to enable the schemes to proceed. 4 At the meeting of members, 8,920 members voted in favour of the resolution, representing 96.85% of the members present and 139,867,978 votes were cast in favour of the resolution representing 99.54% of the votes cast. At the meeting of optionholders, 529 optionholders voted in favour, representing all of the optionholders who voted; 271,871,144 votes were cast in favour and none were cast against. Clearly enough, the resolutions were passed by the requisite majorities referred to in s 411. 5 As part of the restructure to which the schemes are directed, a capital reduction was required. At a general meeting of members held on the say day, the resolution concerning capital reduction was duly passed. 6 My attention has been drawn to three matters that might be constituted as irregularities in relation to the convening of the meetings. Where an employee shareholder held shares under the Macquarie Bank Deferred Employee Share Option Plan, a covering letter was to form part of the documents sent to the shareholder in connection with the relevant meeting. The letter was to incorporate the dates of the grant of options. Shortly after the material had been despatched, it was discovered that wrong option dates had been included in a number of cases. However, within 24 hours, a correcting letter was despatched, together with an email, to all of the affected holders. I am satisfied that no injustice is likely to result from that slight irregularity. 7 Secondly, it appears that because of some human or computer malfunction, on a number of envelopes addressed to optionholders, four additional zeros appeared after the country of destination. I am satisfied from the evidence of Mr Paul Graeme Rowell Pirie that the intrusive zeros would not have interfered with the delivery of the documents in question. In any event, steps were taken to ensure that the material was subsequently delivered to all of the affected shareholders. Finally, a covering letter despatched to some employee shareholders were asked to complete and return a blue election form. However, the election forms despatched to some employee shareholders appeared on a yellow rather than a blue form. Steps were taken to rectify that error within a reasonably short time. I am satisfied there is no injustice occasioned to anybody by either of the two irregularities I have just described. 8 The schemes were expressed to be subject to certain conditions precedent. I have evidence before me that all of the conditions have been satisfied or waived. As I indicated in my reasons for convening the meetings, a question could arise as to the valuation of claims that constituted optionholders as creditors of the Company. If there had been votes against the optionholders' scheme, it may have been necessary to value the options of the various optionholders and evidence was available of the valuation of options. However, that evidence is irrelevant since none of the optionholders voted against the optionholders' scheme. 9 I am satisfied that the schemes are fair and reasonable. I have had regard to the evidence that was before me on 13 September 2007 when I made the orders convening the meetings. In all of the circumstances, having regard to the fact that the schemes have been overwhelmingly agreed to by the shareholders and optionholders, I consider that it is appropriate to approve the schemes pursuant to s 411 of the Act. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 14 November 2007 Counsel for the Plaintiff: Mr I M Jackman SC Solicitor for the Plaintiff Mallesons Stephen Jaques Date of Hearing: 29 October 2007 Date of Judgment: 29 October 2007