Exhibit 4(a) (ii)


DATED AS OF 13 OCTOBER 2008


THE COMMISSIONERS OF HER
MAJESTY’S TREASURY


and


LLOYDS TSB GROUP PLC


	
 


	



	
 


	
PREFERENCE SHARE SUBSCRIPTION AGREEMENT


	
 


	







Slaughter and May

One Bunhill Row

London

EC1Y 8YY

(NV/JAYP/ACZE)





THIS IS AGREEMENT IS EFFECTIVE AS OF 13
OCTOBER 2008 BETWEEN: 


	
 

	
 


	
(1)

	
THE
 COMMISSIONERS OF HER MAJESTY’S TREASURY, of 1 Horse Guards Road, London
 SW1A 2HQ (“HMT”) 


	
 

	
 


	
AND


	
 

	
 


	
(2)

	
LLOYDS
 TSB GROUP PLC incorporated in Scotland with registered number
 SC095000 and whose registered office is at Henry Duncan House, 120 George St,
 Edinburgh, Scotland, EH2 4LH (“Lloyds”);





WHEREAS:


HMT has agreed to subscribe for, and Lloyds has agreed to allot and
issue to HMT, the Preference Shares (as defined in this Agreement) in each case
on the terms and subject to the conditions set out in this Agreement. 


NOW IT IS HEREBY AGREED AS FOLLOWS: 


	
 

	
 


	
1.

	
Interpretation


	
 

	
 


	
1.1

	
In this Agreement:








	
 

	
 

	
 


	
“Acquisition”

	
 

	
has the meaning
 given to it in the Placing Agreement;


	
 

	
 

	
 


	
“Business
 Day”

	
 

	
means any day
 (other than a Saturday or Sunday) on which clearing banks are open for a full
 range of banking transactions in London;


	
 

	
 

	
 


	
“FSA”

	
 

	
has the meaning
 given to it in the Placing Agreement;


	
 

	
 

	
 


	
“Group”

	
 

	
has the meaning
 given to it in the Placing Agreement;


	
 

	
 

	
 


	
“HBOS
 Preference Share

 Subscription Agreement”

	
 

	
means the
 Preference Share Subscription Agreement between HBOS plc and HMT effective as
 of 13 October 2008;


	
 

	
 

	
 


	
“Lloyds
 Account”

	
 

	
means the bank
 account of Lloyds, the details of which shall be notified to HMT by Lloyds at
 least five Business Days prior to the Subscription Date;


	
 

	
 

	
 


	
“Placing
 Agreement”

	
 

	
means the
 agreement effective as of 13 October 2008 entered into by HMT, Lloyds, UBS
 Limited, Citigroup Global Markets Limited, Citigroup Global Markets U.K.
 Equity Limited and Merrill Lynch International relating to the placing and
 open offer of a number of Lloyds’s ordinary shares;


	
 

	
 

	
 


	
“Preference
 Admission”

	
 

	
has the meaning
 given to it in the Placing Agreement;












2


	
 

	
 

	
 


	
“Preference
 Prospectus”

	
 

	
has the meaning
 given to it in the Placing Agreement;


	
 

	
 

	
 


	
“Preference
 Shares”

	
 

	
means preferred
 shares issued by Lloyds with an aggregate liquidation preference of
 £1,000,000,000, having the rights and subject to the restrictions set out in
 Schedule 1 to this Agreement;


	
 

	
 

	
 


	
“Proceedings”

	
 

	
means any
 proceeding, suit or action arising out of or in connection with this
 Agreement;


	
 

	
 

	
 


	
“Prospectus
 Posting Date”

	
 

	
means the date on
 which Lloyds publishes the Preference Prospectus;


	
 

	
 

	
 


	
“Subscription
 Amount”

	
 

	
means
 £1,000,000,000;


	
 

	
 

	
 


	
“Subscription
 Date”

	
 

	
means the date on
 which Preference Admission occurs;


	
 

	
 

	
 


	
“Supplementary

 Preference Prospectus”

	
 

	
has the meaning
 given to it in the Placing Agreement; and


	
 

	
 

	
 


	
“Warranties”

	
 

	
means the
 representations, warranties and undertakings set out in Schedule 3 of the
 Placing Agreement.








	
 

	
 

	
 


	
1.2

	
In this Agreement,
 unless otherwise specified: 


	
 

	
 

	
 


	
 

	
(A)

	
the headings are
 inserted for convenience only and shall not affect the construction of this
 Agreement; 


	
 

	
 

	
 


	
 

	
(B)

	
any reference to
 an enactment or statutory provision is a reference to it as it may have been,
 or may from time to time be, amended, modified, consolidated or re-enacted
 (and includes all instruments or orders made under the enactment); 


	
 

	
 

	
 


	
 

	
(C)

	
references to
 Clauses and the Schedules are to Clauses of, and the Schedules to, this
 Agreement;


	
 

	
 

	
 


	
 

	
(D)

	
references to “pounds” and “£” are references
to the currency of the United Kingdom; and


	
 

	
 

	
 


	
 

	
(E)

	
Schedule 1 shall
 take effect as if set out in this Agreement and references to this Agreement
 shall be deemed to include Schedule 1. 


	
 

	
 

	
 


	
1.3

	
The parties agree
 that applications will be made to the UK Listing Authority for the Preference
 Shares to be admitted to the Official List of the UK Listing Authority and to
 the London Stock Exchange for the Preference Shares to be admitted to trading
 on the London Stock Exchange’s Regulated Market, and that for the purposes of
 such admission to trading the Preference Shares will be cleared through CREST
 (as defined in the Placing Agreement). 












3


	
 

	
 

	
 


	
2.

	
Agreement
 to Subscribe for Preference Shares 


	
 

	
 

	
 


	
2.1

	
Upon the terms and
 subject to the condition set out in Clause 3 of this Agreement and in
 reliance on the Warranties, HMT agrees to subscribe for, and Lloyds agrees to
 allot and issue to HMT, the Preference Shares. 


	
 

	
 

	
 


	
2.2

	
In consideration
 of the agreement to allot and issue the Preference Shares, and subject to
 Clause 3, HMT hereby undertakes to pay to Lloyds, or to procure the payment
 to Lloyds, of an amount equal to the Subscription Amount. 


	
 

	
 

	
 


	
3.

	
Condition
 


	
 

	
 

	
 


	
 

	
The obligations of
 HMT set out in Clause 2 to subscribe for the Preference Shares and to pay the
 Subscription Amount shall be conditional upon the Placing Agreement becoming
 wholly unconditional in accordance with its terms and this Agreement not
 having been terminated in accordance with Clause 7. 


	
 

	
 

	
 


	
4.

	
Warranties
 


	
 

	
 

	
 


	
4.1

	
Lloyds hereby
 represents, warrants and undertakes to HMT that: 


	
 

	
 

	
 


	
 

	
(A)

	
each Warranty in
 Part I of Schedule 3 of the Placing Agreement is true and accurate and not
 misleading as at the date of this Agreement; and 


	
 

	
 

	
 


	
 

	
(B)

	
each Warranty in
 Parts I and II of Schedule 3 of the Placing Agreement will be true and
 accurate and not misleading on the Prospectus Posting Date, at such time as a
 Supplementary Preference Prospectus shall be issued in accordance with the
 Placing Agreement (whether before or after Preference Admission), and
 immediately prior to Preference Admission, in each case by reference to the
 facts and circumstances then existing and will be treated as Warranties given
 and/or repeated on such dates. Warranties shall be deemed repeated under this
 clause in relation to the relevant document, announcement or event on the
 basis that any reference in any such Warranty to something being done or
 something being the case in relation to such document, announcement or event
 which is expressed in the future tense shall be regarded as being expressed
 in the present tense. 


	
 

	
 

	
 


	
4.2

	
Each of the
 Warranties shall be construed as a separate and independent warranty and
 (except where expressly provided to the contrary in the Placing Agreement)
 shall not be limited or restricted by reference to, or inference from, the
 terms of any other Warranty. 


	
 

	
 

	
 


	
5.

	
Subscription
 


	
 

	
 

	
 


	
5.1

	
On the
 Subscription Date, Lloyds shall: 


	
 

	
 

	
 


	
 

	
(A)

	
allot and issue
 the Preference Shares to HMT credited as fully paid; 












4


	
 

	
 

	
 


	
 

	
(B)

	
enter HMT, or its
 nominee, in its register of members as a shareholder of Lloyds in respect of
 the Preference Shares; and 


	
 

	
 

	
 


	
 

	
(C)

	
deliver share
 certificate(s) to HMT or its nominee in respect of the Preference Shares if
 applicable or take such other action as is necessary to vest ownership of the
 Preference Shares in HMT or its nominee. 


	
 

	
 

	
 


	
5.2

	
On the
 Subscription Date, HMT shall pay an amount equal to the Subscription Amount
 by CHAPS transfer for same day value to the Lloyds Account. 


	
 

	
 

	
 


	
5.3

	
Lloyds shall use
 reasonable endeavours to ensure that the Preference Shares remain admitted to
 the Official List of the UK Listing Authority and admitted to trading on the
 London Stock Exchange’s Regulated Market for so long as HMT holds any
 Preference Shares. 


	
 

	
 

	
 


	
5.4

	
HMT recognises
 that Lloyds is proposing to acquire HBOS plc. In anticipation of the
 implementation of that transaction, HMT and Lloyds agree to consider means
 (including, without limitation, a scheme of arrangement under the Companies
 Act 2006) by which the HBOS plc preference shares (if any) subscribed for or
 to be subscribed for by HMT pursuant to the HBOS Preference Share Subscription
 Agreement can be exchanged for or otherwise replaced by Lloyds preference
 shares on terms substantially the same as the Preference Shares in an
 efficient (including, without limitation, tax efficient) way and at no cost
 to HMT. HMT and Lloyds agree that they shall effect an exchange or
 replacement of such HBOS plc preference shares by such Lloyds preference
 shares on the basis described in the preceding sentence on the date Lloyds’
 acquisition of HBOS plc becomes effective (or as soon as reasonably practicable
 thereafter). 


	
 

	
 

	
 


	
6.

	
Use
 of Subscription Proceeds 


	
 

	
 

	
 


	
 

	
Lloyds agrees that
 it shall, promptly after the Subscription Date, apply the proceeds of the
 issue of the Preference Shares in such manner, in such form and for such
 regulatory capital purpose as may be agreed with HM Treasury, the Bank of
 England and the FSA.


	
 

	
 

	
 


	
7.

	
Termination
 


	
 

	
 

	
 


	
 

	
In the event of
 the Placing Agreement terminating in accordance with its terms, this
 Agreement shall terminate and have no further force or effect and no party shall
 have any claim against any other under this Agreement except: (i) in respect
 of any accrued rights arising from any prior breach of this Agreement; and
 (ii) in respect of this clause 7 and clauses 1.1, 1.2, 8, 9 and 11 to 18
 (inclusive), which shall remain in full force and effect notwithstanding such
 termination.


	
 

	
 

	
 


	
8.

	
Assignment
 and Novation 


	
 

	
 

	
 


	
8.1

	
Subject to clause
 8.2, HMT shall be permitted to novate its rights and obligations under this
 Agreement to any entity which is wholly-owned directly or indirectly by HMT
 (a Wholly Owned Entity) and
 Lloyds agrees to consent to, and to execute and deliver all such
 documentation as may be necessary to effect, any such novation provided that 












5


	
 

	
 


	
 

	
such novation is
 effected upon substantially the same terms as are contained in the pro forma
 novation agreement set out in Schedule 2 to this Agreement.


	
 

	
 


	
8.2

	
In the event that
 HMT novates its rights and obligations under this Agreement pursuant to
 clause 8.1, HMT shall procure that, immediately prior to any such Wholly
 Owned Entity ceasing to be wholly-owned directly or indirectly by HMT, such
 rights and obligations under this Agreement shall be novated to HMT or any
 other Wholly Owned Entity. 


	
 

	
 


	
8.3

	
Subject to Clause
 8.1, neither HMT nor Lloyds shall be permitted to assign or novate, or
 purport to assign or novate, all or any part of the benefit of, or its rights
 or benefits under, this Agreement to any other person without the prior
 written consent of the other party. 


	
 

	
 


	
9.

	
Costs
 and Expenses 


	
 

	
 


	
 

	
Lloyds shall bear
 the costs and expenses of both parties in relation to the negotiation of this
 Agreement and the subscription for, and allotment and issue of, the
 Preference Shares (including, without limitation, any stamp duty or stamp
 duty reserve tax).


	
 

	
 


	
10.

	
US
 Securities Laws 


	
 

	
 


	
 

	
Each of HMT and
 Lloyds acknowledge and agree that the Preference Shares have not been and
 will not be registered under the US Securities Act of 1933 (the “Securities
 Act”) and may not be offered or sold except in accordance with Rule 903 of
 Regulation S under the Securities Act or pursuant to an exemption from, or in
 a transaction not subject to, the registration requirements of the Securities
 Act.


	
 

	
 


	
11.

	
Entire
 Agreement 


	
 

	
 


	
11.1

	
This Agreement and
 the Placing Agreement constitute the whole and only agreement and
 understanding between the parties relating to the subject matter of this
 Agreement. All previous agreements, understandings, undertakings,
 representations, warranties and arrangements of any nature whatsoever between
 the parties or any of them with any bearing on the subscription of the
 Preference Shares are superseded and extinguished (and all rights and
 liabilities arising by reason of them, whether accrued or not at the date of
 this Agreement, are cancelled) to the extent they have such a bearing. 


	
 

	
 


	
11.2

	
This Agreement may
 only be varied by agreement in writing signed by each of the parties. 


	
 

	
 


	
12.

	
Notices
 


	
 

	
 


	
12.1

	
A notice under
 this Agreement shall only be effective if it is in writing. Faxes are
 permitted. 


	
 

	
 


	
12.2

	
Notices under this
 Agreement shall be sent to a party to this Agreement at its address or number
 and for the attention of the party set out below: 












6


	
 

	
 

	
 

	
 

	
 


	
Party

	
 

	
Address

	
 

	
Facsimile no.


	


	
 

	


	
 

	



	
 

	
 

	
 

	
 

	
 


	
Lloyds

	
 

	
Its registered
 office from time to time

	
 

	
020 7356 1038


	
 

	
 

	
 

	
 

	
 


	
fao: Company

 Secretary

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
 


	
HMT

 fao: Jeremy

 Pocklington

	
 

	
1 Horse Guards
 Road, London SW1A 2HQ

	
 

	
020 7270 7562








	
 

	
 

	
 


	
 

	
provided that a
 party may change its notice details on giving notice to the other party of
 the change in accordance with this clause. That notice shall only be
 effective on the day falling five clear Business Days after the notification
 has been received or such later date as may be specified in the notice.


	
 

	
 

	
 


	
12.3

	
Any notice given
 under this Agreement shall, in the absence of earlier receipt, be deemed to
 have been duly given as follows: 


	
 

	
 

	
 


	
 

	
(A)

	
if delivered
 personally, on delivery; 


	
 

	
 

	
 


	
 

	
(B)

	
if sent by first
 class post, two clear Business Days after the date of posting; and 


	
 

	
 

	
 


	
 

	
(C)

	
if sent by facsimile,
 when despatched. 


	
 

	
 

	
 


	
13.

	
Counterparts
 


	
 

	
 

	
 


	
13.1

	
This Agreement may
 be executed in any number of counterparts, and by the parties to it on
 separate counterparts, but shall not be effective until each party has
 executed at least one counterpart. 


	
 

	
 

	
 


	
13.2

	
Each counterpart
 shall constitute an original of this Agreement, but all the counterparts
 shall together constitute but one and the same instrument. 


	
 

	
 

	
 


	
14.

	
Invalidity
 


	
 

	
 

	
 


	
 

	
If at any time any
 provision of this Agreement is or becomes illegal, invalid or unenforceable
 in any respect under the law of any jurisdiction, that shall not affect or
 impair:


	
 

	
 

	
 


	
 

	
(A)

	
the legality,
 validity or enforceability in that jurisdiction of any other provision of
 this Agreement; or 


	
 

	
 

	
 


	
 

	
(B)

	
the legality,
 validity or enforceability under the law of any other jurisdiction of that or
 any other provision of this Agreement. 












7


	
 

	
 


	
15.

	
Contracts
 (Rights of Third Parties) Act 1999 


	
 

	
 


	
 

	
The parties to
 this Agreement do not intend that any term of this Agreement should be
 enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999,
 by any person who is not a party to this Agreement. 


	
 

	
 


	
16.

	
Choice
 of governing law 


	
 

	
 


	
 

	
This Agreement and
 any non-contractual obligations arising out of or in connection with it shall
 be governed by and construed in accordance with English law. 


	
 

	
 


	
17.

	
Jurisdiction
 


	
 

	
 


	
17.1

	
The courts of
 England are to have exclusive jurisdiction to settle any dispute arising out
 of or in connection with this Agreement. Any Proceedings shall be brought in
 the English courts. 


	
 

	
 


	
17.2

	
Lloyds waives (and
 agrees not to raise) any objection, on the ground of forum non conveniens or on any other
 ground, to the taking of proceedings in the English courts. Lloyds also
 agrees that a judgment against it in Proceedings brought in England shall be
 conclusive and binding upon it and may be enforced in any other jurisdiction.
 


	
 

	
 


	
17.3

	
Lloyds irrevocably
 submits and agrees to submit to the jurisdiction of the English courts. 


	
 

	
 


	
18.

	
Agent
 for Service of Process 


	
 

	
 


	
 

	
Lloyds shall at
 all times maintain an agent for service of process and for service of any
 other documents and proceedings in England, or any other proceedings in
 connection with this Agreement. Such agent shall be the London office of Lloyds,
 at the offices of Linklaters LLP, London and any writ, judgment or other
 notice of legal process shall be sufficiently served on Lloyds if delivered
 to such agent at its address for the time being. Lloyds irrevocably
 undertakes not to revoke the authority of the above agent and if, for any
 reason, the agent ceases to act as such, Lloyds shall appoint a replacement
 agent having an address for service in England and shall notify HMT of the
 name and address of such replacement agent. If Lloyds fails to appoint
 another agent, HMT shall be entitled to appoint one on Lloyds’s behalf and at
 Lloyds’s expense. 












8


Schedule 1


Terms of the Preference Shares






9


DESCRIPTION OF THE PREFERENCE SHARES


	
 

	
 

	
 


	
1

	
General
 


	
 

	
 

	
 


	
Each Preference
 Share will have a nominal value of £0.25 and will be issued fully paid for
 cash. The Preference Shares constitute a class of preference share capital in
 the Company and will be issued in definitive registered form. 


	
 

	
 

	
 


	
2

	
Dividends
 


	
 

	
 

	
 


	
 

	
2.1

	
Non-cumulative
 preferential dividends on the Preference Shares will accrue from the date the
 Company issues the Preference Shares. The Company will pay dividends when, as
 and if declared by the board of directors of the Company (the “Board of
 Directors”) or a duly authorised committee of the Board of Directors (the
 “Committee”). Subject to the discretions, limitations and qualifications set
 out herein, each Preference Share shall entitle the holder thereof to receive
 out of the distributable profits of the Company a non-cumulative preferential
 dividend (the “Preference Dividend”), in priority to the payment of any
 dividend to the holders of any class of Junior Share Capital and pari passu in such regard with the
 holders of any other class of non-cumulative preference shares in the capital
 of the Company or other Parity Securities. 


	
 

	
 

	
 


	
 

	
2.2

	
In respect of the
 period from (and including) the Issue Date to (but excluding) [5 yr + 1 day]
 2013 (the “First Call Date”), the Preference Dividend shall accrue at a rate
 of 12 per cent. per annum on the liquidation preference in respect of each
 Preference Share outstanding payable, subject as provided below,
 semi-annually in equal instalments in arrear in sterling on [●] and [●]
 in each year (save that the tenth Dividend Payment Date shall fall on the
 First Call Date) when, as and if declared by the Board of Directors or the
 Committee. The first payment of the Preference Dividend will be made on [●]
 2009 in respect of the period from (and including) the Issue Date to (but
 excluding) [●] 2009. For the purposes hereof, “liquidation preference”
 means, in relation to each Preference Share, an amount of £1,000. In respect
 of the period from (and including) the Issue Date to (but excluding) the
 First Call Date, the amount of dividend accruing in respect of any Fixed Rate
 Calculation Period will be calculated on the basis of the Fixed Rate Day
 Count Fraction. 


	
 

	
 

	
 


	
 

	
2.3

	
From (and
 including) the First Call Date, the dividend on the Preference Shares shall
 accrue at a rate, reset quarterly, equal to the aggregate of 7 per cent. per
 annum and LIBOR in respect of the relevant Dividend Period on the liquidation
 preference in respect of each Preference Share outstanding which dividend will
 be payable in quarterly instalments in arrear in sterling on [●], [●],
 [●] and [●] in each year (each, as adjusted in accordance with
 the Modified Following Business Day Convention, together with the payment
 dates specified in paragraph 2.2 above, a “Dividend Payment Date”) when, as
 and if declared by the Board of Directors or the Committee. The amount of
 dividend accruing in respect of any period commencing on or after the First
 Call Date will be calculated on the basis of the actual number of days elapsed
 in the relevant period divided by 365 or, if a leap year, 366 with the
 resultant figure rounded to the nearest £0.01 (£0.005 being rounded upwards).
 The Company shall, upon determining the rate at which the Preference Dividend
 will accrue pursuant to this paragraph 2.3, cause such rate and the amount
 payable in 












10


	
 

	
 

	
 


	
 

	
 

	
respect of the
 relevant Dividend Period on each Preference Share to be notified to holders
 of the Preference Shares in accordance with the Articles and (for so long as
 the Preference Shares are listed on such exchange) to the London Stock
 Exchange as soon as possible after determination of the rate, but in no event
 later than the fourth Business Day thereafter.


	
 

	
 

	
 


	
3

	
Declaration
 of Dividends 


	
 

	
 

	
 


	
If, in the opinion
 of the Board of Directors or the Committee, the distributable profits of the
 Company are sufficient to cover the payment, in full, of dividends accrued on
 the Preference Shares during the Dividend Period immediately preceding the
 relevant Dividend Payment Date and also the payment in full of all other
 dividends and other amounts stated to be payable on such date on any Parity
 Securities in issue (including any arrears of dividends or other amounts on
 any such Parity Securities which have rights to cumulative dividends or other
 amounts), the Board of Directors or the Committee may: 


	
 

	
 

	
 


	
 

	
(a)

	
declare and pay in
 full dividends on the Preference Shares on the relevant Dividend Payment
 Date; or 


	
 

	
 

	
 


	
 

	
(b)

	
in their sole and
 absolute discretion resolve at least 10 Business Days prior to the relevant
 Dividend Payment Date that no dividend shall be declared and paid on the
 Preference Shares or that a dividend on the Preference Shares shall be
 declared and paid only in part. 


	
 

	
 

	
 


	
Notwithstanding
 the Board of Directors’ or the Committee’s discretion described in (a) and
 (b) above, subject always to the existence of sufficient distributable
 profits as described in the first paragraph of this section and subject to
 the immediately following paragraph, dividends on the Preference Shares will
 be mandatorily payable as described under “Payment of Dividends” on each
 Dividend Payment Date upon which (i) a Capital Disqualification Event has
 occurred and (ii) the Company is in compliance with its Applicable Regulatory
 Capital Requirements. 


	
 

	
 

	
 


	
If, however, in
 the opinion of the Board of Directors or the Committee, the payment of any
 dividend on the Preference Shares would breach or cause a breach of the
 capital adequacy requirements of the FSA that apply at that time to the
 Company and/or any of its subsidiaries, then no dividend shall be declared or
 paid unless the FSA confirms that it has no objection to such declaration or
 payment. 


	
 

	
 

	
 


	
If, at least 10
 Business Days prior to a Dividend Payment Date, the Board of Directors or the
 Committee considers that the distributable profits of the Company are
 insufficient to cover the payment in full of dividends on the Preference
 Shares and also the payment in full of all other dividends or other amounts
 stated to be payable on such Dividend Payment Date on any Parity Securities
 (including any arrears of dividends and other amounts on any such Parity
 Securities which have rights to cumulative dividends or other amounts), then,
 subject as provided above on the restrictions relating to the Company’s capital
 adequacy requirements, the Board of Directors or the Committee may declare a
 reduced dividend on the Preference Shares. This will be paid in proportion to
 the dividends and other amounts which would have been due on the Preference
 Shares and any other shares and other instruments of the Company on such
 Dividend Payment Date which are expressed to rank equally with the Preference
 Shares as regards participation in profits (including any arrears of
 dividends and other amounts on any such Parity Securities which have rights
 to cumulative dividends or other amounts) if there had been sufficient
 profit. 












11


As soon as practicable after resolving that no dividends shall be
declared and paid or that they shall be declared and paid only in part, the
Board of Directors or the Committee shall give notice thereof to the holders of
the Preference Shares. 


	
 

	
 


	
4

	
Payment
 of Dividends 





The Company will pay dividends on the Preference Shares out of its
distributable profits in sterling, calculated on the liquidation preference of
£1,000 per Preference Share. Dividends on the Preference Shares may be paid by
the Company by crediting any account which the holder of the Preference Shares,
or in the case of joint holders, the holder whose name stands first in the
register in respect of the Preference Shares, has with the Company, whether in
the sole name of such holder or the joint names of such holder and another
person or persons, unless the Company has received not less than one month’s
notice in writing from such holder or joint holders directing that payment be
made in another manner permitted by the Articles. 


Any dividend on the Preference Shares may also be paid by cheque or
warrant sent by post addressed to the holder of the Preference Shares at his
registered address or, in the case of joint holders, addressed to the holder
whose name stands first in the register in respect of the Preference Shares at
his address as appearing in such register or addressed to such person at such
address as the holder or joint holders may in writing direct. 


Any such dividend may be paid by any bank or other funds transfer
system or, if agreed by the Company, such other means and to or through such
person as the holder or joint holders may in writing direct. 


If payment in respect of the Preference Shares into any such bank
account is to be made on a Dividend Payment Date or Redemption Date which is
not a Business Day, then payment of such amount will be made on the next
succeeding Business Day, without any interest or payment in respect of such
delay. 


Payment on redemption will be against presentation and surrender of the
relative certificate at the place or at one of the places specified in the
notice of redemption. 


Payments in respect of amounts payable by way of dividend on the Preference
Shares and on redemption of the Preference Shares will be subject in all cases
to any applicable fiscal or other laws and other regulations. 


Dividends on the Preference Shares will be non-cumulative and, to the
extent that the Board of Directors or the Committee does not declare a dividend
or any part of a dividend payable on a Dividend Payment Date in respect of the
Preference Shares, then holders of Preference Shares will have no claim in
respect of the non-payment. Except as described in this description of the
Preference Share rights, the holders of the Preference Shares will have no
right to participate in the Company’s profits. 


Any dividend which has remained unclaimed for 12 years from the date
when it became due for payment shall, if the Board of Directors so resolves, be
forfeited and shall revert to the Company. 


	
 

	
 

	
 


	
5

	
Restrictions
 on Dividends and Redemption 


	
 

	
 

	
 


	
 

	
5.1

	
If the Company has
 not declared or paid in full a dividend stated to be payable on the
 Preference Shares as a result only of the exercise of the discretion of the
 Board of Directors or the Committee, then the Company shall not during the
 Stopper Period: 












12


	
 

	
 

	
 

	
 


	
 

	
 

	
(a)

	
redeem, purchase,
 cancel, reduce or otherwise acquire in any other way any Parity Securities,
 Junior Share Capital or the 2004 Preference Shares; or 


	
 

	
 

	
 

	
 


	
 

	
 

	
(b)

	
declare, or pay or
 set aside any sum for payment of any distribution or dividend or make any
 other payment on, and will procure that no distribution or dividend or other
 payment is made on, any Parity Securities, Junior Share Capital or the 2004
 Preference Shares. 


	
 

	
 

	
 

	
 


	
 

	
5.2

	
Until the date on
 which the Preference Shares are redeemed or repurchased in full, the Company
 shall not: 


	
 

	
 

	
 

	
 


	
 

	
 

	
(a)

	
declare or pay any
 dividend or make any distribution (whether in cash or otherwise) on or in
 respect of the ordinary shares of the Company or set aside any sum to provide
 for payment of any such dividend or distribution (save that the foregoing
 restriction shall not apply to a capitalisation issue pursuant to which newly
 issued bonus shares are paid up out of undistributable reserves); or 


	
 

	
 

	
 

	
 


	
 

	
 

	
(b)

	
redeem, purchase,
 cancel or otherwise acquire in any way any ordinary shares of the Company or
 effect a reduction of the ordinary share capital of the Company which involves
 a distribution to holders of ordinary shares. 


	
 

	
 

	
 

	
 


	
6

	
Rights
 upon Liquidation 


	
 

	
 

	
 

	
 


	
On a return of
 capital or distribution of assets, whether or not on a winding-up (but other
 than a redemption or purchase by the Company of any of its share capital
 permitted by its Articles and under applicable law), holders of Preference
 Shares will rank in the application of the assets of the Company available to
 shareholders: (1) equally in all respects with holders of the most senior
 class of preference shares and any other class of shares of the Company in
 issue or which may be issued by the Company which are expressed to rank
 equally with the Preference Shares and (2) in priority to the holders of any
 other share capital of the Company (including the Junior Share Capital). 


	
 

	
 

	
 

	
 


	
Subject to such
 ranking, in such event holders of the Preference Shares will be entitled to
 receive out of the surplus assets of the Company remaining after payment of
 the Company’s prior-ranking liabilities a sum equal to the aggregate of: (1)
 £1,000 per Preference Share, (2) the amount of any dividend which is due for
 payment on the Preference Shares on or after the date of commencement of the
 winding-up or other return of capital but which is payable in respect of a
 period ending on or before such date and (3) the proportion of any dividend
 (whether or not declared or earned) that would otherwise be payable and is
 not otherwise paid in respect of any period that begins before, but ends
 after, the date of commencement of the winding-up or other return of capital
 and which is attributable to the part of the period that ends on such date.
 In respect of any such dividend, the amount of dividend accruing in respect
 of any such period will be calculated on the same basis as is applicable to
 calculation of a dividend accruing on the then-relevant basis. If, upon any
 return of capital or distribution of assets, the amounts available for
 payment are insufficient to cover the amounts payable in full on the
 Preference Shares and any Parity Securities and the 2004 Preference Shares,
 the holders of the Preference Shares and the holders of such Parity
 Securities and the 2004 Preference Shares will share rateably in the
 distribution of surplus assets (if any) of the Company in proportion to the
 full amounts to which they are respectively entitled. 


	
 

	
 

	
 

	
 


	
After payment of
 the full amount of the liquidation distribution to which they are entitled,
 the holders of the Preference Shares will have no claim on any of the
 Company’s remaining assets 












13


and will not be entitled to any further participation in the return of
capital. If there is a sale of all or substantially all of the Company’s
assets, the distribution to the Company’s shareholders of all or substantially
all of the consideration for the sale, unless the consideration, apart from
assumption of liabilities, or the net proceeds consists entirely of cash, will
not be deemed a return of capital in respect of the Company’s liquidation,
dissolution or winding-up. 


	
 

	
 


	
7

	
Redemption
 





Subject to the Articles (including the restrictions described under
“Restrictions on Dividends and Redemption” above), to the provisions of the
Companies Act and all other laws and regulations applying to the Company and to
confirmation from the FSA that it has no objection to the redemption (if such
confirmation is required, in which case the FSA may impose conditions on the
redemption), the Company may, at its option, upon not less than 30 nor more
than 60 days notice redeem all or some only of the Preference Shares on the
First Call Date, and on each Dividend Payment Date thereafter. The Redemption
Price shall be paid on each Preference Share so redeemed. In the event that
fewer than all the outstanding Preference Shares are to be redeemed, the
Preference Shares to be redeemed will be selected by the Company by means of a
draw at the registered office of the Company, or at any other place which the
Board of Directors or the Committee decides on, in the presence of its auditors
on such basis as the Board of Directors or the Committee considers appropriate
at the time. 


If the Preference Shares are to be redeemed, the Company must give a
written notice of redemption (a “Redemption Notice”) to the holders of the
Preference Shares, not less than 30 days nor more than 60 days prior to the
Redemption Date. Each Redemption Notice will specify (i) the Redemption Date
and (ii) the Redemption Price (specifying the amount of the accrued but unpaid
dividend to be paid). No defect in the Redemption Notice or in its service will
affect the validity of the redemption proceedings. 


Payments in respect of the amount due on redemption of a Preference
Share will be made by the same methods as described in “Payment of Dividends”.
Any such amount which has remained unclaimed for 12 years from the date when it
became due for payment shall be forfeited and shall revert to the Company. 


From the Redemption Date, the dividend will cease to accrue on the
Preference Shares being redeemed except on any Preference Share in respect of
which payment of the Redemption Price due on the Redemption Date is improperly
withheld or refused. In such case, the dividend will be deemed to have
continued and will accordingly continue to accrue at the rate which would have
applied but for the redemption, as described under “Payment of Dividends”
above, from the Redemption Date to the actual date of payment of the Redemption
Price. Such Preference Share will not be treated as having been redeemed until
the Redemption Price, including accrued dividend, has been paid. 


A receipt given by the holder for the time being of any Preference
Shares (or in the case of joint holders by the first-named joint holder) in
respect of the amount payable on redemption of such Preference Shares will
constitute an absolute discharge to the Company. 


	
 

	
 


	
8

	
Voting
 





Subject to the next paragraph immediately below, holders of Preference
Shares will only be entitled to receive notice of and to attend any general
meeting of Shareholders and to speak or vote upon any resolution proposed at
such meeting if a resolution is proposed either varying or abrogating any of
the rights and restrictions attached to the Preference Shares or to wind up, or







14


in relation to the winding up of, the Company (and then in each such
case only to speak and vote upon any such resolution). 


If on the applicable Dividend Payment Date immediately preceding the
date of notice of any general meeting of Shareholders, the dividend on the
Preference Shares has not been declared and paid in full, holders of the
Preference Shares will be entitled to speak and to vote upon all resolutions
proposed at such general meeting. In these circumstances only, the rights of
the holders of the Preference Shares so to speak and vote will continue until
the Company has resumed the payment in full of dividends on the Preference
Shares. 


On a show of hands, every holder of Preference Shares who is entitled
to vote or any proxy (other than the chairman of the meeting in his or her
capacity as proxy) or a corporate representative for that holder, in each case
who is present in person, will have one vote. On a poll, each holder of
Preference Shares who is entitled to vote and who is present in person, by
proxy or by corporate representative, will have one vote for each £0.25 of
nominal value of Preference Shares of which he or she is the holder. 


Other provisions in the Articles relating to voting rights and
procedures also apply to the Preference Shares. 


	
 

	
 


	
9

	
Purchase
 of own shares 





Subject to the Articles, the provisions of the Companies Act, all other
laws and regulations applying to the Company and the rights conferred on any
other class of shares of the Company described under “Restrictions on Dividends
and Redemption” above and confirmation from the FSA that it has no objection to
the purchase (for so long as the Company is required to obtain such
confirmation), the Company may at any time and from time to time (subject to
the payment in full of the dividend on the Preference Shares on the immediately
preceding Dividend Payment Date) purchase any Preference Shares in issue in the
open market or by tender upon such terms and conditions as the Board of
Directors or the Committee may determine. The Company will not be required to
select the shares to be purchased rateably or in any particular manner as
between the holders of Preference Shares or as between them and the holders of
shares of any other class (whether or not the Preference Shares rank prior to
such other shares). Any such Preference Shares repurchased shall be cancelled
by the Company. 


	
 

	
 

	
 

	
 


	
10

	
Untraced
 shareholders


	
 

	
 

	
 

	
 


	
 

	
10.1

	
The Articles
 provide that the Company may sell any Preference Shares of a holder of
 Preference Shares at the best price reasonably obtainable at the time of such
 sale if and provided that: 


	
 

	
 

	
 

	
 


	
 

	
 

	
(a)

	
during the period
 of 12 years prior to the date of the publication of the advertisements
 referred to in sub-paragraph (b) below (or, if published on different dates,
 the first thereof) at least three dividends on the Preference Shares have
 become payable and no dividend on those Preference shares has been claimed; 


	
 

	
 

	
 

	
 


	
 

	
 

	
(b)

	
the Company shall
 on expiry of such period of 12 years have inserted advertisements in both a
 national newspaper and a newspaper circulating in the area of the registered
 address of the holder of such Preference Shares within the United Kingdom, or
 (if such holder has no such address) of the address, if any, within the
 United Kingdom supplied by such holder to the 














15


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Company for the
 service of documents giving notice of its intention to sell the Preference
 Shares; and 


	
 

	
 

	
 

	
 


	
 

	
 

	
(c)

	
during the period
 of three months following the publication of such advertisements the Company
 shall have received no communication from such holder. 


	
 

	
 

	
 

	
 


	
 

	
10.2

	
To give effect to
 any such sale the Company may appoint any person to transfer those Preference
 Shares, and such transfer shall be as effective as if it had been carried out
 by the holder of such Preference Shares and the title of the transferee shall
 not be affected by any irregularity or invalidity in the proceedings relating
 thereto. 


	
 

	
 

	
 

	
 


	
 

	
10.3

	
The net proceeds
 of sale shall belong to the Company which shall be obliged to account to the
 former holder of such Preference Shares for an amount equal to such proceeds
 and shall enter the name of such former holder in the books of the Company as
 a creditor for such amount which shall be a debt of the Company. Any net
 proceeds of sale unclaimed after a period of 12 years from the date of sale
 shall be forfeited and shall revert to the Company. 


	
 

	
 

	
 


	
11

	
Form
 and Denomination 


	
 

	
 

	
 


	
The Preference
 Shares will, when issued, be fully paid and, as such, will not be subject to
 a call for any additional payment. For each Preference Share issued, an
 amount equal to its nominal value of £0.25 will be credited to the Company’s
 issued share capital account and an amount of £999.75, being the difference
 between its nominal value and its issue price, will be credited to the
 Company’s share premium account. 


	
 


	
The Preference
 Shares will be issued in definitive registered form. Title to the Preference
 Shares will pass by transfer and registration in the register of members of
 the Company in accordance with the Articles and applicable law. 


	
 


	
Each registration
 of transfer of Preference Shares will be effected by entry on the register
 for the Preference Shares kept by the Company’s registrar at its office in
 the UK. See “Registrar and Paying Agent” below. Any registration of transfer
 will be effected without charge to the person requesting the exchange or
 registration, but the requesting person will be required to pay any related
 taxes, stamp duties or other governmental charges. 


	
 


	
12

	
Variation
 of Rights 


	
 

	
 


	
If applicable law
 permits, the rights, preferences and privileges attached to Preference Shares
 may be varied or abrogated only with the written consent of the holders of 75
 per cent. in nominal value of the outstanding Preference Shares or with the
 sanction of an extraordinary resolution passed at a separate class meeting of
 the holders of the outstanding Preference Shares. An extraordinary resolution
 will be adopted if passed by a majority of 75 per cent. of those holders
 voting in person or by proxy at the meeting. The quorum required for any such
 class meeting will be two persons at least holding or representing by proxy
 one-third in nominal amount of the outstanding Preference Shares affected,
 except at any adjourned meeting where this quorum requirement is not met,
 where any two holders present in person or by proxy will constitute a quorum.
 


	
 


	
The written
 consent of the holders of 75 per cent. in nominal value of the outstanding
 Preference Shares or the sanction of an extraordinary resolution passed at a
 separate class meeting of holders of the outstanding Preference Shares will
 be required if the Board of 












16


	
 

	
 


	
Directors propose
 to authorise, create or increase the amount of any shares of any class or
 any security convertible into shares
 of any class ranking as regards rights to participate in the Company’s
 profits or assets, in priority to the Preference Shares.


	
 


	
If the Company has
 paid the most recent dividend payable on the Preference Shares in full, the
 rights attached to the Preference Shares will not be deemed to be varied by the
 creation or issue of any further non-cumulative preference shares or of any
 other further shares ranking equally as regards participation in the
 Company’s profits or assets with, or junior to, the Preference Shares,
 whether carrying identical rights or different rights in any respect,
 including as to dividend, premium on a return of capital, redemption or
 conversion and whether denominated in sterling or any other currency. 


	
 


	
13

	
Notices
 


	
 


	
Notices given by
 the Company will be given by the Registrar on its behalf unless the Company
 decides otherwise. A notice may be given by the Company to any holder by
 sending it by post to the holder’s registered address. Service of the notice
 shall be deemed to be effected by properly addressing, prepaying and posting
 a letter containing the notice, and to have been effected on the day after
 the letter containing the same is posted. Where a holder’s registered address
 is outside the United Kingdom, all notices shall be sent to him by air mail
 post. 


	
 


	
A notice may be
 given by the Company to the joint holders of Preference Shares by giving the
 notice to the joint holder first named in the register. 


	
 


	
A notice may be
 given by the Company to the extent permitted by the Companies Act and the FSA
 in its capacity as competent authority under the Financial Services and
 Markets Act 2000 (the “UK Listing Authority”) by electronic communication, if
 so requested or authorised by the holder, the holder having notified the
 Company of an e-mail address to which the Company may send electronic
 communications, and having agreed to receive notices and other documents from
 the Company by electronic communication. If a holder notifies the Company of
 an e-mail address, the Company may send the holder the notice or other
 document by publishing the notice or other document on a website and
 notifying the holder by e-mail that the notice or other document has been
 published on the website. The Company must also specify the address of the
 website on which it has been published, the place on the website where the
 notice may be accessed and how it may be accessed, and where the notice in
 question is a notice of a meeting, the notice must continue to be published
 on that website throughout the period beginning with the giving of that
 notification and ending with the conclusion of the meeting, save that if the
 notice is published for part only of that period then failure to publish the
 notice throughout that period shall not invalidate the proceedings of the
 meeting where such failure is wholly attributable to circumstances which it
 would not be reasonable to have expected the Company to prevent or avoid. 


	
 


	
In addition, for
 so long as the Preference Shares are listed and admitted to trading on any
 stock exchange, notices shall be given in accordance with any requirements of
 such exchange. 


	
 


	
14

	
No
 Additional Amounts 


	
 


	
If at any time the
 Company is required by a tax authority to deduct or withhold taxes from
 payments made by the Company with respect to the Preference Shares, the
 Company will not pay additional amounts. As a result, the net amount received
 from the Company by each holder of a Preference Share, after the deduction or
 withholding, will be less than the amount the holder would have received in
 the absence of the deduction or the withholding. 












17


	
 

	
 


	
15

	
Governing
 Law 


	
 

	
 


	
The creation and
 issuance of the Preference Shares and the rights attached to them shall be
 governed by and construed in accordance with the laws of Scotland. 


	
 


	
16

	
Registrar
 and Paying Agent 


	
 


	
The Company’s
 company secretarial department will maintain the register and the Company
 will act as Registrar and Paying Agent. 


	
 


	
The Company
 reserves the right at any time to appoint an additional or successor
 registrar or paying agent; provided, however, that if, and for so long as,
 the Preference Shares are listed on the Official List of the UK Listing
 Authority and to trading on the London Stock Exchange plc’s Regulated Market
 (the “Market”) and the applicable rules so require, the Company shall
 maintain a paying agent having its specified office in London. Notice of any
 change of registrar or agent will be given to holders of the Preference
 Shares. 


	
 


	
17

	
Further
 Issues 


	
 

	
 


	
Subject to the
 provisions set out in “Variation of Rights”, the Company may, at any time and
 from time to time, and without any consent or sanction of the holders of the
 Preference Shares, create or issue further preference shares or other share
 capital ranking equal or junior to the Preference Shares. The creation or
 issuance of further preference shares or other share capital ranking equally
 with the Preference Shares will not be deemed to alter, vary, affect, modify
 or abrogate any of the rights attaching to the Preference Shares. These
 rights will not be deemed to be varied by any change to the provisions in the
 Articles, other than a change which would result in any further preference
 shares or other share capital ranking senior to the Preference Shares. Any
 further series of preference shares or other share capital ranking equal or
 junior to the Preference Shares may either carry identical rights in all
 respects with the Preference Shares (except as regards the date from which
 such shares rank for dividend) or carry different rights. 


	
 


	
18

	
Definitions
 





“Applicable Regulatory Capital
Requirements” means any requirements contained in Capital
Regulations for the maintenance of capital from time to time applicable to the
Company on a solo and/or consolidated basis, including transitional rules and
waivers; 


“Articles” means the
articles of association of the Company; 


“Business Day” means a day
on which banks are open for business in London; 


“Capital Disqualification Event”
shall be deemed to have occurred if (a) the Preference Shares would cease to be
eligible to qualify (save where such non-qualification is only as a result of
any applicable limitation on the amount of such capital) as regulatory capital
for the Company under Applicable Regulatory Capital Requirements and (b) the
FSA has confirmed to the Company that the Preference Shares would cease to be
eligible to qualify as regulatory capital for the Company;


“Capital Regulations”
means at any time the regulations, requirements, guidelines and policies
relating to capital adequacy then in effect of the FSA or other relevant
regulator; 


“Companies Act” means the
Companies Act 1985 (as amended from time to time); 


“Company” means Lloyds TSB
Group plc; 






18


“Directors” means the
executive and non-executive directors of the Company who make up its board of
directors; 


“Distributable Profits”
has the meaning given to it in the Companies Act as, in general terms and
subject to adjustment, accumulated realised profits less accumulated realised
losses; 


“Dividend Determination Date”
means, in relation to each Dividend Period commencing on or after [●],
the first day of such Dividend Period, provided that if the First Call Date is
not a Business Day, the Dividend Determination Date in respect of the Dividend
Period commencing on the First Call Date shall be the Business Day immediately
preceding the First Call Date; 


“Dividend Payment Date”
means (i) [●] and [●] in each year up to and including the First
Call Date, save that the tenth Dividend Payment Date shall fall on the First
Call Date and (ii) thereafter, subject to the Modified Following Business Day
Convention, [●], [●], [●] and [●] in each year; 


“Dividend Period” means
the period from and including the most recent Dividend Payment Date (or the
Issue Date) to but excluding the next proceeding Dividend Payment Date; 


“First Call Date” means [5
years + 1 day] 2013; 


“Fixed Rate Calculation Period”
means the period from (and including) the most recent Dividend Payment Date
(or, if none, the Issue Date) to (but excluding) the relevant payment date; 


“Fixed Rate Day Count Fraction”
means the actual number of days in the period from and including the date from
which dividends begin to accrue for the relevant Fixed Rate Calculation Period
(the “Accrual Date”) to but excluding the date on which it falls due divided by
two times the actual number of days from and including the Accrual Date to but
excluding the next following Dividend Payment Date;


“FSA” means the Financial
Services Authority or such other governmental authority in the United Kingdom
(or if the Company becomes domiciled in a jurisdiction other than the United
Kingdom, in such other jurisdiction) having primary bank supervisory authority;



“Issue Date” means [●]
2008; 


“Junior Share Capital”
means the ordinary shares, or any other shares ranking, or expressed to rank
junior to the Preference Shares (either issued directly by the Company or by a
subsidiary undertaking and the terms of which securities benefit from a
guarantee or support agreement ranking or expressed to rank junior to the
Preference Shares); 


“LIBOR” means, in relation
to a Dividend Period, the offered rate for three month deposits in sterling as
at 11.00 a.m. London time on the related Dividend Determination Date appearing
on the display designated as page “LIBOR01” on the Reuters Service (or such
other page or service as may replace it for the purpose of displaying such
information) as determined by the Company; 


“Modified Following Business Day
Convention” means if a Dividend Payment Date falls on a day which is
not a Business Day, such Dividend Payment Date shall be postponed to the next
day which is a Business Day unless it would fall into the next calendar month
in which event such Dividend Payment Date shall be brought forward to the
immediately preceding day which is a Business Day; 






19


“Parity Securities” means
the most senior ranking class or classes of non-cumulative preference shares in
the capital of the Company from time to time and any other obligations ranking
or expressed to rank pari passu with
the Preference Shares other than the 2004 Preference Shares; 


“Paying Agent” means the
Company or any other entity appointed by it and notified by the Company to the
holders of the Preference Shares to perform the function as Paying Agent in
respect of the Preference Shares; 


“Preference Shares” means
the £1,000,000,000 in aggregate value of the Fixed/Floating Rate Non-Cumulative
Callable Preference Shares of the Company; 


“Redemption Date” means
the date on which the Preference Shares are called for redemption in accordance
with paragraph 7 above; 


“Redemption Price” means
the liquidation preference of £1,000 per Preference Share to be redeemed plus
the dividend accrued for the Dividend Period in which the Redemption Date falls
to, but excluding, the Redemption Date, but only to the extent that any such
amount was, or would have been, payable as a cash dividend; 


“Shareholder” means a
holder of the Company’s shares; 


“Stopper Period” means with
respect to any Dividend Payment Date or the equivalent term in respect of any
Parity Security, one calendar year from and including the earlier of the date
(i) on which a full Dividend is not paid on the Preference Shares or (ii) on
which a full scheduled dividend or distribution on any Parity Security has not
been paid; and 


“2004 Preference Shares”
means the 400 6% Non-Cumulative Redeemable Preference Shares of £0.25 par value
each issued in 2004. 






20


Schedule 2


Pro-forma Novation Agreement


THIS NOVATION AGREEMENT is made the [●] day of [●], 20[●]



BETWEEN: 


	
 

	
 


	
1.

	
THE
 COMMISSIONERS OF HER MAJESTY’S TREASURY, of 1 Horse Guards Road, London
 SW1A 2HQ (“HMT”) 


	
 

	
 


	
2.

	
LLOYDS
 TSB GROUP PLC incorporated in Scotland with registered number
 SC095000 and whose registered office is at Henry Duncan House, 120 George St,
 Edinburgh, Scotland, EH2 4LH; (“Lloyds”)
 


	
 

	
 


	
AND 

	
 


	
 

	
 


	
3.

	
[           
              ]
 of

[                                                                             ]
 (registered in England No.

[           
              ])
 (the “Company”)


	
 

	
 


	
WHEREAS:


	
 

	
 


	
(A)

	
HMT has agreed to
 subscribe for, and Lloyds has agreed to allot and issue to HMT, the
 Preference Shares (as defined in this Agreement) pursuant to the Preference
 Share Subscription Agreement (as defined in this agreement). 


	
 

	
 


	
(B)

	
HMT wishes to be
 released and discharged from the Preference Share Subscription Agreement and
 Lloyds has agreed to release and discharge HMT from the Preference Share
 Subscription Agreement upon the terms of the Company’s undertaking to perform
 the Preference Share Subscription Agreement and be bound by its terms in the
 place of HMT and HMT agreeing to guarantee the Company’s obligations in respect
 of the Preference Share Subscription Agreement. 


	
 

	
 


	
NOW IT IS AGREED
 as follows:-


	
 

	
 


	
1.

	
INTERPRETATION
 


	
 

	
 


	
1.1

	
In this agreement:







	
 

	
 


	
“Preference
 Shares”

	
means [insert relevant number] of preferred
 shares of [£●] each, having the rights and subject to the restrictions
 set out in Schedule 1 to the Preference Share Subscription Agreement;


	
 

	
 


	
“Preference
 Share

 Subscription Agreement”

	
means the
 agreement effective as of 13 October 2008 between HMT and Lloyds pursuant to
 which HMT agreed to subscribe for, and Lloyds agree to allot and issue to
 HMT, the Preference Shares; and












21


	
 

	
 


	
“Proceedings”

	
means any
 proceeding, suit or actions arising out of or in connection with this
 Agreement.








	
 

	
 

	
 


	
1.2

	
In this agreement,
 unless otherwise specified: 


	
 

	
 


	
 

	
(A)

	
references to
 clauses and sub-clauses are to clauses and sub-clauses of this agreement; and
 


	
 

	
 

	
 


	
 

	
(B)

	
headings to
 clauses and schedules are for convenience only and do not affect the
 interpretation of this agreement. 


	
 

	
 

	
 


	
2.

	
COMPANY’S
 UNDERTAKING 


	
 

	
 

	
 


	
 

	
With effect from
the date of this agreement and in consideration of the undertakings given by
Lloyds in clause 3, the Company hereby undertakes to observe, perform,
discharge and be bound by the Preference Share Subscription Agreement as if
the Company were a party to that agreement in the place of HMT. Notwithstanding this undertaking, nothing
in this agreement shall:  


	
 

	
 

	
 


	
 

	
(A)

	
require the
 Company to perform any obligation created by or arising under the Preference
 Share Subscription Agreement falling due for performance in its entirety, or
 which should have been performed in its entirety, before the date of this
 agreement; 


	
 

	
 

	
 


	
 

	
(B)

	
make the Company
 liable for any act, neglect, default or omission in respect of the Preference
 Share Subscription Agreement committed by HMT or occurring before the date of
 this agreement; or 


	
 

	
 

	
 


	
 

	
(C)

	
impose any
 obligation on the Company for or in respect of any obligation performed by
 HMT under the Preference Share Subscription Agreement before the date of this
 agreement. 


	
 

	
 

	
 


	
3.

	
LLOYDS’
 UNDERTAKING AND RELEASE OF HMT 


	
 

	
 

	
 


	
3.1

	
With effect from
 the date of this agreement and in consideration of the undertakings given by
 the Company in clause 2 and the undertakings and guarantee given by
 HMT in clauses 4 and 5 respectively, Lloyds hereby: 


	
 

	
 

	
 


	
 

	
(A)

	
releases and
 discharges HMT from all obligations to observe, perform, discharge and be
 bound by the Preference Share Subscription Agreement; 


	
 

	
 

	
 


	
 

	
(B)

	
accepts the
 Company’s undertaking to observe, perform, discharge and be bound by the
 Preference Share Subscription Agreement (such undertaking being set out in clause
 2); and 


	
 

	
 

	
 


	
 

	
(C)

	
agrees to observe,
 perform, discharge and be bound by the Preference Share Subscription
 Agreement as if the Company were a party to the Preference Share Subscription
 Agreement in the place of HMT. 












22


	
 

	
 

	
 


	
3.2

	
Notwithstanding
 the provisions of sub-clause 3.1(A), nothing in this agreement shall
 affect or prejudice any claim or demand whatsoever which Lloyds may have
 against HMT in relation to the Preference Share Subscription Agreement and
 (i) arising out of matters prior to the date of this agreement and/or (ii)
 arising in connection with those matters contemplated in clause 2(A), (B) or
 (C). 


	
 

	
 

	
 


	
4.

	
HMT’S
 UNDERTAKING AND RELEASE OF LLOYDS 


	
 

	
 


	
 

	
With effect from
 the date of this agreement and in consideration of the undertakings given by
 Lloyds in clause 3, HMT hereby releases and discharges Lloyds from all
 obligations to observe, perform, discharge and be bound by the Preference
 Share Subscription Agreement.
 Notwithstanding this undertaking and release, nothing in this
 agreement shall affect or prejudice any claim or demand whatsoever which HMT
 may have against Lloyds in relation to the Preference Share Subscription
 Agreement and (i) arising out of matters prior to the date of this agreement
 and/or (ii) arising in connection with those matters contemplated in clause
 2(A), (B) or (C). 


	
 

	
 


	
5.

	
GUARANTEE
 AND INDEMNITY 


	
 

	
 


	
5.1

	
In consideration
 of the undertakings given by Lloyds in clause 3, HMT hereby unconditionally
 and irrevocably guarantees to Lloyds the due and punctual performance and
 observance by the Company of all its obligations, commitments and
 undertakings under or pursuant to this agreement and agrees to indemnify
 Lloyds against all loss, damage, costs and breach by the Company of its
 obligations, commitments or undertakings under or pursuant to this
 agreement. The liability of HMT under
 this agreement shall not be released or diminished by any variation of the
 terms of this agreement or the Preference Share Subscription Agreement as
 novated by this agreement (whether or not agreed by HMT), any forbearance,
 neglect or delay in seeking performance of the obligations hereby imposed or
 any granting of time for such performance. 


	
 

	
 

	
 


	
5.2

	
If and whenever
 the Company defaults for any reason whatsoever in the performance of any
 obligation or liability undertaken or expressed to be undertaken by the
 Company under or pursuant to this agreement, HMT shall forthwith upon demand
 unconditionally perform (or procure performance of) and satisfy (or procure
 the satisfaction of) the obligation or liability in regard to which such
 default has been made so that the same benefits shall be conferred on Lloyds
 as it would have received if such obligation or liability had been duly
 performed and satisfied by the Company. 


	
 

	
 

	
 


	
5.3

	
This guarantee is
 to be a continuing guarantee and accordingly is to remain in force until all
 the obligations, commitments and undertakings of the Company referred to in sub-clause
 5.1 shall have been performed or satisfied. This guarantee is in addition to and without prejudice to and
 not in substitution for any rights or security which Lloyds may now or
 hereafter have or hold for the performance and observance of the obligations,
 commitments and undertakings of the Company under or in connection with this
 agreement. 












23


	
 

	
 

	
 


	
5.4

	
As a separate and
 independent stipulation HMT agrees that any obligation expressed to be
 undertaken by the Company (including, without limitation, any moneys expressed
 to be payable under this agreement or the Preference Share Subscription
 Agreement as novated by this
 agreement) which may not be enforceable against or recoverable from the
 Company by reason of any legal limitation, disability or incapacity on or of
 the Company or any other fact or circumstance (other than any limitation
 imposed by this agreement or the Preference Share Subscription Agreement as
 novated by this agreement) shall nevertheless be enforceable against and
 recoverable from HMT as though the same had been incurred by HMT and HMT were
 the sole or principal obligor in respect thereof. 


	
 

	
 

	
 


	
6.

	
NOTICES
 


	
 

	
 


	
 

	
For the purposes
 of all provisions in the Preference Share Subscription Agreement concerning
 the service of notices, the address of the Company is its registered office
 as shown above from time to time and its fax number is [●]. All notices served on the Company under
 the Preference Share Subscription Agreement should be marked for the
 attention of [●]. 


	
 

	
 


	
7.

	
COMPANY
 CEASING TO BE WHOLLY OWNED BY HMT 


	
 

	
 


	
 

	
In the event that
 the Company at any time after the date of this Agreement ceases to be
 directly or indirectly wholly-owned by HMT, the Company shall, and HMT will
 procure that the Company shall, enter into a novation agreement upon substantially
 the same terms as this Agreement such that the rights and obligations assumed
 by the Company under this Agreement are novated either to HMT or to an entity
 which is, directly or indirectly, wholly owned by HMT. Lloyds hereby agrees to consent to, and to
 execute and deliver all such documentation as may be necessary to effect,
 such novation provided that such novation is effected upon substantially the
 same terms as this Agreement. 


	
 

	
 


	
8.

	
COUNTERPARTS
 


	
 

	
 


	
8.1

	
This agreement may
 be executed in any number of counterparts, and by the parties on separate
 counterparts, but shall not be effective until each party has executed at
 least one counterpart. 


	
 

	
 

	
 


	
8.2

	
Each counterpart
 shall constitute an original of this agreement, but all the counterparts shall
 together constitute but one and the same instrument. 


	
 

	
 

	
 


	
9.

	
GOVERNING
 LAW AND JURISDICTION 


	
 

	
 


	
9.1

	
This agreement and
 all non-contractual obligations arising out of or in connection with it shall
 be governed by and construed in accordance with English law. 


	
 

	
 

	
 


	
9.2

	
The courts of
 England are to have exclusive jurisdiction to settle any dispute arising out
 of or in connection with this agreement.
 Any Proceedings shall be brought in the English courts. 












24


	
 

	
 

	
 


	
10.

	
[AGENT
 FOR SERVICE OF PROCESS]


	
 

	
 


	
 

	
[To
 be included if the Company is not a company incorporated in England: 


	
 

	
 


	
 

	
The
 Company shall at all times maintain an agent for service of process and for
 service of any other documents and proceedings in England, or any other
 proceedings in connection with this Agreement. Such agent shall be [agent with address in England] and any
 writ, judgment or other notice of legal process shall be sufficiently served
 on the Company if delivered to such agent at its address for the time
 being. The Company irrevocably
 undertakes not to revoke the authority of the above agent and if, for any
 reason, the agent ceases to act as such, the Company shall appoint a
 replacement agent having an address for service in England and shall notify
 Lloyds and HMT of the name and address of such replacement agent. If the Company fails to appoint another
 agent, Lloyds shall be entitled to appoint one on the Company’s behalf and at
 the Company’s expense.]





IN WITNESS of which this Agreement has been executed on the date which
first appears on page 1 of this Agreement. 


	
 


	



	
 


	
 


	



	
For and on behalf
 of 


	
THE
 COMMISSIONERS OF HER MAJESTY’S TREASURY


	
 


	
 


	



	
For and on behalf
 of 


	
LLOYDS
 TSB GROUP PLC


	
 


	
 


	



	
For and on behalf
 of [insert name of the Company]
 












25


IN WITNESS of which this Agreement has been executed as of the date
which first appears on page 1 of this Agreement on the dates which appear
below. 


	
 

	
 


	
Signed by:

	
 


	
for and on behalf
 of

	
TONY
 CUNNINGHAM


	
THE
 COMMISSIONERS

	
 


	
OF
 HER MAJESTY’S TREASURY

	
BOB
 BLIZZARD


	
 

	
 


	
Signed by:

	
 


	
for and on behalf
 of

	
 


	
LLOYDS
 TSB GROUP PLC

	
G
 TRUETT TATE