Exhibit 4(a) (iii) 


Dated as of 13 October 2008


HBOS PLC


and


MORGAN STANLEY & CO.
INTERNATIONAL PLC


and


DRESDNER KLEINWORT LIMITED 


and 


THE COMMISSIONERS OF HER
MAJESTY’S TREASURY


	
 


	



	
 


	
PLACING AND OPEN OFFER AGREEMENT


	
 


	







Slaughter and May 

One Bunhill Row 

London 

EC1Y 8YY 

(JAYP/ACZE)






Contents


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
Page


	
 


	
1.

	
 

	
INTERPRETATION

	
 

	
2

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
2.

	
 

	
CONDITIONS

	
 

	
20

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
3.

	
 

	
THE PLACING AND
 OPEN OFFER AND APPOINTMENTS

	
 

	
27

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
4.

	
 

	
ALLOTMENT OF THE
 NEW SHARES, CONSIDERATION AND REGISTRATION

	
 

	
34

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
5.

	
 

	
OVERSEAS
 SHAREHOLDERS

	
 

	
35

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
6.

	
 

	
HM TREASURY
 ACQUISITION

	
 

	
38

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
7.

	
 

	
CAPACITY

	
 

	
40

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
8.

	
 

	
FEES, COMMISSIONS,
 EXPENSES AND VAT

	
 

	
41

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
9.

	
 

	
COVENANTS

	
 

	
43

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
10.

	
 

	
REPRESENTATIONS,
 WARRANTIES AND UNDERTAKINGS

	
 

	
47

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
11.

	
 

	
INDEMNITIES

	
 

	
49

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
12.

	
 

	
CONTRIBUTION

	
 

	
52

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
13.

	
 

	
TERMINATION

	
 

	
53

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
14.

	
 

	
EXCLUSIONS OF
 LIABILITY

	
 

	
57

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
15.

	
 

	
MISCELLANEOUS

	
 

	
58

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
16.

	
 

	
GENERAL

	
 

	
58

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
17.

	
 

	
ASSIGNMENT OR
 NOVATION

	
 

	
60

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
18.

	
 

	
NOTICES

	
 

	
61

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
19.

	
 

	
GOVERNING LAW AND
 SUBMISSION TO JURISDICTION

	
 

	
62

	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
SCHEDULE 1
 CERTIFICATES TO BE DELIVERED

	
 

	
64

	
 


	
 

	
 

	
 

	
 


	
SCHEDULE 2
 DOCUMENTS TO BE DELIVERED

	
 

	
68

	
 


	
 

	
 

	
 

	
 


	
SCHEDULE 3
 WARRANTIES

	
 

	
76

	
 


	
 

	
 

	
 

	
 


	
SCHEDULE 4 PRO
 FORMA NOVATION AGREEMENT

	
 

	
98

	
 


	
 

	
 

	
 

	
 


	
SCHEDULE 5 CONDITIONS
 TERM SHEET

	
 

	
103

	
 












THIS AGREEMENT is effective as of 13 October 2008 among:


	
 

	
 


	
(1)

	
HBOS
 PLC,
 a company incorporated in Scotland with registered number 218813 and whose
 registered office is at The Mound, Edinburgh EH1 1YZ (the “Company”);


	
 

	
 


	
(2)

	
MORGAN
 STANLEY & CO. INTERNATIONAL PLC, a company incorporated in England and Wales with
 registered number 02068222 whose registered office is at 25 Cabot Square,
 Canary Wharf, London E14 4QA (“Morgan
 Stanley”); 


	
 

	
 


	
(3)

	
DRESDNER
 KLEINWORT LIMITED, a company incorporated in England and Wales with
 registered number 00551334 and whose registered office is at 30 Gresham
 Street, London EC2V 7PG (“Dresdner”);
 and


	
 

	
 


	
(4)

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


	
 

	
 


	
WHEREAS:


	
 


	
(A)

	
The Company
 proposes to invite Qualifying Shareholders to apply to acquire New Shares at
 the Issue Price by way of an open offer and on the terms and subject to the
 conditions to be set out in the Circular, the Prospectus and (in the case of
 Qualifying Non-CREST Shareholders only) the Application Form.


	
 

	
 


	
(B)

	
Each of Morgan
 Stanley and Dresdner is willing (severally and not jointly or jointly and
 severally), on the terms and subject to the conditions set out in this
 Agreement, to use reasonable endeavours to procure Placees to acquire the New
 Shares on such terms and conditions as may be agreed by the Company and HM
 Treasury, including the Treasury Solicitor, and at a price not lower than the
 Issue Price on the basis that the New Shares shall be subject to clawback to
 the extent they are taken up under the Open Offer.


	
 

	
 


	
(C)

	
To the extent not
 placed or taken up under the Open Offer and subject to the provisions of this
 Agreement, HM Treasury is willing to acquire (or procure that its nominee
 acquires) such New Shares itself.


	
 

	
 


	
(D)

	
The Company
 proposes, subject, inter alia,
 to the passing of the Resolutions, to allot and issue the New Shares to such
 persons as Morgan Stanley and/or Dresdner may (with the consent of HM
 Treasury) direct, or, failing which, to HM Treasury (or its nominee) as
 Placee. The consideration for the allotment and issue of the New Shares to
 Qualifying Shareholders and/or Placees, and/or to HM Treasury or its nominee
 (as the case may be) will be the transfer of the Consideration Shares by each
 of the Joint Sponsors (each in its capacity as a subscriber for the
 Consideration Shares) to the Company.


	
 

	
 


	
(E)

	
The Company has
 agreed to appoint the Joint Sponsors to act as joint sponsors in connection
 with the applications for Admission and, to the extent required by the UKLA,
 the publication of the Circular and as joint bookrunners and placing agents
 in connection with the Placing.













	
 

	
 


	
(F)

	
Application will
 be made to the FSA and the London Stock Exchange for the admission of the New
 Shares and the Preference Shares to the Official List and to trading on the
 London Stock Exchange’s market for listed securities.


	
 

	
 


	
(G)

	
The Company has
 agreed that it shall procure that Admission and Preference Admission shall
 occur after the Scheme Hearing but not later than by 12.00 p.m. (midday) on
 the date on which the Scheme Record Time occurs so as to ensure that the New
 Shares are shares to which the Scheme relates at the Scheme Record Time.


	
 

	
 


	
NOW
 THEREFORE IT IS AGREED as follows:


	
 

	
 


	
1.

	
INTERPRETATION


	
 

	
 


	
1.1

	
In this Agreement
 (including the Recitals):








	
 

	
 

	
 

	
 


	
“Acceptance”

	
 

	
means application
 and payment validly made (or, where the context so requires, treated as
 validly made) in accordance with the procedures to be set out in the
 Prospectus and (where appropriate) the Application Form (including, for the
 avoidance of doubt, any such application and payment validly made in respect
 of New Shares in addition to Qualifying Shareholders’ pre-emptive
 entitlements);


	
 

	
 

	
 


	
“Accepted
 Shares”

	
 

	
has the meaning
 given in clause 6.1(A);


	
 

	
 

	
 

	
 


	
“Accounts”

	
 

	
means the audited
 consolidated accounts of the Group for the three years ended 31 December
 2005, 2006 and 2007 (including, without limitation, the related directors’
 and auditors’ reports, the consolidated income statement, the consolidated
 balance sheet, the consolidated cashflow statement, the consolidated
 statement of recognised income and expense and all related notes);


	
 

	
 

	
 

	
 


	
“Accounts
 Date”

	
 

	
means 31 December
 2007;


	
 

	
 

	
 

	
 


	
“Acquisition”

	
 

	
means the
 recommended acquisition of the Company by Lloyds TSB;


	
 

	
 

	
 

	
 


	
“Acquisition
 Resolution”

	
 

	
means the
 resolution, in a form acceptable to HM Treasury, acting reasonably, to
 approve the terms of the Acquisition;


	
 

	
 

	
 

	
 


	
“Admission”

	
 

	
means the
 admission of the New Shares to the Official List becoming effective in
 accordance with paragraph 3.2.7G of the Listing Rules and admission to
 trading on the London Stock 













	
 

	
 

	
 

	
 


	
 

	
 

	
Exchange’s market
 for listed securities becoming effective in accordance with paragraph 2.1 of
 the Admission and Disclosure Standards;


	
 

	
 

	
 

	
 


	
“Admission
 and Disclosure Standards”

	
 

	
means the
 Admission and Disclosure Standards of the London Stock Exchange, as amended
 from time to time;


	
 

	
 

	
 

	
 


	
“Adverse
 Interest”

	
 

	
means any option,
 lien, mortgage, charge, equity, trust, any other right or interest of any
 third party and any other encumbrance of any kind;


	
 

	
 

	
 

	
 


	
“Affiliate”

	
 

	
means, unless
 otherwise specified herein, “affiliate” as defined in Rule 405 under the
 Securities Act or, as the context may require, Rule 501(b) under Regulation D
 of the Securities Act;


	
 

	
 

	
 

	
 


	
“Application
 Form”

	
 

	
means the
 application form, in a form acceptable to HM Treasury and to the Joint
 Sponsors, acting reasonably, to be despatched to Qualifying Non-CREST
 Shareholders for use in connection with the Open Offer;


	
 

	
 

	
 

	
 


	
“Auditors”

	
 

	
means KPMG Audit
 Plc;


	
 

	
 

	
 

	
 


	
“Auditors’
 Certificate”

	
 

	
means the
 certificate to be issued by the Auditors to the Company in relation to the
 issue of the Preference Shares containing: (i) the report required to be
 delivered to the Company by the Auditors in accordance with article 4.7(i) of
 the articles of association of the Company; and; (ii) a confirmation by the
 Auditors that the condition set out in article 4.7(ii) of the articles of
 association of the Company has been satisfied;


	
 

	
 

	
 

	
 


	
“Board”

	
 

	
means the Board of
 Directors of the Company or a duly authorised committee thereof;


	
 

	
 

	
 

	
 


	
“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;


	
 

	
 

	
 

	
 


	
“CA
 1985”

	
 

	
means the
 Companies Act 1985;


	
 

	
 

	
 

	
 


	
“CA
 2006”

	
 

	
means the
 Companies Act 2006;


	
 

	
 

	
 

	
 


	
“Capital
 Resources Requirement”

	
 

	
has the meaning
 given in the FSA Rules;













	
 

	
 

	
 

	
 


	
“Circular”

	
 

	
means the
 circular, in a form acceptable to HM Treasury and to the Joint Sponsors, to
 be sent to the Qualifying Shareholders (other than the Prohibited
 Shareholders and US Shareholders) giving details of the Placing and Open
 Offer and containing notice of the GM;


	
 

	
 

	
 

	
 


	
“Circular
 Posting Date”

	
 

	
means the date on
 which the Company despatches the Circular to Qualifying Shareholders (other
 than Prohibited Shareholders and US Shareholders);


	
 

	
 

	
 

	
 


	
“Circular
 Warranties”

	
 

	
means the
 Warranties set out in Part II of Schedule 3, with the exception of those Warranties
 set out in paragraphs 2, 3 and 4 of Part II of Schedule 3 and “Circular Warranty” shall be construed
 accordingly;


	
 

	
 

	
 

	
 


	
“Claims”

	
 

	
means any and all
 claims, actions, liabilities, demands, proceedings, investigations, judgments
 or awards whatsoever (and in each case whether or not successful, compromised
 or settled and whether joint or several) threatened, asserted, established or
 instituted against any Indemnified Person and “Claim” shall be construed accordingly;


	
 

	
 

	
 

	
 


	
“Closing
 Date”

	
 

	
means the last
 date for Acceptance under the terms of the Open Offer;


	
 

	
 

	
 

	
 


	
“Companies
 Acts”

	
 

	
means the CA 1985
 and/or the CA 2006 as the context requires;


	
 

	
 

	
 

	
 


	
“Consideration
 Shares”

	
 

	
means the JerseyCo
 Ordinary Shares and the JerseyCo Preference Shares;


	
 

	
 

	
 

	
 


	
“CREST”

	
 

	
means the relevant
 system (as defined in the Regulations) in respect of which Euroclear is the
 Operator (as defined in the Regulations);


	
 

	
 

	
 

	
 


	
“Dealing
 Day”

	
 

	
means a day on
 which dealings in securities may take place on and with the authority of the
 London Stock Exchange;


	
 

	
 

	
 

	
 


	
“Directors”

	
 

	
means the
 directors of the Company from time to time;


	
 

	
 

	
 

	
 


	
“Dresdner
 Indemnified Persons”

	
 

	
means:


	
 

	
 

	
 

	
 


	
 

	
 

	
(a)

	
Dresdner and any
 subsidiary, branch or 













	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
affiliate of
 Dresdner;


	
 

	
 

	
 

	
 


	
 

	
 

	
(b)

	
a person who is,
 on or at any time after the date of this Agreement, a director, officer,
 partner or employee of an undertaking specified in paragraph (a) above; and


	
 

	
 

	
 

	
 


	
 

	
 

	
(c)

	
Dresdner, their
 selling agents and each person, if any, who controls Dresdner within the
 meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
 and Dresdner’s respective affiliates, subsidiaries, branches, affiliates,
 associates and holding companies and the subsidiaries of such subsidiaries,
 branches, affiliates, associates and holding companies and each of such
 person’s respective directors, officers and employees,


	
 

	
 

	
 

	
 


	
 

	
 

	
and “Dresdner Indemnified Person” shall be
 construed accordingly;


	
 

	
 

	
 

	
 


	
“DTRs”

	
 

	
means the
 Disclosure and Transparency Rules, as amended from time to time, made by the
 FSA pursuant to Part VI of FSMA;


	
 

	
 

	
 

	
 


	
“EEA”

	
 

	
means the European
 Economic Area;


	
 

	
 

	
 

	
 


	
“Effective
 Date”

	
 

	
means 13 October
 2008;


	
 

	
 

	
 

	
 


	
“Enablement
 Letter”

	
 

	
means a letter, in
 a form acceptable to HM Treasury and to the Joint Sponsors, acting reasonably,
 from the Company to Euroclear confirming that the conditions for admission of
 the New Shares and the Preference Shares to CREST are satisfied;


	
 

	
 

	
 

	
 


	
“Engagement
 Letter”

	
 

	
means the
 engagement letter entered into between the Company and the Joint Sponsors
 dated the Effective Date and relating to the Placing and Open Offer;


	
 

	
 

	
 

	
 


	
“Environment”

	
 

	
means all or any
 of the following media, namely air (including the air within buildings or
 other natural or man-made structures above or below ground), water (including
 surface or ground water, water in pipe, drainage or sewerage systems) or
 land;


	
 

	
 

	
 

	
 


	
“Environmental
 Consents”

	
 

	
means any permit,
 licence, authorisation, approval or consent required under or in relation to 













	
 

	
 

	
 

	
 


	
 

	
 

	
Environmental Laws
 relating to the carrying on of the business of the Group;


	
 

	
 

	
 

	
 


	
“Environmental
 Laws”

	
 

	
means all
 international, European Union, national, state, federal, regional or local
 laws (including common law, statute law, civil, criminal and administrative
 law), together with all subordinate legislation relating to Environmental
 Matters in full force and effect or expected to come into full force and
 effect;


	
 

	
 

	
 

	
 


	
“Environmental
 Matters”

	
 

	
means all matters
 relating to the pollution or protection of the Environment and/or human health
 and safety;


	
 

	
 

	
 

	
 


	
“Euroclear”

	
 

	
means Euroclear UK
 & Ireland Limited;


	
 

	
 

	
 

	
 


	
“Exchange
 Act”

	
 

	
means the United
 States Securities Exchange Act of 1934;


	
 

	
 

	
 

	
 


	
“FCPA”

	
 

	
means the US
 Foreign Corrupt Practices Act of 1977 including the rules and regulations thereunder;


	
 

	
 

	
 

	
 


	
“Form
 of Proxy”

	
 

	
means the form of
 proxy, in a form acceptable to HM Treasury and to the Joint Sponsors, acting
 reasonably, to be sent to Qualifying Shareholders (other than Prohibited
 Shareholders and US Shareholders) in connection with the GM;


	
 

	
 

	
 

	
 


	
“FSA”

	
 

	
means the
 Financial Services Authority acting in its capacity as the competent
 authority for the purposes of Part VI of the FSMA;


	
 

	
 

	
 

	
 


	
“FSA
 Rules”

	
 

	
means the rules,
 as amended from time to time, made by the FSA under the FSMA;


	
 

	
 

	
 

	
 


	
“FSMA”

	
 

	
means the
 Financial Services and Markets Act 2000, including any regulations made
 pursuant thereto;


	
 

	
 

	
 

	
 


	
“GM”

	
 

	
means the general
 meeting of the Company to be convened at which the Resolutions are to be
 proposed, or any adjournment of it;


	
 

	
 

	
 

	
 


	
“GM
 Date”

	
 

	
means the date on
 which the GM is held, being no later than 17 December 2008, or such later
 date as the Company, HM Treasury and the Joint Sponsors may agree;













	
 

	
 

	
 

	
 


	
“Group”

	
 

	
means the Company
 and its subsidiary undertakings from time to time and “Group Company” means any of them;


	
 

	
 

	
 

	
 


	
“HMT
 Indemnified Persons”

	
 

	
means:


	
 

	
 

	
 

	
 


	
 

	
 

	
(a)

	
The Commissioners
 of Her Majesty’s Treasury;


	
 

	
 

	
 

	
 


	
 

	
 

	
(b)

	
the Treasury;


	
 

	
 

	
 

	
 


	
 

	
 

	
(c)

	
the Treasury
 Solicitor;


	
 

	
 

	
 

	
 


	
 

	
 

	
(d)

	
any entity to
 which HM Treasury novates its rights and obligations under this Agreement
 pursuant to clause 17; and


	
 

	
 

	
 

	
 


	
 

	
 

	
(e)

	
any person who is,
 on or at any time after the date of this agreement, a director, officer,
 official, agent or employee of or under any person specified in paragraph
 (a), (b), (c) or (d) above;


	
 

	
 

	
 

	
 


	
 

	
 

	
and “HMT Indemnified Person” shall be
 construed accordingly;


	
 

	
 

	
 

	
 


	
“IFRS”

	
 

	
means
 International Financial Reporting Standards as adopted by the European Union;


	
 

	
 

	
 

	
 


	
“Indemnified
 Persons”

	
 

	
means each and any
 HMT Indemnified Person, each and any Morgan Stanley Indemnified Person and
 each and any Dresdner Indemnified Person and “Indemnified Person” shall be construed accordingly;


	
 

	
 

	
 

	
 


	
“Intellectual
 Property Rights”

	
 

	
means patents,
 trade marks, service marks, logos, get-up, trade names, rights in designs,
 copyright (including rights in computer software), internet domain names,
 moral rights, utility models, rights in know how, rights in databases and
 other intellectual property rights, in each case whether registered or
 unregistered and including applications for the grant of any such rights and
 all rights or forms of protection having equivalent or similar effect
 anywhere in the world;


	
 

	
 

	
 

	
 


	
“Interim
 Accounts”

	
 

	
means the
 unaudited consolidated financial information for the Group in respect of the
 six month period ended 30 June 2008;













	
 

	
 

	
 

	
 


	
“Investment
 Company Act”

	
 

	
means the United
 States Investment Company Act of 1940;


	
 

	
 

	
 

	
 


	
“Issue
 Documents”

	
 

	
means the Press
 Announcement, the Application Form, the Circular, the Form of Proxy, the
 Prospectus, any Supplementary Prospectus, the Preference Prospectus, any
 Supplementary Preference Prospectus, the Presentation, all documentation
 published or issued in connection with the Preference Share Subscription, any
 interim management statement published after the Effective Date and before
 Admission and any other document published or issued after the Effective Date
 by or on behalf of the Company in connection with the Placing, the Open Offer
 or the Preference Share Subscription;


	
 

	
 

	
 

	
 


	
“Issue
 Price”

	
 

	
means the price of
 113.6 pence per New Share;


	
 

	
 

	
 

	
 


	
“JerseyCo”

	
 

	
means a company to
 be incorporated in Jersey in connection with the Placing;


	
 

	
 

	
 

	
 


	
“JerseyCo
 Ordinary Shares”

	
 

	
means the ordinary
 shares in the capital of JerseyCo to be issued to one or both the Joint
 Sponsors under the terms of the Option Agreement;


	
 

	
 

	
 

	
 


	
“JerseyCo
 Preference Shares”

	
 

	
means the no par
 value redeemable preference shares in the capital of JerseyCo to be issued to
 one or both of the Joint Sponsors, in each case under the terms of the Subscription
 and Transfer Agreement;


	
 

	
 

	
 

	
 


	
“Joint
 Sponsors”

	
 

	
means Morgan
 Stanley and Dresdner;


	
 

	
 

	
 

	
 


	
“Listing
 Rules”

	
 

	
means the Listing
 Rules made by the FSA pursuant to section 73A of the FSMA, as amended from
 time to time;


	
 

	
 

	
 

	
 


	
“Lloyds
 TSB”

	
 

	
means Lloyds TSB
 Group PLC;


	
 

	
 

	
 

	
 


	
“Lloyds
 TSB Confirmation”

	
 

	
means the written
 confirmation in a form acceptable to HM Treasury, acting reasonably,
 addressed to HM Treasury by Lloyds TSB confirming: (i) that Lloyds TSB has
 consented to the Company entering into this Agreement and the Preference
 Share Subscription Agreement; (ii) that neither the entry into such
 agreements by the Company nor any of the transactions contemplated by them
 will give rise to a right to 













	
 

	
 

	
 

	
 


	
 

	
 

	
terminate the
 Lloyds TSB Implementation Agreement exercisable by Lloyds TSB; and (iii) that
 Lloyds TSB will not, as a result of the Company entering into, or performing,
 any of its obligations under this Agreement or the Preference Share
 Subscription Agreement, withdraw, lapse, cease to proceed with, or invoke any
 condition in relation to, the Lloyds TSB Offer;


	
 

	
 

	
 

	
 


	
“Lloyds
 TSB Implementation Agreement”

	
 

	
means the
 agreement dated 18 September 2008 between Lloyds TSB and the Company relating
 to the implementation of the Lloyds TSB Offer (as amended with effect from
 13 October 2008);


	
 

	
 

	
 

	
 


	
“Lloyds
 TSB Offer”

	
 

	
means the proposed
 acquisition by Lloyds TSB of the entire issued share capital of the Company
 as more particularly described in the announcement by Lloyds TSB of its firm
 intention to make an offer on 18 September 2008 (as amended with effect from
 13 October 2008);


	
 

	
 

	
 

	
 


	
“London
 Stock Exchange”

	
 

	
means London Stock
 Exchange plc;


	
 

	
 

	
 

	
 


	
“Losses”

	
 

	
means any and all
 loss, damage, cost, liability, demand, charge or expense (including legal
 fees), in each case whether joint or several, which any Indemnified Person
 may suffer or incur (including, but not limited to, all Losses suffered or
 incurred in investigating, preparing for or disputing or defending or
 settling any Claim and/or in establishing its right to be indemnified
 pursuant to clause 11 and/or in seeking advice regarding any Claim or in any
 way related to or in connection with the indemnity contained in clause 11)
 and “Loss” shall be construed
 accordingly;


	
 

	
 

	
 

	
 


	
“Material
 Adverse Effect”

	
 

	
means an event has
 occurred or is reasonably likely to occur which has resulted in or may result
 in a material adverse change in or affecting the condition (financial,
 operational, legal or otherwise), profitability, prospects, solvency,
 business affairs or operations of the Group, taken as a whole, whether or not
 arising in the ordinary course of business;


	
 

	
 

	
 

	
 


	
“Morgan
 Stanley Indemnified Persons”

	
 

	
means:


	
 

	
 

	
 

	
 


	
 

	
 

	
(a)

	
Morgan Stanley and
 any subsidiary, branch or affiliate of Morgan Stanley;













	
 

	
 

	
 

	
 


	
 

	
 

	
(b)

	
a person who is,
 on or at any time after the date of this Agreement, a director, officer,
 partner or employee of an undertaking specified in sub paragraph (a) above;
 and


	
 

	
 

	
 

	
 


	
 

	
 

	
(c)

	
Morgan Stanley,
 their selling agents and each person, if any, who controls Morgan Stanley
 within the meaning of Section 15 of the Securities Act or Section 20 of the
 Exchange Act and Morgan Stanley’s respective affiliates, subsidiaries,
 branches, affiliates, associates and holding companies and the subsidiaries
 of such subsidiaries, branches, affiliates, associates and holding companies
 and each of such person’s respective directors, officers and employees; 


	
 

	
 

	
 

	
 


	
 

	
 

	
and “Morgan Stanley Indemnified Person” shall
 be construed accordingly;


	
 

	
 

	
 

	
 


	
“New
 Shares”

	
 

	
means the
 7,482,394,366 new Ordinary Shares which are to be allotted and issued
 pursuant to the Placing and the Open Offer;


	
 

	
 

	
 

	
 


	
“Non-Accepted
 Shares”

	
 

	
has the meaning
 given in clause 6.1(B);


	
 

	
 

	
 

	
 


	
“Notifying
 Sponsor”

	
 

	
has the meaning
 given in clause 13.4;


	
 

	
 

	
 

	
 


	
“OECD
 Convention”

	
 

	
means the OECD
 Convention on Combating Bribery of Foreign Public Officials in International
 Business Transactions;


	
 

	
 

	
 

	
 


	
“Official
 List”

	
 

	
means the Official
 List maintained by the FSA in its capacity as UK Listing Authority;


	
 

	
 

	
 

	
 


	
“Open
 Offer”

	
 

	
means the conditional
 invitation by the Company to Qualifying Shareholders (other than Prohibited
 Shareholders and US Shareholders) to apply to acquire New Shares on the basis
 to be referred to in the Circular, the Prospectus and (for Qualifying
 Non-CREST Shareholders only) the Application Form; 


	
 

	
 

	
 

	
 


	
“Open
 Offer Acceptors”

	
 

	
means those
 Qualifying Shareholders that have validly applied (or are treated as having
 validly applied) to acquire New Shares under the Open Offer;


	
 

	
 

	
 

	
 


	
“Open
 Offer Documents”

	
 

	
means the
 Circular, the Prospectus, any Supplementary Prospectus, the Form of Proxy and
 













	
 

	
 

	
 

	
 


	
 

	
 

	
the Application
 Form;


	
 

	
 

	
 

	
 


	
“Open
 Offer Entitlement”

	
 

	
an entitlement to
 apply to subscribe for New Shares allocated to a Qualifying Shareholder
 pursuant to the Open Offer;


	
 

	
 

	
 

	
 


	
“Option
 Agreement”

	
 

	
means the option
 agreement to be entered into between JerseyCo, the Company, and one or both
 of the Joint Sponsors providing a put option in relation to the JerseyCo
 Ordinary Shares granted by the Company in favour of one or both of the Joint
 Sponsors and a call option in relation to the JerseyCo Ordinary Shares
 granted by one or both of the Joint Sponsors in favour of the Company, in the
 form to be agreed;


	
 

	
 

	
 

	
 


	
“Ordinary
 Shareholders”

	
 

	
means holders of
 Ordinary Shares;


	
 

	
 

	
 

	
 


	
“Ordinary
 Shares”

	
 

	
means ordinary
 shares of 25 pence each in the capital of the Company;


	
 

	
 

	
 

	
 


	
“Overall
 Financial Resources Rule”

	
 

	
has the meaning
 given in the FSA Rules;


	
 

	
 

	
 

	
 


	
“Panel”

	
 

	
means the Panel on
 Takeovers and Mergers;


	
 

	
 

	
 

	
 


	
“Participating
 Security”

	
 

	
has the meaning
 given to it in the Regulations (and “Participating
 Securities” shall be construed accordingly);


	
 

	
 

	
 

	
 


	
“Placees”

	
 

	
means any placees
 procured by the Joint Sponsors pursuant to this Agreement to acquire New
 Shares pursuant to the Placing, and approved by HM Treasury in advance of any
 acquisition by them of New Shares, which may include QIBs in the United
 States and HM Treasury in respect of any Residual Shares;


	
 

	
 

	
 

	
 


	
“Placing”

	
 

	
means the proposed
 arrangements for the procuring of Placees for the New Shares on such terms
 and conditions as may be agreed by HM Treasury, including the Treasury
 Solicitor, and at a price not lower than the Issue Price, subject to a right
 of clawback in respect of any New Shares which are taken up under the Open
 Offer;


	
 

	
 

	
 

	
 


	
“Placing
 and Open Offer”

	
 

	
means the Placing
 and the Open Offer or any of them;













	
 

	
 

	
 

	
 


	
“Placing
 Documents”

	
 

	
means the Press
 Announcement, the Presentation and the Prospectus;


	
 

	
 

	
 

	
 


	
“Placing
 Schedule”

	
 

	
has the meaning
 given to it in clause 3.5;


	
 

	
 

	
 

	
 


	
“Preference
 Admission”

	
 

	
means the
 admission of the Preference Shares to the Official List becoming effective in
 accordance with paragraph 3.2.7G of the Listing Rules and admission to
 trading on the London Stock Exchange’s market for listed securities becoming effective
 in accordance with paragraph 2.1 of the Admission and Disclosure Standards;


	
 

	
 

	
 

	
 


	
“Preference
 Prospectus”

	
 

	
means the
 prospectus (including the information incorporated by reference therein and
 comprising a prospectus for the purpose of the Prospectus Rules) to be
 published by the Company in relation to the Preference Admission, in the form
 to be agreed;


	
 

	
 

	
 

	
 


	
“Preference
 Shares”

	
 

	
means preference
 shares to be issued by the Company to HM Treasury (or its nominee) with an
 aggregate liquidation preference of £3,000,000,000 having the rights and
 subject to the restrictions set out in Article 11(A) of the Company’s
 articles of association as supplemented by Schedule 1 of the Preference Share
 Subscription Agreement;


	
 

	
 

	
 

	
 


	
“Preference
 Share Subscription”

	
 

	
means the proposed
 subscription for Preference Shares pursuant to the Preference Share
 Subscription Agreement;


	
 

	
 

	
 

	
 


	
“Preference
 Share Subscription Agreement”

	
 

	
means the
 agreement between the Company and HM Treasury being effective as of the
 Effective Date pursuant to which HM Treasury agrees to subscribe for the
 Preference Shares;


	
 

	
 

	
 

	
 


	
“Presentation”

	
 

	
means any
 presentation, in the form to be agreed, used by the Company during
 presentations to institutional investors in connection with the Placing and
 any other publicity materials relating to the Placing and Open Offer prepared
 by or at the request of the Company;


	
 

	
 

	
 

	
 


	
“Press
 Announcement”

	
 

	
means the press
 announcement dated the Effective Date, giving details of, inter alia, the
 Placing and Open Offer and the Preference Share Subscription;














	
 

	
 

	
 

	
 


	
“Previous
 Announcements”

	
 

	
means all
 documents issued and announcements (other than the Press Announcement) made
 by or on behalf of the Company or any member of the Group through a
 Regulatory Information Service since the Accounts Date and before the
 Effective Date;


	
 

	
 

	
 

	
 


	
“Prohibited
 Shareholders”

	
 

	
means holders of
 Ordinary Shares with registered addresses in Barbados,
 China, Hong Kong, India, Iran, Israel, Jamaica, Japan, Kuwait, Malaysia,
 North Korea, Oman, the Philippines, Kingdom of Saudi Arabia, Singapore, South
 Africa, Thailand, Turkey, United Arab Emirates - Non DIFC, United Arab
 Emirates – DIFC, Zimbabwe, Canada and such other jurisdictions as may be
 agreed by the Company and the Joint Sponsors;


	
 

	
 

	
 

	
 


	
“Prospectus”

	
 

	
means the
 prospectus (including the information incorporated by reference therein)
 comprising a prospectus for the purposes of the Prospectus Rules to be
 published by the Company in relation to the Placing and Open Offer, in the
 form to be agreed;


	
 

	
 

	
 

	
 


	
“Prospectus
 Directive”

	
 

	
means Directive
 2003/71/EC;


	
 

	
 

	
 

	
 


	
“Prospectus
 Posting Date”

	
 

	
means the date on
 which the Company publishes the Prospectus;


	
 

	
 

	
 

	
 


	
“Prospectus
 Rules”

	
 

	
has the meaning
 given in Section 73A(4) of FSMA;


	
 

	
 

	
 

	
 


	
“Qualifying
 CREST Shareholders”

	
 

	
means Qualifying
 Shareholders whose Ordinary Shares on the register of members of the Company
 at the close of business on the Record Date are in uncertificated form;


	
 

	
 

	
 

	
 


	
“Qualifying
 Non-CREST Shareholders”

	
 

	
means Qualifying
 Shareholders whose Ordinary Shares on the register of members of the Company
 at the close of business on the Record Date are in certificated form;


	
 

	
 

	
 

	
 


	
“Qualifying
 Shareholders”

	
 

	
means holders of
 Ordinary Shares whose names are on the register of members of the Company as at
 the close of business on the Record Date;


	
 

	
 

	
 

	
 


	
“QIB
 Purchasers”

	
 

	
has the meaning
 given in clause 5.7(C)(i);


	
 

	
 

	
 

	
 


	
“QIBs”

	
 

	
has the meaning
 given in clause 5.2;













	
 

	
 

	
 

	
 


	
“Receiving
 Agent”

	
 

	
means the
 receiving agent to be appointed pursuant to clause 3.8;


	
 

	
 

	
 

	
 


	
“Receiving
 Agent Agreement”

	
 

	
means an agreement
 among the Company and the Receiving Agent and the Joint Sponsors relating to
 the Placing and Open Offer, in the form to be agreed;


	
 

	
 

	
 

	
 


	
“Record
 Date”

	
 

	
means the record
 date for the Open Offer being such date as the Company, the Joint Sponsors
 and HM Treasury shall agree, all acting reasonably;


	
 

	
 

	
 

	
 


	
“Reduction
 Hearing”

	
 

	
means the court
 hearing to approve the reduction of capital of the Company associated with
 the Scheme;


	
 

	
 

	
 

	
 


	
“Registrars”

	
 

	
means Computershare
 Investor Services PLC;


	
 

	
 

	
 

	
 


	
“Regulations”

	
 

	
means the
 Uncertificated Securities Regulations 2001;


	
 

	
 

	
 

	
 


	
“Regulation
 D”

	
 

	
means Regulation D
 under the Securities Act;


	
 

	
 

	
 

	
 


	
“Regulation
 S”

	
 

	
means Regulation S
 under the Securities Act;


	
 

	
 

	
 

	
 


	
“Regulatory
 Information Service”

	
 

	
has the meaning
 given in the Listing Rules;


	
 

	
 

	
 

	
 


	
“Relevant
 Cost”

	
 

	
has the meaning
 given in clause 8.9;


	
 

	
 

	
 

	
 


	
“Relevant
 Member State”

	
 

	
has the meaning
 given in clause 5.6;


	
 

	
 

	
 

	
 


	
“Residual
 Shares”

	
 

	
has the meaning
 given in clause 6.3;


	
 

	
 

	
 

	
 


	
“Resolutions”

	
 

	
means the
 Acquisition Resolution, the Share Capital Resolutions and the Whitewash
 Resolution and, if required by the Panel, the Rule 21 Resolution;


	
 

	
 

	
 

	
 


	
“Rule
 21 Resolution”

	
 

	
means the
 resolution, in a form acceptable to HM Treasury, acting reasonably, pursuant
 to which the Ordinary Shareholders are to approve, for the purposes of Rule
 21 of the City Code on Takeovers and Mergers, the allotment and issue by the
 Company of the New Shares pursuant to the Placing and Open Offer and the allotment
 and issue by the Company of the Preference Shares pursuant to the Preference
 Share Subscription 














	
 

	
 

	
 

	
 


	
 

	
 

	
Agreement;


	
 

	
 

	
 

	
 


	
“Scheme”

	
 

	
means the scheme
 of arrangement to be effected by the Company under sections 895 to 899 CA
 2006 pursuant to which the Acquisition is to be effected;


	
 

	
 

	
 

	
 


	
“Scheme
 Document”

	
 

	
means the document
 to be posted to shareholders of the Company setting out the terms and
 conditions of the Acquisition;


	
 

	
 

	
 

	
 


	
“Scheme
 Hearing”

	
 

	
means the court
 hearing to sanction the Scheme;


	
 

	
 

	
 

	
 


	
“Scheme
 Record Time”

	
 

	
means 6.00 p.m. on
 the Business Day immediately preceding the date of the Reduction Hearing;


	
 

	
 

	
 

	
 


	
“SDRT”

	
 

	
means stamp duty
 reserve tax;


	
 

	
 

	
 

	
 


	
“Securities
 Act”

	
 

	
means the United
 States Securities Act of 1933;


	
 

	
 

	
 

	
 


	
“Share
 Capital Resolutions”

	
 

	
means the
 resolutions, in a form acceptable to HM Treasury, acting reasonably:


	
 

	
 

	
 

	
 


	
 

	
 

	
(a)

	
to increase the
 authorised share capital of the Company to allow for the creation and issue
 of the New Shares and, to the extent necessary, the Preference Shares; and


	
 

	
 

	
 

	
 


	
 

	
 

	
(b)

	
to authorise the
 Directors to allot under Section 80 of CA 1985 such number of Ordinary Shares
 as equals or exceeds the number of New Shares and, to the extent necessary,
 the Preference Shares; and


	
 

	
 

	
 

	
 


	
 

	
 

	
(c)

	
to the extent required
 by the Company (acting reasonably), to disapply Section 89 of CA 1985 as
 appropriate,


	
 

	
 

	
 

	
 


	
 

	
 

	
to be proposed at
 the GM;


	
 

	
 

	
 

	
 


	
“Specified
 Event”

	
 

	
means an event
 occurring or matter arising on or after the Effective Date, which:


	
 

	
 

	
 

	
 


	
 

	
 

	
(a)

	
if it had occurred
 or arisen before or at the Effective Date; or


	
 

	
 

	
 

	
 


	
 

	
 

	
(b)

	
if it had been
 known by the Directors before or at the Effective Date,













	
 

	
 

	
 

	
 


	
 

	
 

	
would have
 rendered any of the Warranties untrue, inaccurate or misleading in any
 respect;


	
 

	
 

	
 

	
 


	
“Sponsors’
 Fee Letter”

	
 

	
means the side
 letter to be entered into pursuant to the Engagement Letter between the
 Company and each of the Joint Sponsors as soon as practicable after the date
 of this Agreement, with each side letter recording the fee and expense
 reimbursement which the relevant Joint Sponsor is to receive for the services
 performed by it under this Agreement;


	
 

	
 

	
 

	
 


	
“Stamp
 Tax”

	
 

	
means any stamp,
 documentary, registration or capital duty or tax (including, without
 limitation, stamp duty, SDRT and any other similar duty or similar tax) and
 any fines, penalties and/or interest relating thereto;


	
 

	
 

	
 

	
 


	
“Subscription
 and Transfer Agreement”

	
 

	
means the share
 subscription and transfer agreement, in the form to be agreed, to be entered
 into between JerseyCo, the Company and the Joint Sponsors providing, among
 other things, for the transfer to the Company by the Joint Sponsors (in their
 capacity as subscribers for the Consideration Shares) of the Consideration
 Shares;


	
 

	
 

	
 

	
 


	
“SUP”

	
 

	
has the meaning
 given in the FSA Rules;


	
 

	
 

	
 

	
 


	
“Supplementary
 Preference Prospectus”

	
 

	
means any
 prospectus supplementary to the Preference Prospectus published by the
 Company pursuant to section 87G of FSMA;


	
 

	
 

	
 

	
 


	
“Supplementary
 Prospectus”

	
 

	
means any
 prospectus supplementary to the Prospectus published by the Company pursuant
 to section 87G to FSMA;


	
 

	
 

	
 

	
 


	
“Tax”
 or “Taxation”

	
 

	
means all forms of
 taxation and statutory, governmental, state, provincial, local governmental
 or municipal impositions, duties, contributions and levies (including, for the
 avoidance of doubt, Stamp Tax), in each case in the nature of taxation, duty,
 contribution or levy, whether of the United Kingdom or elsewhere in the world
 whenever imposed and whether chargeable directly or primarily against or
 attributable directly or primarily to a Group Company or any other person and
 all penalties, charges, costs and interest relating thereto;













	
 

	
 

	
 

	
 


	
“Tax
 Authority”

	
 

	
means any
 government, state, municipal, local, federal or other fiscal, revenue,
 customs or excise authority, body or official anywhere in the world having
 the power to impose, collect or administer any Tax or exercising a fiscal,
 revenue, customs or excise function with respect to Tax (including, without
 limitation, H.M. Revenue and Customs);


	
 

	
 

	
 

	
 


	
“Time
 of Sale”

	
 

	
means, with
 respect to the Placing, each time identified to the Company by the Joint
 Sponsors as a “Time of Sale” (with respect to which they are obtaining
 commitments from Placees to take up the New Shares), provided that there
 shall not be more than two times that are treated as a “Time of Sale” for
 purposes of this Agreement without the consent of the Company; such consent
 will not be unreasonably withheld;


	
 

	
 

	
 

	
 


	
“Time
 of Sale Documents”

	
 

	
means the
 documents specified as being delivered at, or with respect to, the Time of
 Sale in Part III of Schedule 2;


	
 

	
 

	
 

	
 


	
“Treasury
 Solicitor”

	
 

	
has the same
 meaning as in the Treasury Solicitor Act 1876;


	
 

	
 

	
 

	
 


	
“UK
 Listing Authority”

	
 

	
means the
 Financial Services Authority acting in its capacity as the competent
 authority for the purposes of Part VI of the FSMA and in the exercise of its
 functions in respect of the admission of securities to the Official List
 otherwise than in accordance with Part VI of the FSMA;


	
 

	
 

	
 

	
 


	
“United
 States”

	
 

	
means the United
 States of America, its territories and possessions, any state of the United
 States and the District of Columbia;


	
 

	
 

	
 

	
 


	
“US
 Shareholders”

	
 

	
means Ordinary
 Shareholders who are within the United States or are holding Ordinary Shares
 on behalf of, or for the account or benefit of, persons within the United
 States for whom they are acting without investment discretion (but only with
 respect to any such holdings);


	
 

	
 

	
 

	
 


	
“VAT”

	
 

	
means:


	
 

	
 

	
 

	
 


	
 

	
 

	
(a)

	
any tax imposed in
 conformity with the council directive of 28 November 2006 on the common system
 of value added tax (EC Directive 2006/112) (including, in relation to 













	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
the United
 Kingdom, value added tax imposed by the VATA and legislation and/or any
 regulations supplemental thereto); and


	
 

	
 

	
 

	
 


	
 

	
 

	
(b)

	
any other tax of a
 similar nature (whether imposed in a member state of the European Union in
 substitution for or in addition to the tax referred to in sub-paragraph (a)
 or imposed elsewhere);


	
 

	
 

	
 

	
 


	
“VATA”

	
 

	
means the Value
 Added Tax Act 1994;


	
 

	
 

	
 

	
 


	
“Verification
 Materials”

	
 

	
means verification
 materials in a form acceptable to HM Treasury and to the Joint Sponsors,
 acting reasonably, evidencing the verification process supporting the
 accuracy of certain information contained in the Issue Documents;


	
 

	
 

	
 

	
 


	
“Warranties”

	
 

	
means the
 representations, warranties and undertakings contained in Schedule 3;


	
 

	
 

	
 

	
 


	
“Whitewash
 Resolution”

	
 

	
means the
 resolution, in a form acceptable to HM Treasury, acting reasonably, pursuant
 to which Ordinary Shareholders are to waive any obligation of HM Treasury to
 make an offer under Rule 9 of the City Code on Takeovers and Mergers;


	
 

	
 

	
 

	
 


	
“Wholly
 Owned Entity”

	
 

	
has the meaning
 given in clause 17.1; and


	
 

	
 

	
 

	
 


	
“Working
 Capital Report”

	
 

	
means the working
 capital review report to be prepared by the Auditors, in the form to be
 agreed, relating to the Group, to be dated the date of the Prospectus and
 supporting the working capital statements contained in the Prospectus.








	
 

	
 


	
1.2

	
Any reference to a
document being “in the agreed form” or “form to be agreed” means in the form
of the draft or proof thereof signed or initialled for the purpose of
identification by Allen & Overy LLP (on behalf of the Company), Slaughter
and May (on behalf of HM Treasury) and Freshfields Bruckhaus Deringer LLP (on
behalf of the Joint Sponsors), or (in the case of documents to be agreed) in
such form as may be satisfactory to HM Treasury and the Joint Sponsors
(acting reasonably), and initialled, for the purposes of identification only,
by such firms on behalf of their clients, provided that, in the determination
of whether a document to be agreed is satisfactory to the Joint Sponsors, the
requirement that the Joint Sponsors act reasonably shall not apply in respect
of (i) the Working Capital Report, (ii) the Prospectus (or any Supplementary
Prospectus), (iii) the Circular and (iv) any reference to the Joint Sponsors
in any of the Issue Documents (in respect of each of which their discretion
shall be absolute provided that they shall act in good faith). No such
initialling shall imply approval of all or any part of its contents by or on
behalf of the person initialling it or any of the parties to this Agreement.  













	
 

	
 

	
 

	
 


	
1.3

	
The
 Interpretation Act 1978 shall apply to this Agreement in the same way as it
 applies to an enactment. 


	
 

	
 


	
1.4

	
References
 to a statutory provision include any subordinate legislation made from time
 to time under that provision. 


	
 

	
 


	
1.5

	
References
 to a statutory provision include that provision as from time to time
 modified, supplemented or re-enacted so far as such modification or
 re-enactment applies or is capable of applying to any transactions entered
 into in accordance with this Agreement. 


	
 

	
 


	
1.6

	
In this
 Agreement, a reference to a “subsidiary
 undertaking” or “parent
 undertaking” is to be construed in accordance with section 1162
 (and Schedule 7) of the CA 2006 and a “subsidiary”
 or “holding company” is to be
 construed in accordance with section 1159 of the CA 2006. 


	
 

	
 


	
1.7

	
Expressions
 defined or used in the Regulations shall have the same meaning in this
 Agreement (except where the context otherwise requires). 


	
 

	
 


	
1.8

	
References
 to this Agreement include its Schedules and references in this Agreement to
 clauses, sub-clauses and Schedules are to clauses and sub-clauses of, and
 Schedules to, this Agreement. 


	
 

	
 


	
1.9

	
The
 obligations of the Joint Sponsors under this Agreement shall be several and
 not joint or joint and several. No provision of this Agreement shall impose
 any liability on either of the Joint Sponsors for, nor shall the rights or
 remedies of either of the Joint Sponsors be adversely affected by, any act or
 omission by the other Joint Sponsor or for any breach by the other Joint Sponsor
 of the provisions of this Agreement. The obligations owed by the Company to
 the Joint Sponsors are owed to them as separate and independent obligations,
 and each Joint Sponsor shall have the right to protect and enforce its rights
 hereunder without joining the other Joint Sponsor in any proceedings. 


	
 

	
 


	
1.10

	
Headings
 shall be ignored in construing this Agreement. 


	
 

	
 


	
1.11

	
References
 to time of day are to London time unless otherwise stated. 


	
 

	
 


	
1.12

	
When
 construing any provision relating to VAT, any reference in this Agreement to
 any person shall (where appropriate) be deemed, at any time when such person
 is a member of a group of companies for VAT purposes, to include a reference
 to the representative member of such group at such time. 


	
 

	
 


	
1.13

	
Each
 reference in this Agreement to the Joint Sponsors or either of them by any
 description or in any capacity includes a reference to it in each other
 capacity in which it may act pursuant to this Agreement or otherwise with the
 agreement of the Company in connection with the Placing and Open Offer. 


	
 

	
 


	
1.14

	
Any
 reference to the Joint Sponsors or to HM Treasury approving or agreeing the
 form of an Issue Document, shall be a reference to such approval or agreement
 being given solely for the purposes of this Agreement. 












	
 

	
 

	
 

	
 


	
1.15

	
A reference
 to “certificated” or “certificated form” in relation to a share
 or other security is a reference to a share or other security title to which
 is recorded on the relevant register of the share or other security as being
 held in certificated form. 


	
 

	
 


	
1.16

	
A reference
 to “uncertificated” or “uncertificated form” in relation to a
 share or other security is a reference to a share or other security title to
 which is recorded on the relevant register of the share or other security as
 being held in uncertificated form, and title to which, by virtue of the
 Regulations, may be transferred by means of CREST. 


	
 

	
 


	
1.17

	
Words and
 expressions defined in the Companies Acts shall bear the same meaning. 


	
 

	
 


	
1.18

	
Any
 reference to “this Agreement” or
 “any other agreement relating to the
 Placing and Open Offer” or “the
 arrangements contemplated by the Issue Documents” or similar
 expressions shall be deemed, where the context permits, to include a
 reference to the Subscription and Transfer Agreement and the Option Agreement
 and the arrangements thereunder, including, without limitation, JerseyCo and
 the issue and allotment of the JerseyCo Ordinary Shares and the JerseyCo
 Preference Shares. 


	
 

	
 


	
2.

	
CONDITIONS 


	
 

	
 


	
2.1

	
The
 obligations of HM Treasury and of the Joint Sponsors under this Agreement
 (save for the obligations under clauses 3.3 and 3.4 and such other
 obligations hereunder which fall due for performance before Admission) are
 conditional on: 


	
 

	
 


	
 

	
(A)

	
the release
 of the Press Announcement via a Regulatory Information Service by 8.00 a.m.
 on the Effective Date; 


	
 

	
 

	
 


	
 

	
(B)

	
there having
 occurred, as at Admission, no material default or breach by the Company of
 the terms of: 


	
 

	
 

	
 


	
 

	
 

	
(i)

	
this
 Agreement; 


	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
if executed,
 the Subscription and Transfer Agreement;


	
 

	
 

	
 

	
 


	
 

	
 

	
(iii)

	
if executed, the Option
 Agreement; or


	
 

	
 

	
 

	
 


	
 

	
 

	
(iv)

	
the Preference Share Subscription Agreement; 


	
 

	
 

	
 

	
 


	
 

	
(C)

	
the New
 Shares being validly created under applicable law and forming part of the
 Company’s authorised but unissued share capital; 


	
 

	
 

	
 


	
 

	
(D)

	
the
 Preference Shares being validly created under applicable law and forming part
 of the Company’s authorised but unissued share capital; 


	
 

	
 

	
 


	
 

	
(E)

	
the
 Directors being duly authorised under applicable law to allot and issue the
 New Shares in accordance with the terms of this Agreement; 


	
 

	
 

	
 

	
 


	
 

	
(F)

	
the
 Directors being duly authorised under applicable law to allot and issue the
 Preference Shares to HM Treasury (or its nominee) in accordance with the
 terms of the Preference Share Subscription Agreement; 












	
 

	
 

	
 

	
 


	
 

	
(G)

	
the Company
 having obtained such approvals, authorisations, permits and consents as may
 be required by any government, state or other regulatory body and all
 necessary filings having been made and all necessary waiting periods having
 expired, in each case in any part of the world and as a consequence of the
 actions contemplated by this Agreement and/or the Preference Share
 Subscription Agreement; 


	
 

	
 

	
 


	
 

	
(H)

	
HM Treasury
 having obtained such approvals, authorisations, permits and consents as may
 be required by any governmental, state or other regulatory body in any part
 of the world and all necessary filings having been made and all necessary
 waiting periods having expired, in each case as a consequence of the issue of
 New Shares and/or Preference Shares contemplated by this Agreement and/or the
 Preference Share Subscription Agreement; 


	
 

	
 

	
 


	
 

	
(I)

	
each
 Warranty in Part I of Schedule 3 of this Agreement being true and accurate
 and not misleading as at the date of this Agreement and remaining true and
 accurate and not misleading on the Circular Posting Date, on the Prospectus
 Posting Date, on such date that any Supplementary Prospectus may be published
 in accordance with this Agreement (prior to Admission), at each Time of Sale,
 and immediately prior to Admission in each case by reference to the facts and
 circumstances then existing; 


	
 

	
 

	
 


	
 

	
(J)

	
each
 Warranty in Part II of Schedule 3 of this Agreement being true and accurate
 and not misleading on the Prospectus Posting Date and remaining true and
 accurate and not misleading on such date that any Supplementary Prospectus
 may be published in accordance with this Agreement (prior to Admission), at
 each Time of Sale, and immediately prior to Admission in each case by
 reference to the facts and circumstances then existing; 


	
 

	
 

	
 


	
 

	
(K)

	
each
 Circular Warranty being true and accurate and not misleading on the Circular
 Posting Date by reference to the facts and circumstances then existing; 


	
 

	
 

	
 


	
 

	
(L)

	
there being,
 in the opinion of HM Treasury (acting in good faith), no Material Adverse
 Effect; 


	
 

	
 

	
 


	
 

	
(M)

	
there being
 no contracts or arrangements to which the Company or any member of the Group
 are party which would become capable of being terminated by a party thereto
 (other than a member of the Group) or would permit such a party to exercise a
 right against a member of the Group or may otherwise give rise to material
 adverse consequences for the Group as a whole, in each case as a result of
 the issue of New Shares and/or Preference Shares contemplated by this
 Agreement and/or the Preference Share Subscription Agreement, in each case
 where this or any other consequences thereof would be, or would be reasonably
 likely to be, material in the context of the business of the Group or the
 Placing and Open Offer, the Preference Share Subscription, any acquisition of
 New Shares, or subscription for the Preference Shares by HM Treasury,
 Qualifying Shareholders or Placees, Admission or post-Admission dealings in
 the Ordinary Shares; 


	
 

	
 

	
 


	
 

	
(N)

	
the delivery
 to HM Treasury and to the Joint Sponsors, as applicable: 












	
 

	
 

	
 

	
 


	
 

	
 

	
(i)

	
simultaneously
 with the execution of this Agreement, of the documents listed in Part I of
 Schedule 2; 


	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
prior to
 despatch of the Circular, of the documents listed in Part II of Schedule 2; 


	
 

	
 

	
 

	
 


	
 

	
 

	
(iii)

	
prior to the
 publication of the Prospectus, of the documents listed in Part III of
 Schedule 2; 


	
 

	
 

	
 

	
 


	
 

	
 

	
(iv)

	
at the date
 of each Supplementary Prospectus, the documents (or “bring downs” from such
 documents) listed in Part III of Schedule 2 (as applicable) requested by the
 Joint Sponsors and by HM Treasury in respect of such Supplementary Prospectus
 and dated as of such date; 


	
 

	
 

	
 

	
 


	
 

	
 

	
(v)

	
at each Time
 of Sale, if any, the Time of Sale Documents required to be delivered at such
 Time of Sale listed in Part IV of Schedule 2; 


	
 

	
 

	
 

	
 


	
 

	
 

	
(vi)

	
immediately
 prior to Admission, of the documents listed in Part IV of Schedule 2; and 


	
 

	
 

	
 

	
 


	
 

	
 

	
(vii)

	
immediately
 prior to Preference Admission, of the documents listed in Part V of Schedule
 2, 


	
 

	
 

	
 

	
 


	
 

	
 

	
in each case
 to the extent not already delivered and provided that HM Treasury shall not
 be entitled to rely on this condition in the case of non-delivery of any
 document which is not material, in the respective judgments of HM Treasury
 and the Joint Sponsors, in the context of the Placing and Open Offer or the
 applications for Admission or Preference Admission; 


	
 

	
 

	
 

	
 


	
 

	
(O)

	
the GM being
 duly convened and held no later than the GM Date; 


	
 

	
 

	
 


	
 

	
(P)

	
subject to
 applicable law (including directors’ fiduciary duties), the Directors
 recommending (without qualification and maintaining such recommendation) that
 the Company’s shareholders vote in favour of the Resolutions; 


	
 

	
 

	
 


	
 

	
(Q)

	
subject to
 applicable law, the Directors voting all Ordinary Shares held by them in
 favour of the Resolutions; 


	
 

	
 

	
 


	
 

	
(R)

	
the
 Company’s shareholders passing the Resolutions (without amendment) at the GM;
 


	
 

	
 

	
 


	
 

	
(S)

	
the
 Prospectus, the Preference Prospectus and, to the extent necessary, the
 Circular being approved by the FSA in accordance with the Prospectus Rules,
 the Listing Rules and FSMA; 


	
 

	
 

	
 


	
 

	
(T)

	
the Circular
 being approved by the Panel in relation to the Whitewash Resolution; 


	
 

	
 

	
 


	
 

	
(U)

	
subject to
 satisfaction of the condition set out in clause 2.1(S), the Prospectus being
 made available to Qualifying Shareholders (other than Prohibited 












	
 

	
 

	
 

	
 


	
 

	
 

	
Shareholders
 and US Shareholders) in accordance with the Prospectus Rules and the
 Preference Prospectus being published in accordance with the Prospectus
 Rules; 


	
 

	
 

	
 


	
 

	
(V)

	
subject to
 satisfaction of the conditions set out in clause 2.1(S) and clause 2.1(T),
 the posting to Qualifying Shareholders (other than Prohibited Shareholders
 and US Shareholders) of the Circular and the Form of Proxy with, in the case
 of Qualifying Non-CREST Shareholders, an Application Form, in accordance with
 clause 3; 


	
 

	
 

	
 


	
 

	
(W)

	
the Company
 having applied for Admission and admission of the New Shares to CREST as
 Participating Securities and all of the conditions to such admission having
 been satisfied, in each case, on or before Admission; 


	
 

	
 

	
 


	
 

	
(X)

	
the Company
 allotting, subject only to Admission, the New Shares to the relevant Placees
 in accordance with clauses 3 and 4 or to HM Treasury (or its nominee) in
 accordance with clause 6; 


	
 

	
 

	
 


	
 

	
(Y)

	
the
 Directors having waived all change of control provisions set out in their
 respective service contracts which would otherwise be or have been triggered
 as a result of the issue of New Shares and/or Preference Shares contemplated
 by this Agreement and/or the Preference Share Subscription Agreement; 


	
 

	
 

	
 


	
 

	
(Z)

	
the
 Subscription and Transfer Agreement and the Option Agreement having been duly
 executed, the Subscription and Transfer Agreement having become wholly
 unconditional except for the condition relating to Admission, each of the
 parties thereto complying with its obligations in each of the Subscription
 and Transfer Agreement and the Option Agreement to the extent that the same
 fall to be performed prior to Admission or Preference Admission and there
 having occurred no default or breach by any party thereto under either such
 agreement; 


	
 

	
 

	
 


	
 

	
(AA)

	
no event
 referred to in Section 87G of the FSMA arising between the time of
 publication of the Prospectus and the time of Admission and no Supplementary
 Prospectus being published by or on behalf of the Company before Admission
 which, in any of the foregoing cases, HM Treasury or the Joint Sponsors
 consider in their respective sole judgment acting in good faith to be (singly
 or in the aggregate) material in the context of the business of the Group,
 the Placing and Open Offer, the Preference Share Subscription, any
 acquisition of New Shares or Preference Shares by HM Treasury, Ordinary
 Shareholders or Placees, or Admission, Preference Admission or post-Admission
 dealings in the Ordinary Shares; 


	
 

	
 

	
 


	
 

	
(BB)

	
the Company
 having applied for Preference Admission and admission of the Preference
 Shares to CREST as Participating Securities and all of the conditions to such
 Preference Admission having been satisfied, in each case, on or before Preference
 Admission; 


	
 

	
 

	
 


	
 

	
(CC)

	
Preference
 Admission becoming effective on the date of Admission; 












	
 

	
 

	
 

	
 


	
 

	
(DD)

	
Admission
 occurring at or before 8.00 a.m. on 19 January 2009 (or such later time or
 date as HM Treasury may agree); 


	
 

	
 

	
 


	
 

	
(EE)

	
the
 Prospectus and the Circular not containing disclosure of any fact, matter or
 circumstance material in the context of the Group or the Placing and Open
 Offer, the Preference Share Subscription, any acquisition of New Shares or
 subscription for Preference Shares by HM Treasury, Ordinary Shareholders or
 Placees, or Admission or Preference Admission or post-Admission dealings in
 the Ordinary Shares which has not previously been fairly disclosed, whether
 in the Press Announcement, any of the Previous Announcements or otherwise in
 writing to HM Treasury and to the Joint Sponsors; 


	
 

	
 

	
 


	
 

	
(FF)

	
a certified
 copy of the Auditors’ Certificate having been delivered to HM Treasury in a
 form reasonably satisfactory to it and the report and confirmations provided
 in such certificate not having been revoked or amended; 


	
 

	
 

	
 


	
 

	
(GG)

	
the Lloyds
 TSB Confirmation having been provided to HM Treasury in a form reasonably
 satisfactory to it and the confirmations contained therein not having been
 revoked or amended; 


	
 

	
 

	
 


	
 

	
(HH)

	
(i) the
 resolutions necessary to implement the Acquisition having been approved by
 the Company’s shareholders and the shareholders of Lloyds TSB; (ii) the
 Acquisition having been approved by the relevant court meeting; and (iii) the
 Scheme having been sanctioned by the court at the Scheme Hearing; 


	
 

	
 

	
 


	
 

	
(II)

	
the
 Acquisition having been made on terms such that, if the Acquisition becomes
 effective in accordance with its terms, the New Shares shall be acquired by
 Lloyds TSB on terms such that in consideration of the cancellation or
 transfer of the New Shares, the holders of New Shares shall receive ordinary
 shares in the capital of Lloyds TSB on the terms and conditions set out in
 the Scheme Document; and 


	
 

	
 

	
 


	
 

	
(JJ)

	
the Company
 allotting, subject only to Preference Admission, the Preference Shares to HM
 Treasury in accordance with the Preference Share Subscription Agreement. 


	
 

	
 

	
 


	
2.2

	
Subject to
 the fiduciary duties of the Directors, the Company shall use all reasonable
 endeavours to procure the fulfilment of the conditions set out in clause 2.1
 and, where applicable, by the times and dates stated therein (or such later
 times and/or dates as HM Treasury may agree) and shall notify HM Treasury
 forthwith in the event that the Company or any of the Directors becomes aware
 that any of the conditions set out in clause 2.1 has become or might
 reasonably be expected to become incapable of fulfilment by the time and/or
 date stated in such condition (or such later time and/or date as HM Treasury
 may agree) or at all. In addition, the Company shall provide HM Treasury with
 such information as it may reasonably require to enable it to ascertain
 whether the condition in clause 2.1(M) has been satisfied. 


	
 

	
 


	
2.3

	
For the
 purpose of clause 2.1(B), “material default
 or breach” shall mean a default or breach which HM Treasury or the
 Joint Sponsors, each acting in good faith, consider to be (singly or in
 aggregate) (i) material in the context of the Placing, the Open Offer, the 












	
 

	
 

	
 

	
 


	
 

	
Preference
 Share Subscription, Admission, Preference Admission, post-Admission dealings
 in the Ordinary Shares and/or (ii) such as to make it impracticable or
 inadvisable to proceed with Placing, the Open Offer, the Preference Share
 Subscription, Admission or Preference Admission. 


	
 

	
 


	
2.4

	
Each Joint
 Sponsor shall use its reasonable endeavours to provide to the Company such
 assistance as the Company shall reasonably request in connection with the
 procedural steps required for the performance of the obligations of the
 Company set out in clauses 2.1(S), (W) and (DD). 


	
 

	
 


	
2.5

	
Each Joint
 Sponsor shall not unreasonably refuse consent to executing such documents and
 doing such things as the Company and HM Treasury may reasonably require to
 grant security, and power of attorney, to the Company over, and in respect
 of, the shares in JerseyCo to be subscribed by such Joint Sponsor under the
 Subscription and Transfer Agreement and the Option Agreement and to JerseyCo
 over the bank account to which payments are to be made pursuant to clauses,
 3.24, 3.25 and 6.3, and over all or any rights of the Joint Sponsors to
 receive payments for any New Shares to be acquired pursuant to the Placing
 and Open Offer, in each case as security for the performance by the Joint
 Sponsors of their obligations under such agreements. 


	
 

	
 


	
2.6

	
Subject to
 clause 2.9, HM Treasury shall be entitled, in its absolute discretion and
 upon such terms as it shall think fit, to waive fulfilment of all or any of
 the conditions set out in clause 2.1 (other than clauses 2.1(C) to (G), (R)
 (save in relation to the Whitewash Resolution and Rule 21 Resolution), (S)
 and (DD)) or to extend the time provided for fulfilment of any of the
 conditions set out in clause 2.1 in respect of all or any part of the
 performance thereof. 


	
 

	
 


	
2.7

	
The Company
 shall be entitled to waive fulfilment of the condition set out in clause
 2.1(G). 


	
 

	
 


	
2.8

	
If the
 condition set out in clause 2.1(G) is not satisfied at the time at which all
 other conditions set out in clause 2.1 are satisfied or, to the extent
 permitted, waived the parties shall treat such condition as waived (and the
 Company shall be treated as having waived such condition) if the relevant
 matter in respect of which the condition has not been satisfied is not likely
 to lead to material consequences for the Company or the Directors and is not
 material in the context of the Placing, the Open Offer, Admission, Preference
 Admission, post-Admission dealings in the Ordinary Shares and, in all cases,
 for the avoidance of doubt, taking account of the financial circumstances of
 the Company. 


	
 

	
 


	
2.9

	
If:


	
 

	
 

	
 

	
 


	
 

	
(A)

	
any of the
 conditions set out in clause 2.1 are not fulfilled or, if capable of waiver
 pursuant to clause 2.6 or clause 2.7, waived or treated as waived pursuant to
 clause 2.8 by the time and/or date specified therein (or such later time
 and/or date as HM Treasury may agree); and 


	
 

	
 

	
 


	
 

	
(B)

	
HM Treasury
 does not consider it to be necessary that the arrangements contemplated by
 this Agreement and by the Preference Share Subscription 












	
 

	
 

	
 

	
 


	
 

	
 

	
Agreement
 proceed to completion in order to maintain the financial stability of the
 United Kingdom, 


	
 

	
 

	
 


	
 

	
then on
 notice from HM Treasury to the Joint Sponsors and the Company, the Joint
 Sponsors shall, on behalf of the Company, withdraw any application made to
 the FSA and/or the London Stock Exchange in connection with Admission, the
 Company shall withdraw any application made for Preference Admission, this
 Agreement shall cease and determine and no party to this Agreement shall have
 any claim against any other party to this Agreement for costs, damages,
 compensation or otherwise except as provided in clause 2.11. 


	
 

	
 


	
2.10

	
Without
 prejudice to the rights of HM Treasury and the Joint Sponsors pursuant to
 clauses 13.2 or 13.3, if any of the conditions set out in clause 2.1 are not
 fulfilled or, if capable of waiver pursuant to clause 2.6 or 2.7, waived, or
 treated as waived pursuant to clause 2.8 by the date and/or time specified
 herein (or such later time as HM Treasury may agree) and HM Treasury does
 consider it necessary that the arrangements contemplated by this Agreement
 and by the Preference Share Subscription Agreement proceed to completion in
 order to maintain the financial stability of the United Kingdom, HM Treasury
 shall treat as waived any outstanding conditions in clause 2.1 (other than
 any condition referred to as not being waivable by HM Treasury). 


	
 

	
 


	
2.11

	
Where this
 Agreement has terminated pursuant to clause 2.9: 


	
 

	
 


	
 

	
(A)

	
such
 termination shall be without prejudice to any accrued rights or obligations
 under this Agreement; 


	
 

	
 

	
 


	
 

	
(B)

	
the Company
 shall pay any commissions, fees and expenses as are payable in such
 circumstance under and in accordance with clauses 8.1 and 8.2; and 


	
 

	
 

	
 


	
 

	
(C)

	
the
 provisions of this clause 2.11 and clauses 1, 8, 9.11, 10, 11, 12, 14, 15,
 16, 17, 18 and 19 shall remain in full force and effect. 


	
 

	
 

	
 


	
2.12

	
HM Treasury
 and the Company shall use all reasonable endeavours to procure that, by no
 later than Admission, all approvals, authorisations and consents as may be
 required from any government, state or other regulatory body shall have been
 obtained in order that the conditions set out in clauses 2.1(G) and 2.1(H)
 may be satisfied. The Company and HM Treasury shall co-operate with each
 other (at the cost of the Company) in order that the conditions set out in
 clauses 2.1(G) and 2.1(H) may be satisfied, which co-operation shall include
 the Company: 


	
 

	
 


	
 

	
(A)

	
promptly
 providing to HM Treasury and to HM Treasury’s lawyers and other advisers
 where appropriate, any necessary information and documents reasonably
 required for the purpose of obtaining such approvals, authorisations, permits
 and consents and making such necessary filings; 


	
 

	
 

	
 


	
 

	
(B)

	
promptly
 notifying HM Treasury or HM Treasury’s lawyers and other advisers where
 appropriate, of any material communications received in the course of
 obtaining such approvals, authorisations, permits and consents and making
 such necessary filings; and 












	
 

	
 

	
 

	
 


	
 

	
(C)

	
generally
 supporting HM Treasury in obtaining such approvals, authorisations, permits
 and consents and making such necessary filings. 


	
 

	
 

	
 


	
2.13

	
Upon
 Admission, each of the conditions set out in clause 2.1 shall, to the extent
 not fulfilled, be deemed to have been fulfilled or waived. 


	
 

	
 


	
3.

	
THE PLACING AND OPEN OFFER AND APPOINTMENTS 


	
 

	
 


	
3.1

	
The Company
 hereby: 


	
 

	
 


	
 

	
(A)

	
appoints
 each of Morgan Stanley and Dresdner as joint sponsors in connection with the
 applications for Admission and, if required by the UKLA, the publication of
 the Circular and as joint bookrunners and placing agents in connection with
 the Placing and Open Offer and each of Morgan Stanley and Dresdner accepts
 such appointments; 


	
 

	
 

	
 


	
 

	
(B)

	
confirms
 that such appointments confer on each of the Joint Sponsors all powers,
 authorities and discretions on behalf of the Company which are necessary for
 or incidental to, the performance of its function as Joint Sponsor, joint
 bookrunner and placing agent to the Placing and Open Offer (including the
 power to appoint sub-agents or to delegate the exercise of any of its powers,
 authorities or discretions to such persons as it may think fit); and 


	
 

	
 

	
 


	
 

	
(C)

	
agrees to
 ratify and approve all documents, acts and things which each of the Joint
 Sponsors shall lawfully do in the exercise of such appointments, powers,
 authorities and discretions. 


	
 

	
 

	
 


	
3.2

	
The Company
 hereby agrees, subject always to clause 5.1, to invite Qualifying
 Shareholders (who are not Prohibited Shareholders or US Shareholders) by
 means of the Prospectus and (in the case of Qualifying Non-CREST Shareholders
 who are not Prohibited Shareholders or US Shareholders) the Application Form
 to apply to acquire the New Shares at the Issue Price and otherwise on the
 terms and conditions set out therein. The Company shall procure that, under
 the terms of the Placing and Open Offer Qualifying Shareholders (other than
 Prohibited Shareholders or US Shareholders) shall be entitled (i) to acquire
 their pre-emptive entitlements, and (ii) to the extent reasonably practicable
 (and provided always that such Qualifying Shareholders who are not Prohibited
 Shareholders or US Shareholders are treated equally), and to the extent that
 such pre-emptive entitlements are not taken up by other Qualifying
 Shareholders who are not Prohibited Shareholders or US Shareholders, to apply
 to acquire additional New Shares (either in their capacity as Qualifying
 Shareholders or, if such structure is not reasonably practicable, as Placees)
 whose application for additional New Shares the parties hereby agree will be
 allocated in full to the extent possible, and failing which will be scaled
 back on a basis which is pro rata to such additional applications). 


	
 

	
 


	
3.3

	
Subject to
 the next following sentence, each of the Joint Sponsors hereby agrees
 severally (and not jointly or jointly and severally) and in reliance on the
 representations, warranties and undertakings of the Company set out in this
 Agreement, as agent of the Company, to use reasonable endeavours to procure
 Placees to take up the New Shares on such terms and conditions as may be
 agreed upon by HM Treasury, including the Treasury Solicitor, and at a price
 not lower than the Issue Price, subject to a right of 












	
 

	
 

	
 

	
 


	
 

	
clawback as
 a result of the New Shares being acquired under the Open Offer and on the
 basis of the information in the other Placing Documents, it being understood
 that if having used such reasonable endeavours the Joint Sponsors are unable
 to procure Placees, or if any Placees who are so procured fail to meet their
 payment obligations, for all or any of the New Shares, the Joint Sponsors
 shall not themselves be obliged to acquire such New Shares which shall be
 Residual Shares to be taken up solely by HM Treasury in accordance with
 clause 6.3. The obligation of each of the Joint Sponsors to use reasonable
 endeavours to procure Placees pursuant to the preceding sentence shall not
 apply until publication of the Prospectus in accordance with the provisions
 of this Agreement, provided that each of the Joint Sponsors shall be
 permitted to endeavour to procure Placees prior to such publication.


	
 

	
 


	
3.4

	
Subject to
 compliance with this clause 3 and with the restrictions in clause 5, each of
 Morgan Stanley and Dresdner shall have discretion to procure Placees in the
 manner and otherwise as it thinks fit in compliance, in all material
 respects, with applicable laws as are customarily complied with by banks of
 international reputation, including the last time at which allocations
 pursuant to the Placing may be made and acceptances thereto received. 


	
 

	
 


	
3.5

	
Morgan
 Stanley and Dresdner will procure that a schedule is delivered to the Company
 (or the Registrar on behalf of the Company) and to HM Treasury no later than
 5.00 p.m. on the third Business Day after the close of the Open Offer and in
 any event no later than 5.00 p.m. on the third Business Day following the
 Closing Date following completion of the procedure set out in clause 3.4
 showing the names and registration details of Placees allocated Non-Accepted
 Shares (and the number of New Shares comprised in such allocations) and shall
 specify whether such shares are to be issued in certificated or
 uncertificated form together with details of (and the number of New Shares
 comprised in) the proposed number of Residual Shares to be acquired by HM
 Treasury (or its nominee) pursuant to clause 6.3 (the “Placing Schedule”). HM Treasury, the Company
 and the Joint Sponsors will consult each other in respect of, and agree a
 final version of, the Placing Schedule within one Business Day of the date of
 its delivery pursuant to this clause 3.5. 


	
 

	
 


	
3.6

	
Without
 prejudice to the Joint Sponsors’ obligations under Chapter 8 of the Listing
 Rules, the Company acknowledges and agrees that neither of the Joint Sponsors
 nor HM Treasury is responsible for and has not authorised and will not
 authorise the contents of any Issue Document and that neither of the Joint
 Sponsors nor HM Treasury shall be responsible for verifying the accuracy,
 completeness or fairness of any information in any of the Issue Documents (or
 any supplement or amendment to any of the foregoing). 


	
 

	
 


	
3.7

	
The Company
 consents to each Joint Sponsor disclosing to the FSA at any time before or
 after Admission, any information that such Joint Sponsor is required to
 disclose to satisfy its obligations as a sponsor under the Listing Rules
 and/or the DTRs provided that, where legally permitted and practicable, such
 Joint Sponsor notifies the Company prior to making, and consults as to the
 timing and manner of, such disclosure. 


	
 

	
 


	
3.8

	
The Company
 confirms that it will appoint a receiving agent to act as registrar and
 receiving agent in connection with the Placing and Open Offer and that the
 Receiving Agent will be admitted as registrar and receiving agent in respect
 of CREST. 












	
 

	
 

	
 

	
 


	
3.9

	
The Company
 shall give all such assistance and provide all such information as each of
 the Joint Sponsors may reasonably require for the making and implementation
 of the Placing and Open Offer and will do (or procure to be done) all such
 things and execute (or procure to be executed) all such documents as may be
 reasonably necessary or desirable to be done or executed by the Company or by
 its officers, employees or agents in connection therewith. 


	
 

	
 


	
3.10

	
The Joint
 Sponsors and the Company agree to use their respective reasonable endeavours
 to finalise the Option Agreement and Subscription and Transfer Agreement so as
 to give effect to the arrangements intended to be contemplated by such
 agreements, provided that such arrangements reflect any requirements of the
 Joint Sponsors, acting reasonably, to enable them to comply with any
 regulatory provisions applicable to them and to enter into those agreements
 as soon as reasonably practicable and to execute such documents and do such
 things as may be necessary or desirable to implement such arrangements.
 Finalisation of the Option Agreement and the Subscription and Transfer
 Agreement and the mechanical and cash-flow arrangements related thereto
 (including those in support of the arrangements provided in clauses 2.3, 3.24
 and 3.25 and the arrangements for the provision of security for the transfer
 of the Consideration Shares contemplated by clause 2.3) shall require the
 prior approval of HM Treasury (not to be unreasonably withheld). 


	
 

	
 


	
3.11

	
The Company
 undertakes that it shall release the Press Announcement to a Regulatory
 Information Service at, or as soon as practicable after, 7.00 a.m. on the
 Effective Date. 


	
 

	
 


	
3.12

	
The Company
 undertakes to: 


	
 

	
 


	
 

	
(A)

	
make an
 application: 


	
 

	
 

	
 


	
 

	
 

	
(i)

	
(within the
 meaning of and for the purposes of the Prospectus Rules) to the FSA for the
 approval of the Prospectus, the Preference Prospectus and, to the extent
 required, the Circular; and 


	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
to the Panel
 for the approval of the Circular in relation to the Whitewash Resolution; and
 


	
 

	
 

	
 

	
 


	
 

	
(B)

	
apply to the
 FSA and to the London Stock Exchange for Admission and to the FSA and to the
 London Stock Exchange for Preference Admission and further undertakes to
 provide such information, supply and/or execute such documents, pay such
 fees, give such undertakings and do all such acts and things as may be
 required (a) by the UK Listing Authority and the London Stock Exchange for
 the purposes of obtaining formal approval of the Circular (to the extent
 required) and the Prospectus, the Preference Prospectus, any Supplementary
 Prospectus and any Supplementary Preference Prospectus and obtaining
 Admission and Preference Admission, and (b) to comply with the Listing Rules,
 the Prospectus Rules, the Admission and Disclosure Standards, FSMA and the
 Companies Acts, and (c) by the UK Listing Authority for the passporting of
 the Prospectus into any relevant EU member state, and (d) the relevant
 regulatory authority in any relevant EU member state into which the
 Prospectus is to be passported, and (e) by Euroclear for the purposes of
 obtaining permission for the admission of the New Shares and the Preference
 Shares as Participating 












	
 

	
 

	
 

	
 


	
 

	
 

	
Securities
 in CREST and (f) by the FSA, the London Stock Exchange, in each case to
 obtain the grant of such Admission or Preference Admission, as the case may
 be. Subject to the fiduciary duties of the Directors, the Company will use
 all reasonable endeavours to obtain the grant of Admission (subject only to
 the allotment of the New Shares) and of Preference Admission (subject only to
 the allotment of the Preference Shares) by no later than 8.00 a.m. on 19
 January 2009 (or such later time or date as HM Treasury may agree in
 writing). 


	
 

	
 

	
 


	
3.13

	
The Company
 undertakes that it shall not include any reference to HM Treasury or the
 Joint Sponsors in any of the Issue Documents without the prior written
 consent of HM Treasury or the Joint Sponsors, as applicable. 


	
 

	
 


	
3.14

	
Subject to
 obtaining the approval of the Circular by the FSA (to the extent required)
 and the Panel in relation to the Whitewash Resolution, the Company shall
 procure that: 


	
 

	
 


	
 

	
(A)

	
the Circular
 and the Forms of Proxy are posted to Qualifying Shareholders (other than
 Prohibited Shareholders and US Shareholders) on the Circular Posting Date;
 and 


	
 

	
 

	
 


	
 

	
(B)

	
a copy of
 the Circular is filed with the UKLA pursuant to the Listing Rules and, if
 required, with the Panel. 


	
 

	
 

	
 


	
3.15

	
Subject to
 obtaining the approval of the Prospectus by the FSA, the Company shall
 procure that: 


	
 

	
 


	
 

	
(A)

	
the
 Prospectus is made available to Qualifying Shareholders (other than
 Prohibited Shareholders and US Shareholders) in accordance with the
 Prospectus Rules subject to clause 5; 


	
 

	
 

	
 


	
 

	
(B)

	
a copy of
 the Prospectus is filed with the FSA pursuant to the Prospectus Rules; 


	
 

	
 

	
 


	
 

	
(C)

	
copies of
 the Prospectus, together with any other required documents, are made
 available to the public by or on behalf of the Company in accordance with the
 Prospectus Rules; 


	
 

	
 

	
 


	
 

	
(D)

	
Application
 Forms are posted to all Qualifying Non-CREST Shareholders (other than
 Prohibited Shareholders and US Shareholders) with the Prospectus; and 


	
 

	
 

	
 


	
 

	
(E)

	
the Open
 Offer Entitlements of Qualifying CREST Shareholders (other than Prohibited
 Shareholders and US Shareholders) are credited to their respective stock
 accounts on the first Dealing Day after the Ordinary Shares go ‘ex’ the
 entitlement to apply under the Open Offer. 


	
 

	
 

	
 


	
3.16

	
Subject to
 obtaining the approval of the Preference Prospectus by the FSA and subject to
 clause 5, the Company shall procure that: 


	
 

	
 


	
 

	
(A)

	
a copy of
 the Preference Prospectus is filed with the FSA pursuant to the Prospectus
 Rules; and 












	
 

	
 

	
 

	
 


	
 

	
(B)

	
copies of
 the Preference Prospectus, together with all other required documents, are
 made available to the public by or on behalf of the Company in accordance
 with the Prospectus Rules. 


	
 

	
 

	
 


	
3.17

	
As soon as
 practicable after the Prospectus Posting Date, the Company shall procure
 delivery to Euroclear of security application forms in a form acceptable to
 HM Treasury and to the Joint Sponsors, acting reasonably, in respect of the
 Open Offer Entitlements and the New Shares and the Company undertakes to use
 reasonable endeavours to obtain permission for the admission of each of the
 Open Offer Entitlements and the New Shares as a Participating Security in
 CREST. 


	
 

	
 


	
3.18

	
On the
 Circular Posting Date, prior to the despatch of the Circular, the Company shall
 deliver, or procure there are delivered, to the Joint Sponsors and to the HM
 Treasury those documents listed in Part II of Schedule 2. 


	
 

	
 


	
3.19

	
On the
 Prospectus Posting Date, prior to publication of the Prospectus, and (to the
 extent requested) prior to the publication of each Supplementary Prospectus,
 the Company shall deliver or procure there are delivered to the Joint
 Sponsors and to HM Treasury those documents listed in Part III of Schedule 2.
 


	
 

	
 


	
3.20

	
At or with
 respect to the date of any Time of Sale, the Company shall deliver or procure
 there are delivered to the Joint Sponsors and to HM Treasury the documents
 listed in Part IV of Schedule 2. 


	
 

	
 


	
3.21

	
The Company
 authorises the Joint Sponsors to date the Enablement Letter and deliver it to
 Euroclear. 


	
 

	
 


	
3.22

	
Subject
 always to the fiduciary duties of the Directors, the Company shall procure
 that the GM is duly convened and held no later than 17 December 2008 and that
 the Resolutions are proposed at it. 


	
 

	
 


	
3.23

	
Subject to
 clause 3.24, neither the Placing and Open Offer nor the Lloyds TSB Offer nor
 any of their terms and conditions shall be varied, extended, amended or
 withdrawn without the prior written consent of HM Treasury, except as
 required by any applicable law or regulation. 


	
 

	
 


	
3.24

	
If at any
 time between the Prospectus Posting Date and the Closing Date: (i) any event
 shall have occurred as a result of which the Prospectus, as amended or
 supplemented from time to time, would include an untrue statement of a
 material fact or omit to state any material fact necessary in order to make
 the statements therein, in the light of the circumstances under which they
 were made when such document is delivered, not misleading, or if for any
 other reason, including compliance with Section 87G of FSMA, it shall be
 necessary to amend or supplement the Prospectus, the Company will (without
 prejudice to the rights of HM Treasury and the Joint Sponsors under this
 Agreement) promptly: 


	
 

	
 


	
 

	
(A)

	
notify HM
 Treasury and the Joint Sponsors of the relevant circumstances; 


	
 

	
 

	
 


	
 

	
(B)

	
consult with
 HM Treasury and the Joint Sponsors in considering any requirement to publish
 a Supplementary Prospectus; 












	
 

	
 

	
 

	
 


	
 

	
(C)

	
consult with
 HM Treasury and the Joint Sponsors as to the contents of any Supplementary
 Prospectus and comply with all reasonable requirements of in relation
 thereto; and 


	
 

	
 

	
 


	
 

	
(D)

	
publish such
 Supplementary Prospectus in such manner as may be required by the Prospectus
 Rules, 


	
 

	
 

	
 


	
 

	
and the
 provisions of this clause 3.24 shall apply mutatis mutandis in respect of the
 Preference Prospectus (save that references to the Joint Sponsors shall not
 so apply). 


	
 

	
 

	
 


	
3.25

	
On the
 Prospectus Posting Date, each Joint Sponsor shall deliver to the Company and
 to HM Treasury an original of the Subscription and Transfer Agreement and, in
 the case of Morgan Stanley or Dresdner (as appropriate), the Option
 Agreement, each duly executed by the relevant Joint Sponsor (if a party
 thereto). 


	
 

	
 


	
3.26

	
As between
 the Company and Morgan Stanley, any amounts received by Morgan Stanley in
 respect of the New Shares whether from applicants for New Shares pursuant to
 the Open Offer, Placees or HM Treasury (in accordance with clause 6) shall be
 received by Morgan Stanley and the Company shall have no rights to receive
 such amounts from Morgan Stanley or from any acquiror of such New Shares.
 Such amounts shall be paid by applicants for the New Shares to be issued
 pursuant to the Open Offer, by Placees and by HM Treasury, in each case as
 applicable, into a bank account approved by HM Treasury, being an account
 established on terms approved by HM Treasury, acting reasonably, including as
 to security in respect of the discharge of Morgan Stanley’s undertaking to
 JerseyCo under the Subscription and Transfer Agreement to pay up the JerseyCo
 Preference Shares. 


	
 

	
 


	
3.27

	
As between
 the Company and Dresdner, any amounts received by Dresdner in respect of the
 New Shares whether from applicants for New Shares pursuant to the Open Offer,
 Placees or HM Treasury (in accordance with clause 6) shall be received by
 Dresdner and the Company shall have no rights to receive such amounts from
 Dresdner or from any acquirer of such New Shares. Such amounts shall be paid
 by applicants for the New Shares to be issued pursuant to the Open Offer, by
 Placees and by HM Treasury, in each case as applicable, into a bank account
 approved by HM Treasury, being an account established on terms approved by HM
 Treasury, acting reasonably, including as to security in respect of the
 discharge of Dresdner’s undertaking to JerseyCo under the Subscription and
 Transfer Agreement to pay up the JerseyCo Preference Shares. 


	
 

	
 


	
3.28

	
For the
 avoidance of doubt, nothing in this Agreement confers or imposes on any
 Placee (including HM Treasury) any right or obligation (conditional or
 otherwise) to subscribe for or acquire any JerseyCo Preference Shares or
 JerseyCo Ordinary Shares. 


	
 

	
 


	
3.29

	
Subject to
 the Scheme being sanctioned by the appropriate court at the Scheme Hearing,
 the Company shall procure that the Reduction Hearing shall occur no later
 than three Business Days after the date of the Scheme Hearing. 


	
 

	
 


	
3.30

	
Subject to
 the Scheme being sanctioned by the appropriate court at the Scheme Hearing,
 the Company shall procure that Admission and Preference Admission shall occur
 after the Scheme Hearing but not later than by 12.00 p.m. (midday) on the
 date 













	
 

	
 

	
 

	
 

	
 


	
 

	
on which the
 Scheme Record Time occurs so as to ensure that the New Shares are shares to
 which the Scheme relates at the Scheme Record Time. 


	
 

	
 


	
3.31

	
Subject to the
 Scheme being sanctioned by the appropriate court at the Scheme Hearing, the
 Company shall procure that the order sanctioning the Scheme be registered or
 otherwise filed forthwith at the appropriate registry and in any case by no
 later than 5.00 p.m. on the day on which the Scheme Hearing occurs and,
 subject to the reduction of capital associated with the Scheme being
 confirmed by the appropriate court at the Reduction Hearing, the Company
 shall procure that the order or relevant copy of the order confirming the
 reduction of capital be registered or otherwise filed forthwith at the appropriate
 registry no later than on the Business Day following the Reduction Hearing. 


	
 

	
 


	
3.32

	
Immediately prior
 to Admission the Company shall deliver or procure that there are delivered to
 the Joint Sponsors and to HM Treasury those documents listed in Part IV of
 Schedule 2. 


	
 

	
 


	
3.33

	
Immediately prior
 to Preference Admission, the Company shall deliver to HM Treasury those
 documents listed in Part V of Schedule 2. 


	
 

	
 


	
3.34

	
The Company shall
 procure (to the extent that it lies in its power to do so) to be communicated
 or delivered to the Joint Sponsors all such information and documents (signed
 by the appropriate person where so required) as the Joint Sponsors may
 reasonably require to enable them to discharge their obligations hereunder
 and pursuant to or in connection with obtaining Admission, Preference
 Admission, the Placing and Open Offer or as may be required to comply with
 the requirements of the FSMA, the FSA or the London Stock Exchange. 


	
 

	
 


	
3.35

	
The Company
 confirms to the Joint Sponsors and to HM Treasury that a meeting or meetings
 of the Board has been held (and/or, in the case of (C), (E) and (F) below,
 undertakes to hold such a meeting) which has (or will have, as the case may
 be): 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
authorised the
 Company to enter into and perform its obligations under this Agreement and
 the Preference Share Subscription Agreement; 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
approved the form
 and release of the Press Announcement and the making (including the
 recommendation) of the Lloyds TSB Offer; 


	
 

	
 

	
 

	
 

	
 


	
 

	
(C)

	
approved the form
 of the Circular, Prospectus, and Form of Proxy and authorised and approved
 the publication of the Circular, Prospectus, the Form of Proxy, each of the
 other Issue Documents and all other documents connected with the Placing and
 Open Offer, Admission and Preference Admission, as appropriate; 


	
 

	
 

	
 

	
 

	
 


	
 

	
(D)

	
approved the
 making of the Placing and Open Offer and the allotment of Preference Shares
 under the Preference Share Subscription Agreement; 


	
 

	
 

	
 

	
 

	
 


	
 

	
(E)

	
approved the
 making of the applications for Admission and Preference Admission; and 












	
 

	
 

	
 

	
 

	
 


	
 

	
(F)

	
authorised (or
 authorise, as the case may be) all necessary steps to be taken by the Company
 in connection with each of the above matters. 


	
 

	
 

	
 

	
 

	
 


	
3.36

	
The Company
 irrevocably authorises each of the Joint Sponsors to give to the Registrars
 and/or Euroclear any instructions consistent with this Agreement and/or the
 Issue Documents that it reasonably considers to be necessary for, or
 incidental to, the performance of its functions as joint sponsor or joint
 bookrunner or placing agent (as the case may be). 


	
 

	
 

	
 

	
 

	
 


	
3.37

	
The Company
 acknowledges that the Joint Sponsors’ responsibilities as sponsors pursuant
 to the Listing Rules are owed solely to the FSA and that agreeing to act as
 sponsor does not of itself extend any duties or obligations to any one else,
 including the Company. 


	
 

	
 

	
 

	
 

	
 


	
4.

	
ALLOTMENT
 OF THE NEW SHARES, CONSIDERATION AND REGISTRATION 


	
 

	
 

	
 

	
 

	
 


	
4.1

	
The Company shall,
 prior to Admission, pursuant to a resolution of the Board, allot, conditional
 only on Admission, the New Shares to the Open Offer Acceptors in each case in
 accordance with the terms of the Open Offer Documents. 


	
 

	
 

	
 

	
 

	
 


	
4.2

	
The Company shall,
 in relation to the Placing, as soon as reasonably practicable following
 receipt of the Placing Schedule and in any event (subject only to such
 receipt) prior to Admission: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
as regards the New
 Shares required by Placees to be certificated shares, pursuant to a
 resolution of the Board, allot, conditional only upon Admission, such New
 Shares as certificated shares, subject to the prior consent of HM Treasury
 and to the terms of the Placing Documents, to the Placees of such New Shares
 in the proportions set out in the Placing Schedule; and 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
as regards the New
 Shares which are required by Placees to be uncertificated shares, pursuant to
 a resolution of the Board, allot, conditional only upon Admission, such New
 Shares as uncertificated shares, subject to the prior consent of HM Treasury
 and to the terms of the Placing Documents: 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(i)

	
in the case of
 Placees procured by Morgan Stanley, to such CREST account of such person as
 will be notified by Morgan Stanley to the Company no later than five Business
 Days prior to Admission, such person to hold such New Shares as nominee for
 such Placees; and 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
in the case of
 Placees procured by Dresdner, to such CREST account of such person as will be
 notified by Dresdner to the Company no later than five Business Days prior to
 Admission, such person to hold such New Shares as nominee for such Placees. 


	
 

	
 

	
 

	
 

	
 


	
4.3

	
The consideration
 for the allotment and issue of the New Shares to the Open Offer Acceptors and
 the Placees pursuant to clauses 4.1, 4.2 and 6.3 shall be the transfer to the
 Company by each of the Joint Sponsors, each in its capacity as subscriber for
 the Consideration Shares, of the Consideration Shares pursuant to the
 Subscription and Transfer Agreement. Subject to Admission taking place, each
 of the Joint Sponsors 












	
 

	
 

	
 

	
 

	
 


	
 

	
shall, as shall be
 set out in the Subscription and Transfer Agreement and each in its capacity
 as subscriber for the Consideration Shares, deliver to, or as may be directed
 by, the Company duly executed instruments of transfer in respect of the
 Consideration Shares held by it, by which the Consideration Shares are
 transferred to the Company (or such persons as the Company may direct). For
 the avoidance of doubt, Morgan Stanley and Dresdner will be under no
 obligation to subscribe for Consideration Shares in an amount in excess of
 the amount received by them (a) from Placees (other than HM Treasury); (b)
 from Qualifying Shareholders pursuant to the Open Offer; and (c) from HM
 Treasury.


	
 

	
 

	
 

	
 

	
 


	
4.4

	
Following delivery
 of the instruments of transfer in respect of the Consideration Shares in
 accordance with clause 4.3, the Company shall procure that the Receiving
 Agent will, without delay on the day of Admission: 


	
 

	
 


	
 

	
(A)

	
effect the
 registration, without registration fee, of the persons referred to in clauses
 4.1 and 4.2(B) above and, as appropriate, HM Treasury (or its nominee) in
 accordance with clause 6.3, as the holders of the relevant New Shares and
 shall procure that such New Shares are credited to any relevant accounts as
 specified in CREST (without charging any administration fee); and 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
effect the registration,
 without registration fee, of the Placees referred to in clause 4.2(A) in the
 register of members and to issue definitive certificates. 


	
 

	
 

	
 

	
 

	
 


	
4.5

	
The New Shares
 will, as from the date when they are issued, rank pari passu in all respects
 with, and be identical to, the Ordinary Shares then in issue and will rank in
 full for all dividends and other distributions declared, made or paid on the
 Ordinary Shares after such date of issue. The New Shares and the Preference
 Shares shall be allotted and issued free from all Adverse Interests. 


	
 

	
 

	
 

	
 

	
 


	
5.

	
OVERSEAS
 SHAREHOLDERS 


	
 

	
 

	
 

	
 

	
 


	
5.1

	
The Company shall
 procure that no Application Forms and no copies of the Prospectus (or any
 Supplementary Prospectus) shall be posted to Prohibited Shareholders or
 Ordinary Shareholders with registered addresses in the United States and that
 no Open Offer Entitlements are credited to stock accounts in CREST of
 Prohibited Shareholders or Ordinary Shareholders with registered addresses in
 the United States unless, in the case of Prohibited Shareholders, they have
 supplied the Company with an address in the United Kingdom for the giving of
 notices to them. 


	
 

	
 

	
 

	
 

	
 


	
5.2

	
The Application
 Forms, together with the Prospectus and any Supplementary Prospectus shall
 specify, to the reasonable satisfaction of the Joint Sponsors, such
 procedures as to ensure that no New Shares are credited to the account or for
 the benefit of any person located in the United States unless they have
 established to the reasonable satisfaction of the Company that, in the case
 of US Shareholders, they are qualified institutional buyers (“QIBs”) as defined in Rule 144A under the
 Securities Act or accredited investors as defined in Rule 501 under the
 Securities Act, or in the case of Prohibited Shareholders, they may take up
 their entitlements to the New Shares in accordance with an applicable
 exemption from local securities laws. 












	
 

	
 

	
 

	
 

	
 


	
5.3

	
The Company shall
 not without the written consent of the Joint Sponsors, not to be unreasonably
 withheld, make the New Shares available to the holders of American Depositary
 Shares representing the Ordinary Shares with respect to any Ordinary Shares
 underlying such holder’s American Depositary Shares. 


	
 

	
 

	
 

	
 

	
 


	
5.4

	
Each of the Joint
 Sponsors (severally and not jointly or jointly and severally) and the Company
 acknowledges and agrees that offers and sales of New Shares will be made as
 described in the Prospectus and in accordance with the terms of this
 Agreement. The rights of Prohibited Shareholders and US Shareholders to participate
 in the Open Offer and Placing shall be limited as set out in the Prospectus
 and in this Agreement. 


	
 

	
 

	
 

	
 

	
 


	
5.5

	
Each of the
 Company and the Joint Sponsors (severally and not jointly or jointly and
 severally) confirms and agrees that except in relation to each Member State
 of the EEA which has implemented the Prospectus Directive (each a “Relevant Member State”), none of the New
 Shares have been or will be offered to the public for the purposes of the
 Prospectus Directive in that Relevant Member State prior to the publication
 of a prospectus in relation to the New Shares which has been approved by the
 competent authority in that Relevant Member State or, where appropriate,
 approved in another Relevant Member State and notified to the competent
 authority in that Relevant Member State, all in accordance with the
 Prospectus Directive, except: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
to legal entities
 which are authorised or regulated to operate in the financial markets or, if
 not so authorised or regulated, whose corporate purpose is solely to invest
 in securities; 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
to any legal
 entity which has two or more of: 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(i)

	
an average of at
 least 250 employees during the last financial year; 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
a total balance
 sheet of more than €43,000,000; and 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(iii)

	
an annual net
 turnover of more than €50,000,000, as shown in its last annual or
 consolidated accounts; or 


	
 

	
 

	
 

	
 

	
 


	
 

	
(C)

	
in any other
 circumstances which do not require the publication by the Company of a
 prospectus pursuant to Article 3 of the Prospectus Directive, 


	
 

	
 

	
 

	
 

	
 


	
 

	
provided that no
 such offer of any New Shares shall result in a requirement for the
 publication of a prospectus pursuant to Article 3 of the Prospectus Directive
 or any measure implementing the Prospectus Directive in the Relevant Member State.
 


	
 

	
 

	
 

	
 

	
 


	
 

	
For the purposes
 of this provision, the expression an “offer
 of New Shares to the public” in relation to any New Shares in any
 Relevant Member State means the communication in any form and by any means of
 sufficient information on the terms of the offer and the New Shares to be
 offered so as to enable an investor to decide to purchase or subscribe for
 the New Shares, as the same may be varied in that Member State by any measure
 implementing the Prospectus Directive in that Member State. 


	
 

	
 


	
5.6

	
Each of the
 Company, HM Treasury and the Joint Sponsors (severally and not jointly or
 jointly and severally) acknowledges and agrees that the New Shares and the
 Open












	
 

	
 

	
 

	
 

	
 


	
 

	
Offer Entitlements
 have not been and will not be registered under the Securities Act and may not
 be offered or sold except in accordance with Rule 903 of Regulation S, to
 QIBs or to certain pre-identified US employees of the Company who are
 accredited investors (as defined in Rule 501 under the Securities Act) only
 if such employees have executed and delivered to the Company an investor
 letter in a form reasonably satisfactory to the Joint Sponsors and HM
 Treasury, in each case pursuant to an exemption from, or in a transaction not
 subject to, the registration requirements of the Securities Act. 


	
 

	
 

	
 

	
 

	
 


	
5.7

	
Each of the
 Company, HM Treasury and the Joint Sponsors (severally and not jointly or
 jointly and severally) represents, warrants and agrees that it: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
has not engaged
 and will not engage in any directed selling efforts (within the meaning of
 Regulation S) in the United States with respect to the New Shares; 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
has not offered or
 sold and will not offer or sell New Shares in the United States by means of
 any form of general solicitation or general advertising within the meaning of
 Rule 502(c) under the Securities Act or in a manner involving a public
 offering within the meaning of Section 4(2) of the Securities Act; 


	
 

	
 

	
 

	
 

	
 


	
 

	
(C)

	
has only solicited
 and will only solicit subscriptions of and has only offered or sold and will
 only offer or sell the New Shares: 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(i)

	
to persons that it
 reasonably believes are QIBs pursuant to an exemption from, or in a
 transaction not subject to, the registration requirements of the Securities
 Act, (“QIB Purchasers”) and only
 if such QIB Purchasers have executed and delivered an investor letter in a
 form reasonably satisfactory to the Joint Sponsors and HM Treasury, which in
 the case of the Joint Sponsors does not need to be until the delivery of any
 New Shares to any such QIB Purchasers; 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
to certain
 pre-identified US employees of the Company who are accredited investors (as
 defined in Rule 501 under the Securities Act) only if such employees have
 executed and delivered to the Company an investor letter in a form reasonably
 satisfactory to the Joint Sponsors and HM Treasury in accordance with an
 applicable exemption from local securities laws; 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(iii)

	
in reliance upon
 and in compliance with Regulation S; or 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(iv)

	
to Prohibited
 Shareholders in accordance with an applicable exemption from local securities
 laws and in reliance upon and in compliance with Regulation S; and 


	
 

	
 

	
 

	
 

	
 


	
 

	
(D)

	
has complied and
 will comply with all applicable provisions of FSMA and all other applicable
 securities laws with respect to anything done by it in relation to any New
 Shares in, from or otherwise involving the United Kingdom. 


	
 

	
 

	
 

	
 

	
 


	
5.8

	
The Company
 acknowledges and agrees that it has not, directly or indirectly: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
made nor will it
 make offers or sales of any security; 












	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
solicited nor will
 it solicit offers or sales of any security; 


	
 

	
 

	
 

	
 

	
 


	
 

	
(C)

	
otherwise
 negotiated nor will it negotiate in respect of any security; 


	
 

	
 

	
 

	
 

	
 


	
 

	
(D)

	
taken nor will it
 take any other action, 


	
 

	
 

	
 

	
 

	
 


	
 

	
in any of the
 foregoing cases under circumstances that would require registration of the
 New Shares under the Securities Act. 


	
 

	
 

	
 

	
 

	
 


	
5.9

	
For so long as any
 New Shares are “restricted securities” within the meaning of Rule 144(a)(3)
 under the Securities Act, the Company will during any period in which it is
 neither subject to Section 13 or 15(d) of the Exchange Act nor exempt from
 reporting pursuant to Rule 12g3-2(b) thereunder, provide to any holder or
 beneficial owner of such restricted securities or to any prospective purchaser
 of such restricted securities designated by such holder or beneficial owner,
 upon the request of such holder, beneficial owner or prospective purchaser,
 the information required to be provided by Rule 144A(d)(4) under the
 Securities Act; this undertaking is also for the benefit of the holders and
 beneficial owners from time to time of such restricted securities and
 prospective purchasers designated by such holders or beneficial owners from
 time to time. 


	
 

	
 

	
 

	
 

	
 


	
5.10

	
The Company shall
 ensure that each of its Affiliates and each person acting on behalf of the
 Company or its Affiliates (other than the Joint Sponsors and their respective
 Affiliates and persons acting on behalf of any of the Joint Sponsors and
 their respective Affiliates) has complied and will comply with clauses 5.5,
 5.6, 5.7 and 5.8. 


	
 

	
 

	
 

	
 

	
 


	
5.11

	
Each of the Joint
 Sponsors shall ensure that each of its Affiliates and each person acting on
 its behalf or on behalf of its Affiliates has complied and will comply with
 clauses 5.5, 5.6 and 5.7. 


	
 

	
 

	
 

	
 

	
 


	
6.

	
HM
 TREASURY ACQUISITION 


	
 

	
 

	
 

	
 

	
 


	
6.1

	
For the purposes
 of this clause 6: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
“Accepted Shares” shall mean any New
 Shares in respect of which an Acceptance has been made before 11.00 a.m. on
 the Closing Date; 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
“Non-Accepted Shares” shall mean any New
 Shares which are not Accepted Shares together with any New Shares which are
 treated as Non-Accepted Shares pursuant to clauses 6.1(C); and 


	
 

	
 

	
 

	
 

	
 


	
 

	
(C)

	
the Company shall,
 with the consent of HM Treasury, be entitled to treat as Non-Accepted Shares:
 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(i)

	
any New Shares
 comprised in an Acceptance which has been validly rejected by the Company,
 with the consent of HM Treasury, not later than 2.00 p.m. on the Closing Date
 in accordance with the terms of the Open Offer, by reason of insufficient
 evidence as to identity having been received by that time in accordance with
 the procedures maintained by the Registrars under the Money Laundering
 Regulations 2007; 












	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
any New Shares
 comprised in an Acceptance which has been validly withdrawn pursuant to the
 rights of investors to withdraw acceptances in accordance with Section 87Q of
 FSMA; and 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
(iii)

	
any New Shares
 comprised in any other Acceptance which the Company, with the consent of HM
 Treasury, has elected not later than 2.00 p.m. on the Closing Date to treat
 as invalid, in accordance with the terms of the Open Offer. 


	
 

	
 

	
 

	
 

	
 


	
6.2

	
Without prejudice
 to clause 8, if there are no Non-Accepted Shares, obligations with regards to
 Non-Accepted Shares under this clause 6 will cease. 


	
 

	
 

	
 

	
 

	
 


	
6.3

	
If by 5.00 p.m. on
 the third Business Day following the Closing Date there are Non-Accepted
 Shares for which no Placees have been arranged and consented to by HM
 Treasury (being “Residual Shares”)
 and subject to the conditions set out in clause 2.1 having been satisfied or,
 where permitted by clause 2.6, waived and to this Agreement not having been
 terminated under clause 2.9 or clause 13, and subject to clause 8.4, HM
 Treasury shall itself (or shall procure that its nominee shall) acquire such
 Residual Shares at the Issue Price and on the terms, subject to the
 conditions and on the basis of the information contained in the Issue
 Documents and in reliance on the Warranties given under clause 10 and HM
 Treasury shall, on the date of Admission, pay the relevant acquisition monies
 to the bank account referred to in clause 2.5 which shall constitute a
 complete discharge of HM Treasury’s obligations to make payment in respect of
 the Residual Shares. 


	
 

	
 

	
 

	
 

	
 


	
6.4

	
As between the
 Company and the Joint Sponsors, any amounts received by the Joint Sponsors
 under clause 6.3 or from Placees or from Ordinary Shareholders shall be
 received and held by the relevant Joint Sponsor, and the Company shall have
 no right to receive such amounts from the Joint Sponsors or HM Treasury. Such
 amounts will be received by the Joint Sponsors and shall be applied in
 payment for the JerseyCo Preference Shares. 


	
 

	
 

	
 

	
 

	
 


	
6.5

	
If HM Treasury (or
 its nominee) acquires New Shares pursuant to this clause 6, it has, in
 addition to any other rights and remedies it may have, the rights and
 remedies of a person acquiring New Shares on the basis of the Issue
 Documents. 


	
 

	
 

	
 

	
 

	
 


	
6.6

	
The Company
 confirms to the Joint Sponsors that any information which the Joint Sponsors
 may obtain as to whether or not Placees have been procured to take up any
 Non-Accepted Shares or, if any such Placees have been so procured, as to the
 identities of any such persons, is not information obtained by the Joint
 Sponsors as financial advisers to the Company. Accordingly (and
 notwithstanding any relationship which Joint Sponsors may have with the
 Company as financial adviser), the Joint Sponsors shall be under no
 obligation to disclose to the Company any of such information. 


	
 

	
 

	
 

	
 

	
 


	
6.7

	
Without prejudice
 to the condition in clause 2.1(AA), in the event that a Supplementary
 Prospectus is issued by the Company two or fewer Business Days prior to the
 Closing Date (or such later date as may be agreed between the parties) all
 references to Closing Date in this Agreement (other than in this clause 6.7)
 shall be deemed to be the date which is three Business Days after the date of
 issue of the Supplementary 












	
 

	
 

	
 

	
 

	
 


	
 

	
Prospectus and all
 dates in this Agreement referenced to the Closing Date (excluding, without
 limitation, the date specified in clause 2.1(DD) (or such later date as HM
 Treasury may agree)) shall also be extended mutatis mutandis and the
 obligations of the parties under this Agreement shall, to the extent
 applicable, be required to be performed by the relevant party by reference to
 such extended dates. 


	
 

	
 

	
 

	
 

	
 


	
6.8

	
Each party shall
 execute such documents (including, without limitation, any agreement varying
 the terms of this Agreement) and do such acts and things as may be required
 for the purpose of giving full effect to the extension of the timetable for
 the Placing and Open Offer as contemplated by clause 6.7 above. 


	
 

	
 

	
 

	
 

	
 


	
7.

	
CAPACITY
 


	
 

	
 

	
 

	
 

	
 


	
7.1

	
Any transaction
 carried out by the Joint Sponsors pursuant to clause 3.3 will constitute a
 transaction carried out in the capacity of agent at the request of the
 Company and not in respect of the Joint Sponsors’ own account. 


	
 

	
 

	
 

	
 

	
 


	
7.2

	
Notwithstanding
 that the Joint Sponsors may act as the Company’s agent in connection with the
 Placing and Open Offer, the Joint Sponsors and any of their respective
 Affiliates and/or their agents may: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
receive and keep
 for their own benefit any commissions, fees, brokerage or other benefits paid
 to or received by them in connection with the Placing and Open Offer and shall
 not be liable to account to the Company for any such commissions, fees,
 brokerage or other benefits; and 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
acting as
 investors for their own account, take-up their entitlements to, or subscribe
 for or purchase New Shares in the Open Offer and, in that capacity, may
 retain, purchase, sell or offer to sell for their own account(s) such New
 Shares and any securities of the Company or related investments issued
 otherwise than in connection with the Placing and Open Offer. 


	
 

	
 

	
 

	
 

	
 


	
7.3

	
The Joint Sponsors
 will not be responsible for any loss or damage to any person arising from any
 insufficiency or alleged insufficiency of the amount obtained from the
 Placing, the Open Offer or the Preference Share Subscription or from the
 timing of any such transaction. 


	
 

	
 

	
 

	
 

	
 


	
7.4

	
The Company
 acknowledges and agrees that HM Treasury and the Joint Sponsors are acting
 solely pursuant to a contractual relationship with the Company on an arm’s
 length basis with respect to the Placing and Open Offer and the Preference
 Share Subscription (including in connection with determining the terms of the
 Placing and Open Offer and the Preference Share Subscription) and not, in
 relation to the Placing and Open Offer or the Preference Share Subscription,
 as financial advisers (except, in the case of Morgan Stanley and Dresdner,
 solely on and subject to the strict terms of the Engagement Letter and the
 Sponsors’ Fee Letter) or fiduciaries to the Company or any other person.
 Additionally, the Company acknowledges that neither HM Treasury nor the Joint
 Sponsors are advising the Company or any other person as to any legal, tax,
 investment, accounting or regulatory matters in any jurisdiction. The Company
 shall consult with its own advisors concerning such matters and shall be
 responsible for making its own independent investigation and appraisal of the
 transactions 












	
 

	
 

	
 

	
 

	
 


	
 

	
contemplated
 hereby and neither HM Treasury nor the Joint Sponsors shall have any
 responsibility or liability to the Company with respect thereto. The Company
 further acknowledges and agrees that any review by HM Treasury and/or the
 Joint Sponsors (or their respective advisers and agents) of the Company, the
 Placing and Open Offer, the Issue Documents and other matters relating
 thereto will be performed solely for the benefit of HM Treasury and/or the
 Joint Sponsors and shall not be on behalf of the Company or any other person.
 This is without prejudice to any obligations of the Joint Sponsors under the
 FSA Rules, including any obligations to make recommendations to the Company
 concerning the pricing and allocation of the Placing and Open Offer under the
 Engagement Letter.


	
 

	
 

	
 

	
 

	
 


	
8.

	
FEES,
 COMMISSIONS, EXPENSES AND VAT 


	
 

	
 

	
 

	
 

	
 


	
8.1

	
Subject to clause
 8.2, in consideration of HM Treasury and the Joint Sponsors agreeing to provide
 their services under this Agreement, the Company shall pay: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
to HM Treasury a
 commission of 0.5 per cent. of the aggregate value of the New Shares at the
 Issue Price per New Share; 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
subject to
 Admission occurring, to HM Treasury a further commission of 1 per cent. of
 the aggregate value of the New Shares acquired by Placees (including for the
 avoidance of doubt HM Treasury) at the Issue Price per New Share; and 


	
 

	
 

	
 

	
 

	
 


	
 

	
(C)

	
each of HM
 Treasury and the Joint Sponsors’ legal and other costs and expenses (properly
 incurred in the case of the Joint Sponsors) and the costs and expenses of HM
 Treasury’s financial advisers, in each case incurred for the purpose of or in
 connection with the Placing and Open Offer, the Preference Share Subscription
 or any arrangements referred to in, or contemplated by, this Agreement or the
 Preference Share Subscription Agreement. 


	
 

	
 

	
 

	
 

	
 


	
8.2

	
With respect to
 the fees, commissions and expenses payable pursuant to clause 8.1 above: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
the commissions
 referred to in clause 8.1(A) shall be payable on the earlier of Admission and
 the second Business Day after the day on which this Agreement is terminated; 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
the commissions
 referred to in clause 8.1(B) shall be payable on the date of Admission; and 


	
 

	
 

	
 

	
 

	
 


	
 

	
(C)

	
the expenses
 referred to in clause 8.1(C) shall be payable whether or not this Agreement
 becomes unconditional or is terminated for any reason and shall be payable on
 the earlier of Admission and the second Business Day after the day on which
 this Agreement is terminated. The Joint Sponsors may deduct any amounts
 payable to them under this clause 8 from any amounts due from them under the
 Subscription and Transfer Agreement. 


	
 

	
 

	
 

	
 

	
 


	
8.3

	
Each of the Joint
 Sponsors shall agree with the Company and record in a Sponsor’s Fee Letter
 the amount of any fees and expenses to be paid by the Company for the
 relevant Joint Sponsor for the services to be performed by such Joint Sponsor
 under 












	
 

	
 

	
 

	
 

	
 


	
 

	
this Agreement.
 The Company and the relevant Joint Sponsor shall consult with HM Treasury
 prior to agreeing such fee and expense reimbursement arrangements.


	
 

	
 

	
 

	
 

	
 


	
8.4

	
HM Treasury may
 deduct the amount of the commissions and expenses payable under clause 8.1
 together with, in each case, an amount in respect of any VAT chargeable
 thereon, from any payment to be made by HM Treasury to the Company under
 clause 6.3. 


	
 

	
 

	
 

	
 

	
 


	
8.5

	
The Company shall
 bear all costs and expenses of or incidental to the Placing and Open Offer
 and the matters contemplated by the Preference Share Subscription Agreement
 (including, for the avoidance of doubt, any applicable amounts in respect of
 VAT thereon, in accordance with clause 8.9), such expenses including, without
 limitation, the fees and expenses of its professional advisers, the cost of
 preparation, advertising, printing and distribution of the Issue Documents
 and all other documents connected with the Placing and Open Offer, the
 Preference Share Subscription Agreement, the Subscription and Transfer
 Agreement, the Option Agreement, costs and expenses of and/or related to
 JerseyCo, the Registrars’ fees, the listing fees of the FSA, any charges by
 CREST and the fees of the London Stock Exchange. The Company shall forthwith
 (and, in relation to VAT, in accordance with clause 8.9) upon demand by HM
 Treasury or either of the Joint Sponsors (accompanied by the relevant receipt
 therefor) reimburse such person the amount of any such expenses. This clause
 8.5 shall not apply to any Tax, provision for which is, for the avoidance of
 doubt, made in clauses 8.6, 8.7, 8.8 and 8.9, except to the extent provided
 for in clauses 8.6, 8.7, 8.8 or 8.9. Any costs, charges, and expenses arising
 in connection with the Transfer and Subscription Agreement and/or the Option
 Agreement shall be dealt with in accordance with the terms of such agreements
 to the extent provided for therein. 


	
 

	
 

	
 

	
 

	
 


	
8.6

	
The Company shall
 pay and bear any Stamp Tax which is payable or paid (whether by HM Treasury
 either of the Joint Sponsors or otherwise) in connection with the allotment
 and issue of the New Shares, the delivery of the New Shares and/or the
 acquisition of the New Shares in the manner contemplated by this Agreement or
 the execution, delivery, performance or enforcement of this Agreement, or in
 connection with any matters contemplated by the Subscription and Transfer
 Agreement and/or the Option Agreement, provided that this clause 8.6 shall
 not apply to: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
any Stamp Tax
 payable in respect of transfers of, or agreements to transfer, New Shares
 subsequent to any such New Shares having been acquired by HM Treasury in the
 manner contemplated by this Agreement; or 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
any stamp duty
 chargeable at a rate determined under section 67 or 70 of the Finance Act
 1986 or SDRT chargeable under section 93 or 96 of the Finance Act 1986. 


	
 

	
 

	
 

	
 

	
 


	
 

	
References in this
 clause 8.6 to New Shares include any interest in or rights to allotment of
 New Shares. 


	
 

	
 

	
 

	
 

	
 


	
8.7

	
If either of the
 Joint Sponsors, HM Treasury or any other Indemnified Person is subject to Tax
 in respect of any sum payable under this Agreement, other than any fees,
 commissions and/or expenses payable under clause 8.1, clause 8.2 or clause
 8.3, or if any such sum is taken into account in computing the taxable
 profits or income of either 












	
 

	
 

	
 

	
 

	
 


	
 

	
of the Joint
 Sponsors or HM Treasury or such other Indemnified Person, the sum payable
 shall be increased to such amount as will ensure that (after payment of such
 Tax, including, for the avoidance of doubt, any additional Tax payable as a
 result of such increase) the relevant Joint Sponsor, HM Treasury or the
 relevant Indemnified Person (as the case may be) retains a sum equal to the
 sum that it would have received and retained in the absence of such Tax.


	
 

	
 

	
 

	
 

	
 


	
8.8

	
All sums
 (including, for the avoidance of doubt, any fees, commissions and/or expenses
 payable under clause 8.1, clause 8.2 or clause 8.3) payable by the Company
 (the “Payer”) to HM Treasury, to
 the Joint Sponsors (or any of them) or to any other Indemnified Person (the “Payee”) pursuant to this Agreement are
 expressed exclusive of any amount in respect of VAT which is chargeable on
 the supply or supplies for which such sums (or any part thereof) is or are
 the whole or part of the consideration for VAT purposes. If any Payee makes
 (or is deemed for VAT purposes to make) any supply to the Payer pursuant to
 this Agreement and VAT is or becomes chargeable in respect of such supply,
 the Payer shall pay to the Payee (within 14 days of the receipt of a valid
 VAT invoice) an additional sum equal to the amount of such VAT. 


	
 

	
 

	
 

	
 

	
 


	
8.9

	
In any case where
 the Company is obliged to pay a sum to HM Treasury, to the Joint Sponsors (or
 any one of them) or to any other Indemnified Person under this Agreement by
 way of indemnity, reimbursement, damages or compensation for or in respect of
 any fee, liability, cost, charge or expense (the “Relevant Cost”), the Company shall pay to HM Treasury, to
 the Joint Sponsors (or any one of them) or to any other Indemnified Person
 (as the case may be) at the same time an additional amount determined as
 follows: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
if the Relevant
 Cost is for VAT purposes the consideration for a supply of goods or services
 made to HM Treasury, to the Joint Sponsors (or any one of them) or to any
 other Indemnified Person (including, for the avoidance of doubt, where such
 supply is made to HM Treasury, the Joint Sponsors (or any of them) or any
 other Indemnified Person acting as agent for the Company within the terms of
 section 47 VATA), such additional amount shall be equal to any input VAT
 which was incurred by HM Treasury, by any Joint Sponsor or by any other
 Indemnified Person (as the case may be) in respect of that supply and which
 it is not able to recover from the relevant Tax Authority; and 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
if the Relevant
 Cost is for VAT purposes a disbursement incurred by HM Treasury, any Joint
 Sponsor or any other Indemnified Person as agent on behalf of the Company and
 the relevant supply is made to the Company for VAT purposes, such additional
 amount shall be equal to any amount in respect of VAT which was paid in
 respect of the Relevant Cost by HM Treasury, by any Joint Sponsor or by any
 other Indemnified Person, and HM Treasury, the relevant Joint Sponsor or the
 relevant other Indemnified Person shall use reasonable endeavours to procure
 that the relevant third party issues a valid VAT invoice in respect of the
 Relevant Cost to the Company. 


	
 

	
 

	
 

	
 

	
 


	
9.

	
COVENANTS
 


	
 

	
 

	
 

	
 

	
 


	
9.1

	
The Company shall
 comply in all material respects with the Companies Acts, FSMA, the Prospectus
 Rules, the Listing Rules, the DTRs and the Admission and Disclosure 












	
 

	
 

	
 

	
 

	
 


	
 

	
Standards and all
 other applicable laws and regulations, in each case insofar as they are
 relevant to the Placing and Open Offer (including, for the avoidance of
 doubt, the allotment and issue of the New Shares), the Preference Share
 Subscription, Admission or Preference Admission. 


	
 

	
 

	
 

	
 

	
 


	
9.2

	
Except for the
 publication of the Issue Documents, the Company undertakes to HM Treasury and
 to the Joint Sponsors that, until the close of business on the sixtieth day
 after the Closing Date, it shall not, and will procure that each Group
 Company does not, publish, make or despatch a public announcement or
 communication concerning, or which is reasonably likely to be material in the
 context of, the Placing and Open Offer or the Preference Share Subscription: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
where the
 announcement or communication is required by law, the FSA, the DTRs, the LSE
 or under the Regulations or the rules, practices and procedures laid down by
 Euroclear, without prior consultation with HM Treasury and the Joint Sponsors
 (where legally permitted and practicable) and having due regard to all
 reasonable requests which HM Treasury or the Joint Sponsors may make; or 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
in any other case,
 without the prior consent of HM Treasury and the Joint Sponsors as to the
 content, timing and manner of the publication, making or despatch of the
 announcement or communication (such consent not to be unreasonably withheld).
 


	
 

	
 

	
 

	
 

	
 


	
9.3

	
Between the date
 of this Agreement and the close of business on the sixtieth day after the
 Closing Date, the Company undertakes to HM Treasury and to the Joint Sponsors
 that it shall: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
not, and shall
 procure that each Group Company shall not, without the prior written consent
 of HM Treasury and the Joint Sponsors, take any steps (including, without
 limitation, making any public statement or issuing or publishing any material
 or document) which, in the opinion of HM Treasury or the Joint Sponsors
 (acting in good faith), would be materially inconsistent with any expression
 of policy or intention or statement contained in the Prospectus, subject in
 each case to applicable law and regulation (including the fiduciary duties of
 the Directors) (provided that where any Group Company considers itself or the
 directors thereof consider themselves bound by law or by regulation to take
 any such steps they shall consult with HM Treasury and the Joint Sponsors
 before doing so); 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
use, and shall
 procure that each Group Company uses, all reasonable endeavours to ensure
 that the Company or Group Company concerned consults with HM Treasury and the
 Joint Sponsors as early as reasonably practicable in advance of the entry
 into or variation (other than in the ordinary course of business) of any
 commitment, agreement or arrangement, or any Group Company placing itself in
 a position where it is obliged to announce that any commitment, agreement or
 arrangement may be entered into or varied which, in any case, is either
 material in the context of the Group or may involve an increase in the issued
 capital of a Group Company (other than an increase in












	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 the issued
 capital of a Group Company where all the capital is to be issued to another
 Group Company);


	
 

	
 

	
 

	
 

	
 


	
 

	
(C)

	
consult with HM
 Treasury and the Joint Sponsors as early as reasonably practicable in advance
 regarding any public statement or document which relates to the Group’s
 results, dividends or prospects, or to any acquisition, disposal,
 re-organisation, takeover, management development or any other significant
 matter (whether or not similar to the foregoing) and which it or any Group
 Company proposes to make or publish; and 


	
 

	
 

	
 

	
 

	
 


	
 

	
(D)

	
consult with HM
 Treasury and the Joint Sponsors as early as reasonably practicable in advance
 with respect to any other information which may be required to be notified to
 a Regulatory Information Service in accordance with Chapter 2 of the DTRs. 


	
 

	
 

	
 

	
 

	
 


	
9.4

	
The Company shall
 use all reasonable endeavours to procure that employees of the Company and
 its subsidiaries and advisers to and agents of the Company (other than Joint
 Sponsors and their respective Affiliates) and its subsidiaries observe the
 restrictions set out in clauses 9.2 and 9.3 as if they were parties thereto. 


	
 

	
 

	
 

	
 

	
 


	
9.5

	
The Company shall
 not (without the prior written consent of HM Treasury) directly or
 indirectly, issue, offer, pledge, sell, contract to issue or sell, issue or
 sell any option or contract to purchase or subscribe, purchase any option or
 contract to sell or issue, grant any option, right or warrant to purchase,
 deposit into any depositary receipt facility or otherwise transfer or dispose
 of (or publicly announce any such issue, pledge, sale, grant, deposit,
 transfer or disposal of) any Ordinary Shares or any securities convertible
 into or exercisable or exchangeable for Ordinary Shares or enter into any
 swap or other agreement that transfers, in whole or in part, directly or
 indirectly any of the economic consequences of the ownership of Ordinary
 Shares at any time before the expiry of the period of 60 days following
 Admission save in respect of the New Shares and any Ordinary Shares to be
 issued pursuant to the grant or exercise of options, awards or other rights
 to acquire Ordinary Shares pursuant to any employee share scheme or the grant
 of options or making of awards under the Group’s employee share incentive
 plans provided that this clause 9.5 shall not prevent the Company from doing
 any thing or executing any document which is conditional upon this Agreement
 lapsing, failing to become unconditional or being terminated. 


	
 

	
 

	
 

	
 

	
 


	
9.6

	
The Company
 undertakes to make all such announcements concerning the Placing and Open
 Offer and the Preference Share Subscription as shall be necessary to comply
 with the Listing Rules, the DTRs, the Prospectus Rules, the Admission and
 Disclosure Standards and section 118, sections 118A to 118C inclusive and
 section 397 of the FSMA or which any of the Joint Sponsors or HM Treasury
 otherwise reasonably considers to be necessary or desirable and any of the
 Joint Sponsors and HM Treasury shall be entitled to make any such
 announcement if the Company fails (in the opinion of HM Treasury or such
 Joint Sponsor acting in good faith) promptly to fulfil its obligations under
 this Clause 9.6. 


	
 

	
 

	
 

	
 

	
 


	
9.7

	
The Company and
 the Joint Sponsors undertake to HM Treasury that they will, and the Company
 will procure that JerseyCo will, duly and punctually perform all of the 












	
 

	
 

	
 

	
 

	
 


	
 

	
obligations
 imposed on each of them respectively and JerseyCo pursuant and subject to the
 terms and conditions of the Subscription and Transfer Agreement.


	
 

	
 

	
 

	
 

	
 


	
9.8

	
The Company and
 the Joint Sponsors will procure that, once the Subscription and Transfer
 Agreement and the Option Agreement (and any side letters, cash flow or
 security arrangements related thereto) have been executed or, as the case may
 be, agreed, no amendments or waivers to, or discharges or releases of, the
 same shall be made or given without the prior consent of HM Treasury, such
 consent not to be unreasonably withheld. 


	
 

	
 


	
9.9

	
The Company undertakes
 to provide: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
publications,
 reports and other information with respect to the Company and its
 subsidiaries and affiliates and their businesses; and 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
access to the
 books and records and management and other employees of the Company and its
 subsidiaries and affiliates and their businesses, 


	
 

	
 

	
 

	
 

	
 


	
 

	
as may be required
 in order to allow HM Treasury (including any agent or nominee of HM Treasury)
 to comply fully with all legal and regulatory and other requirements under
 the laws and regulations of any jurisdiction applicable to HM Treasury
 (and/or any such agent or nominee of HM Treasury) as a direct or indirect
 consequence of its shareholdings in the Company, including by acquisition of
 New Shares and Preference Shares. 


	
 

	
 

	
 

	
 

	
 


	
9.10

	
The Company
 undertakes to HM Treasury that it shall, promptly after Admission, apply the
 proceeds of the issue of the New Shares in such manner, in such form and for
 such regulatory capital purposes as may be agreed with, HM Treasury, the Bank
 of England and the FSA. 


	
 

	
 

	
 

	
 

	
 


	
9.11

	
The Company
 undertakes to HM Treasury to comply in full with all statements, conditions
 and undertakings which are set out in either the Press Announcement or
 Schedule 5. 


	
 

	
 

	
 

	
 

	
 


	
9.12

	
The Company
 undertakes to HM Treasury that, 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 or set aside any sum to provide for payment
 of any such dividend or distribution; or 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
redeem, purchase,
 cancel or otherwise acquire in any way any Ordinary Shares or effect a
 reduction of the Ordinary Share capital of the Company which involves a
 distribution to Ordinary Shareholders. 


	
 

	
 

	
 

	
 

	
 


	
9.13

	
The Company
 undertakes to HM Treasury that it shall not issue any New Shares which are to
 be acquired by HM Treasury pursuant to this Agreement to any person referred
 to in section 67 or 70 of the Finance Act 1986 or section 93 or 96 of the
 Finance Act 1986 (such that stamp duty or SDRT would apply at the rate
 determined under any such section) unless HM Treasury requests that such New
 Shares are to be so issued. 












	
 

	
 

	
 

	
 

	
 


	
10.

	
REPRESENTATIONS,
 WARRANTIES AND UNDERTAKINGS 


	
 

	
 

	
 

	
 

	
 


	
10.1

	
The Company
 represents, warrants and undertakes to HM Treasury and to each of the Joint
 Sponsors that the representations, warranties and undertakings set out in
 Part I of Schedule 3 are true, accurate and not misleading as at the date of
 this Agreement. 


	
 

	
 

	
 

	
 

	
 


	
10.2

	
The Company agrees
 with HM Treasury and with each of the Joint Sponsors that: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(A)

	
each statement set
 out in Parts I and II of Schedule 3 (except to the extent that such
 statements relate to the Preference Prospectus or any Supplementary
 Preference Prospectus) will be true and accurate and not misleading on the
 Prospectus Posting Date, at such
 time as a Supplementary Prospectus shall be issued in accordance with this
 Agreement (whether before or after Admission), and at each Time of Sale, if
 any; 


	
 

	
 

	
 

	
 

	
 


	
 

	
(B)

	
each statement set
 out in Part I of Schedule 3 and each Circular Warranty will be true and
 accurate and not misleading on the Circular Posting Date; and 


	
 

	
 

	
 

	
 

	
 


	
 

	
(C)

	
each statement set
 out in Parts I and II of Schedule 3 will be true and accurate and not
 misleading immediately prior to 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 to
 be 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. 


	
 

	
 

	
 

	
 

	
 


	
10.3

	
The Company will
 notify HM Treasury and the Joint Sponsors immediately if it comes to the
 knowledge of the Company or any of the Directors that any of the Warranties
 was breached or untrue or inaccurate when made and/or that any of the
 Warranties is or would be breached or untrue or inaccurate if it were to be
 repeated by reference to the facts and circumstances or the knowledge,
 opinions, intentions or expectations of any of the Directors subsisting at
 any time up to immediately prior to Admission. The Company will make
 reasonable enquiries to ascertain whether any of the Warranties was, or if so
 repeated would be, breached or untrue or inaccurate and as to whether a
 Specified Event has occurred. 


	
 

	
 

	
 

	
 

	
 


	
10.4

	
If, at any time
 prior to Admission, HM Treasury and the Joint Sponsors shall receive a notice
 pursuant to clause 10.3 or otherwise become aware of any of the Warranties
 being or becoming or being likely (if repeated as referred to in clause 10.3)
 to become untrue or inaccurate, HM Treasury and the Joint Sponsors may
 (without prejudice to any other provision of this Agreement) require the
 Company, at its own expense, to make or procure the making of such
 announcement or announcements and/or despatch such communication to Ordinary
 Shareholders as HM Treasury and the Joint Sponsors shall, in their absolute
 discretion but after consultation with the Company, consider necessary. 


	
 

	
 

	
 

	
 

	
 


	
10.5

	
The Warranties
 shall remain in full force and effect notwithstanding completion of the
 Placing and Open Offer and the Preference Share Subscription and all other
 matters 














	
 

	
 

	
 

	
 


	
 

	
and arrangements
 referred to in or contemplated by this Agreement and the Preference Share
 Subscription Agreement. 


	
 

	
 


	
10.6

	
The Company will
 deliver to HM Treasury and the Joint Sponsors a certificate in the form set
 out in Part A of Schedule 1 prior to and with effect immediately before
 Admission and in the form set out in Part B of Schedule 1 prior to and with
 effect immediately before the issue of any Supplementary Prospectus or
 Supplementary Preference Prospectus and at each Time of Sale, if any. 


	
 

	
 


	
10.7

	
The Company
 acknowledges that HM Treasury and the Joint Sponsors are entering into this
 Agreement in reliance on the Warranties and each such representation,
 warranty and undertaking shall not be limited by reference (express or
 implied) to the terms of any other representation, warranty or undertaking or
 any other provision of this Agreement. 


	
 

	
 


	
10.8

	
For the purposes
 of this clause 10 and Schedule 3, references to the knowledge, awareness or
 belief of the Directors or the Company in respect of matters relating to the
 Group shall be read and construed as references to such knowledge, awareness
 or belief after due and careful enquiry. 


	
 

	
 


	
10.9

	
The Company
 undertakes to HM Treasury and to the Joint Sponsors: 


	
 

	
 


	
 

	
(A)

	
promptly to give
 notice to HM Treasury and to the Joint Sponsors of the occurrence of any
 Specified Event, which shall come to the knowledge of the Company prior to
 the earlier of: 


	
 

	
 

	
 


	
 

	
 

	
(i)

	
this Agreement
 being terminated in accordance with its terms; and 


	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
the date of
 allotment of the New Shares pursuant to clauses 4 and/or 6 (as appropriate)
 (whichever is later); and 


	
 

	
 

	
 

	
 


	
 

	
(B)

	
not to cause and
 to use all reasonable endeavours not to permit, and to procure that each
 Group Company and the Directors do not cause and use all reasonable
 endeavours not to permit, any Specified Event to occur before the earlier of:
 


	
 

	
 

	
 


	
 

	
 

	
(i)

	
this Agreement
 being terminated in accordance with its terms; and 


	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
the date of
 allotment of the New Shares pursuant to clauses 4 and/or 6 (as appropriate)
 (whichever is later), 


	
 

	
 

	
 

	
 


	
 

	
 

	
provided that any
 breach of the covenant in this clause 10.9(B) will not give rise to a remedy
 in damages against the Company in respect of such breach in circumstances
 where this Agreement has been terminated pursuant to clause 13 as a result of
 a Specified Event. 


	
 

	
 

	
 


	
10.10

	
For the purpose of
 clauses 10.9(A) and 10.9(B), each of the Warranties and the undertakings
 contained in this clause 10 shall take effect with the exclusion of any
 qualification contained therein with respect to the knowledge, information,
 awareness or belief of the Company or any of the Directors or any other
 person. 












	
 

	
 

	
 


	
11.

	
INDEMNITIES
 


	
 

	
 

	
 


	
11.1

	
The Company agrees
 to fully and effectively indemnify and hold harmless each Indemnified Person
 on an after-Tax basis from and against any and all Losses or Claims,
 whatsoever, as incurred (and whether or not the relevant Loss or Claim is
 suffered or incurred or arises in respect of circumstances or events existing
 or occurring before, on or after the date of this Agreement and regardless of
 the jurisdiction in which such Loss or Claim is suffered or incurred) if such
 Losses or Claims, arise, directly or indirectly, out of, or are attributable
 to, or connected with, anything done or omitted to be done by any person
 (including by the relevant Indemnified Person) in connection with the Placing
 and Open Offer, the Preference Share Subscription, Admission, Preference
 Admission or the arrangements contemplated by the Issue Documents, the Preference
 Share Subscription Agreement or any of them (or any amendment or supplement
 to any of them), or this Agreement or any other agreement relating to the
 Placing and Open Offer (including, without limitation, the Subscription and
 Transfer Agreement and the Option Agreement) or the Preference Share
 Subscription, including but not limited to: 


	
 

	
 

	
 


	
 

	
(A)

	
any and all Losses
 or Claims whatsoever, as incurred, arising out of the Issue Documents, or any
 of them (or any amendment or supplement to any of them) not containing or
 fairly presenting, or being alleged not to contain or not to fairly present,
 all information required to be contained therein, or arising out of any
 untrue or inaccurate statement or alleged untrue or inaccurate statement of a
 material fact contained in the Issue Documents, or any of them (or any
 amendment or supplement to any of them), or the omission or alleged omission
 therefrom of a fact necessary in order to make the statements therein not
 misleading in any material respect, or any statement therein being or being
 alleged to be in any respect not based on reasonable grounds, in the light of
 the circumstances in which they were made; and/or 


	
 

	
 

	
 


	
 

	
(B)

	
any and all Losses
 or Claims whatsoever, as incurred, arising out of any breach or alleged breach
 by the Company or JerseyCo of any of its obligations, including any of the
 Warranties, or the representations, covenants and undertakings set out in
 this Agreement or out of the arrangements contemplated by the Issue Documents
 or the Preference Share Subscription Agreement, or any of them (or any
 amendment or supplement to any of them) or this Agreement or any other
 agreement relating to the Placing and Open Offer (including, without
 limitation, the Subscription and Transfer Agreement and the Option Agreement)
 or the Preference Share Subscription; and/or 


	
 

	
 

	
 


	
 

	
(C)

	
any and all Losses
 or Claims whatsoever, as incurred, in connection with or arising out of the
 issue, publication or distribution of the Issue Documents, or any of them (or
 any amendment or supplement to any of them) and/or any other documents or
 materials relating to the applications for Admission or Preference Admission;
 and/or


	
 

	
 

	
 


	
 

	
(D)

	
any and all Losses
 or Claims whatsoever, as incurred, in connection with or arising out of any
 failure or alleged failure by the Company or JerseyCo or any of the Directors
 or any of its or his agents, employees or advisers to comply with CA 1985, CA
 2006, FSMA, the Listing Rules, the Prospectus Rules, the DTRs, the rules and
 regulations of the London Stock Exchange and the Admission and












	
 

	
 

	
 

	
 


	
 

	
 

	
Disclosure
 Standards, or any other requirement or statute or regulation in any
 jurisdiction in relation to the applications for Admission or Preference
 Admission, the Placing and Open Offer, or the arrangements contemplated by
 the Issue Documents and the Preference Share Subscription Agreement
 (including, without limitation, the issue and allotment of the New Shares and
 the Preference Shares), or any of them (or any amendment or supplement to any
 of them), or this Agreement or any other agreement relating to the Placing
 and Open Offer (including, without limitation, the Subscription and Transfer
 Agreement and the Option Agreement) or the Preference Share Subscription;
 and/or 


	
 

	
 

	
 

	
 


	
 

	
(E)

	
any and all Losses
 or Claims whatsoever, as incurred, suffered or incurred by such Indemnified
 Person: 


	
 

	
 

	
 

	
 


	
 

	
 

	
(i)

	
as a person who
 has communicated or approved the contents of any financial promotion (other
 than the Issue Documents, or any of them, or any amendment or supplement to
 any of them) made in connection with the Placing and Open Offer or the
 Preference Share Subscription or the applications for Admission for the
 purpose of section 21 of FSMA; 


	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
(in the case of
 each of the Joint Sponsors only) in their capacity as sponsor to the
 Company’s applications for Admission; or 


	
 

	
 

	
 

	
 


	
 

	
 

	
(iii)

	
in connection with
 the performance of its obligations under the Subscription and Transfer
 Agreement or the Option Agreement or the arrangements contemplated or
 referred to therein (including for the avoidance of doubt, any side letters,
 cashflow or security arrangements related thereto), 


	
 

	
 

	
 

	
 


	
 

	
PROVIDED THAT, the
 indemnity contained in this clause 11.1 shall not apply to any Losses or
 Claims (i) in respect of HM Treasury (otherwise than in connection with the
 matters referred to in clauses 11.1(A), (B), (C), (D) and (E)) to the extent
 finally and judicially determined to have arisen as a result of the fraud,
 bad faith or wilful default of that HMT Indemnified Person; (ii) in respect
 of Morgan Stanley and Dresdner (otherwise than in connection with the matters
 referred to in clauses 11.1(A) and (B)) to the extent finally and judicially
 determined to have arisen as a result of the fraud, bad faith or wilful
 default of or primarily as a result of the negligence of that Morgan Stanley
 Indemnified Person or that Dresdner Indemnified Person or (iii) if and to the
 extent arising out of a decline in market value of the New Shares suffered or
 incurred by HM Treasury as a result of it having been required to acquire New
 Shares pursuant to clause 6 or Preference Shares pursuant to the Preference
 Share Subscription Agreement, save to the extent such decline is caused by or
 results from or is attributable to or would not have arisen but for (in each
 case directly or indirectly) the neglect or default of the Company in
 relation to the content, publication, issue or distribution of the Issue
 Documents or any breach by the Company of any of its obligations under this
 Agreement, including any of the Warranties, representations, undertakings or
 covenants, or under the Preference Share Subscription Agreement. This clause
 11.1 shall not apply to any Loss or Claim in respect of Tax which is covered
 by clauses 8.6, 8.7, 8.8 and 8.9 (or which would have been so covered but for
 any exclusion contained therein). 












	
 

	
 

	
 

	
 


	
11.2

	
Each Indemnified
 Person shall and shall procure that its Indemnified Persons shall: 


	
 

	
 

	
 

	
 


	
 

	
(A)

	
give notice as
 promptly as reasonably practicable to the Company of any action commenced
 against it after receipt of a written notice of any Claim or the commencement
 of any action, claim, suit, investigation or proceeding in respect of which a
 Claim for indemnification may be sought under this clause 11; and 


	
 

	
 

	
 

	
 


	
 

	
(B)

	
as promptly as
 reasonably practicable notify the Company after any such action is formally
 commenced (by way of service with a summons or other legal process giving
 information as to the nature and basis of the claim), 


	
 

	
 

	
 

	
 


	
 

	
and shall keep the
 Company informed of, and, to the extent reasonably practicable, consult with
 the Company in relation to, all material developments in respect thereof, but
 in each case, only insofar as may be consistent with the terms of any
 relevant insurance policy and provided (in each case) that to do so would not,
 in such Indemnified Person’s view (acting in good faith), be prejudicial to
 it (or to any Indemnified Person connected to it) or to any obligation of
 confidentiality or other legal or regulatory obligation which that
 Indemnified Person owes to any third party or to any regulatory request that
 has been made of it. However, the failure to so notify the Company and keep
 the Company informed shall not relieve the Company from any liability
 hereunder to the extent it is not materially prejudiced as a result thereof
 and in any event shall not relieve the Company from any liability which it
 may have otherwise than on account of the indemnity set out in this clause
 11. 


	
 

	
 

	
 

	
 


	
11.3

	
Legal advisers for
 Indemnified Persons shall be selected by HM Treasury in respect of HMT
 Indemnified Persons, Morgan Stanley in respect of Morgan Stanley Indemnified
 Persons and Dresdner in respect of Dresdner Indemnified Persons. The Company
 may participate at its own expense in the defence of any action commenced
 against it provided however that legal advisers for the Company shall not
 (except with the consent of the relevant Indemnified Person) also be legal
 advisers for the Indemnified Person. 


	
 

	
 

	
 

	
 


	
11.4

	
In no event shall
 the Company be liable for fees and expenses of more than one legal adviser
 (in addition to any local legal advisers) separate from its own legal
 advisers for all Morgan Stanley Indemnified Persons and Dresdner Indemnified
 Persons in connection with any one action or separate but similar or related
 actions in the same jurisdiction arising out of the same general allegations
 or circumstances. 


	
 

	
 

	
 

	
 


	
11.5

	
The Company shall
 not, without the prior written consent of the relevant Indemnified Persons
 (acting in good faith), settle or compromise or consent to the entry of any
 judgment with respect to any litigation, or any investigation or proceeding
 by any governmental agency or body, commenced or threatened, or any claim
 whatsoever in respect of which indemnification or contribution could be
 sought under this clause 11 or clause 12 (whether or not the Indemnified
 Persons are actual or potential parties thereto), unless such settlement,
 compromise or consent: 


	
 

	
 

	
 

	
 


	
 

	
(A)

	
includes an
 unconditional release of each Indemnified Person from all liability arising
 out of such litigation, investigation, proceeding or claim; and 


	
 

	
 

	
 

	
 


	
 

	
(B)

	
does not include a
 statement as to or an admission of fault, culpability or a failure to act by
 or on behalf of any Indemnified Person. 












	
 

	
 

	
 

	
 


	
11.6

	
The Company will
 promptly notify HM Treasury and each of the Joint Sponsors of any limitation
 (whenever arising) on the extent to which the Company and/or any of its
 respective subsidiary undertakings, affiliates, or associates may claim
 against any third party or parties and/or of any waiver or release of any
 right of the Company to so claim (each a “Limitation”)
 in respect of anything which may arise, directly or indirectly, out of or is
 based upon or is in connection with the Placing and Open Offer, the
 Preference Share Subscription, Admission, Preference Admission or the subject
 matter of the obligations or services to be performed under this Agreement or
 in connection with the Placing and Open Offer, the Preference Share
 Subscription, by HM Treasury or by the Joint Sponsors or on its or their behalf.
 Where any damage or loss is suffered by the Company for which any Indemnified
 Person would otherwise be jointly and severally liable with any third party
 or third parties to the Company, or any of its relevant subsidiary
 undertakings, affiliates, or associates, the extent to which such damage or
 loss will be recoverable from the Indemnified Person shall be limited so as
 to be in proportion to the contribution of the Indemnified Person to the
 overall fault for such damage or loss, as agreed between the parties, or, in
 the absence of agreement, as determined by a court of competent jurisdiction,
 but in any event, the Indemnified Person shall have no greater liability than
 if the Limitation did not apply. 


	
 

	
 

	
 

	
 


	
11.7

	
The degree to
 which any Indemnified Person shall be entitled to rely on the work of any
 adviser to the Company or any other third party will be unaffected by any
 limitation (as defined in clause 11.6) which the Company may have agreed with
 any third party. 


	
 

	
 

	
 

	
 


	
11.8

	
The provisions of
 this clause 11 will remain in full force and effect notwithstanding the
 completion of all matters and arrangements referred to in or contemplated by
 this Agreement. 


	
 

	
 

	
 

	
 


	
12.

	
CONTRIBUTION
 


	
 

	
 

	
 

	
 


	
12.1

	
If and to the
 extent that the indemnification provided for in clause 11 is unavailable to
 or insufficient to hold harmless (to the extent specified in clause 11) an
 Indemnified Person in respect of any Loss or Claim referred to therein, then
 the Company, in lieu of indemnifying such Indemnified Person thereunder, shall
 contribute to the amount paid or payable by such Indemnified Person as a
 result of such Loss or Claim (i) in such proportion as is appropriate to
 reflect the relative benefits received by the Company on the one hand and HM
 Treasury or the Joint Sponsors on the other hand from the Placing and Open
 Offer or (ii) if the allocation provided by sub-clause (i) above is not
 permitted by applicable law, in such proportion as is appropriate to reflect
 not only the relative benefits referred to in sub-clause (i) above but also
 the relative fault of the Company on the one hand and HM Treasury or the
 Joint Sponsors on the other in connection with the statements or omissions
 that resulted in such losses, claims, damages or liabilities, as well as any
 other relevant equitable considerations. The relative benefits received by
 the Company on the one hand and HM Treasury on the other shall be deemed to
 be in the same respective proportions respectively as the total fees received
 by HM Treasury pursuant to this Agreement bear to the aggregate Issue Price.
 The relative benefits received by the Company on the one hand and the Joint
 Sponsors on the other shall be deemed to be in the same respective
 proportions respectively as the amount paid up on the Consideration Shares by
 the Joint Sponsors and the total fees received by the Joint Sponsors, as set
 forth in the Sponsors’ Fee Letter and Engagement Letter and not paid to
 Placees, bear to the aggregate Issue 












	
 

	
 

	
 

	
 


	
 

	
Price. The
 relative fault of the Company on the one hand and HM Treasury or the Joint
 Sponsors on the other shall be determined by reference to, among other
 things, whether the untrue or alleged untrue statement of a material fact or
 the omission or alleged omission to state a material fact relates to
 information supplied by the Company or by HM Treasury or the Joint Sponsors
 and the parties’ relative intent, knowledge, access to information and
 opportunity to correct or prevent such statement or omission. 


	
 

	
 

	
 

	
 


	
12.2

	
Notwithstanding
 the provisions of this clause 12 neither HM Treasury nor the Joint Sponsors
 will be entitled to recover from the Company by way of contribution under
 clause 12.1 any amount in excess of the amount that the Company would have
 been liable to pay to HM Treasury or to the Joint Sponsors (as the case may
 be) had the indemnification provided for in the clause 11 been available to
 the extent provided in that clause in respect of the relevant Loss or Claim. 


	
 

	
 

	
 

	
 


	
12.3

	
The parties hereto
 agree that it would not be just and equitable if contribution pursuant to
 this clause 12 were determined by pro rata allocation (even if HM Treasury
 and the Joint Sponsors were treated as one entity for such purposes) or by
 any other method of allocation that does not take account of the equitable
 considerations referred to in clause 12.1. The amount paid or payable by an
 Indemnified Person as a result of the Loss or Claim referred to in clause
 12.1 shall be deemed to include, any legal or other expenses incurred by such
 Indemnified Person in connection with investigating or defending any such
 action or claim. 


	
 

	
 

	
 

	
 


	
12.4

	
The indemnity and
 contribution agreements contained in this clause 12 are in addition to and
 shall not be construed to limit, affect or prejudice any liability which the
 Company may otherwise have to the Indemnified Persons referred to above or
 any other right or remedy in law or otherwise available to any Indemnified
 Person. 


	
 

	
 

	
 

	
 


	
12.5

	
Notwithstanding
 the provisions of this clause 12, neither of the Joint Sponsors will be
 required to contribute any amount in excess of the fees and commissions
 payable to that Joint Sponsor (and which it is not liable to pay to any
 Placee or intermediary) in relation to New Shares for which such Joint
 Sponsor has procured Placees pursuant to this Agreement. 


	
 

	
 

	
 

	
 


	
12.6

	
For the purposes
 of this clause 12, each Indemnified Person shall have the same rights to
 contribution as HM Treasury and the Joint Sponsors and HM Treasury’s and the
 Joint Sponsors’ respective obligations to contribute pursuant to this clause
 12 are several and not joint or joint and several, in the proportions
 specified in clause 12.1. 


	
 

	
 

	
 

	
 


	
13.

	
TERMINATION
 


	
 

	
 

	
 

	
 


	
13.1

	
If following the
 date of this Agreement but before Admission it shall come to the notice of HM
 Treasury or either of the Joint Sponsors that: 


	
 

	
 

	
 

	
 


	
 

	
(A)

	
any statement
 contained in the Issue Documents (or any amendment or supplement thereto) has
 become or been discovered to be untrue, inaccurate or misleading; or 


	
 

	
 

	
 

	
 


	
 

	
(B)

	
matters have
 arisen or have been discovered which would, if any of the Issue Documents (or
 any amendment or supplement thereto) were to be issued at 












	
 

	
 

	
 

	
 


	
 

	
 

	
that time,
 constitute an omission therefrom and which would render any such Issue
 Documents (or any amendment or supplement thereto) to be misleading; or


	
 

	
 

	
 

	
 


	
 

	
(C)

	
there has been a
 breach of any of the Warranties or of any other provision of this Agreement
 or of any representation, warranty or undertaking in or in terms of the
 Preference Share Subscription Agreement; or


	
 

	
 

	
 

	
 


	
 

	
(D)

	
there has been a
 breach by the Company or the Joint Sponsors or any other party thereto of any
 obligations under the Subscription and Transfer Agreement or Option
 Agreement; or


	
 

	
 

	
 

	
 


	
 

	
(E)

	
a Specified Event
 has occurred; or 


	
 

	
 

	
 

	
 


	
 

	
(F)

	
the Company’s
 application to the UK Listing Authority for admission of the New Shares or
 the Preference Shares to the Official List and/or the Company’s application
 to the London Stock Exchange for admission to trading of the New Shares or
 the Preference Shares on the London Stock Exchange’s market for listed securities
 is withdrawn by the Company and/or refused by the UK Listing Authority or
 London Stock Exchange (as appropriate), 


	
 

	
 

	
 

	
 


	
 

	
which, in each
 case, is in HM Treasury’s or either of the Joint Sponsors’ sole judgement,
 material in the context of the Group and/or the context of the Placing and
 Open Offer or the Preference Share Subscription, Admission or Preference
 Admission, HM Treasury or such Joint Sponsor may forthwith give notice
 thereof to the Company in which case clause 13.3 shall apply. 


	
 

	
 

	
 

	
 


	
13.2

	
If following the
 date of this Agreement but before Admission: 


	
 

	
 

	
 

	
 


	
 

	
(A)

	
in the sole
 opinion of HM Treasury (acting in good faith) there shall have been any
 Material Adverse Effect, whether or not foreseeable at the date of this
 Agreement; or 


	
 

	
 

	
 

	
 


	
 

	
(B)

	
any matter has
 arisen which would require the publication of a Supplementary Prospectus; or 


	
 

	
 

	
 

	
 


	
 

	
(C)

	
there has been: 


	
 

	
 

	
 

	
 


	
 

	
 

	
(i)

	
a change in
 national or international financial, political, economic or stock market
 conditions (primary or secondary); 


	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
an incident of
 terrorism, outbreak or escalation of hostilities, war, declaration of martial
 law or any other calamity or crisis; 


	
 

	
 

	
 

	
 


	
 

	
 

	
(iii)

	
a suspension or
 material limitation in trading of the securities of the Company by the London
 Stock Exchange or on any exchange or over-the-counter market, or if trading
 generally on the New York Stock Exchange, the NASDAQ National Market or the
 London Stock Exchange has been suspended or limited, or minimum or maximum
 prices for trading have been fixed, or maximum ranges for prices have 












	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
been required, by
 any of such exchanges or by such system or by order of the SEC, the National
 Association of Securities Dealers, Inc. or any governmental authority, or a
 material disruption has occurred in commercial banking or securities
 settlement or clearance services in the United States or in the EEA; or 


	
 

	
 

	
 

	
 


	
 

	
 

	
(iv)

	
a moratorium in
 commercial banking has been declared by the United States, the United Kingdom
 or a member state of the EEA, 


	
 

	
 

	
 

	
 


	
 

	
 

	
as would in the
 sole opinion of HM Treasury, acting in good faith, be likely to materially
 prejudice the success of the Placing and Open Offer or dealings in the New
 Shares in the secondary market, then HM Treasury may give notice of any such
 matter to the Company in which case clause 13.3 shall apply. 


	
 

	
 

	
 

	
 


	
13.3

	
Where this clause
 applies and: 


	
 

	
 

	
 

	
 


	
 

	
(A)

	
notice has been
 given to the Company pursuant to clause 13.1 or 13.2 by HM Treasury, HM
 Treasury may in its sole discretion: 


	
 

	
 

	
 

	
 


	
 

	
 

	
(i)

	
allow the Placing
 and Open Offer to proceed on the basis of the Issue Documents subject, if HM
 Treasury so requests, to (i) the publication of a Supplementary Prospectus or
 Supplementary Preference Prospectus pursuant to section 87G of FSMA (ii) the
 publication of a supplementary Circular and (iii) to any additional
 requirements of the Prospectus Rules or the FSA; or 


	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
if it does not
 consider it to be necessary that the arrangements contemplated by this
 Agreement and by the Preference Share Subscription Agreement proceed to
 completion in order to maintain the financial stability of the United
 Kingdom, give notice to the Company and to the Joint Sponsors at any time
 prior to Admission to the effect that this Agreement shall terminate and
 cease to have effect; and/or 


	
 

	
 

	
 

	
 


	
 

	
(B)

	
notice has been
 given to the Company pursuant to clause 13.1 by either of the Joint Sponsors,
 then clause 13.4 shall apply. 


	
 

	
 

	
 

	
 


	
13.4

	
Where this clause
 applies, the Joint Sponsor that gave notice to the Company pursuant to clause
 13.1 (the “Notifying Sponsor”)
 may, having consulted with HM Treasury and the UK Listing Authority, give
 notice to the Company and to HM Treasury terminating its appointment under
 this Agreement and all obligations of the Notifying Sponsor under this
 Agreement shall thereupon terminate and: 


	
 

	
 

	
 

	
 


	
 

	
(A)

	
if an application
 for Admission has been submitted to the FSA, the Notifying Sponsor shall
 notify the FSA of the termination of its appointment as sponsor in respect of
 the Placing and Open Offer; 


	
 

	
 

	
 

	
 


	
 

	
(B)

	
all references in
 this Agreement to the Joint Sponsors shall be deemed to be references to the
 Joint Sponsor that is not the Notifying Sponsor (if any); 












	
 

	
 

	
 

	
 


	
 

	
(C)

	
in respect of the
 Notifying Sponsor the Notifying Sponsor shall have no claim against any other
 party to this Agreement and no other party to this Agreement shall have any
 claim against the Notifying Sponsor, in each case for fees, costs, damages,
 compensation or otherwise in respect of such resignation except that: 


	
 

	
 

	
 

	
 


	
 

	
 

	
(i)

	
such termination
 shall be without prejudice to any accrued rights or obligations under this
 Agreement; and 


	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
the provisions of
 this clause 13.4 and clauses 1, 8, 10, 11, 12, 14, 15, 16, 17, 18 and 19
 shall remain in full force and effect and in particular the Company shall pay
 the commission and fees (to HM Treasury) and the costs and expenses as are
 payable in such circumstances under and in accordance with clause 8.1 and
 8.2; and 


	
 

	
 

	
 

	
 


	
 

	
(D)

	
the Company shall
 consult with HM Treasury and with any Joint Sponsor that is not the Notifying
 Sponsor to determine whether a further sponsor should be appointed in
 relation to the Placing and Open Offer and/or the publication of the
 Circular, as appropriate. 


	
 

	
 

	
 

	
 


	
13.5

	
HM Treasury and
 the Joint Sponsors shall have no right to terminate this Agreement on or
 after Admission, without prejudice to any of the rights and remedies of HM
 Treasury and the Joint Sponsors in respect of any breach by the Company of
 its obligations under this Agreement. 


	
 

	
 

	
 

	
 


	
13.6

	
In the event that
 this Agreement is terminated by HM Treasury pursuant to the provisions of
 this clause 13, no party to this Agreement will have any claim against any
 other party to this Agreement for fees, costs, damages, compensation or
 otherwise except that: 


	
 

	
 

	
 

	
 


	
 

	
(A)

	
such termination
 shall be without prejudice to any accrued rights or obligations under this
 Agreement; 


	
 

	
 

	
 

	
 


	
 

	
(B)

	
the Company shall
 pay the commissions, fees, costs and expenses as are payable in such
 circumstance under and in accordance with clause 8.1 and clause 8.2; and 


	
 

	
 

	
 

	
 


	
 

	
(C)

	
the provisions of
 this clause 13.6 and clauses 1, 8, 9.11, 10, 11, 12, 14, 15, 16, 17, 18 and
 19 shall remain in full force and effect. 


	
 

	
 

	
 

	
 


	
13.7

	
Each of the
 parties acknowledges and agrees that the Prospectus, the Preference Prospectus
 and the Circular will have to reflect the status of the Lloyds TSB Offer, the
 process to implement the Lloyds TSB Offer and the status and structure of the
 Placing and Open Offer and the Preference Share Subscription, and will
 include detailed information on the Group, Lloyds TSB and its group and the
 Lloyds TSB Offer as well as in respect of the Placing and Open Offer and the
 Preference Share Subscription. Accordingly, each of the parties acknowledges
 and agrees that certain of the existing provisions of this Agreement may need
 to be amended to address this. In light of the above, each of the parties
 hereby undertakes to negotiate reasonably and in good faith such amendments
 to this Agreement as may be necessary: 












	
 

	
 

	
 

	
 


	
 

	
(A)

	
to take into
 account changes to the structure of the Placing and Open Offer and the
 Preference Share Subscription, the requirement for, and the contents of the
 Prospectus, the Preference Prospectus and/or the Circular and matters related
 thereto, including the appointment of the Joint Sponsors as joint sponsors in
 relation to the publication of the Circular and, to the extent not already
 reflected in this Agreement, the different publication and despatch dates in
 respect of the Circular on the one hand and the Prospectus and Preference
 Prospectus on the other hand, such amendments, if required, to be made so as
 to take effect immediately prior to the Prospectus Posting Date or the Circular Posting Date as applicable;
 and 


	
 

	
 

	
 

	
 


	
 

	
(B)

	
to take account of
 any amendments to the structure, terms and conditions, or any other relevant
 aspect of the Lloyds TSB Offer, such amendments to be made so as to take
 effect at the same time as any relevant amendment to the Lloyds TSB Offer
 takes effect. 


	
 

	
 

	
 

	
 


	
13.8

	
If the amendments
 proposed to be made to this Agreement under clause 13.7 are not in a form
 reasonably satisfactory to any of the Joint Sponsors, such Joint Sponsor may
 terminate its obligations under this Agreement pursuant to clause 13.4. 


	
 

	
 

	
 

	
 


	
14.

	
EXCLUSIONS
 OF LIABILITY 


	
 

	
 

	
 

	
 


	
14.1

	
Without prejudice
 to clause 14.2, no claim shall be made by the Company or any of its
 subsidiary undertakings, affiliates or associates or by HM Treasury, or any
 of the directors, officers or employees of any of them in any jurisdiction
 against any Indemnified Person to recover any Loss or Claim suffered or
 incurred by any person and which arises out of the carrying out by any
 Indemnified Person of obligations or services in connection with this
 Agreement, the Preference Share Subscription Agreement or any other
 agreements relating to the Placing and Open Offer or Preference Share
 Subscription, or in connection with the Placing and Open Offer or Preference
 Share Subscription themselves except (otherwise than in connection with, in
 respect of the Joint Sponsors, the matters set out in clause 11.1(A) and
 11.1(B) or clause 12, or, in respect of HM Treasury, the matters set out in
 clauses 11 or 12 or otherwise than as a result of a payment made or an
 obligation or liability to make payment arising under clauses 11 or 12) to
 the extent only that the Loss or Claim is determined in a final judgement by
 a court of competent jurisdiction, in the case of a HMT Indemnified Person,
 to have resulted from the fraud, bad faith or wilful default of such HMT
 Indemnified Person and, in the case of a Morgan Stanley Indemnified Person,
 to have resulted from the fraud, bad faith, wilful default of or primarily as
 a result of the negligence of that Morgan Stanley Indemnified Person or, in
 the case of a Dresdner Indemnified Person, to have resulted from the fraud,
 bad faith, wilful default of or primarily as a result of the negligence of
 that Dresdner Indemnified Person. 


	
 

	
 

	
 

	
 


	
14.2

	
Notwithstanding
 any rights or claims which the Company or any of its respective subsidiary
 undertakings, affiliates or associates or any of the directors, officers or
 employees of any of them may have or assert against the Joint Sponsors in
 connection with this Agreement, the Placing and Open Offer, or any of the
 other arrangements contemplated by the Issue Documents, or any of them, or
 this Agreement, no claim will be brought by the Company or by any of its
 respective subsidiary undertakings, affiliates or associates or any of the
 directors, officers or employees of any of them against any 












	
 

	
 

	
 

	
 


	
 

	
director or any
 other officer and/or employee of any Indemnified Person in respect of any
 conduct, action or omission by the individual concerned in connection with
 this Agreement or the Placing and Open Offer, or any of the other
 arrangements contemplated by the Issue Documents, or any of them, or this
 Agreement. 


	
 

	
 

	
 

	
 


	
15.

	
MISCELLANEOUS
 


	
 

	
 

	
 

	
 


	
15.1

	
For the avoidance
 of doubt, the Company acknowledges and agrees that it is responsible for its
 own due diligence carried out in relation to the Placing and Open Offer and
 the Preference Subscription and that neither HM Treasury nor any of the Joint
 Sponsors shall be responsible to the Company or any Director for any due
 diligence in relation thereto unless it or they have agreed in writing to
 take specific responsibility for such due diligence. 


	
 

	
 

	
 

	
 


	
15.2

	
The Company agrees
 that for the purpose of the Placing and Open Offer (including for the
 purposes of seeking Placees for the New Shares) and the Preference Share
 Subscription and of obtaining Admission and Preference Admission, neither HM
 Treasury nor any of the Joint Sponsors shall be responsible for the provision
 of or obtaining advice as to the requirements of any applicable laws or
 regulations of any jurisdictions nor shall any such person be responsible
 where it or the Company has acted in the absence of such advice or in
 reliance on any advice obtained by the Company in respect thereof. 


	
 

	
 

	
 

	
 


	
16.

	
GENERAL
 


	
 

	
 

	
 

	
 


	
16.1

	
Any liability to
 any party under this Agreement may in whole or in part be released,
 compounded or compromised and time or indulgence may be given by any party in
 its absolute discretion as regards any other person under such liability
 without in any way prejudicing or affecting the first party’s rights against
 such other person under the same or a similar liability, whether joint and
 several or otherwise. For the avoidance of doubt, any reference in this
 Agreement to the agreement or consent of, or any notice or waiver by, HM
 Treasury or the Joint Sponsors shall be construed as the agreement or consent
 of, or any notice or waiver by (as the case may be), HM Treasury and each of
 the Joint Sponsors, except where expressly provided to the contrary. 


	
 

	
 

	
 

	
 


	
16.2

	
No failure of any
 party to exercise, and no delay by it in exercising, any right, power or
 remedy in connection with this Agreement will operate as a waiver thereof,
 nor will any single or partial exercise of any such right preclude any other
 or further exercise of such right or the exercise of any other right. The
 rights provided in this Agreement are cumulative and not exclusive of any
 other rights (whether provided by law or otherwise). Any express waiver of
 any breach of this Agreement shall not be deemed a waiver of any subsequent
 breach. 


	
 

	
 

	
 

	
 


	
16.3

	
Each of the
 parties hereto acknowledges that the Warranties given by the Company and the
 indemnity contained in clause 11 are, subject as provided in clause 16.12,
 given to HM Treasury, the Joint Sponsors and the Indemnified Persons (as the
 case may be), for themselves and not to them as agent of, trustee for or
 otherwise for the benefit of any other person including (without limitation)
 any person who may subscribe or purchase any of the New Shares. 












	
 

	
 

	
 

	
 


	
16.4

	
Time shall be of
 the essence of this Agreement, both as regards any dates, times or periods mentioned
 and as regards any dates, times or periods which may be substituted for them
 in accordance with this Agreement or by agreement in writing between the
 parties. 


	
 

	
 

	
 

	
 


	
16.5

	
This Agreement may
 be entered into in any number of counterparts and by the parties to it on
 separate counterparts, each of which when so executed and delivered shall be
 an original, but all the counterparts shall together constitute one and the
 same instrument. 


	
 

	
 

	
 

	
 


	
16.6

	
This Agreement,
 together with the Preference Share Subscription Agreement (in the case of the
 Company and HM Treasury, only) and together with the Engagement Letter and
 the Sponsors’ Fee Letter (in the case of the Company and the Joint Sponsors,
 only), constitutes the whole agreement and understanding between the parties
 in relation to the Placing and Open Offer. 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 Placing and Open Offer 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. In
 the event of any conflict between the terms of the Engagement Letter and this
 Agreement, this Agreement shall (as between the parties to the Engagement
 Letter) prevail. 


	
 

	
 

	
 

	
 


	
16.7

	
No variation of
 this Agreement shall be effective unless in writing and signed by or on
 behalf of each of the parties. 


	
 

	
 

	
 

	
 


	
16.8

	
At any time after
 the date of this Agreement the Company and the Joint Sponsors shall, and
 shall use all reasonable endeavours to procure that any necessary third party
 shall, at the cost of that party execute such documents and do such acts and
 things as the party may reasonably require for the purpose of giving full
 effect to all the provisions of this Agreement by which it is bound. 


	
 

	
 

	
 

	
 


	
16.9

	
If any provision
 in this Agreement shall be held to be illegal, invalid or unenforceable, in
 whole or in part, under any enactment or rule of law, such provision or part
 shall to that extent be deemed not to form part of this Agreement but the
 legality, validity and enforceability of the remainder of this Agreement
 shall not be affected. 


	
 

	
 

	
 

	
 


	
16.10

	
All payments by
 the Company under this Agreement shall be paid without set-off or
 counterclaim, and free and clear of and without deduction or withholding for
 or on account of Tax, unless required by law. If any Tax is required by law
 to be deducted or withheld from or in connection with any such payment, the
 Company will: 


	
 

	
 

	
 

	
 


	
 

	
(A)

	
promptly upon
 becoming aware thereof, notify HM Treasury and the Joint Sponsors thereof; 


	
 

	
 

	
 

	
 


	
 

	
(B)

	
make that
 deduction or withholding and any payment of Tax required in connection with
 that deduction or withholding within the time allowed and in the minimum
 amount required by law; 


	
 

	
 

	
 

	
 


	
 

	
(C)

	
deliver to the
 payee such receipts, statements or other documents as the payee may
 reasonably request by way of evidence that the deduction or withholding












	
 

	
 

	
 

	
 


	
 

	
 

	
has been made and
 any appropriate payment of Tax made to the relevant Tax Authority; and 


	
 

	
 

	
 

	
 


	
 

	
(D)

	
increase the
 amount payable so that the amount received by the payee (after such deduction
 or withholding, including for the avoidance of doubt any additional deduction
 or withholding required as a result of such increase) is equal to the amount
 which the payee would have received if no such deduction or withholding had
 been made. 


	
 

	
 

	
 

	
 


	
16.11

	
If the Company
 makes an increased payment to HM Treasury, any Joint Sponsor or any other
 Indemnified Person in accordance with clause 8.7 or 16.10 or (to the extent
 that such payment relates to Tax) clause 11.1 and HM Treasury, the relevant
 Joint Sponsor or such other Indemnified Person (as the case may be)
 determines in good faith that it has obtained, utilised and retained a relief
 from Tax or a refund of Tax which is attributable to such increased payment
 made by the Company, then HM Treasury, the relevant Joint Sponsor or such
 other Indemnified Person (as the case may be) shall reimburse to the Company
 as soon as reasonably practicable an amount equal to such proportion of the
 Tax so saved or refunded as will leave HM Treasury, the relevant Joint
 Sponsor or the relevant other Indemnified Person (as the case may be), after
 such reimbursement, in the same after-Tax position (having regard to the time
 value of money) that it would have been in if the circumstances giving rise
 to such additional payment had not arisen. For the avoidance of doubt, nothing
 in this Agreement shall require HM Treasury, a Joint Sponsor or any other
 Indemnified Person to disclose any information in relation to its Tax affairs
 to the Company or any person acting for or on behalf of the Company. 


	
 

	
 

	
 

	
 


	
16.12

	
Each Indemnified
 Person shall have the right under the Contracts (Rights of Third Parties) Act
 1999 (which shall apply to this Agreement only to the extent provided in this
 clause 16.12) to enforce its rights against the Company under clause 11,
 clause 12, this clause 16 or clause 19.3, provided that HM Treasury will have
 the sole conduct of any action to enforce such rights on behalf of the HMT
 Indemnified Persons, Morgan Stanley will have the sole conduct of any action
 to enforce such rights on behalf of the Morgan Stanley Indemnified Persons
 and Dresdner will have the sole conduct of any action to enforce such rights
 on behalf of the Dresdner Indemnified Persons. Except as provided above and
 as provided in clause 5.10, a person who is not a party to this Agreement has
 no right under the Contracts (Rights of Third Parties) Act 1999 to enforce
 any term of this Agreement. HM Treasury, the Joint Sponsors and the Company
 may agree to terminate this Agreement or vary any of its terms without the
 consent of any Indemnified Person or any other third party. Neither HM
 Treasury nor the Joint Sponsors will have any responsibility to any
 Indemnified Person under or as a result of this Agreement. 


	
 

	
 

	
 

	
 


	
17.

	
ASSIGNMENT
 OR NOVATION 


	
 

	
 

	
 

	
 


	
17.1

	
Subject to clause
 17.2 HM Treasury shall be permitted to novate its rights and obligations
 under this Agreement (including any obligation to acquire New Shares), to any
 entity which is wholly owned, directly or indirectly, by HM Treasury (a
 “Wholly Owned Entity”) and each of the Company, Morgan Stanley and Dresdner
 agrees to consent to, and to execute and deliver all such documentation as
 may be necessary to effect, any such novation provided that such novation is
 effected on substantially the 












	
 

	
 

	
 

	
 


	
 

	
same terms as are
 contained in the pro forma novation
 agreement set out in Schedule 4 to this Agreement. 


	
 

	
 

	
 

	
 


	
17.2

	
In the event that
 HM Treasury novates its rights and obligations under this Agreement pursuant
 to clause 17.1, HM Treasury shall procure that, immediately prior to any such
 Wholly Owned Entity ceasing to be wholly-owned directly or indirectly by HM
 Treasury, such rights and obligations under this Agreement shall be novated
 to HM Treasury or any other Wholly Owned Entity. 


	
 

	
 

	
 

	
 


	
17.3

	
Subject to clause
 17.1, no party to this Agreement 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 each other party. 


	
 

	
 

	
 

	
 


	
18.

	
NOTICES
 


	
 

	
 

	
 

	
 


	
18.1

	
Any notice, claim,
 demand or other communication in connection with this Agreement shall be in
 writing and shall be sufficiently given or served if delivered or sent: 








	
 

	
 

	
 

	
 


	
 

	
(A)

	
in the case of the
 Company to:


	
 

	
 

	
 

	
 


	
 

	
 

	
HBOS plc


	
 

	
 

	
Old Broad Street,
 London


	
 

	
 

	
EC2N 1HZ


	
 

	
 

	
 

	
 


	
 

	
 

	
Fax: 0131 243 5546


	
 

	
 

	
 

	
 


	
 

	
 

	
Attention: Company
 Secretary and Group Legal Counsel.


	
 

	
 

	
 

	
 


	
 

	
(B)

	
in the case of the
 Joint Sponsors to:


	
 

	
 

	
 

	
 


	
 

	
 

	
(i)

	
Morgan Stanley
 & Co. International PLC


	
 

	
 

	
 

	
25 Cabot Square,


	
 

	
 

	
 

	
Canary Wharf,


	
 

	
 

	
 

	
London E14 4QA


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Fax: +44 20 7677
 7999


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Attention: Head of
 Global Capital Markets


	
 

	
 

	
 

	
 


	
 

	
 

	
and

	
 


	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
Dresdner Kleinwort
 Limited


	
 

	
 

	
 

	
30 Gresham Street,


	
 

	
 

	
 

	
London EC2V 7PG


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Fax: +44 20 7929
 2657


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Attention: Alex
 Reynolds


	
 

	
 

	
 

	
 


	
 

	
(C)

	
in the case of HM
 Treasury to:












	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
1 Horse Guards
 Road


	
 

	
 

	
 

	
London SW1A 2HQ


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Fax: 020 7270 7562


	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
Attention: Nikhil
 Rathi (Team Leader, Financial Responsibility).








	
 

	
 

	
 


	
18.2

	
Any such notice or
 other communication shall be delivered by hand or sent by fax or pre-paid
 first class post. In the absence of evidence of earlier receipt, a notice or
 other communication is deemed given: (i) if delivered by hand, when left at
 the address referred to in clause 18.1; (ii) if sent by fax, when
 confirmation of its transmission has been recorded on the sender’s fax
 machine; and (iii) if sent by post, 48 hours from the time of posting. 


	
 

	
 

	
 


	
18.3

	
Any notice given
 by HM Treasury or by a Joint Sponsor under clause 13.1 or 13.2 may also be
 given to the Company’s representative referred to in clause 18.1 or to any
 Director by any director or other authorised representative of HM Treasury or
 the Joint Sponsors either personally or by telephone (to be confirmed
 immediately in writing) and shall have immediate effect. 


	
 

	
 

	
 


	
18.4

	
Any party may
 notify the other party to this Agreement of a change of its name, relevant
 addressee, address or fax number for the purposes of clause 18.1 provided
 that such notification shall only be effective on: 


	
 

	
 

	
 


	
 

	
(A)

	
the date specified
 in the notification as the date on which the change is to take place; or 


	
 

	
 

	
 


	
 

	
(B)

	
if no date is
 specified or the date specified is less than five Business Days after the
 date on which notice is given, the date falling five Business Days after
 notice of any such change has been given. 


	
 

	
 

	
 


	
19.

	
GOVERNING
 LAW AND SUBMISSION TO JURISDICTION 


	
 

	
 

	
 


	
19.1

	
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. 


	
 

	
 

	
 


	
19.2

	
Subject to clause
 19.3, the courts of England have exclusive jurisdiction to hear and decide
 any suit, action or proceedings, and to settle any disputes (including claims
 for set-off and counterclaims), which may arise out of or in connection with
 this Agreement (respectively, “Proceedings”
 and “Disputes”) and, for these
 purposes, the Company and the Joint Sponsors irrevocably submit to the
 jurisdiction of the courts of England. 


	
 

	
 

	
 


	
19.3

	
Notwithstanding
 the provisions of clause 19.2, in the event that any Indemnified Person
 becomes subject to proceedings brought by a third party (the “Foreign Proceedings”) in the courts of
 any country other than England (including, without prejudice to the
 generality of the foregoing, in any court of competent jurisdiction in the
 United States) (the “Foreign Jurisdiction”),
 such Indemnified Person shall be entitled, without objection by the Company,
 to take such steps as are available in the Foreign Jurisdiction, in the
 circumstances of the Foreign Proceedings, including (if reasonably necessary)
 the issuing of separate proceedings, to ensure that any issues between any 












	
 

	
 

	
 


	
 

	
such Indemnified
 Person and the Company are determined in the Foreign Jurisdiction as part of,
 or as closely connected (as the procedure of the Foreign Jurisdiction will
 permit) with, the Foreign Proceedings and the Company hereby submits to the
 jurisdiction of the Foreign Jurisdiction for this purpose.


	
 

	
 

	
 


	
19.4

	
The Company and
 the Joint Sponsors irrevocably waive any objection to the jurisdiction of any
 courts referred to in this clause 19. 


	
 

	
 

	
 


	
19.5

	
The Company and
 the Joint Sponsors irrevocably agree that a judgment and/or order of any
 court referred to in this clause 19 based on any matter arising out of or in
 connection with this Agreement (including but not limited to the enforcement
 of any indemnity) shall be conclusive and binding on it and may be enforced
 against it in any other jurisdiction, whether or not (subject to due process
 having been served on it) it participates in the relevant proceedings. 


	
 

	
 

	
 


	
19.6

	
The Company agrees
 to appoint an agent for service of process in any Foreign Jurisdiction other
 than England in which any other party is subject to legal suit, action or
 proceedings based on or arising under this Agreement within 14 days of
 receiving written notice of such legal suit, action or proceedings and the
 request to appoint such agent for service. In the event that the Company does
 not appoint such an agent within 14 days of the notice requesting it to so,
 such other party may appoint a commercial agent for service for the Company
 on the Company’s behalf and at the Company’s expense and the Company agrees
 that subject to being notified of such appointment in writing, service upon
 such commercial agent will constitute service upon the Company.


	
 

	
 

	
 


	
19.7

	
Process by which
 any Proceedings are begun in England may be served on a party by being
 delivered in accordance with clause 18. Nothing contained in this clause 19.7
 affects the right to serve process in another manner permitted by law. 














	
 

	
 


	
SCHEDULE 1


	
CERTIFICATES TO BE DELIVERED


	
 


	
Part A


	
Certificate to be delivered pursuant to
 clause 10.6 prior to and


	
with effect immediately before Admission


	
 


	
[Company Letterhead]


	
 

	
 


	
To:

	
The Commissioners
 of Her Majesty’s Treasury


	
 

	
1 Horse Guards Road


	
 

	
London SW1A 2HQ


	
 

	
 


	
 

	
Attention of:
 Nikhil Rathi


	
 

	
 


	
 

	
Morgan Stanley
 & Co. International PLC


	
 

	
25 Cabot Square,


	
 

	
Canary Wharf,


	
 

	
London E14 4QA


	
 

	
 


	
 

	
Attention of: Head
 of Global Capital Markets


	
 

	
 


	
 

	
Dresdner Kleinwort
 Limited


	
 

	
30 Gresham Street,


	
 

	
London EC2V 7PG


	
 

	
 


	
 

	
Attention of: Alex
 Reynolds


	
 

	
 


	
 

	
[date]


	
 

	
 


	
Dear Sirs





Proposed Placing and
Open Offer of 7,482,394,366 Ordinary Shares of 25 pence each (the “Placing and
Open Offer”)


Further to the placing and open offer agreement between us effective as
of 13 October 2008 (the “Agreement”), we confirm that:


	
 

	
 


	
(a)

	
the FSA has agreed
 to admit the New Shares and the Preference Shares to the Official List
 subject only to the making of an announcement in accordance with paragraph
 3.2.7G of the Listing Rules;


	
 

	
 


	
(b)

	
the LSE has agreed
 to admit the New Shares and the Preference Shares to trading on the LSE
 subject only to the making of an announcement in accordance with paragraph
 2.1 of the Admission and Disclosure Standards;


	
 

	
 


	
(c)

	
it has not come to
 the notice of any Director that there is any fact or circumstance which
 constitutes a breach of any of the Warranties given under the Agreement or
 which has caused or would or might cause any of the Warranties given pursuant
 to the Agreement to become untrue, inaccurate or misleading by reference to
 the facts or circumstances existing at 8.00 a.m. on [●];












	
 

	
 


	
(d)

	
it has not come to
 the notice of any Director that a Material Adverse Effect has occurred;


	
 

	
 


	
(e)

	
it has not come to
 the notice of any Director that any other event has occurred that would
 entitle HM Treasury to terminate the Agreement;


	
 

	
 


	
(f)

	
the Resolutions
 have been passed without amendment at the GM;


	
 

	
 


	
(g)

	
it has not come to
 the notice of any Director that the Company is in breach of any of its
 obligations under the Agreement; and 


	
 

	
 


	
(h)

	
insofar as the
 Directors are aware (subject only to the giving of this letter and excluding
 any conditions set out in clause 2.1 of the Agreement, the satisfaction of
 which has been waived by HM Treasury pursuant to clause 2.5 of the Agreement
 or by the Company pursuant to clause 2.6 of the Agreement or which is
 treated as waived pursuant to clause 2.7 of the Agreement) the
 conditions set out in clause 2.1 of the Agreement (other than conditions 2.1(CC)
 and 2.1(DD)) have all been fulfilled.





For the purpose of this letter, where in a representation, warranty or
undertaking there is an express or implied reference to the “date of this
Agreement”, that reference is to be construed as a reference to “immediately prior
to Admission”.


Yours faithfully


Director


for and on behalf of

HBOS plc






	
 

	
 


	
Part B


	
Certificate to be delivered pursuant to
 clause 10.6 prior to and with effect


	
immediately before the issue of any
 Supplementary Prospectus or


	
Supplementary Preference Prospectus and at
 each Time of Sale, if any


	
 


	
To:

	
The Commissioners
 of Her Majesty’s Treasury


	
 

	
1 Horse Guards
 Road


	
 

	
London SW1A 2HQ


	
 

	
 


	
 

	
Attention of:
 Nikhil Rathi


	
 

	
 


	
 

	
Morgan Stanley
 & Co. International PLC


	
 

	
25 Cabot Square,


	
 

	
Canary Wharf,


	
 

	
London E14 4QA


	
 

	
 


	
 

	
Attention of: Head
 of Global Capital Markets


	
 

	
 


	
 

	
Dresdner Kleinwort
 Limited


	
 

	
30 Gresham Street,


	
 

	
London EC2V 7PG


	
 

	
 


	
 

	
Attention of: Alex
 Reynolds


	
 

	
 


	
 

	
[date]


	
 


	
Dear Sirs





Proposed Placing and
Open Offer of 7,482,394,366 ordinary shares of 25 pence each (the “Placing and
Open Offer”)


Further to the placing and open offer agreement between us effective as
of 13 October 2008 (the “Agreement”), we confirm that:


	
 

	
 


	
(a)

	
it has not come to
 the notice of any Director that there is any fact or circumstance which
 constitutes a breach of any of the Warranties given under the Agreement or
 which has caused or would or might cause a Warranty to become untrue,
 inaccurate or misleading by reference to the facts or circumstances existing
 at 8.00 a.m. on [●]; and


	
 

	
 


	
(b)

	
it has not come to
 the notice of any Director that the Company is in breach of any of its
 obligations under the Agreement;


	
 

	
 


	
(c)

	
it has not come to
 the notice of any Director that an event having a Material Adverse Effect has
 occurred; and


	
 

	
 


	
(d)

	
it has not come to
 the notice of any Director that any other event has occurred that would
 entitle HM Treasury to terminate the Agreement.












For the purpose of this letter, where in a representation, warranty or
undertaking there is an express or implied reference to the “date of this
Agreement”, that reference is to be construed as a reference to “immediately
prior to [●]”.


Yours faithfully


Director

for and on behalf of

HBOS plc






SCHEDULE 2

DOCUMENTS TO BE DELIVERED


Part I

Documents to be delivered prior to or on execution of this Agreement


The following documents are to be delivered by the Company to HM
Treasury and to the Joint Sponsors at execution of this Agreement:


	
 

	
 


	
1.

	
a certified copy
 of an extract of the minutes of a meeting of the Board at which it was
 approved and authorised (or of the duly authorised committee of such Board),
 or of a resolution of the Board (or of the duly authorised committee of such
 Board) approving and authorising, the issue and/or execution of this
 Agreement and, the Press Announcement (and, if the said resolution is of such
 a committee, a certified copy of the resolution of the Board appointing such
 committee);


	
 

	
 


	
2.

	
three certified
 copies of the Press Announcement.












Part II


Documents to be delivered on the Circular
Posting Date under clause 3.18


The following documents are to be delivered by the Company to the Joint
Sponsors and HM Treasury on the Circular Posting Date as referred to in clause
3.18:


	
 

	
 


	
1.

	
a copy of the
 Circular bearing evidence of the formal approval of the FSA pursuant to the
 Listing Rules, if such approval is required;


	
 

	
 


	
2.

	
two original
 letters in a form acceptable to the Joint Sponsors, acting reasonably, signed
 by each of the Directors authorising the publication of the Circular and
 accepting responsibility for information contained the Circular;


	
 

	
 


	
3.

	
the Verification
 Materials prepared in connection with the Circular signed by or on behalf of
 each person to whom responsibility is therein assigned and copies of all
 evidence supporting answers in the notes;


	
 

	
 


	
4.

	
a certified copy
 of the resolution of the Board of Directors (or of the duly authorised
 Committee of such Board) approving and authorising the issue of the Circular
 and the Form of Proxy (and if the said resolution is of such a Committee, a
 certified copy of the resolution of the Board of Directors appointing such
 Committee);


	
 

	
 


	
5.

	
a certified copy
 of each of the documents stated in the Circular as being available for
 inspection;


	
 

	
 


	
6.

	
a copy of the Form
 of Proxy;


	
 

	
 


	
7.

	
certified copies
 of any power of attorney pursuant to which any Director signed any of the
 documents mentioned above in a form acceptable to the Joint Sponsors, acting
 reasonably; and


	
 

	
 


	
8.

	
such other
 documents as may be reasonably required by HM Treasury and/or the Joint
 Sponsors.












Part III

Documents to be delivered on the Prospectus Posting Date under clause 3.19


The following documents are to be delivered by the Company to the Joint
Sponsors and to HM Treasury on the Prospectus Posting Date as referred to in clause
3.19 and, where reasonably requested, the date of publication of each
Supplementary Prospectus:


	
 

	
 

	
 


	
1.

	
copies of the
 signed applications for admission to the Official List of the New Shares;


	
 

	
 

	
 


	
2.

	
copies of the
 signed applications for admission to trading of the New Shares on the London
 Stock Exchange;


	
 

	
 

	
 


	
3.

	
a copy of the
 passporting statement for the Prospectus issued by the UK Listing Authority
 to the relevant competent authority in the Relevant Member State into which
 the Prospectus is to be passported;


	
 

	
 

	
 


	
4.

	
a completed ‘Form
 A’, to be submitted to the FSA in accordance with paragraph 3.1.1(1) of the
 Prospectus Rules for approval of a prospectus in accordance with Part VI of
 the FSMA;


	
 

	
 

	
 


	
5.

	
a copy of the
 Prospectus bearing evidence of the formal approval of the FSA pursuant to the
 Listing Rules;


	
 

	
 

	
 


	
6.

	
two original
 letters in a form acceptable to the Joint Sponsors, acting reasonably, duly
 signed by the Company’s counsel in relation to paragraphs 8.3.4, 8.4.12 and
 8.4.13 of the UK Listing Rules and dated the Prospectus Posting Date;


	
 

	
 

	
 


	
7.

	
two original
 letters in a form acceptable to the Joint Sponsors, acting reasonably, duly
 signed by the Company in relation to paragraphs 8.3.4, 8.4.12 and 8.4.13 of
 the UK Listing Rules and dated the Prospectus Posting Date;


	
 

	
 

	
 


	
8.

	
two original
 letters in a form acceptable to the Joint Sponsors, acting reasonably, duly
 signed by the Auditors in relation to paragraphs 8.4.12(1) and 8.4.13(3) of
 the UK Listing Rules and dated the Prospectus Posting Date;


	
 

	
 

	
 


	
9.

	
two original
 letters in a form acceptable to the Joint Sponsors, acting reasonably, duly
 signed by the Company’s counsel in relation to paragraphs 8.4.8 and 8.4.9 of
 the UK Listing Rules and dated the Prospectus Posting Date;


	
 

	
 

	
 


	
10.

	
two original letters
 in a form acceptable to the Joint Sponsors, acting reasonably, duly signed by
 the Company in relation to paragraphs 8.4.8 and 8.4.9 of the UK Listing Rules
 and dated the Prospectus Posting Date;


	
 

	
 

	
 


	
11.

	
two original
 letters in a form acceptable to the Joint Sponsors, acting reasonably, duly
 signed by the Company’s auditors in relation to paragraphs 8.4.8(1), 8.4.8(2)
 and 8.4.9(3) of the UK Listing Rules and dated the Prospectus Posting Date;


	
 

	
 

	
 


	
12.

	
two original
 letters in a form acceptable to the Joint Sponsors, acting reasonably, signed
 by each of the Directors authorising the publication of the Prospectus,
 accepting responsibility for information contained in the Prospectus and any
 Supplementary 












	
 

	
 

	
 


	
 

	
Prospectus and
 acknowledging their understanding of their responsibilities under the UK
 Listing Rules and the Disclosure Rules in accordance with paragraph 8.3.4 of
 the UK Listing Rules;


	
 

	
 

	
 


	
13.

	
the Verification
 Materials prepared in connection with the Press Announcement and the
 Prospectus signed by or on behalf of each person to whom responsibility is
 therein assigned and copies of all evidence supporting answers in the notes;


	
 

	
 

	
 


	
14.

	
a certified copy
 of the resolution of the Board of Directors (or of the duly authorised
 Committee of such Board) approving and authorising the issue of the
 Prospectus and the Application Form (and if the said resolution is of such a
 Committee, a certified copy of the resolution of the Board of Directors
 appointing such Committee);


	
 

	
 

	
 


	
15.

	
an original copy
 of any pro forma financial information report incorporated in the Prospectus
 duly signed by the Company’s auditors and dated the Prospectus Posting Date;


	
 

	
 

	
 


	
16.

	
a certified copy
 of each of the other documents stated in the Prospectus as being available
 for inspection;


	
 

	
 

	
 


	
17.

	
an original copy
 of the letter in acceptable to the Joint Sponsors, acting reasonably, duly
 signed by the Auditors and dated the Prospectus Posting Date:


	
 

	
 

	
 


	
 

	
(a)

	
providing comfort
 on there being no significant change in the financial and trading position
 (including indebtedness) of the Group and confirming the proper and accurate
 extraction of financial information contained in the Prospectus;


	
 

	
 

	
 


	
 

	
(b)

	
to the extent
 relevant, giving consent to the inclusion in the Prospectus of their respective
 reports and letters in the form and context in which they are respectively
 included; and


	
 

	
 

	
 


	
 

	
(c)

	
providing comfort
 in relation to the capitalisation and indebtedness statement in the
 Prospectus and in relation to the accuracy of the tax information included in
 the tax disclosures section of the Prospectus.


	
 

	
 

	
 


	
18.

	
original copies of
 letters in a form acceptable to the Joint Sponsors, acting reasonably, duly
 signed by the Company’s auditors and dated the same date as the Prospectus on
 the matters contemplated in the U.S. Statement of Auditing Standards No. 72
 (including a “SAS 72 lookalike” letter) with respect to the financial
 statements and certain financial information contained, or incorporated by
 reference, in the Prospectus;


	
 

	
 

	
 


	
19.

	
an original copy
 of the letter in a form acceptable to the Joint Sponsors, acting reasonably,
 duly signed by the Company and dated the Prospectus Posting Date providing
 comfort on there being no significant change in the financial and trading
 position (including indebtedness) of the Group since 31 December 2007;


	
 

	
 

	
 


	
20.

	
a written English
 opinion in a form acceptable to the Joint Sponsors and to HM Treasury, acting
 reasonably, from Allen & Overy LLP (as English counsel for the Company):












	
 

	
 

	
 


	
21.

	
a rule 10b-5
 disclosure letter and tax disclosure, Investment Company Act and
 no-registration opinion in a form acceptable to the Joint Sponsors and to HM
 Treasury, acting reasonably, from Allen & Overy LLP (as U.S. counsel for
 the Company) and a rule 10b-5 disclosure letter and no-registration opinion
 Freshfields Buckhaus Deringer LLP (US Counsel for the Joint Sponsors);


	
 

	
 

	
 


	
22.

	
original copies of
 the Subscription and Transfer Agreement and the Option Agreement duly
 executed by the Company and JerseyCo;


	
 

	
 

	
 


	
23.

	
certified copies
 of any power of attorney pursuant to which any Director signed any of the
 documents mentioned above in a form acceptable to the Joint Sponsors, acting
 reasonably;


	
 

	
 

	
 


	
24.

	
a certified copy
 of a memorandum to the Directors from Allen & Overy LLP in connection
 with the Placing and Open Offer explaining the nature of their
 responsibilities and obligations as directors of a listed company under the
 Listing Rules and DTRs in a form acceptable to the Joint Sponsors, acting
 reasonably;


	
 

	
 

	
 


	
25.

	
the Working Capital
 Report relating to the Group duly signed by the Auditors in a form acceptable
 to the Joint Sponsors, acting reasonably, and dated the Prospectus Posting
 Date;


	
 

	
 

	
 


	
26.

	
a letter to the
 Joint Sponsors dated the Prospectus Posting Date from the Auditors relating
 to the said Working Capital Report and the Prospectus and any current trading
 statements in the Prospectus, in a form acceptable to the Joint Sponsors,
 acting reasonably;


	
 

	
 

	
 


	
27.

	
a letter to the
 Joint Sponsors from the Company relating to the adequacy of the Group’s
 working capital in a form acceptable to the Joint Sponsors, acting
 reasonably, and dated the Prospectus Posting Date; 


	
 

	
 

	
 


	
28.

	
a certified copy
 of the resolution of the board of directors of JerseyCo approving and authorising
 the execution of the Subscription and Transfer Agreements and the Option
 Agreement; 


	
 

	
 

	
 


	
29.

	
a letter from the
 Auditors addressed to the Company in a form acceptable to HM Treasury and the
 Joint Sponsors, acting reasonably, confirming the effect on the distributable
 reserves of the Company of implementing the Placing and Open Offer, such
 letter to expressly state that a copy of such letter may be provided to HM
 Treasury and to the Joint Sponsors on a no reliance basis; 


	
 

	
 

	
 


	
30.

	
a certified copy
 of any registrar’s agreement entered into by the Company with the Registrar
 in relation to the Placing and Open Offer and of the Receiving Agent
 Agreement; 


	
 

	
 

	
 


	
31.

	
three certified
 copies of the press release relating to the posting of the Prospectus; 


	
 

	
 

	
 


	
32.

	
a certified copy
 of the Memorandum and Articles of Association of the Company; 












	
 

	
 

	
 


	
33.

	
a written Scottish
 opinion in a form acceptable to the Joint Sponsors and to HM Treasury, acting
 reasonably, from Scottish counsel for the Company;


	
 

	
 

	
 


	
34.

	
a written Jersey opinion,
 in a form acceptable to the Joint Sponsors, acting reasonably, from Jersey
 counsel to the Company; and


	
 

	
 

	
 


	
35.

	
such other
 documents as may be reasonably required by HM Treasury and/or the Joint
 Sponsors.












PART IV

Documents to be delivered immediately prior to Admission and at each Time of
Sale, if

any


The following documents are to be delivered by the Company to HM
Treasury and to the Joint Sponsors not later than 5.00 p.m. on the Dealing Day
immediately preceding the proposed date of Admission or Time of Sale, if any
(where indicated):


	
 

	
 


	
1.

	
a certified copy
 of the Resolutions;


	
 

	
 


	
2.

	
a certified copy
 of the resolution of the Board (or of the duly authorised committee of the
 Board) provisionally allotting the New Shares (and, if the said resolution is
 of such a committee, a certified copy of the resolution of the Board
 appointing such committee (if not previously delivered to the HM Treasury and
 the Joint Sponsors));


	
 

	
 


	
3.

	
a certified copy
 of the resolution of the Board of Directors (or of the duly authorised
 committee of the Board) allotting the Preference Shares in terms of the
 Preference Share Subscription Agreement (and, if the said resolution is of
 such a committee, a certified copy of the resolution of the Board appointing
 such committee (if not previously delivered to HM Treasury and to the Joint
 Sponsors));


	
 

	
 


	
4.

	
a letter addressed
 to HM Treasury and to the Joint Sponsors in the form set out in Part A of
 Schedule 1 dated as of the date of Admission (such letter also to be
 delivered at each Time of Sale, if any); 


	
 

	
 


	
5.

	
updating versions
 of the letters referred to in paragraphs 8, 9, 10,17, 18, 19, 20, 21 and 35
 of Part II of this Schedule 2 to the extent in each case such letters related
 to the Prospectus and written opinions in the form previously provided to HM
 Treasury and the Joint Sponsors from Allen & Overy LLP, and from
 Freshfields Bruckhaus Deringer LLP, Scottish counsel to the Company and
 Jersey counsel to the Company all dated the date of Admission (and, in the
 case of the items referred to in paragraph 21, also referencing each Time of
 Sale, if any); 


	
 

	
 


	
6.

	
as of each Time of
 Sale, if any, “bring down” letters with respect to the matters referred to in
 paragraphs 17 and 18 of Part II of this Schedule; and


	
 

	
 


	
7.

	
such other documents
 as may be reasonably required by HM Treasury and/or the Joint Sponsors.


	
 

	
 


	
 

	
Note: It is agreed
 that, other than in respect of the Allen & Overy opinion, the parties
 will discuss (acting reasonably) the extent, to which it is necessary and
 customary to update all of the documents referred to in paragraph 5.












PART V

Documents to be delivered on Preference Admission


The following documents are to be delivered by the Company to HM
Treasury not later than 5.00 pm on the Dealing Day immediately preceding the
proposed date of Preference Admission:


	
 

	
 


	
1

	
a certified copy
 of the signed application for admission to the Official List of the
 Preference Shares (certified by a Director or the Secretary of the Company); 


	
 

	
 


	
2

	
a certified copy
 of the signed applications for admission to trading of the Preference Shares
 issued by the London Stock Exchange (certified by a Director or the Secretary
 of the Company);


	
 

	
 


	
3

	
a certified copy
 of the CREST enablement letter confirming that the conditions for admission
 of the Preference Shares to CREST are satisfied (certified by a Director or
 the Secretary of the Company);


	
 

	
 


	
4

	
a copy of the
 Preference Prospectus and any Supplementary Preference Prospectus bearing
 evidence of the formal approval of the FSA pursuant to the Listing Rules;


	
 

	
 


	
5

	
a copy of the
 Preference Prospectus and any Supplementary Preference Prospectus signed by
 each of the Directors (or by their agents or attorneys);


	
 

	
 


	
6

	
two original
 letters in a form acceptable to HM Treasury, acting reasonably, signed by
 each of the Directors authorising the publication of the Preference
 Prospectus, accepting responsibility for information contained in the
 Preference Prospectus and any Supplementary Preference Prospectus;


	
 

	
 


	
7

	
the due diligence
 questionnaire prepared in connection with the Preference Prospectus;


	
 

	
 


	
8

	
a certified copy
 of the resolution of the Board of Directors (or of the duly authorised
 committee of such Board) approving and authorising the issue of the
 Preference Prospectus (and if the said resolution is of such a committee, a
 copy of the resolution of the Board of Directors appointing such committee)
 (in each case, certified by a Director or the Secretary of the Company);


	
 

	
 


	
9

	
a certified copy
 of any ordinary or special resolutions of the Company in general meeting
 authorising the Directors under section 80 of the Companies Act to allot the
 Preference Shares (certified by a Director or the Secretary of the Company);


	
 

	
 


	
10

	
a certified copy
 of each of the documents stated in the Preference Prospectus as being
 available for inspection (certified by a Director or the Secretary of the
 Company); 


	
 

	
 


	
11

	
a written opinion
 in a form acceptable to HM Treasury, acting reasonably, from Allen &
 Overy LLP (as English counsel for the Company) and from Scottish counsel for
 the Company; and 


	
 

	
 


	
12.

	
such other
 documents as may be reasonably required by HM Treasury and/or the Joint
 Sponsors.












SCHEDULE 3

WARRANTIES


PART I

Representations, warranties and undertakings given on the date of

this Agreement, the Circular Posting Date, the Prospectus Posting Date,

at each Time of Sale, if any, at the date of publication of any 

Supplementary Prospectus and immediately prior to Admission


	
 

	
 


	
1.

	
Compliance


	
 

	
 


	
1.1

	
Each Group Company
 and JerseyCo has been duly incorporated and is validly existing as a company
 with limited liability under the laws of the country of its incorporation
 with full corporate power and authority to own, lease and operate the
 properties which it owns, leases and operates and to own its other assets and
 carry on its business as presently carried on and as intended to be carried
 on as described in the Prospectus, when published.


	
 

	
 


	
1.2

	
All licences,
 permissions, authorisations and consents which are material for carrying on
 the business of the Group have been obtained and are in full force and effect
 and, so far as the Company is aware, there are no circumstances which might
 lead to any of such licences, permissions, authorisations and consents being
 revoked, suspended, varied or refused renewal to an extent which would, or
 would be reasonably likely to, be (singly or in the aggregate) material in
 the context of the Placing and Open Offer, any acquisition of New Shares or
 subscription for the Preference Shares by HM Treasury, Ordinary Shareholders
 or Placees, Admission, Preference Admission or post-Admission dealing in the
 Ordinary Shares.


	
 

	
 


	
1.3

	
Save as fairly
 disclosed in the Press Announcement and, when published, in the Circular, the
 Prospectus, the Preference Prospectus, any Supplementary Prospectus or Supplementary
 Preference Prospectus, each Group Company has conducted its business in
 accordance with all applicable laws and regulations of the United Kingdom and
 all relevant foreign countries or authorities, and there is no order, decree
 or judgment of any court or any governmental or other competent authority or
 agency of the United Kingdom or any foreign country outstanding against any
 Group Company or any person for those acts any Group Company is vicariously
 liable (which in any of the foregoing cases) (singly or in aggregate) would
 have, or would reasonably likely to have a Material Adverse Effect.


	
 

	
 


	
1.3

	
All sums due in
 respect of the issued share capital of the Company at the date of this
 Agreement have been paid to and received by the Company. No owner or holder
 of any of the share capital of the Company shall, with effect from Admission,
 have any right, in his capacity as such, in relation to the Group other than
 as set out in the memorandum and articles of association of the Company.


	
 

	
 


	
1.4

	
The Company is the
 beneficial owner free from all Adverse Interests of the shares it holds in
 each subsidiary of the Company.


	
 

	
 


	
1.5

	
The Company and
 the Directors have at all times complied with the provisions of the Company’s
 memorandum and articles of association and the Companies Acts and, 












	
 

	
 


	
 

	
subject to the
 passing of the Resolutions, have or will have the right, power and authority
 under the memorandum and articles of association of the Company, or pursuant
 to resolution passed in general meeting, to enter into and perform this
 Agreement (including, without limitation, the power to pay commissions, fees,
 costs and expenses provided for in this Agreement) and the Preference Share
 Subscription Agreement, to make the Placing and Open Offer, to allot and issue
 the New Shares in certificated and uncertificated form and the Preference
 Shares in certificated form, to issue the Issue Documents in the manner
 proposed without any sanction or consent by members of the Company or any
 class of them and, subject to Admission and Preference Admission, there are
 no other consents, authorisations or approvals required by the Company in
 connection with the entering into and the performance of this Agreement, the
 Subscription and Transfer Agreement, the Option Agreement or the Preference
 Share Subscription Agreement and the actions referred to in this paragraph
 1.5 which have not been irrevocably and unconditionally obtained. The
 Company’s existing Ordinary Shares are participating securities in, and have
 not been suspended from, CREST.


	
 

	
 


	
1.6

	
The allotment and
 issue of the New Shares and the Preference Shares, the Placing and Open
 Offer, the contents of and the issue and distribution of the Issue Documents
 and any other document by or on behalf of the Company in connection with Admission,
 the Placing and Open Offer or the allotment and issue of the Preference
 Shares will comply in all material respects with all agreements to which any
 Group Company is a party or by which any such Group Company is bound and will
 comply with: (a) all applicable laws and regulations of the United Kingdom
 (including, without limitation, the Companies Acts, FSMA, the Listing Rules,
 the Prospectus Rules, the DTRs and the Admission and Disclosure Standards)
 and all applicable United States and regulations and (in all material
 respects) with, all applicable laws and regulations of any other relevant
 jurisdiction; (b) the memorandum and articles of association of the Company;
 and (c) when published, the Working Capital report; and will not exceed or
 infringe any restrictions or the terms of any contract, indenture, security,
 obligation, commitment or arrangement by or binding upon the board of
 directors of any Group Company or their respective properties, revenues or
 assets or result in the implementation of any right of pre emption or any
 other material provision thereof, or result in the imposition or variation of
 any material rights or obligations of any Group Company.


	
 

	
 


	
1.7

	
The statement set
 out in clause 2.1(L) is true and accurate and not misleading.


	
 

	
 


	
1.8

	
The New Shares
 will, upon allotment, be free from all Adverse Interests and will rank pari
 passu in all respects with the existing issued shares in the issued share
 capital of the Company.


	
 

	
 


	
1.9

	
The Preference
 Shares will, upon allotment be free from all Adverse Interests and will have
 the rights and be subject to the restrictions as set out in Article 11(A) of
 the Company’s articles of association and in Schedule 1 of the Preference
 Share Subscription Agreement.


	
 

	
 


	
1.10

	
The Company has
 complied in all material respects with the requirements of Euroclear and the
 Regulations.














	
 

	
 


	
 

	
 


	
1.11

	
No member of the
 Group or any person acting on its behalf has taken, directly or indirectly,
 any action designed to or which has constituted or which might reasonably be
 expected to cause or result in stabilisation or manipulation of the price of
 any security of the Company. 


	
 

	
 


	
1.12

	
The Company has
 not paid or agreed to pay to any person any compensation for soliciting
 another to purchase any New Shares (except as contemplated in this
 Agreement). 


	
 

	
 


	
1.13

	
All information
 provided by the Company, its subsidiary undertakings or any of its or their
 officers or employees to HM Treasury and/or to the Joint Sponsors and/or the
 Auditors in connection with its or their due diligence enquiries or similar
 requests for information has been supplied in good faith and such information
 was when supplied, and remains, true and accurate in all material respects
 and no further information requested has been withheld, the absence of which
 might reasonably be considered to be material to such due diligence enquiries
 or requests for information. 


	
 

	
 


	
1.14

	
Save as fairly
 disclosed in the Press Announcement and, when published, in the Circular, the
 Prospectus, the Preference Prospectus, any Supplementary Prospectus or any
 Supplementary Preference Prospectus, there are no rights and no agreement,
 undertaking, instrument or arrangement (conditional or otherwise) other than
 those relating to the Group’s employee incentive arrangements consistent with
 normal practice and compliant with law and regulation (and, in any case, such
 as would not (singly or in the aggregate) have or be reasonably likely to
 have, a Material Adverse Effect) (i) to require the allotment, issue,
 redemption or repayment of any shares or other securities (including without
 limitation, any loan capital) or securities convertible into or exchangeable
 for, or warrants, rights or options to purchase, or obligations, commitments
 or intentions to create the same or (ii) except in each case as would not
 (singly or in the aggregate) (1) have or be reasonably likely to have a
 Material Adverse Effect and/or (2) be material or be reasonably likely to be
 material in the context of the Placing and Open Offer, any acquisition of New
 Shares or the subscription of the Preference Shares by HM Treasury,
 Admission, Preference Admission or post-Admission dealings in the Ordinary
 Shares, to sell or otherwise dispose of any shares or other securities of a
 Group Company (other than to another Group Company, as the case may be) which
 are outstanding and in force. 


	
 

	
 


	
2.

	
Announcements
 


	
 

	
 


	
2.1

	
The Press
 Announcement does not contain any untrue statement of a material fact or omit
 to state a material fact necessary in order to make the statements therein,
 in light of the circumstances under which they were made, not misleading, provided
 that this warranty shall not cover the information contained in the Press
 Announcement relating to the Joint Sponsors set out in Clause 17; and all
 expressions of opinion, intention, belief or expectation of the Company or
 the Directors contained in the Press Announcement are truly and honestly held
 and made on reasonable grounds after due and careful enquiry. 


	
 

	
 


	
2.2

	
With respect to
 all Previous Announcements, all statements of fact contained therein were at
 the date of the relevant Previous Announcement and, save to the extent
 corrected, amended or supplemented in any document or announcement issued or 












	
 

	
 

	
 


	
 

	
made by or on
 behalf of the Company or any member of the Group subsequent thereto, remain
 true and accurate and not misleading and all estimates, expressions of
 opinion or intention or expectation of the Directors contained therein were
 made on reasonable grounds and were honestly held by the Directors and were
 fairly based and there were no facts known (or which could on reasonable
 enquiry have been known by the Directors) the omission of which would make
 any statement of fact or estimate or statement or expression of opinion,
 intention or expectation in any of the Previous Announcements misleading. The
 Press Announcement complies and all Previous Announcements complied with the
 memorandum and articles of association of the Company, the Listing Rules, the
 DTRs, the Prospectus Rules, the Companies Acts, FSMA, all applicable rules
 and requirements of the London Stock Exchange, the FSA and all applicable US
 laws and regulations and (in all material respects) all other applicable
 requirements of statute, statutory regulation or any regulatory body. There
 is no existing profit forecast outstanding in respect of the Company, the
 Group taken as a whole, or any member thereof.


	
 

	
 

	
 


	
2.3

	
All necessary
 enquiries have been made to ascertain and verify the accuracy of all
 statements of fact and the reasonableness of all statements made in the Press
 Announcement. The Company has supplied each of the Directors with a copy of
 the Verification Materials in respect of the Press Announcement and is
 satisfied that the replies to such Verification Materials have been prepared
 or approved by persons having appropriate knowledge and responsibility to
 enable them properly to provide or approve those replies, that they have been
 provided in good faith with due care and attention, are true and accurate in
 all material respects and not misleading, and that all statements of opinion
 in such replies are honestly held and based on reasonable grounds. 


	
 

	
 

	
 


	
3.

	
Accounts
 and working capital 


	
 

	
 

	
 


	
3.1

	
The Accounts: 


	
 

	
 

	
 


	
 

	
(A)

	
have been prepared
 and audited in accordance and comply with IFRS, the Companies Acts and all
 applicable laws and regulations; 


	
 

	
 

	
 


	
 

	
(B)

	
give a true and
 fair view of the financial condition and of the state of affairs of the
 Company and the Group as at the end of each of the relevant financial periods
 (including the Accounts Date) and of the profit, loss, cash flow and changes
 in equity of the Company and the Group for such periods; and 


	
 

	
 

	
 


	
 

	
(C)

	
either made proper
 provision for, or, where appropriate, in accordance with IFRS, include a note
 in respect of all liabilities or commitments, whether actual, deferred,
 contingent or disputed, of the Group. 


	
 

	
 

	
 


	
3.2

	
The Interim
 Accounts: 


	
 

	
 

	
 


	
 

	
(A)

	
have been prepared
 in accordance with, and comply with, IFRS, the Companies Acts and all
 applicable laws and regulations; 












	
 

	
 

	
 


	
 

	
(B)

	
present fairly in
 all material respects the financial position of the Group as at 30 June 2008
 and the results of operations and the cash flows of the Group for the
 financial period ended on 30 June 2008; and 


	
 

	
 

	
 


	
 

	
(C)

	
either made proper
 provision for, or, where appropriate, in accordance with IFRS, include a note
 in respect of all liabilities or commitments, whether actual, deferred,
 contingent or disputed, of the Group. 


	
 

	
 

	
 


	
3.3

	
Save as fairly
 disclosed in the Accounts and the Interim Accounts and, when published in the
 Prospectus and the Preference Share Prospectus, no Group Company has any
 off-balance sheet financing, investment or liability material for disclosure
 in the Prospectus or the Preference Share Prospectus. 


	
 

	
 

	
 


	
3.4

	
The Directors have
 established procedures which provide a reasonable basis for them to make
 proper judgements on an ongoing basis as to the financial position and
 prospects of the Company and each Group Company. 


	
 

	
 

	
 


	
3.5

	
There are no, and
 during the past five years have been no: (i) material weaknesses in the
 Company’s internal controls over financial reporting (whether or not
 remediated) of the Company or the Group; (ii) changes in the Company’s
 internal controls over financial reporting of the Company or the Group that
 have materially adversely affected, or would be reasonably likely to
 materially adversely affect, the Company’s internal controls over financial
 reporting of the Company or the Group; or (iii) fraud that involves any
 current member of management of the Company or (so far as the Company is
 aware) of any member of the Group and no material fraud that involves any
 employee of the Company or (so far as the Company is aware) of any member of
 the Group. 


	
 

	
 

	
 


	
3.6

	
Each of the
 Company and its consolidated subsidiaries maintain a system of internal
 accounting controls sufficient to provide reasonable assurance that: 


	
 

	
 

	
 


	
 

	
(A)

	
transactions are
 executed in accordance with management’s general or specific authorisation; 


	
 

	
 

	
 


	
 

	
(B)

	
transactions are
 recorded as necessary to permit preparation of financial statements by the
 Company on a consolidated basis in conformity with IFRS and the Companies
 Acts and the rules and regulations thereunder and to maintain accountability
 for their assets; 


	
 

	
 

	
 


	
 

	
(C)

	
access to assets
 is permitted only in accordance with management’s general or specific
 authorisation; and 


	
 

	
 

	
 


	
 

	
(D)

	
the recorded
 accountability for assets is compared with the existing assets at reasonable
 intervals and appropriate action is taken with respect to any differences. 












	
 

	
 

	
 


	
4.

	
Guarantees,
 indemnities, borrowings and default 


	
 

	
 

	
 


	
4.1

	
Save for: 


	
 

	
 

	
 


	
 

	
(A)

	
guarantees or
 indemnities given by any Group Company in the ordinary course of business;
 and 


	
 

	
 

	
 


	
 

	
(B)

	
any indemnities
 given by the Company to HM Treasury and/or the Joint Sponsors, 


	
 

	
 

	
 


	
 

	
no Group Company
 has given or has agreed to give any guarantee or indemnity or similar
 obligation in favour of a third party and no Group Company has any current or
 prospective liability, howsoever arising which, in any of the foregoing
 cases, would, or would be reasonably likely (singly or in the aggregate) to
 have a Material Adverse Effect and/or to be otherwise material in the context
 of the Placing and Open Offer, the Preference Share Subscription, any
 acquisition of New Shares or subscription for the Preference Shares by HM
 Treasury, Ordinary Shareholders or Placees, Admission, Preference Admission
 or post-Admission dealings in the Ordinary Shares.


	
 

	
 

	
 


	
4.2

	
No event has
 occurred nor have any circumstances arisen (and the making and completion of
 the Placing and Open Offer and the allotment and issue of the New Shares and
 the Preference Shares will not give rise to any such event or circumstance)
 so that any person is or would be entitled, or could, with the giving of
 notice or lapse of time or the fulfilment of any condition or the making of
 any determination, become entitled, to require repayment before its stated
 maturity of, or to take any step to enforce any security for, any
 indebtedness of any member of the Group which is material in the context of
 the Group’s borrowings and working capital projections and no person to whom
 any indebtedness of any member of the Group which is material in the context
 of the Group’s borrowings and is payable on demand is owed has demanded or
 threatened to demand repayment of, or taken or threatened to take any step to
 enforce any guarantee, indemnity or other security for, the same. 


	
 

	
 

	
 


	
4.3

	
There are no
 companies, undertakings, partnerships or joint ventures in existence in which
 any Group Company has an ownership interest but whose results are not
 consolidated with the results of the Group, but whose default would affect
 the indebtedness or increase the contingent liabilities of the Group to an
 extent which would, or would be reasonably likely (singly or in the
 aggregate) to have a Material Adverse Effect and/or to be otherwise material
 in the context of the Placing and Open Offer, any acquisition of New Shares
 or subscription for the Preference Shares by HM Treasury, Ordinary
 Shareholders or Placees, Admission, Preference Admission or post-Admission
 dealings in the Ordinary Shares. 


	
 

	
 

	
 


	
4.4

	
No event or
 circumstance exists, has occurred or arisen or, so far as the Company is
 aware, is about to occur which constitutes or results in, or would with the
 giving of notice and/or lapse of time and/or the making of a relevant
 determination, constitute, or result in, termination of or a default or the
 acceleration or breach of any obligation under any agreement, instrument or
 arrangement to which any Group Company is a party or by which any such Group
 Company or any of its properties, revenues or assets are bound, in any of the
 foregoing cases to an extent which would, or would be reasonably likely
 (singly or in the aggregate) to have a Material Adverse Effect and/or to be
 otherwise 












	
 

	
 


	
 

	
material in the
 context of the Placing and Open Offer, any acquisition of New Shares or
 subscription for the Preference Shares by HM Treasury, Ordinary Shareholders
 or Placees, Admission, Preference Admission or post-Admission dealings in the
 Ordinary Shares.


	
 

	
 


	
5.

	
Taxation
 


	
 

	
 


	
 

	
No stamp duty,
 SDRT or other issuance or transfer taxes or similar duties are payable in
 connection with the allotment, issue and delivery of the New Shares, or the
 Preference Shares, by the Company in accordance with the terms of this
 Agreement or, as the case may be, the Preference Share Subscription Agreement
 or otherwise in connection with the making or implementation of the Placing
 and Open Offer or any subscription for the Preference Shares, save for any
 stamp duty or SDRT payable under sections 67, 70, 93 or 96 of the Finance Act
 1986 in relation to the issue of the New Shares or the Preference Shares. 


	
 

	
 


	
6.

	
Intellectual
 property 


	
 

	
 


	
6.1

	
Except to an
 extent that would not (singly or in the aggregate) have a Material Adverse
 Effect and/or be otherwise material in the context of the Placing and Open
 Offer, any acquisition of New Shares or subscription for the Preference
 Shares by HM Treasury, Ordinary Shareholders or Placees, Admission,
 Preference Admission or post-Admission dealings in the Ordinary Shares, the
 Group does not infringe the Intellectual Property Rights of any third party
 nor so far as the Company is aware does any third party infringe the
 Intellectual Property Rights owned or used by the Group. 


	
 

	
 


	
6.2

	
All material
 Intellectual Property Rights used by the Group are either legally or
 beneficially owned by the Group in all material respects or are used under a
 licence and are not subject to any Adverse Interests to an extent that would
 or might (singly or in the aggregate) have a Material Adverse Effect and/or
 be otherwise material in the context of the Placing and Open Offer, any
 acquisition of New Shares or subscription for the Preference Shares by HM
 Treasury, Admission, Preference Admission or post-Admission dealings in the
 Ordinary Shares. 


	
 

	
 


	
6.3

	
Save as would not
 (singly or in the aggregate) have a Material Adverse Effect or otherwise be
 material in the context of the Placing and Open Offer, any acquisition of New
 Shares or subscription for the Preference Shares by HM Treasury, Admission,
 Preference Admission or post-Admission dealings in the Ordinary Shares, (i)
 all Intellectual Property Rights registered in the name of a Group Company
 (if any) are beneficially owned by it and subsisting and if granted not
 subject to revocation and (ii) all requisite registration and renewal fees in
 respect thereof have been duly and timeously paid. 


	
 

	
 


	
6.4

	
Save as would not
 (singly or in the aggregate) have a Material Adverse Effect or otherwise be
 material in the context of the Placing and Open Offer, any acquisition of New
 Shares or subscription for the Preference Shares by HM Treasury, Ordinary
 Shareholders or Placees, Admission, Preference Admission or post-Admission
 dealings in the Ordinary Shares, (i) all Intellectual Property Rights owned
 and used or reasonably likely to be used by the Group and capable of legal
 protection are subject to appropriate and enforceable protection (including,
 where reasonably appropriate, by registration), 












	
 

	
 


	
 

	
and (ii) so far as
 the Company is aware there is no restriction of the Group’s rights to use any
 Intellectual Property Rights owned by or licensed to the Company to engage in
 any of the activities presently or proposed to be undertaken by it.


	
 

	
 


	
7.

	
Insurance
 


	
 

	
 


	
 

	
The Group is
 insured to adequate levels against all risks which the Company reasonably
 believes to be commonly insured against by persons carrying on the same or
 similar businesses as those carried on by the Group and against all risks
 against which the Group might reasonably be expected to insure in the
 particular circumstances of the businesses carried on by each Group Company,
 all such insurances are in full force and effect and to the best knowledge,
 information and belief of the Company, there are no circumstances which could
 render any such insurances void or voidable and there is no material
 insurance claim, pending, threatened or outstanding against any Group Company
 and all premiums due in respect of all insurances have been duly paid.


	
 

	
 


	
8.

	
Rating
 


	
 

	
 


	
 

	
The Company has
 not received notice of any intended or potential downgrading of the rating
 assigned to any of the Company’s (or any other member of its Group’s) credit
 or debt by a ratings agency and (other than awareness of publicly known
 general market conditions and speculation) is not aware of a specific fact,
 circumstance or condition in respect of itself or any Group Company from
 which or a combination of any of which, when considered in the context of
 current market conditions and speculation in the financial services sector,
 it could reasonably expect such a downgrade to be threatened or to occur. No
 ratings agency has placed the Company or any Group Company or any of the
 Company’s or any Group Company’s debt on credit watch.


	
 

	
 


	
9.

	
Insolvency
 


	
 

	
 


	
9.1

	
No Group Company
 is unable to pay its debts within the meaning of section 123 of the
 Insolvency Act 1986 or is otherwise insolvent. 


	
 

	
 


	
9.2

	
Save in the
 context of a solvent voluntary winding up or otherwise as would not (singly
 or in the aggregate) be material in the content of the Placing and Open
 Offer, any acquisition of New Shares or subscription for the Preference
 Shares by HM Treasury, Admission, Preference Admission or post-Admission
 dealings in the Ordinary Shares, no order has been made, petition presented
 or resolutions passed for the winding up of any Group Company and no meeting
 has been convened for the purpose of winding up any Group Company. No Group
 Company has been a party to any transaction which could be avoided in a
 winding up. 


	
 

	
 


	
9.3

	
No steps have been
 taken for the appointment of an administrator or receiver (including an
 administrative receiver) of all or any part of the assets of any Group
 Company. 


	
 

	
 


	
9.4

	
By reason of
 actual or anticipated financial difficulties, no Group Company has commenced
 negotiations with its creditors or any class of its creditors with a view to
 rescheduling any of its indebtedness or has made or proposed any arrangement
 or composition with its creditors or any class of its creditors. 












	
 

	
 


	
10.

	
Regulatory
 


	
 

	
 


	
10.1

	
Each Group Company
 required to be licensed (as a bank or otherwise) is duly licensed in its
 jurisdiction of incorporation and domicile and, except as would not
 reasonably be expected to be material, is duly licensed or authorised in each
 other jurisdiction where it is required to be licensed or authorised to
 conduct its business as described in the Previous Announcements or, when
 published, the Prospectus, the Preference Prospectus, any Supplementary
 Prospectus or any Supplementary Preference Prospectus. 


	
 

	
 


	
10.2

	
No Group Company
 nor any of its officers has failed to comply with any statutory provision or
 any rules, regulations, directions, requirements, notices and provisions of
 the FSA or any other regulatory body applying to such Group Company in
 relation to its business including (without limitation) in respect of the
 maintenance of its Capital Resources Requirements and satisfaction of the
 Overall Financial Resources Rule and any equivalent capital requirements in
 any other jurisdiction that are applicable to any Group Company; no
 obligation has arisen in respect of the general notification requirements
 under Chapter 15.3 of SUP, save in any of the foregoing cases to an extent
 which would not (singly or in the aggregate) have a Material Adverse Effect
 and/or otherwise be material in the context of the Placing and Open Offer,
 any acquisition of New Shares or subscription for the Preference Shares by HM
 Treasury, Admission or post-Admission dealings in the Ordinary Shares. 


	
 

	
 


	
10.3

	
Save as fairly
 disclosed in the Press Announcement and, when published, the Circular, the
 Prospectus or any Supplementary Prospectus, no Group Company is the subject
 of any investigation, enforcement action (including, without limitation to
 vary the terms of any permission of licence) or disciplinary proceeding by
 the FSA or any other regulatory body having jurisdiction over such Group
 Company, and no such investigation, enforcement action or disciplinary
 proceeding is threatened or pending. 


	
 

	
 


	
10.4

	
Save as fairly
 disclosed on the Press Announcement and, when published, the Circular, the
 Prospectus, the Preference Prospectus and any Supplementary Prospectus and
 any Supplementary Preference Prospectus, the Company is not subject to any
 special or additional surveillance or supervision by the FSA or to any
 special or additional reporting requirements in relation to its assets,
 liquidity position, funding position or otherwise and the Company has not
 been subject to any visits, beyond customary visits, by the FSA. 


	
 

	
 


	
10.5

	
The operations of
 each Group Company are and have been conducted at all times in material
 compliance with the money laundering statutes of all jurisdictions, the rules
 and regulations thereunder and any related or similar rules, regulations or
 guidelines, issued, administered or enforced by any governmental agency (collectively,
 the “Money Laundering Laws”) and
 no action, suit or proceeding by or before any court or governmental agency,
 authority or body or any arbitrator involving any Group Company with respect
 to the Money Laundering Laws is pending or, to the best knowledge of the
 Company, threatened. 


	
 

	
 


	
10.6

	
None of the
 Company, any other member of the Group or, to the knowledge of the Company,
 any director, officer, agent, employee or Affiliate of the Company is
 currently subject to any sanctions administered by the U.S. Department of the
 Treasury (“OFAC”) 














	
 

	
 


	
 

	
or any similar
 sanctions imposed by the European Union, the United Nations or any other
 body, governmental or other, to which the Company or ay of its Affiliates is
 subject (collectively, “other economic sanctions”); and the
 Company will not directly or indirectly use the proceeds of the Placing and
 Open Offer, or lend, contribute or otherwise make available such proceeds to
 any other member of the Group, joint venture partner or other person or
 entity, for the purpose of financing the activities of any person currently
 subject to any sanctions administered by OFAC or any other economic
 sanctions.


	
 

	
 


	
10.7

	
None of the
 Company, any other member of the Group or, to the knowledge of the Company,
 any director, officer, agent, employee or Affiliate of the Company, is aware
 of or has taken any action, directly or indirectly, that could result in a
 violation by such persons of the U.S. Foreign Corrupt Practices Act of 1977,
 as amended, or the rules and regulations thereunder (the FCPA) (including,
 without limitation, making use of the mail or any means or instrument of
 interstate commerce corruptly in furtherance of an offer, payment, promise to
 pay or authorisation of the payment of any money, or other property, gift,
 promise to give, or authorisation of the giving of anything of value to any
 “foreign official” (as such term is defined in the FCPA) or any foreign
 political office, in contravention of the FCPA), the OECD Convention on
 Bribery of Foreign Public Officials in International Business Transactions
 (the OECD Convention) or any similar law or regulation, to which the Company,
 any other member of the Group, any director, officer, agent, employee of any
 member of the Group or, to the knowledge of the Company, any Affiliate is
 subject; and the Company, each member of the Group and, to the knowledge of
 the Company, its Affiliates have conducted their businesses in compliance
 with the FCPA, the OECD Convention and any applicable similar law or
 regulation and have instituted and maintain policies and procedures designed
 to ensure, and which are reasonably expected to continue to ensure, continued
 compliance therewith.


	
 

	
 


	
10.8

	
There are no facts
 or circumstances which have not been included in the Press Announcement and,
 when published, the Prospectus, the Preference Prospectus, any Supplementary
 Prospectus or Supplementary Preference Prospectus or any other information
 provided to the UK Listing Authority, which would cause the UK Listing
 Authority not to be satisfied that the Company’s capital adequacy is regulated
 by the FSA or suitably regulated by another regulatory body.


	
 

	
 


	
11.

	
United States Securities Regulations


	
 

	
 


	
11.1

	
The Company is a
 “foreign issuer” (as defined in Regulation S under the Securities Act). 


	
 

	
 


	
11.2

	
The Company
 reasonably believes that there is no “substantial US market interest” (as
 defined in Rule 902(j) of Regulation S under the Securities Act) in any of
 the New Shares.


	
 

	
 


	
11.3

	
The Company does
 not believe that it is and does not expect to become (whether as a result of
 the receipt and application of the proceeds of the sale of the New Shares or
 otherwise) a “passive foreign investment company” within the meaning of
 section 1297 of the US Internal Revenue Code of 1986.


	
 

	
 


	
11.4

	
The Company is
 not, and, immediately after giving effect to the offering and sale of the New
 Shares and the application of the proceeds thereof as set forth in the Draft












	
 

	
 

	
 


	
 

	
Prospectus and,
 when published, the Prospectus, will not be, an “investment company” as such
 term is defined in the US Investment Company Act of 1940.


	
 

	
 


	
11.5

	
For so long as any
 New Shares are “restricted securities” within the meaning of Rule 144(a)(3)
 under the Securities Act, the Company will not become an “open ended
 company”, “unit investment trust” or “face amount certificate company”, as
 such terms are defined in, and that is or is required to be registered under
 Section 8 of the Investment Company Act.


	
 

	
 


	
11.6

	
There are no
 persons with registration rights or other similar rights to have any shares
 registered by the Company under the Securities Act.


	
 

	
 


	
11.7

	
During the period
 of one year after Admission, the Company will not, and will not permit any of
 its Affiliates to, resell any New Shares which constitute “restricted
 securities” under Rule 144 that have been reacquired by any of them other
 than in transactions that meet the applicable requirements of Regulation S.


	
 

	
 


	
11.8

	
None of the
 Company, its affiliates (as defined in Rule 405 under the Securities Act
 (Affiliates)), or any person acting on its or their behalf (other than HM Treasury
 and the Joint Sponsors, their affiliates or persons acting on their behalf,
 as to whom no representation is made) has engaged or will engage in any
 “directed selling efforts” (within the meaning of Rule 902(c) of Regulation S
 under the Securities Act) with respect to the New Shares.


	
 

	
 


	
12.

	
Panel Confirmation 


	
 

	
 


	
 

	
The Panel has
 confirmed that:


	
 

	
 


	
 

	
(A)

	
subject to the independent shareholders of the Company voting in
 favour of the Whitewash Resolution, the Panel will disapply the requirement
 to make a general offer under the terms of Rule 9 of the City Code on
 Takeovers and Mergers which would otherwise be required by the acquisition by
 HM Treasury (or its nominee) of the New Shares; and


	
 

	
 

	
 


	
 

	
(B)

	
it has consented to the amendment to the terms of the Acquisition as
 announced in the Press Announcement.


	
 

	
 

	
 


	
13.

	
The Premises


	
 

	
 


	
 

	
The Company has
 not, and, so far as the Company is aware, no Group Company has, received nor
 is aware of any claim, demand or other notice, or of any circumstances which
 might give rise to the same, in relation to any material actual or contingent
 liability as an original contracting party, or as guarantor of any party or
 as covenantor (express or implied), or is contractually liable in respect of
 any estate, interest, contractual right or obligation, in relation to any
 land, building or other real property to an extent that could individually or
 in aggregate have a Material Adverse Effect.












	
 

	
 


	
14.

	
Environmental


	
 

	
 


	
14.1

	
Each Group Company
 is in compliance with Environmental Laws in all material respects and, so far
 as the Company is aware, there are no circumstances which may give rise to
 any material liability, obligation or duty (whether actual or contingent)
 under Environmental Laws.


	
 

	
 


	
14.2

	
There are no
 material claims, proceedings actions or investigations pending against the
 Group with respect to non-compliance with or liability (whether actual or
 prospective), obligation or duty under Environmental Laws nor, so far as the
 Company is aware, have any such claims, proceedings, actions or
 investigations been threatened that, in each case, would or would be
 reasonably likely to have (singly or in aggregate) a Material Adverse Effect.


	
 

	
 


	
14.3

	
All Environmental
 Consents required for the Group’s business have been obtained and complied
 with in all material respects and are in full force and effect and there are
 no facts or circumstances which will or are likely to result in any
 Environmental Consents being terminated, revoked, suspended, materially
 varied or modified or which may prejudice its renewal, to an extent which, in
 each case, would or would be reasonably likely to have (singly or in
 aggregate) a Material Adverse Effect.












PART II


Representations, warranties and undertakings
given on the

Circular Posting Date (subject to certain exceptions),

the Prospectus Posting Date, on the date of publication of each Supplementary

Prospectus, at each Time of Sale, if any, and immediately prior to Admission


	
 

	
 


	
All Warranties in
 paragraphs 5 to 13 and in paragraph 15 of this Part II of Schedule 3 are
 qualified by reference to matters which are fairly disclosed in the
 Prospectus or the Circular as the case may be or if, such Warranties are
 given on or after the publication of any Supplementary Prospectus, as fairly
 disclosed in the Prospectus as supplemented by such Supplementary Prospectus.


	
 

	
 


	
1.

	
The Issue Documents


	
 

	
 


	
1.1

	
The Issue
 Documents contain all particulars and information required by, and comply in
 all respects with the memorandum and articles of association of the Company,
 the Companies Acts, FSMA, the Listing Rules, the DTRs, the Prospectus Rules,
 the City Code on Takeovers and Mergers, all applicable rules and requirements
 of the London Stock Exchange, the FSA and all applicable US laws and
 regulations and all other applicable requirements of statute, statutory
 regulation or any regulatory body.


	
 

	
 


	
1.2

	
The Issue
 Documents (and any amendments or supplements thereto) do not and will not
 contain any untrue statement of a material fact or omit to state any material
 fact necessary to make the statements therein, in the light of the
 circumstances under which they were made, not misleading.


	
 

	
 


	
1.3

	
All expressions of
 opinion, intention or expectation contained in any Issue Document are, and
 were on the respective dates of such Issue Document, honestly held by the
 Directors and are fairly based and have been made on reasonable grounds after
 due and careful consideration and enquiry.


	
 

	
 


	
1.4

	
There are no facts
 or matters known, or which could on reasonable enquiry have been known, to the
 Company or any of the Directors omitted from any Issue Document, the omission
 of which would make any statement of fact or expression of opinion, intention
 or expectation contained in a Issue Document misleading.


	
 

	
 


	
1.5

	
Having regard to
 the particular nature of the Company and the Group and the Company’s share
 capital and the other matters referred to in section 87A of the FSMA, the
 Issue Documents contain all information about the Group which is or might be
 material for disclosure to potential investors and their professional
 advisers and which they would reasonably require and reasonably expect to
 find there for the purpose of making an informed assessment of the matters
 specified in section 87A(2) of the FSMA.


	
 

	
 


	
1.6

	
There is no fact
 or circumstance which is not disclosed with sufficient prominence in the
 Issue Documents which ought to be taken into account by the UK Listing
 Authority in considering the application for listing of the New Shares or
 Preference Shares.


	
 

	
 


	
1.7

	
The Placing and
 Open Offer (including without limitation, the creation, allotment and issue
 of the New Shares and the publication and distribution of the Issue
 Documents)












	
 

	
 


	
 

	
has been and will
 be conducted in all material respects in accordance with the terms and
 conditions of the Issue Documents and the Company has complied and will
 comply with all laws, rules and regulations applicable to the Placing and
 Open Offer in each jurisdiction in which the New Shares are offered.


	
 

	
 


	
1.8

	
All necessary
 enquiries have been made to ascertain and verify the accuracy of all
 statements of fact and the reasonableness of all other statements contained
 in the Issue Documents. The Company has supplied each of the Directors with a
 copy of the Verification Materials relating to the Issue Documents and is
 satisfied that the replies to the Verification Materials relating to the
 Issue Documents have been prepared or approved by persons having appropriate
 knowledge and responsibility to enable them properly to provide or approve
 those replies and they have been provided in good faith with due care and
 attention, are true, complete and accurate in all material respects and not
 misleading and all statements of opinion in such replies are honestly held
 and based on reasonable grounds.


	
 

	
 


	
2.

	
Provision of Information


	
 

	
 


	
2.1

	
The pro forma
 financial information on the Group set out in the Prospectus has been duly
 and carefully prepared on the bases set out in the Prospectus, in accordance
 with the Prospectus Rules and is presented on a basis consistent with the
 accounting principles, standards and practices normally applied by the
 Company. 


	
 

	
 


	
2.2

	
The summary and
 selected financial information on the Group set out in the Prospectus has
 been duly and carefully extracted from the Accounts and has been properly compiled
 on a basis consistent with the accounting policies applied in the Accounts.


	
 

	
 


	
2.3

	
The capitalisation
 and indebtedness table set out in the Prospectus has been properly compiled
 on a basis that is consistent with the accounting policies applied in the
 Accounts. 


	
 

	
 


	
2.4

	
No Group Company
 has any off balance sheet financing, investment or liability material for
 disclosure in the Prospectus that is not so fairly disclosed.


	
 

	
 


	
2.5

	
There are no facts
 or circumstances, which have not been included the Prospectus or any other
 information provided to the UK Listing Authority, which would cause the UK
 Listing Authority not to be satisfied that the Company’s capital adequacy is
 regulated by the FSA or suitably regulated by another regulatory body.


	
 

	
 


	
2.6

	
The particulars of
 the employees schemes contained in the Prospectus or, when published, any
 Supplementary Prospectus and, in particular, the information as to the dates
 on which options or other rights may be exercised and the number of options
 or other rights granted (conditionally or otherwise) on or before the date of
 this Agreement are accurate in all material respects and not misleading.


	
 

	
 


	
3.

	
Working capital report 


	
 

	
 


	
3.1

	
All information
 supplied by the Company to the Joint Sponsors and/or the Auditors for the
 purposes of the Working Capital Report and/or any other report prepared by
 the Auditors in connection with the Placing and Open Offer and in respect of
 any updates












	
 

	
 


	
 

	
thereto, has been supplied to them in good faith; and such
 information was when supplied and remains true and accurate in all material
 respects and not misleading, and no information has been withheld the absence
 of which might reasonably have affected the contents of the Working Capital
 Report and/or any other such report.


	
 

	
 


	
3.2

	
The Working
 Capital Report has been approved by the Directors or a duly authorised
 committee thereof and has been made after due and careful enquiry and
 consideration, all statements of fact therein are true and accurate in all
 material respects and not misleading, all expressions of opinion, intention
 or expectation contained therein will be made on reasonable grounds after due
 and careful enquiry and consideration and honestly held by the Directors and
 fairly based, there are no other facts known or which could on reasonable
 enquiry have been known to the Company on the date of the Working Capital
 Report or the date of the Prospectus or at Admission, the omission of which
 would make any such statement or expression in the Working Capital Report
 misleading, all the bases and assumptions on which the Working Capital Report
 will be based are and will be reasonable and, so far as the Company is aware,
 there are no other assumptions on which the Working Capital Report ought to
 have been based which will not have been made.


	
 

	
 


	
3.3

	
The Group has
 sufficient working capital for its present requirements, that is for at least
 18 months following the date of the Prospectus.


	
 

	
 


	
4.

	
Derogation 


	
 

	
 


	
 

	
Each statement
 made by or on behalf of the Company (and of which the Company is aware) in
 connection with any application to the London Stock Exchange or the UK
 Listing Authority for information to be omitted from the Prospectus is true,
 complete and accurate and not misleading. There is no information which has
 not been disclosed in writing to the London Stock Exchange or the UK Listing
 Authority in connection with such an application which by its omission makes
 such a statement untrue, inaccurate or misleading.


	
 

	
 


	
5.

	
Compliance


	
 

	
 


	
5.1

	
Each Group Company
 has conducted its business in all material respects in accordance with all
 applicable laws and regulations of the United Kingdom and all relevant
 foreign countries or authorities, and there is no order, decree or judgment
 of any court or any governmental or other competent authority or agency of
 the United Kingdom or any foreign country outstanding against any Group
 Company or any person for whose acts any Group Company is vicariously liable
 which in any of the foregoing cases would, or would be reasonably likely to,
 be (singly or in the aggregate) material in the context of the Placing and
 Open Offer, any acquisition of New Shares or subscription for the Preference
 Shares by HM Treasury, Ordinary Shareholders or Placees, Admission,
 Preference Admission or post-Admission dealings in the Ordinary Shares.


	
 

	
 


	
5.2

	
This Agreement,
 the Preference Share Subscription Agreement and the other agreements to be
 entered into by the Company in connection with Admission, Preference
 Admission and the Placing and Open Offer and the allotment and issue of the
 Preference Shares have been or will be duly authorised, executed and
 delivered on behalf of the Company and assuming due authorisation, execution
 and delivery by the












	
 

	
 

	
 


	
 

	
other parties
 thereto, do or will constitute valid and binding obligations of the Company
 enforceable against it in accordance with their terms (subject to mandatory
 rules of law relating to insolvency).


	
 

	
 


	
5.3

	
Other than
 pursuant to (i) the Preference Share Subscription Agreement and (ii) options
 or other rights granted under the Group’s share option schemes and save as
 otherwise would not (singly or in the aggregate) be material or reasonably
 likely to be material in the context of the Placing and Open Offer, any
 acquisition of New Shares or subscription for the Preference Shares by HM
 Treasury, Ordinary Shareholders or Placees, Admission, Preference Admission
 or post-Admission dealings in the Ordinary Shares, there are no rights
 (conditional or otherwise) (i) to require the issue, allotment, redemption or
 repayment of any shares or other securities (including without limitation,
 any loan capital) or securities convertible into or exchangeable for, or
 warrants, rights or options to purchase, or obligations, commitments or
 intentions to create the same or (ii) to sell or otherwise dispose of any
 shares or other securities of a Group Company (other than to another Group
 Company, as the case may be) which are outstanding and in force.


	
 

	
 


	
6.

	
Position since Accounts Date


	
 

	
 


	
6.1

	
Since the Accounts
 Date and save as disclosed in the Interim Accounts, the Press Announcement or
 via a Regulatory Information Service:


	
 

	
 


	
 

	
(A)

	
each Group Company
 has carried on its respective business in the ordinary course in all material
 respects, and there has been no Material Adverse Effect;


	
 

	
 


	
 

	
(B)

	
there has been no
 material impairment to charges in respect of any assets of the Company or of
 any Group Company, and there has been no increase in the provisions in
 respect of losses in relation to any mortgage, loans or other assets of the
 Company or of any Group Company that, in any of the foregoing cases, would,
 or would be reasonably likely (singly or in the aggregate) to, have Material
 Adverse Effect or otherwise be material in the context of the Placing and
 Open Offer, any acquisition of New Shares or subscription for the Preference
 Shares by HM Treasury, Ordinary Shareholders or Placees, Admission,
 Preference Admission or post-Admission dealings in the Ordinary Shares; 


	
 

	
 

	
 


	
 

	
(C)

	
save for the
 Preference Share Subscription Agreement and any utilisation by the Company of
 the short-term liquidity measures being made available by the Bank of England
 (in the form notified by HM Government to the European Commission on 12
 October 2008), no Group Company has, otherwise than in the ordinary course of
 business, entered into or assumed or incurred any contract, commitment
 (whether in respect of capital expenditure or otherwise), borrowing,
 indebtedness in the nature of borrowing, guarantee, liability (including
 contingent liability) or any other agreement or obligation that, in any of
 the foregoing cases, would, or would be reasonably likely (singly or in the
 aggregate) to, have a Material Adverse Effect or otherwise be material in the
 context of the Placing and Open Offer, any acquisition of New Shares or subscription
 for the Preference Shares by HM Treasury, Ordinary Shareholders












	
 

	
 

	
 


	
 

	
 

	
or Placees,
 Admission, Preference Admission or post-Admission dealings in the Ordinary
 Shares;


	
 

	
 

	
 


	
 

	
(D)

	
no debtor has been
 released by the Company to an extent which (singly or in the aggregate) is
 material to the Company or any Group Company on terms that he pays less than
 the book value of his debt and no debt of such material amount owing to the
 Company or any Group Company has been deferred, subordinated or written off or
 has proven irrecoverable to any extent that would, or would be likely (singly
 or in the aggregate) to, have Material Adverse Effect;


	
 

	
 

	
 


	
 

	
(E)

	
no Group Company
 has been involved in any transaction (other than any transaction provided for
 in this Agreement or in the Preference Share Subscription Agreement) which
 has resulted or would be reasonably likely to result (singly or in the
 aggregate) in any material liability for Tax on the Company or any Group
 Company, other than a transaction in the ordinary course of business or which
 is provided for in the Accounts or Interim Accounts;


	
 

	
 

	
 


	
 

	
(F)

	
no Group Company
 has been in default in any material respect under any agreement or
 arrangement to which any Group Company is a party and which is or is
 reasonably likely to be material and there are no circumstances likely to
 give rise to such default; and


	
 

	
 

	
 


	
 

	
(G)

	
the Company has
 complied with all its continuing obligations under the Listing Rules and the
 DTRs.


	
 

	
 

	
 


	
7.

	
Litigation


	
 

	
 

	
 


	
7.1

	
No Group Company
 nor any of its officers or agents or employees is involved, or has during the
 recent past (being not less than 18 months ending on the date of this
 Agreement) been involved in any civil, criminal, arbitration, administrative,
 governmental or other proceedings or governmental regulatory or similar
 investigation or enquiry, whether as plaintiff, defendant or otherwise which,
 by itself or with other proceedings, which would have, or is reasonably
 likely to have a Material Adverse Effect.


	
 

	
 

	
 


	
7.2

	
No litigation or
 arbitration, administrative, governmental, civil, criminal or other
 proceedings nor governmental, regulatory or similar investigation or enquiry
 are pending or have been threatened by or against any Group Company or any of
 their respective officers, agents or employees in relation to the affairs of
 any Group Company and, to the best of the knowledge, information and belief
 of the Company and the Directors, there are no facts or circumstances likely
 to give rise to any such litigation or arbitration, administrative, criminal,
 governmental, civil, or other proceedings or governmental, regulatory or
 similar investigation or enquiry, in each case, to an extent which, by itself
 or with other proceedings, would have, or is reasonably likely to have a
 Material Adverse Effect.


	
 

	
 

	
 


	
7.3

	
No Group Company
 nor any of its officers or agents or employees in relation to the affairs of
 any Group Company has been a party to any undertaking or assurance given to
 any court or governmental agency or the subject of any injunction which in
 any of the foregoing cases is still in force and which, by itself or with
 other proceedings, which would be, or is reasonably likely to have a Material
 Adverse Effect.












	
 

	
 


	
7.4

	
For the
 purpose of this paragraph 7, proceedings includes any action by any
 governmental, public or regulatory authority (including any investment
 exchange or any authority or body which regulates investment business or
 takeovers or which is concerned with regulatory, licensing, competition,
 taxation matters or matters concerning Intellectual Property Rights).


	
 

	
 


	
8.

	
Arrangements with directors and
 shareholders


	
 

	
 


	
8.1

	
Save as
 fairly disclosed in the Accounts and the Interim Accounts and save for the
 articles of association of the Company and any service agreement with a
 Director, there are no existing contracts or engagements or other
 arrangements to which any Group Company is a party and in which any of the
 directors of any Group Company and/or any associate of any of them is
 interested; and to the extent that any such contracts, engagements or other
 arrangements exist they comply with the related party requirements of the
 Listing Rules of the UK Listing Authority (or other relevant regulator).


	
 

	
 


	
8.2

	
No
 Shareholder has any rights, in his capacity as such, in relation to any Group
 Company other than as set out in the articles of association of the Company
 or the Preference Share Subscription Agreement.


	
 

	
 


	
8.3

	
The Company
 is not aware of any claim, demand or right of action against any Group
 Company otherwise than for accrued remuneration in accordance with their
 contracts of employment by any officer or employee (or former officer or
 employee) of the Group and/or any associate of them in any of the foregoing
 cases, to an extent that (singly or in the aggregate) would, or would be
 reasonably likely to, have a Material Adverse Effect and/or otherwise be
 material in the context of the Placing and Open Offer, any acquisition of New
 Shares or subscription for the Preference Shares by HM Treasury, Ordinary
 Shareholders or Placees, Admission, Preference Admission or post-Admission
 dealings in the Ordinary Shares.


	
 

	
 


	
8.4

	
So far as
 the Company is aware, no Director nor any person connected with such Director
 nor any of the employees of the Group nor any person connected with any such
 employee is in breach of any restrictive covenant, employment agreement or
 contract for services which would, or would be reasonably likely to, affect
 the Company or any other Group Company and so far as the Company is aware,
 there are no circumstances which might give rise to any claim of such a
 breach or any other dispute with any employer, former employer or other
 person for whom any Director or employee of the Group provides or has
 provided services, in any of the foregoing cases to an extent that (singly or
 in the aggregate) would, or would be reasonably likely to, have a Material
 Adverse Effect and/or otherwise be material in the context of the Placing and
 Open Offer, any acquisition of New Shares or subscription for the Preference
 Shares by HM Treasury, Ordinary Shareholders or Placees, Admission,
 Preference Admission or post-Admission dealings in the Ordinary Shares.


	
 

	
 


	
8.5

	
No Director
 nor any director of any Group Company has given notice of termination of his
 contract of employment. So far as the Company is aware, no Director nor any
 director of any Group Company has indicated an intention to resign.















	
 

	
 

	
 


	
8.6

	
Save as fairly
 disclosed in the Accounts or the Interim Accounts and, when published, in the
 Prospectus, the Preference Prospectus, any Supplementary Prospectus or any
 Supplementary Preference Prospectus: 


	
 

	
 

	
 


	
 

	
(A)

	
none of the
 Directors and their respective associates either individually, collectively
 or with any other persons are directly or indirectly interested in (in any
 way whatsoever) any Intellectual Property Rights not owned by the Group which
 would be of material benefit to its present or proposed activities or in any
 business which is competitive with any business carried on by the Group (save
 as the holder of shares or debentures in a company which confer not more than
 three (3) per cent. of the votes which could be cast at a general meeting of
 that company); 


	
 

	
 

	
 


	
 

	
(B)

	
there are no debts
 owing to any Group Company by any of the shareholders of the Company and/or
 any of the directors of any Group Company and/or any associate of any of them
 save, in each case, to the extent (singly or in the aggregate) that would not
 be material in the context of the Placing and Open Offer, any acquisition of
 New Shares or subscription for the Preference Shares by HM Treasury,
 Admission, Preference Admission or post-Admission dealings in the Ordinary
 Shares; 


	
 

	
 

	
 


	
 

	
(C)

	
there are no loans
 made by any Group Company to any of the shareholders of the Company and/or
 any of the directors of any Group Company and/or any associate of any of them
 save, in each case, to the extent (singly or in aggregate) that would not be
 and would not be reasonably likely to be, material in the context of the
 Placing and Open Offer, any acquisition of New Shares or subscription for the
 Preference Shares by HM Treasury, Admission, Preference Admission or
 post-Admission dealings in the Ordinary Shares. 


	
 

	
 

	
 


	
8.7

	
For the purpose of
 this paragraph 8, associate has the meaning: 


	
 

	
 

	
 


	
 

	
(A)

	
in the case of an
 individual, given to “connected person” under section 96B(2) of FSMA; and 


	
 

	
 

	
 


	
 

	
(B)

	
in the case of a
 body corporate, given to “associated company” in sections 416 et seq. of the Income and
Corporation
 Taxes Act 1988. 


	
 

	
 

	
 


	
9.

	
Information
 Technology 


	
 

	
 

	
 


	
 

	
Save as otherwise
 would not (singly or in the aggregate) have a Material Adverse Effect and/or
 otherwise be material in the context of the Placing and Open Offer, any
 acquisition of New Shares or subscription for the Preference Shares by HM
 Treasury, Admission, Preference Admission or post-Admission dealings in the
 Ordinary Shares: 


	
 

	
 

	
 


	
 

	
(A)

	
systems used or
 planned to be used in connection with the businesses of the Group are all the
 systems required for the present needs of the business of the Group,
 including, without limitation, as to system capacity and ability to process
 current peak volumes and anticipated volumes in a timely manner; 













	
 

	
 

	
 


	
 

	
(B)

	
in the 12 months
 prior to the date of this Agreement, the Group not suffered and, so far as
 the Company is aware, no other person has suffered any failures or bugs in or
 breakdowns of any systems used in connection with the businesses of the Group
 which have caused any substantial disruption or interruption in or to its use
 and the Company is not aware of any fact or matter which may so disrupt or
 interrupt or affect the use of such equipment following the date of this
 Agreement on the same basis as it is presently used; 


	
 

	
 

	
 


	
 

	
(C)

	
all hardware
 comprised in any systems, excluding any software and any external
 communications lines, used in the businesses of the Group are owned (except
 those items which are subject to finance leases) and operated by and are
 under the control of a Group Company and are not wholly or partly dependent
 on any facilities which are not under the ownership, operation or control of
 the Group or (where governed by outsourcing or other similar arrangements)
 are otherwise openly accessible to the Group; and 


	
 

	
 

	
 


	
 

	
(D)

	
each Group Company
 is validly licensed to use the software used in its business. 


	
 

	
 

	
 


	
10.

	
Share
 Schemes and Share Options 


	
 

	
 

	
 


	
10.1

	
Save as required
 by the Preference Share Subscription Agreement and save as disclosed in the
 Previous Announcements or, when published, the Prospectus, the Preference
 Prospectus, any Supplementary Prospectus or any Supplementary Preference
 Prospectus, and except for options or other rights granted under the
 Company’s approved share option schemes or other employee incentive
 arrangements in accordance with normal practice, there are no arrangements
 which (contingently or otherwise) may give rise to an obligation on the
 Company or any Group Company to allot, issue or grant any relevant securities
 as defined in section 80 of the CA 1985. 


	
 

	
 

	
 


	
10.2

	
The particulars of
 the share options schemes contained in the Previous Announcements and, when
 published, the Prospectus, the Preference Prospectus, any Supplementary
 Prospectus or any Supplementary Preference Prospectus, and, in particular,
 the information as to the dates on which options may be exercised and the
 number of options granted (conditionally or otherwise) on or before the date
 of this Agreement are true and accurate in all material respects and not
 misleading. 


	
 

	
 

	
 


	
11.

	
Pension
 Schemes 


	
 

	
 

	
 


	
 

	
Save as would
 otherwise not (singly or in the aggregate) be material in the context of the
 Placing and Open Offer, any acquisition of New Shares or subscription for the Preference Shares by HM Treasury,
 Admission, Preference Admission or post-Admission dealings in the Ordinary
 Shares, the Group is not paying, and is not under any liability (actual or
 contingent) to pay or secure (other than by payment of employers’
 contributions under national insurance or social security legislation), any
 pension or other benefit on retirement, death or disability or on the
 attainment of a specified age or on the completion of a specified number of
 years of service. 












	
 

	
 


	
12.

	
Agreements


	
 

	
 


	
 

	
Save for the Preference
 Share Subscription Agreement there is no agreement, undertaking, instrument
 or arrangement requiring the creation, allotment, issue, redemption or
 repayment, or the grant to any person of the right (whether conditional or
 not) to require the allotment, issue, redemption or repayment, of any shares
 in the capital of the Company or a subsidiary of the Company (including,
 without limitation, an option or right of pre-emption or conversion). 


	
 

	
 


	
13.

	
Regulatory
 


	
 

	
 


	
13.1

	
No Group Company
 nor any of its officers has failed to comply with any statutory provision or
 any rules, regulations, directions, requirements, notices and provisions of
 the FSA or any other regulatory body applying to such Group Company in
 relation to its business including (without limitation) in respect of the
 maintenance of its Capital Resources Requirement and satisfaction of the
 Overall Financial Resources Rule and any equivalent capital requirements in
 any other jurisdiction that are applicable to any Group Company; no
 obligation has arisen in respect of the general notification requirements
 under Chapter 15.3 of SUP, save in any of the foregoing cases to an extent
 which would not (singly or in the aggregate) have a Material Adverse Effect
 and/or otherwise be material in the context of the Placing and Open Offer,
 any acquisition of New Shares or subscription for the Preference Shares by HM
 Treasury, Ordinary Shareholders or Placees, Ordinary Shareholders or Placees,
 Admission, Preference Admission or post-Admission dealings in the Ordinary
 Shares. 


	
 

	
 


	
13.2

	
Save as fairly
 disclosed in the Press Announcement, and when published, the Prospectus, the
 Preference Prospectus, any Supplementary Prospectus or any Supplementary
 Preference Prospectus, no Group Company is the subject of any investigation,
 enforcement action (including, without limitation to vary the terms of any
 permission of licence) or disciplinary proceeding by the FSA or any other
 regulatory body having jurisdiction over such Group Company, and no such
 investigation, enforcement action or disciplinary proceeding is threatened or
 pending. 


	
 

	
 


	
14.

	
Cash
 Box 


	
 

	
 


	
14.1

	
JerseyCo has not
 undertaken any obligations or liabilities except pursuant to or as
 contemplated by the Subscription and Transfer Agreement and the Option
 Agreement. 


	
 

	
 


	
14.2

	
JerseyCo is and
 will remain resident in the United Kingdom and nowhere else for United
 Kingdom tax purposes. 


	
 

	
 


	
14.3

	
No share register
 of JerseyCo is located or kept in the United Kingdom. 


	
 

	
 


	
14.4

	
Neither the
 Company nor JerseyCo has caused or permitted any issue or transfer of shares
 or debentures in JerseyCo which is unlawful for the purposes of Section 765
 of the Income and Corporation Taxes Act 1988. 












	
 

	
 


	
15.

	
Competition
 


	
 

	
 


	
15.1

	
Save as disclosed
 in the Accounts or the Interim Accounts or, when published, the Prospectus,
 the Preference Prospectus, or any Supplementary Prospectus or any
 Supplementary Preference Prospectus, no Group Company is a party to (or is
 concerned in) any agreement, arrangement, concerted practice or course of conduct
 which infringes, or of which particulars have or should have been delivered
 to any relevant governmental or other authority in any jurisdiction under any
 relevant legislation in any territory regarding anti-competitive or
 restrictive trade or business practices or which falls within Articles 81
 and/or 82 of the EC Treaty, or otherwise. 


	
 

	
 


	
15.2

	
No Group Company
 is, or has been, in connection with its business or that of any other Group
 Company, engaged in any practice which contravenes any such legislation as is
 referred to in the preceding paragraph or which is under investigation by any
 authority referred to in the preceding paragraph or which is the subject of
 undertakings to any such authority and, so far as the Company is aware, none
 of the practices carried on by any Group Company contravenes or may
 contravene any such legislation or is reasonably likely to be subject to such
 investigation, in any of the foregoing cases to an extent that would, or
 would be reasonably likely to have (singly or in the aggregate) a Material
 Adverse Effect and/or otherwise be material in the context of the Placing and
 Open Offer, any acquisition of New Shares or subscription for the Preference
 Shares by HM Treasury, Admission, Preference Admission or post-Admission dealings
 in the Ordinary Shares. 












SCHEDULE 4

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.

	
HBOS
 PLC, a company incorporated in Scotland with
 registered number 218813 whose registered office is at 36 St Andrew Square,
 Edinburgh EH2 2YB (“HBOS”)


	
 

	
 


	
3.

	
MORGAN
 STANLEY & CO. INTERNATIONAL PLC, a company incorporated in England and Wales with
 registered number 02068222 whose registered office is at 25 Cabot Square,
 Canary Wharf, London E14 4QA (“Morgan
 Stanley”); 


	
 

	
 


	
(3)

	
DRESDNER
 KLEINWORT LIMITED, a company incorporated in England and Wales with
 registered number 00551334 and whose registered office is at 30 Gresham
 Street, London EC2V 7PG (“Dresdner”);
 


	
 

	
 


	
AND


	
 

	
 


	
5.

	
[                    ]
 of

[                                                            ]
 (registered in England No.
 [                    ])
 (the “Company”)


	
 

	
 


	
WHEREAS:


	
 

	
 


	
(A)

	
HMT, HBOS, Morgan
 Stanley and Dresdner have entered into the Placing Agreement (as defined in
 this agreement).


	
 

	
 


	
(B)

	
HMT wishes to be
 released and discharged from the Placing Agreement and HBOS, Morgan Stanley
 and Dresdner have agreed to release and discharge HMT from the Placing
 Agreement upon the terms of the Company’s undertaking to perform the Placing
 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 Placing Agreement.


	
 

	
 


	
NOW IT IS AGREED
 as follows:-


	
 

	
 


	
1.

	
INTERPRETATION


	
 

	
 


	
1.1

	
In this agreement:








	
 

	
 

	
 


	
“Placing
 Agreement”

	
 

	
means the
 agreement effective as of 13 October 2008 between HMT, HBOS, Morgan Stanley
 and Dresdner relating to the placing and open offer of a number of HBOS’
 ordinary shares; and












	
 

	
 

	
 


	
“Continuing
 Parties”

	
 

	
means HBOS, Morgan
 Stanley and Dresdner and “Continuing Party”
 shall be construed accordingly.








	
 

	
 

	
 


	
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
 the Continuing Parties in clause 3, the Company hereby undertakes to
 observe, perform, discharge and be bound by the Placing 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 Placing
 Agreement falling due for performance, or which should have been performed,
 before the date of this agreement; 


	
 

	
 

	
 


	
 

	
(B)

	
make the Company
 liable for any act, neglect, default or omission in respect of the Placing
 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 Placing Agreement before the date of this agreement.


	
 

	
 

	
 


	
3.

	
CONTINUING
 PARTIES’ 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, each of the Continuing Parties
 hereby: 


	
 

	
 

	
 


	
 

	
(A)

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


	
 

	
 

	
 


	
 

	
(B)

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


	
 

	
 

	
 


	
 

	
(C)

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


	
 

	
 

	
 


	
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 any Continuing Party
 may












	
 

	
 


	
 

	
have against HMT
 in relation to the Placing Agreement and arising out of matters prior to the
 date of this agreement. 


	
 

	
 


	
4.

	
HMT’S
 UNDERTAKING AND RELEASE OF THE CONTINUING PARTIES 


	
 

	
 


	
 

	
With effect from
the date of this agreement and in consideration of the undertakings given by
the Continuing Parties in clause 3, HMT hereby releases and discharges each
of the Continuing Parties from all obligations to observe, perform, discharge
and be bound by the Placing Agreement. Notwithstanding this undertaking and release,
nothing in this agreement shall affect or prejudice any claim or demand
whatsoever which HMT may have against any Continuing Party in relation to the
Placing Agreement and arising out of matters prior to the date of this
agreement.  


	
 

	
 


	
5.

	
GUARANTEE
 AND INDEMNITY 


	
 

	
 


	
5.1

	
In consideration
 of the undertakings given by the Continuing Parties in clause 3, HMT
 hereby unconditionally and irrevocably guarantees to each Continuing Party
 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 each Continuing Party on an after tax basis 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 Placing 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 and so that the same benefits shall be conferred on
 each Continuing Party as such party 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 any Continuing Party 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. 


	
 

	
 


	
5.6

	
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 Placing 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 Placing 












	
 

	
 


	
 

	
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.

	
COMPANY
 CEASES 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.
 The Continuing Parties agree to consent to, and to execute and deliver all
 such documentation as may be necessary to effect, such novation.


	
 

	
 


	
7.

	
NOTICES
 


	
 

	
 


	
 

	
For the purposes
 of all provisions in the Placing 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 Placing Agreement should be marked for the attention of [●]. 


	
 

	
 


	
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 


	
 

	
 


	
 

	
The Continuing
 Parties and the Company hereby agree that 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 and that the courts
 of England and Wales are to have exclusive jurisdiction to settle any matter,
 claim or dispute arising hereunder and submits to the jurisdiction of the
 English Courts. 


	
 

	
 


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


	
 

	
 


	
10.

	
AGENT FOR SERVICE OF PROCESS 


	
 

	
 


	
 

	
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 the Continuing
 Parties of the name and address of such replacement agent. If the Company
 fails to appoint another agent, any of the Continuing Parties 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 

	
 


	
HBOS
 PLC


	
 

	
 


	


	
 


	
For and on behalf of
 

	
 


	
MORGAN
 STANLEY & CO. INTERNATIONAL PLC


	
 

	
 


	


	
 


	
 

	
 


	


	
 


	
For and on behalf
 of 

	
 


	
DRESDNER
 KLEINWORT LIMITED


	
 

	
 


	


	
 


	
For and on behalf
 of

	
 


	
[Insert name of the Company] 

	
 












SCHEDULE 5

CONDITIONS TERM SHEET


	
 

	
 

	
 


	
1.

	
Remuneration
 


	
 

	
 

	
 


	
1.1

	
Remuneration of
 Board of Directors 


	
 

	
 

	
 


	
 

	
(A)

	
For the Company,
 no bonuses for 2008. If part of contractual arrangement, Board Directors
 relinquish these voluntarily. 


	
 

	
 

	
 


	
 

	
(B)

	
For Lloyds TSB, no
 cash bonuses for 2008. If part of contractual arrangement, Board Directors
 relinquish these voluntarily. Instead, Lloyds TSB’s directors may receive
 their 2008 bonus entitlements in stock, subject to a restriction on sale
 until December 2009 


	
 

	
 

	
 


	
 

	
(C)

	
Going forward, for
 the merged group, in addition to complying with the ABI industry best
 practice code, remuneration to be linked to long-term value creation and take
 account of risk, and not short term indicators such as profits or revenues.
 Reward for board members will also take into account internal relative
 compensation packages and perceived fairness in the current economic climate.
 


	
 

	
 

	
 


	
 

	
(D)

	
No rewards for
 failure; where a Board Member loses the confidence of the Board, they should
 be able to be dismissed at a cost that is reasonable and perceived as fair. 


	
 

	
 

	
 


	
1.2

	
Commitment to FSA
 Code on risk based remuneration. 


	
 

	
 

	
 


	
2.

	
Corporate
 Governance 


	
 

	
 

	
 


	
 

	
HM Treasury will
 work with the board on its appointment of 2 new independent directors. Should
 HM Treasury’s holding of the merged group fall below 25%, HM Treasury would
 only expect to be consulted on the appointment of one independent director. 


	
 

	
 

	
 


	
3.

	
Lending
 


	
 

	
 

	
 


	
3.1

	
Mortgages 


	
 

	
 

	
 


	
 

	
(A)

	
A commitment to
 immediately restore and maintain the availability and active marketing of
 competitively priced mortgage lending (other than in the non-conforming
 market) through to the end of 2011 at a level at least equivalent to that of
 2007 (provided that the Company shall not be required to engage in
 uncommercial activities). 


	
 

	
 

	
 


	
 

	
(B)

	
General commitment
 to participate (until at least the end of 2011) in industry initiatives and
 to comply with government codes/guidance. 


	
 

	
 

	
 


	
 

	
(C)

	
Make available,
 until the end of 2009, a sum to be agreed for the establishment and
 maintenance of shared equity/shared ownership schemes to help people












	
 

	
 

	
 

	
 


	
 

	
 

	
struggling with
 mortgage payments to stay in their homes, either through individual bank
 schemes or paid into a central fund run by industry.


	
 

	
 

	
 

	
 


	
 

	
(D)

	
Make available,
 and until the end of 2009, a sum to be agreed to support ongoing expansion of
 financial capability initiatives. 


	
 

	
 

	
 

	
 


	
3.2

	
SMEs 


	
 

	
 

	
 

	
 


	
 

	
(A)

	
A commitment to
 immediately restore and maintain the availability and active marketing of
 competitively priced lending to SMEs at a level at least equivalent to that
 of 2007 until the end of 2011 (provided that the Company shall not be
 required to engage in uncommercial activities). 


	
 

	
 

	
 

	
 


	
 

	
(B)

	
Publish an annual
 report, for each year through to end of 2011, on: 


	
 

	
 

	
 

	
 


	
 

	
 

	
(i)

	
overall level of
 lending to SMEs; 


	
 

	
 

	
 

	
 


	
 

	
 

	
(ii)

	
overdraft
 facilities and loans to SMEs: volumes, amounts and interest rates and other
 charges; 


	
 

	
 

	
 

	
 


	
 

	
 

	
(iii)

	
amount of
 foreclosures of debt finance made available to SMEs; 


	
 

	
 

	
 

	
 


	
 

	
 

	
(iv)

	
amount of lending
 through the Small Firms Loan Guarantee Scheme; and


	
 

	
 

	
 

	
 


	
 

	
 

	
(v)

	
application and use
 of an EIB global loan facility to secure additional liquidity specifically
 for SME lending. 


	
 

	
 

	
 

	
 


	
3.3

	
The activities of
 the Company will be limited to the higher of: (i) the annual growth rate of
 growth of UK nominal GDP in the preceding year; and (ii) the average
 historical growth of the balance sheets in the UK banking sector during the
 period 1987-2007, unless there is evidence that the thresholds are exceeded
 for reasons unrelated to the provision of the aid referred to in the EC
 Commission’s decision dated 13 October 2008 (the “Decision”). 


	
 

	
 

	
 

	
 


	
3.4

	
Further, in
 conjunction with HM Treasury, the merged group will, within six months of the
 earlier of the Recognition Date (pursuant to rule 11.1 of the rules of the
 2008 Credit Guarantee Scheme) and the listing date, prepare, to the extent
 required by the Decision, a restructuring plan in a form suitable for
 notification to the EC Commission in accordance with the Decision and, at the
 request of HM Government, furnish all information reasonably necessary for
 complying with the terms of that Decision. 


	
 

	
 

	
 

	
 


	
4.

	
Other
 


	
 

	
 

	
 

	
 


	
 

	
As agreed at the
 time of the initial announcement, the merged group will continue to use the
 Mound as its Scottish headquarters, will continue to hold its AGM in Scotland
 and will continue to print Bank of Scotland bank notes. 





The constraints in this Schedule shall apply until HM Government or the
Commission determines (or a court of competent jurisdiction finally determines)
that the Company (or 






following implementation of the Acquisition, the merged group) is no
longer in receipt of the aid which is the subject of the Decision. If the
Company does not utilise (or ceases to utilise) the wholesale funding guarantee
being made available by HM Government and which is referred to in the Decision
and either: (i) this Agreement is terminated but, by virtue of clause 2.10(C),
this Schedule remains in full force and effect; or (ii) this Agreement is not
terminated and New Shares are issued to HM Treasury (and/or Preference Shares
are issued to HM Treasury pursuant to and in accordance with the Preference
Share Subscription Agreement) but HM Treasury has substantively reduced its
holding of Ordinary Shares and/or Preference Shares, HM Treasury shall consult
with the Company with a view to making submissions to the Commission that the
constraint in this paragraph (or this Schedule as a whole) be disapplied or to
obtain clarity as to when the constraint in this paragraph (or the Schedule as
a whole) will cease to apply. 






IN WITNESS WHEREOF
 this agreement has been entered into as of the date which first
appears on page 1
 of this agreement on the dates which appear below.



	
 

	
 

	
 


	
SIGNED by and for
 and on behalf of

	
)

	
HARRY
 BAINES


	
HBOS
 PLC

	
)

	
 


	
 

	
)

	



	
Date: 21/10/2008

	
 

	
 


	
 

	
 

	
 


	
SIGNED by and for
 and on behalf of

	
)

	
?


	
MORGAN
 STANLEY & CO.

	
)

	
 


	
INTERNATIONAL
 PLC

	
)

	



	
 

	
 

	
 


	
Date: 21/10/2008

	
 

	
 


	
 

	
 

	
 


	
SIGNED by and for
 and on behalf of

	
)

	
ALEX
 REYNOLDS


	
DRESDNER
 KLEINWORT LIMITED

	
)

	
 


	
 

	
)

	



	
Date: [●]

	
)

	
 


	
 

	
)

	
JONATHAN
 ROE


	
 

	
)

	
 


	
 

	
)

	



	
 

	
 

	
 


	
SIGNED by two of

	
)

	
TONY
 CUNNINGHAM


	
THE
 COMMISSIONERS OF HER

	
)

	
 


	
MAJESTY’S
 TREASURY

	
)

	



	
in the presence
 of:

	
)

	
 


	
 

	
)

	
BOB
 BLIZZARD


	
 

	
)

	
 


	
 

	
)

	



	
 

	
 

	
 


	
Date:3/11/2008