Document:

Exhibit 4.4

 

Form of Second Supplemental Indenture

 

 

 

 

PRUDENTIAL PLC

 

 

AND

 

 

CITIBANK, N.A.

as Subordinated Trustee

 

 

 

 

SECOND SUPPLEMENTAL
INDENTURE

DATED AS OF JULY 15, 2005

 

 

 

Supplement to Subordinated
Indenture dated as of August 6, 2004

(Subordinated Debt Securities)

 

 

6.50% Perpetual Subordinated
Capital Securities Exchangeable at the Issuer’s Option into Non-Cumulative
Dollar Denominated Preference Shares

 

 

 

 

SECOND
SUPPLEMENTAL INDENTURE

 

SECOND SUPPLEMENTAL
INDENTURE, dated as of July 15, 2005 by and between Prudential plc, a public
limited company duly organized and existing under the laws of England and
Wales, and having its principal office at Laurence Pountney Hill,
London EC4R 0HH, England, and Citibank, N.A., a national banking association,
duly incorporated and existing under the laws of the United States of America
and having its Corporate Trust Office at 388 Greenwich Street, New York, New
York 10013, United States of America, as Subordinated Trustee (hereinafter
called the “Subordinated Trustee”). Capitalized terms used herein and not
otherwise defined shall have the respective meanings assigned thereto in the
Subordinated Indenture.

 

RECITALS

 

WHEREAS, the Issuer and the Subordinated
Trustee have as of August 6, 2004 entered into a Subordinated Indenture
(hereinafter called the “Subordinated Indenture”), providing for the issuance
by the Issuer from time to time of its subordinated debt securities;

 

WHEREAS, Section 3.01
of the Subordinated Indenture provides, among other things, that the Issuer and
the Subordinated Trustee may establish the form or terms of Securities of any
series in one or more indentures supplemental to the Subordinated Indenture,
prior to the issuance of Securities of such series;

 

WHEREAS, the Issuer desires to
issue one series of Capital Securities (as defined below) under the Subordinated
Indenture, and has duly authorized the creation and issuance of such debt
securities and the execution and delivery of this Second Supplemental Indenture
to the Subordinated Indenture providing certain additional provisions as
hereinafter described;

 

WHEREAS, the Issuer and the Subordinated
Trustee deem it advisable to enter into this Second Supplemental Indenture for
the purposes of establishing the terms of such Capital Securities and providing
for the rights, obligations and duties of the Subordinated Trustee with respect
to such debt securities; and

 

WHEREAS, all conditions and
requirements of the Subordinated Indenture necessary to make this Second
Supplemental Indenture a valid, binding and legal instrument in accordance with
its terms have been performed and fulfilled by the parties hereto and the
execution and delivery thereof have been in all respects duly authorized by the
parties hereto.

 

NOW, THEREFORE, THIS SECOND
SUPPLEMENTAL INDENTURE WITNESSETH:

 

For and in consideration of
the mutual premises and agreements herein contained, the Issuer and the Subordinated
Trustee covenant and agree, for the equal and proportionate benefit of all
Holders, as follows:

 

 

ARTICLE
ONE

CREATION OF THE SECURITIES

 

SECTION
1.1.  DESIGNATION OF SERIES.  Pursuant to the terms hereof
and Sections 2.01, 3.01 and 3.03 of the Subordinated Indenture, the Issuer
hereby creates a series of its perpetual subordinated capital securities designated
as the “6.50% Perpetual Subordinated Capital Securities Exchangeable at the
Issuer’s Option into Non-Cumulative Dollar Denominated Preference Shares” (the “Capital
Securities”), which Capital Securities shall be deemed “Securities” for all
purposes under the Subordinated Indenture.

 

SECTION
1.2.  FORM OF SECURITIES.  The Capital
Securities will be issued as one or more global securities in registered form
without coupons attached.  Capital
Securities, in global or registered form shall be substantially in the form set
forth in Exhibit A attached hereto, which is incorporated herein and made
part hereof.  The Capital Securities
shall bear interest, be payable and have such other terms as are stated in the
form of global Capital Security and in the Subordinated Indenture, as
supplemented by this Second Supplemental Indenture.

 

SECTION
1.3.  LIMIT ON AMOUNT OF SERIES.  The Capital
Securities shall not exceed $300,000,000 in aggregate principal amount.  The Capital Securities may, upon the execution
and delivery of this Second Supplemental Indenture or from time to time
thereafter, be executed by the Issuer and delivered to the Subordinated Trustee
for authentication, and the Subordinated Trustee shall thereupon authenticate
and deliver said Securities to or upon the written order of the Issuer, signed
by any two of its directors or by one director and the group secretary of the
Issuer.

 

SECTION
1.4.  CERTIFICATE OF
AUTHENTICATION.  The Subordinated Trustee’s certificate of
authentication to be borne on the Capital Securities shall be substantially as
provided in the form of Capital Security attached hereto as Exhibit A.

 

SECTION
1.5.  NO SINKING FUND.  The
Capital Securities will not be subject to any sinking fund or mandatory
redemption.

 

SECTION
1.6.  ADDITIONAL AMOUNTS. 
Section 10.07 (Payment of Additional Amounts) of the Subordinated Indenture
shall apply to the Capital Securities.  Whenever
this Second Supplemental Indenture refers, in any context, to the payment of
the principal of, any interest payments, or any Deferred Interest payments on,
or in respect of, any Capital Securities, such reference shall include the
payment of Additional Amounts to the extent that, in the context, Additional
Amounts are, were or would be payable in accordance with Section 10.07 of
the Subordinated Indenture.

 

SECTION
1.7.  INTEREST; PLACE OF PAYMENT.

 

(a)  Interest on the Capital Securities will be
payable from the date of issue of the Capital Securities and will be calculated
on the basis of twelve 30-day months or, in the case of an incomplete month,
the actual number of days elapsed, in each case assuming a 360-day year.  Interest on the Capital Securities will be
payable quarterly in arrear on March 23, June 23,

 

2

 

September
23 and December 23 of each year (which shall be the Interest Payment Dates for
the Capital Securities of this series), at a fixed rate per annum on their
outstanding principal amount equal to 6.50%, with the first Interest Payment Date
occurring on September 23, 2005. 
Interest payable on September 23, 2005 for the first interest period
will equal $0.3115 per Capital Security.

 

(b)  Payments of interest on the Capital
Securities will be mandatory on each Compulsory Interest Payment Date.  The Issuer may elect to defer payments of
interest on any Interest Payment Date that is an Optional Interest Payment Date.

 

(c)  In respect of any Interest Payment Date, the
Issuer may elect to pay any interest that it does not defer (such non-deferred
interest, the “Current Interest”) in accordance with the procedures described
below under Article Four (Alternative Coupon Satisfaction Mechanism).  If the Issuer elects to pay Current Interest
using the Alternative Coupon Satisfaction Mechanism but the Issuer does not make
such payment in full on the applicable Interest Payment Date, interest will
accrue on any such unpaid amount from (and including) such Interest Payment Date
to (but excluding) the date such unpaid amount is paid, at a rate equal to 6.50%
per annum and which interest shall only be payable in accordance with the
Alternative Coupon Satisfaction Mechanism.

 

(d)  Interest and other payments on the Capital Securities
will be payable to the Holders of record as they appear on the books and
records of the Issuer on the relevant Regular Record Dates.  The “Regular Record Dates” for the Capital
Securities will be the fifteenth day, whether or not a Business Day, preceding
the relevant Interest Payment Date.

 

(e)  A Holder is required to notify the Issuer if
at any time such Holder owns 10% or more of the Issuer’s voting stock (a “10%
Holder”), and the Issuer has the right to suspend interest payments to any such
10% Holder.  Any payments to a 10% Holder
so suspended will be deemed satisfied with respect to the Capital Securities of
such 10% Holder and may not be subsequently claimed.  Notwithstanding any suspension of payments to
a 10% Holder, interest payments made to other Holders generally will be deemed
to have been paid in respect of any such suspended payment to a 10% Holder.

 

(f)  The Place of Payment for the Capital
Securities shall be New York City.

 

SECTION
1.8.  DEFERRED INTEREST.

 

(a)  Deferred Interest will become payable only on
a redemption (as described in Article III below) or an exchange (as described
in Article II below) of the Capital Securities or upon a winding up of the
Issuer.

 

(b)  No interest will accrue on Deferred Interest
except in the circumstances (and in the manner) set forth in Sections 3.5
and 4.2(d).

 

(c)  The Issuer may only satisfy its obligation to
pay Deferred Interest in accordance with the Alternative Coupon Satisfaction
Mechanism described in Article Four except in the case of a winding up of the
Issuer in which case any Deferred Interest will be payable by the liquidator in
the same manner and with the same ranking as the principal on the related Capital
Securities.

 

3

 

SECTION
1.9.  DIVIDEND AND CAPITAL
RESTRICTION.

 

(a)  Following an Optional Interest Payment Date
on which the Issuer does not make payment in full of all interest payments to
be paid on the Capital Securities on such date, or any Interest Payment Date on
which interest is not paid because the Solvency Condition is not met, or any Interest
Payment Date on which the Issuer does not make a payment of interest because
the Issuer is prohibited from doing so under the terms of any Parity Security, the
Issuer will not, and the Issuer will not permit any entity that the Issuer
controls, directly or indirectly, (a) to declare or pay a dividend or
distribution or make any other payment on any Parity Securities or Junior
Securities (other than (i) a final dividend declared by the Issuer with respect
to the Ordinary Shares prior to the date that the decision to defer such interest
payment is made or (ii) a payment made by one of the Issuer’s wholly-owned
subsidiaries to another wholly-owned subsidiary or directly to the Issuer), or
(b) to redeem, purchase or otherwise acquire any Parity Securities or Junior
Securities, in each case unless or until the interest otherwise due and payable
on the next succeeding Interest Payment Date (but excluding Deferred Interest,
if any) on the Capital Securities is duly set aside and provided for or is paid
in full.

 

(b)  Following a Redemption Date or Event Date on
which the Issuer is unable to issue sufficient Ordinary Shares to make payment
in full of all Deferred Interest to be paid on such date, as set forth in Article
Four (Alternative Coupon Satisfaction Mechanism), the Issuer will not, and will
not permit any entity that the Issuer controls, directly or indirectly, (a) to
declare or pay a dividend or distribution or make any other payment on any
Parity Securities or Junior Securities (other than a final dividend declared by
the Issuer with respect to the Ordinary Shares prior to such Redemption Date or
Event Date or a payment made by one of the Issuer’s wholly-owned subsidiaries
to another wholly-owned subsidiary or directly to the Issuer), or (b) to
redeem, purchase or otherwise acquire any Parity Securities or Junior
Securities, in each case until such corporate authorizations as are required to
issue the necessary Ordinary Shares are obtained and all Deferred Interest to
be satisfied has been duly set aside or provided for or paid in full.

 

(c)  The restrictions set forth in Sections 1.9(a)
and 1.9(b) do not apply to payments the Issuer makes to policyholders or other
customers, or transfers to or from the Issuer’s fund for future appropriations,
in each case in the ordinary course of business consistent with past practice.

 

(d)  For the purposes of the provisions set forth
in this Section 1.9, the payment (or declaration of payment) of a dividend or
distribution on Junior Securities or Parity Securities shall be deemed to
include the making of any interest, coupon or dividend payment (or payment
under any guarantee in respect thereof) and the redemption, purchase or other
acquisition of such securities (save where the funds used to redeem, purchase
or acquire those securities are derived from an issue of Junior Securities or
Parity Securities (i) made at any time within the six-month period prior to the
time of such redemption, purchase or acquisition, and (ii) with the same or
junior ranking on a return of assets on a winding up or in respect of a
distribution or payment of interest, coupons or dividends and/or any other
amounts thereunder to those securities being redeemed, purchased or
acquired).  The Subordinated Trustee
shall be entitled to rely on a certificate signed by two of the Issuer’s
directors as to whether the redemption, purchase or acquisition falls within
the exception set out above and, if the Subordinated Trustee does so rely, such
certificate shall, in the absence of clear error, be conclusive and binding on the
Issuer and the Holders.

 

4

 

SECTION
1.10.  SUBORDINATION.

 

(a)  (i) The Capital Securities will constitute
the Issuer’s unsecured, subordinated obligations and will rank equally and
ratably without any preference among themselves.  The rights and claims of the Holders are
subordinated to Senior Creditors, including the claims of any subordinated debt
security holders or the claims of holders of any other series of debt
securities not expressed to rank equally with or junior to the Capital Securities.  The Capital Securities shall rank pari passu as to return of assets on a winding up with any
Preference Shares.

 

	
   

  	
  (ii)

  	
   

  	
  The following are Senior Creditors in respect of the Capital
  Securities:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (A)

  	
  any creditors who are unsubordinated creditors with claims admitted
  in the event of the Issuer’s winding up;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (B)

  	
  any creditors having claims in respect of liabilities that are, or
  are expressed to be, subordinated, whether only in the event of a winding up
  or otherwise, to the claims of the Issuer’s unsubordinated creditors but not
  further or otherwise;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (C)

  	
  any creditor who is a Holder of securities issued under the
  Subordinated Indenture other than the Capital Securities except those that
  rank, or are expressed to rank equally with or junior to the Capital
  Securities; and

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (D)

  	
  all other creditors having claims, including other such creditors
  holding subordinated debt securities, except those that rank, or are
  expressed to rank, equally with (including holders of Parity Securities) or
  junior to (including holders of Junior Securities) the claims of any Holder.

  
	
   

  	
   

  	
   

  	
   

  

 

(b)  On winding-up of the Issuer, no amount will
be payable on the Capital Securities until all claims of the Issuer’s Senior
Creditors admitted in such winding up have been satisfied in full.  Upon a winding up of the Issuer (except in
the case of a solvent winding up solely for the purpose of a reconstruction or
amalgamation or substitution in the Issuer’s place of a successor in business
in each case where the Capital Securities remain outstanding and are assumed by
such successor in business, in which event all claims for principal, interest
and Deferred Interest, if any, shall remain outstanding or on such other terms
as may be approved in writing by the Holders of not less than 75% in aggregate
principal amount of Outstanding Capital Securities), the amount payable with
respect to the Capital Securities will be determined by calculating the amount,
if any, that would have been payable in respect thereof as if on the day prior
to the commencement of the winding up and thereafter, the Holders were the holders
of preference shares in the Issuer’s capital having a preferential right to a
return of assets in the winding up over the holders of the Ordinary Shares (but
pari passu with the holders of the
Issuer’s most senior ranking class of issued preference shares if any, except
to the extent such preference shares represent claims of Senior Creditors)
assuming that such preference shares were entitled (to the exclusion of all
other rights or privileges) to receive as a return of capital in such winding
up an amount equal to the principal amount of the Capital Securities then
outstanding and all interest accrued and unpaid, including Deferred Interest.

 

5

 

(c)  For so long as any Capital Securities remain
outstanding, the Issuer will not issue any preference shares or any other
non-cumulative perpetual instruments (including cumulative perpetual instruments
where coupon payments may be satisfied through a mechanism similar to the
Alternative Coupon Satisfaction Mechanism) of a kind capable of counting as
cover for the minimum or notional amount of solvency or minimum capital or
capital ratios pursuant to the Capital Regulations, if such instruments would
rank senior to the Capital Securities or give any guarantee or support
undertaking in respect of any such qualifying instruments ranking senior to the
Capital Securities, unless the Issuer alters the terms of the Capital Securities
such that the Capital Securities rank equally with any such preference shares,
such other qualifying instruments, or such guarantee or support undertaking.

 

SECTION
1.11.  SOLVENCY CONDITION.

 

(a)  Except in a winding up, or if the Financial
Services Authority has indicated that it has no objection to such payment, all
payments on the Capital Securities will be conditional upon the Issuer
satisfying the Solvency Condition at the time of and immediately after any such
payment, and the Issuer will not make any payment and any such payment shall
not be payable in respect of the Capital Securities and neither the Issuer nor
any of the Issuer’s Subsidiaries, as applicable, may redeem or repurchase any
of the Capital Securities unless the Issuer will satisfy the Solvency Condition
both at the time of and immediately after any such payment, redemption or
repurchase.

 

(b)  A report as to the Issuer’s compliance with
the Solvency Condition by two of the Issuer’s directors or, the Issuer’s auditors
or, if the Issuer is in a winding up in England and Wales, the Issuer’s
liquidator shall in the absence of proven or manifest error be treated and
accepted by the Issuer, the Subordinated Trustee and any Holder as correct and
sufficient evidence thereof.  If the
Issuer fails to make any interest payment as a result of failure to satisfy the
Solvency Condition or on a Payment Event, that payment will constitute Deferred
Interest and will accumulate with any other Deferred Interest until paid.

 

(c)  If the Solvency Condition is not satisfied,
the amount of any payments which would otherwise have been payable in respect
of the Capital Securities but are not paid by reason of the Solvency Condition
will be available to meet the Issuer’s losses.

 

SECTION
1.12.  DEFINITIONS.

 

(a)  Capitalized terms used herein and not
otherwise defined shall have the respective meanings assigned thereto in the
Subordinated Indenture.

 

(b)  Solely for purposes of this Second
Supplemental Indenture and the Capital Securities, the following definitions
are hereby amended in their entirety to read as follows:

 

“Alternative Coupon Satisfaction Mechanism” means
the procedures by which any Deferred Interest or Current Interest is satisfied
on a Redemption Date, Event Date or Interest Payment Date, as the case may be,
as described in Section 4.1.

 

“Capital Adequacy Condition” means that:

 

(i)            in relation to Prudential Assurance, the
ratio of its Regulatory Assets to its Regulatory Capital Requirement is at
least 125%; or

 

6

 

(ii)           if there is a Regulatory Capital Requirement
applicable to the Issuer either directly or in relation to the Issuer and its
subsidiaries as a group, the Issuer exceeds such Regulatory Capital Requirement
by a factor of at least 25% of such Regulatory Capital Requirement; or

 

(iii)          if there is no Regulatory Capital Requirement
applicable to the Issuer, the Issuer’s total Assets exceeds the Issuer’s total
Liabilities, other than liabilities to persons that are not Senior Creditors,
by at least 125% of such percentage specified by the Financial Services
Authority as the Regulatory Capital Requirement.

 

“Clearstream, Luxembourg” means
Clearstream Banking, société anonyme.

 

“Current Interest” has the meaning set forth in
Section 1.7(c).

 

“DTC” means The Depository Trust Company.

 

“Definitive Suspension” has the meaning set forth in
Section 4.3(b).

 

“dividend payment date” has the meaning set forth in
Section 5.2(a).

 

“Eligible Company” means a company incorporated in a
country which is a member of the Organisation for Economic Co-operation and
Development and incorporated by the Issuer or on behalf of the Issuer whose
Ordinary Shares are listed (i) on the official list of the United Kingdom
Listing Authority in its capacity as competent authority under the FSMA and are
admitted to trading on the market for listed securities of the London Stock
Exchange plc or (ii) on such other internationally recognized stock
exchange as the Subordinated Trustee may approve.

 

“Euroclear” means Euroclear Bank S.A./N.V.

 

“Event Date” has the meaning set forth in
Section 2.1(b).

 

“FSMA” means the Financial Services and Markets Act
2000 of the United Kingdom.

 

“Group” means Prudential plc and its Subsidiaries.

 

“Holding Company Shares” means Ordinary Shares of
the New Holding Company.

 

“Interest Payment Date” means each date on which
interest payments on the Capital Securities will be payable quarterly in arrear
on March 23, June 23, September 23 and December 23 of each year, beginning on September
23, 2005.

 

“Junior Securities” means, with respect to the Capital
Securities, the ordinary shares of the Issuer or any other securities issued by
either the Issuer or one of it Subsidiaries benefiting from a guarantee or
support agreement, which rank, as regards to distributions on a return of
assets on a winding up of the Issuer or in respect of

 

7

 

distributions or payment of
dividends or any other payments thereon, after such Capital Securities and Preference
Shares.

 

“New Holding Company” means an Eligible Company that
becomes the ultimate holding company for the Issuer group following Permitted
Restructuring.

 

“Optional Interest Payment Date” means any Interest
Payment Date where the Issuer determines, at the Issuer’s sole discretion, on
or after the 20th Business Day, but not later than the fifth Business Day prior
to such Interest Payment Date, that either the Capital Adequacy Condition will
not be met on such date or the Issuer or any of its EEA Insurance Subsidiaries is
not in compliance with, or that the payment of interest on such Interest
Payment Date would cause the Issuer or any of its EEA Insurance Subsidiaries to
breach, any Capital Regulations.

 

“Ordinary Shares” means the ordinary shares of the
Issuer, having at the date hereof, a par value of 5 pence each.

 

“Parity Securities” means the Issuer’s perpetual
capital instruments (including the Capital Securities), preferred or preference
shares (including the Preference Shares) or other securities issued directly or
indirectly by the Issuer or issued by a Subsidiary of the Issuer and benefiting
from a guarantee or support agreement ranking pari passu
with the Capital Securities as to participation in the Issuer’s assets in the
event of the Issuer’s winding up.

 

“Paying Agent” means the Subordinated Trustee in
respect of the Capital Securities and Lloyds TSB Registrars in respect of the
Preference Shares.

 

“Permitted Restructuring” means the completion of
(i) an offer made by or on behalf of, an Eligible Company to all (or as
nearly as may be practicable all) of the shareholders of the Issuer (or, if the
Issuer is not then the Ultimate Owner, to the shareholders of the then Ultimate
Owner to acquire the whole (or as nearly as may be practicable the whole) of
issued ordinary share capital, of the Issuer (or, if the Issuer is not then the
Ultimate Owner, the then Ultimate Owner’s issued ordinary share capital) other
than those Ordinary Shares already held by or on behalf of such Eligible
Company or (ii) a reorganization or restructuring whether by way of a
scheme of arrangement or otherwise pursuant to which an Eligible Company
acquires all (or as nearly as may be practicable all) of the issued ordinary
share capital of the Issuer (or, if the Issuer is not the then Ultimate Owner, the
then Ultimate Owner’s issued share capital) other than those Ordinary Shares
already held by such Eligible Company or pursuant to which all (or nearly as
may be practicable all) of the issued ordinary share capital of the Issuer (or,
if the Issuer is not then the Ultimate Owner, the then Ultimate Owner’s issued
share capital) not held by the New Holding Company is cancelled.

 

“Permitted Restructuring Arrangement” means an
arrangement whereby the following conditions are satisfied (i) the
execution of a supplemental indenture to the Subordinated Indenture and/or such
other documentation as may be necessary to ensure that the Alternative Coupon
Satisfaction Mechanism, the Subordinated Indenture and certain other agreements
operate so that the Issuer’s Ordinary Shares may be exchanged for Holding
Company Shares in such a manner that ensures that upon sale of such Holding
Company Shares the holder of each security then outstanding will receive, in
the event of a payment to be satisfied pursuant to the Alternative Coupon
Satisfaction

 

8

 

Mechanism, an amount not
less than that which would have been receivable had such a Permitted
Restructuring not taken place and (ii) the Subordinated Trustee is
satisfied that the credit ratings that would be assigned to the Capital
Securities by Standard & Poor’s Rating Services, a division of The
McGraw-Hill Companies, Inc. and by Moody’s Investors Service, Inc., following
any such Permitted Restructuring, shall not be less than those assigned to the
Capital Securities immediately prior to such Permitted Restructuring taking
place.

 

“Preference Share Redemption Date” has the meaning
set forth in Section 5.5(a).

 

“Preference Shares” means the Non-Cumulative Dollar
Denominated Preference Shares to be issued upon exchange of the Capital
Securities, if any, in accordance with Article Fourteen (Conversion or Exchange
of Securities) of the Subordinated Indenture and Article Two (Exchange of
Capital Securities) of this Second Supplemental Indenture.

 

“Prudential Assurance” means the Prudential Assurance
Company Limited, the Issuer’s wholly-owned subsidiary.

 

“Redemption Date” has the meaning set forth in
Section 3.7 (Redemption Procedures).

 

“Redemption Price” has the meaning set forth in Section 5.5(b).

 

“Regular Record Date” has the meaning set forth in
Section 1.7(d).

 

“Regulatory Assets” means the assets eligible to
satisfy a Regulatory Capital Requirement.

 

“Regulatory Capital Requirement” means any minimum
or notional margin of solvency or minimum regulatory capital or capital ratios
required for insurance companies or insurance holding companies or financial
groups by the Financial Services Authority.

 

“Regulatory Event”, with respect to the Capital Securities,
shall be deemed to have occurred if (a) the Capital Securities would not be of
a kind capable of counting as cover for the minimum or notional margin of
solvency or minimum capital or capital ratios required of the Issuer or the
Group by any Regulatory Capital Requirement as a result of any change to the
Capital Regulations or the application or official interpretation thereof at
any relevant time; (b) if, at any time, the Issuer or the Group is required
under any Regulatory Capital Requirement to have Tier 1 Capital, the Capital
Securities would no longer be of a kind eligible to qualify for inclusion in
the Tier 1 Capital of the Issuer on a solo and/or consolidated basis as a
result of any change to the Capital Regulations or the application or official
interpretation thereof at any relevant time; or (c) if, at any time, the Issuer
or the Group is required under any Regulatory Capital Requirement to have Tier
1 Capital and the Issuer would be entitled to substitute the Capital Securities
with Preference Shares, such Preference Shares would no longer be of a kind
eligible to qualify for inclusion in the Tier 1 Capital of the Issuer on a
solo and/or consolidated basis as a result of any change to the Capital
Regulations or the application or official interpretation thereof at any
relevant time.

 

9

 

“Regulatory Liabilities” means the liabilities taken
into account for the purposes of the Regulatory Capital Requirement.

 

“Securities Exchange Act” means the U.S. Securities
Exchange Act of 1934, as amended.

 

“Senior Creditors” has the meaning set forth in
Section 1.10.

 

“Solvency Condition” means that, at and immediately
after the relevant time, the Issuer is solvent by virtue of, (a) it being
able to pay its debts to its Senior Creditors as they fall due and (b) its
total Assets exceeding its total Liabilities other that Liabilities to persons
that are not Senior Creditors by at least 4% or such other percentage specified
by the Financial Services Authority from time to time as the Regulatory Capital
Requirement.

 

“Subsidiary” means a subsidiary undertaking, within
the meaning of Section 258 of the Companies Act 1985 of Great Britain.

 

“Tax Call Event” refers to the occurrence of the circumstances
described in clause (i) of the definition of Tax Event or in clauses (ii)
or (iii) of such definition either (a) following the giving of notice to
the Financial Services Authority of the Issuer’s proposal to convert the
Capital Securities into another series of capital securities constituting
undated cumulative subordinated notes and the Financial Services Authority objecting
to such proposal or (b) if the Issuer determines that a Tax Event applies,
or would apply, to such undated cumulative subordinated notes.

 

“Tier 1 Capital” has the meaning given to that term
from time to time by the Financial Services Authority.

 

“Ultimate Owner” has the meaning set forth in Section 4.3(a).

 

ARTICLE
TWO

EXCHANGE OF CAPITAL SECURITIES

 

SECTION
2.1.  APPLICABILITY OF EXCHANGE
PROVISIONS.

 

(a)  Pursuant to Section 3.01(26) of the
Subordinated Indenture, the Capital Securities are exchangeable, at the Issuer’s
option, in whole or in part, into Preference Shares, in accordance with the
provisions of, and pursuant to, Article Fourteen (Conversion or Exchange of
Securities) of the Subordinated Indenture, as supplemented hereby.

 

(b)  In accordance with the provisions of, and
pursuant to, Article Fourteen (Conversion or Exchange of Securities) of the
Subordinated Indenture, the Capital Securities may be exchanged, at the Issuer’s
option and in the Issuer’s sole discretion and upon not less than 30 nor more
than 60 days’ notice (any such date so designated, an “Event Date”), into Preferences
Shares (i) in whole or in part on any Interest Payment Date falling on or after
March 23, 2011, or; (ii) in whole (but not in part) on any Interest Payment
Date upon the occurrence of a Regulatory Event or Tax Event, subject to the
Solvency Condition being met.  The Issuer
shall give the

 

10

 

Subordinated Trustee at least 45 days prior written notice of any
Event Date (unless a shorter period shall be satisfactory to the Subordinated
Trustee).

 

(c)  The Issuer will not exchange any Capital
Securities for Preference Shares unless:

 

(i)            there is no accrued but unpaid interest on
such Capital Securities;

 

(ii)           any Deferred Interest related to such Capital
Securities has been paid in accordance with the Alternative Coupon Satisfaction
Mechanism;

 

(iii)          no
Capital Security Default, Payment Event or Event of Default has occurred and is
continuing;

 

(iv)          the
Issuer has a sufficient number of authorized but unissued Preference Shares
immediately prior to the exchange;

 

(v)           the
Issuer’s directors have all the necessary authority under English law to allot
and issue the Preference Shares arising on exchange; and

 

(vi)          the Issuer complies with all other
requirements set forth in Article Fourteen (Conversion or Exchange of
Securities) of the Subordinated Indenture.

 

(d)  A notice of exchange of Capital Securities
for Preference Shares will specify:

 

(i)            the
Event Date;

 

(ii)           that
on the Event Date, the Capital Securities to be exchanged will cease to exist
for any purpose on or after such Event Date;

 

(iii)          if
less than all of the Capital Securities are being exchanged, the Capital
Securities to be exchanged;

 

(iv)          the
place or places where the Capital Securities are to be exchanged;

 

(v)           the
form in which the Issuer will issue the Preference Shares;

 

(vi)          whether
there is any Deferred Interest outstanding on the Capital Securities and, if
so, the amount of such Deferred Interest; and

 

(vii)         all other information required by Section
14.03 (Notice of Conversion or Exchange) of the Subordinated Indenture.

 

(e)  If the Issuer exchanges the Capital
Securities in part only, the Issuer must do so in an aggregate principal amount
of at least $100 million (or multiples of $50 million above

 

11

 

$100 million), and no partial exchange or conversion may leave
less than $100 million aggregate principal amount of Capital Securities
outstanding.  The Capital Securities to
be exchanged in any partial exchange will be selected in a manner deemed fair
and appropriate by the Subordinated Trustee; provided,
that if on the Event Date such Capital Securities are registered as a Global
Security, the Depositary shall determine, in accordance with its procedures,
the principal amount of such Capital Securities held by each beneficial owner of
the Capital Security to be exchanged.

 

(f)  Except as otherwise indicated to the Issuer
by the Financial Services Authority, the Issuer may not exchange the Capital
Securities for Preference Shares upon the occurrence of a Regulatory Event or
Tax Event or otherwise on or after March 23, 2011 unless the Issuer has given
at least six months’ notice to the Financial Services Authority and the Financial
Services Authority has issued a statement of no objections prior to the
applicable Event Date, and exchange may only be effected if on, and immediately
following, the Event Date the Issuer is in compliance with any applicable
regulatory capital requirements or capital ratios required to be maintained for
insurance companies, parent companies in insurance groups or financial groups
generally by the Financial Services Authority.

 

(g)  Upon exchange, the Issuer shall pay any
Deferred Interest outstanding on the Capital Securities being exchanged; but
only in accordance with Article Four (Alternative Coupon Satisfaction Mechanism).

 

(h)  If the Issuer elects to exchange some or all
of the Capital Securities, it will effect an exchange by redeeming the Capital Securities
being exchanged for their principal amount and immediately applying such
redemption proceeds to subscribe for the applicable number of Preference Shares
being issued to the Holders.

 

(i)  Holders will be deemed on purchase of the
Capital Securities to have irrevocably authorized and instructed the Issuer
immediately to apply the redemption amounts payable in connection with an
exchange of the Capital Securities in satisfaction in cash of the applicable subscription
amount of the Preference Shares being issued upon such exchange.  Accordingly, the redemption of Capital
Securities and subscription for and issuance of the Preference Shares will
constitute a single transaction initiated and effected solely at the Issuer’s
option.

 

As a consequence of the
exchange provisions described above, Holders of Capital Securities being
exchanged will not be entitled under any circumstances to the redemption
amounts payable in connection with the exchange as described above.  Such Holders will receive only the Preference
Shares the Issuer issues on the Event Date in respect of which the redemption
amounts will have been applied.

 

(j)  Prior to
the exchange of any Capital Securities for Preference Shares, the Issuer shall
be required to deliver to the Subordinated Trustee an Officers’ Certificate and
an Opinion of Counsel stating that all conditions precedent to such exchange
have been complied with in accordance with the terms of the Capital Securities,
and the Subordinated Indenture, as supplemented hereby.

 

SECTION
2.2.  EXCHANGE RATE.  Upon
an exchange, each Capital Security of $25 principal amount will be exchanged
for one Preference Share with a liquidation preference of $25.

 

12

 

ARTICLE
THREE

REDEMPTION

 

SECTION
3.1.  GENERAL.

 

(a)  The Capital Securities are perpetual
securities and have no maturity date. 
The Capital Securities are not redeemable at the option of the Holders
at any time.

 

(b)  Except as otherwise indicated to the Issuer
by the Financial Services Authority, the Issuer may not redeem the Capital
Securities as described under this Article Three unless it has given at least
six months’ prior notice to the Financial Services Authority and the Financial
Services Authority has issued a statement of no objections prior to the
applicable Redemption Date, and redemption may only be effected if on, and
immediately following, the relevant Redemption Date the Issuer is in compliance
with any applicable regulatory capital requirements or capital ratios required
to be maintained for insurance companies, parent companies in insurance groups
or financial groups generally by the Financial Services Authority.  The Issuer shall give the Subordinated
Trustee at least 45 days prior written notice of any Redemption Date
(unless a shorter period shall be satisfactory to the Subordinated Trustee).

 

SECTION
3.2.  OPTIONAL REDEMPTION.

 

(a)  The Issuer may redeem the Capital Securities
in whole or in part, at its option, on any Interest Payment Date falling on or
after September 23, 2010, subject to the Solvency Condition being met.

 

(b)  Capital Securities to be redeemed will be
drawn for redemption at such place and individually, by lot or otherwise in a
manner as may be approved by the Subordinated Trustee; provided, that if at the time of
redemption such Capital Securities are registered as a Global Security, the
Depositary shall determine, in accordance with its procedures, the principal
amount of such Capital Securities held by each beneficial owner of the Capital
Security to be exchanged.  The Issuer is
permitted to satisfy its obligation to pay any Deferred Interest due upon a
redemption only in accordance with Article Four (Alternative Coupon
Satisfaction Mechanism).

 

SECTION
3.3.  TAX CALL EVENT REDEMPTION
AND TAX EVENT CONVERSION.

 

(a)  The Issuer may redeem the Capital Securities
in whole (but not in part), at any time upon the occurrence of a Tax Call Event
subject to the Solvency Condition being met.

 

(b)  Upon the occurrence of a Tax Event, the
Issuer may at its sole discretion, subject in each case to compliance with
applicable regulatory requirements, including those described in Section 3.1(b),
at any time convert the Capital Securities in whole (but not in part) into
another series of capital securities constituting undated cumulative
subordinated notes, having the same material terms as the Capital Securities (and
such other terms as may be set forth in a resolution of the board of directors
of the Issuer on or prior to such conversion); except that such undated
cumulative subordinated notes will:

 

(i)            be a perpetual capital security issued by the
Issuer with cumulative interest payments,

 

13

 

(ii)           rank pari passu with
any other undated cumulative subordinated notes issued by us,

 

(iii)          following conversion be redeemable upon any
Tax Event or Regulatory Event as modified as necessary to be applicable to a
class of undated cumulative subordinated notes; and

 

(iv)          not be subject to the Alternative Coupon
Satisfaction Mechanism.  Any Deferred
Interest outstanding at the time of conversion will be carried over and become
outstanding missed cumulative interest payments for purposes of the undated
cumulative subordinated notes.

 

Upon any such conversion to undated cumulative
subordinated notes, the Issuer shall convert each Outstanding Capital Security into
an undated cumulative subordinated note with a principal amount equal to that
of the applicable Capital Security so converted.

 

If, following a Tax
Event set out in clause (ii) or (iii) of the definition of Tax Event, the
Issuer gives notice to the Financial Services Authority of, and the Financial
Services Authority objects to, the Issuer’s proposal to convert the Capital
Securities into another series of capital securities constituting undated
cumulative subordinated notes, then the Tax Event giving rise to such proposal
will become a Tax Call Event.

 

(c)  Prior to the redemption or conversion of any
series of Capital Securities following the occurrence of a Tax Event, the
Issuer shall, before giving a notice of redemption or conversion, deliver to
the Subordinated Trustee an Officers’ Certificate stating that all conditions
precedent to such redemption or conversion have been complied with and an
Opinion of Counsel concluding that in the opinion of such counsel a Tax Event
has occurred and the Issuer is entitled to exercise its right of redemption or
conversion in accordance with the terms of the Capital Securities.

 

SECTION
3.4.  REGULATORY EVENT REDEMPTION.

 

(a)  The Issuer may redeem the Capital Securities
in whole (but not in part), at any time upon the occurrence of a Regulatory
Event, subject to the Solvency Condition being met and subject to the Issuer’s
compliance with the regulatory requirements described in Section 3.1(b).

 

(b)  Prior to the redemption of any series of Capital
Securities upon the occurrence of a Regulatory Event, the Issuer shall be
required, before giving a notice of redemption, to deliver to the Subordinated
Trustee an Officers’ Certificate and an Opinion of Counsel stating that all
conditions precedent to such redemption have been complied with in accordance
with the terms of the Capital Securities.

 

SECTION
3.5.  POSTPONEMENT OF REDEMPTION
DATE.

 

(a)  If, following the giving of a notice of
redemption with respect to a Redemption Date on which any payments of Deferred
Interest are due to be satisfied, a Market Disruption Event occurs, or the
Issuer is otherwise not able to raise sufficient funds through the Alternative
Coupon Satisfaction Mechanism to satisfy the payment of all Deferred Interest
payable on such Redemption Date, the Issuer will be required to postpone the Redemption
Date.

 

14

 

In
such event, the Capital Securities will continue to accrue and pay interest in
accordance with their terms and such postponement will not constitute a Capital
Security Default.

 

(b)  A determination to postpone the Redemption
Date will be made not later than the Business Day prior to the initially
scheduled Redemption Date, and notice thereof will be given to Holders.  Notice of a new Redemption Date will be given
to Holders not less than 30 nor more than 60 days prior to the newly selected Redemption
Date.

 

(c)  Following the postponement of a Redemption
Date, interest will accrue on outstanding Deferred Interest that would
otherwise have been satisfied on such initially scheduled Redemption Date from
(and including) such initial Redemption Date to (but excluding) the date such
Deferred Interest is paid, at a rate of 6.50% per annum; provided,
that interest on such outstanding Deferred Interest may only be paid in
accordance with the Alternative Coupon Satisfaction Mechanism.

 

SECTION
3.6.  MARKET DISRUPTION EVENT.  If a
Market Disruption Event exists during the 14 Business Days preceding any Redemption
Date, the related payment of Deferred Interest and the Redemption Date may be
deferred by the Issuer until such Market Disruption Event no longer
exists.  A postponement of a Redemption
Date resulting from a market Disruption Event will not constitute a Capital
Security Default; provided that if any Deferred Interest has not been paid, or
an amount set aside for payment, within 14 days after the date on which any
such Market Disruption Event is no longer continuing, such failure will, subject
to, and in accordance with, Section 5.03(b)(2) of the Subordinated
Indenture, constitute a Capital Security Default.  If a Market Disruption Event occurs, interest
will accrue on such Deferred Interest from (and including) the initial Redemption
Date to (but excluding) the date such Deferred Interest is paid at a rate of 6.50%
per annum; provided, that
interest on such Deferred Interest shall be payable only in accordance with Article
Four (Alternative Coupon Satisfaction Mechanism).

 

SECTION
3.7.  REDEMPTION PROCEDURES.  (a)  Any redemption may be made on not less than
30 nor more than 60 days’ notice to the Holders, at a redemption price equal to
the outstanding principal amount of the Capital Securities together with
accrued interest (including any interest not paid on a Compulsory Interest
Payment Date) to the date fixed for redemption (referred to as the ‘‘Redemption Date’’) and the aggregate amount of any Deferred
Interest (which Deferred Interest may only be paid by the Issuer in accordance
with the procedures set forth in Article Four (Alternative Coupon Satisfaction
Mechanism)).  The Issuer shall give the
Subordinated Trustee at least 45 days prior written notice of any
Redemption Date (unless a shorter period shall be satisfactory to the
Subordinated Trustee).

 

(b)  In addition to, or in place of, the Financial
Services Authority requirements described in Section 3.1(b), the Financial
Services Authority may impose conditions on any such redemption or purchase at
the time.  Any notice of redemption will
be irrevocable, subject to the postponement requirements set out above under
Section 3.5 (Postponement of
Redemption Date).  If the
redemption price in respect of the Capital Securities is improperly withheld or refused and is not paid by
the Issuer, interest on the outstanding principal amount of such Capital
Securities will continue to be payable until the redemption price is actually
paid.

 

15

 

ARTICLE
FOUR

ALTERNATIVE COUPON SATISFACTION MECHANISM

 

SECTION
4.1.  MECHANISM.  (a)  The Issuer is permitted to satisfy its
obligation to pay any Deferred Interest on redemption (as described in Article
Three (Redemption)) or exchange (as described in Article Two (Exchange of
Capital Securities)) only in accordance with the procedures described in clause
(c) below which is hereinafter referred to as the “Alternative Coupon
Satisfaction Mechanism”.

 

(b)  Additionally, on any Compulsory Interest
Payment Date or Optional Interest Payment Date on which the Issuer elects to
pay and not defer interest then payable, the Issuer at its option may elect to
pay such Current Interest in accordance with the procedures described in clause
(c) below.

 

(c)  The Issuer’s obligation or election to pay in
accordance with the Alternative Coupon Satisfaction Mechanism will be satisfied
as follows:

 

(i)            not later than 14 Business Days prior to the Redemption
Date, Event Date or Interest Payment Date, as the case may be, the Calculation Agent
shall determine the number of the Ordinary Shares which, in its judgment, have
an aggregate fair market value of not less than the aggregate amount of
Deferred Interest or Current Interest, as the case may be (after conversion
from pounds sterling into U.S. dollars and after the Issuer pays any taxes,
duties, costs and expenses payable by the Issuer in and associated with the
issue, and placement by the Calculation Agent, of the Ordinary Shares);

 

(ii)           no later than ten Business Days prior to the Redemption
Date, Event Date or Interest Payment Date, as the case may be, the Calculation Agent,
or an appointed intermediary, shall place such number of Ordinary Shares in the
market;

 

(iii)          no later than the close of business on the
seventh Business Day prior to the Redemption Date, Event Date or Interest
Payment Date, as the case may be, the Calculation Agent shall notify the Issuer
of the number of the Ordinary Shares for which it has found purchasers;

 

(iv)          as soon thereafter as reasonably practicable but not later than the
sixth Business Day prior to the Redemption Date, Event Date or Interest Payment
Date, as the case may be, the Issuer shall, subject to having necessary
corporate authorizations in place, issue and allot such Ordinary Shares to the
purchasers who have agreed to purchase them;

 

(v)           if, after the operation of the above procedures there would, in the
opinion of the Calculation Agent, be a shortfall of proceeds towards the
satisfaction of the aggregate amount of Deferred

 

16

 

Interest
or Current Interest, payable on the Redemption Date, Event Date or Interest
Payment Date, as the case may be, the Calculation Agent shall use its
reasonable endeavors to find purchasers for further Ordinary Shares and the
Issuer shall, subject to having the necessary corporate authorizations in
place, issue and allot such further Ordinary Shares to the purchasers who have
agreed to purchase them in accordance with these provisions to try to ensure
that a sum (after conversion into U.S. dollars and after the Issuer pays any
taxes, duties, costs and expenses payable by the Issuer and associated with the
issue of the shares) at least equal to the aggregate amount of Deferred
Interest or Current Interest is available on the Business Day prior to the Redemption
Date, Event Date or Interest Payment Date, as the case may be, to make the
Deferred Interest payments or Current Interest payments, as the case may be, in
full on the Redemption Date, Event Date or Interest Payment Date, as the case
may be; provided that if, despite the operation
of the aforementioned provisions, such a shortfall exists on the Business Day
preceding the Redemption Date, Event Date or Interest Payment Date, as the case
may be, the Issuer may, subject to having the necessary corporate
authorizations in place, continue to issue and allot Ordinary Shares until the Subordinated
Trustee (or any paying agent) shall have received funds on the Issuer’s behalf
equal to the full amount of such shortfall and provided
further that no Deferred Interest payment or Current Interest
payment, as the case may be, shall be made to a Holder and, in the case of
payment of Deferred Interest on redemption, no security shall be redeemed until
such time as the Issuer is able to pay a sum at least equal to the aggregate
amount of Deferred Interest or Current Interest, as the case may be, in full in
accordance with this Alternative Coupon Satisfaction Mechanism on the Redemption
Date, Event Date or Interest Payment Date, as the case may be, and, for the
avoidance of doubt, the Redemption Date as set out in the redemption notice or Event
Date as set out in the exchange notice or Interest Payment Date, as the case
may be, shall be deferred until the date the payment of Deferred Interest or,
Current Interest, as the case may be, can be so made in full;

 

(vi)          the Issuer will transfer or arrange for the
transfer of the issue proceeds raised from the operation of the provisions set
forth above (or such amount of issue proceeds as is necessary after conversion
into U.S. dollars), to satisfy the aggregate amount of Deferred Interest or
Current Interest, as the case may be, to the Subordinated Trustee (or any
paying agent) on the Business Day preceding the Redemption Date, Event Date or Interest
Payment Date, as the case may be, for payment by the Subordinated Trustee (or
any paying agent), on the Redemption Date, Event Date or Interest Payment Date,
as the case may be, towards the

 

17

 

satisfaction
on the Issuer’s behalf of the aggregate amount of Deferred Interest or Current
Interest, as the case may be; and

 

(vii)         if, pursuant to this Alternative Coupon
Satisfaction Mechanism, proceeds are raised in excess of the amount required to
pay the applicable Deferred Interest or Current Interest, as the case may be,
plus the claims for the fees, costs and expenses to be borne by the Issuer in
connection with using the Alternative Coupon Satisfaction Mechanism, any
remaining proceeds shall be paid to the Issuer.

 

If the Issuer is required to
make payment of any Deferred Interest in accordance with the Alternative Coupon
Satisfaction Mechanism, or elects to make payment of Current Interest in such
manner, the proceeds from the sale of Ordinary Shares pursuant to the
Alternative Coupon Satisfaction Mechanism will be paid to Holders by the
Subordinated Trustee or any paying agent in respect of the relevant Deferred
Interest or Current Interest, as the case may be.

 

SECTION
4.2.  CERTAIN CONDITIONS;
SUFFICIENCY AND AVAILABILITY OF ORDINARY SHARES.

 

(a)  The Issuer’s ability to use the Alternative
Coupon Satisfaction Mechanism to satisfy the Issuer’s payment of Deferred
Interest on the Capital Securities on a Redemption Date or Event Date or
Current Interest on an Interest Payment Date is subject to the following
conditions:

 

(i)            the procedure will only be activated if (A) the
Issuer has given a redemption notice or exchange notice and at that time there
are Deferred Interest payments to be satisfied, or (B) the Issuer elects to
make a Current Interest payment in such manner;

 

(ii)           the Issuer will not be required to issue or sell any Ordinary Shares,
or cause them to be sold, at a price below the nominal value of the Ordinary
Shares, which is currently five pence per share;

 

(iii)          the Issuer must have a sufficient number of authorized but unissued
Ordinary Shares at the Redemption Date, Event Date or Interest Payment Date, as
the case may be; and

 

(iv)          the Issuer’s directors must have all the necessary authority under
English law to allot and issue a sufficient number of Ordinary Shares at the Redemption
Date, Event Date or Interest Payment Date, as the case may be.

 

(b)  For so long as any Capital Securities remain
outstanding, the Issuer will review its Ordinary Share price and the relevant
exchange rates prior to each annual meeting of the Issuer’s shareholders.  If the Issuer determines as the result of any
such review that it does not have a sufficient number of authorized but unissued
Ordinary Shares to permit it to issue at that date a number of Ordinary Shares
equal to the amount of Deferred Interest if any, outstanding together with
scheduled interest payments for the next 12 months on the Capital Securities,
and/or if the Issuer’s directors do not have the necessary authority to allot
and issue such number of

 

18

 

Ordinary
Shares, then at such annual meeting of the Issuer’s shareholders, the Issuer
will propose resolutions to increase the number of authorized but unissued
Ordinary Shares and the directors’ authority to allot and issue Ordinary Shares
to the level that would enable the Issuer to issue at that date a sufficient
number of Ordinary Shares to enable payment of Deferred Interest, if any,
outstanding together with scheduled interest payments for the next 12 months on
the Capital Securities pursuant to the Alternative Coupon Satisfaction
Mechanism.

 

(c)  The Issuer may not redeem any Capital Securities
unless all accrued but unpaid interest and other payments thereon and the
aggregate amount of Deferred Interest payments, if any, are satisfied at the
same time.  In the event that the Issuer
does not have a sufficient number of Ordinary Shares available, and authorized
to be issued and allotted, to implement the Alternative Coupon Satisfaction
Mechanism, then the Redemption Date shall be deferred until such time as the
Issuer has available, and authorized to be issued and allotted, sufficient
Ordinary Shares and the issue proceeds of such shares are sufficient to pay for
the Deferred Interest in full.  Such
deferral shall not constitute a Capital Security Default.

 

(d)  If the Issuer is unable to make a payment in
full of all Deferred Interest due to be paid on a Redemption Date or Event Date
or Current Interest on the applicable Interest Payment Date because the Issuer
does not have a sufficient number of shares authorized to be issued and the
necessary authority for the Issuer’s directors to issue such shares or for any
other reason, interest will accrue on such Deferred Interest or Current
Interest, as the case may be, from (and including) the initial Redemption Date,
Event Date or applicable Interest Payment Date, as the case may be, to (but
excluding) the date such Deferred Interest or Current Interest, as the case may
be, is paid at a rate of 6.50% per annum; provided,
that any such interest shall be payable by the Issuer only in accordance with
the Alternative Coupon Satisfaction Mechanism.

 

SECTION
4.3.  SUSPENSION.

 

(a)  Following any take-over offer made under the
City Code on Take-overs and Mergers or any reorganization, restructuring or
scheme of arrangement involving the Issuer, the company which, immediately
prior to such event, was the ultimate owner of the Issuer and its subsidiaries
(referred to as the “Ultimate Owner”) ceases to be the Ultimate Owner, unless
such event is a Permitted Restructuring and a Permitted Restructuring
Arrangement is put into place within six months of the occurrence of a
Permitted Restructuring, an independent investment bank appointed by the Issuer
(at the Issuer’s expense) and approved by the Subordinated Trustee will
determine what amendments (if any) to the terms and conditions of the Capital
Securities, the Subordinated Indenture, this Second Supplemental Indenture and
any other relevant documents are appropriate or necessary in order to replicate
the Alternative Coupon Satisfaction Mechanism in the context of the capital
structure of the new Ultimate Owner. 
Upon any such determination being reached and notified to the
Subordinated Trustee and the Issuer by such investment bank, the Subordinated
Trustee and the Issuer shall, pursuant to the terms of the Subordinated
Indenture and this Second Supplemental Indenture and without the consent of the
Holders but subject to the consent of the new Ultimate Owner, effect any
necessary consequential changes to the terms and conditions of the Capital
Securities, the Subordinated Indenture and any other relevant documents.  Any such amendments shall be subject to the
requirements that:

 

(i)            the Issuer will not be obliged to reduce the
Issuer’s net assets,

 

(ii)           no amendment may be proposed or made which would alter the treatment of
the Capital Securities as cover for the minimum or notional

 

19

 

margin of solvency pursuant
to the Capital Regulations without prior written notice thereof being given to
the Financial Services Authority and the Financial Services Authority having
issued a statement of no objection,

 

(iii)          no such amendment may be made which would, in the Subordinated Trustee’s
opinion, impose any additional or more onerous obligations on it, or would
otherwise effect the Subordinated Trustee’s rights, liabilities, duties or
immunities, without its consent, and

 

(iv)          such amendments shall preserve substantially the financial effect for
the Holders of a holding in the Capital Securities.

 

(b)  If, after using all reasonable endeavors,
such investment bank is unable to formulate such amendments, it shall so notify
the Issuer, the previous Ultimate Owner (if not the Issuer), the new Ultimate
Owner, the Subordinated Trustee, any paying agent and the Calculation Agent of
that result.  Such a notice by such
investment bank is hereinafter referred to as a “Definitive Suspension” of the
Alternative Coupon Satisfaction Mechanism.

 

(c)  Upon the occurrence of a Definitive
Suspension, the Issuer may at its sole discretion, subject in each case to
compliance with applicable regulatory requirements, including giving prior
written notice thereof to the Financial Services Authority and the Financial
Services Authority having issued a statement of no objection, at any time
convert the Capital Securities in whole (but not in part) to another series of capital
securities constituting undated cumulative subordinated notes, having the same
material terms as the Capital Securities; except that such undated cumulative
subordinated notes will:

 

(i)            be a perpetual capital security issued by the
Issuer with cumulative interest payments,

 

(ii)           rank pari passu with
any other undated cumulative subordinated notes issued by us,

 

(iii)          following conversion be
redeemable upon any Tax Call Event or Regulatory Event as modified as necessary
to be applicable to a class of undated cumulative subordinated notes, and

 

(iv)          not be subject to the
Alternative Coupon Satisfaction Mechanism. 
Any Deferred Interest outstanding
at the time of conversion will be carried over and become outstanding missed
cumulative interest payments for purposes of the undated cumulative
subordinated notes.

 

Upon any such conversion to undated cumulative subordinated notes, the
Issuer shall convert each Outstanding Capital Security into an undated cumulative
subordinated notes with a principal amount equal to that of the Capital Security
so converted.

 

(d)  If, following a Definitive Suspension, the Financial
Services Authority objects to the Issuer’s proposal to convert the Capital
Securities into another series of capital securities constituting undated
cumulative subordinated notes, then, subject to giving notice thereof to, and
receiving a statement of no objection from, the Financial Services Authority,
the

 

20

 

Issuer
will have the option to redeem the Capital Securities in whole (but not in
part) at a redemption price equal to their principal amount together with
accrued and unpaid interest, all Deferred Interest payments in cash, without utilizing
the Alternative Coupon Satisfaction Mechanism.

 

ARTICLE
FIVE

PREFERENCE SHARES

 

SECTION
5.1.  GENERAL.  (a)  Each series of Preference Shares issued upon
exchange of the Capital Securities will constitute a separate series of the
Issuer’s non-cumulative dollar preference shares.  The Preference Shares of any series shall rank
equally with the Preference Shares of any other series as to any distribution
of the Issuer’s surplus assets in the event that the Issuer is wound up or
liquidated.  The Preference Shares shall
rank pari passu as to return of
assets on a winding up with the Capital Securities.  The Preference Shares issued upon an exchange
as provided for hereunder will be represented by American Depositary Shares (or
“ADSs”), evidenced by American Depositary Receipts (or “ADRs”), which shall be
issued by Citibank, N.A., as ADR depositary (the “ADR Depositary”) in
accordance with, and pursuant to, the terms set forth in the Deposit Agreement,
dated as of August 6, 2004, between the Issuer and the ADR Depositary.

 

(b)  Prior to any Event Date, the Issuer’s board
of directors shall adopt one or more resolutions establishing the rights,
preferences, privileges, limitations and restrictions relating to any
Preference Shares to be issued in exchange for the Capital Securities on such Event
Date, provided that the terms of the Preference Shares issued in connection
with such resolution of the Issuer’s board of directors shall be consistent in
all material respects with the terms of the Preference Shares described in this
Second Supplemental Indenture.  On or
promptly following any such Event Date, the Issuer shall furnish a copy of such
resolution or resolutions, or the applicable portions thereof, to the
Securities and Exchange Commission via a report on Form 6-K, or as may be
otherwise provided at such time.

 

SECTION
5.2.  DIVIDENDS.

 

(a)  Non-cumulative preferential dividends on each
series of Preference Shares will be payable if declared by the Issuer’s board
of directors in accordance with the procedures described below.  If so declared, any such dividend will be 6.50%
of the liquidation preference per annum, payable quarterly in arrears on March
23, June 23, September 23 and December 23 of each year, commencing on the first
such date occurring after the applicable issue date (each, a “dividend payment
date”).

 

(b)  On any dividend payment date on which:

 

(i)            the Issuer satisfies the Solvency Condition;

 

(ii)           the Issuer is not prohibited from paying a
dividend under the terms of a Parity Security; and

 

(iii)          the Issuer’s distributable profits are
sufficient to cover the payment in full of, or the setting aside and providing
for the

 

21

 

dividend
on that series of Preference Shares and dividends on any of the Issuer’s other
preference shares stated to be payable on the same date and ranking equally as
to dividends with the Preference Shares

 

then, the Issuer’s board of
directors, in its sole discretion, may elect to declare and pay dividends.  If, on any dividend payment date, the Issuer
fails to satisfy any of the conditions set forth in clauses (i), (ii) and
(iii) of this paragraph (b), the Issuer’s board of directors will not declare
or pay a dividend.

 

The UK Companies Act 1985 defines “distributable profits” as, in
general terms, and subject to adjustment, accumulated realized profits less
accumulated realized losses.

 

(c)  If the
Issuer does not declare a dividend on any dividend payment date, holders of the
Preference Shares will have no claim in respect of non-payment and the Issuer
will have no obligation to pay such dividend or part thereof or interest thereon
at any time.

 

SECTION
5.3.  DIVIDEND AND CAPITAL
RESTRICTION; ISSUANCE RESTRICTION.

 

(a)  Following a dividend payment date on which the
Issuer does not declare and pay in full all dividend payments on the Preference
Shares, for whatever reason, the Issuer will not, and will not permit any
entity that the Issuer controls, directly or indirectly, (a) to declare or pay
a dividend or distribution or make any other payment on any preference shares
or Junior Securities (other than (i) a final dividend declared by the Issuer with
respect to its Ordinary Shares prior to the date that the decision to not pay
such dividend on Preference Shares is made or (ii) a payment made by one of the
Issuer’s wholly-owned subsidiaries to another wholly-owned subsidiary or
directly to the Issuer), or (b) to redeem, purchase or otherwise acquire any Parity
Securities or Junior Securities, in each case unless or until the Issuer sets
aside and provides for or pays in full the dividend on the Preference Shares
for the next four succeeding quarterly dividend payment dates.

 

(b)  The restrictions set forth in Section 5.3(a)
do not apply to payments the Issuer makes to policyholders or other customers,
or transfers to or from the Issuer’s fund for future appropriations, in each
case in the ordinary course of business consistent with past practice.

 

(c)  For the purposes of this Section 5.3, the
payment (or declaration of payment) of a dividend or distribution on Junior
Securities or preference shares shall be deemed to include the making of any
interest, coupon or dividend payment (or payment under any guarantee in respect
thereof). For the purposes of the foregoing provision, the redemption, purchase
or other acquisition of the Parity Securities or Junior Securities shall be
deemed not to include transactions where the funds used to redeem, purchase or
acquire those securities are derived from an issue of Junior Securities or Parity
Securities (i) made at any time within the six-month period prior to the time
of such redemption, purchase or acquisition, and (ii) with the same or junior
ranking on a return of assets on a winding up or in respect of a distribution
or payment of interest, coupons or dividends and/or any other amounts
thereunder to those securities being redeemed, purchased or acquired.

 

(d)  The Issuer may not issue any shares that rank
senior to the Preference Shares of any series, in regard to rights to
participate in the Issuer’s profits or assets, without the prior

 

22

 

written
consent of the holders of at least three-quarters in nominal value of such series
of Preference Shares.

 

SECTION
5.4.  LIQUIDATION RIGHTS.  On
return of capital on a winding-up or otherwise, the holders of the Preference
Shares of a particular series that are outstanding at the time and the holders
of any other of the preference shares ranking equally with the Preference
Shares as regards participation in the Issuer’s surplus assets will be entitled
to receive payment in U.S. dollars out of any assets available for distribution
to shareholders.  This distribution will
be made in priority to any distribution of assets to holders of the Ordinary
Shares or any other class of the Issuer’s shares ranking below the Preference
Shares of the series as regards participation in the Issuer’s surplus
assets.  Holders of the Preference Shares
will be entitled to a payment equal to the liquidation preference associated
with their Preference Shares unless there are insufficient assets available for
distribution in which case holders of the Preference Shares will be entitled to
share ratably in any distribution of the Issuer’s surplus assets in proportion
to the full respective preferential amounts to which they are entitled.  Holders of the Preference Shares will have no
further right to participate in a return of capital.

 

SECTION
5.5.  OPTIONAL REDEMPTION.

 

(a)  Each series of Preference Shares is
redeemable at the Issuer’s option, in whole or in part, on any dividend payment
date later than five years after the issue date of the relevant series of
Preference Shares (any such date so designated, a “Preference Share Redemption
Date”), upon not less than 30 nor more than 60 days’ notice to the holders of
the Preference Shares prior to the Preference Share Redemption Date.

 

(b)  The Issuer will pay on each Preference Share redeemed
on a Preference Share Redemption Date, in U.S. dollars, an amount equal to its
liquidation preference together with any dividend then payable on such dividend
payment date (such amount, the “Redemption Price”).

 

(c)  If any Preference Shares are to be redeemed,
a notice of redemption will be mailed to the ADR Depositary and to each record holder
of Preference Shares in registered form to be redeemed, not less than 30 nor
more than 60 days prior to the Preference Share Redemption Date.  Each notice of redemption of Preference
Shares will specify:

 

(i)            the Preference Share Redemption Date;

 

(ii)           the particular Preference Shares to be redeemed;

 

(iii)          the Redemption Price and details of any dividend payable on the Preference
Share Redemption Date and stating that dividends shall cease to accrue on
redemption;

 

(iv)          the place or places where holders may surrender documents of title and
obtain payment of the Redemption Price; and

 

(v)           that no defect in the notice of redemption or in giving of the notice
will affect the validity of the redemption proceedings.

 

23

 

(d)  Except as
otherwise indicated to the Issuer by the Financial Services Authority, the
Issuer may not redeem any Preference Shares unless the Issuer has given at
least six months’ notice to the Financial Services Authority and the Financial
Services Authority has issued a statement of no objections prior to such
Preference Share Redemption Date, and redemption may only be effected if on,
and immediately following, the Preference Share Redemption Date the Issuer is
in compliance with any applicable regulatory capital requirements or capital
ratios required to be maintained for insurance companies, parent companies in
insurance groups or financial groups generally by the Financial Services
Authority.

 

SECTION
5.6.  VOTING RIGHTS. 
Holders of the Preference Shares of any series having a registered
address within the United Kingdom will be entitled to receive notice of, but
will not be entitled to attend or vote at any of the Issuer’s general meetings
except as provided by applicable law.

 

SECTION
5.7.  FORM AND DENOMINATION.

 

(a)  The Preference Shares will, when issued, be
fully paid and, as such, will not be subject to a call for any additional
payment.  For each Preference Share
issued, an amount equal to its nominal value will be credited to the Issuer’s
issued share capital account and an amount equal to the difference between its
issue price and its nominal value will be credited to the Issuer’s share
premium account.  The Preference Shares
will have a nominal value of $0.01 per share and will be issued at a price of
$25 per share.

 

(b)  Preference Shares of each series will be
offered in the form of ADSs and will be represented by a single warrant in
bearer form, which will be deposited with the ADR Depositary under the ADR
Deposit Agreement.  The Issuer may
consider the ADR Depositary one holder of any series of Preference Shares so
deposited for all purposes.

 

(c)  Preference Shares may only be withdrawn from
deposit in accordance with the terms of the Deposit Agreement and if so
withdrawn will be evidenced by share certificates in registered form without
dividend coupons which will be delivered at the time of withdrawal.  Preference Shares may not be withdrawn from
deposit in bearer form.

 

(d)  Title to Preference Shares of any series in
registered form may only be transferred by transfer and registration on the
register for the Preference Shares of the relevant series.  The registration or transfer of Preference
Shares of any series may only be made in the register for the Preference Shares
of the series kept by the registrar at its office in the United Kingdom.  The registrar will not charge the person
requesting the transfer a registration fee. 
However, the person requesting registration will be liable for any
taxes, stamp duty or other governmental charges that must be paid in connection
with the registration.

 

SECTION
5.8.  LISTING.  If the
Capital Securities are exchanged for the Preference Shares, upon giving notice
of such exchange, the Issuer will undertake to use its reasonable efforts to
obtain a listing on the New York Stock Exchange of the Preference Shares (in
the form of ADSs evidenced by ADRs).

 

SECTION
5.9.  NO ADDITIONAL AMOUNTS.  If at
any time a U.K. taxing authority requires the Issuer to deduct or withhold
taxes from payments made by the Issuer with respect to the Preference Shares,
the Issuer will not pay any additional amounts. 
As a result, the net amount received from the Issuer by each Preference
Share holder, after the deduction or

 

24

 

withholding,
will be less than the amount the holder would have received in the absence of
the deduction or withholding.

 

ARTICLE
SIX

CERTAIN TAX RELATED AGREEMENTS

 

SECTION
6.1.  QUALIFIED DIVIDEND
CERTIFICATIONS.  To the extent it is reasonably able to do so
without material cost, the Issuer will use reasonable efforts to facilitate appropriate
tax reporting by providing certifications in accordance with any rules
promulgated by the U.S. Treasury Department or the U.S. Internal Revenue
Service pursuant to which holders of ADRs or Capital Securities and
intermediaries through whom such securities are held will be permitted to
establish that interest in respect of the Capital Securities and dividends in
respect of ADRs (representing Preference Shares) are eligible to be treated as
qualified dividends.

 

SECTION
6.2.  U.K. STAMP DUTY.  The Issuer
undertakes to pay, and indemnify the Holder and the ADR Depositary, as
applicable, against any U.K. stamp duty, stamp duty reserve tax or similar
U.K. governmental charge arising in connection with the issuance of the
Preference Shares, ADSs or ADRs to, or to the respective accounts of, the Holder
or beneficial owners of Capital Securities that are exchanged.

 

ARTICLE
SEVEN

 

BOOK-ENTRY
SYSTEM

 

SECTION
7.1.  GENERAL.

 

(a)  The Capital Securities shall initially be
represented by one or more global securities in registered form, without
coupons attached, and will be deposited with or on behalf of DTC or its nominee
and registered in the name of Cede & Co., as nominee of DTC.  Unless and until the Capital Securities are
exchanged in whole or in part for other securities that the Issuer issues or
the global securities are exchanged for definitive securities, the global
securities may not be transferred except as a whole by DTC to a nominee or a
successor of DTC.

 

(b)  The Capital Securities have been accepted for
clearance by DTC.  Beneficial interests
in the global Securities will be shown on, and transfers thereof will be
effected only through, the book-entry records maintained by DTC and its direct
and indirect participants, including Euroclear and Clearstream,
Luxembourg.  Owners of beneficial
interests in the Capital Securities will receive payments relating to their
Securities in U.S. dollars.

 

(c)  So long as DTC, or its nominee, is the holder
of a global Security, DTC or its nominee will be considered the sole holder of
such global Security for all purposes under the Subordinated Indenture and this
supplement thereto.  Except as described
below under Section 7.3 (Issuance of Definitive Securities), no
participant, indirect participant Holder or other person will be entitled to
have registered in its name, receive or be entitled to receive physical
delivery of Capital Securities in definitive form or be considered the owner or
holder of the

 

25

 

Capital
Securities under the Subordinated Indenture and this Second Supplemental
Indenture.  Each person having an
ownership or other interest in the Capital Securities must rely on the
procedures of DTC and, if a person is not a participant in DTC must rely on the
procedures of the participant or other securities intermediary through which
that person owns its interest, to exercise any rights and obligations of a
Holder under the Subordinated Indenture, as amended hereby or the Capital
Securities.

 

SECTION
7.2.  PAYMENTS ON THE GLOBAL
SECURITIES.  Payments of any amounts in respect of any
global Securities will be made by the Subordinated Trustee, in its capacity as
Paying Agent in respect of the Capital Securities, to DTC.  Payments will be made to beneficial owners of
Capital Securities in accordance with the rules and procedures of DTC or its
direct and indirect participants, as applicable.  Neither the Issuer nor the Subordinated Trustee
nor any of the Issuer’s agents will have any responsibility or liability for any
aspect of the records of any securities intermediary in the chain of
intermediaries between DTC and any beneficial owner of an interest in a global
security, or the failure of DTC or any intermediary to pass through to any
beneficial owner any payments that are made to DTC.

 

SECTION
7.3.  ISSUANCE OF DEFINITIVE
SECURITIES.  (a)  So
long as DTC holds the global Securities, such global securities will not be
exchangeable for definitive securities unless:

 

(i)            DTC notifies the Subordinated Trustee that it
is unwilling or unable to continue to hold the book-entry Capital Securities or
DTC ceases to be a “clearing agency” registered under the Securities Exchange
Act and the Issuer does not appoint a successor to DTC which is registered
under the Securities Exchange Act within 120 days; or

 

(ii)           in the event of the Issuer’s winding up the
Issuer fails to make a payment on the Capital Securities when due.

 

(b)  Definitive securities will be issued in
registered form only.  To the extent
permitted by law, the Issuer, the Subordinated Trustee and any Paying Agent
shall be entitled to treat the person in whose name any definitive security is
registered as its absolute owner.

 

(c)  Payments in respect of each series of
definitive securities will be made to the person in whose name the definitive
securities are registered as it appears in the register for that series.  Payments will be made in respect of the
Capital Securities by check drawn on a bank in New York City or, if the Holder
requests, by transfer to the Holder’s account in New York City.  Definitive securities should be presented to
the Paying Agent for redemption.

 

(d)  If the Issuer issues definitive securities of
a particular series in exchange for global Securities, DTC, as holder of the
global Securities, will surrender it against receipt of the definitive
securities, cancel the book-entry securities of that series, and distribute the
definitive securities of that series to the persons and in the amounts that DTC
specifies.

 

(e)  If definitive securities are issued in the
limited circumstances described above, those securities may be transferred in
whole or in part in denominations of any whole number of securities upon
surrender of the definitive securities certificates together with the form of
transfer endorsed on it, duly completed and executed at the specified office of
a paying agent.

 

26

 

If
only part of a securities certificate is transferred, a new securities
certificate representing the balance not transferred will be issued to the
transferor within three Business Days after the paying agent receives the
certificate.  The new certificate
representing the balance will be delivered to the transferor by uninsured post
at the risk of the transferor, to the address of the transferor appearing in
the records of the paying agent.  The new
certificate representing the securities that were transferred will be sent to
the transferee within three Business Days after the paying agent receives the
certificate transferred, by uninsured post at the risk of the Holder entitled
to the securities represented by the certificate, to the address specified in
the form of transfer.

 

ARTICLE
EIGHT

 

MISCELLANEOUS

 

SECTION
8.1.  APPLICATION OF SECOND
SUPPLEMENTAL INDENTURE.  Each and every term and condition contained
in this Second Supplemental Indenture that supplements the terms and conditions
of the Subordinated Indenture shall apply only to the Capital Securities
created hereby and not to any future series of Securities established under the
Subordinated Indenture.

 

SECTION
8.2.  BENEFITS OF SECOND
SUPPLEMENTAL INDENTURE.  Nothing contained in this Second Supplemental
Indenture shall or shall be construed to confer upon any person other than a
Holder, a holder of Preference Shares, the Issuer and the Subordinated Trustee
any right or interest to avail itself, as the case may be, of any benefit under
any provision of the Subordinated Indenture or this Second Supplemental
Indenture.

 

SECTION
8.3.  NOTICES.  All
notices regarding the Capital Securities will be valid if published by the
Issuer in one leading English language daily newspaper of general circulation
in The City of New York and one leading English language daily newspaper of
general circulation in London, England and shall be deemed to have been given
on the date that publication in both cities is completed or, if published more
than once, on the date publication is first completed in both cities.  If it is not practicable to publish a notice,
the Issuer may give valid notice in another manner that the Issuer shall
determine, with effect from the date that the Issuer shall determine.  For so long as the Capital Securities are
represented by one or more global Securities, the Issuer will deliver a copy of
all notices to DTC as the registered holder of the Capital Securities.

 

SECTION
8.4.  EFFECTIVE DATE.  This Second
Supplemental Indenture shall be effective as of the date first above written
and upon the execution and delivery hereof by each of the parties hereto.

 

SECTION
8.5.  GOVERNING LAW.  This Second
Supplemental Indenture shall be governed by, and construed in accordance with,
the laws of the State of New York except as stated in Exhibit A and except for
Section 1.10 which shall be governed by and construed in accordance with the
laws of England and Wales.  The terms of
the Preference Shares will be governed by and construed in accordance with the
laws of England and Wales.

 

27

 

SECTION
8.6.  COUNTERPARTS.  This Second
Supplemental Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.

 

SECTION
8.7.  CONCERNING THE SUBORDINATED
TRUSTEE.  The recitals and statements contained herein
and in the Capital Securities (except the Subordinated Trustee’s certificate of
authentication) shall be taken as the recitals and statements of the Issuer,
and the Subordinated Trustee assumes no responsibility for their
correctness.  The Subordinated Trustee
makes no representations as to the validity or sufficiency of this Second
Supplemental Indenture or of the Capital Securities (except for the
Subordinated Trustee’s certificates of authentication thereof).  The Subordinated Trustee shall not be
accountable for the use or application by the Issuer of the Capital Securities
or the proceeds thereof.

 

28

 

IN WITNESS WHEREOF, the
parties hereto have caused this Second Supplemental Indenture to be duly
executed by their respective officers hereunto duly authorized, all as of the
day and year first above written.

 

 

	
   

  	
  PRUDENTIAL
  PLC,

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
    Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CITIBANK,
  N.A. as Subordinated Trustee,

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
   

  	
   

  
	
   

  	
   

  	
    Name:

  
	
   

  	
   

  	
    Title:

  

 

29

 

EXHIBIT A

 

[FORM
OF FACE OF SECURITY]

 

[THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE SUBORDINATED INDENTURE AND ANY SUPPLEMENTAL
INDENTURES THERETO HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY OR A NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED
IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM IN ACCORDANCE
WITH THE TERMS HEREOF AND OF THE SUBORDINATED INDENTURE AND ANY SUPPLEMENTAL
INDENTURES THERETO, TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST
COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE OR TO THE
DEPOSITORY TRUST COMPANY OR A SUCCESSOR THEREOF AND TRANSFERS OF PORTIONS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN THE SUBORDINATED INDENTURE AND ANY SUPPLEMENTAL
INDENTURES THERETO.

 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW
YORK, NEW YORK) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER ENTITY AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.](1)

 

THE RIGHTS OF THE HOLDER OF THIS GLOBAL SECURITY
ARE, TO THE EXTENT AND IN THE MANNER SET FORTH IN SECTION 13.01 OF THE
SUBORDINATED INDENTURE HEREINAFTER REFERRED TO, SUBORDINATED TO THE CLAIMS OF
OTHER CREDITORS OF THE ISSUER AND THIS GLOBAL SECURITY IS ISSUED SUBJECT TO THE
PROVISIONS OF THAT SECTION 13.01, AND THE HOLDER OF THIS GLOBAL SECURITY BY
ACCEPTING THE SAME, AGREES TO AND SHALL BE BOUND BY SUCH PROVISIONS.  THE PROVISIONS OF SECTION 13.01 OF THE
SUBORDINATED INDENTURE AND THE TERMS OF THIS PARAGRAPH SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF ENGLAND AND WALES.

 

(1)     These
paragraphs should be included only if the Security is a Global Security.

 

30

 

PRUDENTIAL PLC

 

6.50%
Perpetual Subordinated Capital Securities Exchangeable at the Issuer’s Option
into Non-Cumulative Dollar Denominated Preference Shares

 

	
  CUSIP No. G7293H189

  	
   

  	
  No. 1

  

 

PRUDENTIAL PLC, a public limited company duly organized and existing
under the laws of England and Wales (herein called the “Issuer”, which term includes any
successor Person under the Subordinated Indenture and Second Supplemental
Indenture (each hereinafter defined)), for value received, hereby promises, in
accordance with the terms hereof and subject to the Solvency Condition
(hereinafter defined) and certain other restrictions set forth herein and in
the Indentures (hereinafter defined), to pay to CEDE & CO., or its
registered assigns, interest on the principal amount hereof quarterly in
arrears on March 23, June 23, September 23 and December 23 of each year (each
such date, a “Interest Payment Date”),
at a fixed rate per annum on the outstanding principal amount equal to 6.50%,
commencing September 23, 2005; provided,
however, that the Issuer may
under certain circumstances and in accordance with the Indentures defer payments
of interest on this Security and any such failure to pay will not constitute a
default by the Issuer for any purpose.

 

This security (the “Global Security”) represents 12,000,000 Perpetual
Subordinated Capital Securities Exchangeable at the Issuer’s Option into
Non-Cumulative Dollar Denominated Preference Shares, of the Issuer.  Each Capital Security has an aggregate
principal amount of $25 and the principal amount of this Global Security is $300,000,000.  The Capital Securities are perpetual
securities and have no maturity date.

 

If an Interest Payment Date or the date for payment of the principal
amount of this Global Security is not a Business Day, then (subject to the
provisions of the Indentures) such payment shall be made on the immediately
following Business Day with the same force and effect as if made on such date
for payment.  Payments will be calculated
on the basis of twelve months of 30 days each or, in the case of an incomplete
month, on the basis of the actual number of days elapsed in such period, in
each case assuming a 360-day year.  A “Business Day”
is each day, other than a Saturday or Sunday, which is not a day on which
commercial banking institutions in The City of New York, or in London, England
or in the applicable Place of Payment are authorized or required by law,
regulation or executive order to close.

 

Interest and other payments on the Capital Securities will be payable
to the Holders of record as they appear on the books and records of the Security
Registrar on the relevant Regular Record Dates. 
The “Regular Record Dates” for the Capital Securities will be the
fifteenth day, whether or not a Business Day, preceding the relevant Interest
Payment Date.

 

Reference is hereby made to the further provisions of this Global
Security set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.

 

Unless the certificate of authentication hereon has been executed by
the Subordinated Trustee referred to on the reverse hereof or an authenticating
agent appointed by the Issuer, by manual signature, this Global Security shall
not be entitled to any benefit under the Indentures or be valid or obligatory
for any purpose.

 

31

 

[Signature pages follow]

 

32

 

IN WITNESS WHEREOF, the
Issuer has caused this instrument to be duly executed and delivered.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PRUDENTIAL PLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

33

 

This is one of the Securities designated therein referred to in the
within-mentioned Supplemental Indenture.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CITIBANK NA, as Subordinated

  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  

 

34

 

EXHIBIT
A

 

[FORM
OF REVERSE OF SECURITY]

 

1.             Securities.

 

This Global Security is one of a duly authorized issue of securities of
the Issuer (herein called the “Capital Securities”), issued and to be
issued in one or more series under the Second Supplemental Indenture, dated as
of July 15, 2005 (the “Second Supplemental Indenture”), to the
Subordinated Indenture (the “Subordinated Indenture” and together with
the Second Supplemental Indenture, the “Indentures”) dated as of August
6, 2004 between the Issuer and Citibank, N.A., as Subordinated Trustee (herein
called the “Subordinated Trustee”, which term includes any successor
subordinated trustee under the Indentures), and reference is hereby made to the
Indentures for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Issuer, the Subordinated Trustee, and
the Holders of the Capital Securities and of the terms upon which the Capital
Securities are, and are to be, authenticated and delivered.  This Global Security is one of the series
designated on the face hereof as “6.50% Perpetual Subordinated Capital
Securities Exchangeable at the Issuer’s Option into Non-Cumulative Dollar
Denominated Preference Shares”.  Unless
otherwise defined herein, terms used in this Security which are defined in the
Indentures shall have the meanings assigned to them in the Indentures; provided that if a term is defined in both Indentures, the
definition of such term in the Second Supplemental Indenture shall prevail.

 

2.             Interest and
Deferred Interest.

 

Payments of interest on the Securities will be mandatory on each
Compulsory Interest Payment Date.  The
Issuer may elect to defer payments of interest on any interest payment date
that is an Optional Interest Payment Date. 
“Compulsory Interest Payment Date” means each Interest Payment
Date that is not an Optional Interest Payment Date on which the Issuer
satisfies the Solvency Condition and the Issuer is not prohibited from making
interest payments pursuant to the terms of any Parity Security.  “Optional Interest Payment Date” means
any Interest Payment Date where the Issuer determines, at the Issuer’s sole
discretion, on or after the 20th Business Day, but not later than the fifth
Business Day prior to such Interest Payment Date, that the Capital Adequacy
Condition will not be met on such date or the Issuer or any of its EEA
Insurance Subsidiaries is not in compliance with, or that the payment of
interest on such Interest Payment Date would cause the Issuer or any of its EEA
Insurance Subsidiaries to breach, any Capital Regulations.

 

A Holder is required to notify the Issuer if at any time such Holder
owns 10% or more of the Issuer’s voting stock (a “10% Holder”), and the Issuer
has the right to suspend interest payments to any such 10% Holder.  Any payments to a 10% Holder so suspended
will be deemed satisfied with respect to the Capital Securities of such 10%
Holder and may not be subsequently claimed. 
Notwithstanding any suspension of payments to a 10% Holder, interest
payments made to other Holders generally will be deemed to have been paid in
respect of any such suspended payment to a 10% Holder.

 

Any interest payments that the Issuer elects not to make, in respect of
the Capital Securities on an Optional Interest Payment Date, together with any
interest payments the Issuer

 

35

 

does not make because the Solvency Condition
is not met on a relevant Interest Payment Date or the Issuer does not make it
because it is prohibited from making such interest payments pursuant to the
terms of any Parity Security on an Interest Payment Date, will, so long as they
remain unpaid, constitute “Deferred Interest”.  No interest will accrue on Deferred Interest,
except in the limited circumstances described in the Second Supplemental
Indenture. The Issuer will only be required to pay Deferred Interest upon the
redemption or exchange of the Capital Securities (as described in Article Three
(Redemption) and Article Two (Exchange of Securities) of the Second
Supplemental Indenture, respectively) or upon a winding up of the Issuer and
not in any other circumstances. The Issuer shall satisfy its obligation to pay
Deferred Interest only in accordance with the Alternative Coupon Satisfaction
Mechanism (as described in Article Four (Alternative Coupon Satisfaction
Mechanism) of the Second Supplemental Indenture) except in the case of a
winding up of the Issuer, in which case any Deferred Interest will be payable
by the liquidator in the same manner and with the same ranking as the principal
on the related Capital Securities.

 

The Issuer may elect to pay any interest that it does not defer (such
non-deferred interest, the “Current Interest”) in accordance with the
procedures described in Article Four (Alternative Coupon Satisfaction
Mechanism) of the Second Supplemental Indenture.

 

“Solvency Condition” means that, at and immediately after the
relevant time, the Issuer is solvent by virtue of, (a) it being able to pay its
debts to its Senior Creditors as they fall due and (b) its total Assets
exceeding its total Liabilities other that Liabilities to persons that are not
Senior Creditors by at least 4% or such other percentage specified by the
Financial Services Authority from time to time as the Regulatory Capital
Requirement.  “Regulatory Capital
Requirement” means any minimum or notional margin of solvency or minimum
regulatory capital or capital ratios required for insurance companies or
insurance holding companies or financial groups by the Financial Services
Authority or any successor regulatory body.

 

3.             No
Sinking Fund.

 

The Capital Securities
will not be subject to any sinking fund or mandatory redemption.

 

4.             Defaults.

 

If either a court of competent jurisdiction makes an order, which is
not successfully appealed within 30 days, or an effective shareholders’
resolution is validly adopted, for the winding up of the Issuer in England and
Wales (except in the case of a winding up solely for the purpose of a
reconstruction or amalgamation or substitution in place of the Issuer of a
successor in business in each case where the Capital Securities remain
outstanding and are assumed by such successor in business on terms previously
approved in writing by the Holders of not less than 75% in aggregate principal
amount of the outstanding Capital Securities), that order or resolution will
constitute an “Event of Default” with respect to the Capital
Securities.  If an Event of Default
occurs and is continuing, the Subordinated Trustee or the Holder or Holders of
at least 25% in aggregate principal amount of the Outstanding Capital
Securities may declare the entire principal amount of the Capital Securities to
be due and payable immediately.  However,
after this declaration but before the Subordinated Trustee obtains a judgment
or decree for payment of money due, the Holder or Holders of a majority in
aggregate principal amount of the Outstanding Capital Securities may rescind
the declaration of acceleration and its consequences, but only if all Events of
Default have been remedied and all payments due, other than those due as a
result of acceleration, have been made.

 

It shall be a “Capital Security Default” with respect to the
Capital Securities if: (a) the Issuer fails to pay or set aside for
payment the amount due to satisfy any interest payment on a

 

36

 

Compulsory Interest Payment Date, and such
failure continues for 14 days, or (b) the Issuer fails to pay or set aside
a sum to provide for payment of the principal amount of the Capital Securities,
any accrued but unpaid interest and any Deferred Interest on a Redemption Date,
as may be postponed from time to time pursuant to the terms and conditions of
the Capital Securities, and such failure continues for 14 days; provided, that, (i) if the Issuer does not pay, or set
aside, an installment of interest on any Compulsory Interest Payment Date, or
(ii) if the Issuer does not pay, or set aside, all or any part of the principal
of (or premium, if any, on), any accrued but unpaid interest and any Deferred
Interest on any such Capital Securities on any Redemption Date, then, the
failure to make or set aside such payment shall not constitute a Capital
Security Default and the obligation to make such payment shall be deferred
until (x) in the case of a payment of interest, the date upon which the Issuer
pays a dividend on any class of the Issuer’s share capital or the Issuer makes
any payment on any series of debt securities ranking junior to or pari passu with such series of Capital Securities and (z) in
the case of a payment of principal (or premium, if any), any accrued but unpaid
interest or any Deferred Interest on a Redemption Date, the first Business Day
after the date that falls six months after such payment was originally
due.  If any Capital Security Default
occurs and is continuing in respect of the Capital Securities, the Subordinated
Trustee may commence a proceeding in England and Wales (but not elsewhere) for
the Issuer’s winding up, or a judicial proceeding for the collection of the
sums so due and unpaid; provided, that
the Subordinated Trustee may not declare the principal amount of any
Outstanding Capital Securities to be due and payable.

 

If the Issuer fails to make payment as described in the previous
paragraph and the Solvency Condition is not satisfied at the end of the 14-day
period applicable to a Capital Security Default, such failure shall not
constitute a Capital Security Default but instead shall constitute a “Payment
Event”.  On any Payment Event, the
Subordinated Trustee may institute proceedings in England and Wales (but not
elsewhere) for the Issuer’s winding up but may not pursue any other legal
remedy, including a judicial proceeding for the collection of the sums due and
unpaid.

 

5.             Exchange.

 

In accordance with the provisions of Article Fourteen (Conversion or
Exchange of Securities) of the Subordinated Indenture and Article Two (Exchange
of Securities) of the Second Supplemental Indenture, the Capital Securities may
be exchanged, at the Issuer’s option and in the Issuer’s sole discretion, into
Preferences Shares (which shall have terms consistent in all material respects
with the description of such securities in the Second Supplemental Indenture)
issued by the Issuer.  Upon not less than
30 nor more than 60 days’ notice, the Issuer may exchange the Capital
Securities (i) in whole or in part on any interest payment date falling on or
after March 23, 2011, or (ii) in whole (but not in part) on any Interest
Payment Date upon the occurrence of a Regulatory Event or Tax Event, subject
to, among other things, the Solvency Condition being met.

 

If the Issuer exchanges the Capital Securities in part only, the Issuer
must do so in an aggregate principal amount of at least $100 million (or
multiples of $50 million above $100 million), and no partial exchange
may leave less than $100 million aggregate principal amount of Capital
Securities outstanding.  The Capital
Securities to be exchanged in any partial exchange will be selected in a manner
deemed fair and appropriate by the Subordinated Trustee.

 

If on the Event Date such Capital Securities are registered as a global
security, the Depositary shall determine, in accordance with its procedures,
the principal amount of such Capital Securities held by each beneficial owner
of the global security to be exchanged.

 

37

 

Upon an exchange, each Capital Security of $25 principal amount will be
exchanged for one Preference Share issued by the Issuer with a liquidation
preference of $25.  Upon exchange, the
Issuer shall pay any Deferred Interest outstanding on the Capital Securities
being exchanged but only in accordance with the Article Four (Alternative
Coupon Satisfaction Mechanism) of the Second Supplemental Indenture.

 

Except as otherwise indicated to the Issuer by the Financial Services
Authority, the Issuer may not exchange the Capital Securities for Preference
Shares upon the occurrence of a Regulatory Event or Tax Event or otherwise on
or after March 23, 2011 unless the Issuer has given at least six months’ notice
to the Financial Services Authority and the Financial Services Authority has
issued a statement of no objections prior to the applicable Event Date, and
exchange may only be effected if on, and immediately following, the Event Date
the Issuer is in compliance with any applicable regulatory capital requirements
or capital ratios required to be maintained for insurance companies, parent
companies in insurance groups or financial groups generally by the Financial
Services Authority.

 

6.             Subordination.

 

The Capital Securities constitute the Issuer’s unsecured, subordinated
obligations and will rank equally and ratably without any preference among
themselves.  The rights and claims of the
Holders are subordinated to Senior Creditors including the claims of any
subordinated debt security holders or the claims of holders of any other series
of debt securities not expressed to rank equally with or junior to the Capital
Securities.  The Capital Securities shall
rank pari passu as to return of assets on a
winding up with any Preference Shares.

 

On winding-up of the Issuer no amount will be payable on the Capital
Securities until all claims of the Senior Creditors admitted in such winding up
have been satisfied in full.  Upon a
winding up of the Issuer (except in the case of a solvent winding up solely for
the purpose of a reconstruction or amalgamation or substitution in the Issuer’s
place of a successor in business in each case where the Capital Securities
remain outstanding and are assumed by such successor in business, in which
event all claims for principal, interest and Deferred Interest, if any, shall
remain outstanding or on such other terms as may be approved in writing by the
Holders of not less than 75% in aggregate principal amount of Outstanding
Capital Securities), the amount payable with respect to the Capital Securities
will be determined by calculating the amount, if any, that would have been
payable in respect thereof as if on the day prior to the commencement of the
winding up and thereafter, the Holders were the holders of preference shares in
the Issuer’s capital having a preferential right to a return of assets in the
winding up over the holders of the Issuer’s Ordinary Shares (but pari passu with the holders of the Issuer’s most senior
ranking class of issued preference shares if any, except to the extent such
preference shares represent claims of Senior Creditors) assuming that such
preference shares were entitled (to the exclusion of all other rights or
privileges) to receive as a return of capital in such winding up an amount
equal to the principal amount of the Capital Securities then outstanding and
all interest accrued and unpaid, including Deferred Interest.

 

For so long as any Capital Securities remain outstanding, the Issuer
will not issue any preference shares or any other non-cumulative perpetual
instruments (including cumulative perpetual instruments where coupon payments
may be satisfied through a mechanism similar to the Alternative Coupon
Satisfaction Mechanism) of a kind capable of counting as cover for the minimum
or notional amount of solvency or minimum capital or capital ratios pursuant to
the Capital Regulations, if such instruments would rank senior to the Capital
Securities or give any guarantee or support undertaking in respect of any such
qualifying instruments ranking senior to

 

38

 

the
Capital Securities, unless the Issuer alters the terms of the Capital Securities
such that the Capital Securities rank equally with any such preference shares,
such other qualifying instruments, or such guarantee or support undertaking.

 

7.             No
Redemption at Option of Holder.

 

The Capital Securities are not redeemable at the option of the Holders
or Holders at any time.

 

8.             Optional
Redemption.

 

The Issuer may redeem the Capital Securities in whole or in part, at
its option, on any interest payment date falling on or after September 23, 2010,
subject to the Solvency Condition being met and subject, further, to the Issuer’s
compliance with the regulatory requirements described under paragraph 12 below.

 

Capital Securities to be redeemed will be drawn for redemption at such
place and individually, by lot or otherwise in a manner as may be approved by
the Subordinated Trustee; provided,
that if at the time of redemption such Capital Securities are registered as a global
security, the Depositary shall determine, in accordance with its procedures,
the principal amount of such Capital Securities held by each beneficial owner
of the global security to be exchanged. 
The Issuer is permitted to satisfy its obligation to pay any Deferred
Interest due upon a redemption only in accordance with the Alternative Coupon
Satisfaction Mechanism.

 

9.             Tax
Call Event Redemption and Tax Event Conversion.

 

The Issuer may redeem the Capital Securities in whole (but not in
part), at any time upon the occurrence of a Tax Call Event subject to the
Solvency Condition being met.  Upon the
occurrence of a Tax Event, the Issuer may at its sole discretion, subject in
each case to compliance with applicable regulatory requirements, including
those described under paragraph 12 below, at any time convert the Capital
Securities in whole (but not in part) into another series of capital securities
constituting undated cumulative subordinated notes, having the same material
terms as the Capital Securities, subject to such other terms as are set forth
in the Second Supplemental Indenture.

 

If,
following a Tax Event set out in clause (ii) or (iii) of the definition of Tax
Event, the Issuer gives notice to the Financial Services Authority of, and the Financial Services Authority objects to, the Issuer’s proposal to convert the Capital
Securities into another series of capital securities constituting undated
cumulative subordinated notes, then the Tax Event giving rise to such proposal
will become a Tax Call Event.

 

10.           Regulatory
Event Redemption.

 

The Issuer may redeem the Capital Securities in whole (but not in
part), at any time upon the occurrence of a Regulatory Event, subject to the
Issuer’s compliance with the regulatory requirements described under paragraph
12 below and subject to the Solvency Condition being met.

 

39

 

11.           Postponement
of Redemption.

 

If, following the giving of a notice of redemption with respect to a
Redemption Date on which any payments of Deferred Interest are due to be
satisfied, a Market Disruption Event occurs, or the Issuer is otherwise not
able to raise sufficient funds through the Alternative Coupon Satisfaction
Mechanism to satisfy the payment of all Deferred Interest payable on such
Redemption Date, the Issuer will be required to postpone the Redemption Date.
In such event, the Capital Securities will continue to accrue and pay interest
in accordance with their terms and such postponement will not constitute a
Capital Security Default.

 

Following the postponement of a Redemption Date, interest will accrue
on outstanding Deferred Interest that would otherwise have been satisfied on
such initially scheduled Redemption Date from (and including) such initial
Redemption Date to (but excluding) the date such Deferred Interest is paid, at
a rate of 6.50% per annum; provided that
any such interest will be payable only in accordance with the Alternative
Coupon Satisfaction Mechanism.

 

12.           Redemption
Procedures

 

Any redemption may be made on not less than 30 nor more than 60 days’
notice to the Holders, at a redemption price equal to the outstanding principal
amount of the Capital Securities together with accrued interest (including any
interest not paid on a Compulsory Interest Payment Date) to the Redemption Date and the aggregate
amount of any Deferred Interest.

 

Except as otherwise indicated to the Issuer by the Financial Services
Authority, the Issuer may not redeem the Capital Securities for Preference
Shares upon the occurrence of a Regulatory Event or Tax Event or otherwise on
or after September 23, 2010 unless the Issuer has given at least six
months’ notice to the Financial Services Authority and the Financial Services
Authority has issued a statement of no objections prior to the applicable
Redemption Date, and redemption may only be effected if on, and immediately
following, the Redemption Date the Issuer is in compliance with any applicable
regulatory capital requirements or capital ratios required to be maintained for
insurance companies, parent companies in insurance groups or financial groups
generally by the Financial Services Authority.

 

13.           Additional
Amounts.

 

Subject to certain exceptions described in Section 10.07 of the
Subordinated Indenture, the Issuer will pay to the Holder of any Capital
Security such additional amounts as may be necessary in order that every net
payment of the principal of (and premium, if any, on) and interest, if any, and
Deferred Interest, if any, on any such Capital Security after deduction or
other withholding for or on account of any present or future tax, assessment,
duty or other governmental charge of any nature whatsoever imposed, levied or
collected by or on behalf of the United Kingdom or any political subdivision or
taxing authority thereof or therein having power to tax, will not be less than
the amount provided for in any such Capital Security to be then due and
payable.

 

40

 

14.           Alternative
Coupon Satisfaction Mechanism.

 

The Issuer shall satisfy its obligation to pay any Deferred Interest,
and any interest on Deferred Interest to the extent the Second Supplemental
Indenture specifies that such interest shall accrue and be payable, only in
accordance with the Alternative Coupon Satisfaction Mechanism as described in
Article Four of the Second Supplemental Indenture. The Issuer may elect, at its
option, to pay Current Interest in accordance with the Alternative Coupon
Satisfaction Mechanism.

 

15.           Dividend and
Capital Restrictions

 

(a)  Following an Optional Interest Payment Date on which the Issuer does
not make payment in full of all interest payments to be paid on the Capital
Securities on such date, or any Interest Payment Date on which the Issuer does
not pay interest because the Solvency Condition is not met, or any Interest
Payment Date on which the Issuer does not make a payment because the Issuer is
prohibited from doing so under the terms of any Parity Security, the Issuer
will not, and the Issuer will not permit any entity that the Issuer controls,
directly or indirectly, (a) to declare or pay a dividend or distribution or
make any other payment on any Parity Securities or Junior Securities (other
than (i) a final dividend declared by the Issuer with respect to the Issuer’s
Ordinary Shares prior to the date that the decision to defer such interest
payment is made or (ii) a payment made by one of the Issuer’s wholly-owned
subsidiaries to another wholly-owned subsidiary or directly to the Issuer), or
(b) to redeem, purchase or otherwise acquire any Parity Securities or Junior
Securities, in each case unless or until the interest otherwise due and payable
on the next succeeding Interest Payment Date (but excluding Deferred Interest,
if any) on the Capital Securities is duly set aside and provided for or is paid
in full.

 

(b)  Following a Redemption Date or Event Date on which the Issuer is unable
to issue sufficient Ordinary Shares to make payment in full of all Deferred
Interest to be paid on such date, as set forth in Article Four (Alternative
Coupon Satisfaction Mechanism) of the Second Supplemental Indenture, the Issuer
will not, and will not permit any entity that the Issuer controls, directly or
indirectly, (a) to declare or pay a dividend or distribution or make any other
payment on any Parity Securities or Junior Securities (other than a final
dividend declared by the Issuer with respect to the Issuer’s Ordinary Shares
prior to such Redemption Date or Event Date or a payment made by one of the
Issuer’s wholly-owned subsidiaries to another wholly-owned subsidiary or
directly to the Issuer), or (b) to redeem, purchase or otherwise acquire any
Parity Securities or Junior Securities, in each case until such corporate
authorizations as are required to issue the necessary Ordinary Shares are
obtained and all Deferred Interest to be satisfied has been duly set aside or
provided for or paid in full.

 

(c)  The restrictions set forth above do not apply to payments the Issuer
makes to policyholders or other customers, or transfers to or from the Issuer’s
fund for future appropriations, in each case in the ordinary course of business
consistent with past practice.

 

16.           Amendment
and Modification.

 

The Subordinated Indenture contains provisions
permitting the Issuer and the Subordinated Trustee (i) without the consent of
the Holders of any Capital Securities issued under the Subordinated Indenture
to execute one or more supplemental indentures for certain enumerated purposes,
such as to cure any ambiguity or to secure the Capital Securities, and (ii)
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Capital Securities of each series of
Capital Securities affected thereby, to execute

 

41

 

supplemental indentures for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Subordinated
Indenture or of modifying in any manner the rights of Holders of Capital
Securities under the Subordinated Indenture; provided,
that, with respect to certain enumerated provisions, no such supplemental
indenture may be entered into without the consent of the Holder of each
Outstanding Capital Security affected thereby. 
The Subordinated Indenture also permits the Holders of at least a
majority in aggregate principal amount of the Outstanding Capital Securities of
each series to be affected, on behalf of the Holders of all Capital Securities
of such series, to waive compliance by the Issuer with certain restrictive
provisions of the Subordinated Indenture. 
Any such consent or waiver by the Holder of this Global Security shall
bind every future Holder of this Global Security and of any global security
issued upon the registration of transfer hereof or in exchange herefor or in
lieu hereof, whether or not notation of such consent or waiver is made upon
this Global Security or such other global securities.

 

17.           Institution
of Proceedings.

 

As provided in and subject to the provisions of the Subordinated
Indenture, the Holder of this Global Security shall not have the right to
institute any proceeding with respect to the Subordinated Indenture or the Second
Supplemental Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless (i) an Event of Default, Payment
Default, Capital Security Default, Payment Event or other default as specified
in the Subordinated Indenture with respect to the Capital Securities shall have
occurred and be continuing and such Holder shall have previously given written
notice to the Subordinated Trustee of such occurrence and the continuance
thereof; (ii) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Capital Securities shall have made written request to
the Subordinated Trustee for the Capital Securities of such series to institute
proceedings in respect of such occurrence in its own name as Subordinated
Trustee hereunder; (iii) such Holder or Holders have offered to such
Subordinated Trustee indemnity satisfactory to it against the costs, expenses
and liabilities to be incurred in compliance with such request; and
(iv) such Subordinated Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
proceeding; and no direction inconsistent with such written request has been
given to such Subordinated Trustee during such 60-day period by the Holders of
a majority in aggregate principal amount of the Outstanding Capital Securities.

 

18.           Transfer
and Exchange.

 

As provided in the Subordinated Indenture and subject to certain
limitations therein set forth, the transfer of this Global Security is
registrable on the security register maintained by the Security Registrar, upon
surrender of this Global Security for registration of transfer at the office or
agency of the Issuer in any place where the principal of and any interest on
this Global Security are payable, duly endorsed by, or accompanied by a written
instrument of transfer in the form attached hereto or in any other form
satisfactory to the Issuer and the Registrar duly executed by, the Holder
thereof or his attorney in fact duly authorized in writing, and thereupon one
or more new Global Securities, of authorized denominations and for the same
aggregate principal amount, will be registered in the name of the designated
transferee or transferees by the Security Registrar.

 

19.           No
Service Charge.

 

No service charge shall be made for any such registration of transfer
or exchange, but the Issuer may require payment of a sum sufficient to recover
any tax or other governmental charge payable in connection therewith.

 

42

 

20.           Treatment
as Owner.

 

Prior to due presentment of this Global Security for registration of
transfer, the Issuer, the Subordinated Trustee and any agent of the Issuer or
the Subordinated Trustee may treat the Person in whose name the Global Security
is registered as the owner thereof for all purposes, whether or not such Global
Security is overdue, and neither the Issuer, the Subordinated Trustee nor any
such agent shall be affected by notice to the contrary.

 

21.           No
Liability.

 

No personal liability whatsoever shall attach to, or is incurred by,
any incorporator, stockholder, officer or director, past, present or future, of
the Issuer or of any predecessor or successor corporations thereto, either
directly or indirectly through the Issuer or any such predecessor or successor
corporations, because of the incurring of the indebtedness authorized under the
Subordinated Indenture, the Second Supplemental Indenture or the Capital
Securities or under or by reason of any of the obligations, covenants or
agreements contained in the Subordinated Indenture or the Second Supplemental
Indenture or in any of the Capital Securities of any series, as the case may
be, or to be implied herefrom or therefrom; and that all such personal
liability is hereby expressly released and waived as a condition of, and as
part of the consideration for, the execution of the Subordinated Indenture, the
Second Supplemental Indenture and the issuance of the Capital Securities of
each series.

 

22.           Governing
Law.

 

THE SUBORDINATED INDENTURE, SUPPLEMENTAL INDENTURE AND THIS GLOBAL SECURITY
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, EXCEPT FOR THE SUBORDINATION PROVISIONS CONTAINED HEREIN, IN THE
SUBORDINATED INDENTURE AND IN THE SECOND SUPPLEMENTAL INDENTURE, WHICH SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF ENGLAND AND WALES.

 

43

 

ABBREVIATIONS

 

The following abbreviations, when used in the
inscription of the face of this Global Security, shall be construed as though
they were written out in full according to applicable laws or regulations:

 

	
   

  	
  TEN
  COM

  	
  –

  	
  as
  tenants in common

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TEN
  ENT

  	
  –

  	
  as
  tenants by the entireties (Cust)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  JT
  TEN

  	
  –

  	
  as
  joint tenants with right of survivorship and not as tenants in common

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  UNIF
  GIFT MIN ACT

  	
  –

  	
  Uniform
  Gifts to Minors Act

  

 

Additional abbreviations may also be used though not
in the above list.

 

44

 

FORM OF ASSIGNMENT

 

For
value received ________________ hereby sell(s), assign(s) and transfer(s) unto
________________ [also insert social security or other identifying number of
assignee] the within security, and hereby irrevocably constitutes and appoints
____________________ as attorney to transfer the said security on the books of
the Issuer, with full power of substitution in the premises.

 

	
  Dated:
  

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature(s)

  
	
   

  	
   

  
	
   

  	
  Signature(s)
  must be guaranteed by an Eligible

  Guarantor Institution with membership in an

  approved signature guarantee program pursuant to

  Rule 17Ad-15 under the Securities Exchange Act

  of 1934.

  
				

 

45

 

SCHEDULE OF EXCHANGES OR CONVERSIONS OF CAPITAL SECURITIES(2)

 

The
following exchanges or repurchases of a part of this Global Security have been
made:

 

	
  Date of

  Exchange

  	
   

  	
  Principal

  Amount of

  this Global

  Security

  Following

  Such Decrease

  (or Increase)

  	
   

  	
  Authorized

  Signatory of 

  Custodian

  	
   

  	
  Amount

  of Decrease

  in Principal

  Amount of

  this Global

  Security

  	
   

  	
  Amount

  of Increase

  in Principal

  Amount of

  this Global

  Security

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

(2)   This
schedule should be included only if the Security is a Global Security.

 

46Exhibit 4.5

 

Form of Share Warrant
Representing Preference Shares in Bearer Form

 

 

FORM OF GLOBAL SHARE WARRANT

 

Prudential plc

 

(Incorporated with limited liability in

England:  Registered No. 1397169)

 

GLOBAL SHARE WARRANT

 

[                                  ]

preference shares, Series [   ] of US$0.01 each

 

This Warrant is a Global Share Warrant, without
dividend coupons or a talon for further dividend coupons, representing the [                             ]
preference shares, Series [   ] of US$0.01 each (the “Series [      ]
Preference Shares”) of Prudential plc (the “Company”) the terms and the issue
of which was authorised by resolutions of a Committee of the Board of Directors
of the Company passed on [     ] and [     ],
20[   ].

 

THIS IS TO CERTIFY that the bearer hereof is entitled
to                                           
fully paid Series [  ] preference
shares of the Company, subject to the Memorandum and Articles of Association of
the Company and to the terms and conditions of the Series [  ]
Preference Shares as determined by the Committee of the Board of Directors of
the Company on [              ].

 

Dividends on the Series [  ] Preference Shares are payable [              ]
at the rate and subject as mentioned in the Terms and Conditions endorsed
hereon.  The first dividend payment will
be made on [     ], 20[   ] in respect
of the period from the [first] date of issue of the Series [   ]
Preference Shares.

 

The bearer hereof shall be subject to, and entitled to
the benefit of the terms of, and the rights and limitations attaching to, the Series
[    ] Preference Shares contained in the Company’s
Articles of Association and in resolutions of a duly constituted Committee of
the Board of Directors of the Company passed on [     ]
and [      ], 20 [    ], but
so that, notwithstanding anything to the contrary therein, all dividends and
other moneys payable on or in respect of the Series [   ]
dollar preference shares represented hereby shall be paid against the
presentation of this Global Share Warrant.

 

Title to this Global
Share Warrant will pass by delivery.

 

The Company may treat the bearer hereof as the
absolute owner of this Global Share Warrant notwithstanding any notation of
ownership or other writing hereon, for all purposes, and the Company shall not
be affected by any notice to the contrary. 
All payments of dividends and other moneys payable on or in respect of
the Series [   ] Preference Shares represented hereby made
to the bearer hereof shall be valid and, to the extent of the sums so paid,
constitute a full discharge to the Company.

 

This Global Share Warrant is exchangeable (in whole or
in part) at the request of the bearer hereof (free of charge to the bearer
hereof) for one or more definitive share certificates (“Certificates”), each
Certificate representing one Series [   ] Preference Share
in registered form (a “Registered Preference Share”) or an integral multiple
thereof.  Any such request shall specify
the number of Registered Preference Shares in respect of which the exchange is
to be effected and the number of Certificates required, the number of
Registered Preference Shares to be represented by each Certificate and the name
and address of each person (up to a maximum of four persons) in whose name the
relevant Registered Preference Shares are to be registered.  Any such exchange for Registered Preference
Shares shall take place within fourteen calendar days after the relevant
request at the office of the Company at Laurence Pountney Hill, London EC4R
OHH,  England or at such other office in
the United Kingdom as

 

 

the Company may appoint for the purpose and notify to
the bearer hereof.  Upon such exchange,
against the presentation and surrender of this Global Share Warrant at the
Company’s registered office, the Company shall issue and deliver to or to the
order of the bearer hereof, free of charge, the Certificates representing the
total number of Series [   ] Preference Shares (not
exceeding the aggregate number of such shares represented hereby) for which
this Global Share Warrant is submitted for exchange.  Upon such presentation and surrender this
Global Share Warrant shall be cancelled by the Company and, insofar as the
total number of Series [   ]  Preference Shares represented by the
Registered Preference Shares for which this Global Share Warrant is submitted
for exchange is less than the aggregate number of Series [   ]
Preference Shares represented by this Global Share Warrant, then the Company
shall issue and deliver to or to the order of the bearer hereof, free of
charge, a fresh global Share Warrant (in like form to the present Global Share
Warrant) representing the balance of the Series [   ]  Preference Shares not so submitted for
exchange and duly executed by the Company.

 

GIVEN under the Seal of the Company this   day of   
, 20  , in the presence of:

 

Issued in London

 

2

 

(endorsed on
Certificate and Warrant)

 

Terms and
Conditions

 

The terms and conditions
attaching to the Preference Shares are contained in the Articles of Association
of the Company and in resolutions of a committee of the board of directors of
the Company dated [                
].  The full text of the
resolutions are available for inspection at the registered office of the
Company.  There follows a summary of the
terms and conditions.

 

1.     Definitions

 

	
  “ADR Depositary”

  	
   

  	
  means Citibank, N.A.;

  
	
   

  	
   

  	
   

  
	
  “Assets”

  	
   

  	
  means the total amount
  of the Company’s non-consolidated gross assets as shown by its latest
  published balance sheet, but adjusted, as specified in the Subordinated
  Indenture, for contingencies and subsequent events, and to such extent as the
  person or persons giving the Solvency Condition report may determine;

  
	
   

  	
   

  	
   

  
	
  “Capital Securities”

  	
   

  	
  means $[•]
  per cent. Perpetual Subordinated Capital Securities of the Company issued
  pursuant to a prospectus supplement dated [•];

  
	
   

  	
   

  	
   

  
	
  “Company”

  	
   

  	
  means Prudential plc;

  
	
   

  	
   

  	
   

  
	
  “FSA”

  	
   

  	
  means the United
  Kingdom Financial Services Authority or any successor regulatory body;

  
	
   

  	
   

  	
   

  
	
  “Junior Securities”

  	
   

  	
  means ordinary shares
  in the capital of the Company or any other securities (either issued by the
  Company or one of its Subsidiaries benefiting from a guarantee or support
  agreement) which rank, as regards distributions on a return of assets or on a
  winding-up of the Company or in respect of distributions or payments of
  dividends or any other payments thereon, after the Capital Securities and the
  Preference Shares;

  
	
   

  	
   

  	
   

  
	
  “Liabilities”

  	
   

  	
  means the total amount
  of the Company’s non-consolidated gross liabilities as shown by its latest
  published balance sheet, but adjusted, as specified in the Subordinated
  Indenture, for contingencies and subsequent events, and to such extent as the
  person or persons giving the Solvency Condition report may determine;

  
	
   

  	
   

  	
   

  
	
  “Parity Security”

  	
   

  	
  means the Company’s
  perpetual capital instruments (including the Capital Securities), preferred
  or preference shares (including the Preference Shares) or other securities
  issued directly or indirectly by the Company or issued by one of its
  Subsidiaries and benefiting from a guarantee or support agreement ranking pari passu with the Capital Securities as to participation
  in the Company’s assets in the event of the Company’s winding up;

  
	
   

  	
   

  	
   

  
	
  “Preference Shares”

  	
   

  	
  means Perpetual Non-Cumulative
  Preference Shares in the Company;

  
	
   

  	
   

  	
   

  
	
  “Regulatory Capital Requirement”

  	
   

  	
  means any minimum or
  notional margin of solvency or minimum regulatory capital or capital ratios
  required for insurance companies, insurance holding companies or financial
  groups by the FSA;

  
	
   

  	
   

  	
   

  
	
  “Senior Creditors”

  	
   

  	
  means in respect of the
  Capital Securities:

  

 

3

 

	
   

  	
   

  	
  (i)        any
  creditors who are unsubordinated creditors with claims admitted in the event
  of a winding up of the Company;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)       any
  creditors having claims in respect of liabilities that are, or are expressed
  to be, subordinated, whether only in the event of a winding up or otherwise,
  to the claims of unsubordinated creditors of the Company but not further or
  otherwise;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iii)      any
  creditor who is a holder of capital securities other than the Capital
  Securities except those that rank, or are expressed to rank, equally with or
  junior to the Capital Securities; and 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iv)     all
  other creditors having claims, including other such creditors holding
  subordinated debt securities, except those that rank, or are expressed to
  rank, equally with (including holders of Parity Securities) or junior to
  (including holders of Junior Securities) the claims of any holder of the
  Capital Securities;

  
	
   

  	
   

  	
   

  
	
  “Solvency Condition”

  	
   

  	
  means the test of
  solvency of the Company. The Company is solvent if it is able to pay its
  debts to Senior Creditors as
  they fall due and total Assets exceed total Liabilities, other than
  Liabilities to persons that are not Senior Creditors, by at least 4% or such
  other percentage specified by the FSA as the Regulatory Capital Requirement;

  
	
   

  	
   

  	
   

  
	
  “Subordinated
  Indenture”

  	
   

  	
  means the subordinated
  indenture dated [•] between the Company and Citibank, N.A. as
  subordinated trustee as supplemented by the first supplemental indenture
  between the Company and Citibank, N.A. as subordinated trustee; and

  
	
   

  	
   

  	
   

  
	
  “Subsidiary”

  	
   

  	
  means a subsidiary
  undertaking within the meaning of section 258 of the Companies Act 1985.

  

 

1.     Dividend
Rights of the Preference Shares

 

Perpetual Non-Cumulative
Preference Shares

 

Non-cumulative preferential
dividends on this series of Preference Shares will be payable if declared by
our board of directors in its sole discretion, and subject to the satisfaction
of the following conditions:

 

(a) the Solvency
Condition is satisfied;

 

(b) the Company is
not prohibited from paying a dividend under the terms of any Parity Security;
and

 

(c) the distributable profits of the Company are
sufficient to cover the payment in full of the dividend, or the setting aside
and providing for the dividend on this series of Perpetual Non-Cumulative
Preference Shares and dividends on any other preference shares stated to be payable
on the same date and ranking equally as to dividends with this series of
Perpetual Non-Cumulative Preference Shares.

 

If so
declared, any such dividend will be [•]% of the liquidation preference per annum, payable
quarterly in arrear on 23 March, 23 June, 23 September and 23 December of
each year, commencing on the first such date occurring after the applicable
issue date (each, a “Dividend Payment Date”).

 

4

 

2.     Capital
Rights of the Preference Shares

 

Return of capital

 

On return of capital on a winding-up or otherwise of
the Company, the holders of Preference Shares of this series, and the holders
of any other preference shares ranking equally with the Preference Shares with
regard to rights to participation in the surplus assets, will be entitled to
receive payment in U.S. dollars out of any assets available for distribution to
shareholders.  This distribution will be
made in priority to any distribution of assets to holders of ordinary shares in
the capital of the Company or any other class of shares ranking below the
Preference Shares of this series with regard to participation in the surplus
assets of the Company. Holders of Preference Shares will be entitled to a payment
equal to the amount paid up (or credited as paid up) on each Preference Share
together with any accrued but unpaid dividends and any premium on such share as
may be determined in accordance with the procedures described in paragraph 3
below under “Redemption  and purchase
of Preference Shares - Optional
Redemption” unless there are insufficient assets available for
distribution in which case holders of Preference Shares will be entitled to
share ratably in any distribution of the surplus assets in proportion to the
full respective preferential amounts to which they are entitled.  Holders of Preference Shares have no further
right to participate in any return of capital.

 

If the holders of the Preference
Shares are entitled to any recovery with respect to the Preference Shares in a
winding up or liquidation, they might not be entitled in such proceedings to a
recovery in U.S. dollars and might be entitled only to a recovery in pounds
sterling.

 

Dividend and capital restriction

 

If the Company does not
declare a dividend for this series of Preference Shares, the Company will not,
and it will not permit any entity that it controls to, directly or indirectly:

 

(a) declare or pay a
dividend or make a distribution or any other payment on any preference shares or
Junior Securities (other than (i) a final dividend declared by the Company
with respect to ordinary shares prior to the date that the decision to not pay
such dividend is made or (ii) a payment made by one of the Company’s
wholly-owned Subsidiaries to another wholly-owned Subsidiary or directly to the
Company); or

 

(b) to redeem,
purchase or otherwise acquire any Parity Securities or any Junior Securities,
in each case unless or until the Company sets aside and provides for or pays in
full the dividend on the Preference Shares for the next succeeding four
quarterly dividend payment dates. These restrictions do not apply to any
payments made by the Company to policyholders or other customers or transfers
to or from the fund for future appropriations, in each case in the ordinary
course of business consistent with past practice.

 

For the purposes of the
foregoing provision, the payment (or declaration of payment) of a dividend or
distribution on Junior Securities or preference shares shall be deemed to
include the making of any interest, coupon or dividend payment (or payment
under any guarantee in respect thereof). 
For the purposes of the foregoing provision, the redemption, purchase or
other acquisition of the Parity Securities or Junior Securities shall be deemed
not to include transactions where the funds used to redeem, purchase or acquire
those securities are derived from an issue of Junior Securities or Parity
Securities (i) made at any time within the six month period prior to the
time of such redemption, purchase or acquisition, and (ii) with the same
or junior ranking on a return of assets on a winding up or in respect of a
distribution or payment of interest, coupons or dividends and/or any other
amounts thereunder to those securities being redeemed, purchased or acquired.

 

5

 

3.     Redemption
and Purchase of the Preference Shares

 

Optional Redemption

 

This series of Preference Shares is redeemable, in
whole or in part, at the option of the Company on any Dividend Payment Date at
least five years after the date of issue of the this series of Preference
Shares (a “Preference Share Redemption Date”),
giving not less than 30 and not more than 60 days’ notice.  The Company may elect to redeem this series
of Preference Shares in whole or in part provided that it has given at least
six months’ notice to the FSA and the FSA have issued a statement of no
objection prior to the Preference Share Redemption Date (except as otherwise
indicated by the FSA), and redemption may only be effected if on, and
immediately following, the Preference Share Redemption Date the Company is in
compliance with any applicable Regulatory Capital Requirement.

 

On redemption the holder of each share will be
entitled to an amount equal to $25 per Preference Share together with any
accrued but unpaid dividends (such amount, the “Redemption Price”).

 

If any Preference Shares are to be redeemed, a notice
of redemption will be given to the ADR Depositary and to each record holder of
Preference Shares in registered form to be redeemed, not less than 30 and not
more than 60 days prior to the Preference Share Redemption Date.  Each notice of redemption will specify:

 

(i)            the
Preference Share Redemption Date;

 

(ii)           the
particular Preference Shares to be redeemed;

 

(iii)          the
Redemption Price and details of any dividend payable on the Preference Share
Redemption Date (stating that dividends shall cease to accrue on redemption);

 

(iv)          the
place or places where holders may surrender documents of title and obtain
payment of the Redemption Price; and

 

(v)           that
no defect in the notice of redemption or in giving of the notice will affect
the validity of the redemption proceedings.

 

The Company may (subject to the
provisions of the Companies Act 1985, applicable U.S. securities laws and
regulations and the Company’s Articles of Association) purchase Preference
Shares of any series, in the open market, or by private agreement, in each case
upon the terms and conditions that the board of directors of the Company or a
committee thereof shall determine. 
However, under existing FSA requirements, the Company may not redeem or
purchase any Preference Shares unless the FSA consents in advance.  The FSA may impose any conditions on any
redemption or purchase.

 

4.     Voting
Rights

 

Holders of this series of
Preference Shares having a registered address within the United Kingdom will be
entitled to receive notice of, but will not be entitled to attend or vote at,
general meetings except as provided by applicable law.

 

5.     Additional
Amounts

 

If at any time a U.K.
taxing authority requires the Company to deduct or withhold any amount in
relation to any dividend payments, the Company is under no obligation to pay
any holder of Preference Shares in this series any additional amounts.

 

6

 

6.     Issuance
Restriction

 

The Company may not issue
any shares that rank ahead of the Preference Shares with regard to rights to
participate in the Company’s profits or assets, without the prior written consent
of the holders of at least three-quarters in nominal value of this series of
Preference Shares.

 

7

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