Document:

Exhibit 10.2

Restricted Stock Unit Agreement for

Outside Directors under
Assured Guaranty Ltd. 2004 Long-Term Incentive
Plan

THIS AGREEMENT, entered into as of the Grant Date (as
defined in paragraph 1), by and between the Director and Assured Guaranty
Ltd. (the “Company”):

WITNESSETH THAT:

WHEREAS, the Company maintains the Assured Guaranty
Ltd. 2004 Long-Term Incentive Plan (the “Plan”), and the Director
has been selected by the committee administering the Plan (the “Committee”) to
receive a Restricted Stock Unit Award under the Plan; and

NOW, THEREFORE, IT IS AGREED, by and between the
Company and the Director, as follows:

1. Terms of Award.
The following words and phrases used in this Agreement shall have the
meanings set forth in this paragraph 1:

(a)                                  The
“Director” is _______________.

(b)                                 The
“Grant Date” ______________________________.

Other words and phrases
used in this
Agreement are defined pursuant to paragraph 14 or elsewhere in this Agreement.

2. Restricted
Stock Unit Award. This Agreement specifies the terms of the “Restricted
Stock Unit Award” granted to the Director. Subject to the terms of this
Agreement and the Plan, the Director is hereby granted the right to receive
_________ shares (“Restricted Stock Units”) at the “Delivery Date,” which shall
be ______________.(1) [Alternate Delivery
Date:  (must use when  share guidelines have not been met) on or
about the sixth month anniversary of the date the Director ceases to be a
director of Assured Guaranty Ltd.] 
Notwithstanding the foregoing, if the Director ceases to be a director
of the Company by reason of his death or Disability (as defined in paragraph
3), and the Restricted Period with respect to the Restricted Stock Units has
ended under the terms of paragraph 3, then the Delivery Date for the shares
shall be the date immediately following the date on which the Director ceases
to be a director, or as soon as practicable thereafter.

3. Restricted
Period. Subject to the limitations of this Agreement,
the “Restricted Period” for the Restricted Stock Units shall begin on the Grant
Date and end on the day immediately prior to the next annual shareholders
meeting during which elections for directors are held following the Grant Date.

The Restricted Period
shall end prior to the date specified above to the extent set forth below:

(1) This should be a date
occurring after the vesting date.

 

 

(a)           The
Restricted Period shall end on the date the Director ceases to be a director of the
Company (and is not otherwise employed by the Company or its Subsidiaries),
if the Director ceases to be a director of the Company by reason of his
Disability or death. The Director shall be considered to have a “Disability” if
the Nominating and Governance Committee of the Board of Directors determines
that he is unable to serve as a Director as a result of a medically
determinable physical or mental impairment.

(b)           The
Restricted Period shall end upon a Change in Control (as defined in the Plan),
provided that such Change in Control occurs on or before the date the Director ceases to be a director of the
Company.

4. Transfer and
Forfeiture of Shares.
If the Restricted Period with respect to the Restricted Stock Units ends on or
before the date the Director ceases to be a director of the Company, then at
the end of such Restricted Period, the Restricted Stock Units shall be fully
vested, and shall be transferred to the Director free of all restrictions on
the Delivery Date. If the Restricted Period with respect to the Restricted
Stock Units does not end on or before the date the Director ceases to be a
director of the Company, then as of the date the Director ceases to be a
director of the Company, the Director shall forfeit all Restricted Stock Units.(2)

5. Transferability.
Restricted Stock Units may not be sold, assigned, transferred, pledged or
otherwise encumbered prior to the Delivery Date.

6. Dividends.
The Director will be credited with additional Restricted Stock Units to reflect
dividends payable with respect to shares during the period between the Grant
Date and the Delivery Date, with the increase in the number of Restricted Stock
Units equal to the number of shares which could be purchased with the dividends
(assuming each Restricted Stock Unit was a share), based on the value of such
share at the time such dividends are paid. The Restricted Stock Units credited on account of the preceding sentence
(other than extraordinary dividends, as determined by the Committee) shall be
fully vested at the time of crediting to the Director, and distribution shall
be made with respect to such Restricted Stock Units on the Delivery
Date. Extraordinary dividends shall be vested in accordance with the same
schedule as the Restricted Stock Units to which such extraordinary dividends
are attributable. No dividends shall be credited to or for the benefit of the
Director for Restricted Stock Units with respect to record dates occurring
prior to the Grant Date, or with respect to record dates occurring on or after
the date, if any, on which the Director has forfeited those Restricted Stock Units.

7. Director’s
Rights to Shares. Prior to the Delivery Date, (a) the Director shall
not be treated as owner of the shares, shall not have any rights as a
shareholder as to those shares, and shall have only a contractual right to
receive them, unsecured by any assets of the Company or its subsidiaries; (b) the
Director shall be not permitted to vote the Restricted Stock Units; and (c) the
Director’s right to receive such shares will be subject to the adjustment
provisions relating to mergers, reorganizations, and similar events set forth
in the Plan.

8. Heirs and
Successors. This Agreement shall be binding upon, and inure to the benefit
of, the Company and its successors and assigns, and upon any person acquiring,
whether by

(2) The Award will not continue to vest if a person
ceases to be a Director of the Company but continues to be an employee of the
Company.

 2
 

 

 

merger, consolidation, purchase of assets or otherwise, all or
substantially all of the Company’s assets and business. If any benefits deliverable
to the Director under this Agreement have not been
delivered at the time of the Director’s death, such benefits shall be delivered
to the Designated Beneficiary, in accordance with the provisions of this Agreement
and the Plan. The “Designated Beneficiary” shall be the beneficiary or
beneficiaries designated by the Director in a writing filed with the Committee
in such form and at such time as the Committee shall require. If a deceased
Director fails to designate a beneficiary, or if the Designated Beneficiary
does not survive the Director, any rights that would have been exercisable by
the Director and any benefits distributable to the Director shall be
distributed to the legal representative of the estate of the Director. If a
deceased Director designates a beneficiary and the Designated Beneficiary
survives the Director but dies before the complete distribution of benefits to
the Designated Beneficiary under this Agreement, then any
benefits distributable to the Designated Beneficiary shall be distributed to
the legal representative of the estate of the Designated Beneficiary.

9. Administration.
The authority to manage and control the operation and administration of this Agreement
shall be vested in the Committee, and the Committee shall have all powers with
respect to this
Agreement as it has with respect to the Plan. Any interpretation
of this Agreement by the Committee and any decision made by it with respect to
this Agreement is final and binding on all persons.

10. Plan
Governs. Notwithstanding anything in this Agreement
to the contrary, this Agreement shall be subject to the terms of the Plan, a
copy of which may be obtained by the Director from the office of the Secretary
of the Company; and this Agreement is subject to all interpretations, amendments,
rules and regulations promulgated by the Committee from time to time
pursuant to the Plan.

11. Notices.
Any written notices provided for in this Agreement or the Plan
shall be in writing and shall be deemed sufficiently given if either hand
delivered or if sent by fax or overnight courier, or by postage paid first
class mail. Notices sent by mail shall be deemed received three business days
after mailing but in no event later than the date of actual receipt. Notices
shall be directed, if to the Director, at the Director’s address indicated by
the Company’s records, or if to the Company, at the Company’s principal
executive office.

12. Fractional
Shares. In lieu of issuing a fraction of a share, resulting from an
adjustment of the Restricted Stock Unit Award pursuant to the Plan or
otherwise, the Company will be entitled to pay to the Director an amount equal
to the fair market value of such fractional share.

13. Amendment.
This
Agreement may be amended in accordance with the provisions of the
Plan, and may otherwise be amended by written agreement of the Director and the
Company without the consent of any other person.

14. Plan
Definitions. Except where the context clearly implies or indicates the
contrary, a word, term, or phrase used in the Plan is similarly used in this
Agreement.

 3
 

 

IN WITNESS
WHEREOF, the Director has executed the Agreement, and the Company has caused
these presents to be executed in its name and on its behalf, all as of the
Grant Date.

	
   

  	
  Assured
  Guaranty Ltd.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
  Director:

  	
   

  
					

 

 4Exhibit 4.2(a)

 

RETAIL
GLOBAL NOTE

 

CUSIP
NO. 74367CDG7

 

 

PROTECTIVE LIFE SECURED
TRUST 2006-2

CALLABLE INTERNOTE®

 

REGISTERED FACE AMOUNT:  $28,500,000.00

No. 1

 

THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE (HEREINAFTER DEFINED) AND IS REGISTERED IN THE NAME OF A DEPOSITARY
(AS DEFINED IN THE INDENTURE) OR A NOMINEE OF A DEPOSITARY. THIS NOTE IS NOT
EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS
A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE
REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

 

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”),
TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND UNLESS ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

1

 

	
  Principal Amount:
  $28,500,000.00

  	
   

  	
   

  	
  LIBOR o

  
	
  Original Issue
  Date: February 16, 2006

  	
   

  	
   

  	
  o
  LIBOR Reuters Page:

  
	
  Price to Public:
  100%

  	
   

  	
   

  	
  o
  LIBOR Telerate Page:

  
	
  Stated Maturity
  Date: February 15, 2009

  	
   

  	
   

  	
  Designated LIBOR
  Currency:

  
	
  Settlement Date
  and Time: February 16, 2006 3:30 pm, New 

  York City time

  	
   

  	
   

  	
  EURIBOR o

  Treasury Rate (other than Constant Maturity 

  
	
  Securities
  Exchange Listing: o
  Yes ý No. If yes,
  indicate 

  name(s) of Securities Exchange(s)_______________________.

  	
   

  	
   

  	
  Treasury Rate) o

  Constant
  Maturity Treasury Rate o

  
	
  Depositary: The
  Depository Trust Company

  	
   

  	
   

  	
  Designated CMT
  Telerate Page:

  
	
  Authorized Denominations (if other than $1,000):

  	
   

  	
   

  	
  If Telerate
  Page 7052:

  
	
  Collateral held in the Trust: Protective Life Insurance Company

  	
   

  	
   

  	
  o
  Weekly Average

  
	
  Funding Agreement No. GA 6078, all proceeds,
  rights and books and records related thereto.

  	
   

  	
   

  	
  o
  Monthly Average

  Designated CMT Maturity Index:

  
	
  Interest Rate or
  Formula:

  	
   

  	
   

  	
  Prime Rate o

  
	
  Fixed Rate Note: ý
  Yes o No. If yes,

  	
   

  	
   

  	
  Inverse Floating
  Rate Note o

  
	
   

  	
  Interest Rate:%

  	
   

  	
   

  	
  Fixed Interest
  Rate:

  
	
   

  	
  Interest Payment
  Frequency:

  	
   

  	
   

  	
  Floating
  Rate/Fixed Rate o

  
	
   

  	
  o
  Monthly           o
  Quarterly

  	
   

  	
   

  	
  Fixed Interest
  Rate:

  
	
   

  	
  ý      Semi-annually             o
  Annually

  	
   

  	
   

  	
  Fixed Rate
  Commencement Date:

  
	
   

  	
  Interest Payment Dates, if other than as specified
  on the 

  	
   

  	
   

  	
  Index Maturity:

  
	
   

  	
  reverse hereof:

  	
   

  	
   

  	
  Spread and/or
  Spread Multiplier, if any:

  
	
   

  	
  Additional/Other
  Terms: None.

  	
   

  	
   

  	
  Initial Interest
  Rate, if any:

  
	
  Amortizing Note:
  o
  Yes ý No. If yes,

  	
   

  	
   

  	
  Initial Interest
  Reset Date:

  
	
   

  	
  Amortization
  schedule or formula:

  	
   

  	
   

  	
  Interest Reset
  Dates:

  
	
   

  	
  Additional/Other
  Terms:

  	
   

  	
   

  	
  Rate
  Determination Date(s):

  
	
  Discount Note: o
  Yes ý No. If yes,

  	
   

  	
   

  	
  Interest Payment
  Frequency:

  
	
   

  	
  Registered Face
  Amount:

  	
   

  	
   

  	
  o
  Monthly           o
  Quarterly

  
	
   

  	
  Total Amount of
  Discount:

  	
   

  	
   

  	
  o
  Semi-Annually o
  Annually

  
	
   

  	
  Yield to Maturity:

  	
   

  	
   

  	
  Maximum Interest
  Rate, if any:

  
	
   

  	
  Additional/Other
  Terms:

  	
   

  	
   

  	
  Minimum Interest
  Rate, if any:

  
	
  Redemption
  Provisions: ý
  Yes o No. (If yes,
  the 

  	
   

  	
   

  	
  Additional/Other
  Terms:

  
	
  Trust
  will redeem the Note on the date and to the 

  extent that the Funding Agreement (as defined in the

  	
   

  	
  Regular Record
  Date(s): Each date, whether or not a business day, that is fifteen calendar
  days immediately 

  
	
  Indenture)
  has been redeemed by Protective Life 

  Insurance Company (“Protective Life”). Protective

  Life has the right to redeem the Funding Agreement,

  in full or in part, on February 15, 2007 (such date, the

  	
   

  	
  preceding an
  interest payment date.

  Sinking Fund: Not Applicable.

  Day Count Convention:

  ý
  30 over 360       o
  Actual over Actual

  
	
  “Initial
  Redemption Date”) or on any other Interest 

  	
   

  	
  o
  Actual over 360               o
  Other (See attached)

  
	
  Payment
  Date thereafter).

  	
   

  	
  Specified
  Currency: U.S. Dollars

  
	
   

  	
  Initial
  Redemption Percentage:

  	
   

  	
  Calculation
  Agent: Not Applicable

  
	
   

  	
  Annual
  Redemption Percentage Reduction, if any:

  	
   

  	
  Additional/Other
  Terms: None

  
	
   

  	
  Additional/Other
  Terms:

  	
   

  	
   

  
	
  Repayment Provisions: o
  Yes ý No. (If yes,
  the 

  Holder of this Note has the right to repayment of 

  this Note on any Interest Payment Date after
                 ).

  	
   

  	
   

  
	
   

  	
  Additional/Other
  Terms:

  	
   

  	
   

  
	
  Survivor’s
  Option: ý
  Yes o No. (If yes,
  the attached Survivor’s Option is incorporated into this Note).

  	
   

  	
   

  
	
   

  	
  Trust Put
  Limitation: Not Applicable

  	
   

  	
   

  
	
  Floating Rate
  Note: o
  Yes ý No. If yes,

  	
   

  	
   

  
	
   

  	
  Interest Rate:

  	
   

  	
   

  
	
   

  	
  Interest Rate
  Basis(es) (or Base Rate):

  	
   

  	
   

  
	
   

  	
  CD Rate o

  	
   

  	
   

  
	
   

  	
  Commercial Paper Rate o

  	
   

  	
   

  
	
   

  	
  Federal Funds
  (Effective) Rate o

  	
   

  	
   

  
	
   

  	
  Federal Funds
  (Open) Rate o

  	
   

  	
   

  
										

 

 

2

 

The Protective Life Secured Trust designated above
(the “Trust”), for value received, hereby promises to pay to Cede &
Co., or its registered assigns, the Principal Amount on the Stated Maturity
Date and, if so specified above, to pay interest thereon from the Original
Issue Date specified above or from the most recent Interest Payment Date
specified herein to which interest has been paid or duly provided for at the
rate per annum determined in accordance with the provisions on the reverse
hereof and as specified above, until the principal hereof is paid or made
available for payment and (to the extent that the payment of such interest
shall be legally enforceable) at such rate per annum on any overdue principal
and premium and on any overdue installment of interest as specified above. The “Principal
Amount” of this Note at any time means (1) if this Note is a Discount Note
(as hereinafter defined), the Amortized Face Amount (as defined in Section 2(b) on
the reverse hereof) at such time, (2) if this Note is an Amortizing Note
(as defined in Section 2(c) on the reverse hereof), the
Outstanding Face Amount (as defined in Section 2(c) on the
reverse hereof) at such time and (3) in all other cases, the Registered
Face Amount hereof. Capitalized terms not otherwise defined herein shall have
their meanings set forth in the Indenture, dated as of the Original Issue Date
specified in the Pricing Supplement (the “Indenture”), between The Bank of New
York (the “Indenture Trustee”) and the Trust, or on the face hereof.

 

This Note will mature on the Stated Maturity Date,
unless its principal (or, any installment of its principal) becomes due and
payable prior to the Stated Maturity Date whether, as applicable, by the
declaration of acceleration of maturity, notice of redemption at the direction
of the Trust, notice of the Holder’s option to elect repayment or otherwise
(the Stated Maturity Date or any date prior to the Stated Maturity Date on
which the principal amount of this Note becomes due and payable, as the case may be,
are referred to as the “Maturity Date” with respect to principal of this Note
repayable on such date).

 

A “Discount Note” is any Note that has a Price to
Public that is less than 100% of the Registered Face Amount thereof by more
than a percentage equal to the product of 0.25% and the number of full years to
the Stated Maturity Date.

 

Except as provided in the following paragraph, the
Trust will pay interest on each Interest Payment Date specified herein,
commencing with the first (1st) Interest Payment Date next succeeding the
Original Issue Date, and on the Maturity Date; provided that
any payment of principal, premium, if any, or interest to be made on any
Interest Payment Date or on a Maturity Date that is not a Business Day shall be
made on the next succeeding Business Day with the same force and effect as if
made on such Interest Payment Date or such Maturity Date, as the case may be,
except that with respect to Interest Payment Dates, other than the Maturity
Date, if this Note is a LIBOR Note or a EURIBOR Note and such next succeeding
Business Day falls in the next calendar month, such payment shall be made on
the Business Day immediately preceding the Interest Payment Date; provided that, in connection with
Floating Rate Notes, and except in the case of an Interest Payment Date that
falls on a Maturity Date, interest will continue to accrue to but excluding the
date the interest is paid. Unless otherwise specified above, the interest
payable on each Interest Payment Date or the Maturity Date will be the amount
of interest accrued from and including the Original Issue Date or from and

 

3

 

including the last Interest Payment Date to which
interest has been paid or duly provided for, as the case may be, to, but
excluding, such Interest Payment Date or the Maturity Date, as the case may be.

 

Unless otherwise specified above, the interest
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in the Indenture, be paid to the Person in whose name this
Note (or one or more predecessor Notes) is registered at the close of business
on the Regular Record Date for such Interest Payment Date, which Regular Record
Date shall be the fifteenth (15th) calendar day, whether or not a Business Day,
immediately preceding the related Interest Payment Date; provided that, notwithstanding
any provision of the Indenture to the contrary, interest payable on any
Maturity Date shall be payable to the Person to whom principal shall be
payable; and provided, further, that unless
otherwise specified above, in the case of a Note initially issued between a
Regular Record Date and the Interest Payment Date relating to such Regular
Record Date, interest for the period beginning on the Original Issue Date and
ending on such Interest Payment Date shall be paid on the Interest Payment Date
following the next succeeding Regular Record Date to the registered Holder on
such next succeeding Regular Record Date. Any such interest not so punctually
paid or duly provided for shall be payable as provided in the Indenture.

 

The principal of and interest on this Note are payable
in immediately available funds in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts at the Corporate Trust Office of the Indenture Trustee (or any
such Paying Agent). Payments of principal, interest and other amounts hereon
(other than on the Maturity Date) will be made in accordance with existing
arrangements between the Indenture Trustee (or any such Paying Agent) and the
Depositary. Any principal, premium and/or interest payable hereon on the
Maturity Date will be paid by wire transfer in immediately available funds to
an account specified by the Depositary upon surrender of this Note at the
Corporate Trust Office of the Indenture Trustee (or any such Paying Agent), provided that this Note is
presented to the Indenture Trustee (or any such Paying Agent) in time for the
Indenture Trustee (or any such Paying Agent) to make such payments in such
funds in accordance with its normal procedures.

 

Unless otherwise specified on the face hereof, the
Holder hereof will not be obligated to pay any administrative costs imposed by
banks in making payments in immediately available funds by the Trust. Unless
otherwise specified on the face hereof, any tax assessment or governmental
charge imposed upon payments hereunder, including, without limitation, any
withholding tax, will be borne by the Holder thereof.

 

REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF
THIS NOTE SET FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL
PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

 

Unless the certificate of authentication hereon shall
have been executed by the Indenture Trustee pursuant to the Indenture, this
Note shall not be entitled to any benefit under such Indenture or be valid or
obligatory for any purpose.

 

4

 

IN WITNESS WHEREOF, the Trust has caused this
instrument to be duly executed, by manual or facsimile signature.

 

	
   

  	
  THE PROTECTIVE LIFE SECURED TRUST SPECIFIED ON THE
  FACE OF THIS NOTE

  
	
   

  	
   

  
	
  Dated: Original
  Issue Date

  	
  By: Wilmington
  Trust Company, not in its individual capacity but solely as Delaware Trustee.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jennifer A. Luce

  	
   

  

 

CERTIFICATE OF
AUTHENTICATION

 

This is one of the Notes of the Protective Life
Secured Trust specified on the face of this Note referred to in the
within-mentioned Indenture.

 

	
   

  	
  THE BANK OF NEW YORK

  
	
   

  	
  As Indenture Trustee

  
	
   

  	
   

  
	
  Dated: Original Issue Date

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph A. Lloret

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  

 

5

 

[REVERSE
OF NOTE]

 

Section 1.                                          General.
This Note is one of a duly authorized issue of Notes of the Protective Life
Secured Trust designated on the face hereof (the “Trust”). The Series of
Notes are issued pursuant to the Indenture. Capitalized terms not otherwise
defined herein shall have their meanings set forth in the Indenture.

 

Section 2.                                          Determination of Interest Rate and Certain
Other Terms.

 

(a)                                  Fixed
Rate Notes.

 

(i)                                     If
this Note is specified on the face hereof as a “Fixed Rate Note,” for the
period from the Original Issue Date, or from the last Interest Payment Date to
which interest has been paid or duly provided for, as the case may be, the
interest rate hereon shall be at the rate per annum stated on the face hereof
until, but excluding the date on which the Principal Amount is paid or made
available for payment. Unless otherwise specified on the face hereof, the rate
of interest payable on this Note will not be adjusted.

 

(ii)                                  Unless
otherwise specified on the face hereof, the Interest Payment Dates for a Note
that provides for monthly interest payments shall be the fifteenth (15th) day
of each calendar month, beginning in the first (1st) calendar month following
the month in which the Note was issued; in the case of a Note that provides for
quarterly interest payments, the Interest Payment Dates shall be the fifteenth
(15th) day of every third (3rd) calendar month, beginning in the third (3rd)
calendar month following the month in which the Note was issued; in the case of
a Note that provides for semi-annual interest payments, the Interest Payment
Dates shall be the fifteenth (15th) day of every sixth (6th) calendar month,
beginning in the sixth (6th) calendar month following the month in which the
Note was issued; and in the case of a Note that provides for annual interest
payments, the Interest Payment Date shall be the fifteenth (15th) day of every
twelfth (12th) calendar month, beginning in the twelfth (12th) calendar month
following the month in which the Note was issued. Interest will be computed on
the basis of a 360-day year of twelve 30-day months or, in the case of an
incomplete month, the number of days elapsed.

 

(b)                                 Discount
Notes.

 

(i)                                     If
this Note is specified on the face hereof as a “Discount Note,” this Note shall
bear interest at the rate set forth on the face hereof in the same manner as
set forth in Section 2(a) above, and payments of principal and
interest shall be made as set forth on the face hereof.

 

(ii)                                  In
the event a Discount Note is redeemed, repaid or accelerated, the amount
payable to the Holder of such Note on the Maturity Date will be equal to the
sum of (1) the Price to Public (increased by any accruals of Discount)
and, in the event of any redemption of Discount Notes, if applicable, multiplied
by the

 

6

 

Initial Redemption
Percentage (as adjusted by the Annual Redemption Percentage Reduction, if
applicable); and (2) any unpaid interest accrued on such Discount Notes to
the Maturity Date (such sum, the “Amortized Face Amount”). For purposes of
determining the amount of Discount that has accrued as of any date on which a
redemption, repayment or acceleration of this Note occurs for Discount Notes,
the Discount will be accrued using a Constant Yield Method. The Constant Yield
Method will be calculated using a 30-day month, 360-day year convention, a
compounding period that, except for the Initial Period (as defined below),
corresponds to the shortest period between Interest Payment Dates for the
Discount Notes (with ratable accruals within a compounding period), a coupon
rate equal to the initial coupon rate applicable to the applicable Discount
Notes and an assumption that the Stated Maturity Date of such Discount Notes
will not be accelerated. If the period from the Original Issue Date to the
first (1st) Interest Payment Date for Discount Notes (the “Initial Period”) is
shorter than the compounding period for such Discount Notes, a proportionate
amount of the yield for an entire compounding period will be accrued. If the
Initial Period is longer than the compounding period, then the period will be
divided into a regular compounding period and a short period with the short
period being treated as provided above.

 

(c)                                  Amortizing
Notes.

 

(i)                                     If
this Note is specified on the face hereof as an “Amortizing Note,” this Note
shall bear interest at the rate set forth on the face hereof, in the same
manner as set forth in Section 2(a) above and payments of
principal, premium (if any) and interest shall be made as set forth on the face
hereof and/or in accordance with Schedule I attached hereto.

 

(ii)                                  If
it is specified on the face hereof that this Note is an Amortizing Note, the
Trust will make payments combining principal, premium (if any) and interest, if
applicable, on the dates and in the amounts set forth in the table, or in
accordance with the formula, appearing in Schedule I, attached to
this Note. If this Note is an Amortizing Note, payments made hereon will be
applied first to interest due and payable on each such payment date and then to
the reduction of the Outstanding Face Amount. The term “Outstanding Face Amount”
means, at any time, the amount of unpaid principal hereof at such time.

 

(d)                                 Floating
Rate Notes.

 

(i)                                     If
this Note is specified on the face hereof as a “Floating Rate Note,” interest
on this Note shall accrue and be payable in accordance with this Section 2(d).
A Floating Rate Note may be a CD Rate Note, Commercial Paper Rate Note,
Federal Funds (Effective) Rate Note, Federal Funds (Open) Rate Note, LIBOR
Note, EURIBOR Note, Treasury Rate Note, Constant Maturity Treasury Rate Note, a
Prime Rate Note, an Inverse Floating Rate Note, or a Floating Rate/Fixed Rate
Note. For the period from the Original Issue Date to, but not including, the first
(1st) Interest Reset Date set forth on the face hereof, the

 

7

 

interest rate hereon
shall be the Initial Interest Rate specified on the face hereof. Thereafter,
the interest rate hereon will be reset as of and be effective as of each
Interest Reset Date; provided, however, that the interest
rate in effect for the ten (10) days immediately prior to the Maturity
Date will be that in effect on the tenth (10th) day preceding such Maturity
Date.

 

(A)                              Unless
specified otherwise on the face hereof, Interest Reset Dates are as
follows:  (1) in the case of Notes
that reset daily, each Business Day, (2) in the case of Notes that reset
weekly, other than Treasury Rate Notes, the Wednesday of each week, (3) in
the case of Treasury Rate Notes that reset weekly and except as provided below
under “Treasury Rate Notes,” the Tuesday of each week, (4) in the case of
Notes that reset monthly, the fifteenth (15th) day of each calendar month,
beginning in the first (1st) calendar month following the month in which the
Note was issued, (5) in the case of Notes that reset quarterly, the
fifteenth (15th) day of every third (3rd) calendar month, beginning in the
third (3rd) calendar month following the month in which the Note was issued, (6) in
the case of Notes that reset semiannually, the fifteenth (15th) day of every
sixth (6th) calendar month, beginning in the sixth (6th) calendar month
following the month in which the Note was issued and (7) in the case of
Notes that reset annually, the fifteenth (15th) day of every twelfth (12th)
calendar month, beginning in the twelfth (12th) calendar month following the
month in which the Note was issued.

 

(B)                                If
any Interest Reset Date would otherwise be a day that is not a Business Day
(or, if this Note is a LIBOR Note, a day that is not a London Business Day or,
if this Note is a EURIBOR Note, a day that is not a Euro Business Day), such
Interest Reset Date shall be postponed to the next day that is also a Business
Day (or, if this Note is a LIBOR Note, to the next day that is a London
Business Day or, if this Note is a EURIBOR Note, to the next day that is a Euro
Business Day); provided, however, that if this Note
is a LIBOR Note and such London Business Day is in the next succeeding calendar
month, such Interest Reset Date shall be the London Business Day immediately
preceding such Reset Date and if this Note is a EURIBOR Note and such Euro
Business Day is in the next succeeding calendar month, such Interest Reset Date
shall be the Euro Business Day immediately preceding such Reset Date. If this
Note is a Treasury Rate Note (as defined below) and an auction date for direct
obligations of United States securities shall fall on any Interest Reset Date,
then such Interest Reset Date shall instead be the first (1st) Business Day
immediately following such auction date.

 

(C)                                If
this Note has more than one Interest Reset Date, accrued interest will be
calculated by multiplying the Principal Amount of the Note specified on the
face hereof by an Accrued Interest Factor. The Accrued Interest Factor will be
computed by adding the interest factors calculated for each day in the Interest
Reset Period for which accrued

 

8

 

interest is being
calculated. The Interest Reset Period is the period from each Interest Reset
Date to, but not including, the following Interest Reset Date. Unless otherwise
specified on the face hereof, the Interest Factor for each such day will be
computed by dividing the interest rate in effect on that day by 360, in the
case of CD Rate Notes, Commercial Paper Rate Notes, Federal Funds (Effective)
Rate Notes, Federal Funds (Open) Rate Notes, LIBOR Notes, EURIBOR Notes and
Prime Rate Notes. In the case of Treasury Rate Notes and Constant Maturity
Treasury Rate Notes, the Interest Factor for each such day will be computed by
dividing the interest rate by the actual number of days in the year. The
Interest Rate Basis shall be set forth on the face hereof and shall be the
Interest Rate Basis, as adjusted in accordance with any Spread or Spread
Multiplier and subject to any Maximum Interest Rate or Minimum Interest Rate
specified on the face hereof. Notwithstanding Section 2(d)(i)(E) below,
the Interest Factor will be expressed as a decimal calculated to seven decimal
places without rounding. For purposes of making the foregoing calculation, the
interest rate in effect on any Interest Reset Date will be the applicable rate
as reset on that date. Unless otherwise specified on the face hereof, the interest
rate that is effective on the applicable Interest Reset Date will be determined
on the applicable Rate Determination Date and calculated on the applicable
Calculation Date. Unless otherwise specified on the face hereof, the interest
rate in effect for each day to and excluding the next Interest Reset Date will
be the interest rate that was in effect on the preceding Interest Reset Date. “Calculation
Date” means the date by which the Calculation Agent specified on the face
hereof, is to calculate the interest rate which will be the earlier of (1) the
fifth (5th) Business Day after the related Rate Determination Date, or if any
such day is not a Business Day, the next Business Day and (2) the Business
Day preceding the applicable Interest Payment Date or the Maturity Date.

 

(D)                               If
this Note has one Interest Reset Date, accrued interest will be calculated by
multiplying the Principal Amount of the Note specified on the face hereof by
the interest rate in effect during the period for which accrued interest is
being calculated. That product is then multiplied by the quotient obtained by
dividing the number of days in the period for which accrued interest is being
calculated by 360, in the case of CD Rate Notes, Commercial Paper Rate Notes,
Federal Funds (Effective) Rate Notes, Federal Funds (Open) Rate Notes, LIBOR
Notes, EURIBOR Notes and Prime Rate Notes. In the case of Treasury Rate Notes
and Constant Maturity Treasury Rate Notes, the product is multiplied by the
quotient obtained by dividing the number of days in the period for which
accrued interest is being calculated by the actual number of days in the year.

 

(E)                                 Unless
otherwise specified on the face hereof, all percentages resulting from any
calculation of the interest rate on this Note will be rounded, if necessary, to
the nearest 1/100,000 of 1% (.0000001),

 

9

 

with five one-millionths
of a percentage point rounded upward. All currency amounts used in, or
resulting from, the calculation on a Floating Rate Note will be rounded to the
nearest one-hundredth of a unit. For purposes of such rounding, .005 of a unit
will be rounded upward.

 

(ii)                                  Unless
otherwise specified on the face hereof and except as provided below, the
Interest Payment Date for a Floating Rate Note shall be as follows:  (1) if the Reset Date for a Note is
daily, weekly or monthly, the Interest Payment Date shall be the fifteenth
(15th) day of each calendar month, beginning in the first (1st) calendar month
following the month in which the Note was issued, (2) if the Reset Date
for a Note is quarterly, the fifteenth (15th) day of every third (3rd) calendar
month, beginning in the third (3rd) calendar month following the month in which
the Note was issued, (3) if the Reset Date for a Note is semiannually, the
fifteenth (15th) day of every sixth (6th) calendar month, beginning in the
sixth (6th) calendar month following the month in which the Note was issued, (4) if
the Reset Date for a Note is annually, the fifteenth (15th) day of every twelfth
(12th) calendar month, beginning in the twelfth (12th) calendar month following
the month in which the Note was issued. In each of these cases, interest will
also be payable on the Maturity Date.

 

(iii)                               If
specified on the face hereof, this Note may have either or both of a
Maximum Interest Rate or Minimum Interest Rate. If a Maximum Interest Rate is
so designated, the interest rate for a Floating Rate Note cannot ever exceed
such Maximum Interest Rate and in the event that the interest rate on any Interest
Reset Date would exceed such Maximum Interest Rate (as if no Maximum Interest
Rate were in effect) then the interest rate on such Reset Date shall be the
Maximum Interest Rate. If a Minimum Interest Rate is so designated, the
interest rate for a Floating Rate Note cannot ever be less than such Minimum
Interest Rate and in the event that the interest rate on any Interest Reset
Date would be less than such Minimum Interest Rate (as if no Minimum Interest
Rate were in effect) then the interest rate on such Reset Date shall be the
Minimum Interest Rate. Notwithstanding anything to the contrary contained
herein, the interest rate on a Floating Rate Note shall not exceed the maximum
interest rate permitted by applicable law.

 

(iv)                              All
determinations of interest by the Calculation Agent will, in the absence of
manifest error, be conclusive for all purposes and binding on the Trust, the
Indenture Trustee and the Holder of this Note and neither the Trust, the
Indenture Trustee nor the Calculation Agent shall have any liability to the
Holder of this Note in respect of any determination, calculation, quote or rate
made or provided by the Calculation Agent. Upon request of the Holder of this
Note, the Calculation Agent will provide the interest rate then in effect and,
if determined, the interest rate that will become effective on the next
Interest Reset Date with respect to this Note. The Calculation Agent will
notify the Indenture Trustee, Paying Agent, Registrar, the Trust and if this
Note is listed on a stock exchange, and the rules of such exchange so
require, such exchange of each determination of the interest rate, Initial
Interest Period, Interest Reset Period, and interest amount

 

10

 

payable applicable to
this Note promptly after such determination is made. If the Calculation Agent
is incapable or unwilling to act as such or if the Calculation Agent fails duly
to establish the interest rate for any interest accrual period or to calculate
the interest amount or any other requirements, the Trust will appoint the
Paying Agent or another leading commercial bank to act as such in its place.

 

(v)                                 Subject
to applicable provisions of law and except as specified herein, on each
Interest Reset Date, the rate of interest on this Note on and after the first
(1st) Interest Reset Date shall be the interest rate determined in accordance
with the provisions of the heading below which has been designated as the
Interest Rate Basis on the face hereof, the base rate, multiplied by the Spread
Multiplier, if any, specified on the face hereof and/or plus or minus the
Spread, if any, specified on the face hereof.

 

(A)                              CD
Rate Notes. If the Interest Rate Basis is the CD Rate, this Note shall be
deemed to be a “CD Rate Note.” A CD Rate Note will bear interest at the
interest rate calculated with reference to the CD Rate and the Spread or Spread
Multiplier, if any. The Calculation Agent will determine the CD Rate for each
CD Rate Determination Date by the Calculation Date pertaining to such CD Rate
Determination Date. The CD Rate Determination Date is the second (2nd) Business
Day prior to the Interest Reset Date for each Interest Reset Period. Unless
otherwise specified on the face hereof, “CD Rate” means the rate for negotiable
certificates of deposit having the Index Maturity specified on the face hereof
as published in H.15(519) under the heading “CDs (Secondary Market)” or, if not
so published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such CD Rate Determination Date, the CD Rate for the Interest
Reset Period will be the rate on such date for negotiable certificates of
deposit of the applicable Index Maturity as published in the H.15 Daily Update
under the heading “CDs (Secondary Market).” 
If such rate is not yet published in either H.15(519) or the H.15 Daily
Update by 3:00 p.m., New York City time, on such Calculation Date, then
the CD Rate will be the arithmetic mean of the secondary market offered rates
as of 3:00 p.m., New York City time, on such date, of three (3) leading
nonbank dealers in negotiable U.S. Dollar certificates of deposit in New York
City selected by the Calculation Agent after consultation with the Trust for
negotiable certificates of deposit of major United States money center banks of
the highest credit standing (in the market for negotiable certificates of
deposit) with a remaining maturity closest to the applicable Index Maturity in
a denomination of $5,000,000; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned
above, the CD Rate for the applicable Interest Reset Period will be the CD Rate
for the immediately preceding Interest Reset Period. If there was no such
Interest Reset Period, the CD Rate shall be the Initial Interest Rate. “H.15(519)”
means the publication entitled “Statistical Release H.15(519), Selected
Interest Rates,” or any successor publication, published weekly by the

 

11

 

Board of Governors of the
Federal Reserve System; and “H.15 Daily Update” means the daily update of the
Board of Governors of the Federal Reserve System at
http://www.federalreserve.gov/releases/h15/update/, or any successor site or
publication.

 

(B)                                Commercial
Paper Rate Notes. If the Interest Rate Basis is the Commercial Paper Rate,
this Note shall be deemed to be a “Commercial Paper Rate Note.” A Commercial
Paper Rate Note will bear interest for each Interest Reset Period at the
interest rate calculated with reference to the Commercial Paper Rate and the
Spread or Spread Multiplier, if any. The Calculation Agent will determine the
Commercial Paper Rate for each Commercial Paper Rate Determination Date by the
Calculation Date pertaining to such Commercial Paper Rate Determination Date. The
Commercial Paper Rate Determination Date is the second (2nd) Business Day prior
to the Interest Reset Date for each Interest Reset Date for each Interest Reset
Period. Unless otherwise specified on the face hereof, “Commercial Paper Rate”
means the Money Market Yield (calculated as described below) on the Calculation
Date of the rate for commercial paper having the Index Maturity specified on
the face hereof as such rate is published in H.15(519) under the heading “Commercial
Paper -- Nonfinancial.”  If such rate is
not published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Commercial Paper Rate Determination Date, then the
Commercial Paper Rate for the Interest Reset Period shall be the Money Market
Yield of the rate on such date for commercial paper having the applicable Index
Maturity as published in the H.15 Daily Update or such other recognized
electronic source used for the purpose of displaying such rate, under the
heading “Commercial Paper -- Nonfinancial.” 
If such rate is not yet published in either H.15(519) or H.15 Daily
Update or such other recognized electronic source used for the purpose of
displaying this rate, by 3:00 p.m., New York City time, on such
Calculation Date, then the Commercial Paper Rate for the Interest Reset Period
shall be the Money Market Yield of the arithmetic mean of the offered rates, as
of 3:00 p.m., New York City time, on such date, of three (3) leading
dealers of commercial paper in New York City selected by the Calculation Agent
after consultation with the Trust for commercial paper having the applicable
Index Maturity placed for an industrial issuer whose bond rating is “AA” or the
equivalent, from a nationally recognized securities rating agency; provided, however, that if the dealers selected by the
Calculation Agent are not quoting offered rates as mentioned above, the
Commercial Paper Rate for the Interest Reset Period will be the same as the
Commercial Paper Rate for the immediately preceding Interest Reset Period. If
there was no such Interest Reset Period, the Commercial Paper Rate will be the
Initial Interest Rate. “Money Market Yield” shall be a yield calculated in
accordance with the following formula:

 

12

 

Money Market Yield=       D X 360         x     100

360 - (D X M)

 

where “D” refers to the per annum rate for commercial
paper quoted on a bank discount basis and expressed as a decimal; and “M”
refers to the actual number of days in the applicable Index Maturity.

 

(C)                                Federal
Funds (Effective) Rate Notes. If the Interest Rate Basis is the Federal
Funds (Effective) Rate, this Note shall be deemed to be a “Federal Funds
(Effective) Rate Note.” A Federal Funds (Effective) Rate Note will bear
interest for each Interest Reset Period at the interest rate calculated with
reference to the Federal Funds (Effective) Rate and the Spread or Spread
Multiplier, if any. The Calculation Agent will determine the Federal Funds
(Effective) Rate for each Federal Funds (Effective) Rate Determination Date by
the Calculation Date pertaining to such Federal Funds (Effective) Rate
Determination Date. The Federal Funds (Effective) Rate Determination Date is
the first (1st) Business Day prior to the Interest Reset Date for each Interest
Reset Period. Unless otherwise specified on the face hereof, “Federal Funds
(Effective) Rate” means the rate for Federal Funds as published in H.15(519)
under the heading “Federal Funds (Effective),” as this rate is displayed on
Moneyline Telerate, Inc. on page 120, or any successor service or page (“Telerate
Page 120”) or, if not so displayed or published by 3:00 p.m., New
York City time, on the Calculation Date pertaining to such Federal Funds
(Effective) Rate Determination Date, the Federal Funds (Effective) Rate for the
Interest Reset Period will be the rate on such Calculation Date as published in
the H.15 Daily Update, or another recognized electronic source used for the
purpose of displaying this rate, under the heading “Federal Funds (Effective).”  If such rate is not yet published in either
H.15(519), H.15 Daily Update or another recognized electronic source used for
the purpose of displaying this rate by 3:00 p.m., New York City time, on
the Calculation Date then the Federal Funds (Effective) Rate for such Interest
Reset Period will be the arithmetic mean of the rates, as of 3:00 p.m.,
New York City time, on the Calculation Date, for the last transaction in
overnight Federal Funds arranged by three (3) leading brokers of Federal
Funds transactions in New York City selected by the Calculation Agent after
consultation with the Trust. If the dealers selected by the Calculation Agent,
however, are not quoting rates as described above, the Federal Funds
(Effective) Rate for the Interest Reset Period will be the same as the Federal
Funds (Effective) Rate in effect for the immediately preceding Interest Reset
Period. If there was no such Interest Reset Period, the Federal Funds
(Effective) Rate will be the Initial Interest Rate.

 

If this Note is a Federal Funds (Effective) Rate Note
that resets daily, the interest rate on the Note for the period from and
including a Monday to,

 

13

 

but excluding, the succeeding Monday will be reset by
the Calculation Agent on the second (2nd) Monday, or, if not a Business Day, on
the next Business Day, to a rate equal to the average of the Federal Funds
(Effective) Rates in effect for each such day in such week.

 

(D)                               Federal
Funds (Open) Rate Notes. If the Interest Rate Basis is the Federal Funds
(Open) Rate, this Note shall be deemed to be a “Federal Funds (Open) Rate Note.”
A Federal Funds (Open) Rate Note will bear interest for each Interest Reset
Period at the interest rate calculated with reference to the Federal Funds
(Open) Rate and the Spread or Spread Multiplier, if any. The Calculation Agent
will determine the Federal Funds (Open) Rate for each Federal Funds (Open) Rate
Determination Date by the Calculation Date pertaining to such Federal Funds
(Open) Rate Determination Date. The Federal Funds (Open) Rate Determination
Date is the first (1st) Business Day prior to the Interest Reset Date for each
Interest Reset Period. Unless otherwise specified on the face hereof, “Federal
Funds (Open) Rate” means the rate for Federal Funds as published in H.15(519)
under the heading “Federal Funds” and opposite the caption “Open” as this rate
is displayed on Moneyline Telerate, Inc. on page 5, or any successor
service or page (“Telerate Page 5”) or, if not so displayed or
published by 3:00 p.m., New York City time, on the Calculation Date
pertaining to such Federal Funds (Open) Rate Determination Date, the Federal
Funds (Open) Rate for the Interest Reset Period will be the rate on such
Calculation Date as reported by Prebon Yamane (or a successor) on Bloomberg
that appears on FEDSPREB Index. If such rate is not yet published in either
Telerate Page 5 or FEDSPREB Index on Bloomberg, by 3:00 p.m., New
York City time, on the Calculation Date then the Federal Funds (Open) Rate for
such Interest Reset Period will be the arithmetic mean of the rates, before
9:00 a.m., New York City time, on the Calculation Date, for the last
transaction in overnight Federal Funds arranged by three (3) leading
brokers of Federal Funds transactions in New York City selected by the
Calculation Agent after consultation with the Trust. If the dealers selected by
the Calculation Agent, however, are not quoting rates as described above, the
Federal Funds (Open) Rate for the Interest Reset Period will be the same as the
Federal Funds (Open) Rate in effect for the immediately preceding Interest
Reset Period. If there was no such Interest Reset Period, the Federal Funds
(Open) Rate will be the Initial Interest Rate.

 

If this Note is a Federal Funds (Open) Rate Note that
resets daily, the interest rate on the Note for the period from and including a
Monday to, but excluding, the succeeding Monday will be reset by the
Calculation Agent on the second (2nd) Monday, or, if not a Business Day, on the
next Business Day, to a rate equal to the average of the Federal Funds (Open)
Rates in effect for each such day in such week.

 

14

 

(E)                                 LIBOR
Notes. If the Interest Rate Basis is LIBOR, this Note shall be deemed to be
a “LIBOR Note.” A LIBOR Note will bear interest for each Interest Period at the
interest rate calculated with reference to LIBOR and the Spread or Spread
Multiplier, if any. The Calculation Agent will determine LIBOR for each LIBOR
Determination Date by the Calculation Date pertaining to such LIBOR Determination
Date. The LIBOR Determination Date is the second (2nd) London Business Day
prior to the Interest Reset Date for each Interest Reset Period.

 

(1)                                  Unless
otherwise indicated on the face hereof, on a LIBOR Determination Date, the
Calculation Agent will determine LIBOR for each Interest Reset Period as
follows:

 

The Calculation Agent will determine the offered rates
for deposits in U.S. Dollars for the period of the Index Maturity specified on
the face hereof, commencing on the Interest Reset Date, which appears on the “designated
LIBOR page” as of 11:00 a.m., London time, on that LIBOR Determination
Date. If “LIBOR Telerate” is designated on the face hereof, “designated LIBOR
page” means the display on Moneyline Telerate, Inc. on page 3750, or
any successor service or page for the purpose of displaying the London
interbank offered rates of major banks. If “LIBOR Reuters” is designated on the
face hereof, “designated LIBOR page” means the arithmetic mean determined by
the Calculation Agent of the two (2) or more offered rates (unless the
designated LIBOR page by its terms provides only for a single rate, in
which case such single rate shall be used) on the display on the Reuters
Monitor Money Rates Service Page “LIBOR,” or any successor service or page for
the purpose of displaying the London interbank offered rates of major banks. If
neither “LIBOR Telerate” nor “LIBOR Reuters” is specified on the face hereof,
LIBOR will be determined as if LIBOR Telerate had been specified.

 

(2)                                  If
LIBOR cannot be determined on a LIBOR Determination Date as described above,
then the Calculation Agent will determine LIBOR as follows:

 

The Calculation Agent will select four (4) major
banks in the London interbank market after consultation with the Trust. The
Calculation Agent will request that the principal London offices of those four (4) selected
banks provide their offered quotations to prime banks in the London interbank
market at approximately 11:00 a.m., London time, on the LIBOR
Determination Date. These quotations will be for deposits in U.S. Dollars for
the period of the Index Maturity specified on the face hereof, commencing on
the Interest Reset Date. Offered quotations must be based on a

 

15

 

principal amount equal to an amount that is
representative of a single transaction in U.S. Dollars in the market at the
time. If two (2) or more quotations are provided, LIBOR for the Interest
Reset Period will be the arithmetic mean of the quotations. If fewer than two (2) quotations
are provided, the Calculation Agent will select three (3) major banks in
New York City after consultation with the Trust and then determine LIBOR for
the Interest Reset Period as the arithmetic mean of rates quoted by those three
(3) major banks in New York City to leading European banks at
approximately 3:00 p.m., New York City time, on the LIBOR Determination
Date. The rates quoted will be for loans in U.S. Dollars, for the period of the
Index Maturity specified on the face hereof, commencing on the Interest Reset
Date. Rates quoted must be based on a principal amount equal to an amount that
is representative of a single transaction in U.S. Dollars in the market at the
time. If fewer than three (3) New York City banks selected by the
Calculation Agent are quoting rates, LIBOR for the Interest Reset Period will
be the same as LIBOR for the immediately preceding Interest Reset Period. If
there was no such Interest Reset Period, LIBOR will be the Initial Interest
Rate.

 

(F)                                 EURIBOR
Notes. If the Interest Rate Basis is EURIBOR, this Note shall be deemed to
be a “EURIBOR Note.” A EURIBOR Note will bear interest for each Interest Period
at the interest rate calculated with reference to EURIBOR and the Spread or
Spread Multiplier, if any. The Calculation Agent will determine EURIBOR for
each EURIBOR Determination Date by the Calculation Date pertaining to such
EURIBOR Determination Date. The EURIBOR Determination Date is the second (2nd)
Euro Business Day prior to the Interest Reset Date for each Interest Reset Period.

 

(1)                                  Unless
otherwise indicated on the face hereof, on a EURIBOR Determination Date, the
Calculation Agent will determine EURIBOR for each Interest Reset Period as
follows:

 

The Calculation Agent will determine the offered rate
for deposits in euros as sponsored, calculated and published jointly by the
European Banking Federation and ACI - The Financial Markets Association, or any
company established by them for purposes of establishing those rates, having
the Index Maturity specified on the face hereof, commencing on the Interest
Reset Date, as displayed on Moneyline Telerate, Inc. on page 248, or
any successor service or page used for the purpose of displaying this rate
(“Telerate Page 248”) as of 11:00 a.m., Brussels time, on that
EURIBOR Determination Date.

 

16

 

(2)                                  If
EURIBOR cannot be determined on a EURIBOR Determination Date as described
above, then the Calculation Agent will determine EURIBOR as follows:

 

The Calculation Agent will select four (4) major
banks in the euro-zone interbank market after consultation with the Trust. The
Calculation Agent will request that the principal London offices of those four (4) selected
banks provide their offered quotations to prime banks in the euro-zone interbank
market at approximately 11:00 a.m., Brussels time, on the EURIBOR
Determination Date. These quotations will be for euro deposits for the period
of the Index Maturity specified on the face hereof, commencing on the Interest
Reset Date. Offered quotations must be based on a principal amount equal to an
amount that is representative of a single transaction in euros in the market at
the time. If two (2) or more quotations are provided, EURIBOR for the
Interest Reset Period will be the arithmetic mean of the quotations. If fewer
than two (2) quotations are provided, the Calculation Agent will select
three (3) major banks in the euro-zone after consultation with the Trust
and then determine EURIBOR for the Interest Reset Period as the arithmetic mean
of rates quoted by those three (3) major banks in the euro-zone to leading
euro-zone banks at approximately 11:00 a.m., Brussels time, on the EURIBOR
Determination Date. The rates quoted will be for loans in euros, for the period
of the Index Maturity specified on the face hereof, commencing on the Interest
Reset Date. Rates quoted must be based on a principal amount equal to an amount
that is representative of a single transaction in euros in the market at the
time. If fewer than three (3) euro-zone banks selected by the Calculation
Agent are quoting rates, EURIBOR for the Interest Reset Period will be the same
as EURIBOR for the immediately preceding Interest Reset Period. If there was no
such Interest Reset Period, EURIBOR will be the Initial Interest Rate.

 

(G)                                Treasury
Rate Notes.

 

(1)                                  If
the Interest Rate Basis is the Treasury Rate, this Note shall be deemed to be a
“Treasury Rate Note.” A Treasury Rate Note will bear interest for each Interest
Reset Period at the interest rate calculated with reference to the Treasury
Rate and the Spread or Spread Multiplier, if any. The Calculation Agent will
determine the Treasury Rate for each Treasury Rate Determination Date by the
Calculation Date pertaining to such Treasury Rate Determination Date. Unless “Constant
Maturity Treasury Rate” is specified on the face hereof and unless otherwise
set forth on the face hereof, the Treasury Rate for each Interest Reset Period
will be the rate for the auction held on the Treasury Rate Determination

 

17

 

 

Date for the Interest Reset Period of U.S. treasury
securities having the Index Maturity specified on the face hereof as that rate
appears on the display on Moneyline Telerate, Inc. (or any successor
service) on page 56 (or any other page as may replace this page on
that service) under the heading “Investment Rate” or, if not so published by
3:00 p.m., New York City time, on such Calculation Date pertaining to the
Treasury Rate Determination Date, then the Treasury Rate for the Interest Reset
Period will be the auction average rate (expressed as a bond equivalent on the
basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) on such Treasury Rate Determination Date as otherwise announced by the
United States Department of the Treasury. In the event that the results of the
auction are not published or reported as provided above by 3:00 p.m., New
York City time, on such Calculation Date, or if no such auction is held on such
Treasury Rate Determination Date, then the Treasury Rate for such Interest
Reset Period shall be the rate having the Index Maturity specified on the face
hereof as published in H.15(519) under the heading “U.S. Government
Securities—Treasury bills (Secondary Market)” or, if not published by 3:00 p.m.,
New York City time, on the Calculation Date, the rate on the Treasury Rate
Determination Date of treasury securities as published in H.15 Daily Update, or
another recognized electronic source used for the purpose of displaying that
rate, under the heading “U.S. Government Securities—Treasury Bills (Secondary
Market).”  If none of the above rates is
published by 3:00 p.m., New York City time on the Calculation Date, then
the Treasury Rate shall be calculated as a yield to maturity (expressed as a
bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates as of approximately 3:30 p.m., New York City time, on such Treasury
Rate Determination Date, of three (3) leading primary United States
government securities dealers selected by the Calculation Agent for the issue
of treasury securities with a remaining maturity closest to the Index Maturity
specified on the face hereof, provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting bid rates as
mentioned above, then the Treasury Rate for the Interest Reset Period will be
the same as the Treasury Rate for the immediately preceding Interest Reset
Period. If there was no such Interest Reset Period, the Treasury Rate will be
the Initial Interest Rate.

 

(2)                                  The
“Treasury Rate Determination Date” for each Interest Reset Period will be the
day of the week in which the Interest Reset Date for such Interest Reset Period
falls on which treasury securities would normally be auctioned. Treasury

 

18

 

securities are
normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that such auction may be held on the preceding Friday. If, as the
result of a legal holiday, an auction is so held on the preceding Friday, such
Friday will be the Treasury Rate Determination Date pertaining to the Interest
Reset Period commencing in the next succeeding week. If an auction date shall
fall on any day that would otherwise be an Interest Reset Date for a Treasury
Rate Note, then such Interest Reset Date shall instead be the Business Day
immediately following such auction date.

 

(H)                               Constant
Maturity Treasury Rate Notes.

 

(1)                                  If
the Interest Rate Basis is the Constant Maturity Treasury Rate, this Note shall
be deemed to be a “Constant Maturity Treasury Rate Note.”  A Constant Maturity Treasury Rate Note will
bear interest for each Interest Reset Period at the interest rate calculated
with reference to the Constant Maturity Treasury Rate and the Spread or Spread
Multiplier, if any. If “Constant Maturity Treasury Rate” is specified on the
face hereof and unless otherwise specified on the face hereof, “Constant
Maturity Treasury Rate” for each Interest Reset Period will be the rate
displayed on the Designated Constant Maturity Treasury Page (as defined
below) under the caption “Treasury Constant Maturities” under the column for
the Designated CMT Maturity Index for either (1) that Constant Maturity
Treasury Rate Determination Date (as hereinafter defined), if the Designated
Constant Maturity Treasury Page is 7051 (or any other page that may replace
this page on that service); or (2) the week, or the month, as set
forth on the face hereof, ended immediately preceding the week in which the
Calculation Date pertaining to the Constant Maturity Treasury Rate
Determination Date occurs, if the Designated Constant Maturity Treasury Page is
7052 (or any other page that may replace this page on that
service).

 

If the Treasury Rate is no longer displayed on the
Designated Constant Maturity Treasury Page, or if not displayed by 3:00 p.m.,
New York City time, on the Calculation Date pertaining to the Constant Maturity
Treasury Rate Determination Date, then the Constant Maturity Treasury Rate will
be the Treasury Constant Maturity rate for the Designated CMT Maturity Index
(as hereinafter defined) as published in H.15(519) for the Constant Maturity
Treasury Rate Determination Date. If the Constant Maturity Treasury Rate is no
longer published, or if not published in H.15(519) by 3:00 p.m., New York
City time, on the Calculation Date pertaining to the Constant Maturity Treasury
Rate

 

19

 

Determination Date, then the Constant Maturity
Treasury Rate for that Constant Maturity Treasury Rate Determination Date will
be the Treasury Constant Maturity rate for the Designated CMT Maturity Index
(or other United States Treasury Rate for the Designated CMT Maturity Index)
for that Constant Maturity Treasury Rate Determination Date with respect to the
Interest Reset Date then published by either the Board of Governors of the
Federal Reserve System or the United States Department of the Treasury that the
Calculation Agent determines is comparable to the rate formerly displayed on
the Designated Constant Maturity Treasury Page and published in the
relevant H.15(519). If the information in the immediately preceding sentence is
not available by 3:00 p.m., New York City time, on the Calculation Date
pertaining to the Constant Maturity Treasury Rate Determination Date, then the
Calculation Agent will calculate the Constant Maturity Treasury Rate to be a
yield to maturity, based on the arithmetic mean of the secondary market offer
side prices as of approximately 3:30 p.m., New York City time, on the
Constant Maturity Treasury Rate Determination Date reported, according to their
written records, by three (3) leading primary United States government
securities dealers (each, a “CMT Reference Dealer”) in the City of New York
selected by the Calculation Agent. The three (3) CMT Reference Dealers
shall be selected from five CMT Reference Dealers selected by the Calculation
Agent by eliminating the highest quotation (or, in the event of equality, one
of the highest) and the lowest quotation (or, in the event of equality, one of
the lowest), for the most recently issued direct noncallable fixed rate
obligations of the United States (“Treasury Notes”) with an original maturity
of approximately the Designated CMT Maturity Index and a remaining term to
maturity of not less than such Designated CMT Maturity Index minus one year. If
the Calculation Agent cannot obtain three (3) Treasury Note quotations as
described above, the Treasury Rate will be a rate with a yield to maturity
based on the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 p.m., New York City time, on the Constant Maturity
Treasury Rate Determination Date of three (3) CMT Reference Dealers in the
City of New York. The three (3) CMT Reference Dealers shall be selected
from five CMT Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest), for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining term
to maturity closest to the Designated CMT Maturity Index and in an amount of at
least $100 million. If two (2) of these Treasury Notes

 

20

 

have remaining terms to maturity equally close to the
Designated CMT Maturity Index, the quotes for the Treasury Note with the
shorter remaining term to maturity will be used. If fewer than five but more
than two (2) CMT Reference Dealers are quoting as described above, then
the Treasury Rate will be based on the arithmetic mean of the offer prices
obtained and neither the highest nor lowest of those quotes will be eliminated;
provided, however, that if fewer than
three (3) CMT Reference Dealers are quoting as described above, then the
Constant Maturity Treasury Rate for the Interest Reset Period will be the same
as the Constant Maturity Treasury Rate for the immediately preceding Interest
Reset Period. If there was no such Interest Reset Period, the Constant Maturity
Treasury Rate will be the Initial Interest Rate.

 

(2)                                  For
purposes of Constant Maturity Treasury Rate Notes, the “Constant Maturity
Treasury Rate Determination Date” will be the tenth (10th) Business Day prior
to the Interest Reset Date for the applicable Interest Reset Period. “Designated
Constant Maturity Treasury Page” means the display on Moneyline Telerate, Inc.
on the page designated on the face hereof, or any successor service or page for
the purpose of displaying Treasury Constant Maturities as reported in H.15(519).
If that page is not specified on the face hereof, the Designated Constant
Maturity Treasury Page shall be 7052, for the most recent week. “Designated
CMT Maturity Index” means the original period to maturity of the Treasury Notes
(either 1, 2, 3, 5, 7, 10, 20, or 30 years) designated on the face hereof with
respect to which the Constant Maturity Treasury Rate will be calculated. If no
such maturity is specified on the face hereof, the Designated CMT Maturity
Index shall be 2 years.

 

(I)                                    Prime
Rate Notes. If the Interest Rate Basis is the Prime Rate, this Note shall
be deemed to be a “Prime Rate Note.”  A
Prime Rate Note will bear interest for each Interest Reset Period calculated
with reference to the Prime Rate and the Spread or Spread Multiplier, if any,
specified on the face hereof. The Calculation Agent will determine the Prime
Rate for each Interest Reset Period on each Prime Rate Determination Date by
the Calculation Date pertaining to such Prime Rate Determination Date. The
Prime Rate Determination Date is the second (2nd) Business Day prior to the
Interest Reset Date for each Interest Reset Period. Unless otherwise specified
on the face hereof, “Prime Rate” means the rate on the Calculation Date made
available and subsequently published on the Calculation Date in H.15(519) under
the heading “Bank Prime Loan” or, if not so published by 3:00 p.m., New
York City time, on the Calculation Date pertaining to such Prime Rate
Determination Date, the Prime Rate will be the rate on that day as published in
the H.15 Daily Update or another recognized electronic source used for the
purpose of

 

21

 

displaying this
rate, under the heading “Bank Prime Loan,” or if neither such rate is published
by 3:00 p.m., New York City time, on such Calculation Date pertaining to
the Prime Rate Determination Date, the Prime Rate will be the arithmetic mean
of the rates of interest offered by various banks that appear on the Reuters
Screen USPRIME1 Page (hereinafter defined) as each such bank’s prime rate
or base lending rate as in effect for the Prime Rate Determination Date. If
fewer than four (4) such rates appear on the Reuters Screen USPRIME1 Page,
the Calculation Agent will select three (3) major banks in New York City
after consultation with the Trust. The Prime Rate will be the arithmetic mean
of the prime rates quoted by those three (3) banks on the basis of the
actual number of days in the year divided by a 360-day year as of the close of
business on such Prime Rate Determination Date; provided, however,
that if fewer than three (3) banks in New York City are quoting as
mentioned in this sentence, the Prime Rate for the Interest Reset Period will
be the same as the Prime Rate in effect for the immediately preceding Interest
Reset Period. If there was no such Interest Reset Period, the Prime Rate will
be the Initial Interest Rate. “Reuters Screen USPRIME1 Page” means the display
designated as page “USPRIME1” on the Reuters Monitor Money Rates Service,
or any successor service or page, for the purpose of displaying prime rates or
base lending rates of major United States banks.

 

(J)                                   Inverse
Floating Rate Notes. If this Note is designated as an Inverse Floating Rate
Note on the face hereof, the Inverse Floating Rate shall be equal to (1) in
the case of the period, if any, commencing on the Original Issue Date (or such
other date which may be specified on the face hereof as the date on which
this Note shall begin to accrue interest), up to the first (1st) Interest Reset
Date, a fixed rate of interest established by the Trust as specified on the
face hereof, and (2) in the case of each period commencing on an Interest
Reset Date, a fixed rate of interest as specified on the face hereof minus the
interest rate determined based on the Interest Rate Basis as adjusted by the Spread
or Spread Multiplier, if any; provided, however, that (1) the
interest rate will not be less than zero and (2) the interest rate in
effect for the ten (10) days immediately prior to the Maturity Date will
be that in effect on the tenth (10th) day preceding the Maturity Date.

 

(K)                               Floating
Rate/Fixed Rate Notes. If this Note is designated as a “Floating Rate/Fixed
Rate Note” on the face hereof, this Note will be a Floating Rate Note for a
specified portion of its term and a Fixed Rate Note for the remainder of its
term, commencing on the Fixed Rate Commencement Date specified on the face
hereof, in which event the interest rate on this Note will be determined as
provided herein as if it were a Floating Rate Note and a Fixed Rate Note
hereunder for each such respective period.

 

22

 

Section 3.                                          Optional
Redemption. If no redemption right is set forth on the face hereof,
this Note may not be redeemed prior to the Stated Maturity Date, except as
set forth in the Indenture. If a Redemption Right is set forth on the face of
this Note, the Trust shall elect to redeem this Note on the Initial Redemption
Date set forth on the face hereof or on any other Interest Payment Date
thereafter on which the Funding Agreement is to be redeemed in whole or in part by
Protective Life Insurance Company (“Protective Life”) (each, a “Redemption Date”),
in which case this Note must be redeemed on such Redemption Date in whole or in
part, as applicable, in increments of the authorized denomination specified on
the face hereof at the applicable Redemption Price (as defined below), together
with unpaid interest accrued thereon to the applicable Redemption Date. “Redemption
Price” shall mean an amount equal to the Initial Redemption Percentage (as adjusted by the Annual Redemption Percentage Reduction,
if applicable) multiplied by the unpaid principal amount of this Note to be
redeemed. The unpaid principal amount of this Note to be redeemed shall be
determined by multiplying (1) the Outstanding Principal Amount of this
Note by (2) the quotient derived by dividing (A) the outstanding
principal amount of the Funding Agreement to be redeemed by Protective Life, by
(B) the outstanding principal amount of the Funding Agreement. The Initial
Redemption Percentage, if any, applicable to this Note shall decline at each
anniversary of the Initial Redemption Date by an amount equal to the applicable
Annual Redemption Percentage Reduction, if any, until the Redemption Price is
equal to 100% of the principal amount thereof to be redeemed. Notice must be
given not more than seventy-five (75) nor less than thirty (30) calendar days
prior to the proposed redemption date. In the event of redemption of this Note
in part only, a new Note for the unredeemed portion hereof shall be issued
in the name of the Holder hereof upon the surrender hereof. If less than all of
the Notes are redeemed, the Depositary will select by lot the amount of the
interest of each direct participant in the Trust to be redeemed. Unless otherwise
specified herein, the Trust may not redeem the Notes after the date that
is thirty (30) days prior to the Stated Maturity Date.

 

Section 4.                                          Sinking
Funds and Amortizing Notes. Unless this Note is specified as an
Amortizing Note on the face hereof, this Note will not be subject to any
sinking fund.

 

Section 5.                                          Optional
Repayment. If no repayment right is set forth on the face hereof, this
Note may not be repaid at the option of the Holder hereof prior to the
Stated Maturity Date. If a Repayment Right is granted on the face of this Note,
this Note may be subject to repayment at the option of the Holder on any
Interest Payment Date on and after the date, if any, indicated on the face
hereof (each, a “Repayment Date”). On any Repayment Date, unless otherwise
specified on the face hereof, this Note shall be repayable in whole or in part in
increments of the authorized denomination specified on the face hereof at the
option of the Holder hereof at a repayment price equal to 100% of the principal
amount to be repaid, together with interest thereon payable to the date of
repayment. For this Note to be repaid in whole or in part at the option of
the Holder hereof, this Note must be received by the Indenture Trustee, with
the form entitled “Option to Elect Repayment,” below, duly completed. Exercise
of such repayment option by the Holder hereof shall be irrevocable.

 

23

 

Section 6.                                          Modification
and Waivers. The Indenture contains provisions permitting the Trust and
the Indenture Trustee (1) at any time without notice to, or the consent
of, the Holders of any Notes issued under the Indenture to execute supplemental
indentures for certain enumerated purposes and (2) with the consent of the
Holders of not less than a majority in aggregate principal amount of the
Outstanding Notes affected thereby, to execute supplemental indentures for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of the Indenture or of modifying in any manner the rights
of Holders of Notes under the 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
Note affected thereby. Any such consent or waiver by the Holder of this Note
shall be conclusive and binding upon such Holder and upon all future Holders of
this Note and of any Note issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Note or such other Notes.

 

Section 7.                                          Obligations
Unconditional. No reference herein to the Indenture and no provisions
of this Note or of the Indenture shall impair the right of each Holder of any
Note, which is absolute and unconditional, to receive payment of the principal
of, and any interest on, such Note on the respective Stated Maturity Date
thereof and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.

 

Section 8.                                          Events
of Default. If an Event of Default with respect to Notes of this Series shall
occur and be continuing, the principal of the Notes of this Series may be
declared due and payable, or may be automatically accelerated, as the case
may be, in the manner and with the effect provided in the Indenture. In
the event that this Note is a Discount Note, the amount of principal of this
Note that becomes due and payable upon such acceleration shall be equal to the
amount calculated as set forth in Section 2(b) hereof.

 

Section 9.                                          Additional
Amounts; Tax Event. No Additional Amounts will be paid with respect to
any payment of principal of (or premium, if any, on) or interest, if any, on
this Note to any Holder.

 

If (1) a Tax Event
(defined below) as to the relevant Funding Agreement(s) occurs and (2) Protective
Life redeems the Funding Agreement in whole or in part, the Trust will redeem
the Notes, subject to the terms and conditions of Section 2.04 of
the Indenture, at the Tax Event Redemption Price (defined below) together with
unpaid interest accrued thereon to the applicable redemption date. “Tax Event”
means that Protective Life shall have received an opinion of independent legal
counsel stating in effect that as a result of (a) any amendment to, or
change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority therefor or therein or (b) any amendment to, or change in,
an interpretation or application of any such laws or regulations by any
governmental authority in the United States, which amendment or change is
enacted, promulgated, issued or announced on or after the date the applicable
Funding Agreement is entered into, there is more than an insubstantial risk
that (i) the Trust is, or will be

 

24

 

within ninety (90)
days of the date thereof, subject to U.S. federal income tax with respect to
interest accrued or received on the relevant Funding Agreement or (ii) the
Trust is, or will be within ninety (90) days of the date thereof, subject to
more than a de minimis amount of taxes, duties or other governmental charges. “Tax
Event Redemption Price” means an amount equal to the unpaid principal amount of
this Note to be redeemed. The unpaid principal amount of this Note to be
redeemed shall be determined by multiplying (1) the Outstanding Principal
Amount of this Note by (2) the quotient derived by dividing (A) the
outstanding principal amount to be redeemed by Protective Life of the Funding
Agreement by (B) the outstanding principal amount of the Funding
Agreement.

 

Section 10.                                   Listing.
Unless otherwise specified on the face hereof, this Series of Notes will
not be listed on any securities exchange.

 

Section 11.                                   No
Recourse Against Certain Persons.
No recourse shall be had for the payment of the principal of or the interest on
this Note, or for any claim based hereon, or otherwise in respect hereof, or
based on or in respect of the Indenture or any indenture supplemental thereto,
against the Nonrecourse Parties, whether by virtue of any constitution, statute
or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such personal liability being, by the acceptance hereof and as part of
the consideration for issue hereof, expressly waived and released.

 

Section 12.                                   Miscellaneous.

 

(a)                                  This
Note is issuable only as a registered Note without coupons in denominations of
$1,000 and any integral multiple in excess thereof unless otherwise
specifically agreed between the parties and
provided on the face of this Note.

 

(b)                                 As
provided in the Indenture and subject to certain limitations therein set forth
(including, in the case of a Global Note, certain additional limitations), the
transfer of this Note is registrable in the
Register, upon surrender of this Note for registration of transfer at the Place
of Payment, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Administrator and the Registrar duly
executed by the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Notes of like tenor, of authorized denominations and
for the same aggregate principal amount, will be issued to the designated
transferee or transferees.

 

(c)                                  As
provided in the Indenture and subject to certain limitations (including, in the
case of any Global Note, certain additional limitations) therein set forth,
this Note is exchangeable for a like aggregate principal amount of Notes of
like tenor of a different authorized denomination, as requested by the Holder
surrendering the same.

 

(d)                                 Prior
to due presentment for registration of transfer of this Note, the Trust, the
Indenture Trustee, the Registrar, the Paying Agent, any Agent, and any other
agent of the Trust or the Indenture Trustee may treat the Person in whose
name this Note is registered as the owner hereof for the purpose of receiving
payment as herein provided (subject to Section 2.09 of the
Indenture) and for all other purposes, whether or not this

 

25

 

Note be overdue,
and, except as otherwise required by applicable law, none of the Trust, the
Indenture Trustee, the Registrar, the Paying Agent, any Agent, and any other
agent of the Trust or the Indenture Trustee shall be affected by notice to the
contrary.

 

(e)                                  The
Notes are being issued by means of a book-entry-only system with no physical
distribution of certificates to be made except as provided in the Indenture. The
book-entry system maintained by DTC will evidence ownership of the Notes, with
transfers of ownership effected on the records of DTC and its participants
pursuant to rules and procedures established by DTC and its participants. The
Trust and the Indenture Trustee will recognize Cede & Co., as nominee
of DTC, as the registered owner of the Notes, as the Holder of the Notes for
all purposes, including payment of principal, premium (if any) and interest,
notices and voting. Transfer of principal, premium (if any) and interest to
participants of DTC will be the responsibility of DTC, and transfer of
principal, premium (if any) and interest to beneficial owners of the Notes by
participants of DTC will be the responsibility of such participants and other
nominees of such beneficial owners. So long as the book-entry system is in
effect, the selection of any Notes to be redeemed or repaid will be determined
by DTC pursuant to rules and procedures established by DTC and its
participants. Neither the Trust nor the Indenture Trustee will be responsible
or liable for such transfers or payments or for maintaining, supervising or
reviewing the records maintained by DTC, its participants or persons acting
through such participants.

 

(f)                                    This
Note or portion hereof may not be exchanged for Definitive Notes of this Series of
Notes, except in the limited circumstances provided for in the Indenture. The
transfer or exchange of Definitive Notes shall be subject to the terms of the
Indenture. No service charge will be made for any registration of transfer or
exchange, but the Trust may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.

 

Section 13.                                   GOVERNING
LAW. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.

 

26

 

	
  ASSIGNMENT

  
	
   

  
	
  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
  transfer(s) unto

  
	
   

  
	
  .

  
	
  [PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS

  
	
  INCLUDING ZIP CODE, OF ASSIGNEE]

  
	
   

  
	
   

  

Please Insert Social Security
or Other

	
  Identifying Number of Assignee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

	
  the within
  Note and all rights thereunder, hereby irrevocably constituting and
  appointing 

  	
   

  	
   Attorney to 

  
	
  transfer
  said Note in the Register, with full power of substitution in the premises.

  	
   

  	
   

  

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature
  Guaranteed)

  
	
   

  
	
  NOTICE: 
  The signature to this assignment must correspond with the name as it
  appears upon the face of the within Note in every particular, without
  alteration or enlargement or any change whatever and must be guaranteed.

  

 

27

 

OPTION TO ELECT REPAYMENT

 

The undersigned hereby irrevocably request(s) and
instruct(s) the Trust to repay this Note (or portion hereof specified below)
pursuant to its terms at a price equal to the Principal Amount hereof together
with interest to the repayment date, to the undersigned, at:

	
   

  
	
   

  

(Please print or typewrite name and address of the
undersigned).

 

For this Note to be repaid, the Indenture Trustee (or
the Paying Agent on behalf of the Indenture Trustee) must receive at its
Corporate Trust Office, or at such other place or places of which the Trust
shall from time to time notify the Holder of this Note, not more than sixty
(60) nor less than thirty (30) days prior to a Repayment Date, if any, shown on
the face of this Note, this Note with this “Option to Elect Repayment” form duly
completed.

 

If less than the entire Principal Amount of this Note
is to be repaid, specify the portion hereof (which shall be in increments of
the authorized denomination specified on the face hereof) which the Holder
elects to have repaid and specify the denomination or denominations (which
shall be $_______ or an integral multiple of the
authorized denomination in excess of $_______) of the
Notes to be issued to the Holder for the portion of this Note not being repaid
(in the absence of any such specification, one such Note will be issued for the
portion not being repaid).

 

	
  $                                                                                             

  	
   

  	
   

  
	
  DATE:

  	
   

  	
   

  	
  NOTICE: The signature on this Option to
  Elect Repayment must correspond with the name as written upon the face of
  this Note in every particular, without alteration or enlargement or any
  change whatever.

  
	
   

  
	
   

  	
   

  	
   

  
	
  Registered Face Amount to be repaid, if
  amount to be repaid is less than the Registered Face Amount of this Note
  (Registered Face Amount remaining must be an authorized denomination)

  	
   

  	
  Fill in for registration of Notes if to be
  issued otherwise than to the registered Holder:

  
	
   

  	
   

  	
  Name:

  	
   

  
	
  $

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Please print name and

  address including zip code)

  
	
   

  	
   

  	
   

  
	
  SOCIAL SECURITY OR OTHER TAXPAYER ID
  NUMBER:

  	
                                                                                                               

  
							

 

28

 

SURVIVOR’S OPTION RIDER

 

Unless the Notes have been declared due and payable
prior to their maturity by reason of any Event of Default under the Indenture,
or have been previously redeemed or otherwise repaid, the authorized
Representative (as defined below) of a deceased Beneficial Owner (as defined
below) of that Note shall have the option to elect repayment of such Notes
following the death of the Beneficial Owner (a “Survivor’s Option”). The
Survivor’s Option may not be exercised unless the Notes to be repaid were
held by the Beneficial Owner or the estate of that Beneficial Owner for a
period beginning at least 6 months immediately prior to such election. “Beneficial
Owner” as used in this Survivor’s Option Rider means, with respect to a Note,
the person who has the right, immediately prior to such person’s death, to
receive the proceeds from the disposition of that Note, as well as the right to
receive payments on that Note.

 

Upon (i) the valid exercise of the Survivor’s
Option and the proper tender of the Notes for repayment by or on behalf of the
person that has authority to act on behalf of the deceased Beneficial Owner of
such Notes under the laws of the appropriate jurisdiction (including, without
limitation, the personal representative or executor of the deceased Beneficial
Owner or the surviving joint owner of the deceased Beneficial Owner) (the “Representative”)
and (ii) the tender and acceptance of that portion of the Funding
Agreement equal to the amount of the portion of the Note to be redeemed, the
Trust shall repay the Notes (or portion thereof)  at a price equal to 100% of the principal
amount of the deceased Beneficial Owner’s beneficial interest in such Note plus
accrued and unpaid interest to the date of such repayment. However, the Trust
shall not be obligated to repay:

 

•                  beneficial
ownership interests in Notes exceeding the greater of $2,000,000 or 2% (or such
other amounts, as specified in the Pricing Supplement) in aggregate principal
amount for all notes then outstanding and issued to retail investors under the
Program as of the end of the most recent calendar year (the “Annual Put
Limitation”);

 

•                  on behalf of an
individual deceased Beneficial Owner, any beneficial ownership interest in all
notes issued to retail investors under the Program that exceeds $250,000 (or
such other amounts, as specified in the Pricing Supplement) in any calendar
year (the “Individual Put Limitation”); or

 

•                  beneficial
ownership interests in Notes of the Trust exceeding the amount specified on the
face hereof for the Trust Put Limitation, if any (the “Trust Put Limitation”).

 

The Trust shall not make principal repayments pursuant
to exercise of the Survivor’s Option in amounts that are less than the
authorized denomination specified on the face hereof, and, in the event that
the limitations described in the preceding sentence would result in the partial
repayment of any Note, the Principal Amount of such Note remaining Outstanding
after repayment must be at least the authorized denomination of the Notes).

 

29

 

An otherwise valid election to exercise the Survivor’s
Option may not be withdrawn.

 

Each Note (or portion thereof) that is elected for
exercise of the Survivor’s Option will be accepted in the order that elections
are received by the Indenture Trustee, except for any Notes (or portion
thereof) the acceptance of which would contravene (i) the Annual Put
Limitation, (ii) the Individual Put Limitation, if applied, or (iii) the
Trust Put Limitation. Any Note (or portion thereof) accepted for repayment
pursuant to exercise of the Survivor’s Option shall be repaid on the first
Interest Payment Date that occurs 20 or more calendar days after the date of
such acceptance. If, as of the end of any calendar year, the aggregate
principal amount of all notes (or portions thereof) issued under the Program
that have been tendered pursuant to the valid exercise of the Survivor’s Option
during such year has exceeded the Annual Put Limitation or the Individual Put
Limitation, for such year, any exercise(s) of the Survivor’s Option with
respect to Notes (or portions thereof) not accepted during such calendar year,
because such acceptance would have contravened any such limitation, if applied,
shall be deemed to be tendered in the following calendar year in the order all
such notes (or portions thereof) were originally tendered. In the event that a
Note (or any portion thereof) tendered for repayment pursuant to valid exercise
of the Survivor’s Option is not accepted, the Indenture Trustee shall deliver a
notice by first-class mail to the Depositary that states the reason such
Note (or portion thereof) has not been accepted for payment.

 

In order to obtain repayment through exercise of the
Survivor’s Option with respect to any Note (or portion thereof), the
Representative must provide the following items to the broker or other entity
through which the beneficial interest in the Notes is held by the deceased
Beneficial Owner:  (i) a written
instruction to such broker or other entity to notify the Depositary of the
Representative’s desire to obtain repayment through the exercise of the
Survivor’s Option; (ii) appropriate evidence satisfactory to the Indenture
Trustee that (A) the deceased was the Beneficial Owner of such Notes at
the time of death and the interest in such Notes was owned by the deceased
Beneficial Owner or his or her estate for a period beginning at least six
months immediately prior to the request for repayment, (B) the death of
such Beneficial Owner has occurred, and the date of such death, and (C) the
Representative has authority to act on behalf of the deceased Beneficial Owner;
(iii) if the interest in such Notes is held by a nominee of the deceased
Beneficial Owner, a certificate satisfactory to the Indenture Trustee from such
nominee attesting to the deceased’s beneficial ownership of such Notes; (iv) a
written request for repayment signed by the Representative, with the signature
guaranteed by a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or correspondent in the United States; (v) if
applicable, a properly executed assignment or endorsement; (vi) tax
waivers and such other instruments or documents that the Indenture Trustee
reasonably requires in order to establish the validity of the beneficial ownership
of the Notes and the claimant’s entitlement to payment; and (vii) any
additional information the Indenture Trustee requires to evidence satisfaction
of any conditions to the exercise of such Survivor’s Option or to document
beneficial ownership or authority to make the election and to cause the
repayment of such Notes. Such broker or other entity shall then deliver each of
these items to the direct participant of the Depositary, such direct

 

30

 

participant being the entity that holds the beneficial
interest in the Notes on behalf of the deceased Beneficial Owner, together with
evidence satisfactory to the Indenture Trustee from the broker or other entity
stating that it represents the deceased Beneficial Owner. Such direct
participant shall then deliver such items to the Indenture Trustee. Such direct
participant shall be responsible for disbursing any payments it receives from
the Depositary pursuant to exercise of the Survivor’s Option to the appropriate
Representative. All questions, other than with respect to the right to limit
the aggregate principal amount of Notes as to which exercises of the Survivor’s
Option shall be accepted in any one calendar year or as to the Notes or as to
the eligibility or validity of any exercise of the Survivor’s Option, will be
determined by the Indenture Trustee, in its sole discretion, which
determination shall be final and binding on all parties. The Indenture Trustee
shall be entitled to rely and shall be fully protected in relying without
further inquiry on, in the case of documentation believed by it in good faith
to be genuine and to have been signed or presented by the proper Person and
that is required to be provided pursuant to (i) clause (ii)(A) of the
first sentence of this paragraph, a certificate of the Representative to the
effect the deceased was the Beneficial Owner of such Notes at the time of death
and the interest in such Notes was owned by the deceased Beneficial Owner or
his or her estate for a period beginning at least six months immediately prior
to the request for repayment to which is attached a copy of account statements
in respect of the account in which such Notes were held demonstrating that such
Notes were held for the requisite period, (ii) clause (ii)(B) of the
first sentence of this paragraph, a government certified copy of the deceased’s
death certificate, and (iii) clause (ii)(C) of the first sentence of
this paragraph, a court certified copy of letters testamentary, letters of
administration or analogous letters issued by the applicable court.

 

The death of a person holding a beneficial interest in
a Note as a joint tenant or tenant by the entirety with another person, or as a
tenant in common with the deceased owner’s spouse, will be deemed the death of
the Beneficial Owner of that Note, and the entire principal amount of the Note
so held shall be subject to repayment by the Trust upon request. However, the
death of a person holding a beneficial interest in a Note as tenant in common
with a person other than such deceased owner’s spouse will be deemed the death
of a Beneficial Owner only with respect to such deceased person’s ownership
interest in the Note.

 

The death of a person who, during his or her lifetime,
was entitled to substantially all of the beneficial ownership interests in a
Note will be deemed the death of the Beneficial Owner of such Note for purposes
of the Survivor’s Option, regardless of whether that Beneficial Owner was the
registered holder of the Note, if such beneficial ownership interest can be
established to the satisfaction of the Indenture Trustee. A beneficial
ownership interest will be deemed to exist in typical cases of nominee
ownership, ownership under the Uniform Transfers to Minors Act or Uniform Gifts
to Minors Act, community property or other joint ownership arrangements between
a husband and wife. In addition, a beneficial ownership interest will be deemed
to exist in custodial and trust arrangements where one person has all of the
beneficial ownership interests in the Note during his or her lifetime.

 

31

 

PROTECTIVE
LIFE SECURED TRUSTS

INTERNOTES®

 

FORM OF
NOTICE OF ELECTION TO EXERCISE SURVIVOR’S OPTION

 

o                                   By
checking this box, the undersigned represents that:  (1) he/she is the authorized
representative of the deceased Beneficial Owner identified below; (2) (a) the
deceased was the Beneficial Owner of the principal amount of Notes listed below
at the date of his or her death and the interest in such Notes was owned by the
deceased or his or her estate for a period beginning at least six months
immediately prior to this request for repayment, (b) the death of the
Beneficial Owner listed below has occurred and (c) the undersigned
representative has authority to act on behalf of the deceased Beneficial Owner;
and (3) subject to the aggregate limitations on the amount of Notes that may be
tendered in any calendar year, he/she hereby elects to tender the principal
amount of Notes set forth below for repayment by the Trust for a price equal to
100% (or such lesser amount as may be accepted for repayment) of the
principal amount of the beneficial interest of the deceased Beneficial Owner
plus accrued interest to the date of repayment.

 

The deceased Beneficial Owner held the principal
amount of Notes to be tendered as (check one):

 

o                                    a
sole Beneficial Owner, a joint tenant or a tenant by the entirety with another
or others, a tenant in common with a spouse or an individual entitled to
substantially all of the beneficial interest.

 

o                                    a
tenant in common with another (other than a spouse). If applicable please
provide the amount of interest held by the deceased Beneficial Owner. $_______

 

Full name of deceased Beneficial Owner (please attach death certificate):

 

	
   

  	
   

  	
   

  

If applicable, full name of the nominee of the
deceased Beneficial Owner (please attach a
certificate attesting to the deceased’s ownership of the beneficial interest in
the notes):

 

	
   

  	
   

  	
   

  

Principal amount of Notes being tendered for repayment
(amount must be no less than the authorized
denomination specified on the face of the Note):

 

	
   

  	
   

  	
   

  

The Bank of New York, as Indenture Trustee on behalf
of the Trust, has the right to reject tenders of Notes if a properly executed
election is not submitted or if it fails to receive any tax or additional
information that is required to document adherence to any conditions precedent,
ownership or authority to make the election.

 

32

 

THIS
NOTICE OF ELECTION MAY NOT BE WITHDRAWN AND NOTES

SUBJECT TO THIS NOTICE OF ELECTION MAY NOT BE TRANSFERRED

PRIOR TO THE DATE OF REPAYMENT

 

PLEASE SIGN HERE

 

(Must be signed by authorized
representative(s) of deceased Beneficial Owner. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation
or another person acting in a fiduciary capacity, please set forth full title).

 

Signature(s) of
Authorized Representative(s):

 

	
   

  
	
   

  

 

	
  Dated:

  	
                  

  	
  , 20

  	
     

  	
   

  

 

	
  Name(s):

  	
   

  
	
   

  	
  (Please Print)

  
	
   

  
	
  Capacity (full title):

  	
   

  
	
   

  
	
  Address:

  	
   

  
	
   

  	
  (Include Zip Code)

  
	
   

  
	
  Area Code(s) and Telephone Number(s):

  	
   

  
					

 

GUARANTEE OF SIGNATURE(S)

 

(Must be signed by authorized representative
of:  (1) a member firm of a
registered national securities exchange or the National Association of Securities
Dealers, Inc., or (2) a commercial bank or trust company having an
office or correspondent in the United States.)

 

	
  Name of Firm:

  	
   

  
	
   

  
	
  Authorized Signature:

  	
   

  
	
   

  
	
  Name:

  	
   

  
	
   

  	
  (Please Print)

  
	
   

  
	
  Title:

  	
   

  
	
   

  
	
  Address:

  	
   

  
	
   

  	
  (Include Zip Code)

  
	
   

  
	
  Area Code(s) and Telephone Number(s):

  	
   

  
							

 

	
  Dated:

  	
                  

  	
  , 20

  	
     

  	
   

  

 

33

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