LLOYDS TSB GROUP plc. LLOYDS TSB BANK plc

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1 OFFERING CIRCULAR Dated 26 March 2002 LLOYDS TSB GROUP plc (Incorporated in Scotland with limited liability under the Companies Acts with registered number 95,000) 500,000,000 6 per cent. Undated Subordinated Guaranteed Bonds callable 2032 guaranteed on a subordinated basis by LLOYDS TSB BANK plc (Incorporated in England with limited liability under the Companies Act 1862 and the Companies Act 1985 with registered number 2065) Issue Price: per cent. The 500,000,000 6 per cent. Undated Subordinated Guaranteed Bonds callable 2032 of Lloyds TSB Group plc (the Issuer ) guaranteed on a subordinated basis by Lloyds TSB Bank plc (the Guarantor ) are proposed to be issued on 28 March 2002 (the Closing Date ). The Bonds will bear interest calculated from, and including 28 March 2002 to, but excluding, 7 June 2032 at a rate of 6 per cent. per annum, payable annually in arrear on 7 June in each year starting on 7 June There will be a short first coupon payable on the first Interest Payment Date (as defined in Condition 4 Interest ). From, and including, 7 June 2032, the Bonds will bear interest at a rate, reset every five years, of 2.02 per cent. per annum above the gross redemption yield on a specified United Kingdom government security, payable annually in arrear on 7 June in each year, all as more particularly described in Condition 4 Interest. The Bonds will be perpetual securities and not subject to any mandatory redemption provisions. The Bonds will be redeemable on any Reset Date (as defined in Condition 4(d)) in whole, but not in part at the option of the Issuer, at their principal amount, together with interest accrued to, but excluding, the date of redemption and all Arrears of Interest (as defined herein), if any. The Bonds will also be redeemable, subject to the satisfaction of certain conditions, in whole but not in part, at any time prior to the Reset Date and, thereafter, on any Interest Payment Date as a result of certain taxation reasons (all as more fully described in Condition 5(b) Redemption for Taxation Reasons ). Under existing requirements, the Issuer may not redeem or purchase any Bonds unless the Financial Services Authority has given its prior written consent. The Bonds and the obligations of the Guarantor under the guarantee in respect thereof will constitute unsecured obligations of the Issuer and the Guarantor respectively, subordinated to the claims of Senior Creditors (as defined in Conditions 2 and 3 Status and Subordination and Subordinated Guarantee, respectively). The Bonds have been assigned a rating of A+ by Standard & Poor s Rating Services, a division of the McGraw Hill Companies, Inc. ( Standard & Poor s ) and a rating of Aa1 by Moody s Investors Service, Inc. ( Moody s ). A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the relevant rating organisation. The Bonds will be represented initially by a temporary global Bond (the Temporary Global Bond ), without interest coupons and talons, which will be deposited with a common depositary for Clearstream Banking, société anonyme ( Clearstream, Luxembourg ) and Euroclear Bank S.A./N.V. as operator of the Euroclear System ( Euroclear ) on or about 28 March The Temporary Global Bond will be exchangeable for a permanent global Bond (the Permanent Global Bond ), without interest coupons and talons, on or after a date which is expected to be 7 May 2002 upon certification as to non-us beneficial ownership. Definitive Bonds will be available only in the limited circumstances set out in the Permanent Global Bond. Application has been made to the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000 (the UK Listing Authority ) for the Bonds to be admitted to the official list of the UK Listing Authority (the Official List ) and to the London Stock Exchange plc (the London Stock Exchange ) for the Bonds to be admitted to trading on the London Stock Exchange s market for listed securities. Admission to the Official List of the UK Listing Authority, together with admission to trading on the London Stock Exchange s market for listed securities, constitutes official listing on a stock exchange. Credit Suisse First Boston Goldman Sachs International UBS Warburg Lehman Brothers

2 This document comprises listing particulars relating to the issue of the Bonds by the Issuer in accordance with the listing rules (the Listing Rules ) made by the UK Listing Authority under Section 74 of the Financial Services and Markets Act 2000 for the purpose of giving information with regard to the issue by the Issuer of the Bonds, the Issuer and the Guarantor. Copies of this document have been delivered for registration to the Registrar of Companies both in England and Wales and Scotland as required by Section 83 of the Financial Services and Markets Act The Issuer and the Guarantor accept responsibility for the information contained in this document. To the best of the knowledge and belief of each of the Issuer and the Guarantor (each having taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. No person is authorised to give any information or to make any representation not contained herein in connection with the offering or sale of the Bonds and any information or representation not contained herein must not be relied upon as having been authorised by the Issuer, the Guarantor or the Managers (as defined under Subscription and Sale below). Neither the delivery of this document nor any sale or purchase made in connection herewith shall, under any circumstances, constitute a representation or create any implication that there has been no change in the affairs of the Issuer or the Guarantor since the date hereof. This document does not constitute an offer of, or an invitation by or on behalf of the Issuer, the Guarantor or the Managers to subscribe for or purchase, any of the Bonds. The distribution of this document and the offering of the Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this document comes are required by the Issuer, the Guarantor and the Managers to inform themselves about, and to observe, any such restrictions. A further description of certain restrictions on the offering and sale of the Bonds and on the distribution of this document is given under Subscription and Sale below. The Bonds have not been and will not be registered under the US Securities Act of 1933, as amended, and are subject to US tax law requirements. Subject to certain exceptions, Bonds may not be offered, sold or delivered, directly or indirectly, within the United States or to US Persons. References herein to the Group are to Lloyds TSB Group plc and its subsidiaries taken as a whole. References herein to pounds, sterling and are to the currency of the United Kingdom of Great Britain and Northern Ireland (the United Kingdom or the UK ). In connection with this issue, Credit Suisse First Boston (Europe) Limited ( CSFB ) may over-allot or effect transactions with a view to supporting the market price of the Bonds at a level higher than that which might otherwise prevail for a limited period after the issue date. However, there may be no obligation on CSFB to do this. Such stabilising, if commenced, may be discontinued at any time, and must be brought to an end after a limited period. 2

3 TABLE OF CONTENTS TERMS AND CONDITIONS OF THE BONDS... 4 SUMMARY OF PROVISIONS RELATING TO THE BONDS WHILE IN GLOBAL FORM USE OF PROCEEDS LLOYDS TSB GROUP PLC CAPITALISATION AND INDEBTEDNESS OF LLOYDS TSB GROUP PLC LLOYDS TSB BANK PLC CAPITALISATION AND INDEBTEDNESS OF LLOYDS TSB BANK PLC UNITED KINGDOM TAXATION SUBSCRIPTION AND SALE GENERAL INFORMATION DOCUMENTS INCORPORATED BY REFERENCE Any reference in this document to listing particulars means this document excluding all information incorporated by reference. The Issuer has confirmed that any information incorporated by reference, including any such information to which readers of this document are expressly referred, has not been and does not need to be included in the listing particulars to satisfy the requirements of the Financial Services and Markets Act 2000 or the Listing Rules. The Issuer believes that none of the information incorporated herein by reference conflicts in any material respect with the information included in the listing particulars. 3

4 TERMS AND CONDITIONS OF THE BONDS Neither the Trust Deed constituting the Bonds nor the Conditions of the Bonds will contain any negative pledge covenant by the Issuer or the Guarantor or any events of default other than those set out in Condition 9 below (which do not include, inter alia, a cross default provision). The terms and conditions to be endorsed on each of the Bonds in definitive form (if issued) will be substantially in the following form: The 500,000,000 6 per cent. Undated Subordinated Guaranteed Bonds callable 2032 (the Bonds, which expression shall in these Conditions, unless the context otherwise requires, include any further bonds issued pursuant to Condition 13 and forming a single series with the Bonds) of Lloyds TSB Group plc (the Issuer ) are constituted by a trust deed dated 28 March 2002 (the Trust Deed ) between the Issuer, Lloyds TSB Bank plc (the Guarantor ) as guarantor and The Law Debenture Trust Corporation p.l.c. (the Trustee, which expression shall include all persons for the time being the trustee or trustees under the Trust Deed) as trustee for the Bondholders and the Couponholders (both as defined below). The issue of the Bonds was authorised by a resolution of a duly constituted committee of the Board of Directors of the Issuer passed on 7 February The giving of the guarantee in respect of the Bonds (the Guarantee ) was authorised by a resolution of the Chairman s Committee of the Board of Directors of the Guarantor passed on 7 February 2002 and a resolution of the shareholders of the Guarantor passed on 26 March These Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed. An Agency Agreement dated 28 March 2002 (the Agency Agreement ) has been entered into in relation to the Bonds between the Issuer, the Trustee, Citibank, N.A., London office, as principal paying agent and the other paying agent named in it. The principal paying agent and the other paying agent are referred to below respectively as the Principal Paying Agent and the Paying Agents (which expression shall, where the context so permits, include the Principal Paying Agent and any other paying agents appointed from time to time under the Agency Agreement). Copies of the Trust Deed and the Agency Agreement are available for inspection during usual business hours at the registered office for the time being of the Trustee (being at the date of issue of the Bonds at Fifth Floor, 100 Wood Street, London EC2V 7EX) and at the specified offices of the Paying Agents. The holders of the Bonds (the Bondholders ), the holders (the Couponholders ) of the interest coupons (the Coupons ) appertaining to the Bonds and the talons for further Coupons (the Talons ) are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of those provisions applicable to them of the Agency Agreement. 1. Form, Denomination and Title The Bonds are issued in bearer form in denominations of 1,000, 10,000 and 100,000. Bonds are serially numbered and are issued with Coupons (and a Talon) attached and title will pass by delivery. Bonds of one denomination are not exchangeable for Bonds of any other denomination. Except as ordered by a court of competent jurisdiction or as required by law, the holder of any Bond, Coupon or Talon shall be deemed to be and may be treated as its absolute owner for all purposes whether or not it is overdue and regardless of any notice of ownership, trust or an interest in it, any writing on it or its theft or loss and no person shall be liable for so treating the holder. 2. Status and Subordination of the Bonds (a) No Set-off: Subject to applicable law, no Bondholder or Couponholder may exercise, claim or plead any right of set-off, compensation or retention in respect of any amount owed to it by the Issuer or the Guarantor arising under or in connection with the Bonds or Coupons and each Bondholder and Couponholder shall, by virtue of being the holder of any Bond or Coupon (as the case may be), be deemed to have waived all such rights of set-off, compensation or retention. (b) Status: The Bonds and the Coupons relating to them constitute unsecured, subordinated obligations of the Issuer, conditional as described below, and rank pari passu without any preference among themselves. 4

5 (c) Subordination: The rights of the Bondholders and the Couponholders are subordinated to the claims of Senior Creditors (as defined below) and accordingly payments of principal and interest are conditional upon the Issuer being solvent at the time of payment by the Issuer and no principal or interest shall be payable in respect of the Bonds except to the extent that the Issuer could make such payment and still be solvent immediately thereafter. For the purpose of this Condition 3(c), the Issuer shall be solvent if (i) it is able to pay its debts as they fall due and (ii) its Assets exceed its Liabilities (other than its Liabilities to persons who are not Senior Creditors). A report as to the solvency of the Issuer by two Directors of the Issuer or, in certain circumstances as provided in the Trust Deed, the auditors of the Issuer or, if the Issuer is in winding-up, its liquidator, shall in the absence of proven error be treated and accepted by the Issuer, the Trustee, the Bondholders and the Couponholders as correct and sufficient evidence thereof. If at any time an order is made or an effective resolution is passed for the winding-up in Scotland of the Issuer, there shall be payable in respect of the Bonds (in lieu of any other payment), but subject as provided in this Condition 2(c), such amount, if any, as would have been payable to a Bondholder if, on the day prior to the commencement of the winding-up and thereafter, such holder of such Bond were the holder of a preference share in the capital of the Issuer having a preferential right to a return of assets in the winding-up over the holders of all issued shares for the time being in the capital of the Issuer on the assumption that such preference share was entitled to receive on a return of assets in such winding-up an amount equal to the principal amount of such Bond together with Arrears of Interest (as defined in Condition 4(c)), if any, and any accrued interest (other than Arrears of Interest) up to, but excluding, the date of repayment (as provided in the Trust Deed) in respect thereof. For the purposes of this Condition 2(c), Senior Creditors means creditors of the Issuer (i) who are depositors or other unsubordinated creditors of the Issuer or (ii) whose claims are, or are expressed to be, subordinated (whether only in the event of the winding-up of the Issuer or otherwise) to the claims of depositors and other unsubordinated creditors of the Issuer but not further or otherwise or (iii) who are subordinated creditors of the Issuer other than those whose claims are, or are expressed to rank, pari passu with, or junior to, the claims of the Bondholders; Assets means the unconsolidated gross assets of the Issuer; and Liabilities means the unconsolidated gross liabilities of the Issuer, all as shown by the latest published audited balance sheet of the Issuer, but adjusted for contingent assets and contingent liabilities and for subsequent events, all in such manner as such Directors, the auditors or the liquidator (as the case may be) may determine. N.B. The obligations of the Issuer in respect of the Bonds and the Coupons are conditional upon the Issuer being solvent for the purpose of this Condition 2(c) immediately before and after payment by the Issuer. If this Condition 2(c) is not satisfied, any amounts which might otherwise have been allocated in or towards payment of principal and interest in respect of the Bonds may be used to absorb losses. 3. Status and Subordination of the Guarantee The payment of principal and interest in respect of the Bonds and all other moneys payable by the Issuer under or pursuant to the Trust Deed has been irrevocably and (save as to subordination) unconditionally guaranteed by the Guarantor, as provided in the Trust Deed. The obligations of the Guarantor under the Guarantee constitute unsecured obligations of the Guarantor. The obligations of the Guarantor under the Guarantee are subordinated to the claims of Senior Creditors (as defined below) and accordingly payments of principal and interest are conditional upon the Guarantor being solvent at the time of payment by the Guarantor and no principal or interest shall be payable in respect of the Bonds except to the extent that the Guarantor could make such payment and still be solvent immediately thereafter. For the purpose of this Condition 3, the Guarantor shall be solvent if (i) it is able to pay its debts as they fall due and (ii) its Assets exceed its Liabilities (other than its Liabilities to persons who are not Senior Creditors). A report as to the solvency of the Guarantor by two Directors of the Guarantor or, in certain circumstances as provided in the Trust Deed, the auditors of the Guarantor or, if the Guarantor is in winding-up, its liquidator, shall in the absence of proven error be treated and accepted by the Guarantor, the Trustee, the Bondholders and the Couponholders as correct and sufficient evidence thereof. For the purpose of this Condition 3, amounts (whether by way of principal, interest or otherwise) otherwise payable by the Issuer shall be deemed so payable notwithstanding that the solvency condition set out in Condition 2(c) is not satisfied. 5

6 If at any time an order is made or an effective resolution is passed for the winding-up in England of the Guarantor, there shall be payable under the Guarantee in respect of each Bond (in lieu of any other payment), but subject as provided in this Condition 3, such amount, if any, as would have been payable to a Bondholder if, on the day prior to the commencement of the winding-up and thereafter, such holder of such Bond were the holder of a preference share in the capital of the Guarantor (ranking pari passu with the Cumulative Floating Rate Preference Share of 1 in the capital of the Guarantor) having a preferential right to a return of assets in the winding-up over the holders of all issued shares for the time being in the capital of the Guarantor on the assumption that such preference share was entitled to receive on a return of assets in such winding-up an amount equal to the principal amount of such Bond together with Arrears of Interest (as defined in Condition 4(c)), if any, and any accrued interest (other than Arrears of Interest) up to, but excluding, the date of repayment (as provided in the Trust Deed) in respect thereof. For the purposes of this Condition 3, Senior Creditors means creditors of the Guarantor (i) who are depositors or other unsubordinated creditors of the Guarantor or (ii) whose claims are, or are expressed to be, subordinated (whether only in the event of the winding-up of the Guarantor or otherwise) to the claims of depositors and other unsubordinated creditors of the Guarantor but not further or otherwise or (iii) who are subordinated creditors of the Guarantor other than those whose claims are, or are expressed to rank, pari passu with, or junior to, the claims of the Bondholders; Assets means the unconsolidated gross assets of the Guarantor; and Liabilities means the unconsolidated gross liabilities of the Guarantor, all as shown by the latest published audited balance sheet of the Guarantor, but adjusted for contingent assets and contingent liabilities and for subsequent events, all in such manner as such Directors, the auditors or the liquidator (as the case may be) may determine. N.B. The obligations of the Guarantor in respect of the Bonds and the related Coupons are conditional upon the Guarantor being solvent for the purpose of this Condition immediately before and after payment by the Guarantor. If this Condition is not satisfied, any amounts which might otherwise have been allocated in or towards payment of principal and interest in respect of the Bonds may be used to absorb losses. 4. Interest (a) Rate of Interest: The Bonds bear interest at the rate of 6 per cent. per annum from, and including, 28 March 2002 to, but excluding, 7 June 2032 and thereafter at an applicable rate of interest determined in accordance with paragraph (d) below (the Reset Rate of Interest ). Interest on the Bonds will be payable, subject as provided below, in arrear on 7 June in each year (each an Interest Payment Date ), the first Interest Payment Date being 7 June The amount payable on the first Interest Payment Date shall be per 1,000 principal amount of Bonds. If in any other circumstance, interest is required to be calculated for a period of less than one year, it will be calculated on the basis of (i) the actual number of days in the period from, and including, the date from which interest begins to accrue (for the purpose of this Condition 4(a), the Accrual Date ) to, but excluding, the date on which it falls due divided by (ii) the actual number of days from, and including, the Accrual Date to, but excluding, the next following Interest Payment Date. (b) Interest Payments: Interest will cease to accrue on the Bonds on the first due date for redemption thereof unless, upon due presentation thereof, payment of principal is improperly withheld or refused or is not made by reason of Condition 4(c) below, as the case may be. In such event interest will continue to accrue (as well after as before any judgment) as provided in the Trust Deed. (c) Optional Payment of Interest: Without prejudice to the provisions of Condition 2, the Issuer shall not be obliged to make payment of any interest accrued on the Bonds if, during the period of six months immediately prior to the date on which payment of such interest would otherwise be due, no dividend shall have been declared, paid or made on any class of share capital of the Issuer, and all interest not so paid shall, so long as the same remains unpaid, constitute Arrears of Interest. The Issuer may at its option (upon the expiry of not less than seven days notice to the Bondholders given in accordance with Condition 14 and subject to Condition 2) at any time pay all or part of the Arrears of Interest (being, if part only, the whole of the interest that would have been due on all the Bonds on any due date for the payment of interest) but so that, in the case of any such partial payment, the interest that would have been due on any date shall not be paid prior to that accrued in respect of 6

7 any earlier date. If notice is given by the Issuer of its intention to pay the whole or part of Arrears of Interest, the Issuer shall be obliged (subject to Condition 2) to do so upon the expiry of such notice. All Arrears of Interest shall (subject to Condition 2) become due in full on the date on which any dividend is next declared, paid or made on any class of share capital of the Issuer or, if earlier, the date set for any redemption under Condition 5(b) or (c) or the commencement of a winding-up of the Issuer. Arrears of Interest under this Condition 4(c) shall not bear interest. (d) The Reset Rate of Interest: (i) The Reset Rate of Interest for any Reset Period (as defined below) shall be the rate per annum determined by the Agent Bank or such other person as may be appointed from time to time pursuant to Condition 4(d)(iv) on the following basis. On the Determination Date (as defined below) relating to such Reset Period, the Agent Bank shall determine the gross redemption yield (calculated by the Agent Bank on the basis set out by the United Kingdom Debt Management Office in the paper Formulae for Calculating Gilt Prices from Yields page 4, Section One Price/Yield Formulae Conventional Gilts; Double-dated and Undated Gilts with Assumed (or Actual) Redemption or a Quasi-Coupon Date (published 8/6/1998) (as amended or updated from time to time) on a semi-annual compounding basis) on the basis of the Benchmark Five-Year Gilt (as defined below) in respect of that Reset Period (converted to an annualised payment and expressed as a percentage rounded up (if necessary) to four decimal places) (the Yield ) with the price of the Benchmark Five-Year Gilt for this purpose being the arithmetic mean of the offered and bid quotations for the sale or purchase on a spot delivery basis of such Benchmark Five-Year Gilt as at 3.00 p.m. (London time) on the relevant Determination Date (quoted by the Reference Dealers (as defined below)). The Reset Rate of Interest for such Reset Period shall be the aggregate of the Yield, as so determined by the Agent Bank, and the Margin (as defined below). In these Conditions: Agent Bank means such investment bank as may be appointed as agent bank by the Issuer with the prior written approval of the Trustee; Benchmark Five-Year Gilt means, in respect of a Reset Period, such United Kingdom government security having a maturity date on or about the last day of such Reset Period as the Agent Bank, with the agreement of the Reference Dealers, may determine to be appropriate; Business Day means, in relation to any place, a day on which commercial banks and foreign exchange markets settle payments in that place; Determination Date means, in relation to any Reset Period, the fifth day prior to the first day of such Reset Period, provided that if such fifth day is not a Business Day in London, it shall be postponed to the next day which is a Business Day in London provided that such day occurs before the first day of such Reset Period. If such day falls on or after the first day of such Reset Period, the Determination Date shall instead be the Business Day in London preceding the first day of such Reset Period which is nearest to the first day of such Reset Period and upon which the Agent Bank determines that it is possible to determine the Yield; Margin means 2.02 per cent. per annum; Reference Dealers means three brokers of gilts and/or gilt edged market makers or such other three persons operating in the United Kingdom gilt-edged market (approved by the Trustee) as the Agent Bank may select, each of which (A) is acting through its principal London office, (B) agrees with the Agent Bank s nomination of the relevant Benchmark Five-Year Gilt and (C) is willing to provide the quotations referred to above; Reset Date means 7 June 2032 and every fifth 7 June thereafter; and 7

8 Reset Period means the period beginning on a Reset Date and ending on the day immediately preceding the next succeeding Reset Date. (ii) (iii) (iv) (v) The Issuer shall cause such Reset Rate of Interest to be notified to the Trustee, each of the Paying Agents and any relevant listing authority as soon as practicable after the determination of such Reset Rate of Interest and shall procure that the Principal Paying Agent gives notice to the Bondholders thereof in accordance with Condition 14. If the Agent Bank for any reason defaults in its obligation to determine the Reset Rate of Interest for any Reset Period in accordance with this Condition 4(d), the Trustee shall determine such Reset Rate of Interest at such rate as, in its absolute discretion (having such regard as it shall think fit to the procedure described in this Condition 4(d)), it shall deem fair and reasonable in all the circumstances, and such determination shall be deemed to be a determination thereof by the Agent Bank. So long as any Bonds remain outstanding (as defined in the Trust Deed), the Issuer will maintain an Agent Bank. The Issuer may from time to time appoint another leading bank or investment banking firm in London as Agent Bank as may be approved in writing by the Trustee. If the Agent Bank is unable or unwilling to continue to act as the Agent Bank, the Issuer shall forthwith appoint such other leading bank or investment banking firm in London as may be approved in writing by the Trustee to act as such in it place. The Agent Bank may not resign its duties or be removed without a successor having been appointed and approved as aforesaid. All notifications, opinions, determinations, certificates, calculations, quotations and decisions given, expressed, made or obtained for the purposes of this Condition 4(d), whether by the Agent Bank or the Trustee, shall (in the absence of wilful default, bad faith or manifest error) be binding on the Issuer, the Agent Bank, the Trustee, the Paying Agents and all Bondholders and Couponholders and (in the absence as aforesaid) no liability to the Bondholders or Couponholders or the Issuer shall attach to the Agent Bank or the Trustee in connection with the exercise or nonexercise by it of its powers, duties and discretions. 5. Redemption, Purchase and Options (a) Limitation on Redemption: The Bonds have no final maturity date and are only redeemable in accordance with the following provisions of this Condition 5 or Condition 9. Any redemption or purchase of Bonds pursuant to this Condition 5 is subject to the prior written consent of the Financial Services Authority (the FSA ) (so long as the Issuer is required by the FSA to obtain such consent). (b) Redemption for Taxation Reasons: (i) If at any time the Issuer satisfies the Trustee immediately prior to the giving of the notice referred to below that (x) if a payment of principal or interest in respect of the Bonds were to be due (whether or not the same is in fact then due) on or before the next Interest Payment Date, either the Issuer would, for reasons outside its control, be unable (after using such endeavours as the Trustee shall consider reasonable) to make such payment of principal or interest without having to pay additional amounts as provided or referred to in Condition 7, or the Guarantor would, for reasons outside its control, be unable (after using such endeavours as the Trustee shall consider reasonable) to procure payment by the Issuer and in making payment itself would be required to pay such additional amounts or (y) on the next Interest Payment Date the payment of interest in respect of the Bonds would be treated as a distribution within the meaning of the Income and Corporation Taxes Act 1988 (or such other Act as may from time to time supersede or replace that Act), the Issuer may at its option (subject to Condition 2(c)), having given not less than 30 nor more than 60 days notice in accordance with Condition 14, redeem all, but not some only, of the Bonds then outstanding and shall also pay Arrears of Interest (if any) and any accrued interest (other than Arrears of Interest) up to, but excluding, the date of redemption. 8

9 (ii) Subject only to the obligation of the Issuer to use such endeavours as aforesaid, it shall be sufficient to establish the existence of the circumstances required to be established pursuant to this paragraph (b) if the Issuer shall deliver to the Trustee a certificate of an independent lawyer or accountant satisfactory to the Trustee, in a form satisfactory to the Trustee, to the effect either that such circumstances exist or that, upon a change in the taxation laws (or regulations made thereunder) of the United Kingdom or any authority thereof or therein having power to tax or in the application or interpretation of such laws or regulations, which at the date of such certificate is proposed and which in the opinion of such lawyer or accountant can reasonably be expected to become effective on or prior to such Interest Payment Date or time as is referred to in (i) above, becoming so effective, such circumstances would exist. (c) Redemption at the Option of the Issuer: On giving not less than 7 nor more than 30 days irrevocable notice to the Trustee and the Bondholders, the Issuer may on any Reset Date redeem all but not some only of the Bonds at their principal amount. Any such redemption of Bonds shall be at their principal amount together with all Arrears of Interest (if any) as provided in Condition 4(c). (d) Purchases: The Issuer, the Guarantor or any other subsidiary of the Issuer may at any time purchase Bonds in the open market or otherwise at any price. Any purchase by tender shall be made available to all Bondholders alike. (e) Cancellation: All Bonds purchased by or on behalf of the Issuer or any of its subsidiaries may be surrendered for cancellation by surrendering each such Bond together with all unmatured Coupons and all unexchanged Talons to the Principal Paying Agent and if so surrendered, shall, together with all Bonds redeemed by the Issuer, be cancelled forthwith (together with all unmatured Coupons and unexchanged Talons attached thereto or surrendered therewith). Any Bonds so surrendered for cancellation may not be reissued or resold and the obligations of the Issuer in respect of any such Bonds shall be discharged. 6. Payments and Talons (a) Method of Payment: Payments of principal and interest in respect of Bonds shall, subject as mentioned below, be made against presentation and surrender of the relevant Bonds or Coupons (save as specified in Condition 6(d)(ii)), as the case may be, at the specified office of any Paying Agent by a cheque payable in pounds sterling, or, at the option of the holder, by transfer to a pounds sterling account maintained by the payee with, a bank in London. The sole currency of payment and account in respect of the Bonds is pounds sterling. (b) Payments subject to Fiscal Laws: The Issuer reserves the right to require a Bondholder or Couponholder to provide a Paying Agent with such certification or information as may be required to enable the Issuer to comply with the requirements of the United States federal income tax laws. (c) Appointment of Agents: The Principal Paying Agent and the other Paying Agents initially appointed by the Issuer and the Guarantor and their respective specified offices are listed below. Subject as provided in the Trust Deed and the Agency Agreement, the Principal Paying Agent and the other Paying Agents act solely as agents of the Issuer and the Guarantor and do not assume any obligation or relationship of agency or trust for or with any Bondholder or Couponholder. The Issuer and the Guarantor reserve the right at any time with the approval of the Trustee to vary or terminate the appointment of the Principal Paying Agent or any other Paying Agent and to appoint additional or other Paying Agents, provided that they shall at all times maintain (i) a Principal Paying Agent and (ii) a Paying Agent having a specified office in the United Kingdom, which, so long as the Bonds are listed on the official list (the Official List ) of the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000 (the UK Listing Authority ) and are admitted to trading on the market for listed securities of the London Stock Exchange plc (the London Stock Exchange ), shall be in London and provided further, that if any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of November 2000, or any law implementing or complying with, or introduced in order to conform to, such Directive is introduced, the Issuer and the Guarantor shall maintain a Paying Agent with a specified office in a European Union member state (other than the United Kingdom) that will not be obliged to withhold or deduct tax pursuant to such Directive. 9

10 Notice of any such change or any change of any specified office shall promptly be given to the Bondholders by the Issuer in accordance with Condition 14. (d) Unmatured Coupons and unexchanged Talons: (i) (ii) (iii) (iv) In relation to any Bond, if any payment is to be made in respect of interest the Interest Payment Date for which falls on or after the date on which the winding-up of the Issuer is deemed to have commenced, such payment shall be made only against presentation of the relevant Bond and the Coupon for any such Interest Payment Date shall be void. In addition, any Bond presented for payment after an order is made or an effective resolution is passed for the winding-up in Scotland of the Issuer must be presented together with all Coupons in respect of Arrears of Interest relating to Interest Payment Dates falling prior to such commencement of the winding-up of the Issuer, failing which there shall be withheld from any payment otherwise due to the holder of such Bond such proportion thereof as the Arrears of Interest due in respect of any such missing Coupon bears to the total of the principal amount of the relevant Bond, all Arrears of Interest in respect thereof and interest (other than Arrears of Interest) accrued on such Bond in respect of the Interest Period current at the date of the commencement of the winding-up. Upon the due date for redemption of any Bond, unmatured Coupons relating to such Bond (whether or not attached) shall become void and no payment shall be made in respect of them. Upon the due date for redemption of any Bond, any unexchanged Talon relating to such Bond (whether or not attached) shall become void and no Coupon shall be delivered in respect of such Talon. Where any Bond is presented for redemption without all unmatured Coupons and any unexchanged Talon relating to it, and where any Bond is presented for redemption without any unexchanged Talon relating to it, redemption shall be made only against the provision of such indemnity as the Issuer may require. (e) Talons: On or after the Interest Payment Date for the final Coupon forming part of a Coupon sheet issued in respect of any Bond, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Principal Paying Agent in exchange for a further Coupon sheet (and if necessary another Talon for a further Coupon sheet) (but excluding any Coupons that may have become void pursuant to Condition 8). (f) Non-Business Days: If any date for payment in respect of any Bond or Coupon is not a business day, the holder shall not be entitled to payment until the next following business day nor to any interest or other sum in respect of such postponed payment. In this paragraph, business day means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets (including but not limited to pounds sterling) are open for business in both London and in the relevant place of presentation (including but not limited to markets dealing in pounds sterling). 7. Taxation All payments of principal and/or interest by or on behalf of the Issuer or the Guarantor in respect of the Bonds and the Coupons shall be made without withholding or deduction for or on account of any present or future tax, duty or charge of whatsoever nature imposed or levied by or on behalf of the United Kingdom or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law. In that event, the Issuer or the Guarantor, as the case may be, shall pay such additional amounts as will result (after such withholding or deduction) in receipt by the Bondholders, and the Couponholders of the sums which would have been receivable (in the absence of such withholding or deduction) from it in respect of their Bonds and/or Coupons, as the case may be; except that no such additional amounts shall be payable with respect to any Bond or Coupon: (a) presented for payment by or on behalf of any holder who is liable to such tax, duty or charge in respect of such Bond or Coupon by reason of such holder having some connection with the United Kingdom other than the mere holding of such Bond or Coupon; or 10

11 (b) to, or to a third party on behalf of, a holder if such withholding or deduction may be avoided by complying with any statutory requirement or by making a declaration of non-residence or other similar claim for exemption to any authority of or in the United Kingdom, unless such holder proves that he is not entitled so to comply or to make such declaration or claim; or (c) to, or to a third party on behalf of, a holder that is a partnership, or a holder that is not the sole beneficial owner of the Bond or Coupon, or which holds the Bond or Coupon in a fiduciary capacity, to the extent that any of the members of the partnership, the beneficial owner or the settlor or beneficiary with respect to the fiduciary would not have been entitled to the payment of an additional amount had each of the members of the partnership, the beneficial owner, settlor or beneficiary (as the case may be) received directly his beneficial or distributive share of the payment; or (d) presented for payment more than 30 days after the Relevant Date except to the extent that the holder thereof would have been entitled to such additional amounts on presenting the same for payment at the expiry of such period of 30 days; or (e) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive; or (f) presented for payment by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting the relevant Bond or Coupon to another Paying Agent in a Member State of the European Union. The Relevant Date in respect of any payment means the date on which such payment first becomes due or (if the full amount of the moneys payable has not been duly received by the Principal Paying Agent or the Trustee on or prior to such date) the date on which notice is given to the Bondholders that such moneys have been so received. References in these Conditions to (i) interest shall be deemed to include any Arrears of Interest and (ii) principal and/or interest (other than such interest as is referred to in Condition 9(f)) shall be deemed to include any additional amounts that may be payable under this Condition 7 or under any obligations undertaken in addition thereto or in substitution therefor under the Trust Deed. 8. Prescription Claims for payment of principal (excluding principal comprised in a withheld amount) will become void 12 years, and claims for payment of interest (other than interest comprised in, or accrued on, a withheld amount) will become void six years after the Relevant Date (as defined in Condition 7) relating thereto. Claims in respect of principal comprised in a withheld amount and claims in respect of interest comprised in, or accrued on, a withheld amount will, in the case of such principal, become void 12 years and will, in the case of such interest, become void six years after the due date for payment thereof as specified in Condition 9(e) or, if the full amount of the moneys payable has not been duly received by the Principal Paying Agent, another Paying Agent or the Trustee, as the case may be, on or prior to such date, the date of which notice is given in accordance with Condition 14 that the relevant part of such moneys has been so received. The prescription period in respect of Talons shall be: (a) as to any Talon the original due date for exchange of which falls within the 12 years immediately prior to the due date for redemption (pursuant to Condition 5(a), 5(b) or 5(d)) of the Bond to which it pertains, six years from the Relevant Date for the redemption of such Bond, but so that the Coupon sheet for which it is exchangeable shall be issued without any Coupon itself prescribed in accordance with this Condition 8 or the Relevant Date for payment of which would fall after the Relevant Date for the redemption of the relevant Bond and without a Talon; and (b) as to any other Talon, 12 years from the Relevant Date for payment of the last Coupon of the Coupon sheet of which it formed part. 11

12 9. Events of Default and Enforcement (a) If there is default by the Issuer or the Guarantor, as the case may be, in any payment in respect of the Bonds (in the case of any payment of principal) for a period of 14 days or more after the due date for the same or (in the case of any payment of interest) for a period of 14 days or more after a date upon which the payment of interest is compulsory, the Trustee may institute proceedings, in the case of such default by the Issuer, in Scotland (but not elsewhere) for the winding-up of the Issuer or, in the case of such default by the Guarantor, in England (but not elsewhere) for the winding-up of the Guarantor, provided that it shall not have the right to institute such proceedings if the Issuer or the Guarantor, as the case may be, withholds or refuses any such payment (i) in order to comply with any fiscal or other law or regulation or with the order of any court of competent jurisdiction, in each case applicable to such payment, the Issuer or the Guarantor, as the case may be, the relevant Paying Agent or the holder of the Bond or Coupon or (ii) (subject as provided in the Trust Deed) in case of doubt as to the validity or applicability of any such law, regulation or order, in accordance with advice as to such validity or applicability given at any time during the said period of 14 days by independent legal advisers acceptable to the Trustee. For the purpose of this Condition 9, a payment otherwise due (in the case of principal) or compulsory (in the case of interest) shall be deemed so due or compulsory notwithstanding that the solvency condition set out in Condition 2(c) or in the first paragraph of Condition 3, as the case may be, is not satisfied. (b) The Trustee shall not be bound to institute proceedings as referred to in paragraph (a) above to enforce the obligations of the Issuer or the Guarantor, as the case may be, in respect of the Bonds and Coupons unless (i) it shall have been so requested by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders or in writing by the holders of at least one-fifth in principal amount of the Bonds then outstanding (as defined in the Trust Deed) and (ii) it shall have been indemnified to its satisfaction. (c) No Bondholder or Couponholder shall be entitled to institute proceedings for the winding-up of the Issuer or the Guarantor, or to prove in such winding-up, except that if the Trustee, having become bound to proceed against the Issuer or the Guarantor, as the case may be, as aforesaid, fails to do so, or, being able to prove in such winding-up, fails to do so, in either case within a reasonable period and such failure is continuing, then any such holder may, on giving an indemnity satisfactory to the Trustee, in the name of the Trustee (but not otherwise), himself institute proceedings for the winding-up in Scotland (but not elsewhere) of the Issuer or in England (but not elsewhere) of the Guarantor and/or prove in such winding-up to the same extent (but not further or otherwise) that the Trustee would have been entitled so to do. No remedy against the Issuer or the Guarantor, as the case may be, other than the institution of proceedings for the winding-up of the Issuer in Scotland or the Guarantor in England or, as the case may be, proving in the winding-up of the Issuer or the Guarantor, as the case may be, in the manner and by the persons aforesaid, shall be available to the Trustee or the Bondholders, or Couponholders, whether for the recovery of amounts owing in respect of the Bonds or under the Trust Deed or in respect of any breach by the Issuer of any of its obligations under the Bonds or the Trust Deed (other than for recovery of the Trustee s remuneration or expenses). The Issuer has undertaken in the Trust Deed to pay United Kingdom stamp and other duties (if any) on or in connection with the execution of the Trust Deed and United Kingdom, Belgian and Luxembourg stamp and other duties or taxes (if any) on the constitution and issue of the Bonds in temporary global, permanent global or definitive form (provided such stamp and other duties or taxes result from laws applicable on or prior to the date 40 days after the issue date of the Bonds and, in the case of exchange of a global Bond for Bonds in definitive form, such tax results from laws applicable on or prior to the date of such exchange) and stamp and other duties or taxes (if any) payable in the United Kingdom (but not elsewhere) solely by virtue of and in connection with any permissible proceedings under the Trust Deed or the Bonds, save that the Issuer shall not be liable to pay any such stamp or other duties or taxes to the extent that the obligation arises or the amount payable is increased by reason of the holder at the relevant time unreasonably delaying in producing any relevant document for stamping or similar process. Subject as aforesaid, the Issuer will not be otherwise responsible for stamp or other duties or taxes otherwise imposed and in particular (but without prejudice to the generality of the foregoing) for any penalties arising on account of late payment where due by the holder at the relevant time. Any such stamp or other duties or taxes that might be imposed upon or in respect of Bonds in temporary global, permanent global or definitive form or the Coupons or Talons (in each case other than as aforesaid) are the liability of the holders thereof. (d) If payment to any Bondholder of any amount due in respect of the Bonds (other than interest) is improperly withheld or refused (any withholding or refusal effected in reliance upon the proviso to paragraph (a) 12