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.....

DATED

1997

READING MORTGAGES plc to be renamed Bristol & West plc

- and -

THE LAW DEBENTURE TRUST CORPORATION p.l.c.

TRUST

DEED

13 /

constituting 75,000,000 per cent. Unsecured Perpetual Subordinated Bonds . Y<y

For the Issuer:

Slaughter and May 35 Basinghall Street London EC2V 5DB (Ref: EGLW) Allen & Overy One New Change London EC4M 9QQ (Ref: P C / M M OK)

for the Trustee:

J.

INDEX

Clause 1. INTERPRETATION 2. AMOUNT OF THE BONDS AND COVENANT TO PAY 3. SUBORDINATION 4. FORM OF THE BONDS 5. STAMP DUTIES 6. COVENANT TO OBSERVE THE CONDITIONS 7. ENFORCEMENT 8. APPLICATION OF MONEYS RECEIVED BY THE TRUSTEE 9. COVENANTS 10. REMUNERATION AND INDEMNIFICATION OF THE TRUSTEE 11. PROVISIONS SUPPLEMENTAL TO THE TRUSTEE ACT 1925 12. TRUSTEE LIABLE FOR NEGLIGENCE 13. WAIVER AND PROOF OF DEFAULT 14. TRUSTEE NOT PRECLUDED FROM ENTERING INTO CONTRACTS 15. MODIFICATION AND SUBSTITUTION 16. APPOINTMENT, RETIREMENT AND REMOVAL OF THE TRUSTEE 17. COMMUNICATIONS 18. EXECUTION IN COUNTERPARTS 19. GOVERNING LAW SCHEDULE 1 FORM OF CERTIFICATE FOR BOND

Page 2 6 9 10 11 11 11 12 13 16 18 21 21 21 22 23 25 25 26 27

SCHEDULE 2 TERMS AND CONDITIONS OF THE BONDS 1. TITLE AND DENOMINATION 2. STATUS AND SUBORDINATION 3. INTEREST 4. REDEMPTION 5. PAYMENTS 6. TAXATION 7. EVENTS OF DEFAULT AND ENFORCEMENT 8. PRESCRIPTION 9. INDEMNIFICATION OF THE TRUSTEE

31 31 32 34 36 37 37 38 39 39

10. MEETINGS OF BONDHOLDERS, MODIFICATIONS, WAIVER AND SUBSTITUTION OF PRINCIPAL DEBTOR 39 11. REPLACEMENT OF BONDS 12. NOTICES 13. FURTHER ISSUES 14. GOVERNING LAW AND JURISDICTION SCHEDULE 3 REGISTER AND TRANSFER OF BONDS SCHEDULE 4 PROVISIONS FOR MEETINGS OF BONDHOLDERS 41 41 41 41 42 44

THIS TRUST DEED is made on BETWEEN: (1)

t T t ^

READING MORTGAGES plc (registered in England and Wales No. 2l|24201), a company to be renamed Bristol & West plc, whose registered office i? at Plaza West, Bridge Street, Reading, Berkshire RG1 2LZ (the "Issuer"); and THE LAW DEBENTURE TRUST CORPORATION p.l.c. (registered in England and Wales No. 1675231) whose registered office is at Princes House, 95 Gresham Street, London EC2V 7LY (the "Trustee", which expression shall, where the context so admits, include all persons for the time being the trustee or trustees of this Trust Deed).

(2)

WHEREAS: (A) By a resolution of the Board of Directors of the Issuer passed on 25 j i l y 1997 the Issuer has created and resolved to issue 75,000,000 1 3 / per cent. Unsecured Perpetual Subordinated Bonds to be constituted by this Trust Deed.
3 8

(B)

On 26 February 1997 The Bristol and West Building Society (the "Sodiety"), the Issuer and The Governor and Company of the Bank of Ireland entlered into a transfer agreement pursuant to which the whole of the business of the Society will be transferred to the Issuer, a wholly-owned subsidiary of The Governor and Company of the Bank of Ireland, on 28 July 1997 (the ["Vesting Date"). The Issuer will, on the Vesting Date, assume a liability in respect of each holder of a 1 3 / per cent, permanent interest bearing share issued by the Society (the "PIBS") as if such holder (each a "Subordinated Depositor") had made a deposit on a subordinated basis (each a "Subordinated Deposit") with the Issuer in an amount equal to the principal amount of the PIBS held by such holder.
3 8

(C)

(D)

On the Vesting Date each Subordinated Deposit will be applied in the subscription of a principal amount ofthe said 75,000,000 13 /8 per cent. Unsecured Perpetual Subordinated Bonds ofthe Issuer equal to the principal amount of such Subordinated Deposit.
3

(E)

The Law Debenture Trust Corporation p.l.c. has agreed, on the terms and subject to the conditions set out below, to act as trustee of the trusts created by this Trust Deed for the benefit ofthe holders ofthe said 75,000,000 1 3 / per cent. Unsecured Perpetual Subordinated Bonds ofthe Issuer, but assumes no responsibility for or in relation to the holders of the PIBS or the Subordinated Depositors (save in relation to the PIBS Interest Payment, as defined below)
3 e

NOW THIS DEED WITNESSES A N D IT IS HEREBY DECLARED WITH EFIfECT FROM AND INCLUDING THE VESTING DATE as follows: 1. (A) INTERPRETATION Definitions: In this Trust Deed the following expressions shall have the following meanings: has the meaning set out in Condition 3(d); has the meaning set out in Condition 2(d); means the auditors for the time being of the Issuer or, if they are unable or unwilling to carry out any action requested of them under th is Trust Deed, such other firm of auditors as may be njominated or approved in writing by the Trustee for the purpose and which the Issuer has approved prior to such nomination (such approval, in each case, not to be unreasonably withheld or delayed); means a subsidiary of the Issuer having as its principal business the business of Danking (which shall be deemed to include the business of an authorised institution within the aning of the Banking Act 1987 or merchant banking) or any banking activity which is, at the relevant time, generally recognised as an integral part of the business of banking; means the several persons who are for the time being registered as the holders of jthe Bonds; means the registered bonds in the denomination of 1,000 each or integral multiples thereof comprising the 75,000,000 l 3 / per cent. Unsecured Perpetual Subordinated Bonds of the Issuer constituted by this Trust Deed and for the time being outstanding or, as the context may require, a specific number of them;
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"Arrears of Interest" "Assets" "Auditors"

"banking subsidiary"

"Bondholders"

'Bonds"

'Conditions"

means the Terms and Conditions to be endorsed on the certificates for the Bonds in the form or substantially in the form set out in Schedule 2 as the same may from time to time be modified in

accordance with this Trust Deed and any reference in this Trust Deed to a particular specified Condition or paragraph of a Condition shall in relation to the Bonds be construed accordingly; "Event of Default" "Extraordinary Resolution" means any of the events described in Condition 7(a); has the meaning set out in paragraph 1 of Schedule 4; has the meaning set out in Condition 3(a); | means the Issuer, any subsidiary of the Issuer, any company of which the Issuer is a subsidiary or any other subsidiary of any such company; includes Arrears of Interest and the PIBS Interest Payment; has the meaning set out in Condition 3(a); has the meaning set out in Condition 2(d); means, in relation to the Bonds, all tiie Bonds issued other than (a) those which have been redeemed in accordance with the Conditions, (b) iliose in respect of which the date for redemption in accordance with the Conditions has occurred and the redemption moneys (including all interest accrued on such Bonds to the date for such redemptiojn) have been duly paid to the Trustee or to the Registrar as provided in clause 2 and remain available for payment in accordance with the Conditions, (c) those in respect of which claims hjave become prescribed under Condition 8 and (d) those which have been purchased and cancelled as provided in Condition 4; has the meaning set out in Condition 3(b); means The Royal Bank of Scotland plc or such other registrar for the Bonds for the time being as may have been appointed as such by the Issuer with the approval of the Trustee (such approval not to be

"First Interest Payment Date" "Group"

"interest"

"Interest Payment Date" "Liabilities" "outstanding"

"PIBS Interest Payment" "Registrar"

unreasonably withheld); "Registrar's Agreement" means the agreement dated 25 July 1997 and made between the Issuer, the Registrar and the Trustee and/or any other agreement for the time being in force the terms o f w h i c h have been approved by the Trustee (such approval not to be unreasonably withheld) appointing the Registrar or in connection with its duties together with any other agreement for the time being in force the terms of which have been approved by the Trustee (such approval not to be unreasonably withheld) amending or modifying any of the aforesaid agreements; has the meaning set out in Condition 8; shall each include both of the others and "repaid", "repayable" and "repayment", "redeemed", "redeemable" and "redemption" and "paid", "payable", and "payment" shall be construed accordingly; has the meaning set out in paragraph 1 of Schedule 4; has the meaning set out in Condition 2(d); has the meaning ascribed to it by Section 736 of the Companies Act 1985; means London Stock Exchange Limited; means this Deed, the Schedules (as from time to time modified in accordance with this Deed) and any other document executed in accordance with this Deed (as from time to time so modified) and expressed to be supplemental to this Deed; means a corporation entitled by rules made under the Public Trustee Act 1906 or entitled pursuant to any other legislation applicable to a trustee in any jurisdiction other than England to carry out the functions of a custodian trustee.

"Relevant Date" "repay", "redeem" and "pay"

"Reserved Matter"

"Senior Creditors" "subsidiary"

"The Stock Exchange" "this Trust Deed"

"trust corporation'

(B)

Construction of Certain References: References to: (i) costs, charges, remuneration or expenses shall mclude any value added tax, tumover tax or similar tax charged in respect thereof; clauses and Schedules are to clauses of, and Schedules to, this Deed and references to sub-clauses, paragraphs and sub-paragraphs are to the relevant sub-clauses, paragraphs and sub-paragraphs of the clause in which the reference appears; the singular shall, where the context so admits, include a refe rence to the plural and vice versa; any reference to the masculine gend sr shall be construed as including the other genders; references to persons shall include corporations; "pounds", "pounds sterling" or the sign "" shall be construed as references to the currency of the United Kingdom of Great Britain and Northern Ireland; the remedies of the Trustee or the Bondholders being restricted to bringing proceedings in England for the winding-up of the Issuer shall not restrict the right of the Trustee or the Bondholders to prove (in the case of the Bondholders, where permitted in and pursuant to Condition 7(d) mutatis mutandis) in any winding-up of the Issuer in England commenced by any other person, and such proof shall be deemed riot to be the exercise of a remedy or the enforcement of a right; and any provision of any statute shall be deemed also to refer to any statutory modification or re-enactment thereof or any statutory instrument, order or regulation made thereunder or under such reenactment.

(ii)

(iii)

(iv)

(v)

(vi)

(C) (D)

Headings: Headings shall be ignored in construing this Trust Deed. Schedules: The Schedules are part of this Deed and shall have effect accordingly. Outstanding Bonds: For the purposes of: (i) the exercise of any right of the relevant Bondholders (other than to payment);

(E)

(ii)

the determination of how many Bonds are outstanding for the purposes of rhe provisions for meetings of Bondholders referred to in the Conditions or ascertaining whether a requirement under this Trust Deed or the Conditions for a specified percentage of the principal amount of the Bonds outstanding has been satisfied; the exercise of any discretion, power or authority which the Trustee is required, expressly or impliedly, to exercise in or by referelnce to the interests of the Bondholders; and the certification (where relevant) by the Trustee as to whether any event or circumstance is in its opinion materially prejudicial to the interests of the Bondholders,

(iii)

(iv)

those Bonds which are beneficially held by or on behalf of any member of the Group and not cancelled shall (unless no longer so held) be deemed not to remain outstanding. 2. (A) AMOUNT OF THE BONDS AND COVENANT TO PAY Amount of the Bonds: The aggregate principal amount of the Bonds is limited to 75,000,000. Covenant to Pay. Subject to the subordination provisions contained in clause 3 and Condition 2, the Issuer shall: (i) on any date when the Bonds or any of them become due to be redeemed (subject to the Conditions) pay to or to the ordeir of the Trustee in London in pounds sterling in immediately available funds the principal amount of the Bonds becoming due for redemption on that date and shall (subject to the Conditions) until such payment (both before and after any judgment) unconditionally pay to or to the order of the Trustee as aforesaid interest on the principal amount of the Bonds outstanding at the rate of 13 /8 per cent, per annum (subject to any deduction pursuant to Condition 6) semi-annually in arrear on 7th May and 7th November in each year, save that the first such payment of interest, which shall be made on the First Interest Payment Date, shall be in respect of the period from, and including, the Vesting Date to, but excluding, the First Interest Payment Date and shall amount to 37.37671 (subject to any deduction pursuant to C o n d i t k ^ 6) in respect of each 1,000 in principal amount of Bonds; and
3

(B)

(ii)

on the First Interest Payment Date pay to or to the order of the Trustee in London in pounds sterling in immediately available funds the aggregate amount of the PIBS Interest Payment (subject to any deductions pursuant to Condition 6) which shall amount to 3 0 . 0 4 7 9 5

(subject to any deduction as aforesaid) in respect of each 1 , 0 0 0 principal amount of Bonds, ' provided that (1) every payment of. any sum due in respect of the Bonds (including the PIBS Interest Payment) made to the Registrar as proviked in the Registrar's Agreement shall, to such extent, satisfy such obligation exjcept to the extent that there is failure in its subsequent payment to the Bondholders under the Conditions and (2) in the case of any payment made pursuant to Condition 7, payment will be deemed to have been made when the full amount due has been received by the Registrar or the Trustee, except to the extent that there is failure in the subsequent payment to the Bondholders (if any) under the Conditions.
(C)

Discharge: Subject to sub-clause (D), any payment to be made in resjpect of the Bonds (including the PIBS Interest Payment) by the Issuer or the jTrustee may be made as provided in the Conditions and any payment so madp shall (subject to sub-clause (D)) to such extent be a good discharge to the Issuer or the Trustee, as the case may be. Payment after a Default: At any time after an Event of Default has occurred the Trustee may: (i) by notice in writing to the Issuer and the Registrar, require the Registrar, until notified by the Trustee to the contrary, so far as permitted by any applicable law: (a) to act, in relation to payments to^se made by or on behalf of the Trustee, as agent of the Trustee under this Trust Deed and the Bonds on the terms of the Registrar's Agreement (with! consequential amendments as necessary and except that the . Trustee's liability for the indemnification, remuneration and all other out-of-pocket expenses of the Registrar will be limited to the amounts for the time being held by the Trustee in respect of the Bonds on the terms of this Trust Deed) and thereafter to hold all certificates for Bonds and all moneys, documents and records held by it in respect of such Bonds to the order of the Trustee; or to deliver all certificates for Bonds and all moneys, documents and records held by it in respect of the Bonds to the Trustee or as the Trustee directs in such notice; and

(D)

(b)

(ii)

by notice in writing to the Issuer require' it to make all subsequent payments in respect of the Bonds to or to the order of the Trustee and not to the Registrar.

(E)

Interest after a Default: Subject to clause 3 and Condition 2: (i) in the case of any payment or provision for payment in respect of the principal amount of the Bonds made to the Trustee or to oij to the account of or with the Registrar after the due date, or where any such payment or provision is not made by reason of clause 3 or Condition 2, interest at the rate of 13 /8 per centl per annum shall continue to accrue on the principal amount of the Bonds due for redemption or as regards which such payment or provision is not made up to but excluding the final date (being not later than 30 days after the date on which the whole of such principal amount, together with an amount equal to the interest which has accrued and is to accrue up to but excluding such final date, has been received by the Trustee or the Registrar) which the Trustee determines to be the date on and after which payment is to be made to the Bondholders in respect of the Bonds as stated in a notice given pursuant to Condition 12 or the day upon which payment is in fact so made, whichever first occurs (and so that to the extent that interest is provided by the Issuer in excess of that to which the Bondholders are entitled, such excess shall promptly be refunded to the Issuer); and
3

(ii)

in any case where payment in respect of the whole or any part of the principal amount of any Bond is improperly withheld or refused (other than in the circumstances contemplated by paragraph (i) above) or, once made to the Trustee or to or to the account of or with the Registrar, is not made by reason of clause 3 or Condition 2, interest at the rate of 1 3 / per cent, per annum shall accrue on the principal amount of such Bond payment ofwhich has been so improperly withheld or refused or not made as aforesaid from and including the date of such withholding or refusal or (as the case may be) from and including the date payment should otherwise have been made up to but excluding the date (ofwhich not less than 10 days' notice is given in accordance with Condition 12) on and from which the full amount in pounds sterling payable in respect of such Bond is available for payment or the day upon which payment is in fact so made, whichever first occurs (and so that to the extent that interest is provided by the Issuer in excess of that to which the Bondholder is entitled, such excess shall promptly be refunded to the Issuer) provided that interest shall not cease to accrue on the day stipulated unless subsequen tly, subject always to Condition 5, upon due presentation of such Bond payment in full is in fact made. !
3 B

3. (A)

SUBORDINATION The claims of the Bondholders are subordinated to the claims of Senior Creditors in that payments of principal and interest in respect of the Bonds (including the PIBS Interest Payment) are conditional upon the Issuer being solvent at the time for payment by the Issuer and in that no principal or interest (including the PIBS interest) shall be payable in respect of llhe Bonds except to the extent that the Issuer could make such payment and still be solvent immediately thereafter (subject always to the provisions of llhe last sentence of Condition 7(a)). Interest will continue to accrue on any Bonds payment of the principal of which is not made by virtue of the operation of this clause subject to and in accordance with the provisions of clause 2(E) and the Conditions. For the purposes of this clause, the Issuer shall be solvent if: (i) to the extent that any determination as to solvency falls to be made prior to the commencement of winding up in England of the Issuer, it is able to pay its debts to Senior Creditors as they fall due; and its Assets exceed its Liabilities to Senior Creditors.

(ii) (B)

The Issuer may at any time and shall whenever requested by the Trustee procure that two directors of the Issuer or (if the Issuer is in winding-up) the liquidator of the Issuer shall give a report in writing as to whether or not the Issuer is or would in any specified circumstances be solvent for the purposes of sub-clause 3(A) and in the absence of manifest error any such report shall be treated and accepted by the Issuer, the Trustee and the Bondholders as correct and sufficient evidence of such fact. In the absence of any such repo'rt to the contrary, it shall for the purposes of this Trust Deed be assumed (unljsss the contrary is proved prior to the date of payment or, for the purposes of paragraph (ii) of clause 8(A), within 30 days after receipt by the Trustee of any moneys in respect of the Bonds (including the PIBS Interest Payment)) that the Issuer is and will after any payment under this Trust Deed be solvent for such purposes. In the event of a delivery of a report of two directors that the Issuer is not solvent, the Issuer shall procure that the Auditors sh'all provide a report of the Auditors within 30 days of the date of the repjort of the two directors as to whether the Issuer is solvent for the purposes of sjub-clause 3(A) and such report of the Auditors shall, if it is to the effect that thfe Issuer is solvent, supersede the report of the two directors for all purposes of this Trust Deed. If at any time an order is made or an effective resolution is passed for the winding up in England of the Issuer otherwise than a solvent winding up solely for the purposes of a reconstruction or amalgamation on terms

(C)

10

previously approved by the Trustee in writing or by an Extraordinary Resolution of the Bondholders and which do not provide that the Bonds shall thereby become payable, there shall be payable on each Bond (in lieu of any other payment), but subject as provided in this clause, such amount, if any, as would have been payable to the holder of such Bond if, on the day prior to the commencement of the winding up and thereafter, such Bondholder were the holder of a preference share in the capital of the Issuer having a pjreferential right to a retum of assets in the winding up over the holders of all other classes of stock or shares for the time being in the share capital of the Issuer on the assumption that such preference share was entitled to receive on a retum of assets in such winding up an amount equal to the principal amount of such Bond together with Arrears of Interest, if any, and any interest (other than Arrears of Interest) which has accrued up to (but excluding) the date of repayment (as provided in this Trust Deed). I (D) Subject to applicable law, no Bondholder may exercise or claim any right of set-off in respect of any amount owed by it to the Issuer arising under or in connection with the Bonds and each Bondholder shall, by virtue o!f being the person in whose name a Bond is registered, be deemed to have waived all such rights of set-off. The provisions of this clause 3 apply only to the principal and interest (including the PIBS Interest Payment) in respect of the Bonds, and nothing in this clause shall affect or prejudice the payment of the costs, charges, expenses, liabilities or remuneration of the Trustee or the rights or remedies of the Trustee in respect of payment thereof. Nothing contained in this Trust Deed shall in any way restrict the right of the Issuer to issue obligations or give guarantees in each case ranking in priority to or pari passu with or junior to the obligations of the Issuer in respect of the Bonds and if in the opinion ofthe Trustee any modifications to the provisions of this clause to permit such ranking is necessary or expedient the Trustee is hereby authorised to concur with the Issuer in executing a supplemental deed effecting such modification. FORM OF THE BONDS The Bonds shall be in registered form and the certificates therefor shall be in or substantially in the form set out in Schedule 1. The Bonds shal. be issued in the denomination of 1,000 or integral multiples of 1,000, and the certificates for the Bonds shall be serially numbered and shall be endorsed with a form of transfer and with the Conditions. Title to the Bonds will pass upon registration of their transfer in accordance with this Trust Deed.

(E)

(F)

4. (A)

11

(B)

The certificates for the Bonds shall have affixed to them the official !teal of the Issuer. Certificates so executed shall be valid evidence of the obligations of the Issuer in respect of the Bonds. The person in whose name a Bond is registered shall be deemed to be, and shall be treated as, its absolute owner for the purpose of receiving payment of, or payment or delivery on account of, the Bond (notwithstanding aniy writing on the certificate for the Bond or notice of ownership) and for all other purposes whether or not such Bond is overdue. STAMP DUTIES The Issuer shall pay any English stamp, issue, registration, documentary or other taxes and duties, including interest and penalties, in respect of the constitution and issue of the Bonds and the execution and delivery of this Deed provided that the liability to pay such taxes or duties arises from a law which is in effect on the Vesting Date. The Issuer will also indemnify the Trustee and the Bondholders from and against all stamp, issue, regis Tation, documentary or other taxes payable by any of them in England (but not elsewhere) in connection with any supplemental deed or solely by virtue of or in connection with any action taken by or on behalf of the Trustee or as the case may be, (where entitled under Condition 7 to do so) the Bondholders to enforce the obligations of the Issuer under this Trust Deed or the Bonds. Save as provided in this clause 5, the Issuer will not be responsible for stamp, issue, registration, documentary or other taxes otherwise imposed in conne'ction with the Bonds or this Trust Deed. In particular, without prejudice to the generality of the foregoing, the Issuer will not be responsible for any penalties arising on account of the late payment of any such taxes or duties by any Bondllolder.

(C)

5.

6.

COVENANT TO OBSERVE THE CONDITIONS The Issuer hereby covenants with the Trustee that it will comply with and perform its obligations under and observe the Conditions, which sha 1 be binding on the Issuer and the Bondholders. The Trustee shall be entitled to enforce the obligations under the Bonds and the Conditions as if the same were set out in this Trust Deed, which shall be read and construed as one document with the Bonds, subject always to the restrictions on enforcement and institution of proceedings contained in the Conditions and otherwise in this Trust Deed.

7. (A)

ENFORCEMENT At any time after the occurrence of an Event of Default the Trustee (o r, where entitled to do so under Condition 7(d), any Bondholder in the name of the Trustee) shall have the right, and only the right, described in Condition 7(a) to

12

enforce payment by the Issuer of amounts required to be paid pursuant to the Conditions and this Trust Deed. ' (B) The Trustee shall not be bound to institute any proceedings to enforce the performance of any of the provisions of the Bonds or of this Trust Deed unless directed or requested to do so by an Extraordinary Resolution or in writing by Bondholders holding at least one-fifth in principal amount of the Bonds then outstanding and in any case then only if it shall be indemnified to its satisfaction against all actions, proceedings, claims and demands :o which it may thereby render itself liable and all costs, charges, damages and expenses which it may incur by so doing. The rights of Bondholders to take action against the Issuer are and w i l l be limited as provided in Condition 7. If any money is paid by the Issuer to the Trustee or any Bondholder at a time when, as a consequence of the operation of clause 3 or Condition 2, the Issuer is under no obligation to pay the same, such money shall not (subiect only to clause 8(A)(ii)) be recoverable by the Issuer and the Issuer shall have no right against the Trustee or any Bondholder in respect of such payment. APPLICATION OF MONEYS RECEIVED BY THE TRUSTEE Declaration of Trust: Subject to the provisions of clause 3 above, all moneys received by the Trustee in respect of the Bonds or amounts payable under this Trust Deed will, regardless of any appropriation of all or part of them by the Issuer, be held by the Trustee upon trust to apply them (subject to subclause (B)): (i) first, in payment of all costs, charges, expenses and liabilities incurred by the Trustee and all remuneration payable to the Trusteej in carrying out its functions under this Trust Deed; secondly, if prior to receipt of such moneys or within 30 days thereafter the Trustee is provided with a report pursuant to clause 3 (jwhich has been requested by the Trustee on receipt of any such moneys) which states that the Issuer could not make or could not have made such payment in whole or in part and still be or still have been solvent for the purposes of clause 3 immediately thereafter, in the retv m to the Issuer (in each case after any necessary deductions pursuant to the preceding provisions of this sub-clause) of the whole of such payment, or (if less) such part of such payment as could not have been made without thereby rendering the Issuer insolvent (and any moneys so retumed shall then be treated for the purposes of the Issuer's obligations under this Trust Deed as if they had not been paid by the

(C)

(D)

8. (A)

(ii)

13

Issuer and their original payment shall not be deemed to havie discharged any of the obligations of the Issuer under this Trust Deed); (iii) thirdly, in payment of any principal and interest owing in respect of the Bonds pari passu and rateably; and fourthly, in payment of the balance (if any) to the Issuer for itself.

(iv)

Without prejudice to this sub-clause (A), if the Trustee holds any moneys which represent principal or interest in respect of Bonds in respect ofj which claims have become prescribed under Condition 8, the Trustee will hold such moneys upon the above trusts. ! (B) Accumulation: If the amount of the moneys at any time available for payment in respect of the Bonds under sub-clause (A) is less than 10 per cent, of the principal amount of the Bonds then outstanding, the Trustee may, at its discretion,' invest such moneys. The Trustee may retain such investments and accumulate the resulting income until the investments and the accumulations, together with any other funds for the time being under the control of the Trustee and available for such payment, amount to at least 10 per cent, of the principal amount of the Bonds then outstanding and then such investments, accumulations and funds (after deduction of, or provision for, any applicable taxes) will be applied as specified in sub-clause (A). Investment: Any moneys held by the Trustee under the trusts contained in this Trust Deed may be invested in the name or under the control of the Trustee in any investments or other assets in any part of the world whether or not they produce income or placed on deposit in the name or under the control of the Trustee at such bank or other financial institution and in such currency as the Trustee may, in its absolute discretion, think fit. The Trustee may at any time vary or transpose any such investments for or into other such investments or convert any moneys so deposited into any other currency, and will not be responsible for any loss occasioned thereby, whether by depreciation in value, fluctuation in exchange rates or otherwise. Declaration of Trust of Covenants: The Trustee will hold the benefit of the covenants given by the Issuer under this Trust Deed upon trust for itself and the Bondholders according to its and their respective interests. COVENANTS So long as any Bond is outstanding (or, in the case of paragraph (L), SD long as any claim for payment of principal or interest (including the PIBS Interest Payment) in respect of any Bond remains liable to prescription), the Issuer will:

(C)

(D)

9.

14

(A)

Carrying on affairs: at all times carry on and conduct its affairs ahd procure its subsidiaries to carry on and conduct their respective affairs in a; proper and efficient manner; Books of Account: keep and procure that its subsidiaries keep proper books of account and, so far as permitted by applicable law, allow the Trustee and anyone appointed by it access to such books of account at all reasonable times during normal business hours; Accounts: cause to be prepared and certified by the Auditors in respect of each financial accounting period accounts in such form as w i l l comply with all relevant legal and accounting requirements and all requirements fbr the time being of The Stock Exchange;
I I

(B)

(C)

(D)

Notice of Events of Default: notify the Trustee in writing immediately upon becoming aware of the occurrence of any Event of Default or any event which, with the giving of notice and/or lapse of time, would constitute ari Event of Default; Information: so far as permitted by applicable law, give to the Trustee such information and evidence as it requires for the performance of its functions vested in it under this Trust Deed or by operation of law; Financial Statements etc.: send to the Trustee at the time of their issue and in the case of annual and interim financial statements in any event not more than 180 and 90 days respectively after the end of the periods to which they relate, two copies of every balance sheet, profit and loss account, and eve^ry report or other notice, statement or circular issued generally, or which shoul;d, under the provisions of applicable law be issued generally, to the creditors arid/or shareholders (or any class of either of them) of the Issuer in its or their capacity as such; Certificate of directors: send to the Trustee promptly after the publication of its audited balance sheet and profit and loss account in respect of each financial period commencing with the financial period ended 31 March 1998 and in any event not later than 180 days after the end of such financial period and also within 14 days after any request by the Trustee a certificate of the Issuer signed by any two of its directors to the effect that, having made all reasonable enquiries, to the best of the knowledge, information and belief of the Issuer as at a date (the "Certification Date") being not more than five days before the date of the certificate there did not exist and had not existed since the Certification Date of the previous certificate (or, in the case of the first such certificate, the date of this Deed) any Event of Default or any|event which, with the giving of notice and/or lapse of time, would constitute an Event of Default and that during the period from and including the:

(E)

(F)

(G)

15

Certification Date of the last such certificate (or, in the case of the first such certificate, the date of this Deed) to and including the Certification oSate of such certificate the Issuer has comphed with all its obligations contained in this Trust Deed or (if such is not the case) specifying the respects in which it has not complied; (H) Notices to Bondholders: send to the Trustee not less than 14 days prior to the date of publication thereof, a proof copy of the form of each notice to the Bondholders to be pubhshed in accordance with Condition 12 and upon publication two copies of each notice so published (such notice to be in a form approved by the Trustee in writing prior to the date of such publication and such approval not to be approval for the purposes of section 57 of the Financial Services Act 1986 ofthe United Kingdom of any such notice which is an investment advertisement (as therein defined)); Further acts: so far as permitted by applicable law, do all such further acts as may be necessary in the opinion of the Trustee to give effect to this Trust Deed; Notice of late payment: give notice to the Bondholders in accordance with Condition 12 of any unconditional payment to the Registrar or the Trustee of any sum due in respect of the Bonds made after the due date for such payment; Listing: use its best endeavours to maintain the listing of the Bonds on The Stock Exchange. If, however, it is unable to do so, having used such endeavours, or if the maintenance of such listing is agreed by the Trustee to be unduly onerous and the Trustee is satisfied that the interests of the Bondholders would not be thereby materially prejudiced, the Issuer will instead use its best endeavours to obtain and maintain a listing of the Bonds on such other stock exchange as it may (with the prior written approval of the Trustee) decide; Change in Registrar: subject to the provisions of the Registrar's Agreement, give not less than 60 days' prior notice to the Bondholders in accordance with Condition 12 of any future appointment or any resignation or removal of the Registrar or of any change in its specified office, not make any such appointment or removal or change without the written approval of the Trustee and not amend the terms and provisions of the Registrar's Agreement without the prior consent in writing of the Trustee (such approval and consent not to be unreasonably withheld); Bonds held by Issuer etc.: send to the Trustee as soon as practicable after being so requested by the Trustee a certificate of the Issuer signed by any two

(I)

(J)

(K)

(L)

(M)

16

directors setting out the total number of Bonds which, at the date of such certificate, were held by or on behalf of any member of the Group;

j
CN)
Registrar's Agreement: at all times maintain a Registrar in accorjdance with the Conditions and comply with all of its obligations under the Registrar's Agreement; Conditions: comply with all of its obligations under the Conditions; and Certificate: if at any time the directors of the Issuer determine a ; provided in the definition of Compulsory Interest Payment Date in Condition 3(f), forthwith deliver to the Trustee a certificate signed by two directors of the Issuer to the effect that such determination has been made. Nothing in this clause 9 shall entitle the Trustee to any information regarding matters: (i) for which the Issuer or any of its subsidiaries would be entitled to claim exemption from disclosure by reason of the provisions of Part III of Schedule 9 to the Companies Act 1985 or any other statute in any jurisdiction in which it operates analogous thereto and irrespective of whether any such exemption is being claimed or has been waived for any other purpose; or which the Issuer or any subsidiary of the Issuer is under a duty imposed by law not to disclose; or the disclosure of which could properly be regarded by the Issuer or any of its subsidiaries as improper.

(O) CP)

(ii)

(iii)

10. (A)

REMUNERATION AND INDEMNIFICATION OF THE TRUSTEE Normal Remuneration: So long as any Bond is outstanding the Issuer will pay to the Trustee by way of remuneration for its services as Trustee s ach sum as may from time to time be agreed between them. Such remuneration will accrue from day to day from the date of this Trust Deed and will be payable on such dates as may from time to time be agreed between the Issuer and the Trustee. If any payment to a Bondholder of the moneys due in respect of any Bond is improperly withheld or refused upon due presentation of such Bond, such remuneration will again accrue as from the date of such presentation until payment to such Bondholder is duly made. Extra Remuneration: At any time after the occurrence of an Event of Default or if the Trustee finds it expedient or necessary or is requested by the Issuer to undertake duties which the Trustee and the Issuer agree to be of an

(B)

17

exceptional nature or otherwise outside the scope of the normal duties of the Trustee under this Trust Deed, the Issuer will pay such additional remuneration as may be agreed between them or, failing agreement; as to any of the matters in this sub-clause (or as to such sums referred to in subclause (A)), as determined by a merchant bank (acting as an expert) selected by the Trustee and approved by the Issuer or, failing such approval, nominated by the President for the time being of The Law Society of England and Wales, the expenses involved in such nomination and the fee of such merchant bank being discharged by the Issuer. The determination of such mercham: bank will be conclusive and binding on the Issuer, the Trustee and the Bondholders.
(C)

Expenses: The Issuer will also pay or discharge all costs, charges, liabilities and expenses properly incurred by the Trustee in relation to the preparation and execution of this Trust Deed and the canying out of its function:; under this Trust Deed including, but not limited to, legal and travelling expenses and any stamp, registration, documentary or other taxes or duties paid by the Trustee in connection with any permissible legal proceedings brought or contemplated by the Trustee against the Issuer for enforcing any obligation under this Trust Deed or the Bonds. Payment of Expenses: A l l costs, charges, liabilities and expenses properly incurred and payments properly made by the Trustee in the lawful performance of its functions under this Trust Deed will be payable oij reimbursable by the Issuer on demand by the Trustee and: (i) in the case of payments made by the Trustee prior to such demand will carry interest from the date on which the demand is made at a rate equal to two per cent, above the base rate of National Westminster Bank Plc on the date on which such payments were made by :he Trustee; and in all other cases will carry interest at such rate from the date|which is 30 days after the date on which the demand is made or (where the demand specifies that payment is to be made on an earlier date) from such earlier date.

(D)

(ii)

(E)

Indemnity: The Issuer will indemnify the Trustee in respect of all liabilities and expenses properly incurred by it or by anyone properly appointed by it or to whom any of its functions may properly be delegated by it in the carrying out of its functions and against any loss, liability, cost, claim, action, demand or expense (including, but not limited to, all costs, charges and expenses properly paid or incurred in disputing or defending any of the foregoing) which any of them may properly incur or which may be made against any of them arising out of or in relation to or in connection with its appointment or the exercise of its functions under this Trust Deed.

18

(F)

Provisions Continuing: The provisions of sub-clauses (C), (D) and (E) w i l l continue in full force and effect in relation to the Trustee even if it may have ceased to be Trustee. Tax: The Issuer shall in addition pay to the Trustee an amount equal to the amount of any value added tax or similar tax chargeable in respect of its remuneration under this clause. PROVISIONS SUPPLEMENTAL TO THE TRUSTEE ACT 1925 By way of supplement to the Trustee Act 1925 it is expressly declared as follows:

(G)

11.

(A)

Advice: The Trustee may act on the opinion or advice of, or information obtained from, any expert (including an adviser to the Issuer) anc will not be responsible to anyone for any loss occasioned by so acting. Any such opinion, advice or information may be given orally and confirmed by lettei or sent or obtained by letter, telex or facsimile transmission and the Trustee will not be liable to anyone for acting in good faith on any opinion, advice or information purporting to be conveyed by such means even if it contains some error or is not authentic. Trustee to Assume Due Performance: The Trustee need not notify anyone of the execution of this Trust Deed or do anything to ascertain whether any Event of Default or any breach by the Issuer of the Trust Deed or Conditions has occurred and, until it has actual knowledge or express notice to the contrary, the Trustee may assume that no such event or breach has occurred and that the Issuer is performing all its obligations under this Trust Deed and the Bonds. Resolutions of Bondholders: The Trustee will not be responsible for having acted in good faith upon a resolution purporting to have been passed at a meeting of Bondholders in respect of which minutes have been made and signed even though it may later be found that there was a defect m the constitution of such meeting or the passing of such resolution or that such resolution was not valid or binding upon the Bondholders. Certificate signed by duly authorised signatories: The Trustee may call for and may accept as sufficient evidence of any fact or matter or of the expediency of any act a certificate of the Issuer signed by any two directors of the Issuer as to any fact or matter upon which the Trustee may, in the exercise of any of its functions, require to be satisfied or to have information or to the effect that, in the opinion of the person or persons so certifying, ajny particular act is expedient and the Trustee need not call for further evidencej and will not be responsible for any loss that may be occasioned by acting on any such

(B)

(C)

(D)

19

certificate. The Trustee may also so accept and act on any report delivered by the Auditors or the liquidator of the Issuer pursuant to clause 3. (E) Deposit of Documents: The Trustee may deposit this Trust Deed and any other documents in any part of the world with any banker or banking company or entity whose business includes undertaking the safe custody of documents or with any lawyer or firm of lawyers believed by it to be of good repute and may pay all sums to be paid on account of or in respect of any such deposit. Discretion of Trustee: The Trustee will have absolute and uncontro led discretion as to the exercise of its functions and, except in the case of its own wilful misconduct, negligence or breach of the terms of this Trust Deed, w i l l not be responsible for any loss, liability, cost, claim, action, demand, expenses or inconvenience which may result from their exercise or non-exercise. Agents: Whenever it considers it expedient in the interests of the Bondholders, the Trustee may, in the conduct of its trust business, instead of acting personally, employ and pay an agent selected by it, whether or not a lawyer or other professional person, to transact or conduct, or concur in transe cting or conducting, any business and to do or concur in doing all acts required to be done by the Trustee Cincluding the receipt and payment of money). If the Trustee exercises reasonable care in the selection of such agent the Trustee will not be responsible to anyone for any misconduct or omission on the part of any such agent so employed by it or be bound to supervise the proceedings or acts of any such agent. Delegation: Whenever it considers it expedient in the interests of the Bondholders, the Trustee may delegate to any person or body of persons fluctuating in number selected by it all or any of the duties, powers, trusts, authorities and discretions vested in the Trustee in connection with this Trust Deed and any such delegation may be by power of attorney or in such other manner as the Trustee may think fit and may be made upon terms and conditions (including power to sub-delegate) and subject to such regulations as the Trustee shall think fit. If the Trustee exercises reasonable care in the selection of such delegate, it will not be under any obligation to supervise such delegate or be responsible for any loss, liability, cost, claim, action, demand or expense incurred by reason of any misconduct or default by any such delegate or sub-delegate. Forged Bonds: The Trustee will not be liable to the Issuer or any Bondholder by reason of having accepted as valid or not having rejected any certificate for any Bond purporting to be such and later found to be forged or not authentic.

CF)

(G)

(H)

20

(J)

Confidentiality: Unless ordered to do so by a court of competent] jurisd iction the Trustee shall not be required to disclose to any Bondholder any confidential fmancial or other information made available to the Trustee by the Issuer. Determinations Conclusive: As between itself and the Bondholdjers the Trustee may determine all questions and doubts arising in relation to any of the provisions of this Trust Deed. Every such determination, whether made upon such a question actually raised or implied in the acts or proceedings of the Trustee, will be conclusive and shall bind the Trustee and the! Bondholders. Payment for and Delivery of Bonds: The Trustee will not be responsible for the receipt or application by the Issuer of the proceeds of the issue of the Bonds, or the delivery of the certificates for the Bonds to the persons entitled to them. Bonds held by the Issuer: In the absence of knowledge or express notice to the contrary, the Trustee may assume without enquiry (other than requesting a certificate of the Issuer under clause 9(K)) that no Bonds are for Ihe time being held by or on behalf of any member of the Group. Limitation of Liability to Individual Bondholders etc.: In connection with the exercise by it of any of its trusts, powers, authorities and discretions vested in it by this Trust Deed (including, without limitation, any modification, waiver, authorisation or substitution), the Trustee shall have regard to the general interests of the Bondholders as a class but shall not have regard to any interests arising from circumstances particular to individual Bondholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of the exercise of its trusts, powers, authorities and discretions for individual Bondholders (whatever their
i

(K)

(L)

(M)

(N)

number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to thejurisdiction of, any] particular territory or any political sub-division thereof and the Trustee shall not be entitled to require, nor shall any Bondholder be entitled to claim,: from the Issuer, the Trustee or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Bondholders. (O) Notifications to be final: A l l notifications, opinions, determinations, certificates, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the Conditions by the Trustee shall bje binding on the Issuer and the Bondholders and no liability to the Issuer or the Bondholders shall attach to the Trustee in connection with the exercise or nonexercise by it of its powers, duties and discretions in the Conditions.

21

(P)

Consents of Trustee: Any consent given by the Trustee for the purpjoses of this Trust Deed may be given on such terms and subject to such conditions (if any) as the Trustee in its absolute discretion thinks fit and may be given retrospectively. TRUSTEE LIABLE FOR NEGLIGENCE Nothing in this Trust Deed shall in any case in which the Trustee has failed to show the degree of care and diligence required of it as trustee relieve or indemnify it from or against any liability which by virtue of any rule of law would otherwise attach to it in respect of any negligence, default, breach of duty or breach of trust of which it may be guilty.

12.

13. (A)

WAIVER AND PROOF OF DEFAULT Waiver: The Trustee may, without the consent of the Bondholders and without prejudice to its rights in respect of any subsequent breach or Event of Default, from time to time and at any time, if in its opinion the interests of the Bondholders will not be materially prejudiced thereby, waive or authorise, on such terms and conditions as seem expedient to it, any breach or proposed breach by the Issuer of any of the provisions of this Trust Deed or the Bonds or determine that any Event of Default or any event which, with the givi ing of notice and/or the lapse of time, would constitute an Event of Defaul: will not be treated as such provided that the Trustee will not do so in contraviention of any express direction given by an Extraordinary Resolution or a request made pursuant to Condition 7(c) but no such direction or request w i l l affect any previous waiver, authorisation or determination. Any such waiver, authorisation or determination shall be binding on the Bondholders and, if the Trustee so requires, shall be notified to the Bondholders as soon as practicable. Proof of Default: If it is proved that as regards any specified Bond the Issuer has made default in paying any sum due to the relevant Bondholder such proof will (unless the contrary be proved) be sufficient evidence that the same default has been made as regards all other Bonds which are then pay. able. TRUSTEE NOT PRECLUDED FROM ENTERING INTO CONTRACTS Neither the Trustee nor any director or officer of a corporation acting as a Trustee or holding or associated company of such corporation shall be precluded from acquiring, holding, dealing in or disposing of any Bonds or any other securities, notes, bonds, debenture stock or debentures whatsoever of the Issuer or any company in which the Issuer is interested or o f w h i c h the Issuer is a subsidiary or from otherwise at any time contracting or entering into any financial or other transactions with the Issuer or from being interested in any contract or transaction or from accepting and holding the

(B)

14.

22

office of trustee for the holders of any other securities of or relating to the Issuer or any company in which the Issuer is interested or of which the Issuer is a subsidiary and shall not be liable to account for any profit arising therefrom. 15. (A) MODIFICATION AND SUBSTITUTION Modification: The Trustee may agree without the consent of the Bondholders to any modification to this Trust Deed (including the Conditions) which is of a formal, minor or technical nature or is made to correct a manifest error. The Trustee may also so agree to any modification to this Trust Deed (including the Conditions) which is in its opinion not materially prejudicial to the interests of the Bondholders. Any modification made pursuant to this sub-clause (A) shall, if the Trustee so requires, be notified to the Bondholders as soon as practicable. Substitution (i) The Trustee may, without the consent of the Bondholders, but subject to the Issuer having gained the approval of the Bank of England and having provided the Trustee with satisfactory evidence of s jch approval, agree to the substitution of any subsidiary of the Issuer or any company of which the Issuer is a subsidiary or any other subsidiary of any such company (the "Substituted Obligor") in place of the Issuer (or of any previous substitute under this sub-clause) as the principal debtor under this Trust Deed, and the Bonds provided that (a) a trust deed is executed or some other form of undertaking is given by the Substituted Obligor to the Trustee, in form and manner satisfactory to the Trustee, agreeing to be bjound by the terms of this Trust Deed and the Bonds with any consequential amendments which the Trustee may deem appropriate as fully as if the Substituted Obligor had been named in this Trust Deed and on the Bonds as the principal debtor in place of the Issuer; the Bonds being irrevocably and unconditionally guaranteed (on a subordinated basis equivalent, mutatis mutandis, to the subordination set out in clause 3) by the Issuer in a form and manner satisfactory to the Trustee; without prejudice to paragraph (b) above, where the Substituted Obligor is a banking subsidiary, the obligations of the Substituted Obligor in respect of the Bonds may be subordinated in a winding-up of the Substituted Obligor to the rights of Senior Creditors (as defined in clause 1 but with the

(B)

(b)

(c)

23

substitution in such definition of references to "the Substituted Company" in place of references to "the Issuer"); j (d) if any two of the directors ofthe Substituted Obligor certify that it will be solvent immediately after such substitution, the Trustee need not have regard to the financial condition, profits or prospects of the Substituted Obligor or compare them with those of the Issuer; the Issuer and the Substituted Obligor comply with siach other requirements as the Trustee may direct in the interests of the Bondholders; and the Trustee is satisfied (without prejudice to its rights to rely on paragraph (d)) that the said substitution is not materially prejudicial to the interests of Bondholders.

(e)

(f)

(ii)

Any such agreement by the Trustee pursuant to paragraph (i) will, if so expressed, operate to release the Issuer (or any such previous substitute) from any or all of its obligations as principal debtor under this Trust Deed and the Bonds. Not later than 14 days after the execution of any such documents and after compliance with 'such requirements, notice of the substitution will be given to the Bondholders. Upon the execution of such documents and compliance with [such requirements, the Substituted Obligor will be deemed to be riamed in this Trust Deed and on the Bonds as the principal debtor in place of the Issuer (or of any previous substitute under paragraph (i)) and this Trust Deed and the Bonds will be deemed to be modified in such manner as shall be necessary to give effect to the substitution.

(iii)

16. (A)

APPOINTMENT, RETIREMENT AND REMOVAL OF THE TRUSTEE Appointment: The Issuer shall have the power of appointing new trustees of the trusts constituted by this Trust Deed but no person shall be so appointed unless previously approved by an Extraordinary Resolution. A trust corporation shall at all times be a Trustee and may be the sole Trustee. Any appointment of a new Trustee shall be notified by the Issuer to the Bondholders as soon as practicable in accordance with the provisions of Condition 12. j Retirement and Removal: Any Trustee may retire at any time on giving not less than three months' notice in writing to the Issuer without giving any reason and without being responsible for any costs occasioned by such

(B)

24

retirement and the Bondholders may by Extraordinary Resolution Remove any Trustee provided that the retirement or removal of any sole trustee or sole trust corporation will not become effective until a trust corporation is appointed as successor Trustee. If a sole trustee or sole trust corporation gives notice of retirement or an Extraordinary Resolution is passed for its removal under this clause, the Issuer shall use all reasonable endeavours to procure that another trust corporation be appointed as Trustee. (C) Separate or Co-Trustees: The Trustee may, despite sub-clause (A), by notice in writing to the Issuer, appoint anyone to act either as a separate trustee or as a co-trustee jointly with the Trustee: (i) if the Trustee considers such appointment to be in the interests of the Bondholders; for the purpose of conforming with any legal requirement, restriction or condition in any jurisdiction in which any particular act is to be performed; or for the purpose of obtaining a judgment in any jurisdiction br the enforcement in any jurisdiction against the Issuer of either a judgment already obtained or any of the provisions of this Trust Deed

(ii)

(iii)

Subject to the provisions of this Trust Deed the Trustee may confer on any person so appointed such functions as it thinks fit. The Trustee may by notice in writing to the Issuer and such person remove any person so appointed. At the request of the Trustee, the Issuer shall forthwith do all things as may be required to perfect such appointment or removal and it irrevocably appoints the Trustee to be its attomey in its name and on its behalf to do so* Such a person shall (subject always to the provisions of this Trust Deed) have such trust, powers, authorities and discretions (not exceeding those conferred on the Trustee by this Trust Deed) and such duties and obligations as shall be conferred or imposed by the instrument of appointment. Such reasonable remuneration as the Trustee may pay to any such person, together [with any attributable costs, charges, liabilities and expenses incurred by it in performing its functions as such separate or co-trustee shall for the purposes ofthis Trust Deed be treated as remuneration, liabilities, costs, charges and expjenses incurred by the Tmstee. (D) Competence of a Majority of Trustees: If there are more than two Trustees the majority of such Trustees will (provided such majority includesla tmst corporation) be competent to carry out all or any of the Tmstee's functions.

25

17.

COMMUNICATIONS Any communication shall be by letter or by fax transmission:

in the case of the Issuer, to it at: PO Box 27 Broad Quay Bristol BS99 7AD Fax No: Attention: 0117 929 1115 General Counsel

and in the case of the Trustee, to it at: Princes House 95 Gresham Street London EC2V 7LY Fax No: Attention: 0171 696 5261 The Manager, Trust Administration

Any such notice, if delivered in person or by fax, shall be deemed to lave been given on receipt if received before 5.00 p.m. on a business day and otherwise to have been received at 9.00 a.m. on the next following business day. Any such notice, if delivered by post, shall be deemed to have been givenjon receipt. Either party may change its address for the purpose of this clause 17 by giving written notice of such change to the other. 18. EXECUTION IN COUNTERPARTS This document may be executed in counterparts (and in engrossment, photocopy or facsimile form) and the executed documents shall, from the date on which both parties hereto have executed a counterpart hereof, be construed and have effect as though all such counterparts were one document executed by the parties hereto.

26

19.

GOVERNING LAW This Trust Deed and the Bonds are governed by, and shall be construed in accordance with, Enghsh law.

IN WITNESS whereof this Trust Deed has been executed as a deed on the date stated at the beginning.

27

SCHEDULE 1 FORM OF CERTIFICATE FOR BOND

On the front: Certificate No. [ ][

ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 1650) AND 1287(a) OF THE INTERNAL REVENUE CODE. BRISTOL & WEST plc (Incorporated in England with limited liability under the Companies Act 1985, registered number 2124201) ISSUE OF 75,000,000 ISVgPER CENT. UNSECURED PERPETUAL SUBORDINATED BONDS

The issue of the above Bonds (the "Bonds") was authorised by a resolution of the Board of Directors of Bristol & West plc (the "Issuer") passed on 25 July 1997. The Bond represented by this certificate forms one of a series of registered Bonds in principal amounts of 1,000 each or integral multiples thereof, in an aggregate principal amount of 75,000,000, all constituted by a Trust Deed dated 25 July 1997 made between the Issuer and The Law Debenture Trust Corporation p.l.c. ) THIS IS TO CERTIFY that is/are the registered holder(s) of in principal amount of the above-mentioned Bonds and is/are entitled on such date as such principal amount may become repayable in accordance with the Cond itions endorsed hereon to the repayment of such principal amount, except in the event of the winding-up in England of the Issuer, in which event his/their entitlement shall be as set out in Condition 2 endorsed hereon. Interest is payable semi-annually in arrear on the said principal amount at the rate of 1 3 / per cent, per annum from and including the Vesting Date, payment to be made on the Compulsory Interest Payment Dates and otherwise as specified in the Conditions, subject to and in accordance with the said Conditions.
3 8

28

Given under the Official Seal of the Issuer on

This certificate must be surrendered before any transfer of the whole or p^t of the registered Bonds herein mentioned can be registered.

29

On the back: FORM OF TRANSFER OF BOND FOR VALUE RECEIVED the undersigned hereby sellCs), assign (s) and transfer(s) to

(please print or type name and address (including postal code) of transferee) principal amount of this registered Bond and all rights hereunder,; subject to and in accordance with the Trust Deed and the Conditions, hereby irrevocably constituting and appointing the Registrar as agent to transfer such principall amount of this Bond in the register maintained by the Registrar with full power of substitution. Signature(s) of transferor(s)

Date: N.B.: This form of transfer must be accompanied by such documents, evidence and information as may be required pursuant to the Conditions and must Ibe executed under the hand of the transferor or, if the transferor is a corporation, either under its common seal or under the hand of two of its officers jduly authorised in writing and, in such latter case, the document so authorising such officers must be delivered with this form of transfer. The signature(s) ofthe person(s) effecting a transfer shall conform taj any list of duly authorised specimen signatures supplied by the registered holder(s) or be certified by a recognised bank, notary public or in such other manner as the Registrar may require. The signature(s) on this form of transfer must correspond with the n^me(s) as it/they appear(s) on the face of this registered Bond in every particular. Registered Bonds are only transferable in amounts of 1,000 or any integral multiples thereof. No transfer is effective until it has been registered.

30

TERMS AND CONDITIONS OF THE 75,000,000 13 /. PER CENT. UNSECURED PERPETUAL SUBORDINATED BONDS OF BRISTOL & WEST plc
3

[Here will be set out the Terms and Conditions which appear in Schedule 2]

31

SCHEDULE 2 TERMS AND CONDITIONS OF THE BONDS The 75,000,000 I s V s P e r cent. Unsecured Perpetual Subordinated Bonds (the "Bonds") of Bristol & West plc (the "Issuer") are constituted by a trust deed dated 25 July 1997 (the "Trust Deed") between (1) the Issuer and (2) The Law Debenture Trust Corporation p.l.c., as trustee, (the "Trustee", which expression shall include its successors). The Trustee acts as trustee for the Bondholders (as defined below) in accordance with the provisions of the Trust Deed. The Bondholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions contained in the Trust Deed. The Bondholders are also bound by, and are deemed to have notice of, all the provisions contained in a registrar's agreement dated 25 July 1997 (the "Registrar's Agreement") between the Issuer, The Royal Bank of Scotland plc, as registrar, (the "Registrar", which, expression shall include its successors) and the Trustee. Copies of the Trust Deed and the Registrar's Agreement are available for inspection by Bondholders during normal business hours at the registered office for the time being of the Trustee (being at the date of the Trust Deed at Princes House, 95 Gresham Street, London EC2V 7LY) and at the specified office of the Registrar. The date on which the Trust Deed takes effect is referred to in these Terms and Conditions as the "Vesting Date". 1. (a) TITLE AND DENOMINATION The Bonds are in certificated registered form in principal amounts of 1,000 or integral multiples of 1,000 ("authorised denominations"). Title to the Bonds passes upon registration in a register of the Bonds (the "Register") which the Issuer shall procure to be kept by the Registrar. The person in whose name a Bond is registered (a "Bondholder") shall be deemed to be, and shall be treated as, its absolute owner for the purpose of receiving payment of, or payment or delivery on account of, the Bond (notwithstanding any writing on the certificate for the Bond or notice of ownership) and for all other purposes whether or not such Bond is overdue. (c) Bonds may, subject to the terms of the Registrar's Agreement and to paragraph (f) of this Condition, be transferred in whole or in part in an authorised denomination by lodging the certificate for the relevant Bond (with the relative form of application for transfer endorsed thereon duly executed and duly stamped where applicable) at the specified office of the Registrar. No transfer of a Bond shall be valid unless and until entered on the Register. A Bond may be registered only in the name of, and transferred only to, a named person (or persons, not exceeding 4 in number).

(b)

32

(d)

The Issuer shall procure that the Registrar will within 7 business days (not including any day during which neither the Issuer nor the Registrar is required to register the transfer of any Bond pursuant to paragraph (f) of this Condition) of any duly made apphcation for the transfer of a Bond or a part of a Bond in an authorised denomination deliver a certificate for a Bond in the relevant denomination to the transferee (and, in the case of a transfer of part only of a Bond, deliver a certificate for a Bond comprising the untransferred balance to the transferor) at the specified office of the Registrar or (at the risk and, if mailed at the request of the transferee or, as the case may be, the transferor otherwise than by ordinary uninsured mail, at the expense of the transferee or, as the case may be, the transferor) mail the certificate for the Bond to such address, other than an address in the United States, as the transferee or, as the case may be, the transferor may request. In these Terms and Conditions, "business day" means a day (other than a Saturday or Sunday) on which banks in London are open for business.

(e)

Any transfer of the whole or part of a Bond in accordance with paragraph (c) of this Condition shall be effected without charge subject to (i) the person making such application for transfer paying or procuring the payment of any taxes, duties and other govemmental charges payable in connection therewith, (ii) the Registrar being satisfied with the documents of title and/or identity of the person making the application and (iii) such reasonable regulations as the Issuer may from time to time agree with the Tmstee and the Registrar. Neither the Issuer nor the Registrar shall be required to register the transfer of any Bond during the period of 7 business days immediately prior to any date fixed for payment in respect of the Bonds. STATUS AND SUBORDINATION The Bonds constitute unsecured and, as described below, subordinated obligations of the Issuer and rank pari passu without any preference among themselves. The claims of the Bondholders are subordinated to the claims of Senior Creditors (as defined below) in that payments of principal and interest in respect of the Bonds (including the PIBS Interest Payment, as defined in Condition 3(b)) are conditional upon the Issuer being solvent (as defined below) at the time for payment by the Issuer and in that no principal or interest (including the PIBS Interest Payment) 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 this purpose, the Issuer shall be considered to be solvent if:

(f)

2. (a)

(b)

33

(i)

to the extent that any determination as to solvency falls to be made prior to the commencement of winding up in England of the Issuer, it is able to pay its debts to Senior Creditors as they fall due; and its Assets exceed its Liabilities (each as defined below) to Senior Creditors.

(ii)

(c)

A report as to the solvency of the Issuer by 2 directors of the Issuer or, in certain circumstances as provided in the Trust Deed, the Auditors (as defined in the Trust Deed) or, if the Issuer is being wound up, its liquidator shall, unless the contrary is proved, be treated and accepted by the Issuer, the Trustee and the Bondholders as correct and sufficient evidence of the matters stated in such report. In these Terms and Conditions, "Senior Creditors" means creditors of the Issuer (i) who are unsubordinated depositors or other unsubordinated creditors of the Issuer or (ii) who are subordinated creditors of the Issuer (including the holders of any dated subordinated debt) other than those whose claims rank, or are expressed to rank, pari passu with or junior to the claims of the Bondholders (whether only in the event of a winding up of the Issuer or otherwise); "Assets" means the total non-consolidated gross assets o f t h e Issuer and "Liabilities" means the total non-consolidated gross liabilities of the Issuer, all as shown by the latest published audited balance sheet of the Issuer but adjusted for contingencies and for subsequent events in such manner and to such extent as such directors, the Auditors or, as the case may be, such liquidator may determine to be appropriate. If at any time an order is made or an effective resolution is passed for the winding up in England of the Issuer otherwise than a solvent winding up solely for the purpose of a reconstruction or amalgamation on terms previously approved by the Trustee in writing or by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders and which do not provide that the Bonds shall thereby become repayable, there shall be payable on each Bond (in lieu of any other payment), but subject as provided in this Condition, such amount, if any, as would have been payable to the relevant Bondholder if, on the day prior to the commencement ofthe winding up and thereafter, such Bondholder were the holder of a preference share in the capital of the Issuer having a preferential right to a retum of assets in the winding up over the holders of all other classes of stock or shares for the time being in the share 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 3(d)), if any, and any interest (other than Arrears of Interest) which is payable as provided in the Tmst Deed.

^ ft

(d)

(e)

''
T

34

The obligations of the Issuer in respect of the Bonds are conditional upon the Issuer being solvent for the purpose of Condition 2(e) immediately before and after payment by the Issuer. 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. (f) Subject to applicable law, no Bondholder may exercise or claim any right of set-off in respect of any amount owed to it by the Issuer arising under or in connection with the Bonds and each Bondholder shall, by virtue of being the person in whose name a Bond is registered, be deemed to have waived all such rights of set-off. INTEREST The Bonds bear interest from and including the Vesting Date at the rate of 1 3 / p e r cent, per annum payable, subject as provided in these Terms and Conditions, in arrear in equal semi-annual instalments on 7 May and 7 November in each year (each an "Interest Payment Date"), except that the first such payment, which shall be made on the first interest payment date following the Vesting Date (the "First Interest Payment Date"), shall be in respect of the period from and including the Vesting Date to but excluding the First Interest Payment Date and shall amount to 37.37671 (subject to any deduction pursuant to Condition 6) in respect of each 1,000 principal amount of Bonds.
3 8

3. (a)

(b)

The Issuer shall, subject as provided in these Terms and Conditions, pay by way of interest to each Bondholder on the First Interest Payment Date 30.04795 (subject to any deduction pursuant to Condition 6) in respect of each 1,000 principal amount of Bonds held by such Bondholder (the "PIBS Interest Payment"). The PIBS Interest Payment shall be in respect of interest accrued on the 75,000,000 I s V s P e r cent. Permanent Interest Bearing Shares of The Bristol and West Building Society (50,000,000 o f w h i c h were issued on 7 November 1991, and 25,000,000 of which were issued on 31 December 1991), in replacement for which the Bonds have been issued, for the period from and including the interest payment date in respect thereof which immediately precedes the Vesting Date to but excluding the Vesting Date. Subject as provided in these Terms and Conditions, the aggregate amount payable by the Issuer to each Bondholder pursuant to paragraphs (a) and (b) of this Condition on the First Interest Payment Date shall be 67.42466 (subject to any deduction pursuant to Condition 6) in respect of each 1,000 principal amount of Bonds held by such Bondholder. Interest accruing on each Bond shall cease to accrue from the date for its redemption unless, upon due presentation, payment of principal is improperly withheld or refused or is not

(c)

35

made by reason of Condition 2, in which event interest shall continue to accrue as provided in the Trust Deed. (d) Interest payments on the Bonds (including the PIBS Interest Payment) shall (subject to Condition 2) be payable on each Compulsory Interest Payment Date (as defined below). On any Optional Interest Payment Date (as defined below) there may be paid (if the Issuer so elects and gives notice of such election to the Bondholders in accordance with paragraph (e) of this Condition) the interest (including the PIBS Interest Payment) payable on such Optional Interest Payment Date, but the Issuer shall not have any obligation to make such payment and any failure to pay shall not constitute a default by the Issuer for any purpose. Any interest (including the PIBS Interest Payment) which is not paid on an Interest Payment Date shall, so long as the same remains unpaid, constitute "Arrears of Interest". Arrears of Interest may, at the option of the Issuer, be paid in whole or in part at any time upon the expiration of not less than 7 days' notice to such effect given to the Bondholders in accordance with Condition 12, but all Arrears of Interest on all Bonds outstanding shall (subject to Condition 2) become due in full on whichever is the earliest of: (i) the date upon which a dividend is next paid on any class of share capital of the Issuer; the date set for any redemption pursuant to Condition 4(a); or the commencement of winding up of the Issuer.

(ii) (iii)

Notwithstanding the foregoing, 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 expiration of such notice. Arrears of Interest shall not themselves bear interest. (e) The Issuer shall give not less than 30 days' notice prior to any Optional Interest Payment Date to the Bondholders in accordance with Condition 12 specifying whether the Issuer elects to pay the interest due on such Optional Interest Payment Date. For the purposes of this Condition, the following expressions have the following meanings: "Compulsory Interest Payment Date" means any Interest Payment Date unless (i) in the period of 6 calendar months immediately preceding such Interest Payment Date the Issuer has not declared or paid any dividend on any class of its share capital and (ii) the directors of

(f)

36

the Issuer have determined and notified the Trustee that prudent capital ratios would not have been maintained if payment of any such dividend had been made in such period. "Optional Interest Payment Date" means any Interest Payment Date other than a Compulsory Interest Payment Date.

If interest is required to be calculated for a period of less than one year (other than a full semi-annual interest period), it shall be calculated on the basis of the actual number of days elapsed and a 365-day year. All references in these Terms and Conditions and the Trust Deed to interest shall, unless the context otherwise requires, include Arrears of Interest. 4. REDEMPTION The Issuer shall not be at liberty to redeem or purchase the Bonds except in accordance with the following provisions of this Condition. Any such redemption or purchase is subject to the prior consent of the Bank of England (so long as the Issuer is required to obtain such consent). (a) Redemption for Taxation Reasons If the Issuer satisfies the Trustee, immediately prior to the giving of the notice referred to below, that on the next Interest Payment Date the payment of interest in respect of the Bonds (including, if applicable, the PIBS Interest Payment) would not be treated as a deductible expense for UK tax purposes, the Issuer may at its option (subject to Condition 2), having given not less than 30 nor more than 45 days' notice to the Bondholders, redeem all, but not some only, of the Bonds at their principal amount and shall also pay Arrears of Interest (if any) and any interest (other than Arrears of Interest) up to (but excluding) the date of redemption. (b) Purchase The Issuer or any other member of the Group (as defined in the Trust Deed) may at any time purchase Bonds at any price in the open market or by tender (available to all Bondholders alike) or by private treaty. (c) Cancellation All Bonds which are (i) redeemed or (ii) purchased (otherwise than in the ordinary course of a business of dealing in securities) by or on behalf of the

37

Issuer or any other member of the Group may not be reissued or resold and shall in due course be cancelled. 5. (a) PAYMENTS Payments of principal on the Bonds or accrued interest which is payable other than on an Interest Payment Date shall be made to the persons shown in the Register at the close of business on the date (the "Record Date") being the seventh business day prior to the relevant payment date subject to surrender of the certificates for the Bonds at the specified office of the Registrar. Payments of interest (including the PIBS Interest Payment) due on an Interest Payment Date shall be made to the persons shown in the Register at the close of business on the Record Date. Each such payment shall be made by sterling cheque drawn on a branch of a bank in the United Kingdom and mailed not later than the business day preceding the due date for payment (at the risk and, if mailed at the request of the Bondholder otherwise than by ordinary uninsured mail, expense of the Bondholder) to the holder or to the first-named of joint holders of the relevant Bonds at his registered address or in accordance with mandate instructions acceptable to the Registrar. In no event shall interest payments be mailed to an address in the United States. Payments shall be subject in all cases to any applicable fiscal and other laws and regulations. Without prejudice to the generality of the foregoing, the Issuer reserves the right to require a Bondholder to provide 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. (b) Details of the initial Registrar and its initial specified office are set out below. The Issuer reserves the right, subject to the approval of the Trustee (such approval not to be unreasonably withheld), to vary or terminate the appointment .of the Registrar and appoint another Registrar at any time, provided that it will at all times maintain a Registrar with a specified office in the United Kingdom. Notice of any such tennination or appointment and of any changes in the specified office of the Registrar will be given to the Bondholders promptly by the Issuer in accordance with Condition 12. TAXATION All payments of principal and/or interest (including the PIBS Interest Payment) in respect of Bonds shall be made subject to deduction of any United Kingdom tax required to be withheld at source.

6.

38

7. (a)

EVENTS OF DEFAULT AND ENFORCEMENT If the Issuer fails to make any payment of principal in respect of the Bonds for a period of 15 days or more after the due date for its payment or fails to make any payment of interest Cincluding the PIBS Interest Payment) for a period of 15 days or more after a Compulsory Interest Payment Date or any other date upon which the payment of interest (including the PIBS Interest Payment) is compulsory, the Trustee may, subject as provided below, at its discretion and without further notice, institute proceedings in England (but not elsewhere) for the winding up of the Issuer, but may take no further action in respect of such default. For the purpose of this paragraph a payment otherwise due (in the case of principal) or compulsory (in the case of interest (including the PIBS Interest Payment)) shall be deemed so due or compulsory notwithstanding that the condition set out in Condition 2 is not satisfied. If at any time an order is made or an effective resolution is passed for the winding up in England of the Issuer otherwise than a solvent winding up solely for the purpose of a reconstruction or amalgamation on terms previously approved by the Trustee in writing or by an Extraordinary Resolution of the Bondholders and which do not provide that the Bonds shall thereby become repayable, the Trustee may, subject as provided below, at its discretion, give notice to the Issuer that the Bonds are, and they shall accordingly thereby forthwith become, immediately due and repayable, together with accrued interest as provided in the Trust Deed. The Trustee shall not be bound to take the action referred to in paragraph (a) or (b) of this Condition or any other action to enforce the obligations of the Issuer in respect of the Bonds unless (i) it is so requested by an Extraordinary Resolution of the Bondholders or in writing by Bondholders holding at least one-fifth in principal amount of the Bonds then outstanding and (ii) it shall have been indemnified to its satisfaction. No Bondholder shall be entitled to institute proceedings for the winding up of the Issuer, or to prove in such winding up, except that if the Trustee, having become bound to proceed against the Issuer 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 Bondholder 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 England (but not elsewhere) of the Issuer 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, other than the institution of proct =dings for the winding up of the Issuer in England, shall be available to the T:...;tee or the

(b)

(c)

(d)

(e)

39

Bondholders, whether for the recovery of amounts owing in respect of the Bonds or under the Trust Deed or in respecs of any breach by the Issuer of any of its obhgations under the Trust Deed or the Bonds (other than for recovery of the Trustee's remuneration or expenses). (f) The Issuer has undertaken in the Trust Deed to pay English stamp and other duties (if any) on or in connection with the execution of the Trust Deed and English stamp and other duties or taxes (if any) on the original issue and constitution of the Bonds (provided such stamp and other duties or taxes result from laws applicable on the Vesting Date) and stamp or other duties or taxes payable in England (but not elsewhere) solely by virtue of and in connection with any permissible proceedings under the Trust Deed or the Bonds but shall 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 Bondholder at the relevant time. PRESCRIPTION Claims against the Issuer for the payment of principal and interest (including the PIBS Interest Payment) shall be prescribed unless made within 12 years (in the case of principal) and 6 years (in the case of interest (including the PIBS Interest Payment)) from the Relevant Date. 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 Registrar 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. 9. INDEMNIFICATION OF THE TRUSTEE The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking proceedings unless indemnified to its satisfaction. The Trustee is entitled to enter into business transactions with the Issuer and/or any of its subsidiaries without accounting for any resulting profit. 10. MEETINGS OF BONDHOLDERS, MODIFICATIONS, WAIVER AND SUBSTITUTION OF PRINCIPAL DEBTOR The Trust Deed contains provisions for convening meetings of Bondholders to consider any matter affecting their interests, including any modification of these Terms and Conditions or the provisions ofthe Trust Deed, provided that certain provisions (including, inter alia, the terms conceming the currency.

8.

(a)

40

amount and due dates of payment of interest (including the PIBS Interest Payment) or principal in respect of the Bonds, and the provisions as to subordination referred to in Condition 2 may, subject to paragraph (b) of this Condition, only be modified by an Extraordinary Resolution passed at a meeting of Bondholders to which special quorum provisions shall have applied. Any Extraordinary Resolution duly passed at any such meeting shall be binding on all the Bondholders, whether present or not. (b) The Trustee may agree, without the consent of the Bondholders, to any modification of, or to any waiver or authorisation of any breach or proposed breach of, any provision of these Terms and Conditions or the Trust Deed which, in the opinion of the Trustee, is not materially prejudicial to the interests of the Bondholders or to any modification which is of a formal, minor or technical nature or to correct a manifest error. Unless the Trustee agrees otherwise, any modification shall be notified to the Bondholders by the Issuer in accordance with Condition 12 as soon as practicable thereafter. The Trustee may also agree, subject to modification of the Trust Deed, the consent of the Bank of England and such other conditions as the Trustee may require, but without the consent ofthe Bondholders, to the substitution, subject to the Bonds being unconditionally and irrevocably guaranteed on a subordinated basis equivalent to that mentioned in Condition 2 by the Issuer and otherwise to the satisfaction of the Trustee, of any subsidiary of the Issuer or of any company of which the Issuer is a subsidiary or any other subsidiary of any such company in place of the Issuer as principal debtor under the Trust Deed and the Bonds and so that the claims of the Bondholders may, in the case of the substitution of a banking subsidiary (as defined in the Trust Deed) in the place of the Issuer, be subordinated to the rights of Senior Creditors (as defined in Condition 2, but with the substitution of references to that subsidiary in place of references to "the Issuer"). In the case of a substitution pursuant to this Condition, the Trustee may in its absolute discretion agree to a change of the law goveming the Bonds and/or the Trust Deed without the consent of Bondholders provided that such change would not in the opinion of the Tmstee be materially prejudicial to the interests of Bondholders. In connection with the exercise by it of any ofits tmsts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorisation or substitution), the Trustee shall have regard to the general interests of the Bondholders as a class but shall not have regard to any interests arising from circumstances particular to individual Bondholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of the exercise of its tmsts, powers, authorities and discretions for individual Bondholders (whatever their

(c)

(d)

(e)

41

number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Trustee shall not be entitled to require, nor shall any Bondholder be entitled to claim, from the Issuer, the Trustee or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Bondholders. 11. REPLACEMENT OF BONDS Should any ceitificate for a Bond be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Registrar (or such other place ofwhich notice has been given in accordance with Condition 12) upon payment by the claimant of the expenses incurred in connection with its replacement and on such terms as to evidence, security and indemnity as the Issuer may reasonably require. Mutilated or defaced certificates for Bonds must be surrendered before replacements will be issued. 12. NOTICES Notices to Bondholders shall be posted to them at their respective addresses in the Register and shall be deemed to have been given on the second weekday after the date of posting. 13. FURTHER ISSUES The Issuer is not at liberty, without the consent of the Bondholders, to create and issue further bonds so as to be consolidated and form a single series with the Bonds. 14. GOVERNING LAW AND JURISDICTION The Trust Deed and the Bonds are governed by and shall be construed in accordance with English law. The Courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with any of the Bonds and accordingly any legal action or proceedings arising out of or in connection with any of the Bonds may be brought in such courts. The initial Registrar is The Royal Bank of Scotland plc and its initial specified office is PO Box 435, Owen House, 8 Bankhead Crossway North, Edinburgh EH 11 4BR.

42

SCHEDULE 3 REGISTER AND TRANSFER OF BONDS 1. The Issuer shall at all times ensure that the Registrar maintains in London or at such other place as the Trustee may agree, a register showing the amount of the Bonds from time to time outstanding and the dates of issue and all subsequent transfers and changes of ownership thereof and the names and addresses of the holders of the Bonds. The Trustee and the Bondholders or any of them and any person authorised by it or any of them may at all reasonable times during office hours inspect the register and take copies of or extracts from it. The register may be closed by the Issuer for such periods at such times (not exceeding in total 30 days in any one year) as it may think fit. Each certificate for a Bond shall have an identifying number which shall be entered on the register. The Bonds are transferable by execution of the form of transfer endorsed on the certificates therefor under the hand of the transferor or, where the transferor is a corporation, under its common seal or under the hand of two of its officers duly authorised in writing. The signature(s) of the person(s) effecting a transfer shall conform to any list of authorised specimen signatures supplied by the registered holder(s) or be certified by a recognised bank, notary public or in such other manner as the Registrar may require. The certificate for the Bonds to be transferred must be delivered for registration to the specified office of the Registrar with the form of transfer endorsed thereon duly completed and executed and must be accompanied by such documents, evidence and information as may be required pursuant to the Conditions and such other evidence as the Issuer may reasonably require to prove the title of the transferor or his right to transfer the Bonds and, if the form of transfer is executed by some other person on his behalf or, in the case of the execution of a form of transfer on behalf of a corporation by its officers, the authority of that person or those persons to do so. The executors or administrators of a deceased Bondholder (not being one of several joint holders) and in the case of the death of one or more of several joint holders the survivor or survivors of such joint holders shall be the only person or persons recognised by the Issuer as having any title to such Bonds. Any person becoming entitled to Bonds in consequence of the death or bankruptcy of the relevant Bondholder may upon producing such evidence that he holds the position in respect of which he proposes to act under this paragraph or of his title as the Issuer shall require be registered himself as the holder of such Bonds. The Issuer shall be at liberty to retain any amount

2.

3.

4.

5.

6.

43

payable upon the Bonds to which any person is so entitled until such person shall be registered as aforesaid or shall duly transfer the Bonds. 7. Unless otherwise requested by him,, each Bondholder shall be entitled to receive only one certificate in respect of his entire holding of Bonds. The joint holders of Bonds shall be entitled to one certificate only in respect of their joint holding which shall, except where they otherwise direct, be delivered to the joint holder whose name appears first in the register of the Bondholders in respect of such joint holding. Where a Bondholder has transferred part only of his holding of any series there shall be delivered to him without charge a certificate in respect of the balance of such holding. Save as set out in Condition 1(e), the Issuer shall make no charge to the holders for the registration of any holding of Bonds or any transfer thereof or for the issue thereof or for the delivery of the certificates in respect thereof at the specified office of the Registrar or by post to the address specified by the Bondholder. If any Bondholder entitled to receive a certificate wishes to have the same delivered to him otherwise than at the specified office of the Registrar, such delivery shall be made, upon his written request to the Registrar, at his risk and (except where sent by ordinary uninsured mail) at his expense to the address specified by the Bondholder other than an address in the United States. The Bondholder may (to the fullest extent permitted by applicable laws) be treated at all time, by all persons and for all purposes as the absolute owner of such Bond notwithstanding any notice any person may have of the right, title, interest or claim of any other person thereto. The Issuer and the Trustee shall not be bound to see to the execution of any trust to which any Bond may be subject and no notice of any trust shall be entered on the register. The Bondholder shall be recognised by the Issuer as entitled to his Bond free from any equity, set-off or counterclaim on the part of the Issuer against the original or any intermediate holder of such Bond.

8.

9.

Ik-.^3

10.

11.

45

(C)

Any proxy appointed pursuant to sub-paragraph (A) above or representative appointed pursuant to sub-paragraph (B) above shall so long as such appointment remains in force be deemed, for all purposes in connection with the relevant meeting or adjourned meeting of the Bondholders, to be the holder of the Bonds to which such appointment relates, and the registered holder of the Bonds shall be deemed for such purposes not to be the holder. For the purposes of this Schedule: (i) "24 hours" shall mean a period of 24 hours including all or part of a day upon which banks are open for business in both the place where the relevant meeting is to be held and in the place where the Registrar has its specified office (disregarding for this purpose the day upon which such meeting is to be held) and such period shall be extended by one period or, to the extent necessary, more periods of 24 hours until there is included as aforesaid all or part of a day upon which banks are open for business in both the places as aforesaid; and "48 hours" shall mean a period of 48 hours including all or part of two days upon which banks are open for business both in the place where the relevant meeting is to be held and in the place where the Registrar has its specified office (disregarding for this purpose the day upon which such meeting is to be held) and such period shall be extended by one period or, to the extent necessary, more periods of 24 hours until there is included as aforesaid all or part of two days upon which banks are open for business in both the places as aforesaid.

(D)

(ii)

3.

The Issuer or the Trustee may at any time and, save as provided in this paragraph, the Issuer shall upon a requisition in writing signed by the holders of not less than one-tenth of the principal amount of the Bonds for the time being outstanding convene a meeting of the Bondholders and if the Issuer makes default for a period of 7 days in convening such a meeting the same may be convened by the Trustee or the requisitionists. Every such meeting shall be held at such place and at such time as the Trustee may appoint or approve. Where any such meeting is convened upon the requisition of the Bondholders, it shall not be incumbent upon the Issuer within 12 months of such meeting or, if applicable, any adjourned such meeting to convene any further meeting upon any further such requisition to consider the same or an effectively or materially similar matter or matters. Save as provided in paragraph 8, at least 21 days' notice (exclusive of the day on which the notice is given and the day on which the meeting is held)

4.

46

specifying the place, day and hour of meeting shall be given prior to any meeting of the Bondholders in each case in the manner provided by Condition 12. Such notice shall state generally the nature of the business to be transacted at the meeting thereby convened but (except for an Extraordinary Resolution) it shall not be necessary to specify in such notice the terms of any resolution to be proposed. Such notice shall include a statement to the effect that Bondholders may appoint proxies by executing and delivering a form of proxy in the English language to the specified office of the Registrar as referred to above. A copy of the notice shall be sent by first class pre-paid post (airmail, if overseas), telex, facsimile transmission or telegram or delivered by hand to the Trustee (unless the meeting is convened by the Trustee) and to the Issuer (unless the meeting is convened by the Issuer).
5.

Some person nominated in writing by the Trustee (who may but need not be a Bondholder) shall be entitled to take the chair at every such meeting but if no such nomination is made or if at any meeting the person nominated shall not be present within fifteen minutes after the time appointed for holding the meeting the Bondholders present shall choose one of their number to be Chairman. At any such meeting one or more persons present being proxies or representatives or holding Bonds and representing or holding in the aggregate not less than one-twentieth of the principal amount of the Bonds for the time being outstanding shall (except for the purpose of passing an Extraordinary Resolution) form a quorum for the transaction of business and no business (other than the choosing of a Chairman) shall be transacted at any meeting unless the requisite quorum is present at the commencement of business. The quorum at any such meeting for passing an Extraordinary Resolution shall (subject as provided below) be one or more persons present being proxies or representatives or holding Bonds and representing or holding in the aggregate a clear majority of the principal amount of the Bonds for the time being outstanding PROVIDED THAT at any meeting the business of which includes consideration of any of the Reserved Matters the quorum shall be one or more persons present being proxies or representatives or holding Bonds and representing or holding in the aggregate not less than two-thirds o f t h e principal amount of the Bonds for the time being outstanding. If within half an hour after the time appointed for any such meeting a quorum is not present the meeting shall if convened upon the requisition of Bondholders be dissolved. In any other case it shall stand adjourned to the same day in the next week (or, if such day is a public holiday at the place of the meeting, the next succeeding business day) at the same time and place (except in the case of a meeting at which an Extraordinary Resc: .::ion is to be proposed in which case it shall stand adjourned for such period : emg not less than 14 days nor more than 24 days and to such place and time is may be

6.

7.

47

appointed by the Chainnan and approved by the Trustee or, failing agreement, as appointed by the Trustee) and at such adjourned meeting one or more persons present being proxies or representatives or holding Bonds (whatever the principal amount of the Bonds so represented or held by them) shall (subject as provided below) form a quorum and shall (subject as provided below) have power to pass any Extraordinary Resolution or other resolution and to decide upon all matters which could properly have been dealt with at the meeting from which the adjournment took place had the requisite quorum been present PROVIDED THAT at any adjourned meeting the business of which includes any of the Reserved Matters, the quorum shall be one or more persons present being proxies or representatives or holding Bonds and representing or holding in the aggregate not less than one-third of the principal amount of the Bonds for the time being outstanding and provided further that at any adjourned meeting the business of which includes consideration of an Extraordinary Resolution as referred to in Condition 7(c) the quorum shall be one or more persons present being proxies or representatives or holding Bonds and representing or holding in the aggregate not less than twenty-six and two-thirds per cent, of the principal amount of the Bonds for the time being outstanding. 8. In the case of any adjourned meeting at which an Extraordinary Resolution is to be submitted notice thereof shall be given in the same manner as notice of an original meeting but as if 10 were substituted for 21 in paragraph 4 and such notice shall (except in cases where the proviso to paragraph 6 shall apply when it shall state the relevant quorum) state that one or more persons present being proxies or representatives or holding Bonds at the adjourned meeting whatever the principal amount of the Bonds then outstanding so represented or held by them will form a quorum. Subject as aforesaid it shall not be necessary to give any notice of an adjourned meeting. Every question submitted to a meeting shall be decided in the first instance by a show of hands and in the case of an equality of votes the Chairman shall both on a show of hands and on a poll have a casting vote in addition to the vote or votes (if any) to which he may be entitled as a proxy or as a representative or as a Bondholder. At any meeting unless a poll is (before or on the declaration of the result of the show of hands) demanded by the Chairman or the Issuer or the Trustee or by one or more persons present being proxies or representatives or holding Bonds and representing or holding in the aggregate not less than one-fiftieth of the principal amount of the Bonds then outstanding a declaration by the Chairman that a resolution has been carried or carried by a particular majority or lost or not earned by a particular majority shall be conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against such resolution.

9.

10.

48

11.

If at any such meeting a poll is so demanded it shall be taken in such manner and subject as hereinafter provided either at once or after an adjournment as the Chairman directs and the result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded as at the date of the taking of the poll. The demand for a poll shall not (save as provided in paragraph 13) prevent the continuance of the meeting for the transaction of any business other than the resolution on which the poll has been demanded. Without prejudice to the first sentence of, and the provisos to, paragraph 7 the Chairman may with the consent of (and shall if directed by) any such meeting adjourn the same from time to time and from place to place but no business shall be transacted at any adjourned meeting except business which might lawfully (but for lack of required quorum) have been transacted at the meeting from which the adjournment took place. Any poll demanded at any such meeting on the election of a Chairman or on any question of adjournment shall be taken at the meeting without adjournment. Without prejudice to paragraph (ii) of clause 1(E) no person shall be entitled to attend and vote at any meeting of the Bondholders or join with others in requesting the convening of such a meeting or to exercise the rights conferred on the Bondholders by Condition 7 unless he is a proxy or is a representative or is registered as the holder of a Bond. The Trustee and its lawyers and any director, officer or employee of a corporation being a trustee hereof and any director, officer or employee of the Issuer and its lawyers and any other person authorised in that behalf by the Trustee may attend, and speak at, any meeting or adjourned meeting. Neither the Issuer nor any subsidiary of the Issuer nor any holding company of the Issuer nor any other subsidiary of any such holding company shall be entitled to vote in respect of Bonds beneficially held by it or on its behalf but this shall not prevent any of the proxies named in any form of proxy or any representative from being a director, officer or representative of or otherwise connected with any such company. Subject as provided in paragraphs 9 and 14 at any meeting: (iii) on a show of hands every person who is present in person and who is a proxy or representative or the holder of a Bond shall have one vote; and on a poll every person who is so present shall have one vote in respect of each 1 principal amount of the Bonds in respect of which he is a proxy or representative or the holder.

12.

13.

14.

15.

(iv)

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Subject to the obligations of the proxies named in any form of proxy any person entitled to more than one vote need not use all his votes or cast all the votes to which he is entitled in the same way. 16. The proxies named in any form of proxy or representatives need not be Bondholders. Each form of proxy shall be deposited at the registered office of the Issuer (or at such other place as the Trustee shall approve) not less than 24 hours before the time appointed for holding the meeting or adjourned meeting at which the proxies named in the form of proxy propose to vote and in default the form of proxy shall not be treated as valid unless the Chairman of the meeting decides otherwise before such meeting or adjourned meeting proceeds to business. A notarially certified copy of each form of proxy shall be deposited with the Trustee before the commencement of the meeting or adjourned meeting but the Trustee shall not thereby be obliged to investigate or be concerned with the validity of or the authority of the proxies named in any such form of proxy. Any vote given in accordance with the terms of a form of proxy shall be valid notwithstanding the previous revocation or amendment of the form of proxy or of any the Bondholders' instructions pursuant to which it was executed provided that no intimation in writing of such revocation or amendment has been received from the holder thereof by the Issuer at its registered office (or such other place as may have been approved by the Trustee for the purpose) by the time being 24 hours before the time appointed for holding the meeting or adjourned meeting at which the form of proxy is to be used. A meeting of the Bondholders shall in addition to the powers given above have the following powers exercisable by Extraordinary Resolution (subject to the provisions relating to quorum contained in paragraphs 6 and 7) only namely: (i) power to sanction any compromise or arrangement proposed to be made between the Issuer and the Bondholders or any of them; power to sanction any abrogation, modification, compromise or arrangement in respect of the rights of the Bondholders against the Issuer or against its property or any part of its property whether such rights arise under this Trust Deed, the Bonds or otherwise; power to assent to any modification of the provisions contained in this Trust Deed or the Conditions which shall be proposed by the Issuer or the Trustee;

17.

-J

18.

19.

(ii)

(iii)

50

(iv)

power to give any authority or sanction which under the provisions of this Trust Deed or the Bonds is required to be given by Extraordinary Resolution; power to appoint two or more persons (whether Bondholders or not) to act as a committee or committees to represent the interests of the Bondholders and to confer upon such committee or committees any powers or discretions which the Bondholders could themselves exercise by Extraordinary Resolution; power to approve of a person to be appointed a trustee of this Trust Deed and power to remove any trustee or trustees for the time being of this Trust Deed; power to discharge or exonerate the Trustee from all liability in respect of any act or omission for which the Trustee may have become responsible under this Trust Deed or under the Bonds; power to authorise the Trustee to concur in and execute and do all such deeds, instruments, acts and things as may be necessary to carry out and give effect to any Extraordinary Resolution; and power to sanction any scheme or proposal for the exchange or sale of the Bonds for or the conversion of the Bonds into or the cancellation of the Bonds in consideration of shares, stock, bonds, notes, debentures, debenture stock and/or other obligations and/or securities of the Issuer or any other body corporate formed or to be formed, or for or into or in consideration of cash, or partly for or into or in consideration of such shares, stock, bonds, notes, debentures, debenture stock and/or other obligations and/or securities as aforesaid and partly for or into or in consideration of cash.

(v)

(vi)

(vii)

(viii)

(ix)

20.

Any resolution passed at a meeting of the Bondholders duly convened and held in accordance with this Trust Deed shall be binding upon all the Bondholders whether present or not at such meeting and each of them shall be bound to give effect thereto accordingly and the passing of any such resolution shall be conclusive evidence that the circumstances justify the passing thereof. Notice of the result of the voting on any resolution considered by the Bondholders shall unless the Trustee shall otherwise agree be given in accordance with Condition 12 by the Issuer within 14 days of the voting on such resolution provided that the failure to give such notice shall not of itself invalidate such resolution. Minutes of all resolutions and proceedings at every such meeting as aforesaid shall be made and duly entered in books to be from time to time provided for

21.

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that purpose by the Issuer and any such minutes as aforesaid if purporting to be signed by the Chairman of the meeting at which such resolutions were passed or proceedings had or by the Chairman of the next succeeding meeting of the Bondholders shall be conclusive evidence of the matters therein contained and until the contrary is proved every such meeting in respect of the proceedings of which minutes have been made and signed shall be deemed to have been duly held and convened and all resolutions passed thereat or proceedings had to have been duly passed or had. 22. Subject to all other provisions contained in this Trust Deed, the Trustee may without the consent of the Issuer or the Bondholders prescribe such further regulations regarding the requisitioning and/or the holding of meetings of the Bondholders and attendance and voting thereat as the Trustee may in its sole discretion think fit.

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52

THE COMMON SEAL of READING MORTGAGES plc was affixed to this Trust Deed in the presence of:

Director

Btfactef/Secretary

THE COMMON SEAL of THE LAW DEBENTURE TRUST CORPORATION p.l.c. was affixed in this Trust Deed in the presence of:

Director

JM
"2.

Authorised Signatory

CC<J63S 10.044