SUMMARY OF THE PROPOSED SCHEME

FOR THE TRANSFER OF PART OF THE BUSINESS OF

BANK OF PLC TO LLOYDS TSB PLC

1. INTRODUCTION

1.1 It is proposed that the part of the business of plc ("Bank of Scotland") that comprises its Major Corporate and Financial Institution customer relationships, as described in paragraph 4 below (the "Customer Relationships"), will be transferred to Lloyds TSB Bank plc ("Lloyds TSB"). The transfer of the Customer Relationships is to be implemented through the statutory process available under Part VII of the and Markets Act 2000 (the "FSMA") for the transfer of banking businesses.

1.2 The transfer of the Customer Relationships is subject to the approval of the High Court of Justice in . If the Court approves the transfer, customers will transfer on an individual basis on dates agreed with them (each a "Customer Effective Date") between the date of the court order (expected to be on or about 24 May 2011) and a final transfer date of 30 December 2011 (the "Final Transfer Date ").

1.3 This document summarises the terms of the Scheme (the "Scheme") under which the transfer will be implemented.

1.4 The information in this document is only a summary of the Scheme. If you require further information or a copy of the Scheme, please contact your Relationship Manager or write to us at Financial Institutions, Integration Project, 2nd Floor, Corporate Banking, , 25 Gresham Street, London EC2V 7HM. A copy of the Scheme can be obtained free of charge from our website www.lloydsbankcorporatemarkets.com/changes- to-your-banking-relationship.

2. REASON FOR THE TRANSFER

Bank of Scotland and Lloyds TSB have been part of the Lloyds Banking Group since 2009. Following a strategic review of the two businesses, a decision has been taken to manage all corporate customers of Lloyds Banking Group from the same IT platforms and to transfer the Customer Relationships from Bank of Scotland to Lloyds TSB to ensure that all customers continue to have to an appropriate range of products and services.

3. TRANSFER DATES

3.1 Lloyds TSB shall endeavour to agree, either before or after the date of the court order sanctioning the Scheme (the "Order"), a Customer Effective Date with each customer which shall be no earlier than the date of the Order and no later than that business day which is 2 days before the Final Transfer Date. Lloyds TSB shall confirm the Customer

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Effective Date by giving the customer notice in writing despatched no less than 10 business days before such date.

3.2 Assuming the Court approves the transfer, the Scheme will become effective in relation to each customer on the Customer Effective Date or, if no Customer Effective Date is agreed for a particular customer, at close of business on the Final Transfer Date, or on such other date and time as the Court may allow on the application of Bank of Scotland and Lloyds TSB. Unless the Scheme becomes effective by close of business on the Final Transfer Date, or on such other date and time as the Court may allow on the application of Bank of Scotland and Lloyds TSB, it will lapse.

4. TRANSFER

4.1 The Customer Relationships to be transferred from Bank of Scotland to Lloyds TSB are those that relate to customers of the Major Corporate and Financial Institution business units of Bank of Scotland who will have been notified, prior to the date of the Order, that their Customer Relationship is to be transferred under the Scheme.

4.2 The Scheme provides for the transfer of the banking relationship (excluding certain agreements, such as some fixed term deposits). The transfer of the Customer Relationships also excludes any funding or contingent arrangements that Bank of Scotland has made for its own account to cover any obligation it has given in relation to the Customer Relationships. These arrangements will remain with Bank of Scotland.

4.3 Any part of a Customer Relationship that for any reason is not transferred on the Relevant Dates will be retained by Bank of Scotland but may be transferred to Lloyds TSB subsequently (please see paragraph 11 below).

4.4 As a result of the transfer of the Customer Relationship, customers and connected third parties will have the same rights against Lloyds TSB as they had against Bank of Scotland before the transfer took effect. Conversely, Lloyds TSB will have the same rights against customers and connected third parties as Bank of Scotland had against customers, suppliers and other persons before the transfer took effect. Bank of Scotland will cease to have any rights or obligations in respect of the Customer Relationships as a result of the transfer except as described below.

5. WIDENING OF RIGHTS

5.1 Although rights under the agreements attributable to the Customer Relationships that Bank of Scotland has entered with any customer (the "Customer Agreements") will not change as a result of the transfer (other than as set out in paragraph 7), the scope for exercising certain of those rights would be widened as a result of the transfer, unless the

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Scheme provides otherwise. The Scheme will therefore impose a general restriction against this happening, as well as the specific restrictions described below.

5.2 However, these restrictions will only apply where rights would be widened as a result of the transfer. They will not affect rights that Bank of Scotland, Lloyds TSB or customers would otherwise have had, or may in future obtain, outside the Scheme.

Set-Off Rights

5.3 A set-off right is the right of a bank, in certain circumstances, to use money deposited with them (such as in an account) against a debt the same customer has with them that becomes repayable.

5.4 The Scheme will state that, after the transfer, where someone has accounts with both Lloyds TSB and Bank of Scotland, Lloyds TSB will not be able to:

(a) use money deposited in accounts transferred to it from Bank of Scotland as a consequence of the transfer to pay debts due on existing facilities opened with Lloyds TSB prior to the Relevant Date; or

() use money deposited in existing Lloyds TSB accounts, opened prior to the Relevant Date to pay debts on facilities transferred to it from Bank of Scotland as a consequence of the transfer.

5.5 The Scheme will not restrict set-off rights where, immediately before the transfer:

(a) a customer has accounts with Bank of Scotland only; or

(b) the relevant Customer Agreement permits set-off between accounts held with Lloyds TSB and accounts held with Bank of Scotland.

Cross Default Rights

5.6 A "cross default" clause is one which means that a customer will automatically be in breach of the account terms and conditions if in breach of certain other agreements. This may give rise to a right of early termination or a right to demand early repayment of any sum due to the bank.

5.7 The Scheme will state that, after the transfer, where someone has accounts with both Lloyds TSB and Bank of Scotland, one of which contains a cross-default right:

(a) unless it would have done so prior to the Customer Effective Date, a breach of an existing Lloyds TSB agreement will not give rise to a breach of any Bank of Scotland agreement transferred to it as a consequence of the transfer; and

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(b) unless it would have done so prior to the Customer Effective Date, a breach of a Bank of Scotland agreement transferred to Lloyds TSB as a consequence of the transfer, will not give rise to a breach of an existing Lloyds TSB agreement.

5.8 The Scheme will not restrict cross-default rights where, immediately before the transfer:

(a) a customer has accounts with Bank of Scotland only; or

(b) the relevant Customer Agreement would treat a breach of an agreement with the other bank as being a breach of the Customer Agreement.

All monies rights

5.9 An "all monies" clause is one which allows a mortgage or charge to be used as security for all debts owed to the lender, not just the secured facility.

5.10 The Scheme will state that, after the transfer, all monies clauses:

(a) in existing Lloyds TSB customer agreements will not apply to debts transferred from Bank of Scotland as a consequence of the transfer; and

(b) in Customer Agreements transferred from Bank of Scotland as a consequence of the transfer will not apply to existing debts owed to Lloyds TSB.

Consolidation rights

5.11 A "consolidation clause" is one which permits a lender to retain security until all debts owed to the lender have been repaid, even if the original secured facility has been repaid.

5.12 The Scheme will state that, after the transfer, consolidation rights:

(a) in existing Lloyds TSB customer agreements will not apply to prevent the release of the security until all obligations have been satisfied under any lending transferred from Bank of Scotland as a consequence of the transfer; or

(b) in Customer Agreements transferred from Bank of Scotland as a consequence of the transfer will not apply to prevent the release of the security until all obligations have been satisfied under any existing lending provided by Lloyds TSB.

6. ENTIRE AGREEMENT PROVISIONS

Some Customer Agreements state that they set out the entire agreement relating to a particular product or service, or that they apply to all accounts or services of a certain type that a customer holds with either Bank of Scotland or Lloyds TSB. The Scheme will provide that, from the Customer Effective Date, those Customer Agreements will continue

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to apply to the same accounts as immediately prior to the Customer Effective Date so that:

(a) products and services that have transferred to Lloyds TSB from Bank of Scotland as a consequence of the transfer will continue to be governed by the relevant Bank of Scotland Customer Agreement;

(b) existing Lloyds TSB products and services will continue to be governed by the relevant Lloyds TSB customer agreement; and

(c) the terms of new Lloyds TSB customer agreement that are entered into on or after the Relevant Date will only apply to products and services that have transferred to Lloyds TSB from Bank of Scotland as a consequence of the transfer if explicitly agreed in such new customer agreement.

7. CHANGES TO TERMS AND CONDITIONS

7.1 One impact of the transfer on terms and conditions is that all references to Bank of Scotland should be read as being references to Lloyds TSB, which from the Relevant Date, will become the contracting party and account or service provider in place of Bank of Scotland.

7.2 In addition, to allow the transferred accounts and services to be managed from Lloyds TSB’s IT platforms, the Scheme will state that the following changes will be made to existing Customer Agreements:

(a) customers will no longer be able to give instructions by fax without agreement to a secure bank code authenticator scheme with its own separate terms and conditions and any term to that effect will be read as if deleted;

(b) any reference to cut-off times by when payments need to be received or instructions given and any references to payment clearing cycles will be deemed to be references to the Lloyds TSB cut-off times and clearing cycles that are available to Customers on www.lloydsbankcorporatemarkets.com/changes-to- your-banking-relationship;

(c) customers will no longer be able to ask for interest earned on deposit accounts to be paid into other accounts, unless the account is another account held with Lloyds TSB; and

(d) the default dates on which interest is calculated and applied to accounts will change, with interest being calculated on balances up to the 9th of a particular month and debited or credited to the account on the 10th of the month.

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7.3 In addition, Bank of Scotland will be contacting customers to agree other changes to certain terms and conditions and pricing. These changes will be subject to separate agreement and will not be made as part of the Scheme. They will take effect immediately after the Customer Effective Date.

8. TRANSITIONAL ARRANGEMENTS

8.1 The benefit of any applications made to Bank of Scotland before the Customer Effective Date will transfer to Lloyds TSB.

8.2 Any customer agreements that Bank of Scotland purports to enter into after the Customer Effective Date will be deemed to be entered into by Lloyds TSB.

9. SUBJECT ACCESS REQUESTS

9.1 Where an individual has made a subject access request which relates to a Customer Relationship (under the Data Protection Act 1998) to Bank of Scotland before the transfer, which is actioned after the transfer, Lloyds TSB will be able to treat the request as limited to a request for information held by Bank of Scotland before the transfer.

9.2 Conversely, where an individual has made a subject access request which relates to a Customer Relationship to Lloyds TSB before the transfer, which is actioned after the transfer, Lloyds TSB will not need to provide information held by Bank of Scotland before the transfer.

10. LITIGATION

Any judicial, quasi-judicial, administrative proceedings or other proceedings for the resolution of a dispute or claim (whether implemented, pending, threatened or otherwise) by or against Bank of Scotland in relation to a Customer Relationship will be continued by or against Lloyds TSB. Lloyds TSB will also be entitled to all defences, claims, counterclaims and rights of set-off that would have been available to Bank of Scotland in any such proceedings.

11. BUSINESS WHICH MIGHT BE TRANSFERRED AFTER THE TRANSFER DATE

11.1 Any part of the Customer Relationship that for any reason is not transferred on the Customer Effective Date (for example, because the Court does not have jurisdiction to order its transfer) will be retained by Bank of Scotland but may be transferred to Lloyds TSB subsequently.

11.2 Creditors of Bank of Scotland and Lloyds TSB will not be affected by any retention of any part of the Customer Relationships by Bank of Scotland. This is because under the Scheme, Lloyds TSB will indemnify Bank of Scotland against any charges, costs,

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liabilities and claims arising in respect of liabilities which accrue to Bank of Scotland after the Customer Effective Date.

12. MODIFICATIONS AND ADDITIONS

12.1 Bank of Scotland and Lloyds TSB can apply jointly to the Court at any time before or after the sanction of the Scheme for any amendment, variation, modification or addition to the Scheme provided that, if such application is made after the sanction of the Scheme, the FSA shall be notified of, and have the right to be heard at, any hearing of the Court at which such application is considered.

12.2 At any time after the sanction of the Scheme, in the case of minor amendments, the amendment may be made without the consent of the Court provided that the FSA has been notified of and has approved the amendment.

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