Exhibit
4.3


 


THE
DIAGEO PLC 2008 SENIOR EXECUTIVE SHARE OPTION PLAN


 


Approved
by shareholders of the Company on 15 October 2008


 


Adopted
by the Remuneration Committee of the Company on 15 October 2008


 


HMRC
Reference (Part A only): X103011


 


The Plan is a
discretionary benefit offered by the Diageo Group for the benefit of its
employees.  Its main purpose is to
increase the interest of the employees in Diageo plc’s long-term business goals
and performance through share ownership. 
The Plan is an incentive for the employees’ future performance and
commitment to the goals of the Diageo Group.


 


Shares
purchased under the Plan, any cash received under the Plan and any gains made
by exercising options granted under the Plan are not part of salary for any
purpose (except to any extent required by statute).


 


It is intended
that the Plan will be offered for the first time in 2008 in selected
countries.  The remuneration committee of
Diageo plc shall have the right to decide, in its sole discretion, whether or
not further options will be offered in the future and to which employees those
options will be granted.


 


Participating in the Plan is an investment opportunity distinct from any
employment contract.  Participation in
the Plan entails the risks associated with an investment.  An individual who participates in the Plan is
treated as being aware of such risks and accepts such risks of his own free
will.


 


The detailed rules of
the Plan are set out in this document.


 

















 


CONTENTS


 


	
  Rule

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Part A - HMRC Approved

  	
   

  	
  1

  
	
  1.

  	
  Definitions And Interpretation

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Eligibility

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Grant Of Options

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Limits

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Exercise Of Options

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Leavers And Deceased Participants

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Takeovers And Other Corporate
  Events

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Adjustment Of Options

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Alterations

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Miscellaneous

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  Part B - Unapproved

  	
   

  	
  19

  
	
  1.

  	
  Definitions And Interpretation

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Eligibility

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Grant Of Options

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Limits

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Exercise Of Options

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Leavers And Deceased Participants

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Takeovers And Other Corporate
  Events

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Adjustment Of Options

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Alterations

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Miscellaneous

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Incentive Stock Options

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule 1: SHARE APPRECIATION RIGHTS

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule 2: PERFORMANCE CONDITION

  	
   

  	
  41

  



 

















 


PART A -
HMRC APPROVED


 


1.                                 DEFINITIONS AND INTERPRETATION


 


1.1                           In the
Plan, unless the context otherwise requires:


 


“Committee” means the remuneration committee
of the board of directors of the Company (or, on and after the occurrence of a
corporate event described in Rule 7 (Takeovers
and other corporate events), the remuneration committee of the board
of directors of the Company as constituted immediately before such event
occurs) and any duly appointed individual or committee appointed by the
remuneration committee;


 


“Company” means Diageo plc (registered in
England and Wales with registered number 23307);


 


“Control” means control within the meaning
of section 719 of ITEPA;


 


“Grant Date” means the date on which an
Option is granted;


 


“Group Member” means:


 


(a)                                      a Participating Company or a body corporate which is the Company’s
holding company (within the meaning of section 1159 of the Companies Act 2006)
or a subsidiary (also within the meaning of section 1159 of that Act) of the
Company’s holding company;


 


(b)                                     a body corporate which is a subsidiary undertaking (within the
meaning of section 1162 of that Act) of a body corporate within paragraph (a) above
and has been designated by the Committee for this purpose; and


 


(c)                                      any other body corporate in relation to which a body corporate
within paragraph (a) or (b) above is able (whether directly or
indirectly) to exercise 15% or more of its equity voting rights and has been
designated by the Committee for this purpose;


 


“HMRC” means H.M. Revenue &
Customs;


 


“ITEPA” means the Income Tax (Earnings and
Pensions) Act 2003;


 


“Listing Rules” means the Listing Rules published
by the UKLA;


 


“London Stock Exchange” means London Stock
Exchange plc or any successor to that company;


 


“Option” means a right to acquire Shares
granted under the Plan;


 


“Participant” means a person who holds an
Option including his personal representatives;


 


“Participating Company” means the Company or
any Subsidiary;


 


“Performance Condition” means an objective
condition related to performance which is specified by the Committee under Rule 3.1
(Terms of grant);


 


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“Plan” means the Diageo plc 2008 Senior
Executive Share Option Plan as amended from time to time;


 


“Rule” means a rule of the Plan;


 


“Schedule 4” means Schedule 4 to ITEPA;


 


“Shares” means fully paid ordinary shares in
the capital of the Company which satisfy the requirements of paragraphs 16 to
20 of Schedule 4 (fully paid up, unrestricted
ordinary share capital) unless Rule 5.11 (Shares ceasing to satisfy Schedule 4 requirements)
applies;


 


“Subsidiary” means a body corporate which is
a subsidiary (within the meaning of section 1159 of the Companies Act 2006) of
the Company and of which the Company has Control;


 


“Tax Liability” means any amount of tax or
social security contributions for which a Participant would or may be liable
and for which any Group Member or former Group Member would or may be obliged
to (or would or may suffer a disadvantage if it were not to) account to any
relevant authority;


 


“UKLA” means the United Kingdom Listing
Authority;


 


and
expressions not defined in Part A of the Plan have the same meanings as
they have in Schedule 4.


 


1.2                           Any
reference in the Plan to any enactment includes a reference to that enactment
as from time to time modified, extended or re-enacted.


 


1.3                           Expressions
in italics and headings are for guidance only and do not form part of the Plan.


 


2.                                 ELIGIBILITY


 


2.1                           General rule on eligibility


 


Subject to Rule 2.3
(Individuals not eligible), an
individual is eligible to be granted an Option only if he is a full-time
director or qualifying employee as defined in Rule 2.2.


 


2.2                           Individuals eligible


 


For the
purposes of Rule 2.1:


 


(a)                                      a full-time director is an individual who is a director of a
Participating Company and is obliged to devote not less than 25 hours a week
(excluding meal breaks) to the performance of the duties of his office or
employment with that and any other Participating Company; and


 


(b)                                     a qualifying employee is an employee of a Participating Company
(except an employee who is a director of a Participating Company).


 


2

















 


2.3                           Individuals not eligible


 


An individual
is not eligible to be granted an Option at any time when he is not eligible to
participate in the Plan by virtue of paragraph 9 of Schedule 4 (material interest in a close company).


 


3.                                 GRANT OF OPTIONS


 


3.1                           Terms of grant


 


Subject to Rule 3.5
(Timing of grant), Rule 3.7
(Approvals and consents) and Rule 4
(Limits), the Committee may
resolve to grant an Option on:


 


(a)                                      the terms set out in Part A of the Plan; and


 


(b)                                     such additional terms (whether a Performance Condition and/or any
other terms) as the Committee may specify


 


to any person
who is eligible to be granted an Option under Rule 2 (Eligibility).


 


3.2                           Method of grant


 


An Option
shall be granted by deed executed by the Company.


 


3.3                           Method of satisfying Options


 


Unless
specified to the contrary by the Committee at the time of grant of an Option,
an Option may be satisfied:


 


(a)                                      by the issue of new Shares; and/or


 


(b)                                     by the transfer of treasury Shares; and/or


 


(c)                                      by the transfer of Shares (other than the transfer of treasury
Shares).


 


The Committee
may decide to change the way in which it is intended that an Option may be
satisfied after it has been granted, having regard to the provisions of Rule 4
(Limits).


 


3.4                           Option price


 


The
Committee shall decide before an Option is granted the price at which Shares
may be acquired by the exercise of that Option, but the price shall not be less
than:


 


(a)                                      if Shares are quoted in the London Stock Exchange Daily Official
List, the average of the middle-market quotation of the Shares (as derived from
that List) for the 3 dealing days before the Grant Date (or on such other
dealing day(s) as may be agreed with HMRC) provided such dealing day(s) do
not fall within any period when dealings in Shares are prohibited under the
Company’s share dealing code;


 


(b)                                     if Rule 3.4(a) does not apply, the market value (within
the meaning of Part VIII of the Taxation of Chargeable Gains Act 1992) of
Shares, as agreed in advance for the purposes of the Plan with HMRC Shares and
Assets Valuation, on the Grant Date (or such other day(s) as may be agreed
with HMRC); and


 


3

















 


(c)                                      in the case of an Option to acquire Shares only by subscription, the
nominal value of those Shares.


 


3.5                           Timing of grant


 


Subject to Rule 3.7
(Approvals and consents), an
Option may only be granted:


 


(a)                                      within the period of 6 weeks beginning with:


 


(i)                        the day on which the Plan is approved by shareholders of the
Company; or


 


(ii)                     the dealing day after the day on which the Company announces its
results for any period; or


 


(b)                                     at any other time when the Committee considers that circumstances
are sufficiently exceptional to justify its grant


 


but an Option
may not be granted:


 


(c)                                      under Part A of the Plan before the day on which Part A of
the Plan is approved by HMRC under Schedule 4; or


 


(d)                                     after [14 October 2018] (that is, the expiry of the period of
10 years beginning with the date on which the Plan is approved by shareholders
of the Company).


 


3.6                           Non-transferability and bankruptcy


 


An Option
granted to any person:


 


(a)                                      shall not be transferred, assigned, charged or otherwise disposed of
(except on his death to his personal representatives) and shall lapse
immediately on any attempt to do so; and


 


(b)                                     shall lapse immediately if he is declared bankrupt.


 


3.7                           Approvals and consents


 


The grant of
any Option shall be subject to obtaining any approval or consent required under
the Listing Rules, any relevant share dealing code of the Company, the City
Code on Takeovers and Mergers, or any other relevant UK or overseas regulation
or enactment.


 


3.8                           Shareholding condition


 


The Committee
may decide that it shall be a condition of the grant of an Option that an
individual eligible to be granted an Option shall have held beneficially a
number of Shares determined by the Committee for such period as the Committee
decides.  If the Committee decides to set
such a shareholding condition, it must notify the individual of the condition
no later than 3 calendar months before the beginning of the financial year in
which it is intended to grant the Option.


 


4

















 


4.                                 LIMITS


 


4.1                           5% in 10 years limit


 


An Option
shall not be granted in any calendar year if, at the time of its proposed Grant
Date, it would cause the number of Shares allocated (as defined in Rule 4.3)
in the period of 10 calendar years ending with that calendar year under the
Plan and under any other executive share plan adopted by the Company to exceed
such number as represents 5% of the ordinary share capital of the Company in
issue at that time.


 


4.2                           10% in 10 years limit


 


An Option
shall not be granted in any calendar year if, at the time of its proposed Grant
Date, it would cause the number of Shares allocated (as defined in Rule 4.3)
in the period of 10 calendar years ending with that calendar year under the
Plan and under any other employee share plan adopted by the Company to exceed
such number as represents 10% of the ordinary share capital of the Company in
issue at that time.


 


4.3                           Meaning of “allocated”


 


For the
purposes of Rules 4.1 and 4.2:


 


(a)                                      Shares are allocated:


 


(i)                     when an option,
award or other contractual right to acquire unissued Shares or treasury shares
is granted;


 


(ii)                  where Shares are
issued or treasury shares are transferred other than in respect of an option,
award or other contractual right to acquire Shares, when those Shares are
issued or treasury shares transferred;


 


(b)                                     any Shares which have been issued or which may be issued (or any
Shares transferred out of treasury or which may be transferred out of treasury)
to any trustees to satisfy the exercise of any option, award or other
contractual right  shall be treated as “allocated”
unless they are already treated as allocated under this Rule; and


 


(c)                                      for the avoidance of doubt, existing Shares other than treasury
shares that are transferred or over which options, awards or other contractual
rights are granted shall not count as “allocated”.


 


4.4                           Post-grant events affecting numbers of “allocated”
Shares


 


For the
purposes of Rule 4.3:


 


(a)                                      where:


 


(i)                        any option, award or other contractual right to acquire unissued
Shares or treasury shares is released or lapses (whether in whole or in part);
or


 


(ii)                     after the grant of an option, award or other contractual right the
Committee determines that:


 


(aa)          where an amount is normally
payable on its exercise it shall be satisfied without such payment but instead
by the payment of cash equal to the gain made on its exercise; or


 


5

















 


(bb)        it shall be satisfied by the
transfer of existing Shares (other than Shares transferred out of treasury)


 


the unissued
Shares or treasury shares which consequently cease to be subject to the option,
award or other contractual right shall not count as allocated; and


 


(b)                                     the number of Shares allocated in respect of an option, award or
other contractual right shall be such number as the Committee shall reasonably
determine from time to time.


 


4.5                           Changes to investor guidelines


 


Treasury
shares shall cease to count as “allocated” Shares for the purposes of Rule 4.3
if institutional investor guidelines cease to require such Shares to be so
counted.


 


4.6                           Individual limit


 


(a)                                      Subject to Rule 4.7 (HMRC
limit), the maximum total market value of Shares (calculated as set
out in this Rule) over which Options may be granted to any employee during any
financial year of the Company is 375% of his salary (as defined in this Rule),
unless Rule 4.6(b) applies.


 


(b)                                     If the Committee decides that exceptional circumstances exist in
relation to the recruitment or retention of an employee when the maximum total
market value of Shares over which Options may be granted to that employee
during a financial year of the Company is such higher percentage of his salary
(as defined in this Rule) as the Committee may determine.


 


For the
purpose of this Rule 4.6:


 


(c)                                      an employee’s salary
shall be taken to be his base salary (excluding benefits in kind), expressed as
an annual rate payable by the Participating Companies to him on the Grant Date
(or on such other date as the Committee shall reasonably determine).  Where a payment of salary is made in a
currency other than sterling, the payment shall be treated as equal to the
equivalent amount of sterling determined by using any rate of exchange which
the Committee may reasonably select; and


 


(d)                                     the market value of the
Shares over which an Option is granted shall be calculated:


 


(i)                        for an Option, on the days by reference to which the price at which
Shares may be acquired by the exercise of that Option was determined under Rule 3.4
(Option price); and


 


(ii)                     for an option granted under any other share option plan approved by
HMRC under Schedule 4, at the time when it was granted or, in a case where an
agreement relating to the shares has been made under paragraph 22 of Schedule
4, such earlier time or times as may be provided in that agreement.


 


6

















 


4.7                           HMRC limit


 


No person
shall be granted an Option which would, at the time it is granted, cause the
total market value of the Shares (calculated as set out in Rule 4.6(b))
which he may acquire as a result of options granted to him (and not exercised)
under:


 


(a)                                      Part A of the Plan; and


 


(b)                                     any other share option plan approved under Schedule 4 and
established by the Company or by any associated company of the Company


 


to exceed
£30,000 (or such other limit as may from time to time be imposed by Schedule
4).


 


4.8                           Effect of limits


 


Any Option
shall be limited and take effect so that the limits in this Rule 4 are
complied with.


 


5.                                 EXERCISE OF OPTIONS


 


5.1                           General prohibition on exercise before
third anniversary of the Grant Date


 


An Option may
only be exercised on or after the third anniversary of the Grant Date except
where Rule 6 (Leavers and deceased
Participants), Rule 7.1 (General
offers), Rule 7.2 (Compulsory
acquisition, schemes of arrangement and winding up) or Rule 7.3
(Demerger and similar events)
applies.


 


5.2                           Performance Condition and other exercise
conditions


 


An Option may
only be exercised:


 


(a)                                      to the extent that the Performance Condition is satisfied; and


 


(b)                                     as permitted by any other term specified under Rule 3.1(b).


 


The Option
shall lapse regardless of any other Rule to the extent the Performance
Condition is not satisfied.


 


5.3                           Restrictions on exercise:  regulatory and tax issues


 


An Option
may not be exercised unless the following conditions are satisfied:


 


(a)                                      the exercise of the Option and the issue or transfer of Shares after
such exercise would be lawful in all relevant jurisdictions and in compliance
with the Listing Rules, any relevant share dealing code of the Company, the
City Code on Takeovers and Mergers and any other relevant UK or overseas
regulation or enactment;


 


(b)                                     if a Tax Liability would arise by virtue of the exercise of the
Option, then, unless the Participant agrees with the Committee to fund all or
part of the Tax Liability in a different manner, the Participant authorises the
Company to sell or procure the sale of sufficient Shares on his behalf to
ensure that any relevant Group Member receives the amount required to discharge
the Tax Liability;


 


7
















 


(c)                                      the Participant has entered into such arrangements as the Committee
requires by way of agreement or election under Paragraphs 3A and 3B
(respectively) of Schedule 1 of the Social Security Contributions and Benefits
Act 1992 to satisfy a Group Member’s liability to social security contributions
in respect of the exercise of the Option; and


 


(d)                                     if the Participant will exercise the Option in circumstances which
will give rise to a Tax Liability and the Committee requires, the Participant
has entered into, or agreed to enter into, a valid election under Part 7
of ITEPA (Employment income:  elections to disapply tax charge on
restricted securities).


 


For the
purposes of this Rule 5.3, references to Group Member include any former
Group Member.


 


5.4                          Restriction on exercise: material interest
in a close company


 


A Participant
shall not be eligible to exercise an Option at any time when he is not eligible
to participate in Part A of the Plan by virtue of paragraph 9 of Schedule
4 (material interest in close company).


 


5.5                          Long stop date for exercise


 


An Option may
not in any circumstances (and regardless of any other Rule) be exercised after
the expiry of 10 years beginning with the Grant Date (or such shorter period
beginning with the Grant Date as the Committee may have decided before the
grant of that Option) and if not exercised shall lapse at the end of such
period.


 


5.6                          Exercise in whole or in part


 


An Option may
be exercised to the maximum extent possible at the time of exercise or over
such fewer number of Shares as the Participant decides.


 


5.7                          Method of exercise


 


The exercise
of any Option shall be effected in the form and manner prescribed by the
Committee and subject to the prior approval of HMRC.  Unless the Committee, acting fairly and
reasonably, determines otherwise, any notice of exercise shall, subject to Rules 5.3
and 5.4 (Restrictions on exercise),
take effect only when the Company receives it, together with:


 


(a)                                      payment of the relevant price at which Shares can be acquired under
the Option (or, if the Committee so permits, an undertaking to pay that
amount); and


 


(b)                                     if a Tax Liability arises and if a Participant decides to satisfy
the Tax Liability other than by selling Shares pursuant to the authority in Rule 5.3(b),
an agreement relating to the payment of the Tax Liability having been entered
into.


 


5.8                          Restriction on use of unissued Shares and
treasury shares


 


No Shares may
be issued or treasury shares transferred to satisfy the exercise of any Option
to the extent that such issue or transfer would cause the number of Shares
allocated (as defined in Rule 4.3 (Meaning
of “allocated”) and adjusted under Rule 4.4 


 


8

















 


(Post-grant events affecting numbers of “allocated”
Shares)) to exceed the limits in Rules 4.1 (5 % in 10 years limit) and 4.2 (10 % in 10 years limit) except where there
is a variation of share capital of the Company which results in the number of
Shares so allocated exceeding such limits solely by virtue of that variation.


 


5.9                          Allotment and transfer timetable


 


Within 30 days
after an Option has been exercised by a Participant, the Committee shall allot
to him (or a nominee for him) or, if appropriate, transfer or procure the
transfer to him (or a nominee for him) of the number of Shares in respect of
which the Option has been exercised.


 


5.10                    Share rights


 


All Shares
allotted under the Plan shall rank equally in all respects with Shares then in
issue except for any rights attaching to such Shares by reference to a record
date before the date of allotment.  Where
Shares are transferred under the Plan after the exercise of an Option,
Participants will be entitled to any rights attaching to such Shares by
reference to a record date on or after the date of such transfer.


 


5.11                    Shares ceasing to satisfy Schedule 4
requirements


 


If at any time
the Shares cease to satisfy the requirements of paragraphs 16 to 20 of Schedule
4 (fully paid up, unrestricted, ordinary
share capital):


 


(a)                                      an Option may be exercised regardless of that fact (but subject to
the other provisions of the Plan); and


 


(b)                                     the Company shall notify HMRC as soon as practicable (which may
withdraw its approval of Part A of the Plan under Schedule 4).


 


6.                                LEAVERS AND DECEASED PARTICIPANTS


 


6.1                          Deceased Participants


 


If a Participant
dies at a time when either he is a director or employee of a Group Member or he
is or may be entitled to exercise the Option under Rule 6.2 (Retirement,  ill-health,  injury,
disability, redundancy and transfer out of the Group) or Rule 6.4
(Cessation of employment in other
circumstances), the following provisions apply:


 


(a)                                      any Option granted to him that is already capable of exercise at the
time of death shall, subject to Rules 5.3 and 5.4 (Restrictions on exercise), continue to be
capable of exercise by his personal representatives for a period of 12 months
after his death and if not exercised shall lapse at the end of that period;


 


(b)                                     any other Option granted to him may, subject to Rules 5.3 and
5.4 (Restrictions on exercise)
and the remainder of this Rule, be exercised by his personal representatives
during the period of 12 months after his death and if not exercised shall lapse
at the end of that period; and


 


(c)                                      in both cases (a) and (b) above the period for exercise
shall be shortened if Rule 5.5 (Long
stop date for exercise), Rule 7.1 (General offers), Rule 7.2 


 


9

















 


(Compulsory
acquisition, schemes of arrangement and winding up) or Rule 7.3
(Demerger and similar events)
applies.


 


For the
purposes of this Rule, the Committee shall determine the number of Shares over
which the Option becomes exercisable by:


 


(i)                                         applying the Performance Condition and any other term specified by
the Committee on the Grant Date; and


 


(ii)                                      reducing the number of Shares pro rata to reflect any unexpired part
of the period of 3 years after the Grant Date as at the time that the
Participant ceases to be a director or employee unless the Committee, acting
fairly and reasonably, decides that the pro rata reduction in the number of
Shares is inappropriate in any particular case when it shall increase the
number of Shares to such higher number as it decides (provided that the number
does not exceed the number of Shares determined under paragraph (i) above).


 


6.2                          Retirement, ill-health, injury, disability,
redundancy and transfer out of the Group


 


If a
Participant ceases to be a director or employee of a Group Member by reason of:


 


(a)                                      retirement with the agreement of his employer;


 


(b)                                     ill-health, injury or disability (evidenced to the satisfaction of
his employer);


 


(c)                                      redundancy (within the meaning of the Employment Rights Act 1996) or
any overseas equivalent; or


 


(d)                                     his office or employment being either with a company which ceases to
be a Group Member or relating to a business or part of a business which is
transferred to a person who is not a Group Member


 


the following
provisions apply:


 


(e)                                      any Option granted to him that is already capable of exercise at the
date of cessation shall, subject to Rules 5.3 and 5.4 (Restrictions on exercise) and Rule 6.1
(Deceased Participants), continue
to be capable of exercise for a period of 6 months after the date of cessation
and if not exercised shall lapse at the end of that period;


 


(f)                                        any other Option granted to him may, subject to Rules 5.3 and
5.4 (Restrictions on exercise), Rule 6.1
(Deceased Participants) and the
remainder of this Rule, be exercised during the period of 6 months after the
third anniversary of the Grant Date, unless the Committee decides that his
Option may be exercised during such period immediately following the date of
cessation as the Committee may determine (not being greater than 42 months
after the Grant Date) and if not exercised shall lapse at the end of that
period; and


 


(g)                                     in both cases (e) and (f) above, the period for exercise
shall be shortened if Rule 5.5 (Long
stop date for exercise), Rule 7.1 (General offers), Rule 7.2 (Compulsory acquisition, schemes of arrangement and winding up)
or Rule 7.3 (Demerger and similar
events) applies.


 


10

















 


For the
purposes of this Rule, the Committee shall determine the number of Shares over
which the Option becomes exercisable by:


 


(i)                                         applying the Performance Condition and any other term specified by
the Committee on the Grant Date; and


 


(ii)                                      reducing the number of Shares pro rata to reflect any unexpired part
of the period of 3 years after the Grant Date as at the time that the
Participant ceases to be a director or employee unless the Committee, acting
fairly and reasonably, decides that the pro rata reduction in the number of
Shares is inappropriate in any particular case when it shall increase the
number of Shares to such higher number as it decides (provided that the number
does not exceed the number of Shares determined under paragraph (i) above).


 


6.3                          Specified Retirement Age


 


For the
purposes of paragraph 35A of Schedule 4, the specified retirement age shall be
55.


 


6.4                          Cessation of employment in other
circumstances


 


If a
Participant ceases to be a director or employee of a Group Member for any
reason other than those specified in Rule 6.1 (Deceased Participants), and Rule 6.2 (Retirement, ill-health, injury, disability,
redundancy and transfer out of the Group), the following provisions
apply:


 


(a)                                      any Option granted to him may not be exercised at all and shall
lapse on such cessation unless the Committee, acting fairly and reasonably,
decides it may be exercised under this Rule 6.4;


 


(b)                                     if the Committee permits the Option to be exercised then it may,
subject to Rule 5.3 and Rule 5.4 (Restrictions
on exercise), Rule 6.1 (Deceased
Participants) and the remainder of this Rule, be exercised during
the period of 6 months after the third anniversary of the Grant Date, unless
the Committee decides that his Option may be exercised during such period
immediately following the date of cessation as the Committee may determine (not
being greater than 42 months after the Grant Date) and if not exercised shall
lapse at the end of that period; and


 


(c)                                      the period for exercise referred to in (b) above shall be
shortened if Rule 5.5 (Long stop date
for exercise), Rule 7.1 (General
offers), Rule 7.2 (Compulsory
acquisition, schemes of arrangement and winding up) or Rule 7.3
(Demerger and similar events)
applies.


 


For the
purposes of this Rule, the Committee shall determine the number of Shares over
which the Option becomes exercisable by:


 


(i)                                         applying the Performance Condition and any other term specified by
the Committee on the Grant Date; and


 


11

















 


(ii)                                      reducing the number of Shares pro rata to reflect any unexpired part
of the period of 3 years after the Grant Date as at the time that the
Participant ceases to be a director or employee unless the Committee, acting
fairly and reasonably, decides that the pro rata reduction in the number of
Shares is inappropriate in any particular case when it shall increase the
number of Shares to such higher number as it decides (provided that the number
does not exceed the number of Shares determined under paragraph (i) above).


 


6.5                          Meaning of ceasing employment


 


A Participant
shall not be treated for the purposes of this Rule 6 as ceasing to be a
director or employee of a Group Member until such time as he is no longer a
director or employee of any Group Member. 
Any Participant who ceases to be such a director or employee before
exercising an Option in circumstances where he retains a statutory right to
return to work then he shall be treated as not having ceased to be such a
director or employee until such time (if at all) as he ceases to have such a
right to return to work while not acting as an employee or director.


 


7.                                TAKEOVERS AND OTHER CORPORATE EVENTS


 


7.1                          General offers


 


If any person
(or any group of persons acting in concert):


 


(a)                                      obtains Control of the Company as a result of making a general offer
to acquire shares in the Company; or


 


(b)                                     having obtained Control of the Company makes such an offer and such
offer becomes unconditional in all respects


 


the Committee
shall within 7 days of becoming aware of that event notify every Participant of
it and, subject to Rules 5.3 and 5.4 (Restrictions
on exercise), Rule 5.5 (Long
stop date of exercise), Rule 6 (Leavers and deceased Participants) and Rule 7.7 (Internal reorganisations), any Option may
be exercised within 1 month (or such longer period not exceeding 6 months as
the Committee may permit) of such notification, provided that or to the extent
that the Performance Condition is satisfied on the occurrence of such an event
and Rule 7.6 (Reduction in number of
Shares) shall apply.


 


7.2                          Compulsory acquisition, schemes of
arrangement and winding up


 


In the event
that:


 


(a)                                      any person becomes bound or entitled to acquire shares in the
Company under sections 979 to 985 of the Companies Act 2006;


 


(b)                                     under section 899 of the Companies Act 2006 the Court sanctions a
compromise or arrangement proposed for the purposes of or in connection with a
scheme for the reconstruction of the Company or its amalgamation with any other
company or companies;


 


(c)                                      the Company passes a resolution for a voluntary winding up of the
Company; or


 


12

















 


(d)                                     an order is made for the compulsory winding up of the Company


 


an Option may,
subject to Rules 5.3 and 5.4 (Restrictions
on exercise), Rule 5.5 (Long
stop date for exercise), Rule 6 (Leavers and deceased Participants) and Rule 7.7 (Internal reorganisations), be exercised
within 1 month of such event, provided that or to the extent that the
Performance Condition is satisfied on the occurrence of such an event and Rule 7.6
(Reduction in number of Shares)
shall apply, but to the extent that the Option is not exercised within that
period, it shall (regardless of any other provision of the Plan) lapse at the
end of that period.


 


7.3                          Demerger and similar events


 


If a demerger,
special dividend or other similar event (the “Relevant
Event”) is proposed which, in the opinion of the Committee, would
affect the market price of Shares to a material extent, then the Committee may,
at its discretion and acting fairly and reasonably, decide that the following
provisions will apply:


 


(a)                                      the Committee shall, as soon as reasonably practicable after
deciding to apply these provisions, notify a Participant that, subject to Rules 5.3
and 5.4 (Restrictions on exercise),
Rule 5.5 (Long stop date of exercise),
and Rule 6 (Leavers and deceased
Participants), his Option may be exercised on such terms as the
Committee may determine and during such period preceding the Relevant Event or
on the Relevant Event as the Committee may determine provided that or to the
extent that the Performance Condition is satisfied on the occurrence of such a
Relevant Event and Rule 7.6 (Reduction
in number of Shares) shall apply, but to the extent that the Option
is not exercised within that period, it shall (regardless of any other
provision of the Plan) lapse at the end of that period; and


 


(b)                                     if an Option is exercised in advance of and conditional upon the
Relevant Event and such event does not occur then the conditional exercise
shall not be effective and the Option shall continue to subsist.


 


7.4                          Option rollover: general provisions


 


If any company
(the “acquiring company”):


 


(a)                                      obtains Control of the Company as a result of making a general offer
to acquire:


 


(i)                        the whole of the issued ordinary share capital of the Company (other
than that which is already owned by it) which is made on a condition such that
if it is satisfied the person making the offer will have Control of the
Company; or


 


(ii)                     all the Shares (other than those Shares already owned by it); or


 


(b)                                     obtains Control of the Company as a result of a compromise or
arrangement sanctioned by the Court under section 899 of the Companies Act
2006; or


 


(c)                                      becomes bound or entitled to acquire shares in the Company under sections
979 to 985 of the Companies Act 2006


 


13

















 


any
Participant may, at any time within the relevant period specified under
paragraph 26(3) of Schedule 4, by agreement with the acquiring company,
release any Option granted under Part A of the Plan (the “Old Option”) in consideration of the grant
to him of an Option (the “New Option”)
which for the purposes of paragraph 27 of Schedule 4 is equivalent to the Old
Option but relates to shares in a different company (whether the acquiring
company itself or some other company falling within paragraph 16(b) or (c) of
Schedule 4).


 


7.5                          Option rollover: interpretation of Rules


 


Where a New
Option is granted under Rule 7.4 (Option
rollover: general provisions) the following terms of Part A of
the Plan shall, in relation to the New Option, be construed as if:


 


(a)                                      except for the purposes of the definitions of “Group Member”, “Participating
Company” and “Subsidiary” in Rule 1.1 and the reference to the “Committee”
in Rule 5.5, the expression the “Company” were defined as “a company whose
shares may be acquired by the exercise of Options granted under Part A of
the Plan”;


 


(b)                                     the Performance Condition had been satisfied (subject to any
alterations made under Rule 9.5 (Alterations
to the Performance Condition) including the altered Performance
Condition applying to the New Option); and


 


(c)                                      Rule 9.2 (Shareholder
approval) were omitted.


 


7.6                          Corporate events:  reduction in number of Shares


 


Where, under
any of Rules 7.1 to 7.3 (Corporate
events), an Option would (subject to the satisfaction of any
Performance Condition) become exercisable before the end of the full period
over which performance would otherwise be measured under the Performance
Condition then the number of Shares over which the Option becomes exercisable
shall be determined by the Committee by:


 


(a)                                      applying the Performance Condition and any other term specified by
the Committee on the Grant Date; and


 


(b)                                     if the Committee, acting fairly and reasonably, decides the number
of Shares shall be reduced pro rata to reflect any unexpired part of the period
of 3 years after the Grant Date.


 


If an
Option becomes exercisable under any of Rules 7.1 to 7.3 when the holder
of that Option has ceased to be a director or employee of a Group Member, then
the number of Shares over which the Option becomes exercisable shall be
determined under Rule 6.1, 6.2 or 6.4 (whichever is relevant) in
precedence over this Rule.


 


7.7                          Internal reorganisations


 


In the event
that:


 


(a)                                      an offer (as referred to in Rule 7.1 (General offers)) is made or a compromise
or arrangement (as referred to in Rule 7.2(b) (Schemes of arrangement)) is 


 


14

















 


proposed which is expected to result in the Company
becoming controlled by a new company (the “New
Company”);


 


(b)                                     at least 75% of the shares in the New Company will be held by
substantially the same persons who immediately before the offer or proposal was
made were shareholders in the Company; and


 


(c)                                      the Committee and the New Company agree that this Rule should
apply


 


then an Option
granted under Part A of the Plan shall not become exercisable under Rule 7.1
(General offers) or Rule 7.2
(Compulsory acquisition, schemes of
arrangement and winding up) but may nonetheless be released in
consideration for the grant of a New Option under Rule 7.4 and, if not so
released, shall then automatically lapse at the end of the relevant period
specified in paragraph 26(3) of Schedule 4.


 


8.                                ADJUSTMENT OF OPTIONS


 


8.1                          General rule


 


Subject to Rules 8.3
(HMRC approval), in the event of
any variation of the share capital of the Company, the Committee may make such
adjustment as it considers appropriate under Rule 8.2 (Method of adjustment).


 


8.2                          Method of adjustment


 


An
adjustment made under this Rule shall be to one or more of the following:


 


(a)                                      the number of Shares in respect of which any Option may be
exercised;


 


(b)                                     subject to Rule 8.4 (Adjustment
below nominal value), the price at which Shares may be acquired by
the exercise of any Option; and


 


(c)                                      where any Option has been exercised but no Shares have been allotted
or transferred after such exercise, the number of Shares which may be so
allotted or transferred and the price at which they may be acquired.


 


8.3                          HMRC approval


 


At a time when
Part A of the Plan is approved by HMRC under Schedule 4, no adjustment
under Rule 8.2 (Method of adjustment)
shall be made without the prior approval of HMRC.


 


8.4                          Adjustment below nominal value


 


An adjustment
under Rule 8.2 (Method of adjustment)
may reduce the price at which Shares may be subscribed for on the exercise of
an Option to less than their nominal value, but only if and to the extent that
the Committee is authorised:


 


(a)                                      to capitalise from the reserves of the Company a sum equal to the
amount by which the nominal value of the Shares in respect of which the Option
is exercised and which are to be allotted after such exercise exceeds the price
at which the Shares may be subscribed for; and


 


15

















 


(b)                                     to apply that sum in paying up such amount on such Shares


 


so that on
exercise of any Option in respect of which such a reduction shall have been
made the Committee shall capitalise that sum (if any) and apply it in paying up
that amount.


 


9.                                ALTERATIONS


 


9.1                          General rule


 


Except as
described in Rule 9.2 (Shareholder
approval) and Rule 9.4 (Alterations
to disadvantage of Participants), the Committee may at any time
alter the Plan or the terms of any Option.


 


If an
alteration which does not solely relate to the Performance Condition is made to
a key feature (as defined in paragraph 30(4) of Schedule 4) of the Plan at
a time when Part A of the Plan is approved by HMRC under Schedule 4, the
alteration will not have effect unless and until either HMRC has approved the
alteration or the Committee resolves that the alteration shall take effect even
if this causes the Plan to cease to be approved under Schedule 4.


 


9.2                          Shareholder approval


 


Except as
described in Rule 9.3 (Exceptions to
shareholder approval), no alteration to the advantage of an
individual to whom an Option has been or may be granted shall be made under Rule 9.1
(General rule on alterations)
to the provisions concerning:


 


(a)                                      eligibility;


 


(b)                                     the individual limits on participation;


 


(c)                                      the overall limits on the issue of Shares or the transfer of
treasury Shares;


 


(d)                                     the basis for determining a Participant’s entitlement to, and the
terms of, Shares provided under the Plan;


 


(e)                                      the adjustments that may be made in the event of any variation of
capital; and


 


(f)                                        the terms of this Rule 9.2


 


without the
prior approval by ordinary resolution of the members of the Company in general
meeting.


 


9.3                          Exceptions to shareholder approval


 


Rule 9.2
(Shareholder approval) shall not
apply to:


 


(a)                                      any minor alteration to benefit the administration of the Plan, to
take account of a change in legislation or to obtain or maintain favourable
tax, exchange control or regulatory treatment for Participants or any Group
Member; or


 


(b)                                     any alteration relating to a Performance Condition made under Rule 9.5.


 


16

















 


9.4                          Alterations to disadvantage of Participants


 


No alteration
to the material disadvantage of any Participant (other than to any Performance
Condition) shall be made under Rule 9.1 unless:


 


(a)                                      the Committee shall have invited every relevant Participant to
indicate whether or not he approves the alteration; and


 


(b)                                     the alteration is approved by a majority of those Participants who
have given such an indication.


 


9.5                          Alterations to a Performance Condition


 


The Committee
may amend any Performance Condition without prior shareholder approval if:


 


(a)                                      any circumstance has arisen which causes the Committee reasonably to
consider that it would be appropriate to amend the Performance Condition;


 


(b)                                     the altered Performance Condition will, in the reasonable opinion of
the Committee, be not materially less difficult to satisfy than the unaltered
Performance Condition would have been but for the circumstance in question; and


 


(c)                                      the Committee shall act fairly and reasonably in making the
alteration.


 


10.                          MISCELLANEOUS


 


10.1                    Employment


 


The rights and
obligations of any individual under the terms of his office or employment with
any Group Member shall not be affected by his participation in the Plan or any
right which he may have to participate in it. 
An individual who participates in the Plan waives any and all rights to
compensation or damages in consequence of the termination of his office or
employment for any reason whatsoever (and regardless of whether such
termination is lawful or unlawful) insofar as those rights arise or may arise
from his ceasing to have rights under or be entitled to exercise any Option as
a result of such termination. 
Participation in the Plan shall not confer a right to continued
employment upon any individual who participates in it.  The grant of an Option does not imply that
any further Options will be granted nor that a Participant has any right to be
granted any further Options.


 


10.2                    Disputes


 


In the event
of any dispute or disagreement as to the interpretation of the Plan, or as to
any question or right arising from or relating to the Plan, the decision of the
Committee shall be final and binding upon all persons.


 


17
















 


The exercise
of any power or discretion by the Committee shall not be open to question by
any person and a Participant or former Participant shall have no rights in
relation to the exercise of or omission to exercise any such power or
discretion.


 


10.3                    Notices


 


Any notice or
other communication under or in connection with the Plan may be given:


 


(a)                                      by personal delivery or by post, in the case of a company to its
registered office, and in the case of an individual to his last known address,
or, where he is a director or employee of a Group Member, either to his last
known address or to the address of the place of business at which he performs
the whole or substantially the whole of the duties of his office or employment;
or


 


(b)                                     in an electronic communication to their usual business address or
such other address for the time being notified for that purpose to the person
giving the notice; or


 


(c)                                      by such other method as the Committee determines.


 


10.4                    Third parties


 


No third party
has any right under the Contracts (Rights of Third Parties) Act 1999 to enforce
any term of the Plan.


 


10.5                    Benefits not pensionable


 


Benefits
provided under the Plan shall not be pensionable.


 


10.6                    Data Protection


 


Each
Participant consents to the collection, processing and transfer of his personal
data for any purpose relating to the operation of the Plan.  This includes:


 


(a)                                      providing personal data to any Group Member and any third party such
as trustees of any employee benefit trust, administrators of the Plan,
registrars, brokers and any of their respective agents;


 


(b)                                     processing of personal data by any such Group Member or third party;


 


(c)                                      transferring personal data to a country outside the European
Economic Area (including a country which does not have data protection laws equivalent
to those prevailing in the European Economic Area); and


 


(d)                                     providing personal data to potential purchasers of the Company, the
Participant’s employer or the business in which the Participant works.


 


10.7                    Governing law


 


The Plan and
all Options shall be governed by and construed in accordance with the law of
England and Wales and the Courts of England and Wales have exclusive
jurisdiction to hear any dispute.


 


18

















 


PART B -
UNAPPROVED


 


1.                                DEFINITIONS AND INTERPRETATION


 


1.1                          In the Plan,
unless the context otherwise requires:


 


“ADS” means an American Depositary
Share being an authorised depositary security representing for the time being 4
Shares in the Company and being evidenced by an authorised depositary receipt
issued by the Bank and quoted on the New York Stock Exchange;


 


“Bank” means The Bank of New York or such
other bank as the Company may from time to time appoint to issue authorised
depositary receipts;


 


“Committee” means the remuneration committee
of the board of directors of the Company (or, on and after the occurrence of a
corporate event described in Rule 7 (Takeovers
and other corporate events), the remuneration committee of the board
of directors of the Company as constituted immediately before such event
occurs) and any duly appointed individual or committee appointed by the
remuneration committee;


 


“Company” means Diageo plc (registered in
England and Wales with registered number 23307);


 


“Control” means control within the meaning of
section 719 of ITEPA;


 


“Grant Date” means the date on which an
Option is granted;


 


“Group Member” means:


 


(a)                                      a Participating Company or a body corporate which is the Company’s
holding company (within the meaning of section 1159 of the Companies Act 2006)
or a subsidiary (also within the meaning of section 1159 of that Act) of the
Company’s holding company;


 


(b)                                     a body corporate which is a subsidiary undertaking (within the
meaning of section 1162 of that Act) of a body corporate within paragraph (a) above
and has been designated by the Committee for this purpose; and


 


(c)                                      any other body corporate in relation to which a body corporate
within paragraph (a) or (b) above is able (whether directly or
indirectly) to exercise 15% or more of its equity voting rights and has been
designated by the Committee for this purpose;


 


“ITEPA” means the Income Tax (Earnings and
Pensions) Act 2003;


 


“Listing Rules” means the Listing Rules published
by the UKLA;


 


“London Stock Exchange” means London Stock
Exchange plc;


 


“New York Stock Exchange” means The New York Stock Exchange, Inc.;


 


“Option” means a right to acquire Shares or,
where relevant, ADSs granted under the Plan;


 


19

















 


“Participant” means a person who holds an
Option including his personal representatives;


 


“Participating Company” means the Company or
any Subsidiary;


 


“Performance Condition” means an objective
condition related to performance which is specified by the Committee under Rule 3.1
(Terms of grant);


 


“Plan” means the Diageo plc 2008 Senior
Executive Share Option Plan as amended from time to time;


 


“Rule” means a rule of the Plan;


 


“Shares” means fully paid ordinary shares in
the capital of the Company;


 


“Subsidiary” means a body corporate which is
a subsidiary (within the meaning of section 1162 of the Companies Act 2006) of
the Company;


 


“Tax Liability” means any amount of tax or
social security contributions for which a Participant would or may be liable
and for which any Group Member or former Group Member would or may be obliged
to (or would or may suffer a disadvantage if it were not to) account to any
relevant authority;


 


“UKLA” means the United Kingdom Listing
Authority;


 


“US Participant” means a Participant who is resident in the
United States of America on the Grant Date.


 


1.2                          Any
reference in the Plan to any enactment includes a reference to that enactment
as from time to time modified, extended or re-enacted.


 


1.3                          Expressions
in italics and headings are for guidance only and do not form part of the Plan.


 


2.                                ELIGIBILITY


 


An individual
is eligible to be granted an Option only if he is an employee (including an
executive director) of a Participating Company.


 


3.                                GRANT OF OPTIONS


 


3.1                          Terms of grant


 


Subject to Rule 3.6
(Timing of grant), Rule 3.8
(Approvals and consents) and Rule 4
(Limits), the Committee may
resolve to grant an Option on:


 


(a)                                      the terms set out in Part B of the Plan; and


 


(b)                                     such additional terms (whether a Performance Condition and/or any
other terms) as the Committee may specify


 


to any person
who is eligible to be granted an Option under Rule 2 (Eligibility).


 


20

















 


3.2                          Grant of Option to a US Participant


 


Where an
Option is granted under Rule 3.1 (Terms
of grant) to a US Participant, such Option shall be to acquire ADSs
and not Shares.


 


3.3                          Method of grant


 


An Option
shall be granted by deed executed by the Company.


 


3.4                          Method of satisfying Options


 


Unless
specified to the contrary by the Committee at the time of grant of an Option,
an Option may be satisfied:


 


(a)                                      by the issue of new Shares; and/or


 


(b)                                     by the transfer of treasury Shares; and/or


 


(c)                                      by the transfer of Shares (other than the transfer of treasury
Shares); or


 


(d)                                     in the case of an Option granted to a US Participant, by the issue
or transfer of ADSs.


 


The Committee
may decide to change the way in which it is intended that an Option may be
satisfied after it has been granted, having regard to the provisions of Rule 4
(Limits).


 


3.5                          Option price


 


The Committee
shall decide before an Option is granted the price at which Shares or ADSs may
be acquired by the exercise of that Option, but the price shall not be less
than:


 


(a)                                      if Shares are quoted in the London Stock Exchange Daily Official
List, the average of the middle-market quotation of the Shares (as derived from
that List) for the 3 dealing days before the Grant Date (or on such other
dealing day(s) as the Committee may decide) provided such dealing day(s) do
not fall within any period when dealings in Shares are prohibited under the
Company’s share dealing code;


 


(b)                                     if the Option is granted over ADSs, the average of the closing
prices of the ADSs on the New York Stock Exchange for the 3 New York Stock
Exchange trading days before the Grant Date; or


 


(c)                                      if Rule 3.5(a) or (b) (as appropriate) does not
apply, the market value of the Shares or ADSs as determined by the Committee;


 


(d)                                     in the case of an Option to acquire Shares only by subscription, the
nominal value of those Shares.


 


3.6                          Timing of grant


 


Subject to Rule 3.8
(Approvals and consents), an
Option may only be granted:


 


(a)                                      within the period of 6 weeks beginning with:


 


(i)                        the day on which the Plan is approved by shareholders of the
Company; or


 


21

















 


(ii)                     the dealing day after the day on which the Company announces its
results for any period; or


 


(b)                                     at any other time when the Committee considers that circumstances
are sufficiently exceptional to justify its grant


 


but an Option
may not be granted after [14 October 2018] (that is, the expiry of the
period of 10 years beginning with the date on which the Plan is approved by
shareholders of the Company).


 


3.7                          Non-transferability and bankruptcy


 


An Option
granted to any person:


 


(a)                                      shall not be transferred, assigned, charged or otherwise disposed of
(except on his death to his personal representatives) and shall lapse
immediately on any attempt to do so; and


 


(b)                                     shall lapse immediately if he is declared bankrupt.


 


3.8                          Approvals and consents


 


The grant of
any Option shall be subject to obtaining any approval or consent required under
the Listing Rules, any relevant share dealing code of the Company, the City
Code on Takeovers and Mergers, the listing rules of the New York Stock
Exchange, or any other relevant UK or overseas regulation or enactment.


 


3.9                          Shareholding condition


 


The Committee
may decide that it shall be a condition of the grant of an Option that an
individual eligible to be granted an Option shall have held beneficially a
number of Shares determined by the Committee for such period as the Committee
decides.  If the Committee decides to set
such a shareholding condition, it must notify the individual of the condition
no later than 3 calendar months before the beginning of the financial year in
which it is intended to grant the Option.


 


4.                                LIMITS


 


4.1                          5% in 10 year limit


 


An Option
shall not be granted in any calendar year if, at the time of its proposed Grant
Date, it would cause the number of Shares allocated (as defined in Rule 4.3)
in the period of 10 calendar years ending with that calendar year under the
Plan and under any other executive share plan adopted by the Company to exceed
such number as represents 5% of the ordinary share capital of the Company in
issue at that time.


 


4.2                          10% in 10 year limit


 


An Option shall
not be granted in any calendar year if, at the time of its proposed Grant Date,
it would cause the number of Shares allocated (as defined in Rule 4.3) in
the period of 10 calendar years ending with that calendar year under the Plan
and under any other 


 


22

















 


employee share
plan adopted by the Company to exceed such number as represents 10% of the
ordinary share capital of the Company in issue at that time.


 


4.3                          Meaning of “allocated”


 


For the
purposes of Rules 4.1 and 4.2:


 


(a)                                      Shares are allocated:


 


(i)                     when an option,
award or other contractual right to acquire unissued Shares or treasury shares
is granted;


 


(ii)                  where Shares are
issued or treasury shares are transferred other than in respect of an option,
award or other contractual right to acquire Shares, when those Shares are
issued or treasury shares transferred;


 


(b)                                     any Shares which have been issued or which may be issued (or any
Shares transferred out of treasury or which may be transferred out of treasury)
to any trustees to satisfy the exercise of any option, award or other
contractual right shall be treated as “allocated” unless they are already
treated as allocated under this Rule; and


 


(c)                                      for the avoidance of doubt, existing Shares other than treasury
shares that are transferred or over which options, awards or other contractual
rights are granted shall not count as “allocated”.


 


4.4                          Post-grant events affecting numbers of “allocated”
Shares


 


For the
purposes of Rule 4.3:


 


(a)                                      where:


 


(i)                        any option, award or other contractual right to acquire unissued
Shares or treasury shares is released or lapses (whether in whole or in part);
or


 


(ii)                     after the grant of an option, award or other contractual right the
Committee determines that:


 


(aa)          where an amount is normally
payable on its exercise it shall be satisfied without such payment but instead
by the payment of cash equal to the gain made on its exercise; or


 


(bb)        it shall be satisfied by the
transfer of existing Shares (other than Shares transferred out of treasury)


 


the unissued
Shares or treasury shares which consequently cease to be subject to the option,
award or other contractual right shall not count as “allocated”; and


 


(b)                                     the number of Shares allocated in respect of an option, award or
other contractual right shall be such number as the Committee shall reasonably
determine from time to time.


 


23

















 


4.5                          Changes to investor guidelines


 


Treasury
shares shall cease to count as “allocated” Shares for the purposes of Rule 4.3
if institutional investor guidelines cease to require such Shares to be so
counted.


 


4.6                          Individual limit


 


(a)                                      The maximum total market value of Shares or ADSs (calculated as set
out in this Rule) over which Options may be granted to any employee during any
financial year of the Company is 375% of his salary (as defined in this Rule),
unless Rule 4.6(b) applies.


 


(b)                                     If the Committee decides that exceptional circumstances exist in
relation to the recruitment or retention of an eligible employee then the
maximum total market value of Shares or ADSs (calculated as set out in this
Rule) over which Options may be granted to that employee during a financial
year of the Company is such higher percentage of his salary (as defined in this
Rule) as the Committee may determine.


 


(c)                                      For the purpose of this Rule 4.6:


 


(i)                     an employee’s salary shall be taken to be his base salary
(excluding benefits in kind), expressed as an annual rate payable by the
Participating Companies to him as at the Grant Date (or on such other date as
the Committee shall reasonably determine). 
Where a payment of salary is made in a currency other than sterling, the
payment shall be treated as equal to the equivalent amount of sterling
determined by using any rate of exchange which the Committee may reasonably
select; and


 


(ii)                  the market value of the Shares or ADSs over
which an Option is granted shall be calculated by reference to the price at
which Shares or ADSs may be acquired by the exercise of that Option as determined
under Rule 3.5 (Option price).


 


4.7                          Effect of limits


 


Any Option
shall be limited and take effect so that the limits in this Rule 4 are
complied with.


 


Where the
grant of an Option under Part A of the Plan is limited solely by virtue of
Rule 4.7 of that Part (HMRC limit)
the grant shall be effective under this Part B of the Plan subject to the
limits set out in this Part.


 


5.                                EXERCISE OF OPTIONS


 


5.1                          General prohibition on exercise before
third anniversary of the Grant Date


 


An Option may
only be exercised on or after the third anniversary of the Grant Date except
where Rule 6 (Leavers and deceased
Participants), Rule 7.1 (General
offers), Rule 7.2 (Compulsory
acquisition, schemes of arrangement and winding up) or Rule 7.3
(Demerger and similar events) applies
or such earlier date as the Committee shall determine.


 


24

















 


5.2                          Performance Condition and other exercise
conditions


 


An Option may
only be exercised:


 


(a)                                      to the extent that the Performance Condition is satisfied; and


 


(b)                                     as permitted by any other term specified under Rule 3.1(b).


 


The Option
shall lapse regardless of any other Rule to the extent that the
Performance Condition is not satisfied.


 


5.3                          Restrictions on exercise: regulatory and
tax issues


 


An Option may
not be exercised unless the following conditions are satisfied:


 


(a)                                      the exercise of the Option and the issue or transfer of Shares or
ADSs after such exercise would be lawful in all relevant jurisdictions and in
compliance with the Listing Rules, any relevant share dealing code of the
Company, the City Code on Takeovers and Mergers and any other relevant UK or
overseas regulation or enactment;


 


(b)                                     if a Tax Liability would arise by virtue of the exercise of the
Option then the Participant authorises the Company to sell or procure the sale
of sufficient Shares or ADSs on his behalf to ensure that any relevant Group
Member receives the amount required to discharge the Tax Liability except to
the extent that he agrees with the Committee to fund all or part of the Tax
Liability in a different manner;


 


(c)                                      the Participant has entered into such arrangements as the Committee
requires (and where permitted in the relevant jurisdiction) to satisfy a Group
Member’s liability to social security contributions in respect of the exercise
of the Option; and


 


(d)                                     where the Committee requires, the Participant has entered into, or
agreed to enter into, a valid election under Part 7 of ITEPA (Employment income: 
elections to disapply tax charge on restricted securities) or
any similar arrangement in any overseas jurisdiction.


 


For the
purposes of this Rule 5.3, references to Group Member include any former
Group Member.


 


5.4                          Long stop date for exercise


 


An Option may
not in any circumstances (and regardless of any other Rule) be exercised after
the expiry of 10 years beginning with the Grant Date (or such shorter period
beginning with the Grant Date as the Committee may have decided before the
grant of that Option) and if not exercised shall lapse at the end of such period.


 


5.5                          Exercise in whole or in part


 


An Option may
be exercised to the maximum extent possible at the time of exercise or over
such fewer number of Shares or ADSs as the Participant decides.


 


25

















 


5.6                          Method of exercise


 


The exercise
of any Option shall be effected in the form and manner prescribed by the
Committee.  Unless the Committee, acting
fairly and reasonably determines otherwise, any notice of exercise shall,
subject to Rule 5.3 (Restrictions on exercise:  regulatory and tax issues) take
effect only when the Company receives it, together with:


 


(a)                                      payment of the relevant price at which Shares or ADSs can be
acquired under the Option (or, if the Committee so permits, an undertaking to
pay that amount); and


 


(b)                                     if a Participant decides to satisfy the Tax Liability other than by
selling Shares or ADSs pursuant to the authority in Rule 5.3(b), an
agreement relating to the payment of the Tax Liability having been entered
into.


 


5.7                          Restriction on use of unissued Shares and
treasury shares


 


No Shares may
be issued or treasury shares transferred to satisfy the exercise of any Option
to the extent that such issue or transfer would cause the number of Shares
allocated (as defined in Rule 4.3 (Meaning
of “allocated”) and adjusted under Rule 4.4 (Post-grant events of affecting numbers of “allocated”
Shares)) to exceed the limits in Rules 4.1 (5% in 10 year limit) and 4.2 (10% in 10 year limit) except where there
is a variation of share capital of the Company which results in the number of
Shares so allocated exceeding such limits solely by virtue of that variation.


 


5.8                          Allotment and transfer timetable


 


Within 30 days
after an Option has been exercised by a Participant, the Board shall allot to
him (or a nominee for him) or, if appropriate, transfer or procure the transfer
to him (or a nominee for him) of the number of Shares or ADSs in respect of
which the Option has been exercised.


 


5.9                          Share rights


 


All Shares
allotted under the Plan shall rank equally in all respects with Shares then in
issue except for any rights attaching to such Shares by reference to a record
date before the date of allotment.


 


Where Shares
are transferred under the Plan after the exercise of an Option, Participants
will be entitled to any rights attaching to such Shares by reference to a
record date on or after the date of such transfer.


 


5.10                    Cash alternative


 


Where an
Option has been exercised by a Participant in respect of any number of Shares
or ADSs, and those Shares or ADSs have not yet been allotted or transferred to
him (or his nominee), the Committee may determine that, in substitution for his
right to acquire such number of those Shares or ADSs as the Committee may
decide (but in full and final satisfaction of that right), he shall be paid by
way of additional employment income a sum equal to the cash equivalent (as
defined in Rule 5.10(a)) of that number of Shares or ADSs in accordance
with the following provisions of this Rule 5.10.


 


26
















 


(a)                                      For the purpose of this Rule 5.10, the cash equivalent of a
Share or an ADS is the amount by which the market value of that Share or ADS
exceeds the option price.  The market
value of a Share or ADS for this purpose is:


 


(i)                      if on the day of
exercise, Shares are quoted in the London Stock Exchange Daily Official List,
the middle-market quotation of a Share, as derived from that List, on that day;
or


 


(ii)                   in the case of an
Option granted to a US Participant, if on the day of exercise, ADSs are quoted
on the New York Stock Exchange, the closing price of an ADS on the dealing day
before that date; or


 


(iii)                if Shares or ADSs are
not so quoted, such value of a Share or ADS as the Committee reasonably
determines.


 


(b)                                     Subject to Rule 5.10(c), as soon as reasonably practicable
after the Committee has determined under this Rule 5.10 that a Participant
shall be paid a sum in substitution for his right to acquire any number of
Shares or ADSs:


 


(i)                      the Company
shall pay to him or procure the payment to him of that sum in cash; and


 


(ii)                   if he has already
paid the Company for those Shares or ADSs, the Company shall return to him the
amount so paid by him.


 


(c)                                      There shall be deducted from any payment under this Rule 5.10
such amounts (on account of tax or similar liabilities) as may be required by
law or as the Committee may reasonably consider to be necessary or desirable.


 


(d)                                     If the Committee so decides, the whole or any part of the sum
payable under Rule 5.10(b)(i) (but after any deductions under Rule 5.10(c))
shall, instead of being paid to the Participant in cash, be applied on his
behalf:


 


(i)                      in subscribing
for Shares or issuing ADSs at a price equal to the market value by reference to
which the cash equivalent is calculated; or


 


(ii)                   in purchasing such
Shares or ADSs; or


 


(iii)                partly in one way and
partly in the other


 


and the
Company shall allot or transfer to him (or his nominee) or procure the transfer
to him (or his nominee) of the Shares so subscribed for or Shares or ADSs
purchased.


 


5.11                    Limitation on the application of Rule 5.10


 


Rule 5.10
shall not apply in relation to an Option granted to a Participant in any
jurisdiction where the presence of Rule 5.10 would cause:


 


(a)                                      the grant of the Option to be unlawful or for it to fall outside any
applicable securities law exclusion or exemption; or


 


27

















 


(b)                                     adverse tax or social security contribution consequences for the
Participant or any Group Member as determined by the Board


 


provided that
this Rule 5.11 shall apply only if its application would prevent the
occurrence of a consequence referred to in (a) or (b) above.


 


5.12                    Change of jurisdiction


 


If a
Participant relocates to another jurisdiction before his Option becomes
exercisable and, as a result of the relocation, the Participant or any Group
Member would be subject to additional tax or social security on the exercise of
the Option or the exercise of the Option in that other jurisdiction would be
subject to any regulatory restriction, approval or consent, the Committee may
determine that the Option may be:


 


(a)                                      exercised on such terms and during such period preceding the date on
which the Participant relocates as the Committee may determine; or


 


(b)                                     released by the Participant for a Share Appreciation Right which
shall be paid in cash under paragraph 6 of Schedule 1.


 


6.                                LEAVERS AND DECEASED PARTICIPANTS


 


6.1                          Deceased Participants


 


If a
Participant dies at a time when either he is a director or employee of a Group
Member or he is or may be entitled to exercise the Option under Rule 6.2 (Retirement, ill-health,  injury,
disability, redundancy and transfer out of the Group) or Rule 6.3
(Cessation of employment in other
circumstances), the following provisions apply:


 


(a)                                      any Option granted to him that is already capable of exercise at the
time of death shall, subject to Rule 5.3 (Restrictions
on exercise), continue to be capable of exercise by his personal
representatives for a period of 12 months after his death and if not exercised
shall lapse at the end of that period;


 


(b)                                     any other Option granted to him may, subject to Rule 5.3 (Restrictions on exercise) and the
remainder of this Rule, be exercised by his personal representatives during the
period of 12 months after his death and if not exercised shall lapse at the end
of that period; and


 


(c)                                      in both cases (a) and (b) above the period for exercise
shall be shortened if Rule 5.4 (Long
stop date for exercise), Rule 7.1 (General offers), Rule 7.2 (Compulsory acquisition, schemes of arrangement and winding up)
or Rule 7.3 (Demerger and similar
events) applies.


 


For the
purposes of this Rule, the Committee shall determine the number of Shares or
ADSs over which the Option becomes exercisable by:


 


(i)                                         applying the Performance Condition and any other term specified by
the Committee on the Grant Date; and


 


(ii)                                      reducing the number of Shares or ADSs pro rata to reflect any
unexpired part of the period of 3 years after the Grant Date  (or such shorter period set by the 


 


28

















 


Committee under Rule 5.1) as at the time that the
Participant ceases to be a director or employee unless the Committee, acting
fairly and reasonably, decides that the pro rata reduction in the number of
Shares or ADSs is inappropriate in any particular case when it shall increase
the number of Shares or ADSs to such higher number as it decides (provided that
the number does not exceed the number of Shares or ADSs determined under
paragraph (i) above).


 


6.2                          Retirement, ill-health, injury, disability,
redundancy and transfer out of the Group


 


If a
Participant ceases to be a director or employee of a Group Member by reason of:


 


(a)                                      retirement with the agreement of his employer;


 


(b)                                     ill-health, injury or disability (evidenced to the satisfaction of
his employer);


 


(c)                                      redundancy (within the meaning of the Employment Rights Act 1996) or
any overseas equivalent; or


 


(d)                                     his office or employment being either with a company which ceases to
be a Group Member or relating to a business or part of a business which is
transferred to a person who is not a Group Member


 


the following
provisions apply:


 


(e)                                      any Option granted to him that is already capable of exercise at the
date of cessation shall, subject to Rule 5.3 (Restrictions on exercise) and Rule 6.1 (Deceased Participants), continue to be
capable of exercise for a period of 6 months after the date of cessation and if
not exercised shall lapse at the end of that period;


 


(f)                                        any other Option granted to him may, subject to Rule 5.3 (Restrictions on exercise), Rule 6.1 (Deceased Participants) and the remainder
of this Rule, be exercised during the period of 6 months after the third
anniversary of the Grant Date, unless the Committee decides that his Option may
be exercised during such period immediately following the date of cessation as
the Committee may determine (not being greater than 42 months after the Grant
Date) and if not exercised shall lapse at the end of that period; and


 


(g)                                     in both cases (d) and (e) above, the period for exercise
shall be shortened if Rule 5.4 (Long
stop date for exercise), Rule 7.1 (General offers), Rule 7.2 (Compulsory acquisition, schemes of arrangement and winding up)
or Rule 7.3 (Demerger and similar
events) applies.


 


For the
purposes of this Rule, the Committee shall determine the number of Shares  or ADSs over which the Option becomes
exercisable by:


 


(i)                                         applying the Performance Condition, any other term specified by the
Committee on the Grant Date and any other factors considered by the Committee
to be relevant to reduce the number of Shares or ADSs over which the Option
becomes exercisable; and


 


29

















 


(ii)                                      reducing the number of Shares or ADSs pro rata to reflect any
unexpired part of the period of 3 years after the Grant Date  (or such shorter period set by the Committee
under Rule 5.1) as at the time that the Participant ceases to be a
director or employee unless the Committee, acting fairly and reasonably,
decides that the pro rata reduction in the number of Shares or ADSs is inappropriate
in any particular case when it shall increase the number of Shares or ADSs to
such higher number as it decides (provided that the number does not exceed the
number of Shares or ADSs determined under paragraph (i) above).


 


6.3                          Cessation of employment in other
circumstances


 


If a
Participant ceases to be a director or employee of a Group Member for any
reason other than those specified in Rule 6.1 (Deceased Participants) and Rule 6.2 (Retirement, ill-health, injury, disability,
redundancy and transfer out of the Group), the following provisions
apply:


 


(a)                                      any Option granted to him may not be exercised at all and shall
lapse on such cessation unless the Committee, acting fairly and reasonably,
decides it may be exercised under this Rule 6.3;


 


(b)                                     if the Committee permits the Option to be exercised then it may,
subject to Rule 5.3 (Restrictions on
exercise), Rule 6.1 (Deceased
Participants) and the remainder of this Rule, be exercised during
the period of 6 months after the third anniversary of the Grant Date, unless
the Committee decides that his Option may be exercised during such period
immediately following the date of cessation as the Committee may determine (not
being greater than 42 months after the Grant Date) and if not exercised shall
lapse at the end of that period; and


 


(c)                                      the period for exercise referred to in (b) above shall be
shortened if Rule 5.4 (Long stop date
for exercise), Rule 7.1 (General
offers), Rule 7.2 (Compulsory
acquisition, schemes of arrangement and winding up) or Rule 7.3
(Demerger and similar events)
applies.


 


For the
purposes of this Rule, the Committee shall determine the number of Shares  or ADSs over which the Option becomes
exercisable by:


 


(i)                                         applying the Performance Condition, any other term specified by the
Committee on the grant Date and any other factors considered by the Committee
to be relevant to reduce the number of Shares or ADSs over which the Option
becomes exercisable; and


 


(ii)                                      reducing the number of Shares or ADSs pro rata to reflect any
unexpired part of the period of 3 years after the Grant Date  (or such shorter period set by the Committee
under Rule 5.1) as at the time that the Participant ceases to be a
director or employee unless the Committee, acting fairly and reasonably,
decides that the pro rata reduction in the number of Shares or ADSs is
inappropriate in any particular case when it shall increase the number of
Shares or ADSs to such higher number as it decides (provided that the number
does not exceed the number of Shares or ADSs determined under paragraph (i) above).


 


30

















 


6.4                          Meaning of ceasing employment


 


A Participant
shall not be treated for the purposes of this Rule 6 as ceasing to be a
director or employee of a Group Member until such time as he is no longer a
director or employee of any Group Member. 
Any Participant who ceases to be such a director or employee before
exercising an Option in circumstances where he retains a statutory right to
return to work then he shall be treated as not having ceased to be such a
director or employee until such time (if at all) as he ceases to have such a
right to return to work while not acting as an employee or director.


 


7.                                TAKEOVERS AND OTHER CORPORATE EVENTS


 


7.1                          General offers


 


If any person
(or any group of persons acting in concert):


 


(a)                                      obtains Control of the Company as a result of making a general offer
to acquire shares in the Company; or


 


(b)                                     having obtained Control of the Company makes such an offer and such
offer becomes unconditional in all respects


 


the Committee
shall within 7 days of becoming aware of that event notify every Participant of
it and, subject to 5.3 (Restrictions on
exercise), Rule 5.4 (Long
stop date for exercise), Rule 6 (Leavers and deceased Participants) and Rule 7.5 (Internal reorganisations), any Option may
be exercised within 1 month (or such longer period as the Committee may permit)
of such notification, provided that or to the extent that the Performance
Condition is satisfied on the occurrence of such an event and Rule 7.4 (Reduction in number of Shares or ADSs)
shall apply.


 


7.2                          Compulsory acquisition, schemes of
arrangement and winding up


 


In the event
that:


 


(a)                                      any person becomes bound or entitled to acquire shares in the
Company under sections 979 to 985 of the Companies Act 2006;


 


(b)                                     under section 899 of the Companies Act 2006 the Court sanctions a
compromise or arrangement proposed for the purposes of or in connection with a
scheme for the reconstruction of the Company or its amalgamation with any other
company or companies;


 


(c)                                      the Company passes a resolution for a voluntary winding up of the
Company; or


 


(d)                                     an order is made for the compulsory winding up of the Company


 


an Option may,
subject to Rule 5.3 (Restrictions on
exercise), Rule 5.4 (Long stop date for exercise), Rule 6
(Leavers and deceased Participants)
and Rule 7.5 (Internal reorganisations),
be exercised within 1 month of such event, provided that or to the extent that
the Performance Condition is satisfied on the occurrence of such an event and Rule 7.4
(Reduction in number of Shares or ADSs)
shall apply, but to the extent that the 


 


31

















 


Option is not
exercised within that period, it shall (regardless of any other provision of
the Plan) lapse at the end of that period.


 


7.3                          Demerger and similar events


 


If a demerger,
special dividend or other similar event (the “Relevant
Event”) is proposed which, in the opinion of the Committee, would
affect the market price of Shares to a material extent, then the Committee may,
at its discretion and acting fairly and reasonably, decide that the following
provisions will apply:


 


(a)                                      the Committee shall, as soon as reasonably practicable after
deciding to apply these provisions, notify a Participant that, subject to Rule 5.2
(Performance Condition), Rule 5.3
(Restrictions on exercise), Rule 5.4 (Long
stop date for exercise) and Rule 6 (Leavers and deceased Participants), his Option may be
exercised on such terms as the Committee may determine and during such period
preceding the Relevant Event or on the Relevant Event as the Committee may
determine provided that or to the extent that the Performance Condition is
satisfied on the occurrence of such a Relevant Event and Rule 7.4 (Reduction in number of Shares or ADSs) shall
apply, but to the extent that the Option is not exercised within that period,
it shall (regardless of any other provision of the Plan) lapse at the end of
that period; and


 


(b)                                     if an Option is exercised in advance of and conditional upon the
Relevant Event and such event does not occur then the conditional exercise
shall not be effective and the Option shall continue to subsist.


 


7.4                          Corporate events:  reduction in number of Shares or ADSs


 


Where, under
any of the Rules 7.1 to 7.3 (Corporate
events), an Option would (subject to the satisfaction of any
Performance Condition) become exercisable before the end of the full period
over which performance would otherwise be measured under the Performance
Condition then the number of Shares or ADSs over which the Option becomes
exercisable shall be determined by the Committee by:


 


(i)                                         applying the Performance Condition and any other term specified by
the Committee on the Grant Date; and


 


(ii)                                      if the Committee, acting fairly and reasonably, decides the number
of Shares or ADSs shall be reduced pro rata to reflect any unexpired part of
the period of 3 years after the Grant Date (or such shorter period set by the
Committee under Rule 5.1)


 


If an Option
becomes exercisable under any of Rules 7.1 to 7.3 when the holder of that
Option has ceased to be a director or employee of a Group Member, then the
number of Shares or ADSs over which the Option becomes exercisable shall be
determined under Rule 6.1, 6.2 or 6.3 (whichever is relevant) in
precedence over this Rule.


 


32

















 


7.5                          Internal reorganisations


 


In the event
that:


 


(a)                                      an offer (as referred to in Rule 7.1 (General offers)) is made or a compromise
or arrangement (as referred to in Rule 7.2(b) (Schemes of arrangement)) is proposed which
is expected to result in the Company becoming controlled by a new company (the “New Company”);


 


(b)                                     at least 75% of the shares in the New Company will be held by
substantially the same persons who immediately before the offer or proposal was
made were shareholders in the Company; and


 


(c)                                      the Committee and the New Company agree that this Rule should
apply


 


then an Option
granted under Part B of the Plan (the “Original
Option”) shall not become exercisable under Rule 7.1 (General offers) or Rule 7.2 (Compulsory acquisition, schemes of arrangement and
winding up) but shall be automatically surrendered in consideration
for the grant of a new Option which the Committee determines is equivalent to
the Original Option it replaces except that it will be over shares in the New
Company or some other company.


 


The Rules will
apply to any new Option granted under this Rule 7.5 as if references to
Shares or ADSs were references to shares over which the new Option is granted
and references to the Company were references to the company whose shares are
subject to the new Option.


 


8.                                ADJUSTMENT OF OPTIONS


 


8.1                          General rule


 


In the event
of:


 


(a)                                      any variation of the share capital of the Company; or


 


(b)                                     a demerger, special dividend or other similar event which affects
the market price of Shares or ADSs to a material extent


 


the Committee
may make such adjustment as it considers appropriate under Rule 8.2 (Method of adjustment).


 


8.2                          Method of adjustment


 


An adjustment
made under this Rule shall be to one or more of the following:


 


(a)                                      the number of Shares in respect of which any Option may be
exercised;


 


(b)                                     the number of ADSs in respect of which an Option may be exercised;


 


(c)                                      subject to Rule 8.3 (Adjustment
below nominal value), the price at which Shares or ADSs may be
acquired by the exercise of any Option; and


 


33

















 


(d)                                     where any Option has been exercised but no Shares or ADSs have been
allotted or transferred after such exercise, the number of Shares or ADSs which
may be so allotted or transferred and the price at which they may be acquired.


 


8.3                          Adjustment below nominal value


 


An adjustment
under Rule 8.2 (Method of adjustment)
may reduce the price at which Shares may be subscribed for on the exercise of
an Option to less than their nominal value, but only if and to the extent that
the Committee is authorised:


 


(a)                                      to capitalise from the reserves of the Company a sum equal to the
amount by which the nominal value of the Shares in respect of which the Option
is exercised and which are to be allotted after such exercise exceeds the price
at which the Shares may be subscribed for; and


 


(b)                                     to apply that sum in paying up such amount on such Shares


 


so that on
exercise of any Option in respect of which such a reduction shall have been
made the Committee shall capitalise that sum (if any) and apply it in paying up
that amount.


 


9.                                ALTERATIONS


 


9.1                          General rule


 


Except as
described in Rule 9.2 (Shareholder
approval) and Rule 9.4 (Alterations
to disadvantage of Participants), the Committee may at any time
alter the Plan or the terms of any Option granted under it.


 


9.2                          Shareholder approval


 


Except as
described in Rule 9.3 (Exceptions to
shareholder approval), no alteration to the advantage of an
individual to whom an Option has been or may be granted shall be made under Rule 9.1
(General rule on alterations)
to the provisions concerning:


 


(a)                                      eligibility;


 


(b)                                     the individual limits on participation;


 


(c)                                      the overall limits on the issue of Shares or the transfer of
treasury Shares;


 


(d)                                     the basis for determining a Participant’s entitlement to, and the
terms of, Shares or ADSs or cash provided under the Plan;


 


(e)                                      the adjustments that may be made in the event of any variation of
capital; and


 


(f)                                        the terms of this Rule 9.2


 


without the
prior approval by ordinary resolution of the members of the Company in general
meeting.


 


9.3                          Exceptions to shareholder approval


 


Rule 9.2
(Shareholder approval) shall not
apply to:


 


34

















 


(a)                                      any minor alteration to benefit the administration of the Plan, to
take account of a change in legislation or to obtain or maintain favourable
tax, exchange control or regulatory treatment for Participants or any Group
Member; or


 


(b)                                     any alteration relating to a Performance Condition made under Rule 9.5.


 


9.4                          Alterations to disadvantage of Participants


 


No alteration
to the material disadvantage of any Participant (other than to any Performance
Condition) shall be made under Rule 9.1 unless:


 


(a)                                      the Committee shall have invited every relevant Participant to
indicate whether or not he approves the alteration; and


 


(b)                                     the alteration is approved by a majority of those Participants who
have given such an indication.


 


9.5                          Alterations to a Performance Condition


 


The Committee
may amend any Performance Condition without prior shareholder approval if:


 


(a)                                      any circumstance has arisen which causes the Committee reasonably to
consider that it would be appropriate to amend the Performance Condition;


 


(b)                                     the altered Performance Condition will, in the reasonable opinion of
the Committee, be not materially less difficult to satisfy than the unaltered
Performance Condition would have been but for the circumstance in question; and


 


(c)                                      the Committee shall act fairly and reasonably in making the
alteration.


 


10.                          MISCELLANEOUS


 


10.1                    Employment


 


The rights and
obligations of any individual under the terms of his office or employment with
any Group Member shall not be affected by his participation in the Plan or any
right which he may have to participate in it. 
An individual who participates in the Plan waives any and all rights to
compensation or damages in consequence of the termination of his office or
employment for any reason whatsoever (and regardless of whether such
termination is lawful or unlawful) insofar as those rights arise or may arise
from his ceasing to have rights under or be entitled to exercise any Option as
a result of such termination. 
Participation in the Plan shall not confer a right to continued
employment upon any individual who participates in it.  The grant of any Option does not imply that
any further Options will be granted nor that a Participant has any right to be
granted any further Options.


 


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10.2                    Disputes


 


In the event
of any dispute or disagreement as to the interpretation of the Plan, or as to
any question or right arising from or relating to the Plan, the decision of the
Committee shall be final and binding upon all persons.


 


The exercise of
any power or discretion by the Committee shall not be open to question by any
person and a Participant or former Participant shall have no rights in relation
to the exercise of or omission to exercise any such power or discretion.


 


10.3                    Notices


 


Any notice or
other communication under or in connection with the Plan may be given:


 


(a)                                      by personal delivery or by post, in the case of a company to its
registered office, and in the case of an individual to his last known address,
or, where he is a director or employee of a Group Member, either to his last
known address or to the address of the place of business at which he performs
the whole or substantially the whole of the duties of his office or employment;
or


 


(b)                                     in an electronic communication to their usual business address or
such other address for the time being notified for that purpose to the person
giving the notice; or


 


(c)                                      by such other method as the Committee determines.


 


10.4                    Third parties


 


No third party
has any right under the Contracts (Rights of Third Parties) Act 1999 to enforce
any term of the Plan.


 


10.5                    Benefits not pensionable


 


Benefits
provided under the Plan shall not be pensionable.


 


10.6                    Data Protection


 


Each
Participant consents to the collection, processing and transfer of his personal
data for any purpose relating to the operation of the Plan.  This includes:


 


(a)                                      providing personal data to any Group Member and any third party such
as trustees of any employee benefit trust, administrators of the Plan,
registrars, brokers and any of their respective agents;


 


(b)                                     processing of personal data by any such Group Member or third party;


 


(c)                                      transferring personal data to a country outside the European
Economic Area (including a country which does not have data protection laws
equivalent to those prevailing in the European Economic Area); and


 


(d)                                     providing personal data to potential purchasers of the Company, the
Participant’s employer or the business in which the Participant works.


 


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10.7                    Governing law


 


The Plan and
all Options shall be governed by and construed in accordance with the law of
England and Wales and the Courts of England and Wales have exclusive
jurisdiction to hear any dispute.


 


11.                          INCENTIVE STOCK OPTIONS


 


11.1                    Definitions


 


In this Rule:


 


“Incentive Stock Option” means an Option as
defined in and satisfying the requirements of section 422 of the Code;


 


“Code” means the United States Internal
Revenue Code of 1986 (as amended);


 


“Market Value” at any date means the fair
market value of the number of ADSs on that date, as reasonably determined by
the Committee, provided that if on such date the ADSs are listed on the New
York Stock Exchange, the fair market value shall be not less than the closing
price of such ADSs on the Grant Date;


 


“Non-Qualified Stock Option” means an Option
which is not an Incentive Stock Option.


 


11.2                    Grant of Incentive Stock Option


 


The Committee
may grant an Incentive Stock Option over ADSs to any US Participant upon the
terms set out in the Plan and subject to the additional terms and conditions in
this Rule provided that the US Participant is an employee of:


 


(a)                                      the Company; or


 


(b)                                     a “subsidiary corporation” (as defined in section 424(f) of the
Code) with respect to the Company; or


 


(c)                                      a “parent corporation” (as defined in section 424(e) of the
Code) with respect to the Company.


 


11.3                    Option price for Incentive Stock Option


 


(a)                                      Subject to Rule 11.4, the option price for an ADS subject to an
Incentive Stock Option granted under this Rule may not be less than the
Market Value of the ADS on the Grant Date.


 


(b)                                     A person who, within the meaning of section 422(b)(6) of the
Code, is deemed to own shares in the Company possessing more than 10% of the
total combined voting power of all classes of shares of the Company (or of its
parent or subsidiary corporations within the meaning of section 424 of the
Code) shall be eligible to receive an Incentive Stock Option only if the option
price of an ADS is at least 110% of the Market Value of the ADS on the Grant Date
and only if the term of the Option does not exceed 5 years.


 


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11.4                    Individual Limit


 


(a)                                      The aggregate Market Value determined at the Grant Date of the
number of ADSs with respect to which Incentive Stock Options first become
exercisable by any US Participant in any calendar year under the Plan (or any
other stock option required to be taken into account under section 422(d) of
the Code) shall not exceed US $100,000.


 


(b)                                     To the extent that this US $100,000 limit is exceeded, an Incentive
Stock Option will be treated as a Non-Qualified Stock Option.


 


(c)                                      Each Option that is intended to be granted as an Incentive Stock
Option shall so indicate that, and to what extent, the Option is intended to be
an Incentive Stock Option.


 


11.5                    Leavers


 


Section 421(a) of
the Code will not apply to an Incentive Stock Option unless it is exercised no
more than:


 


(a)                                      12 months after the date of termination of employment because of
total and permanent disability or


 


(b)                                     3 months after the date of termination of employment for any reason
other than that described in paragraph (a) and death.


 


11.6                    Other Dispositions


 


(a)                                      Section 421(a) of the Code will not apply to ADSs acquired
upon exercise of Incentive Stock Options if such ADSs are disposed of in a
disqualifying disposition within the meaning of section 422 of the Code by a US
Participant within either 2 years from the Grant Date of such Option or 1 year
from the transfer of the ADSs to satisfy such Option, or in any other disqualifying
disposition within the meaning of section 422 of the Code.


 


(b)                                     If a disqualifying disposition occurs, the US Participant shall be
required to notify the Company in writing as soon as practicable of the date
and terms of the disposition and, if the Company (or any affiliate) has a tax
withholding obligation, the US Participant shall pay to the Company (or
affiliate) an amount equal to any withholding tax the Company (or affiliate) is
required to pay as a result of the disqualifying disposition.


 


11.7                    Maximum Aggregate Number of Shares
Underlying ADSs


 


The maximum
aggregate number of Shares underlying the ADSs with respect to Incentive Stock
Options which may be issued under the Plan is 50,000,000.


 


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11.8                    Modifications


 


Any
modification, extension or renewal of an Incentive Stock Option shall be
subject to the terms of Treasury Regulation 1.424-1.


 


11.9                    Miscellaneous


 


Notwithstanding
any other provisions of the Plan, the Company will not be required to issue or
cause to be issued any ADSs if at such time such issuance would violate the
United States Federal Securities laws or any other laws of the United States or
any state of the United States.  In
addition, the holder of any ADSs issued in connection with the Plan agrees not
to sell or transfer such ADSs in violation of the United States Federal
Securities laws or any other laws of the United States or any state of the
United States.  The Company shall have the
right in its sole discretion to modify the terms of the Plan at any time and
from time to time as it deems necessary or appropriate to ensure or facilitate
such compliance and to include appropriate legends on any Options or ADSs
issued or caused to be issued in connection with the Plan.


 


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SCHEDULE 1:  SHARE
APPRECIATION RIGHTS


 


A Share
Appreciation Right (“SAR”) may be
granted under this Schedule to Part B of the Plan.  The Rules shall apply to a SAR as if it
were an Option, except as set out in this Schedule.  Where there is any conflict between the Rules and
this Schedule, the terms of this Schedule shall prevail.


 


1.                                 Before the grant of a SAR, the Committee shall determine a “base price” for each Share or ADS under the
SAR.  The base price shall be subject to
the same restrictions as an option price set out in Rule 3.5 of Part B
of the Plan.  There shall be no amount
payable on the exercise of a SAR.


 


2.                                 Subject to paragraph 7 below, within 30 days after a SAR has been
exercised by a Participant, the Committee shall procure the transfer to him (or
a nominee for him) or, if appropriate, allot to him (or a nominee for him) the
number of Shares or ADSs which shall have an aggregate market value (as defined in paragraph 5
below) as near as possible equal to (but not exceeding) the notional gain (as defined in paragraph 4
below).


 


3.                                 The notional gain is
the amount by which the aggregate market
value of the number of Shares or ADSs in respect of which the SAR is
exercised exceeds the aggregate base price
(as calculated in accordance with paragraph 1 above) of that number of Shares
or ADSs.


 


4.                                 For the purposes of this Schedule the market value of a Share or ADS is:


 


(a)                                      if Shares are quoted in the London Stock Exchange Daily Official
List, the middle market quotation of a Share (as derived from that List) on the
day before the day on which the SAR is exercised; or


 


(b)                                     if ADSs are quoted on the New York Stock Exchange, the closing price
of the ADS on the New York Stock Exchange on the day before the day on which
the SAR is exercised


 


(c)                                      where Shares are not so quoted, such value on the day on which the
SAR is exercised as the Committee, acting fairly and reasonably, shall decide.


 


5.                                 Shares or ADSs may only be allotted to a Participant (or a nominee for
him) who exercises his SAR to the extent that the Committee is authorised to
capitalise from the reserves of the Company a sum equal to at least the
aggregate nominal value of the Shares to be allotted to satisfy the exercise of
the SAR and to apply that sum in paying up such amount on such Shares.


 


6.                                 If the Committee so decides, the whole or any part of the notional gain determined under paragraph 4
above shall, instead of being delivered to the Participant (or his nominee) in
Shares or ADSs under paragraph 3 above, be paid in cash.


 


7.                                 Any payment of cash under paragraph 6 above will be subject to
deduction of such amount (on account of tax and similar liabilities) as may be
required by law or as the Committee may reasonably consider to be necessary or
desirable.


 


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SCHEDULE 2: 
PERFORMANCE CONDITION


 


The first Options granted under the Plan after it is approved by
shareholders will be subject to the Performance Condition set out below.  The Committee may set a different Performance
Condition for subsequent Options.


 


All words and expressions defined in the Rules of the Plan shall
have the same meanings when used in this Performance Condition.  Where there is any conflict
between the Rules and this Performance Condition, the terms of this
Performance Condition shall prevail.


 


1.                                Definitions


 


“EPS” means the basic earnings per share of
the Company as reported to shareholders, adjusted to neutralise the impact of
foreign exchange and on such other basis as deemed appropriate by the
Committee(1);


 


“Financial Year” means a financial year of
the Company within the meaning of section 390 of the Companies Act 2006;


 


“Performance Period” means the three
consecutive Financial Years of which the first is the Financial Year in which
the Grant Date falls.


 


2.                                Condition and vesting


 


(a)                                      The Performance Condition is that the Company’s average EPS growth
over the Performance Period must be at least equal to 6% compound per annum
(calculated by comparing EPS for the Financial Year ending immediately before
the Performance Period starts with EPS for the last Financial Year in the
Performance Period).


 


(b)                                     The percentage of an Option subject
to the Performance Condition that will become
exercisable upon the satisfaction of the Performance Condition is as follows:


 


	
  Average EPS growth

  	
   

  	
  %
  of Option exercisable

  
	
  10% compound p.a. or more

  	
   

  	
  100%

  
	
  Between 6% and 10% compound
  p.a.

  	
   

  	
  Pro rata between 30% and 100%

  
	
  6% compound p.a.

  	
   

  	
  30%

  
	
  Less than 6% compound p.a.

  	
   

  	
  0%

  



 






(1)     If the Committee
makes adjustments to the method of calculating EPS, the Committee shall
consider whether such adjustment should be reported in the Company's
Remuneration Report for the Financial Year in which the adjustment is made.


 


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3.                                Adjustments


 


The Committee
may make such adjustments to the method of calculating EPS or any other feature
of the terms of this Performance Condition as it considers appropriate to take
account of:


 


(a)                                      any increase or variation of the share capital of the Company;


 


(b)                                     any change to accounting standards;


 


(c)                                      there being no EPS of the Company for any relevant Financial Year;
or


 


(d)                                     any other factors considered by the Committee to be relevant.


 


4.                                Leavers and Deceased
Participants


 


If the
Participant ceases to be a director or employee of a Group Member as described
in Rules 6.1, 6.2 and 6.4 of Part A of the Plan or in Rules 6.1
to 6.3 of Part B of the Plan in circumstances where his Option is
exercisable before the end of the original Performance Period, the Committee
will determine the extent to which the Performance Condition has been satisfied
(if at all) up to the date of cessation as follows:


 


(a)                                      if the date of cessation occurs before the end of the first
Financial Year of the Performance Period, the Committee shall determine the
extent to which the Performance Condition has been satisfied on such reasonable
basis as it may decide;


 


(b)                                     if the relevant event occurs after the end of the first Financial
Year in the Performance Period, the Company’s compound EPS growth shall be
calculated on the basis of the most recently completed Financial Year of the
Company.


 


5.                                Takeovers and other corporate events


 


If an event as
described in Rule 7 of the Plan occurs, the Performance Period shall end
on the date of that event and the Committee shall determine the extent to which
the Performance Condition has been satisfied (if at all) up to the date of the
relevant event as follows:


 


(a)                                      if the relevant event occurs before the end of the first Financial
Year of the Performance Period, the Committee shall determine the extent to
which the Performance Condition has been satisfied on such reasonable basis as
it may decide;


 


(b)                                     if the relevant event occurs after the end of the first Financial
Year in the Performance Period, the Company’s compound EPS growth shall be
calculated on the basis of the most recently completed Financial Year of the
Company.


 


6.                                Disputes


 


The calculations of the Committee shall not be open to question and, in
the absence of fraud, the Committee shall be under no liability to any person
by reason of those calculations or of anything done or omitted by them for the
purposes of or in connection with those calculations.


 


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