dex102.htm


    TEMPUR
PEDIC INTERNATIONAL INC.

     

    UNITED
KINGDOM APPROVED SHARE OPTION SUB PLAN

     

    TO
THE 2003 EQUITY INCENTIVE PLAN

     

    Her
Majesty’s Revenue and Customs Reference: X23169/GWW

     

    Adopted
by the Committee on ________________

     

    Approved
by Her Majesty’s Revenue and Customs on ________________

     

     

    KPMG

    1
Puddle Dock

    LONDON

    EC4V
3PD

     


    
      
         


      

      
         


        
          

        

      

      
         


      

       

    

     

    RULES
OF THE TEMPUR PEDIC INTERNATIONAL INC. UNITED

    
      KINGDOM
APPROVED SHARE OPTION SUB PLAN TO THE 2003 EQUITY

      INCENTIVE
PLAN

       

      INDEX

       

    

    
      	
              1.

            	
              Definitions 

            	
              3

            


    

     

    
      	
              2.

            	
              Grant of Options 

            	
              7

            


    

     

    
      	
              3.

            	
              Limitations on Grants 

            	
              8

            


    

     

    
      	
              4.

            	
              Exercise of Options 

            	
              9

            


    

     

    
      	
              5.

            	
              Acquisitions, Change of Control and
      Option Exchanges 

            	
              11

            


    

     

    
      	
              6.

            	
              Variation of Share
      Capital 

            	
              12

            


    

     

    
      	
              7.

            	
              Manner of Exercise of
      Options 

            	
              12

            


    

     

    
      	
              8.

            	
              Administration and
      Amendment 

            	
              15

            


    

     

    
      	
              9.

            	
              Miscellaneous 

            	
              16

            


    

     

     


    
      
        
        

      

      
         


        
          

        

      

      
        Index

      

    


    RULES
OF THE TEMPUR PEDIC INTERNATIONAL INC. UNITED

    KINGDOM
APPROVED SHARE OPTION SUB PLAN TO THE 2003 EQUITY

    INCENTIVE
PLAN

     

    
      	
              1.  

            	
              Definitions

            


    

     

    
      	
              1.1  

            	
              As
      used in this Plan, the following terms and phrases shall have the
      following meanings:

            


    

     

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

     

    “Acquiring Company” means,
where the conditions of paragraph 26(2) of Schedule 4 are met, such company as
shall be at any time the “acquiring company” as defined in that
paragraph;

     

    “Acquisition” means a merger
or consolidation of the Company with or into another person or the sale,
transfer, or other disposition of all or substantially all of the Company’s
assets to one or more other persons in a single transaction or series of related
transactions;

     

    “Adoption Date” means the
earlier of the date on which the Main Plan was adopted by the Board and the date
on which the Main Plan was approved by the Company’s shareholders;

     

    “Affiliate” means any
corporation, partnership, limited liability company, business trust, or other
entity controlling, controlled by or under common control with the
Company;

     

    “Approval Date” means the date
upon which Her Majesty’s Revenue and Customs approves the Plan;

     

    “Associated Company” means has
the same meaning as in paragraph 35(1) of Schedule 4;

     

    “Board” means the board of
directors of the Company;

     

    “Change of Control” means the
occurrence of any of the following after the date of the approval of the Main
Plan by the Board:

     

    
      	
               
      

            	
              (a)

            	
              an
      Acquisition, unless securities possessing more than 50% of the total
      combined voting power of the survivor’s or acquiror’s outstanding
      securities (or the securities of any parent thereof) are held by a person
      or persons who held securities possessing more than 50% of the total
      combined voting power of the Company’s outstanding securities immediately
      prior to that transaction, or

            


    

     

    
      	
               
      

            	
              (b)

            	
              any
      person or group of persons (within the meaning of Section 13(d)(3) of the
      Securities Exchange Act of 1934, as amended and in effect from time to
      time) directly or indirectly acquires beneficial ownership (determined
      pursuant to Securities and Exchange Commission Rule 13d-3 promulgated
      under the said Exchange Act) of securities possessing more than 50% of the
      total combined voting power of the Company’s outstanding securities
      pursuant to a tender or exchange offer made directly to the Company’s
      shareholders that the Board does not recommend such shareholders accept,
      other than:

            


    

     

    
      	
               
      

            	
              (i)

            	
              the
      Company or an Affiliate;

            


    

     

    
      	
               
      

            	
              (ii)

            	
              an
      employee benefit plan of the Company or any of its
    Affiliates;

            


    

     

    
      	
               
      

            	
              (iii)

            	
              a
      trustee or other fiduciary holding securities under an employee benefit
      plan of the Company or any of its Affiliates;
or

            


    

     

    
      	
               
      

            	
              (iv)

            	
              an
      underwriter temporarily holding securities pursuant to an offering of such
      securities; or

            


    

     

    
      
        
        

      

      
        - 3 -


        
          

        

      

      
        Index

      

    

     

     

    
      	
               

               
      

            	
              (c)

            	
              over
      a period of 36 consecutive months or less, there is a change in the
      composition of the Board such that a majority of the Board members
      (rounded up to the next whole number, if a fraction) ceases, by reason of
      one or more proxy contests for the election of Board members, to be
      composed of individuals who either:

            


    

     

    
      	
               
      

            	
              (i)

            	
              have
      been Board members continuously since the beginning of that period;
      or

            


    

     

    
      	
               
      

            	
              (ii)

            	
              have
      been elected or nominated for election as Board members during such period
      by at least a majority of the Board members described in sub-point (c)(i)
      above who were still in office at the time that election or nomination was
      approved by the Board; or

            


    

     

    
      	
               
      

            	
              (d)

            	
              a
      majority of the Board votes in favour of a decision that a Change in
      Control has occurred;

            


    

     

    “Committee” means the
compensation committee of the Board, which in general is responsible for the
administration of the Main Plan and for any period during which no such
committee is in existence “Committee” shall mean the Board and all authority and
responsibility assigned to the Committee under the Plan shall be exercised, if
at all, by the Board;

     

    “Company” means:

     

    
      	
               
      

            	
              (a)

            	
              Tempur
      Pedic International Inc. a corporation organized under the laws of the
      State of Delaware;

            


    

     

    
      	
               
      

            	
              (b)

            	
              in
      relation to New Options granted pursuant to Rule 2.2 save for the purposes
      of Rules 2, 3 and 8.2 the Acquiring Company;
or

            


    

     

    
      	
               
      

            	
              (c)

            	
              some
      other company falling within sub-paragraph (b) or sub-paragraph (c) of
      paragraph 14 of Schedule 4 over whose shares a New Option has been
      granted;

            


    

     

    “Competitive Enterprise” means
a business enterprise that engages in, or owns or controls a significant
interest in, any entity that engages in the manufacture, sale or distribution of
mattresses or pillows or other bedding products or other products competitive
with the Company’s products and shall include, but not be limited to, the
entities set out in any appendix to the Option Agreement, which may be amended
from time to time upon notice to the Participant;

     

    “Conversion Rate” means on any
given day the average currency conversion rate quoted by the Wall Street Journal
as the price for pounds sterling purchased with US dollars on the preceding day
on which the New York Stock Exchange is open for business;

     

    “Date of Grant” means the date
on which an Option is granted as specified in the Option Agreement. Only if
expressly so provided in the applicable Option Agreement shall the Date of Grant
be the date on which the Option Agreement has been duly executed and delivered
by the Company and the Participant;

     

    “Eligible Employee” means any
Group Employee who is required to devote substantially all his working time to
the business of the Group (provided that in the case of a director, he is
required to devote to his duties not less than 25 hours per week, excluding meal
breaks) and is not precluded by paragraph 9 of Schedule 4 from participating in
the Plan;

     

    “Exercise Price” means the
amount in US dollars (“Dollars”) as determined by the Company at the Date of
Grant, which a Participant shall pay to acquire a Share on the exercise of an
Option being, subject to Rule 2.2 and Rule 6, not less than 100% of the Market
Value of a Share on the Date of Grant or not less than 110% of the Market Value
of a Share on the Date of Grant if the Participant holds more than 10% of the
total combined voting power of all classes of stock of the Company;

     

    “Group” means the Company and
its Subsidiaries and the phrase “Group Company” shall be construed
accordingly;

     

    “Group Employee” means an
employee or an executive director of any Group Company;

     

    
      
        
        

      

      
        - 4 -


        
          

        

      

      
        Index

      

    

     

    
      

      

    

    “Key Feature” means a
provision of the Plan which is necessary to meet the requirements of Schedule
4;

     

    “Main Plan” means the Tempur
Pedic International Inc. 2003 Equity Incentive Plan;

     

    “Market Value” means on any
day an amount equal to the closing price of a Share as reported on the New York
Stock Exchange for that day or, if no closing price is reported for that date,
the closing price on the next preceding date for which a closing price was
reported, or if on that day the Shares are not so listed, the market value of a
Share determined in accordance with Part VIII of the UK Taxation of Chargeable
Gains Act 1992 and agreed in advance with HMRC Shares Valuation;

     

    “New Option” means an option
over shares meeting the requirements of sub-paragraphs 27(4)(a) to (d) of
Schedule 4, granted in consideration for the release of a Subsisting Option
within the periods specified in paragraph 26(3) of Schedule 4;

     

    “NIC” means UK National
Insurance Contributions;

     

    “NIC Election” means an
election in the form envisaged in Paragraph 3B(1) of Schedule 1 to the Social
Security Contribution and Benefits Act 1992 as a result of which the secondary
NIC liability, if any, in respect of the exercise of the Option becomes the
Participant’s liability;

     

    “Notice of Exercise” means the
notice of exercise in such form as the Committee may determine from time to
time;

     

    “Option” means a right to
acquire Shares granted or to be granted pursuant to Rules 2.1 or
2.2;

     

    “Option Agreement” means the
option agreement entered into by the Company and the Participant in such form as
the Committee may determine from time to time;

     

    “Other Option Plan” means any
share option plan (other than this Plan) approved by Her Majesty’s Revenue and
Customs under Schedule 4 and established by the Company or any Associated
Company thereof;

     

    “Participant” means a person
who has been granted an Option or (where the context admits) his legal personal
representative(s);

     

    “Plan” means this Tempur Pedic
International Inc. United Kingdom Approved Share Option Sub Plan to the Main
Plan constituted and governed by the Rules with, and subject to, any amendments
hereto properly effected;

     

    “Redundancy” means the
cessation of employment or office by reason of redundancy within the meaning of
the UK Employment Rights Act 1996;

     

    “Retirement” means the
cessation of employment or office by reason of retirement at or beyond the age
of 55;

     

    “Rules” means the rules of the
Plan as the same may be amended from time to time;

     

    
      
        
        

      

      
        - 5 -


        
          

        

      

      
        Index

      

    

     

     

    “Schedule 4” means Schedule 4
to the Act;

     

    “Share” means a share of
common stock in the capital of the Company that meets the requirements to be
ordinary share capital within the meaning of section 832(1) of the UK Income and
Corporation Taxes Act 1988;

     

    “Subsidiary” means a company
which is under Tax Control of the Company;

     

    “Subsisting Option” means an
Option which has been granted and which has not lapsed, been surrendered,
renounced or exercised in full;

     

    “Tax Control” means has the
same meaning as in section 840 of the UK Income and Corporation Taxes Act
1988.

     

    
      	
              1.2  

            	
              In
      these Rules, except insofar as the context otherwise
    requires:

            


    

     

    
      	
              (a)  

            	
              words
      denoting the singular shall include the plural and vice
    versa;

            


    

     

    
      	
              (b)  

            	
              words
      importing a gender shall include every gender and references to a person
      shall include bodies corporate and unincorporated and vice
      versa;

            


    

     

    
      	
              (c)  

            	
              reference
      to any enactment shall be construed as a reference to that enactment as
      from time to time amended, modified, extended or re-enacted and shall
      include any orders, regulations, instruments or other sub-ordinate
      legislation made under the relevant
enactment;

            


    

     

    
      	
              (d)  

            	
              words
      have the same meanings as in Schedule 4 unless the context otherwise
      requires; and

            


    

     

    
      	
              (e)  

            	
              headings
      and captions are provided for reference only and shall not be considered
      as part of the Plan.

            


    

     

    
      	
              2.  

            	
              Grant of
Options

            


    

     

    
      	
              2.1  

            	
              The
      Committee may in its absolute discretion select any number of individuals
      who shall at the intended Date of Grant be Eligible Employees and
      recommend the grant to them of Options. The Committee may also delegate to
      an executive officer or officers the authority to grant Options to
      Eligible Employees who are not officers in accordance with such guidelines
      as the Committee shall set forth at any time or from time to time. Options
      may be granted subject to Rule 3 under this Plan by the Committee or by an
      executive officer or officers as provided above but in both cases not
      earlier than the Approval Date and not later than the tenth anniversary of
      the Adoption Date provided that the Shares satisfy the conditions
      specified in paragraphs 16 to 20 inclusive of Schedule 4 on the Date of
      Grant.

            


    

     

    
      	
              2.2  

            	
              Where
      the circumstances noted in Rule 5.3 apply New Options may be granted
      within the terms of paragraph 26 of Schedule 4 in consideration for the
      release of Options. Such New Options are deemed to be equivalent to the
      old Options and to have been granted within the terms of this
      Plan.

            


    

     

    
      	
              2.3  

            	
              No
      Option may be transferred, assigned or charged and any purported transfer,
      assignment or charge shall be void ab initio. For the avoidance of doubt,
      this Rule 2.3 shall not prevent the Option of a deceased Participant being
      exercised by his personal representative(s) within the terms of these
      Rules.

            


    

     

    
      
        
        

      

      
        - 6 -


        
          

        

      

      
        Index

      

    

     

     

    
      	
              2.4  

            	
              An
      Option may be granted subject to a condition of exercise that the
      Participant is required to:

            


    

     

    
      	
              (a)  

            	
              bear
      the cost of all or part of the secondary NIC, if any, which arises in
      respect of the exercise of the Option;
and/or

            


    

     

    
      	
              (b)  

            	
              enter
      into an NIC Election; or

            


    

     

    
      	
              (c)  

            	
              accept
      that an NIC Election that has already been entered into will apply to the
      Option being granted

            


    

     

    in which
case any secondary NIC due on the exercise of the Option shall be payable by or
recoverable from that Participant in accordance with Rule 7.4 provided that the
Committee, acting fairly and reasonably, may in its discretion at any time or
times release the Participant from his liability or reduce his liability
hereunder provided that where an NIC Election has been entered into between the
relevant Group Company and that Participant any amendment to that election to
reduce the Participant’s liability will require prior approval of Her Majesty’s
Revenue and Customs.

     

    Where an
Option is granted subject to (b) or (c) above and at the date of exercise no
valid NIC Election is in place then the Option shall be deemed to have been
granted subject to (a) above.

     

    
      	
              2.5  

            	
              Options
      shall be granted to an Eligible Employee by way of an Option Agreement.
      The Option Agreement shall specify the Date of Grant, the number of Shares
      subject to Option, the Exercise Price, details of when and how the Option
      may be exercised and, where this is a condition of exercise of the Option,
      that the Participant is liable to pay secondary
  NIC.

            


    

     

    
      	
              3.  

            	
              Limitations on
Grants

            


    

     

    
      	
              3.1  

            	
              Any
      Option granted to an Eligible Employee shall be limited and take effect so
      that immediately following such grant he would hold Subsisting Options
      over Shares with an aggregate Market Value not exceeding £30,000, or such
      other limit specified in paragraph 6 of Schedule
  4.

            


    

     

    For the
purpose of this Rule 3.1, Subsisting Options shall comprise Subsisting Options
and subsisting options granted under all Other Option Plans.

     

    For the
purpose of this Rule 3.1 the Market Value of Shares shall be calculated in
accordance with paragraph 6(3) of Schedule 4 (converted from US dollars to
pounds sterling at the Conversion Rate applicable on each Date of
Grant).

     

    
      	
              3.2  

            	
              At
      no time shall the aggregate number of Shares issued pursuant to or subject
      to Subsisting Options granted under this Plan and subsisting awards
      granted under the Main Plan exceed 8,000,000 Shares or any other limit
      referred to in the Main Plan from time to time, subject to the provisions
      of Section 8 of the Main Plan. For the purposes of this Rule 3.2, if any
      Option granted under the Plan or option or stock appreciation right
      granted under the Main Plan expires, terminates or is cancelled for any
      reason without having been exercised in full or if any other award under
      the Main Plan is forfeited by the recipient, the Shares not purchased by
      the participant or optionee under the Main Plan or which are forfeited by
      the recipient under the Main Plan shall again be available for Options to
      be granted under the Plan and awards granted under the Main Plan. In
      addition, settlement of any award under the Main Plan shall not count
      against the foregoing limitations except to the extent settled in the form
      of Shares.

            


    

     

    
      	
              3.3  

            	
              The
      aggregate number of Shares covered by Options under this Plan and awards
      under the Main Plan granted to any one person in any calendar year shall
      not exceed 25% of the limit referred to in Rule
  3.2.

            


    

     

    
      
        
        

      

      
        - 7 -


        
          

        

      

      
        Index

      

    

     

     

    
      	
              4.  

            	
              Exercise of
Options

            


    

     

    
      	
              4.1  

            	
              Subject
      to each of the succeeding rules of this Rule 4 and Rule 7 any Subsisting
      Option may be exercised by the Participant or, if deceased, by his
      personal representatives in whole or in part at the time of or at any time
      following the occurrence of the earlier of the following
      events:

            


    

     

    
      	
              (a)  

            	
              the
      date or dates specified by the Company and stated in the Option Agreement,
      provided that the Subsisting Option (or part thereof) will only become
      exercisable on each such date if the Participant continues to be a Group
      Employee on that date;

            


    

     

    
      	
              (b)  

            	
              upon
      an event giving a right of exercise in accordance with the provisions of
      Rule 5.

            


    

     

    
      	
              4.2  

            	
              No
      Option may be exercised by a Participant at any time when he is precluded
      by paragraph 9 of Schedule 4 from participating in the
    Plan.

            


    

     

    
      	
              4.3  

            	
              An
      Option shall lapse and become thereafter incapable of exercise on the
      earliest of the following events:

            


    

     

    
      	
              (a)  

            	
              the
      tenth anniversary of the Date of Grant or such earlier date specified by
      the Company at the Date of Grant and stated in the Option
      Agreement;

            


    

     

    
      	
              (b)  

            	
              where
      a Participant ceases to be a Group Employee by reason of death or
      disability, twelve months following such
  cessation;

            


    

     

    
      	
              (c)  

            	
              where
      a Participant ceases to be a Group Employee for a reason not falling
      within Rule 4.3(b) (including cessation as a result of Redundancy or
      Retirement), three months following such
  cessation;

            


    

     

    
      	
              (d)  

            	
              the
      surrender of the Option by the
Participant;

            


    

     

    
      	
              (e)  

            	
              on
      the dates determined in accordance with Rule
  5.1;

            


    

     

    
      	
              (f)  

            	
              where
      at any time within twelve months after ceasing to be a Group Employee by
      reason of disability or at any time within three months after ceasing to
      be a Group Employee for a reason not falling within Rule 4.3(b), in both
      cases any of the following occurs in relation to a Participant, the date
      the Participant enters into such an
activity:

            


    

     

    
      	
              (i)  

            	
              the
      Participant unreasonably refuses to comply with lawful requests for
      cooperation made the Board, the Company or its
  Affiliates;

            


    

     

    
      	
              (ii)  

            	
              the
      Participant accepts employment or a consulting or advisory engagement with
      any Competitive Enterprise of the Company or its Affiliates or engages
      otherwise in competition with the Company or its
    Affiliates;

            


    

     

    
      	
              (iii)  

            	
              the
      Participant acts against the interest of the Company or its Affiliates
      including recruiting or employing, or encouraging or assisting his new
      employer to recruit or employ an employee of the Company or its
      Affiliates, without the Company’s written
  consent;

            


    

     

    
      
        
        

      

      
        - 8 -


        
          

        

      

      
        Index

      

    

     

     

    
      	
              (iv)  

            	
              the
      Participant fails to protect and safeguard while in his possession or
      control, or surrender to the Company upon termination of his employment or
      association with the Company or its Affiliates or such earlier time or
      times as the Board, the Company or any Affiliate may specify, all
      documents, records, tapes, disks and other media of every kind and
      description relating to the business, present or otherwise, of the Company
      and its Affiliates, and any copies, in whole or in part thereof, whether
      or not prepared by the Participant;

            


    

     

    
      	
              (v)  

            	
              the
      Participant solicits or encourages any person or enterprise with which he
      has had business-related contact or who has been a customer of the Company
      or any of its Affiliates to use confidential information of the Company or
      any of its Affiliates for his own benefit or gain, or the Participant
      discloses or otherwise misuses confidential information or materials of
      the Company or any of its Affiliates (except as required by applicable
      law).

            


    

     

    
      	
              4.4  

            	
              Military
      or sick leave or other bona fide leave shall not be deemed a cessation of
      employment or other association, provided that it does
      not exceed the longer of ninety (90) days and the period during which the
      absent Participant’s reemployment rights, if any, are guaranteed by
      statute or by contract.

            


    

     

    
      	
              5.  

            	
              Acquisitions, Change of Control and
      Option Exchanges

            


    

     

    
      	
              5.1  

            	
              In
      the event of an Acquisition in which Subsisting Options are not
      exercisable in full pursuant to Rule 5.2, any Subsisting Option shall
      nevertheless become exercisable in full if not replaced with New Options
      pursuant to Rule 5.3 and shall lapse after 6 months following the
      Acquisition. As to any one or more Subsisting Options which do not
      otherwise become exercisable in full by reason of such Acquisition, the
      Committee, acting fairly and reasonably, may also, either in advance of an
      Acquisition or at the time thereof, provide for such Subsisting Options to
      become exercisable in the event that the employment of the Participants
      should subsequently cease following the
  Acquisition.

            


    

     

    
      	
              5.2  

            	
              Subject
      to the following, upon the occurrence of a Change of Control, Subsisting
      Options not otherwise exercisable shall become exercisable with respect to
      50% of the Shares for which such Subsisting Options are not then
      exercisable. The provisions of this Rule 5.2 shall not apply: (i) in the
      case of any Option granted pursuant to an Option Agreement requiring other
      or additional terms upon a Change in Control (or similar event) or (ii) if
      specifically prohibited under applicable laws, or by the rules and
      regulations of any governing governmental agencies or national securities
      exchanges.

            


    

     

    
      	
              5.3  

            	
              If
      a company obtains Tax Control of the Company in the circumstances
      specified in paragraph 26(2)(a) of Schedule 4, a Participant may, by
      agreement with that other company (the “Acquiring Company”), within the
      period referred to in paragraph 26(3)(a) of Schedule 4, release his Option
      (the “Old Option”) in consideration for the grant of a new option (the
      “New Option”) which satisfies the conditions that
  it:

            


    

     

    
      	
              (a)  

            	
              is
      over shares in the Acquiring Company or some other company falling within
      subparagraphs (b) or (c) of paragraph 16 of Schedule 4, which satisfies
      the conditions specified in paragraphs 16 to 20 inclusive of Schedule
      4;

            


    

     

    
      	
              (b)  

            	
              is
      a right to acquire such number of shares as has on acquisition of the New
      Option an aggregate Market Value equal to the aggregate Market Value of
      the shares subject to the Old Option on its
  release;

            


    

     

    
      	
              (c)  

            	
              has
      an exercise price per share such that the aggregate price payable on the
      complete exercise of the New Option equals the aggregate price which would
      have been payable on complete exercise of the Old Option, and is
      exercisable in the same manner as the Old Option and subject to the
      provisions of the Plan, and where appropriate the Main Plan, as it had
      effect immediately before the release of the Old
  Option.

            


    

     

    
      
        
        

      

      
        - 9 -


        
          

        

      

      
        Index

      

    

     

     

              The New Option shall, for all
purposes of the Plan, be treated as having been acquired at the same time as the
Old Option.

     

    Where any
New Options are awarded pursuant to this Rule 5.3, the provision of the Plan and
where appropriate, the Main Plan, shall, in relation to the New Options, be
construed as if references to the Company and to the Shares were references to
the Acquiring Company or shares in that company or, as the case may be, to the
other company over whose shares the New Option relates, and to shares in that
other company.

     

    Where, in
accordance with Rule 5.3, Old Options are released and New Options granted, the
New Options shall not be exercisable by virtue of the event by reason of which
the New Options were granted.

     

    
      	
              6.  

            	
              Variation of Share
  Capital

            


    

     

    
      	
              6.1  

            	
              All
      of the Share numbers set forth in this Plan reflect the capital structure
      of the Company as at 23 December 2003. In the event of any variation of
      the share capital of the Company, including, but without prejudice to the
      generality of the preceding words, any capitalisation or open offer or any
      consolidation, sub-division or reduction of capital the number of Shares
      subject to any Option and the Exercise Price may be adjusted by the
      Committee in such manner as is in their opinion fair and reasonable
      provided that:

            


    

     

    
      	
              (a)  

            	
              the
      aggregate Exercise Price payable on the exercise of the whole Option
      remains unchanged (except for minor changes caused by
      rounding);

            


    

     

    
      	
              (b)  

            	
              at
      any time when the Plan remains approved by Her Majesty’s Revenue and
      Customs no adjustment shall take effect without the prior approval of Her
      Majesty’s Revenue and Customs;

            


    

     

    
      	
              (c)  

            	
              at
      any time when the Plan remains approved by Her Majesty’s Revenue and
      Customs following the adjustment the Shares continue to satisfy the
      conditions specified in paragraphs 16 to 20 inclusive of Schedule
      4.

            


    

     

    Such
variation shall be deemed to be effective, once Her Majesty’s Revenue and
Customs approval has been given, from the record date at which the respective
variation applied to other shares of the same class as the Shares. Any Options
exercised within the period from the record date to the date when the Options
are adjusted shall be treated as exercised with the benefit of the
variation.

     

    
      	
              6.2  

            	
              If
      an adjustment is made pursuant to Rule 6.1 above with the intention that
      the Plan shall cease to be approved by Her Majesty’s Revenue and Customs,
      the Company shall immediately notify Her Majesty’s Revenue and
      Customs.

            


    

     

    
      
        
        

      

      
        - 10 -


        
          

        

      

      
        Index

      

    

     

     

    
      	
              7.  

            	
              Manner of Exercise of
  Options

            


    

     

    
      	
              7.1  

            	
              No
      Option may be exercised whilst the Plan is approved by Her Majesty’s
      Revenue and Customs unless the Shares satisfy the conditions specified in
      paragraphs 16 to 20 inclusive of Schedule
4.

            


    

     

    
      	
              7.2  

            	
              An
      Option shall be exercised in whole or in part by the Participant or, as
      the case may be, his personal representative and the exercise shall be
      effective on the date of receipt by the Company of a duly completed Notice
      of Exercise accompanied by the appropriate payment in the form of cash or
      a cheque payable to the order of the Company (or where a formal cashless
      exercise program has been authorised by the Company entailing the sale of
      Shares subject to an Option in a brokered transaction (other than to the
      Company) an agreement with the Company as agent for the Participant to
      sell or procure the sale of sufficient Shares acquired on exercise to pay
      an amount equal to the appropriate
payment).

            


    

     

    
      	
              7.3  

            	
              Subject
      to Rules 7.4 and 7.5, where an Option is exercised the number of Shares
      specified in the Notice of Exercise given in accordance with Rule 7.2
      shall be allotted or transferred, as appropriate, credited as fully paid
      to the Participant within 30 days of the date of exercise and the Company
      shall deliver or cause to be delivered to the Participant or his agent a
      certificate or certificates for the number of Shares subject of the
      exercise other than those which the Participant has instructed shall be
      sold on his behalf by the Company. Save for any rights determined by
      reference to a record date preceding the date of allotment or transfer,
      such Shares shall rank pari passu with the other shares of the same class
      then in issue.

            


    

     

    Notwithstanding
the preceding provisions of this Rule 7.3, if, at any time, in the reasonable
opinion of the Company, the issuance or transfer of Shares may constitute a
violation of law, then the Company may delay such issuance or registration of
transfer of such shares and the delivery of a certificate for such shares until
(i) approval shall have been obtained from such governmental agencies, other
than the Securities and Exchange Commission, as may be required under any
applicable law, rule, or regulation and (ii) in the case where such issuance or
transfer would constitute a violation of a law administered by or a regulation
of the Securities and Exchange Commission, one of the following conditions shall
have been satisfied:

     

    
      	
              (a)  

            	
              the
      Shares are at the time of the issue or transfer of such Shares effectively
      registered under the Securities Act of
1933;

            


    

     

    
      	
              (b)  

            	
              the
      Company shall have determined, on such basis as it deems appropriate
      (including an opinion of counsel in form and substance satisfactory to the
      Company) that the sale, transfer, assignment, pledge, encumbrance or other
      disposition of such shares or such beneficial interest, as the case may
      be, does not require registration under the Securities Act of 1933, as
      amended or any applicable State securities laws;
  or

            


    

     

    
      	
              (c)  

            	
              the
      Participant shall have made such written representation to the Company
      (upon which the Company may reasonably rely) as the Company may deem
      necessary or appropriate for the purpose of confirming that the issuance
      or transfer of such Shares will be exempt from the registration
      requirements of the Securities Act 1933 and any applicable state
      securities laws and otherwise in compliance with all applicable laws,
      rules and regulations, including but not limited to that the Participant
      is acquiring the Shares for his or her own account for the purpose of
      investment and not with a view to, or for the sale in connection with, the
      distribution of any such Shares.

            


    

     

    The
Company shall make all reasonable efforts to bring about the occurrence of said
events.

     

    
      
        
        

      

      
        - 11 -


        
          

        

      

      
        Index

      

    

     

     

    
      	
              7.4  

            	
              If
      an Option is exercised and the Participant was required under Rule 2.4 to
      either bear the cost of all or part of the secondary NIC and/or to enter
      into an NIC Election then the Participant shall grant to the Company the
      irrevocable authority to withhold from his remuneration or any payment
      otherwise due to him (in so far as legally able to do so) and/or, as agent
      of the Participant and on his behalf, to sell or procure the sale of
      sufficient of the Shares subject to Option so that the aggregate of the
      amount withheld and the net proceeds payable to the Group Company are so
      far as possible equal to but not less than the amount of the secondary NIC
      for which the Participant is liable and the Company shall account to the
      Participant for any balance.

            


    

     

    No Shares
shall be allotted or transferred to the Participant until the Group Company has
received payment. This Rule 7.4 shall not apply if the Participant pays to the
Company in Pounds Sterling (whether by cheque or banker’s draft) the amount
necessary to satisfy such liabilities or makes alternative arrangements to the
satisfaction of his employer or former employer and the Company is informed by
the Group Company that the arrangements are satisfactory.

     

    
      	
              7.5  

            	
              If
      an Option is exercised and the Participant is liable to tax, duties or
      other amounts on such exercise and his employer or former employer being a
      Group Company is liable to make a payment to the appropriate authorities
      on account of that liability then the Participant shall grant to the
      Company the irrevocable authority to withhold from his remuneration or any
      payment otherwise due to him (in so far as legally able to do so) and/or,
      as agent of the Participant and on his behalf, to sell or procure the sale
      of sufficient of the Shares subject to Option so that the aggregate of the
      amount withheld and the net proceeds payable to the Group Company are so
      far as possible equal to but not less than the amount payable to the
      appropriate authorities and the Company shall account to the Participant
      for any balance.

            


    

     

    No Shares
shall be allotted or transferred to the Participant until the Group Company has
received payment. This Rule 7.5 shall not apply if the Participant pays to the
Company in Pounds Sterling (whether by cheque or banker’s draft) the amount
necessary to satisfy such liabilities or makes alternative arrangements to the
satisfaction of his employer or former employer and the Company is informed by
the Group Company that the arrangements are satisfactory.

     

    
      	
              7.6  

            	
              When
      an Option is exercised in part, the balance shall remain exercisable on
      the same terms as originally applied to the
  Option.

            


    

     

    
      	
              7.7  

            	
              For
      so long as Shares are listed on the New York Stock Exchange, the Company
      shall apply for Shares in respect of which an Option has been exercised to
      be admitted for listing on the New York Stock Exchange, if they were not
      so admitted already.

            


    

     

    
      
        
        

      

      
        - 12 -


        
          

        

      

      
        Index

      

    

     

     

    
      	
              8.  

            	
              Administration and
      Amendment

            


    

     

    
      	
              8.1  

            	
              The
      Plan shall be administered by the Committee provided, however, that at any
      time and on any one or more occasions the Board may itself exercise any of
      the powers and responsibilities assigned the Committee under the Plan and
      when so acting shall have the benefit of all of the provisions of the Plan
      pertaining to the Committee’s exercise of its authorities
      hereunder.

            


    

     

    
      	
              8.2  

            	
              The
      Board may from time to time amend these Rules provided
    that:

            


    

     

    
      	
              (a)  

            	
              no
      amendment may materially adversely affect a Participant as regards an
      Option granted prior to the amendment being made except with the consent
      in writing of the Participant;

            


    

     

    
      	
              (b)  

            	
              no
      amendment to any Key Feature shall have effect until approved by Her
      Majesty’s Revenue and Customs whilst the Plan is and is intended to remain
      approved by Her Majesty’s Revenue and Customs pursuant to Schedule 4;
      and

            


    

     

    
      	
              (c)  

            	
              no
      amendment made with the intention that the Plan shall cease to be approved
      by Her Majesty’s Revenue and Customs shall take effect unless at the same
      time Her Majesty’s Revenue and Customs is notified of such
      amendment.

            


    

     

    
      	
              8.3  

            	
              The
      Committee shall have complete authority to interpret the Plan. The
      Committee’s determinations made in good faith, acting fairly and
      reasonably, on matters referred to in the Plan shall be final, binding and
      conclusive on all persons having or claiming any interest under the Plan
      or Options granted under the Plan.

            


    

     

    
      	
              8.4  

            	
              Any
      notice, demand, request or other communication under the Plan to any party
      shall be deemed to be sufficient if contained in a written instrument
      delivered in person or duly sent by first class registered, certified or
      overnight mail, postage prepaid, or telecopied with a confirmation copy by
      regular, certified or overnight mail, addressed or telecopied, as the case
      may be, (i) if to the recipient of an Option, at his residence address
      last filed with the Company and (ii) if to the Company, at its principle
      place of business, addressed to the attention of its treasurer, or to such
      other address or telecopier number, as the case may be, as the addressee
      may have designated by notice to the addressor. All such notices,
      requests, demands, and other communications shall be deemed to have been
      received: (i) in the case of personal delivery, on the date of such
      delivery; (ii) in the case of mailing, when received by the addressee; and
      (iii) in the case of facsimile transmission, when confirmed by facsimile
      machine report.

            


    

     

    
      	
              8.5  

            	
              The
      Company shall at all times during the term of the Plan in respect of
      Subsisting Options granted hereunder reserve or otherwise keep available
      such number of Shares as will be sufficient to satisfy the requirements of
      the Plan (if then in effect) and the Subsisting Options and shall pay all
      fees and expenses necessarily incurred by the Company in connection
      therewith.

            


    

     

    
      
        
        

      

      
        - 13 -


        
          

        

      

      
        Index

      

    

     

     

    
      	
              9.  

            	
              Miscellaneous

            


    

     

    
      	
              9.1  

            	
              The
      Plan shall terminate upon the tenth anniversary of the Adoption Date or at
      any earlier time by the passing of a resolution of the Board. Termination
      of the Plan shall be without prejudice to the subsisting rights of
      Participants.

            


    

     

    
      	
              9.2  

            	
              The
      rights and obligations of any individual under the terms of his office or
      employment with any Group Company shall not be affected by his
      participation in the Plan or any right which he may have to participate
      therein, and an individual who participates therein shall waive any and
      all rights to compensation or damages in consequence of the termination of
      his office or employment (whether lawfully or unlawfully) for any reason
      whatsoever insofar as those rights arise or may arise from his ceasing to
      have rights under or be entitled to exercise any Option under the Plan as
      a result of such termination.

            


    

     

    
      	
              9.3  

            	
              A
      Participant shall, by participating in the Plan, waive any and all rights
      to compensation or damages in consequence of any loss of income tax relief
      under section 524 of the Act and/or any loss of relief or exemption from
      liability to primary NIC or secondary NIC as a result of the Plan losing
      approval under the Act and/or in consequence of the operation of the terms
      of this Plan.

            


    

     

    
      	
              9.4  

            	
              The
      existence of any Option or Options shall not affect in any way the right
      or power of the Company or its shareholders to make or authorise any or
      all adjustments, recapitalisation, reorganisations, reductions of capital,
      purchase or redemption of its own shares in accordance with Company law of
      the State of Delaware or other changes in the Company’s capital structure
      or any merger or consolidation of the Company, or any issue of bonds,
      debentures, preferred or prior preference stock ahead of or convertible
      into, or otherwise affecting the Shares or the rights thereof, or the
      dissolution or liquidation of the Company, or any sale or transfer of all
      or any part of its assets or business, or any other corporate act or
      proceeding, whether of a similar character or
  otherwise.

            


    

     

    
      	
              9.5  

            	
              Neither
      the grant of an Option nor any benefit which may accrue to a Participant
      on the exercise of an Option shall form part of that Participant’s
      pensionable remuneration for the purposes of any pension scheme or similar
      arrangement which may be operated by any Group
  Company.

            


    

     

    
      	
              9.6  

            	
              It
      is a condition of participation in this Plan that a Participant agree to
      the holding of information about him by the Company and that he authorise
      the Company and its agents and advisers to use such information according
      to these Rules for the purposes of this Plan. It is a further condition of
      participation in this Plan that each Participant agrees that data
      concerning his participation may be processed by agents of the Company
      wherever located and where necessary transmitted outside of the United
      Kingdom. Each Option Agreement shall contain statements to this
      effect.

            


    

     

    
      	
              9.7  

            	
              The
      benefit of Rules 9.2 to 9.4 is given to the Company for itself and as
      trustee and agent of each Subsidiary. To the extent that this Rule
      benefits any company which is not a party to this Plan, the benefit shall
      be held on trust and as agent by the Company for such company and the
      Company may, at its discretion, assign the benefit of such Rules to such
      company.

            


    

     

    
      
        	
                9.8  

              	
                The
      Plan and all Options granted under it shall be governed by and construed
      in accordance with the laws of the state of Delaware without regard to the
      conflict of laws principles
thereof.