exv4wxcy



 



Exhibit 4(c)



NATIONAL GRID GROUP PLC



 





NATIONAL GRID

EXECUTIVE SHARE OPTION PLAN 2002













	 	 	 
	 	 	
New Bridge Street Consultants

20 Little Britain

London EC1A 7DH
	 
	 	 	
Ref: N\3061\02 Exec Plan

Inland Revenue Ref: X21918\RF

Dated approved by Inland Revenue: 24 April 2002








 



CONTENTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	 	 	 	 	 	

	PART A: INLAND REVENUE APPROVED
	 	 	1	 
	1
	 	DEFINITIONS AND INTERPRETATION	 	 	1	 
	2
	 	ELIGIBILITY	 	 	2	 
	3
	 	GRANT OF OPTIONS	 	 	2	 
	4
	 	LIMITS	 	 	3	 
	5
	 	EXERCISE OF OPTIONS	 	 	5	 
	6
	 	TAKEOVER, RECONSTRUCTION AND WINDING-UP	 	 	6	 
	7
	 	VARIATION OF CAPITAL	 	 	8	 
	8
	 	ALTERATIONS	 	 	9	 
	9
	 	MISCELLANEOUS	 	 	9	 
	PART B: UNAPPROVED
	 	 	11	 
	1
	 	INTERACTION WITH PART A	 	 	11	 
	2
	 	ELIGIBILITY	 	 	11	 
	3
	 	LIMITS	 	 	11	 
	4
	 	EXERCISE OF OPTIONS	 	 	11	 
	5
	 	CASH EQUIVALENT	 	 	11	 
	6
	 	PROVISIONS REFERRING TO INLAND REVENUE APPROVAL	 	 	12	 
	7
	 	TAKEOVER, RECONSTRUCTION AND WINDING-UP	 	 	12	 
	8
	 	VARIATION OF CAPITAL	 	 	12	 
	9
	 	EXTENSION OF PLAN OVERSEAS	 	 	12	 
	PART C: US OPTIONS
	 	 	13	 
	1
	 	INTERACTION WITH PART A	 	 	13	 
	2
	 	DESIGNATION OF OPTIONS	 	 	13	 
	3
	 	ELIGIBILITY	 	 	13	 
	4
	 	GRANT OF OPTIONS	 	 	13	 
	5
	 	LIMITS	 	 	13	 
	6
	 	EXERCISE OF OPTIONS	 	 	13	 








 




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	 	 	 	 	 	

	7
	 	CASH EQUIVALENT	 	 	14	 
	8
	 	PROVISIONS REFERRING TO INLAND REVENUE APPROVAL	 	 	14	 
	9
	 	TAKEOVER, RECONSTRUCTION AND WINDING-UP	 	 	15	 
	10
	 	VARIATION OF CAPITAL	 	 	15	 
	11
	 	MISCELLANEOUS	 	 	15	 








 




PART A: INLAND REVENUE APPROVED




1.      DEFINITIONS AND INTERPRETATION




	(1)	 	In this Plan, unless the context otherwise requires:-




		
	 	“Committee” means the Remuneration Committee of the board of directors
of the Company, consisting exclusively of non-executive directors of the
Company or if any of the events envisaged in Rules 6(1), 6(3) or 6(4)
occurs then, except where a “new option” is granted under Rule 6(7), the
Remuneration Committee as constituted immediately before such event
occurred;
	 
	 	the “Company” means National Grid Group plc (registered in England and
Wales No. 4031152);
	 
	 	the “Grant Date” in relation to an Option means the date on which the
Option was granted;
	 
	 	“Group Member” means:-




	 	(a)	 	a Participating Company or a body corporate which is (within
the meaning of section 736 of the Companies Act 1985) the Company’s
holding company or a subsidiary of the Company’s holding company; or
	 
	 	(b)	 	a body corporate which is (within the meaning of section 258 of
that Act) a subsidiary undertaking of a body corporate within
paragraph (a) above and has been designated by the Board for this
purpose;




		
	 	“Option” means an option to acquire (whether by subscription or purchase)
shares in the Company granted under the Plan;
	 
	 	“Participant” means a person who holds an Option or in the event of his
death, his personal representatives;
	 
	 	“Participating Company” means the Company or any Subsidiary or any company
which is not under the control of any single person, but is under the
control of two persons (within the meaning of section 840 of the Taxes Act
1988), one of them being the Company, and to which the Committee has with
the prior approval of the Inland Revenue resolved that this Plan shall for
the time being extend;
	 
	 	the “Plan” means National Grid Executive Share Option Plan 2002 (Part A)
as herein set out but subject to any alterations or additions made under
Rule 8 below;
	 
	 	“Schedule 9” means Schedule 9 to the Taxes Act 1988;
	 
	 	“Subsidiary” means a body corporate which is a subsidiary of the Company
(within the meaning of section 736 of the Companies Act 1985) and of which
the Company has control (within the meaning of section 840 of the Taxes
Act 1988);
	 
	 	the “Taxes Act 1988” means the Income and Corporation Taxes Act 1988;
	 
	 	the “Trustees” means the trustee or trustees for the time being of any
trust established for the benefit of all or most of the employees of the
Company and/or its Subsidiaries;
	 
	 	“UKLA” means the UK Listing Authority;



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	 	and expressions not otherwise defined in this Plan have the same meanings
as they have in Schedule 9.




	(2)	 	Any reference in this Plan to any enactment includes a reference to that
enactment as from time to time modified, extended or re-enacted.
	 
	(3)	 	Expressions in italics are for guidance only and do not form part of this
Plan.




2.      ELIGIBILITY




	(1)	 	Subject to Rule 2(3), a person is eligible to be granted an Option if
(and only if) he is a full-time director or qualifying employee of a
Participating Company.
	 
	(2)	 	For the purposes of Rule 2(1) above:-




	 	(a)	 	a person shall be treated as a full-time director of a
Participating Company if he is obliged to devote to the performance
of the duties of his office or employment with that and any other
Participating Company not less than 25 hours a week excluding meal
breaks;
	 
	 	(b)	 	a qualifying employee, in relation to a Participating Company,
is an employee of the Participating Company (other than one who is a
director of a Participating Company).




	(3)	 	A person is not eligible to be granted an option at any time:-




	 	(a)	 	within the one year immediately preceding the date on which he
is bound to retire in accordance with the terms of his contract of
employment; or
	 
	 	(b)	 	when he is not eligible to participate in this Plan by virtue
of paragraph 8 of Schedule 9 (material interest in close company).




3.      GRANT OF OPTIONS




	(1)	 	Subject to Rule 4 below, the Committee or the Trustees may by deed (but,
in the case of the Trustees, only following a recommendation of the
Committee) grant an Option to acquire shares in the Company which satisfy
the requirements of paragraphs 10 to 14 of Schedule 9 (fully paid up,
unrestricted, ordinary share capital) on the Grant Date and (subject to
Rule 7(5)) at the date of exercise of the Option, upon the terms set out
in this Plan and upon such other objective terms as the person granting
the Option may specify, to any person who is eligible to be granted an
Option in accordance with Rule 2 above.
	 
	(2)	 	If, after the Committee or the Trustees (as the case may be) have imposed
a condition pursuant to Rule 3(1) (performance condition), events happen
which cause them to consider that it is no longer appropriate they may
vary such condition provided always that any such amendment may only be
one which the Committee reasonably considers will result in a fairer
measure of the performance, will ensure that this Plan operates more
effectively in the achievement of its purpose of providing share benefits
for employees who contribute to the prosperity of the Company and its
shareholders, and will be neither substantially more nor less difficult to
satisfy than the original condition was intended to be at the time of its
grant.
	 
	(3)	 	The price at which shares may be acquired by the exercise of an Option
shall be determined by the Committee before its grant, but shall not be
less than:




	 	(a)	 	if shares of the same class as those shares are quoted in the
Official List of the UKLA:



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	 	(i)	 	the middle-market quotation of shares of that class
(as derived from the Daily Official List of the London Stock
Exchange) on the dealing day before the Grant Date; or
	 
	 	(ii)	 	if the Committee so determines, the average of the
middle-market quotations for the three dealing days ending on
the dealing day last preceding the Grant Date; or
	 
	 	(iii)	 	such other dealing day(s) as may be agreed in
advance with the Inland Revenue




		
	 	provided that no such dealing day shall be before the day on which
the Company last announced its results for any period;






	 	(b)	 	if paragraph (a) above does not apply, the market value (within
the meaning of Part VIII of the Taxation of Chargeable Gains Act
1992) of shares of that class, as agreed in advance for the purposes
of this Plan with the Shares Valuation Division of the Inland
Revenue, on the Grant Date or such other day as may be agreed with the Inland Revenue; and





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





	(4)	 	An Option may only be granted after the Plan has been approved by the
Inland Revenue and:-




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




	 	(i)	 	the date on which this Plan is approved by the
Inland Revenue under Schedule 9; or
	 
	 	(ii)	 	the dealing day next following the date on which
the Company announces its results for any period; or





	 	(b)	 	at any other time when the circumstances are considered by the
Committee to be sufficiently exceptional to justify its grant; and
	 
	 	(c)	 	within the period of 10 years beginning with 15 December 2001,
being the date on which this Plan is approved by the shareholders of
National Grid Holdings One plc in general meeting.




	(5)	 	An Option granted to any person:-




	 	(a)	 	shall not, except to a Participant’s personal representatives
in the event of his death, be capable of being transferred by him;
and
	 
	 	(b)	 	shall lapse forthwith if he is adjudged bankrupt.




4.      LIMITS




	(1)	 	No Options shall be granted in any year which would, at the time they are
granted, cause the number of shares in the Company which shall have been
or may be issued in pursuance of options granted in the period of 10
calendar years ending with that year, or been issued in that period
otherwise than in pursuance of options, under this Plan or under any other
executive share scheme adopted by the Company or a Subsidiary to exceed
such number as represents 5 per cent. of the ordinary share capital of the
Company in issue at that time.



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	(2)	 	No Options shall be granted in any year which would, at the time they are
granted, cause the number of shares in the Company which shall have been
or may be issued in pursuance of options granted in the period of 10
calendar years ending with that year, or been issued in that period
otherwise than in pursuance of options, under this Plan or under any other
employees’ share scheme adopted by the Company or a Subsidiary to exceed
such number as represents 10 per cent. of the ordinary share capital of
the Company in issue at that time.
	 
	(3)	 	No person shall be granted Options which would, at the time they are
granted, cause the aggregate market value of the shares which he may
acquire in pursuance of options granted to him under this Plan or under
any other share option plan, not being a savings-related share option
plan, approved under Schedule 9 and established by the Company or by any
associated company of the Company, to exceed or further exceed £30,000 (or
such other limit imposed from time to time under paragraph 28(1) of
Schedule 9) and to the extent that the grant of any Option would otherwise
exceed this limit such grant shall be void ab initio as to such excess.
	 
	(4)	 	Except where the Committee determines otherwise, no person shall be
granted Options which would, at the time they are granted, cause the
aggregate market value of the shares which he may acquire in pursuance of
options granted to him under Parts A, B or C of this Plan in any financial
year of the Company to exceed 300% of the annual base salary of such
person, and for the purposes of this sub-rule:




	 	(a)	 	a person’s base salary shall be taken to be his current base
salary (excluding benefits in kind) expressed as an annual rate in
respect of the financial year of the Company in which the Grant Date
falls; and
	 
	 	(b)	 	where a payment of remuneration is made otherwise than in
sterling, the payment shall be treated as being of the amount of
sterling ascertained by applying such rate of exchange as published
in a national newspaper on the Grant Date as the Committee shall
reasonably determine.




	(5)	 	For the purposes of this Rule, the market value of the shares in relation
to which an option was granted shall be calculated:-




	 	(a)	 	in the case of an Option granted under this Plan, as on the day
(or days) by reference to which the price at which shares may be
acquired by the exercise thereof was determined in accordance with
Rule 3(3) above; and
	 
	 	(b)	 	in the case of an option granted under any other approved
scheme, as on the day or days by reference to which the price at
which shares may be acquired by the exercise thereof was determined.




	(6)	 	References in this Rule 4 to shares being issued pursuant to the exercise
of options shall include any shares issued for the purpose of satisfying
any such option.
	 
	(7)	 	For the purposes of Rules 4(1) and 4(2), any shares in National Grid
Holdings One plc (company number 2367004) which have been issued (or
remain issuable) under any executive or employees’ share scheme (as the
case may be) shall be treated as shares in the Company, subject to the
proviso that:




	 	(a)	 	any shares issued or issuable pursuant to any options granted
as “Replacement Options” under paragraph (f) of the Unapproved
Appendix to the National Grid Executive Share Option Scheme (1990)
shall be regarded as having been granted on the date that the “1998
Option” (as that term is defined in such paragraph) to which they
relate was granted; and



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	 	(b)	 	any shares issued or issuable pursuant to any option granted
under The National Grid Company PLC’s 1995 Unapproved Savings Related
Share Option Scheme and any corresponding option granted under The
National Grid Company PLC’s Savings Related Share Option Scheme
established in 1990 shall be treated as a single option in
recognition that only one or other, but not both, of such options may
be exercised.




5.      EXERCISE OF OPTIONS




	(1)	 	The exercise of any Option shall be effected in the form and manner
prescribed by the Committee.
	 
	(2)	 	Subject to Rules 5(4) and 5(5) and to Rules 6(1) and 6(3) to 6(5), an
Option may not be exercised before the third anniversary of the Grant
Date.
	 
	(3)	 	Subject to Rule 3(2), Rule 5(4) and paragraphs (a) and (c) of Rule 5(5)
and to Rule 6(6) below, an Option may not be exercised if the relevant
condition is not satisfied; and in this Rule 5(3), Rule 6(6) and Rule 8(1)
the relevant condition is a condition related to performance which is
specified by the Committee under Rule 3(1) above.
	 
	(4)	 	If any Participant dies, any Option granted to him may (and must, if at
all) be exercised by his personal representatives within 12 months after
the date of his death, provided that his death occurs at a time when
either he is a director or employee of a Group Member or he is or would be
entitled to exercise the option by virtue of Rule 5(5).
	 
	(5)	 	If any Participant ceases to be a director or employee of a Group Member
(otherwise than by reason of his death), the following provisions apply in
relation to any Option granted to him:-




	 	(a)	 	if he so ceases by reason of injury, disability, pregnancy or
redundancy (within the meaning of the Employment Rights Act 1996), or
by reason only that his office or employment is in a company which
ceases to be a Group Member, or relates to a business or part of a
business which is transferred to a person who is not a Group Member,
the Option may (and subject to Rule 5(4) must, if at all) be
exercised within the exercise period;
	 
	 	(b)	 	if he so ceases by reason of retirement on reaching the age at
which he is bound to retire in accordance with the terms of his
contract of employment, the Option may (and subject to Rule 5(4)
must, if at all) be exercised subject to Rule 5(3) within the
exercise period;
	 
	 	(c)	 	if he so ceases for any other reason, the Option may not be
exercised at all unless the Committee shall so permit, in which event
it may (and subject to Rule 5(4) must, if at all) be exercised to the
extent permitted by the Committee within the exercise period;




		
	 	and in this sub-rule the exercise period is the period which shall expire
12 months in the cases where sub-rules (a) or (c) apply or six months in
cases where sub-rule (b) applies after his so ceasing, or such later date
as the Committee may determine, but such date shall not be later than 42
months after the later of the Grant Date and the last time when the
Participant exercised an Option with income tax relief.




	(6)	 	A Participant shall not be treated for the purposes of Rule 5(5) 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.



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	(7)	 	Notwithstanding any other provision of this Plan, an Option may not be
exercised after the expiration of the period of 10 years (or such shorter
period as the Committee may have determined before its grant) beginning
with the Grant Date.
	 
	(8)	 	A Participant shall not be eligible to exercise an Option at any time
when he is not eligible to participate in this Plan by virtue of paragraph
8 of Schedule 9 (material interest in close company).
	 
	(9)	 	An Option may not be exercised unless:




	 	(a)	 	the Committee considers that the issue or transfer of the
shares subject to the Option would be lawful in all relevant
jurisdictions; and
	 
	 	(b)	 	in a case where a company which is or was a Group Member or the
Trustees are obliged to (or would suffer a disadvantage if it were
not to) account for any tax (in any jurisdiction) for which the
person in question is liable by virtue of the exercise of the Option
and/or for any social security contributions for which the person in
question is liable (including but not limited to, primary National
Insurance contributions in the UK) (together, the “Tax Liability”),
that person has either:





	 	(i)	 	made a payment to the Group Member (or former Group
Member) or the Trustees of an amount equal to the Tax Liability; or
	 
	 	(ii)	 	entered into arrangements acceptable to that person
or another Group Member to secure that such a payment is made
(whether by authorising the sale of some or all of the shares
on his behalf and the payment to the relevant person of the
relevant amount out of the proceeds of sale or otherwise).





	(10)	 	Within 30 days after an Option has been exercised by any person, the
grantor of the Option shall procure the allotment or transfer to him (or a
nominee for him) of the number of shares in respect of which the Option
has been exercised.
	 
	(11)	 	All shares allotted under this Plan shall rank equally in all respects
with shares of the same class then in issue except for any rights
attaching to those shares by reference to a record date prior to the date
of allotment.




6.      TAKEOVER, RECONSTRUCTION AND WINDING-UP




	(1)	 	Subject to Rule 6(9), if any person obtains control of the Company
(within the meaning of section 840 of the Taxes Act 1988) as a result of
making a general offer to acquire shares in the Company, or having
obtained control makes such an offer, the Committee shall within 7 days of
becoming aware thereof notify every Participant thereof and, subject to
earlier lapse under Rules 5(4), 5(5) and 5(7), any Option may be exercised
within one month (or such longer period up to a maximum of six months as
the Committee may permit) of the notification, but to the extent that it
is not exercised within that period shall lapse on the expiry of that
period.
	 
	(2)	 	For the purposes of Rule 6(1), a person shall be deemed to have obtained
control of the Company if he and others acting in concert with him have
together obtained control of it.
	 
	(3)	 	Subject to Rule 6(9), if any person becomes bound or entitled to acquire
shares in the Company under sections 428 to 430F of the Companies Act
1985, or if the Company passes a resolution for voluntary winding up, or
if an order is made for the compulsory winding up of the Company, the
Committee shall forthwith notify every Participant thereof and, subject to
earlier lapse under Rules 5(4), 5(5) and 5(7), any Option may be exercised
within one month of



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	 	 	such notification, but to the extent that it is not exercised within that
period shall lapse on the expiration of that period.
	 
	(4)	 	Subject to Rule 6(9), if a scheme of arrangement or compromise under
section 425 of the Companies Act 1985 is proposed, the Committee shall
forthwith notify every Participant that, subject to earlier lapse under
Rules 5(4), 5(5) and 5(7), any Option may be conditionally exercised
within the period commencing from the date of notification and ending on
the day immediately preceding the date scheduled for the Court hearing or
such later date up to a maximum of six months from the date scheduled for
the Court hearing, as the Committee may determine. If the Court sanctions
the scheme of arrangement or compromise:




	 	(a)	 	any Option so conditionally exercised shall immediately
become unconditionally exercised by the Participant; and
	 
	 	(b)	 	any Option not so conditionally exercised shall lapse on the
expiration of that period.





	 	 	However, if the Court declines to sanction the scheme of arrangement or
compromise, the conditional exercise shall not be effective and the
Options shall continue to subsist.




	(5)	 	If a demerger, special dividend or other event which, in the opinion of
the Committee would affect the share price to a material extent, is
proposed then the Committee acting fairly and reasonably may at its
discretion forthwith notify every Participant that, subject to earlier
lapse under Rule 5 or the other provisions of this Rule 6, an Option may
be exercised on such terms and during such period preceding or following
such event as may be determined by the Committee provided that if an
Option is exercised in advance of and conditional upon such event and such
event shall not occur then the conditional exercise shall not be effective
and the Option shall continue to subsist.
	 
	(6)	 	In relation to an Option which would, but for Rule 5(3) (Performance
Condition) above, be exercisable by virtue of an event mentioned in Rule
6(1), 6(3), 6(4) or 6(5), the Committee shall acting fairly and reasonably
determine the extent (if any) to which the performance condition has been
satisfied at the date on which such event occurs (as if that date were the
end of the relevant performance period) and the Option shall become
exercisable to that extent.
	 
	(7)	 	If any company (“the acquiring company”):-




	 	(a)	 	obtains control of the Company as a result of making -




	 	(i)	 	a general offer to acquire the whole of the issued
ordinary share capital of the Company 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)	 	a general offer to acquire all the shares in the
Company which are of the same class as the shares which may be
acquired by the exercise of options granted under this Plan, or





	 	(b)	 	obtains control of the Company in pursuance of a compromise or
arrangement sanctioned by the court under section 425 of the
Companies Act 1985 or Article 418 of the Companies (Northern Ireland)
Order 1986, or
	 
	 	(c)	 	becomes bound or entitled to acquire shares in the Company
under sections 428 to 430F of that Act or Articles 421 to 423 of that
Order,




	 	 	any Participant may at any time within the appropriate period (which
expression shall be construed in accordance with paragraph 15(2) of
Schedule 9), by agreement with the acquiring



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	 	 	company, release any Option which has not lapsed (“the old option”) in
consideration of the grant to him of an option (“the new option”) which
(for the purposes of that paragraph) 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 10(b) or (c) of
Schedule 9).




	(8)	 	The new option shall not be regarded for the purposes of Rule 6(7) as
equivalent to the old option unless the conditions set out in paragraph
15(3) of Schedule 9 are satisfied, but so that the provisions of this Plan
shall for this purpose be construed as if:-




	 	(a)	 	the new option were an option granted under this Plan at the
same time as the old option;
	 
	 	(b)	 	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(7), the expression “the
Company” were defined as “a company whose shares may be acquired by
the exercise of options granted under this Plan”; and
	 
	 	(c)	 	Rule 8(2) below were omitted.




	(9)	 	If:-




	 	(a)	 	the events referred to in this Rule 6 are part of an
arrangement which will mean that the Company will be under the
control of another company (within the meaning of Section 840 of the
Taxes Act 1988) or the business of the Company is carried on by
another company, and the persons who owned the shares in the Company
immediately before the change of control will immediately afterwards
own more than 50% of the shares in that other company (“a
Reorganisation”); and
	 
	 	(b)	 	an equivalent option is offered to the Participant pursuant to
Rule 6(7) above,
	 





	 	 	then an Option shall not become exercisable as a result of the
Reorganisation and, subject to earlier lapse under Rules 5(4), 5(5) and
5(7), shall lapse three months following the notification of the
Reorganisation to every Participant. Notwithstanding that an Option does
not become exercisable, nothing in this Rule 6(9) shall prevent the
provisions of Rule 6(7) from applying. Where Rule 6(7) is applied in
these circumstances, the provisions of Rule 6(8) will also apply but with
the omission of paragraph (c) of Rule 6(8).




7.      VARIATION OF CAPITAL




	(1)	 	Subject to Rule 7(3), in the event of any variation of the share capital
of the Company, the Committee may make such adjustments as it considers
appropriate under Rule 7(2).
	 
	(2)	 	An adjustment made under this sub-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 price at which shares may be acquired by the exercise of
any option;
	 
	 	(c)	 	where any option has been exercised but no shares have been
allotted or transferred pursuant to the exercise, the number of
shares which may be so allotted or transferred and the price at which
they may be acquired.




	(3)	 	At a time when this Plan is approved by the Inland Revenue under Schedule
9, no adjustment under Rule 7(2) shall be made without the prior approval
of the Inland Revenue.



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	(4)	 	An adjustment under Rule 7(2) may have the effect of reducing the price
at which shares may be acquired by the exercise of an Option to less than
their nominal value, but only if and to the extent that the Committee
shall be authorised to and shall determine that it shall 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 pursuant to the exercise exceeds the price at which the
shares may be subscribed for and to apply that sum in paying up that
amount on the shares; and so that on the 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.
	 
	(5)	 	If the shares subject to any Option cease to satisfy the requirements of
paragraphs 10 to 14 of Schedule 9 at any time after the Grant Date then:-




	 	(a)	 	the Board shall as soon as practicable notify the Inland
Revenue of this;
	 
	 	(b)	 	the grantor of the Option will not be required to allot,
transfer or procure the allotment or transfer of shares which satisfy
those requirements upon the exercise of any Option;
	 
	 	(c)	 	for the avoidance of doubt, all unexercised Options shall
continue to exist; and
	 
	 	(d)	 	the Plan shall continue to exist but if the Inland Revenue
withdraw their approval of the Plan under Schedule 9, it shall
continue to exist as an unapproved share option plan.




8.      ALTERATIONS




	(1)	 	Subject to Rules 8(2) and 8(4), the Committee may at any time alter this
Plan. When doing so, they shall have regard to the fact that, if an
alteration (other than an alteration to a relevant condition) is made at a
time when this Plan is approved by the Inland Revenue under Schedule 9,
the alteration will not thereafter have effect unless the Inland Revenue
have approved the alteration. The Company shall notify the Inland Revenue
of any alteration under this Rule 8 or any variation under Rule 7 which
could cause the Plan to cease to be approved by the Inland Revenue under
Schedule 9.
	 
	(2)	 	Subject to Rule 8(3), no alteration to the advantage of the persons to
whom Options have been or may be granted shall be made under Rule 2, Rules
3(2), 3(3), 3(4) and 3(5), Rule 4, Rules 5(2) to 5(5) and Rules 5(7) to
5(11), Rules 6(1) to 6(6), Rule 6(9) and Rules 7(1) and 7(2) without the
prior approval by ordinary resolution of the members of the Company in
general meeting.
	 
	(3)	 	Rule 8(2) shall not apply to any minor alteration to benefit the
administration of this 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.
	 
	(4)	 	No alteration to the disadvantage of any Participant shall be made under
Rule 8(1) above unless:-




	 	(a)	 	the Committee shall have invited every relevant Participant to
give an indication as to 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.      MISCELLANEOUS



-9-






 






	(1)	 	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 this Plan or any right which he may have to participate
in it, and an individual who participates in it and does not renounce an
option within 30 days of its grant, shall and does by participating in
this Plan waive any and all rights to compensation or damages in
consequence of the termination of his office or employment 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 as a result of
such termination.
	 
	(2)	 	In the event of any dispute or disagreement as to the interpretation of
this Plan, or as to any question or right arising from or related to this
Plan, the decision of the Committee shall be final and binding upon all
persons.
	 
	(3)	 	Any notice or other communication under or in connection with this Plan
may be given by personal delivery or by sending it 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 employment or in the absence of their
being such a place, the place of business to which regular correspondence
in connection with his employment is sent; and where a notice or other
communication is given by first class post it shall be deemed to have been
received 48 hours after it was put into the post properly addresses and
stamped.
	 
	(4)	 	The Company and any Subsidiary may provide money to the trustees of any
trust or any other person to enable them or him to acquire shares to be
held for the purpose of the Plan or enter into any guarantee or indemnity
for these purposes, to the extent permitted by the Companies Act 1985.
	 
	(5)	 	The Plan and all options granted under it shall be governed and construed
in accordance with English law.



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PART B: UNAPPROVED




1.      INTERACTION WITH PART A




		
	 	The provisions of Part A shall, save where otherwise specified below,
apply in relation to the grant and exercise of Options under Part B, and
all references to “the Plan” shall include this Part B.




2.      ELIGIBILITY




		
	 	A person is eligible to be granted an Option under Part B if (and only if)
he is an executive director or employee of a Participating Company and is
not within the one year immediately preceding the date on which he is
bound to retire in accordance with the terms of his contract of
employment.




3.      LIMITS




		
	 	Rule 4(3) of Part A shall not apply to any Option granted under Part B.




4.      EXERCISE OF OPTIONS




	(1)	 	In Rule 5(5) of Part A, for Options granted under Part B the wording from
“but such date” to the end of that rule shall be omitted.
	 
	(2)	 	For Options granted under Part B, the Tax Liability as defined in Rule
5(9) of Part A shall extend to any tax and any social security (in any
jurisdiction) liability associated with the grant, vesting or exercise of
an Option (including but not limited to, secondary National Insurance
contributions in the UK if the grantor of the Option so determines at the
Grant Date).




5.      CASH EQUIVALENT




	(1)	 	Where an Option granted under Part B to which this Rule applies has been
exercised by any person in respect of any number of shares, and those
shares have not yet been issued or transferred to him in accordance with
Rule 5(10) of Part A, the Committee (but only with the prior consent of
the board of directors of the Company) may determine that, in substitution
for his right to acquire such number of those shares as the Committee may
decide (but in full and final satisfaction of his said right), he shall be
paid by way of additional emoluments a sum equal to the cash equivalent of
that number of shares.
	 
	(2)	 	For the purposes of this Rule, the cash equivalent of any shares is the
amount by which the Committee’s opinion of the market value of those
shares on the day last preceding the date on which the Option was
exercised (or, if at the relevant time shares of the same class as those
shares were listed in the Official List of the UKLA, the middle-market
quotation of shares of that class, as derived from the Daily Official List
of the London Stock Exchange, on the dealing day last preceding that date)
exceeds the price at which those shares may be acquired by the exercise of
the Option.
	 
	(3)	 	As soon as reasonably practicable after a determination has been made
under Rule 5(1) of this Part B that a person shall be paid a sum in
substitution for his right to acquire any number of shares:-




	 	(a)	 	the Company shall pay to him or procure the payment to him of
that sum in cash; and
	 
	 	(b)	 	if he has already paid the Company for those shares, the
Company shall return to him the amount so paid by him.



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	(4)	 	There shall be made from any payment under this Rule such deductions (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.




6.      PROVISIONS REFERRING TO INLAND REVENUE APPROVAL




	(1)	 	Rules 2(3)(b), 3(3)(b), 5(8), 7(3) and 7(5) of Part A shall not apply to
Options granted under Part B of this Plan. In Rule 3(1) the words “which
satisfy the requirements of paragraphs 10 to 14 of Schedule 9 on the Grant
Date and (subject to Rule 7(5)) at the date of exercise of the Option”
shall be deleted.
	 
	(2)	 	Rule 3(3)(a)(iii) shall be replaced by “such other dealing day or days
falling within the period of 30 days ending with the Grant Date as the
Committee may determine”.
	 
	(3)	 	Rule 3(4)(a)(i) shall operate by reference to the approval of the Plan by
National Grid Holdings Onle plc in general meeting.
	 
	(4)	 	There shall be no need to seek Inland Revenue approval or agreement for
anything done under Part B of this Plan and references to events occurring
by reference to Inland Revenue approval shall be ignored.




7.      TAKEOVER, RECONSTRUCTION AND WINDING-UP




	(1)	 	Rule 6(6) of Part A shall be subject to the proviso that the Committee
may (in exceptional circumstances) determine that the Option should become
exercisable on a different basis if they consider that such a curtailment
of the performance period does not properly reflect the performance of the
Company over the relevant period.
	 
	(2)	 	In the event of a Reorganisation as defined in Rule 6(9) of Part A, and
with the agreement of the acquiring company, the Board in its absolute
discretion may require that the relevant Participants release their
Options in consideration of the grant to them of “new options” over shares
in the relevant acquiring company, provided that the “new options” meet
the conditions of paragraphs 15(3)(b) to (d) of Schedule 9. Rule 6(8)
shall be construed accordingly.




8.      VARIATION OF CAPITAL




		
	 	The Committee may make such adjustments to any subsisting Options as it
considers appropriate following a demerger involving the Company or any
subsidiary or of a capital or other dividend or distribution which is of
an unusual nature and which, in the opinion of the Committee, has a
material impact on the value of a share in the Company.




9.      EXTENSION OF PLAN OVERSEAS




		
	 	Notwithstanding any other provision of this Plan, the Committee may in
respect of Participants who are or who may become subject to taxation
outside the United Kingdom on their remuneration amend or add to the
provisions of the Plan as it considers necessary or desirable to take
account of or to mitigate or to comply with the relevant overseas
taxation, securities or exchange control laws provided that the terms of
options granted to such participants are not overall more favourable than
the terms of options granted to other participants.



-12-






 








PART C: US OPTIONS




1.      INTERACTION WITH PART A




		
	 	The provisions of Part A shall, save where otherwise specified below,
apply in relation to the grant and exercise of Options under Part C, and
all references to “the Plan” shall include this Part C.




2.      DESIGNATION OF OPTIONS




		
	 	Options granted under Part C may be designated as “incentive stock
options” (“ISOs”) within the meaning of section 422 of the United States
Internal Revenue Code of 1986, as amended (the “US Tax Code”). Any
options not granted under Part C as ISOs shall be granted as nonqualified
stock options for purposes of the US Tax Code.




3.      ELIGIBILITY




	(1)	 	Rule 2(3)(a) shall not apply to any person to the extent that the
application of such rule would violate applicable U.S. federal or State
law.
	 
	(2)	 	The class of person who may be granted ISOs under this Part C shall, in
addition to the limitations otherwise imposed by the Plan, be limited to
those persons who are employees of the Company or its “parent” or
“subsidiary” corporations within the meaning of section 424(e) and (f),
respectively, of the US Tax Code.




4.      GRANT OF OPTIONS




		
	 	No Option may be granted as an ISO under this Part C after 6 December
2011, being the tenth anniversary of the date of approval of the Plan by
the Company.




5.      LIMITS




	(1)	 	Rules 4(3) and 4(4) of Part A shall not apply to any Options granted
under Part C.
	 
	(2)	 	The exercise price of any Option granted as an ISO shall not be less than
the fair market value of the shares at the time such Option is granted
(determined in accordance with Section 422(c)(1) of the U.S. Tax Code and
any regulations promulgated thereunder).
	 
	(3)	 	The aggregate number of shares for which ISOs may be granted under Part C
to all option holders during the term of the Plan shall not exceed
200,000,000 (being 10% of the expected issued share capital on the
adoption of the Plan), subject to adjustment if any of the events
envisaged in Rule 7 of Part A occur.
	 
	(4)	 	To the extent that the aggregate fair market value of shares with respect
to which ISOs are exercisable for the first time by an option holder
during any calendar year (under all plans or schemes of the Company or its
“parent” or “subsidiary” corporations within the meaning of sections
424(e) and (f), respectively, of the US Tax Code) exceeds US$100,000, such
Options shall be treated, to the extent of the excess, as nonqualified
stock options.




6.      EXERCISE OF OPTIONS




	(1)	 	If any Option is exercised in accordance with Rule 5 of the Plan more
than three (3) months after the date that the option holder was last
employed by the Company (or by its parent or a subsidiary as defined in
this Part C), or in the case of “total disability” (as defined by section
422(c)(6) of the US Tax Code) more than twelve (12) months after the date
that the option



-13-






 





	 	 	holder was last employed by the Company (or by its parent or a subsidiary
as defined in this Part C), then such option shall be treated as a
nonqualified stock option for purposes of the US Tax Code.
	 
	(2)	 	The Grantor may satisfy its obligations under this Part C of the Plan by
delivering American Depository Shares representing Shares in the Company.




7.      CASH EQUIVALENT




	(1)	 	Where an Option granted under Part C to which this Rule applies has been
exercised by any person in respect of any number of shares, and those
shares have not yet been issued or transferred to him in accordance with
Rule 5(10) of Part A, the Committee (but only with the prior consent of
the board of directors of the Company) may determine that, in substitution
for his right to acquire such number of those shares as the Committee may
decide (but in full and final satisfaction of his said right), he shall be
paid by way of additional emoluments a sum equal to the cash equivalent of
that number of shares.
	 
	(2)	 	For the purposes of this Rule, the cash equivalent of any shares is the
amount by which the Committee’s opinion of the market value of those
shares on the day last preceding the date on which the Option was
exercised (or, if at the relevant time shares of the same class as those
shares were listed in the Official List of the UKLA, the middle-market
quotation of shares of that class, as derived from the Daily Official List
of the London Stock Exchange, on the dealing day last preceding that date)
exceeds the price at which those shares may be acquired by the exercise of
the Option.
	 
	(3)	 	As soon as reasonably practicable after a determination has been made
under Rule 7(1) of this Part C that a person shall be paid a sum in
substitution for his right to acquire any number of shares:




	 	    (a)	 	the Company shall pay to him or procure the payment to him of
that sum in cash; and
	 
	 	    (b)	 	if he has already paid the Company for those shares, the
Company shall return to him the amount so paid by him.




	(4)	 	There shall be made from any payment under this Rule such deductions (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.




8.      PROVISIONS REFERRING TO INLAND REVENUE APPROVAL




	(1)	 	Rules 2(3)(b), 3(3)(b), 5(8), 7(3) and 7(5) of Part A shall not apply to
Options granted under Part C of this Plan.
	 
	(2)	 	In Rule 3(1) the words “which satisfy the requirements of paragraphs 10
to 14 of Schedule 9 on the Grant Date and (subject to Rule 7(5)) at the
date of exercise of the Option” shall be deleted.
	 
	(3)	 	Subject to Rule 5(2) of Part C, Rule 3(3)(a)(iii) shall be replaced by
“such other dealing day or days falling within the period of 30 days
ending with the Grant Date as the Committee may determine”.
	 
	(4)	 	Rule 3(4)(a)(i) shall operate by reference to the adoption of the Plan by
the Company.



-14-






 







	(5)	 	There shall be no need to seek Inland Revenue approval or agreement for
anything done under Part C of this Plan and references to events occurring
by reference to Inland Revenue approval shall be ignored.




9.      TAKEOVER, RECONSTRUCTION AND WINDING-UP




	(1)	 	Rule 6(6) of Part A shall be subject to the proviso that the Committee
may (in exceptional circumstances) determine that the Option should become
exercisable on a different basis if they consider that such a curtailment
of the performance period does not properly reflect the performance of the
Company over the relevant period.
	 
	(2)	 	In the event of a Reorganisation as defined in Rule 6(9) of Part A, and
with the agreement of the acquiring company, the Board in its absolute
discretion may require that the relevant Participants release their
Options in consideration of the grant to them of “new options” over shares
in the relevant acquiring company, provided that the “new options” meet
the conditions of paragraphs 15(3)(b) to (d) of Schedule 9. Rule 6(8)
shall be construed accordingly.




10.      VARIATION OF CAPITAL




	    	 	The Committee may make such adjustments to any subsisting Options as it
considers appropriate following a demerger involving the Company or any
subsidiary or of a capital or other dividend or distribution which is of
an unusual nature and which, in the opinion of the Committee, has a
material impact on the value of a share in the Company.




11.      MISCELLANEOUS




	(1)	 	Shares shall not be issued pursuant to the exercise of any Option granted
under this Part C unless the exercise of the Option and the issuance and
delivery of such shares shall comply with all relevant provisions of law,
involving, without limitation, the Securities Act of 1933, as amended (the
“Securities Act”), the Securities Exchange Act of 1934, as amended,
applicable State securities laws, and the requirements of any stock
exchange upon which shares or American Depository Shares may then be
listed, and, at the discretion of the Company, shall be further subject to
approval of counsel for the Company with respect to such compliance. None
of the Company or any of its subsidiaries or affiliates shall have any
obligation to register any shares under the Securities Act or any
applicable State law. Any stock certificates evidencing any share issued
pursuant to the Plan may bear a legend indicating that the transferability
of the certificate and the shares are restricted and subject to terms and
conditions contained in the Plan or otherwise.
	 
	(2)	 	Rules 3(5)(b), 8(4)(b), and 9(1) shall not apply to this Part C to the
extent prohibited by US federal or applicable State law.




-15-









 


NATIONAL GRID GROUP PLC


 




SHARE MATCHING PLAN 2002











	 	 	 
	 	 	
New Bridge Street Consultants

20 Little Britain

London EC1A 7DH
	 	 	
Ref: N\3061\02 Matching Plan








 



CONTENTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	 	 	 	 	 	

	PART A: UK MATCHING AWARDS
	 	 	1	 
	1
	 	DEFINITIONS AND INTERPRETATION	 	 	1	 
	2
	 	GRANT OF AWARDS	 	 	2	 
	3
	 	LIMITS	 	 	3	 
	4
	 	EXERCISE OF MATCHING AWARDS	 	 	4	 
	5
	 	TAKEOVER, RECONSTRUCTION AND WINDING-UP	 	 	5	 
	6
	 	VARIATION OF CAPITAL	 	 	6	 
	7
	 	ADMINISTRATION AND AMENDMENT OF THIS PLAN	 	 	6	 
	8
	 	MISCELLANEOUS	 	 	7	 
	PART B: US BONUS AWARDS
	 	 	9	 
	1
	 	INTERACTION WITH PART A	 	 	9	 
	2
	 	DEFINITIONS	 	 	9	 
	3
	 	GRANT OF AWARDS	 	 	9	 
	4
	 	MISCELLANEOUS	 	 	9	 








 




PART A: UK MATCHING AWARDS




1.      DEFINITIONS AND INTERPRETATION




	(1)	 	In this Plan, unless the context otherwise requires:-




		
	 	“Announcement Date” means the date on which the Company announces its
annual results to the London Stock Exchange in any year while this Plan
subsists;
	 
	 	“the Approval Date” means 15 December 2001, being the date on which this
Plan was approved by the shareholders of National Grid Holdings One plc in
general meeting;
	 
	 	“the Board” means the Remuneration Committee of the board of directors of
the Company, a duly authorised committee thereof, or if any of the events
envisaged in Rules 5(1), 5(3) or 5(4) occurs then, except where a “new
option” is granted under Rule 5(7), the Remuneration Committee as
constituted immediately before such event occurred;
	 
	 	“Bonus” means the annual cash bonus payable to the Eligible Executive
under the Company’s senior executive bonus scheme or such other annual
bonus scheme applying to him from time to time as may be approved for the
purposes of this Plan by the Directors;
	 
	 	“the Company” means National Grid Group plc (registered in England and
Wales number 4031152);
	 
	 	“Control” means control as prescribed by section 840 of the Income and
Corporation Taxes Act 1988;
	 
	 	“Date of Grant” means the date on which a Matching Award is granted by
deed pursuant to Rule 2 of this Plan;
	 
	 	“Eligible Executive” means any person who is an executive director or
employee of a Participating Company and, at the time a Bonus is due to be
paid, is not within one year of his Normal Retirement Date;
	 
	 	“Financial Year” means a financial year of the Company within the meaning
of Section 742 of the Companies Act 1985;
	 
	 	“Group Member” means:




	 	(a)	 	a Participating Company or a body corporate which is (within
the meaning of section 736 of the Companies Act 1985) the Company’s
holding company or a subsidiary of the Company’s holding company; or
	 
	 	(b)	 	a body corporate which is (within the meaning of section 258 of
that Act) a subsidiary undertaking of a body corporate within
paragraph (a) above and has been designated by the Board for this
purpose;




		
	 	“Qualifying Shares” means shares purchased by an Eligible Executive with
part of his Bonus, pursuant to Rule 2 of this Plan;
	 
	 	“Matching Award” means a right to acquire Shares granted or the
acquisition of Shares pursuant to Rule 2 of this Plan;
	 
	 	“Normal Retirement Date” means the date on which an Eligible Executive
reaches age 65 or, if earlier, any other date on which he is bound to
retire in accordance with the terms of his contract of employment;



-1-






 



		
	 	“Participant” means a person to whom a Matching Award has been granted
under the Plan pursuant to Rule 2;
	 
	 	“Participating Company” means the Company and its Subsidiaries and any
company which is not under the Control of any single person, but is under
the Control of two persons, one of them being the Company, and to which
the Directors have resolved that this Plan shall for the time being
extend;
	 
	 	“the Plan” means the National Grid Share Matching Plan 2002 as herein set
out but subject to any amendments or additions made under Rule 7 below;
	 
	 	“Retention Period” means in relation to Qualifying Shares means the period
ending on the third anniversary of the Date of Grant of the Matching Award
to which the Qualifying Shares relate or, if earlier, the date on which
the Matching Award becomes exercisable under Rule 4 or Rule 5 of this
Plan;
	 
	 	“Shares” means fully paid ordinary shares in the capital of the Company;
	 
	 	“Subsidiary” means a company which for the time being is a subsidiary of
the Company within the meaning of Section 736 of the Companies Act 1985;
	 
	 	“Trustee” means the trustee or trustees for the time being of any employee
trust established by the Company from time to time for the benefit of
(inter alia) employees of Participating Companies and which is operated in
conjunction with this Plan;




	(2)	 	Any reference in this Plan to any enactment includes a reference to that
enactment as from time to time modified, extended or re-enacted.
	 
	(3)	 	Expressions in italics are for guidance only and do not form part of this
Plan.




2.      GRANT OF AWARDS




	(1)	 	An Eligible Executive may, if invited to do so by the Board in respect of
any Financial Year, make arrangements with the Company to apply up to such
maximum percentage of his Bonus as the Board may from time to time decide
and in such increments as the Board may decide, net of any deductions
required by law, in the purchase of Shares and payment of associated
expenses as soon as reasonably practicable after the Bonus is payable.
	 
	(2)	 	The Qualifying Shares so acquired shall either be held by the Trustee as
nominee for the Eligible Executive or the share certificate relating to
the Qualifying Shares shall be deposited with the Trustee, as the Board
may determine.
	 
	(3)	 	Subject to Rules 2(4), 2(9) and Rule 3, the Board shall recommend to the
Trustee that it grants to the Eligible Executive a Matching Award over
such number of Shares (or one half thereof in the case of an Eligible
Executive who, at the time a Bonus is due to be paid, is within two years
of his Normal Retirement Date) as does not exceed the number found by
dividing the amount of the Bonus invested in Shares (before any deductions
required by law) by the market value of a Share, such value to be
reasonably determined by the Trustee, on a dealing day (or the average of
three dealing days) within the period of 7 days prior to the Date of Grant
relating to the Matching Award (rounded down to the nearest whole number
of Shares), upon the terms set out in this Plan and upon such other
objective terms (performance conditions) as the Trustee may specify.
	 
	(4)	 	A Matching Award may only be granted within the period of six weeks
beginning with the Approval Date or within the period of six weeks after
any Announcement Date or any other



-2-






 





	 	 	time when the circumstances are considered by the Board to be sufficiently
exceptional to justify recommending to the Trustee that a grant should be
made at that time.
	 
	(5)	 	The Eligible Executive shall not pay any monetary consideration for the
grant of a Matching Award, which shall be granted by deed as an option
with a nominal exercise price or be in such other form as the Trustee
shall determine from time to time.
	 
	(6)	 	The grant of a Matching Award shall be evidenced by the issue to the
Participant of a written notice stating the number of shares subject to
the Matching Award, the Date of Grant, the number of Qualifying Shares
acquired by him, the Retention Period and, if applicable, the performance
condition applying to them.
	 
	(7)	 	For the purposes of Rules 2(1) and 2(3), where an Eligible Executive is
paid a Bonus otherwise than in sterling, any conversion into sterling for
the calculations above shall be at such exchange rate as reasonably
determined by the Board or Trustee.
	 
	(8)	 	A Matching Award shall be personal to the Participant to whom it is
granted and shall not be transferable or assignable except to his personal
representatives in the event of his death. If a Participant does or
suffers any act or thing whereby he would or might be deprived of the
legal or beneficial ownership of a Matching Award, that Matching Award
shall forthwith lapse.
	 
	(9)	 	No Matching Award may be granted under this Plan after the tenth
anniversary of the Approval Date.




3.      LIMITS




	(1)	 	No Matching Award shall be granted in any year which would, at the time
it is granted, cause the number of shares in the Company which shall have
been or may be issued in pursuance of Matching Awards or options granted
in the period of 10 calendar years ending with that year, or been issued
in that period otherwise than in pursuance of Matching Awards or options,
under this Plan or under any other employee share scheme adopted by the
Company or a Subsidiary to exceed such number as represents 10 per cent.
of the ordinary share capital of the Company in issue at that time.
	 
	(2)	 	No Matching Award shall be granted in any year which would, at the time
it is granted, cause the number of shares in the Company which shall have
been or may be issued in pursuance of Matching Awards or options granted
in the period of 10 calendar years ending with that year, or been issued
in that period otherwise than in pursuance of Matching Awards or options,
under this Plan or under any other executive share scheme adopted by the
Company or a Subsidiary to exceed such number as represents 5 per cent. of
the ordinary share capital of the Company in issue at that time.
	 
	(3)	 	References in this Rule to shares being issued pursuant to the exercise
of Matching Awards or options shall include any shares issued for the
purpose of satisfying any such Matching Award or option.
	 
	(4)	 	For the purposes of Rule 3(1), any shares in National Grid Holdings One
plc (company number 2367004) which have been issued (or remain issuable)
under any executive or employees’ share scheme (as the case may be) shall
be treated as shares in the Company, subject to the provisio that:




	 	(a)	 	any shares issued or issuable pursuant to any options granted
as “Replacement Options” under paragraph (f) of the Unapproved
Appendix to the National Grid Executive Share Option Scheme (1990)
shall be regarded as having been granted on the date that the



-3-






 





	 	 	 	“1998 Option” (as that term is defined in such paragraph) to which
they relate was granted; and
	 
	 	(b)	 	any shares issued or issuable pursuant to any option granted
under The National Grid Company PLC’s 1995 Unapproved Savings Related
Share Option Scheme and any corresponding option granted under The
National Grid Company PLC’s Savings Related Share Option Scheme
established in 1990 shall be treated as a single option in
recognition that only one or other, but not both, of such options may
be exercised.




4.      EXERCISE OF MATCHING AWARDS




	(1)	 	A Matching Award shall:




	 	(a)	 	not be capable of exercise or release prior to the expiry of
the Retention Period;
	 
	 	(b)	 	unless exercised or released in accordance with the Rules of
this Plan, lapse upon the expiry of ten years from its Date of Grant
or any earlier date specified by the Trustee when making the Matching
Award or, if earlier, the date on which the Participant sells,
transfers or pledges the Qualifying Shares to which the Matching
Award relates if such date is prior to the end of the Retention
Period, pro rata to the number of Qualifying Shares being so sold,
transferred or pledged;
	 
	 	(c)	 	be exercised or released only when such performance condition
(if any) as has been set by the Trustee on its Date of Grant is
satisfied, unless upon the Board’s recommendation, the Trustee
determines otherwise;
	 
	 	(d)	 	be exercised or released by a Participant giving notice in
writing to the Trustee in the form prescribed by the Board together
with the written notice of that Matching Award referred to in Rule
2(6), and paying the Matching Award’s exercise price (if any); and
	 
	 	(e)	 	lapse forthwith on the Participant ceasing to be employed by a
Group Member, unless the Board determines otherwise, in which case
the Board shall specify the extent to which the Matching Award can be
exercised, the exercise price to be paid, whether the performance
target (if any) has to be satisfied, and the period of time during
which the Matching Award may be exercised.




	(2)	 	For the purposes of Rule 4(1)(e), no Participant shall be treated as
ceasing to be employed by a Group Member until he ceases to hold an office
or employment in any Group Member.
	 
	(3)	 	Notwithstanding any other Rule of this Plan, the exercise or release of
Matching Awards will be subject to such additional conditions and
procedures as the Trustee and/or Board may determine are necessary or
desirable for the time being in order to comply with or take into account
any legal or taxation obligations of, or implications for, a Group Member
in respect of such exercise or release. For the avoidance of doubt, and
without limiting any of the foregoing, the Trustee and/or Board may
require that in a case where a Group Member is obliged to account for or
could suffer a disadvantage should it not account for any tax (in any
jurisdiction) for which the person in question is liable by virtue of the
exercise or release of the Matching Award and/or for any social security
contributions recoverable from the person in question (together, the “Tax
Liability”) that person has either:




	 	(a)	 	made a payment to the relevant Group Member or Trustee of an
amount equal to the Tax Liability; or
	 
	 	(b)	 	entered into arrangements with the relevant Group Member, the
Trustee or another company to secure that such a payment is made
(whether by authorising any person to



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	 	 	 	procure the sale on his behalf of some or all of the shares subject
to the Matching Award and authorising the payment to the relevant
Group Member or Trustee of the appropriate amount out of the
proceeds of sale, or otherwise).




	(4)	 	The Trustee shall (subject to any necessary consent) transfer the Shares
in respect of which a Matching Award within 30 days after such exercise or
release.
	 
	(5)	 	Where Shares are issued to or transferred to a participant following the
exercise of an option, the participant shall not be entitled to any
rights, attaching to such shares by reference to a record date before the
date on which the shares are so issued or transferred.




5.      TAKEOVER, RECONSTRUCTION AND WINDING-UP




	(1)	 	Subject to Rule 5(8), if any person obtains Control of the Company as a
result of making a general offer to acquire shares in the Company, or
having obtained Control makes such an offer, the Board shall within 7 days
of becoming aware thereof notify every Participant thereof and, subject to
earlier lapse under Rule 4, any Matching Award may be exercised or
released within one month (or such longer period as the Board may permit)
of the notification, but to the extent that it is not exercised or
released within that period shall lapse on the expiry of that period.
	 
	(2)	 	For the purposes of Rule 5(1), a person shall be deemed to have obtained
Control of the Company if he and others acting in concert with him have
together obtained Control of it.
	 
	(3)	 	Subject to Rule 5(8), if any person becomes bound or entitled to acquire
shares in the Company under sections 428 to 430F of the Companies Act
1985, or if the Company passes a resolution for voluntary winding up, or
if an order is made for the compulsory winding up of the Company, the
Board shall forthwith notify every Participant thereof and, subject to
earlier lapse under Rule 4, any Matching Award may be exercised or
released within one month of such notification, but to the extent that it
is not exercised or released within that period shall lapse on the
expiration of that period.
	 
	(4)	 	Subject to Rule 5(8), if a scheme of arrangement or compromise under
section 425 of the Companies Act 1985 is proposed, the Board shall
forthwith notify every Participant that, subject to earlier lapse under
Rule 4, any Matching Award may be conditionally exercised or released
within the period commencing from the date of notification and ending on
the day immediately preceding the date scheduled for the Court hearing or
such other date as the Board may determine. If the Court sanctions the
scheme of arrangement or compromise, any Matching Award not so
conditionally exercised or released shall lapse on the expiration of that
period. However, if the Court declines to sanction the scheme of
arrangement or compromise, the conditional exercise or release shall not
be effective and the Matching Award shall continue to subsist.
	 
	(5)	 	If a demerger, special dividend or other event which, in the opinion of
the Board would affect the share price to a material extent, is proposed
then the Board may at its discretion forthwith notify every Participant
that, subject to earlier lapse under Rule 4 or this Rule 5, a Matching
Award may be conditionally exercised or released during such period
preceding such event as may be determined by the Board provided that if
such event shall not occur then the conditional exercise or release shall
not be effective and the Matching Award shall continue to subsist.
	 
	(6)	 	In relation to a Matching Award which would, but for Rule 4(1)(c), be
exercisable or releasable by virtue of an event mentioned in Rule 5(1),
5(3) or 5(4), the Board shall determine the extent



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	 	 	(if any) to which the performance condition has been satisfied at the date
on which such event occurs and the Matching Award shall become exercisable
or releasable to that extent.
	 
	(7)	 	If any company (“the acquiring company”):




	 	(a)	 	obtains Control of the Company as a result of making:




	 	(i)	 	a general offer to acquire the whole of the issued
ordinary share capital of the Company 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)	 	a general offer to acquire all the shares in the
Company which are of the same class as the shares which may be
acquired by the exercise of options granted under this Plan, or




	 	(b)	 	obtains control of the Company in pursuance of a compromise or
arrangement sanctioned by the court under section 425 of the
Companies Act 1985 or Article 418 of the Companies (Northern Ireland)
Order 1986; or
	 
	 	(c)	 	becomes bound or entitled to acquire shares in the Company
under sections 428 to 430F of that Act or Articles 421 to 423 of that
Order,
	 
	 	any Participant may at any time by agreement with the acquiring company,
release any Matching Award which has not lapsed (“the old award”) in
consideration of the grant to him of an award (“the new award”) relating
to shares in a different company (whether the acquiring company itself or
some other company) subject to any applicable laws.





	(8)	 	If:-





	 	(a)	 	the events referred to in this Rule 5 are part of an
arrangement (“a Reorganisation”) which will mean that the Company
will be under the Control of another company or the business of the
Company is carried on by another company;
	 
	 	(b)	 	the persons who owned the shares in the Company immediately
before the change of Control will immediately afterwards own more
than 50% of the shares in that other company; and
	 
	 	(c)	 	a new award is offered to the Participant pursuant to Rule
5(7),
	 
	 	then a Matching Award shall not become exercisable as a result of the
Reorganisation but, instead the provisions of Rule 5(7) will automatically
apply to all Matching Awards as at the date of the Reorganisation without
the need for the Participant’s agreement at that time.




6.      VARIATION OF CAPITAL




		
	 	In the event of any variation of the share capital of the Company, a
demerger involving the Company or any Subsidiary, or the payment of a
capital or other dividend or distribution which is of an unusual nature
and which, in the opinion of the Board, has a material impact on the value
of a Share, the Board (with the consent of the Trustee) may make such
adjustment to the number of Shares subject to a Matching Award as it
considers appropriate.




7.      ADMINISTRATION AND AMENDMENT OF THIS PLAN




	(1)	 	Subject to Rules 7(2) and 7(4), the Board may at any time alter this
Plan.



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	(2)	 	Subject to Rule 7(3), no alteration to the advantage of the persons to
whom Matching Awards have been or may be granted shall be made under the
definition of “Eligible Executive” and Rules 2, 3, 4(1) to 4(3) and 6
without the prior approval by ordinary resolution of the members of the
Company in general meeting.
	 
	(3)	 	Rule 7(2) shall not apply to any minor alteration to benefit the
administration of this 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.
	 
	(4)	 	No alteration to the disadvantage of any Participant shall be made under
Rule 7(1) above unless:-




	 	(a)	 	the Board shall have invited every relevant Participant to give
an indication as to 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.




	(5)	 	Notwithstanding any other provision of this Plan, the Board may in
respect of Participants who are or who may become subject to taxation
outside the United Kingdom on their remuneration amend or add to the
provisions of the Plan as it considers necessary or desirable to take
account of or to mitigate or to comply with the relevant overseas
taxation, securities or exchange control laws provided that the terms of
matching awards granted to such participants are not overall more
favourable than the terms of matching awards granted to other participant.
	 
	(6)	 	If, after the Trustee has imposed a condition pursuant to Rule 2(3)
(performance condition), events happen which cause them to consider that
it is no longer appropriate they may vary such condition provided always
that any such amendment may only be one which the Board reasonably
considers will result in a fairer measure of the performance, will ensure
that this Plan operates more effectively in the achievement of its purpose
of providing share benefits for employees who contribute to the prosperity
of the Company and its shareholders, and will be neither substantially
more nor less difficult to satisfy than the original condition was
intended to be at the time of its grant.




8.      MISCELLANEOUS




	(1)	 	The rights and obligations of any individual under the terms of his
office or employment, including but not limited to an employment contract,
with any Group Member shall not be affected by this Plan. An individual
who participates in the Plan shall by participating in this Plan waive any
and all rights to compensation or damages in consequence of the
termination of his office or employment 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 Matching Award as a result of such
termination.
	 
	(2)	 	In the event of any dispute or disagreement as to the interpretation of
this Plan, or as to any question or right arising from or related to this
Plan, the decision of the Board shall be final and binding upon all
persons.



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	(3)	 	Any notice or other communication under or in connection with this Plan
may be given by personal delivery or by sending it 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 in the absence of their being such
a place, the place of business to which regular correspondence in
connection with his employment is sent; and where a notice or other
communication is given by first class post it shall be deemed to have been
received 48 hours after it was put into the post properly addresses and
stamped.
	 
	(4)	 	The Company and any Subsidiary may provide money to the Trustees or any
other person to enable them or him to acquire shares to be held for the
purpose of the Plan or enter into any guarantee or indemnity for these
purposes, to the extent permitted by the Companies Act 1985.
	 
	(5)	 	A Participant shall be entitled to receive a cash payment on the expiry
of the Retention Period as determined by the Trustee and calculated by
reference to the dividends (if any) paid in respect of any Shares
constituting a Matching Award during the Retention Period.
	 
	(6)	 	The Plan and all Matching Awards granted under it shall be governed and
construed in accordance with English law.



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PART B: US INCENTIVE SHARE AWARDS




1.      INTERACTION WITH PART A




		
	 	The provisions of Part A shall, save where disapplied in this Part B,
apply in relation to the grant and exercise of Matching Awards under Part
B. In addition, the Company may approve supplementary guidance provisions
to assist in the practical implementation and administration of this Part
B of the Plan.




2.      DEFINITIONS




		
	 	“Retention Period” means such period of time specified by the Board or
Trustee when making a Matching Award, which in default shall be the period
of five years from the Date of Grant, subject to earlier curtailment by
the operation of Rule 4 or Rule 5 of Part A of the Plan.




		
	 	“Shares” means fully paid ordinary shares in the capital of the Company
and/or American Depository Receipts representing the right to receive
fully paid ordinary shares in the capital of the Company.




		
	 	References to “Qualifying Shares” shall be ignored for the purposes of
Matching Awards granted under this Part B.




3.      GRANT OF AWARDS




		
	 	The grant of a Matching Award under this Part B shall not be linked to the
purchase or continuing ownership of Qualifying Shares and may be vested on
award.




4.      MISCELLANEOUS




	(1)	 	Shares shall not be issued pursuant to the exercise of any Matching Award
granted under this Part B unless the exercise of the Matching Award and
the issuance and delivery of such shares shall comply with all relevant
provisions of law, involving, without limitation, the Securities Act of
1933, as amended (the “Securities Act”), the Securities Exchange Act of
1934, as amended, applicable State securities laws, and the requirements
of any stock exchange upon which shares or American Depository Receipts
may then be listed, and, at the discretion of the Company, shall be
further subject to approval of counsel for the Company with respect to
such compliance. None of the Company or any of its subsidiaries or
affiliates shall have any obligation to register any shares under the
Securities Act or any applicable State law. Any stock certificates
evidencing any share issued pursuant to the Plan may bear a legend
indicating that the transferability of the certificate and the shares are
restricted and subject to terms and conditions contained in the Plan or
otherwise.
	 
	(2)	 	The reference to “is not within one year of his Normal Retirement Age” in
the definition of “Eligible Executive” in Rule 1(1), Rules 2(1) to 2(3),
Rules 2(5) to 2(7) and Rule 7(4) shall not apply to this Part B.




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