EXHIBIT 4.2


                         THE COLT PERFORMANCE SHARE PLAN









                    ----------------------------------------

                   Established by a resolution of a Committee
                    of the Board of Directors of the Company
                    dated 4th April, 2000 and approved by an
                    ordinary resolution of the Company passed
                                on 25th May, 2000
                    ----------------------------------------









                      As amended up to 15th February, 2001





                             SLAUGHTER AND MAY (JZF)
                              35 Basinghall Street,
                                 London EC2V 5DB

                                   PN003670201
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                  THE RULES OF THE COLT PERFORMANCE SHARE PLAN

                                    CONTENTS

                                                                       Page

1. INTERPRETATION AND CONSTRUCTION                                       1

            1.1         Definitions                                      1

            1.2         Construction                                     2

            1.3         Governing law                                    2

2. ELIGIBILITY                                                           3

3. GRANT OF AWARDS                                                       3

            3.1         Operation of the Plan                            3

            3.2         Grant of Awards                                  3

            3.3         Value of Award                                   4

            3.4         Market value                                     4

            3.5         Shares comprised in an Award                     4

            3.6         Adjustment of Performance Targets                4

4. VESTING OF AWARDS                                                     5

            4.1         General                                          5

            4.2         Vesting of Awards                                5

            4.3         Notification to Participant                      6

5. RESTRICTIONS UPON VESTING                                             6

            5.1         General                                          6

            5.2         Lapsing of Awards                                6

            5.3         Meaning of "ceasing to be employed"              6

            5.4         Cessation of employment                          7
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6. CHANGE IN CONTROL AND LIQUIDATION                                     8

7. PROCEDURE ON VESTING                                                  8

            7.1         Issue or Transfer of Shares                      8

            7.2         Withholding obligations                          9

            7.3         Provision of Shares                              9

8. NON-TRANSFERABILITY OF AWARDS                                        10

9. LOSS OF OFFICE                                                       10

10. VARIATION OF CAPITAL                                                10

            10.1        General                                         10

            10.2        Adjustment of Awards                            11

            10.3        Restrictions on adjustment                      11

            10.4        Notification of adjustment                      11

11. GENERAL                                                             11

            11.1        Administration                                  11

            11.2        Costs and expenses                              11

            11.3        Power of amendment                              11

            11.4        Grant of Options                                12

            11.5        Termination                                     13

12. PLAN LIMITS                                                         13

            12.1        General                                         13

            12.2        Life of Plan                                    14

13. NOTICES                                                             14

            13.1        To Employees and Participants                   14

            13.2        To the Company                                  14
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            13.3        To the Trustee                                  14


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1.    INTERPRETATION AND CONSTRUCTION

1.1   Definitions

      (A)   In this Plan, the following definitions apply.

      (B)   The "Auditors" are the auditors for the time being of the Company.

      (C)   An "Award" is an Award granted under Rule 3 of the Plan.

      (D)   The "Board" means the board of directors of the Company.

      (E)   The  "Committee"  means the  Compensation  Committee of the Board or
            such other  committee  or  committees  of the Board as the Board may
            from time to time  determine  or, if the  Board so  determines,  the
            Board.

      (F)   The "Company" is COLT Telecom Group plc  registered in England under
            No. 3232904.

      (G)   "Conditions" has the meaning given in Rule 3.2(A).

      (H)   "Control"  has the meaning  given to it by section 840 of the Income
            and Corporation Taxes Act 1988.

      (I)   The "Date of  Grant" of an Award is the date on which it is  granted
            or  such  earlier  date  as may  be  specified  in the  notification
            referred to in Rule 3.2(D).

      (J)   A "Dealing Day" is a day on which the London Stock  Exchange is open
            for the transaction of business.

      (K)   "Employee"  is any employee or salaried  director of a member of the
            Group.

      (L)   A  "Financial  Year" means a  financial  year of the Company as that
            expression is defined in section 742 of the Companies Act 1985.

      (M)   "Grantor"  means the Company where an Award is, or is to be, granted
            by the  Company  and the  Trustee  where an Award  is,  or is to be,
            granted by the Trustee.

      (N)   The "Group"  means the Company and its  Subsidiaries  and "member of
            the Group" is to be construed accordingly.

      (O)   The "London Stock Exchange" means the London Stock Exchange Limited.

      (P)   The "Market  Price" in relation to any share means the middle market
            quotation for that share as shown in the Daily  Official List of the
            London Stock Exchange.
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                                       2


      (Q)   A  "Participant"  is the  holder of an Award or,  where the  context
            admits or requires, his personal representatives.

      (R)   The  "Performance  Period" in respect of an Award is a period set by
            the Committee at or prior to grant of an Award.

      (S)   "Performance  Target"  means the measure of the  financial  or other
            performance  of the  Company  applied  in  relation  to any Award in
            accordance with Rule 3.2(A).

      (T)   The  "Plan"  means this plan (and  including  the  Schedules  to the
            Rules) as from time to time amended.

      (U)   The "Rules" means the rules of this Plan.

      (V)   "Shares"  means  fully-paid  ordinary  shares in the  capital of the
            Company.

      (W)   "Subsidiary"  has the  meaning  given  to it by  section  736 of the
            Companies Act 1985.

      (X)   The  "Trust"  means  any  trust  for the  benefit  of,  inter  alia,
            employees  of  the  Group  from  time  to  time  designated  by  the
            Committee.

      (Y)   The  "Trustee"  means the trustee or trustees  for the time being of
            the Trust or, if there is more than one,  the trustee or trustees of
            the Trust nominated by the Committee.

1.2   Construction

      (A)   Where  the  context  so  admits,  any  reference  in the Plan to the
            singular includes the plural and vice versa.

      (B)   Any reference in the Plan to an enactment  includes the enactment as
            for the time being amended or re-enacted.

      (C)   The headings to the Rules are for reference  purposes only and shall
            not affect the meaning or construction of the Rules.

1.3   Governing law

      This Plan and any Award  granted  under it is  governed  by,  and is to be
construed in accordance with, English law.
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                                       3


2.    ELIGIBILITY

2.1   The persons who are eligible to receive  Awards are such  Employees as are
      selected by the Committee to participate in the Plan.

2.2   An Award may not be made to an Employee  within the two years prior to the
      date on which the  Employee  is  obliged  to retire  under the  Employee's
      contract of employment.

3.    GRANT OF AWARDS

3.1   Operation of the Plan

      (A)   The Committee shall decide whether or not to operate the Plan on any
            occasion and whether  Awards should be made by the Company or by the
            Trustee.

      (B)   All Awards must, save in  circumstances  determined by the Committee
            to be exceptional,  be granted as soon as is reasonably  practicable
            after the  announcement of the Group's results for any period to the
            London Stock Exchange.

      (C)   The  Committee  shall  ensure  that the Plan is not  operated at any
            time, or in any  circumstances,  when to do so would  contravene the
            provisions of the Criminal  Justice Act 1993,  the  Company's  share
            dealing code,  the Listing Rules of the London Stock Exchange or any
            other applicable laws or regulations.

3.2   Grant of Awards

      (A)   Prior to the grant of  Awards  the  Committee  shall  determine  the
            conditions  which  shall  apply  before  an Award  may  vest.  Those
            conditions shall include

            (i)   a measure or measures of the financial or other performance of
                  the Group (the "Performance Target"); and

            (ii)  such  additional  conditions  (if  any) as the  Committee  may
                  determine,

            together the "Conditions").

      (B)   If Awards are to be granted by the  Company,  the Company will grant
            an Award to each relevant Employee on such Conditions. The Committee
            will determine the cash amount of that Award.

      (C)   If Awards are to be  granted  by the  Trustee,  the  Committee  must
            notify the Trustee of:

            (i)   the Employees  whom it  recommends  be granted  Awards and the
                  cash amount of the Award which it recommends; and
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                                       4


            (ii)  the  Conditions  which  the  Committee  recommends  should  be
                  attached to Awards and the applicable Performance Period,

            and, if the Trustee agrees to the Plan being operated in relation to
            that period and those  individuals,  the Trustee will grant an Award
            to each such Employee on such terms.

      (D)   Each Employee who receives an Award will be given written  notice of
            the Award and of any Conditions applying to that Award.

3.3   Value of Award

      The maximum number of Shares which a Participant  may,  subject to Rule 4,
      acquire on vesting of an Award shall be  calculated  by dividing  the cash
      amount of the Award granted under Rule 3.2 by the market value of a Share,
      as determined in accordance with Rule 3.4.

3.4   Market value

      The  "market  value"  of a  Share  for  the  purpose  of  Rule  3.3 is the
      arithmetic  average  of the  Market  Prices,  for the three  Dealing  Days
      immediately  before the Date of Grant or over such other period or periods
      as the Committee may determine either generally or in any particular case.

3.5   Shares comprised in an Award

      Participants  will  have no  entitlement  to or in  respect  of any  Share
      comprised in an Award until that Award vests.  In particular,  but without
      limitation,  Participants will have no entitlement to receive dividends in
      respect of such Shares or to exercise  any other rights in respect of them
      until the relevant Award vests.

3.6   Adjustment of Performance Targets

      (A)   In the  circumstances  mentioned  in Rule  3.6(D),  the  Grantor may
            change  the  Performance  Target  and/or the  additional  Conditions
            imposed under Rule 3.2(A).

      (B)   The power to change  includes  both the power to adjust and also the
            power to impose a replacement  Performance Target and/or replacement
            additional Conditions.

      (C)   The Grantor's power is, however, restricted as follows -

            (i)   the change must not have the effect of making the  Performance
                  Target or the additional  Conditions  more onerous than it was
                  or they were immediately  before the circumstance in question,
                  and
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                                       5


            (ii)  the change  must not be made  unless the  Auditors  (acting as
                  experts and not as  arbitrators)  have confirmed in writing to
                  the Committee  (and to the Trustee where the Award was made by
                  the  Trustee)  that,  in  their   opinion,   it  is  fair  and
                  reasonable, and

            (iii) where the Award was made by the  Trustee,  the  Committee  has
                  approved the change.

      (D)   The circumstances are -

            (i)   any variation of the Company's capital,

            (ii)  such  circumstances  as were  specified  when  the  Award  was
                  granted, and

            (iii) any  event or  events  as a  result  of  which  the  Committee
                  considers  it fair and  reasonable  to change the  Performance
                  Target and/or the additional Conditions.

4.    VESTING OF AWARDS

4.1   General

            The number of Shares in respect of which an Award vests and to which
            the  Participant  will   consequently   become  entitled  is  to  be
            determined by the Committee (with the consent of the Trustee, if the
            Trustee is the Grantor) in accordance with the following  provisions
            of this Rule 4.

4.2   Vesting of Awards

      (A)   Subject to Rule 4.2(B), Awards will vest on the later of:

            (i)   the date or dates  specified by the Committee at or before the
                  Date of Grant; and

            (ii)  the  date  on  which  the   Committee   determines   that  the
                  Performance Target and any other Conditions imposed under Rule
                  3.2(A) have been satisfied,

            unless they have  previously  lapsed in accordance with the Rules of
            the Plan.

      (B)   If the Performance  Target and/or such Conditions are not and cannot
            be satisfied the Award will lapse.  However,  the Grantor may permit
            Awards to vest on or after the date(s) specified in Rule 4.2(A) even
            if the Performance  Target and/or other Conditions cannot be or have
            not  been  satisfied  if -
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                                       6


            (i)   the Grantor considers that it is unlikely that the Performance
                  Target and/or other applicable Conditions will be satisfied in
                  the reasonably  foreseeable  future because of some unforeseen
                  event or events, and

            (ii)  the Grantor does not consider that it is appropriate to change
                  the Performance  Target or other Conditions in accordance with
                  Rule 3.6 (Adjustment of Performance Targets), and

            (iii) the Grantor  considers that it is fair and reasonable to allow
                  the Award to vest,

            in each  case  following  consultation  with the  Committee,  if the
            Option was granted by the Trustees.

      (C)   If the Participant's  Award does not vest, or does not vest in full,
            then the Award or, as the case may be,  the  unvested  portion of it
            shall lapse.

4.3   Notification to Participant

            The  Committee  shall  notify  Participants  as soon  as  reasonably
practicable of the percentage (if any) of an Award which has vested.

5.    RESTRICTIONS UPON VESTING

5.1   General

      This Rule 5 overrides the other Rules.

5.2   Lapsing of Awards

      If an Award lapses under any Rule, it will lapse for all purposes and will
      not vest.

5.3   Meaning of "ceasing to be employed"

      (A)   Unless the Committee decides otherwise,  a Participant shall for the
            purposes of these  Rules be treated as having  ceased to be employed
            within the Group on whichever is the earliest of the following -

            (i)   the date on which the  Participant  gives  notice  ending  the
                  Participant's employment with the Group,

            (ii)  the date on which the  Participant  is given notice ending the
                  Participant's employment with the Group, and

            (iii) the date on which the Participant's  employment with the Group
                  otherwise ends without notice.
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                                       7


      (B)   A  Participant's  employment  with the Group will, if the Grantor so
            determines  on or before  the grant of an Award,  be deemed  for the
            purpose of this Rule 5.3 not to end if on  cessation  of  employment
            with a member of the Group the  Participant  becomes or is to become
            an employee or director of (i) a Holding Company of the Company;  or
            (ii) a company  holding  not less than 25 per  cent.  of the  issued
            ordinary share capital of the Company; or (iii) a Holding Company or
            Subsidiary  of any Company  referred to in (ii) or any other company
            that is a  Subsidiary  of the  Holding  Company of any such  Holding
            Company.  If the Grantor so determines,  that fact shall be set out,
            or referred to, in the Option Certificate.

5.4   Cessation of employment

      (A)   If a Participant ceases to be employed within the Group by reason of
            the  Participant's  death, the  Participant's  Award(s) will vest in
            full.

      (B)   If a Participant ceases to be employed within the Group in any other
            circumstance, where the Committee so agrees, the Participant's Award
            will vest if and to the extent that the Committee so determines  and
            subject to such conditions as the Committee may determine.

      (C)   Where a Participant  ceases to be employed for any reason other than
            those  detailed  in  Rules  5.4(A)  or (B),  any  Award  held by the
            Participant which has not then vested will lapse immediately.

      (D)   Notwithstanding  any provision of the Plan to the  contrary,  if the
            Committee   determines,   after  full  consideration  of  the  facts
            presented  on  behalf of the  Company  and a  Participant,  that the
            Participant has:

            (i)   been engaged in fraud,  embezzlement or theft or has committed
                  a criminal  offence or other  dishonesty  in the course of the
                  Participant's  employment by or  involvement  with a member of
                  the Group, which has damaged any member of the Group; or

            (ii)  made  unauthorised   disclosure  of  trade  secrets  or  other
                  proprietary  information  of any  member  of the Group or of a
                  third party who has entrusted  such  information to any member
                  of the Group; or

            (iii) materially  breached  any  non-competition   covenant  of  the
                  Participant in favour of any member of the Group; or

            (iv)  violated  the Code of Ethics  adopted by the Company from time
                  to time,

            any Award held by the Participant  shall lapse,  whether or not that
            Award has already vested and the  Participant  shall have no further
            rights in relation to any such Award under the Plan.
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                                       8


6.    CHANGE IN CONTROL AND LIQUIDATION

6.1   If a person becomes entitled to give notice to Shareholders  under section
      429 of the Companies Act 1985 as a result of obtaining Control or making a
      general  offer to acquire all the Shares of the  Company  other than those
      which are already  owned by him and/or any person  acting in concert  with
      him,  all Awards will lapse on the date on which that person  ceases to be
      so entitled.

6.2   If under  section  425 of the  Companies  Act 1985 the court  sanctions  a
      compromise or arrangement between the Company and its members proposed for
      the purposes of, or in connection with, a scheme for the reconstruction of
      the Company or its  amalgamation  with any other  company or companies all
      Awards will lapse upon the compromise or arrangement becoming effective.

6.3   All Awards will lapse when an effective  resolution  is passed or an order
      is made for the winding-up of the Company.

6.4   (A)   This Rule 6.4 applies if -

            (a)   the  events  referred  to in  this  Rule  6  form  part  of an
                  arrangement as a result of which the Company will be under the
                  Control of another company; and

            (b)   Participants are to be offered  substitute Awards which are in
                  the  reasonable  opinion of the Committee of equivalent  value
                  to, and which will vest in  equivalent  circumstances  to, the
                  subsisting Awards.

      (B)   If a Participant  holds an Award which has not then vested under the
            Rules the  Committee  may prior  to, or within 14 days  after,  that
            change of Control and with effect from the date on which that change
            of Control  occurs,  and if the  Participant  so agrees,  amend each
            Award so that it becomes a right to acquire  shares in the acquiring
            company,  in accordance  with Rule  6.4(A)(b)  and, if the Committee
            does so, such Awards will not lapse under Rules 6.1 or 6.2.

7.    PROCEDURE ON VESTING

7.1   Issue or Transfer of Shares

      (A)   Within 30 days of the date on which an Award vests the Company  will
            issue (or procure the  transfer)  or (where the Award was granted by
            the Trustee),  the Trustee will transfer to the  Participant  (or at
            the Participant's direction) the number of Shares which have vested.

      (B)   This obligation is, however, subject to Rules 7.2 and 7.3.
<PAGE>
                                       9


      (C)   It is also subject to obtaining such consents or approvals as may be
            required by any competent  authority under regulations or enactments
            for  the  time  being  in  force.  It is the  responsibility  of the
            Participant to obtain such consents and approvals.

      (D)   Any stamp duty  payable  on the  transfer  of Shares  under an Award
            shall be paid by the Company.

7.2   Withholding obligations

      (A)   This Rule 7.2 applies if a Participant  is liable to tax,  duties or
            other  amounts  on the  vesting  or  exercise  of an  Award  and the
            Participant's  employer  or  former  employer  is  liable  to make a
            payment to the appropriate authorities on account of that liability.

      (B)   Where an Award has vested  either the  Company or the  Trustee  will
            sell on behalf of the  Participant  sufficient  of the Shares  which
            would  otherwise be issued or transferred to the Participant on that
            vesting  or  exercise  so that the net  proceeds  of sale  equal the
            payment which the employer or former  employer is required to pay to
            the appropriate authorities on behalf of the Participant. Where such
            shares are sold by the  Trustee,  the  Trustee  will  account to the
            employer  or  former  employer  for the net  proceeds  of sale.  The
            Company  will  procure that an amount equal to those net proceeds is
            remitted   to  the   appropriate   authorities   on  behalf  of  the
            Participant.

      (C)   Rule  7.2(B)  shall not apply,  however,  if the  Participant  makes
            alternative  arrangements to the  satisfaction of the  Participant's
            employer or former employer.

      (D)   The Company or Trustee need not sell the Shares  referred to in Rule
            7.2(B) in whole or in part and may either  not issue such  Shares or
            may retain them as assets of the Trust provided that an amount equal
            to the payment required to be made to the appropriate authorities is
            made  by the  Company  or is  accounted  for by the  Trustee  to the
            employer or former  employer,  derived  from the other assets of the
            Company or the Trustee, as the case may be.

7.3   Provision of Shares

      (A)   If and to the extent that an Award  granted by the Trustee  vests in
            accordance with the Rules and

            (i)   the Trustee is unable to transfer  Shares to the  Participant,
                  whether due to it holding  insufficient Shares or other assets
                  to enable it to meet such Award or otherwise; or

            (ii)  any  such   transfer   would  be  unlawful  in  any   relevant
                  jurisdiction; or
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                                       10


            (iii) in making such a transfer  the  Trustee  would be in breach of
                  its duties under the Trust,

            the  obligations  of the Trustee  under the Plan and the Award shall
            lapse.

      (B)   If the  obligations  of the  Trustee  so lapse,  the  Company  shall
            procure that any Shares not so  transferred  by the Trustee to which
            the  Participant is entitled under the Rules  (ignoring Rule 7.3(A))
            (or an amount  equal to the  proceeds  of the sale of such number of
            Shares) are issued by the  Company or  transferred  to the  relevant
            Participant,  either by the Trustee or by some other person, as soon
            as reasonably practicable.

8.    NON-TRANSFERABILITY OF AWARDS

      (A)   An  Award  is  personal  to the  Participant  and the  Participant's
            personal representatives.

      (B)   If a Participant transfers, assigns, charges, encumbers or otherwise
            alienates  an Award or  creates  in favour  of any  third  party any
            interest therein or, in any case, attempts so to do, or a bankruptcy
            order is made in respect of the  Participant  (or any similar  event
            occurs under the laws of any other country), the Award shall lapse.

9.    LOSS OF OFFICE

      (A)   The  participation in the Plan by a Participant is a matter entirely
            separate  from,  and shall not  affect,  the  Participant's  pension
            rights and terms of employment.

      (B)   In particular  (but without  limitation),  if a Participant  for any
            reason  whatsoever  ceases to be  employed  by a member of the Group
            (whether or not such cessation  involves breach,  or alleged breach,
            of contract by the  Company) or to be entitled to exercise an Award,
            the  Participant is not entitled to any rights or benefits under the
            Plan save as specifically  provided  elsewhere in these Rules and is
            not entitled to any  compensation by reference to the rights granted
            to, or the benefits  capable of being  received by, the  Participant
            under  this  Plan or for any  loss or  diminution  in  value in such
            rights or benefits.

10.   VARIATION OF CAPITAL

10.1  General

      This Rule 10 applies if there is a variation  in the share  capital of the
      Company or in the event of a demerger or a special dividend by the Company
      or upon the  happening of any other event as a result of which the Grantor
      (with the  consent of the  Committee  where the  Grantor  is the  Trustee)
      considers that it is appropriate to do so.
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                                       11


10.2  Adjustment of Awards

      (A)   Subject to the rest of this Rule 10, the Grantor  shall  adjust each
            Award in such  manner  as it  decides  to be  appropriate,  with the
            consent of the Committee where the Grantor is the Trustee.

      (B)   For the avoidance of doubt, the Grantor may make such adjustments to
            an Award  which has vested but in respect of which  Shares  have not
            yet been issued or transferred.

      (C)   The  Grantor's   decision   shall  be  final  and  binding  on  each
            Participant.

10.3 Restrictions on adjustment

      Before  making  the  adjustment,  the  Grantor  must  obtain  the  written
      confirmation  of the Auditors  (acting as experts and not as  arbitrators)
      that the adjustment is, in their opinion, fair and reasonable.

10.4 Notification of adjustment

      The Grantor must notify each  Participant of any adjustment to an Award as
      soon as practicable after the decision.

11.   GENERAL

11.1  Administration

      (A)   Save  as  otherwise  provided  in the  Rules,  the  Committee  shall
            administer the Plan.

      (B)   The Committee may from time to time make and amend such  regulations
            for the  implementation  and administration of the Plan as it thinks
            fit.

      (C)   The Committee's decision on the construction of the Rules and on any
            disputes  arising  under the Plan shall be final and  binding on all
            persons.

11.2  Costs and expenses

      The costs of the  preparation and operation of this Plan shall be borne by
      the Company and the Subsidiaries in such proportions as the Committee from
      time to time determines.

11.3  Power of amendment

      (A)   The  Committee  may at any time and from time to time amend the Plan
            in any respect provided that:
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                                       12


            (i)   subject  to  Rule  11.3(B),  no  amendment  may be made to the
                  advantage of Employees or Participants to any provision of the
                  Rules relating to:

                  (a)   the  persons  to whom or for whom  Shares  are  provided
                        under the Plan;

                  (b)   limitations on the number or amount of Shares subject to
                        the Plan;

                  (c)   the maximum entitlement for any one Participant; or

                  (d)   the basis for  determining a  Participant's  entitlement
                        to,  and the terms  of,  Shares  and for the  adjustment
                        thereof,

                  without the prior approval of the Company in general meeting.

            (ii)  no amendment shall be made which would affect adversely any of
                  the subsisting rights of a Participant  except either with the
                  Participant's  consent  in  writing  or  the  consent  of  the
                  majority  of the  Participants  affected by the  amendment  or
                  addition.

      (B)   Notwithstanding  the  limitation  contained  in  Rule  11.3(A),  the
            Committee  may without the prior  approval of the Company in general
            meeting:

            (i)   amend the Plan in order to take account of any  amendments  to
                  any applicable legislation or to obtain or maintain favourable
                  tax, exchange control or regulatory treatment for Participants
                  or any member of the Group; or

            (ii)  make   minor   amendments   to  the   Plan  to   benefit   its
                  administration.

      (C)   The Committee  must give written notice to all  Participants  of any
            amendment made in accordance with this Rule 11.3 which affects their
            rights in any material respect.

11.4  Grant of Options

      (A)   The Committee may determine in any  particular  case or from time to
            time that the Plan should be operated on the basis that, in place of
            Awards,  Participants  are  granted  options  by the  Company or the
            Trustee  entitling  them to acquire  the number of Shares that would
            otherwise have been comprised in the relevant Award.

      (B)   Any  such  option  shall  be  exercisable  for  such  period  as the
            Committee may determine  following  satisfaction  of the  applicable
            Performance  Target and any  conditions  imposed in accordance  with
            Rule 3.2(A).
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      (C)   The provisions of the Rules shall apply mutatis mutandis to any such
            options and the Committee  may make such  amendments to the Rules as
            may be necessary in order to implement the grant and exercise of any
            such options.

11.5  Termination

      The  Committee  may at any time suspend or terminate the operation of this
      Plan and in such event no further  Awards  will be made for the time being
      or,  as the  case  may  be,  permanently  but in all  other  respects  the
      provisions of this Plan shall remain in force.

12.   PLAN LIMITS

12.1  General

      (A)   The Committee  must ensure that the nominal  amount of Shares issued
            (whether  directly to the  Participant  or to the Trustee) under the
            Plan on any date does not exceed 10 per cent. of the nominal  amount
            of the  Company's  issued equity share capital on the day before the
            date of issue, less the total nominal amount of -

            (i)   Shares  issued on the exercise of options  granted  within the
                  previous 10 years under any share option scheme,

            (ii)  Shares remaining issuable in respect of options granted on the
                  same  date or within  the  previous  10 years  under any share
                  option scheme, and

            (iii) Shares issued on the same date or within the previous 10 years
                  under any share  incentive  scheme in respect  of moneys  made
                  available by the Group.

      (B)   For the purposes of this Rule 12 -

      (i)   "equity share capital" has the meaning given to it by section 744 of
            the Companies Act 1985,

      (ii)  the word "issue"  means,  in relation to Shares,  the  allotment and
            issue of Shares  forming part of the  authorised  but unissued share
            capital  of  the  Company  and  derivative  expressions  are  to  be
            construed accordingly,

      (iii) a "share  incentive  scheme" is the Plan and any other scheme (other
            than a share  option  scheme) for  employees  of the Group which has
            been approved by the Company in general meeting and provides for the
            subscription of Shares, and

      (iv)  a "share option scheme" is the COLT Telecom Group Share Plan and any
            other  share  scheme  (other  than a  share  incentive  scheme)  for
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                                       14

            employees  of the Group  which has been  approved  by the Company in
            general  meeting and  provides for the grant of options to employees
            to acquire Shares.

12.2  Life of Plan

      No  Awards  may be  granted  more than 10 years  after the first  grant of
      Awards.

13.   NOTICES

13.1  To Employees and Participants

      (A)   Any notice or document to be given any Employee or  Participant  may
            be given  through  normal  internal  communications  or by  personal
            delivery or by sending it by ordinary post to the individual's  last
            known address or by e-mail or other electronic transmission.

      (B)   Where a notice  or  document  is sent by post it shall be  deemed to
            have been  received 72 hours after it was put into the post properly
            addressed and stamped.

      (C)   All notices and  documents  sent by post will be sent at the risk of
            the Employee or Participant  concerned.  Neither the Company nor any
            of its  Subsidiaries  nor  the  Trustee  shall  have  any  liability
            whatsoever to any Employee or  Participant  in respect of any notice
            or document sent,  nor shall the Company or any of its  Subsidiaries
            or the Trustee be concerned to see that any Employee or  Participant
            actually receives it.

13.2  To the Company

      Any  notice or  document  given by an  Employee  or a  Participant  to the
      Company or the Committee  shall be delivered or sent to the Company at its
      registered  office,  marked for the attention of the Company Secretary (or
      at such  other  place or  places  as the  Committee  may from time to time
      determine and notify to Employees and  Participants) and be effective upon
      receipt. Notices may be sent by e-mail or other electronic transmission to
      such address as the Company may from time to time specify.

13.3  To the Trustee

      Any  notice or  document  given by an  Employee  or a  Participant  to the
      Trustee shall be delivered or sent to the Trustee,  care of the Company at
      its registered office (or at such other place or places as the Trustee may
      from time to time determine and notify to Employees and Participants), and
      be effective upon receipt.