EX-4.2





 Exhibit 4.2 

BT GROUP PLC 
  

 
 BT GROUP INCENTIVE SHARE PLAN

  
  

As approved by the Board on 14 April 2011 and approved by ordinary resolution of Shareholders in general meeting on 13 July 2011 and
amended by the Remuneration Committee on 28 October 2014, on 9 July 2015, 25 October 2016 and 31 July 2019. 
 Expiry
date 13 July 2021 












 THE RULES OF THE BT GROUP INCENTIVE SHARE PLAN 

CONTENTS 
  

							
	 	 	 	  	Page	 
	 1.
	 	How the Plan will operate	  	 	1	 
			
	 2.
	 	Performance targets	  	 	2	 
			
	 3.
	 	Limit on the number of Shares which can be issued and Treasury Shares which can be used	  	 	3	 
			
	 4.
	 	Rights in relation to Shares prior to the Vesting of an Award	  	 	4	 
			
	 5.
	 	General offer, scheme of arrangement or voluntary winding-up of the Company	  	 	6	 
			
	 6.
	 	Ceasing to be in Employment during the Incentive Period	  	 	9	 
			
	 7.
	 	The end of the Incentive Period	  	 	11	 
			
	 8.
	 	Transfer of Shares	  	 	12	 
			
	 9.
	 	Amending the Plan	  	 	12	 
			
	 10.
	 	General	  	 	13	 
		
	 US Appendix
	  	 	16	 
		
	 Definitions Appendix
	  	 	20	 













 THE RULES OF THE BT GROUP INCENTIVE SHARE PLAN 

 

	1.	 HOW THE PLAN WILL OPERATE 



 

	1.1	 Policies set by the Board 



The Board will, from time to time, set the policies for the Company’s operation and administration of the Plan within the terms of the
Rules, which may include the determination of: 
  

	 	1.1.1	 Eligible Executives who will be eligible from time to time for the grant of an Award; 



 

	 	1.1.2	 the performance target on the Vesting of Awards, and whether or not the performance target has been met;



  

	 	1.1.3	 the Incentive Period for each Award; 



 

	 	1.1.4	 the maximum amount of an Eligible Executive’s Award; 



 

	 	1.1.5	 how Awards are granted; and 



 

	 	1.1.6	 the extent to which Awards will Vest when Participants cease Employment. 



 

	1.2	 When Awards will be granted 



An Award can be granted at any time provided that the Date of Grant of an Award is not during a Closed Period. 

 

	1.3	 Awards personal to Participants 



Awards cannot be transferred, assigned, charged or otherwise disposed of. On the death of a Participant, his Awards can be transmitted to his
personal representatives. A Participant can renounce his Award within 30 days following the Date of Grant and, to the extent renounced, the Award will be treated as if it had never been granted. If a Participant purports to transfer, assign, charge
or otherwise dispose of his Award otherwise than as permitted by this Rule 1.3, his Award shall immediately lapse. 
  

	1.4	 How Awards are granted 



The Company will, from time to time and at its discretion, grant Awards or request the Trustee to grant Awards to one or more recommended
Eligible Executives, in accordance with the Rules. 
  

	1.5	 Award certificate 



 

	 	1.5.1	 When an Award is granted to a Participant, the Participant will, as soon as administratively practicable,
receive an Award certificate specifying the basis on which the Award may Vest in accordance with the Rules, and whether or not the Award is subject to Rule 7.3. An Award certificate will be in such form as the Company may determine from time to
time. 



  
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	 	1.5.2	 If within three months after the Date of Grant a Participant fails to sign and return a copy of the Award
certificate to the Company acknowledging his or her agreement to be bound by the terms of the Plan or fails to indicate in writing their acceptance of the Award and to be bound by the terms of the Plan, which may include indicating acceptance in
electronic form through an online facility, such method being at the Company’s discretion the Award shall (unless the Remuneration Committee determines otherwise) lapse and shall be treated as if it had never been granted.



  

	1.6	 Holding period 



 

	 	1.6.1	 At its discretion and subject to Rules 1.6.2 and 1.6.3 below, the Company may grant an Award subject to a
holding period starting on the date on which the Award Vests and ending on the second anniversary of such Vesting date (unless the Remuneration Committee selects a different period of time). During any such holding period, the Participant will not
be permitted to sell, assign, charge, transfer or otherwise dispose of the after-tax number of Shares under the Vested Award. The Participant will, if requested by the Company and as a condition of Vesting,
enter into such agreement as the Company may require to give effect to the holding period and enter into any election with his employing company in respect of tax on the Award. For the purposes of this Rule 1.6.1, the after-tax number of Shares under the Vested Award shall mean the number of Shares the subject of the Award which has Vested less the number of Shares as is necessary to be sold to discharge the
Participant’s Tax Liability in respect of the Vesting of the Award. 


  

	 	1.6.2	 Any holding period imposed pursuant to Rule 1.6.1 above shall not apply to any Award, or shall cease to apply
if the Award has already Vested, where the circumstances set out in Rules 5.1, 5.4 or 5.6 apply. 


  

	 	1.6.3	 Unless the Remuneration Committee in its discretion determines otherwise at the date of cessation of
Employment, any holding period imposed pursuant to Rule 1.6.1 above shall continue to apply to any Award, regardless of whether it has Vested or not, where the circumstances set out in Rules 6.2, 6.3, 6.4 or 6.6 apply. 



 

	2.	 PERFORMANCE TARGETS 



 

	2.1	 Awards and performance targets 



An Award will be granted subject to a performance target selected by the Remuneration Committee which will, subject to the relevant provisions
under the Rules, have to be met before the Award can Vest. The grant or Vesting of an Award can be subject to any additional terms and conditions the Company considers appropriate. The performance target and any additional terms and conditions which
the Vesting of an Award is subject to will be specified at the Date of Grant. If Awards are exchanged under Rule 5.7 the performance target can be varied at the discretion of the Remuneration Committee to take account of this. 

  
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 If an event or transaction occurs which causes the Company to consider that the performance
target subject to which a subsisting Award has been granted is no longer appropriate, the Company may substitute or vary the performance target in such manner (and make such consequential amendments to the rules) as: 

 

	 	(a)	 is reasonable in the circumstances; and 



 

	 	(b)	 produces a fairer measure of performance and is neither materially more nor less difficult to satisfy.



 The subsisting Award shall then take effect subject to the performance target as so substituted or varied. 

 

	2.2	 Different performance targets can apply to different Eligible Executives 



Awards can be subject to different performance targets for each Eligible Executive. 

 

	3.	 LIMIT ON THE NUMBER OF SHARES WHICH CAN BE ISSUED AND TREASURY SHARES WHICH CAN BE USED



  

	3.1	 The limit for all Shares issued and Treasury Shares used under the Plan  



The number of Shares which can be allocated under the Plan on any day, when aggregated with the number of Shares allocated in the previous 10
years under: 
  

	 	3.1.1	 any other Employees’ Share Scheme, cannot exceed 10 per cent. of the ordinary issued share capital of
the Company from time to time; and 


  

	 	3.1.2	 any other Employees’ Share Scheme operated on a selective basis, cannot exceed 5 per cent. of the
ordinary issued share capital of the Company from time to time. 


  

	3.2	 Meaning of allocation and exclusion from these limits 



The references in this Rule 3 to the “allocation” of Shares mean, in the case of any share option plan, the placing of unissued
Shares or (for so long as UK institutional shareholders recommend) Treasury Shares under option and, in the case of any other Employees’ Share Scheme, the issue and allotment of Shares, or (for so long as UK institutional shareholders
recommend) the transfer of Treasury Shares. For the purposes of the limit in this Rule 3: 
  

	 	3.2.1	 Shares where the right to acquire such Shares was released, cancelled or lapsed without being exercised will be
ignored; and 



  
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	 	3.2.2	 to the extent that the Vesting of Awards is to be satisfied by the transfer of Shares other than Treasury
Shares, already in issue, those Awards will not be treated as granted over unissued Shares or Treasury Shares. 


  

	3.3	 Adjustment to Shares to be taken into account 



Where Treasury Shares transferred, or Shares issued, under the Plan or any other Employees’ Share Scheme of the Company are to be taken
into account for the purposes of any of the limits in this Rule 3 and a Variation in the equity share capital of the Company has taken place between the date of transfer or issue of any such Shares and the date on which any such limit is to be
calculated, the number of such Shares which will be taken into account for the purposes of any such limit will be adjusted in such manner as the Company considers appropriate to take account of the Variation. 

 

	3.4	 The individual limit 



The Remuneration Committee will, from time to time, set an individual limit on the Market Value (at the Date of Grant) of the Shares the
subject of an Award granted to a Participant on an annual basis. This limit cannot be exceeded without the prior approval of the Remuneration Committee. 
  

	4.	 RIGHTS IN RELATION TO SHARES PRIOR TO THE VESTING OF AN AWARD 



 

	4.1	 Voting rights, dividends and other rights 



A Participant has no voting rights attaching to the Shares the subject of his Award, nor a right to any dividends nor any other rights
attaching to the Shares the subject of such Award prior to the Vesting of the Award in respect of those Shares. However, the Company may, or the Trustee may on the recommendation of the Company, increase the number of Shares the subject of a
Participant’s Award after any dividend has been paid in relation to the Shares. Any such increase will be made as follows: 
  

	 	4.1.1	 in the case of a dividend in specie paid in order to effect a demerger of the Company, such dividend shall be
retained or reinvested as appropriate (net of taxes and, if applicable, associated costs) so that it comprises only shares in the Employing Company; or 


  

	 	4.1.2	 in the case of any dividend paid in any other circumstances, the Award shall be increased by an appropriate
number of Shares unless the Company recommends otherwise 


 and in either case, the number of shares by which the Award is
increased must have, unless Rule 4.3 applies, a Market Value on the date of increase which is as close as possible equal in value to the aggregate dividend (net of any taxes) paid in respect of the same number of Shares as those under the Award.


  
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	4.2	 Events which affect the share capital of the Company 



Subject to Rule 4.3, if there is a Variation affecting the share capital of the Company prior to the Vesting of an Award, if the Company thinks
it appropriate it, or the Trustee on the recommendation of the Company, may adjust the number of Shares the subject of that Award . Any Participant whose Award is adjusted will be notified in writing of any such adjustment. 

 

	4.3	 A Variation which is a demerger of the Company 



If there is a Variation which is a demerger of the Company, if the Company thinks it appropriate it, or the Trustee on the recommendation of
the Company, may adjust an Award so as to be over shares in the Employing Company (“the Adjusted Award”). Each Adjusted Award will be equivalent to the Award which was adjusted (“the Unadjusted Award”) prior to the adjustment. An
Adjusted Award will not be regarded as equivalent to an Unadjusted Award unless: 
  

	 	4.3.1	 it is governed by the Rules in effect immediately before the preservation of the Unadjusted Award; and



  

	 	4.3.2	 the total Market Value of the shares the subject of the Unadjusted Award is equal to the total Market Value
immediately after the adjustment of the shares the subject of the Adjusted Award, calculated by reference to an averaging of the relevant Market Value, as specified by the Company or as recommended to the Trustee, as the case may be.



 The provisions of the Plan shall, for this purpose, be construed as if the Adjusted Awards were granted under the Plan
at the same time as the Unadjusted Awards. References to the “Company” shall, in relation to the Adjusted Award, be taken as references to the Employing Company and references to “Share” shall be taken as references to a
fully-paid share in the Employing Company. The Company will procure the Trustee’s agreement to any amendment to the applicable employee share ownership trust to give effect to this Rule 4.3. 

 

	4.4	 Malus and claw back  



 

	4.4.1	 If, subsequent to the grant of an Award (but prior to the Vesting of an Award), facts become known to the
Remuneration Committee which, in the absolute discretion of the Remuneration Committee, would justify a reduction in the number of Shares under the Award, the Remuneration Committee shall have the discretion to reduce (including to nil) the number
of Shares under the Award to take account of this. For the avoidance of doubt if the Remuneration Committee exercises this discretion, the Award shall be deemed to have been granted over the lower number of Shares (or none, as the case may be) and
the Vesting of the Award in accordance with the Rules will be by reference to this reduced number of Shares (if any). 


  

	4.4.2	 In respect of Awards granted on or after 18 June 2015 if, within the two year period following the Vesting
of an Award, facts become known to the Remuneration Committee which, in the absolute discretion of the Remuneration Committee, would so justify, the Remuneration Committee will have the discretion to require a Participant to transfer or pay to the
Company or such other person as the Company may direct within 30 days after a written demand from the Company the number of 



  
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Shares (not exceeding the number of Vested Shares under the Participant’s Award at the date of Vesting) or monetary amount with a value to be determined in the Remuneration Committee’s
absolute discretion. If the Participant fails to transfer the Shares or pay the monetary amount specified by the Remuneration Committee in accordance with this Rule 4.4.2 when first requested to do so, the Participant will indemnify the Company
against any costs and expenses (including legal fees) that the Company incurs in enforcing this Rule 4.4.2. 

  

	4.4.3	 The circumstances in which the Remuneration Committee may consider that it is appropriate to exercise its
discretion under Rule 4.4.2 include but are not limited to the following: 


  

	 	(i)	 behaviour by a Participant which fails to reflect the Company’s governance and business values;



  

	 	(ii)	 material adverse change in the financial performance of the Company or any division in which the Participant
works and/or worked; 


  

	 	(iii)	 a material financial misstatement of the Company’s audited financial accounts (other than as a result of a
change in accounting practice); 


  

	 	(iv)	 misconduct of a Participant which results in or is reasonably likely to result in reputational damage to the
Company; 


  

	 	(v)	 a material failure in risk management; 



 

	 	(vi)	 negligence or gross misconduct of a Participant; and/or 



 

	 	(vii)	 fraud effected by or with the knowledge of a Participant. 



 

	4.4.4	 If the Remuneration Committee exercises its discretion under Rule 4.4.1 or Rule 4.4.2, it shall confirm this in
writing to each affected Participant and, if necessary, the Trustee. 


  

	5.	 GENERAL OFFER, SCHEME OF ARRANGEMENT OR VOLUNTARY
WINDING-UP OF THE COMPANY 


  

	5.1	 General offer  



If, before an Award has Vested, an offeror (either alone or together with any party acting in concert with him) obtains Control of the Company
as a result of a general offer to acquire the whole of the issued ordinary share capital of the Company (or such part of it which is not at the time owned by the offeror and any party acting in concert with the offeror) a Participant’s Award
will Vest as soon as the change of Control takes effect, but only to the extent specified by the Remuneration Committee in accordance with Rule 5.2. 
  

	5.2	 The discretion of the Remuneration Committee 



The Remuneration Committee will confirm as soon as practicable after the general offer has been made the minimum extent to which an Award may
Vest, to the extent that the performance target has been met up to the change of Control taking effect. Subject to this, the Remuneration Committee may in its absolute discretion decide to take other factors into account, which it believes to be
relevant in permitting the Award to Vest beyond the extent to which the performance target has been met. 

  
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	5.3	 Extension to Participants of general offer 



The Company will use its best endeavours to procure that to the extent a Participant’s Award Vests in accordance with Rule 5.1, the
offeror will make an offer to acquire from the Participant his Shares on the same terms as Shares of the same class were acquired under the general offer. 
  

	5.4	 Scheme of arrangement 



If, before an Award has Vested, the court directs that a meeting of the holders of Shares should be convened under Section 899 of the
Companies Act 2006 to consider a scheme of arrangement, a Participant’s Award will Vest on the date the scheme of arrangement is sanctioned by the court, but only to the extent specified by the Remuneration Committee in accordance with Rule
5.5. If however, the purpose and effect of the scheme of arrangement is to create a new holding company for the Company, where such holding company would, following the scheme of arrangement, have substantially the same shareholders and
proportionate shareholdings as those of the Company immediately prior to the scheme of arrangement, Rule 5.7 may, with the consent of the Board, apply. If it does apply, Awards will not Vest under this Rule 5.4. 

 

	5.5	 The discretion of the Remuneration Committee 



The Remuneration Committee will confirm as soon as practicable after the date of the court’s direction the minimum extent to which an
Award may Vest, to the extent that the performance target has been met up to the date the scheme of arrangement is sanctioned by the court. Subject to this, the Remuneration Committee may decide to take other factors into account, which it believes
to be relevant in permitting the Award to Vest beyond the extent to which the performance target has been met. 
  

	5.6	 Voluntary winding-up  



If there is a resolution for a member’s voluntary winding-up of the Company, the Awards will Vest
in full conditionally on the resolution being passed. 
  

	5.7	 The exchange of Awards 



If, before an Award has Vested, any company (the “Acquiring Company”) obtains Control of the Company in pursuance of a compromise or
arrangement sanctioned by the court under Section 899 of the Companies Act 2006 and the Acquiring Company has agreed that the outstanding Awards may be exchanged under this Rule 5.7, the Company may determine that an Award shall be exchanged
under this Rule 5.7. On this basis, Participants’ Awards (“Old Awards”) will be automatically surrendered in consideration of the grant to Participants of new awards (“New Awards”) which, in the opinion of the Company, are
equivalent to the Old Awards (before the change of Control) but relate to shares in a different company. The New Awards will not be regarded as equivalent to the Old Awards unless: 

 

	 	5.7.1	 they are governed by the Rules in effect immediately before the release of the Old Awards; and




  
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	 	5.7.2	 the total Market Value of the Shares the subject of the Old Awards is equal to the total Market Value
immediately after the release of the shares the subject of the New Awards. The provisions of the Plan will, for this purpose be constructed as if the New Awards were granted under the Plan at the same time as the Old Awards. 



References to Shares will, in relation to the New Award, be taken as references to shares of the company whose shares are under New Awards.
References to the Company shall be taken to be references to the company whose shares are under the New Awards, where appropriate. The New Awards will not Vest/lapse if Rule 5 applies following and in respect of the change of Control which led to
the grant of the New Awards. The Company will procure the Trustee’s agreement to any amendment to the applicable employee share ownership trust to give effect to this Rule 5.7. This Rule 5.7 will only apply if the purpose and effect of the
scheme of arrangement is to create a new holding company for the Company and the Board consents, as set out in Rule 5.4. 
  

	5.8	 Cessation of Employment following a change of Control 



If, at any time within the period of 12 months following the date of any change of Control of the Company (other than a change of Control as a
consequence of a scheme of arrangement under Section 899 of the Companies Act 2006 the effect of which was to create a new holding company for the Company, where such holding company had, following the scheme of arrangement, substantially the
same shareholders and proportionate shareholdings as those of the Company immediately prior to the scheme of arrangement), a Participant’s Employment: 
  

	 	5.8.1	 is terminated by his employer for a reason other than misconduct or poor performance; or 



 

	 	5.8.2	 ceases following the Participant’s resignation because the nature of his duties are such that the
Participant reasonably believes that he has lesser duties and responsibilities than before the change of Control which constitute a material breach of the Participant’s employment contract, 



the Participant will be entitled to receive an amount which is equal in value to the difference between the aggregate Market Value of the
Shares he became entitled to when his Award Vested under Rule 5.1 or Rule 5.4 and the aggregate Market Value of the Shares he would have become entitled to had the Award Vested at that time as if the performance target had been met in full. For the
purposes of this Rule 5.8, the Market Value used shall be the Market Value of a Share as at the date his Award Vested. Any amount payable under this Rule 5.8 shall be payable, subject to any deduction required by law to be made, within thirty days
after the cessation of Employment concerned and in such currency as the Company shall determine in its absolute discretion. 

  
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	6.	 CEASING TO BE IN EMPLOYMENT DURING THE INCENTIVE PERIOD 



 

	6.1	 Ceasing to be in Employment: generally 



Unless otherwise provided in the Rules, if a Participant ceases to be in Employment before the end of the Incentive Period, all his Awards will
lapse in full on the date he so ceases. Notwithstanding any other provision in the Rules, no Award may Vest more than ten years after the Date of Grant. 
  

	6.2	 Ceasing to be in Employment because of death, injury, ill health or disability



 If a Participant ceases or is to cease to be in Employment before the end of the Incentive Period because of death,
injury, ill health or disability: 
  

	 	6.2.1	 in respect of Awards the Incentive Period for which will end less than 12 months from the date the Participant
so ceases Employment, those Awards will Vest on the date the Participant so ceases Employment; and 


  

	 	6.2.2	 in respect of all other Awards, the Company may, at its discretion, Vest, or recommend the Trustee to Vest, as
soon as possible, all or part of any Award and/or preserve all or part of any Award to the extent that it is not Vested immediately. The Award, to the extent that it is preserved, must be preserved until the end of the Incentive Period and will
continue to be subject to the Rules. To the extent that the Company or the Trustee has not exercised its discretion to Vest or preserve all or part of an Award, it will lapse on the date the Company, or the Trustee, confirms its decision (as the
case may be). 


  

	6.3	 Ceasing to be in Employment because of Redundancy  



If a Participant ceases or is to cease to be in Employment before the end of the Incentive Period because of his Redundancy, all his Awards
will lapse on the date he so ceases. The Company may, however, at its discretion, Vest, or recommend the Trustee to Vest, as soon as possible, all or part of any Award and/or preserve all or part of any Award to the extent that it is not Vested
immediately. The Award, to the extent that it is preserved, must be preserved until the end of the Incentive Period and will continue to be subject to the Rules. To the extent that the Company or the Trustee has not exercised its discretion to Vest
or preserve all or part of an Award, it will lapse on the date the Company, or Trustee confirms its decision (as the case may be). 
  

	6.4	 Ceasing to be in Employment because of the sale of a company or business  



If a Participant ceases to be in Employment before the end of the Incentive Period because the company in the Group which employs him ceases to
be a Participating Company or an Associated Company or because of the transfer or sale of the undertaking (or part of the undertaking) in which he is employed to a person who is neither a Participating Company nor an Associated Company, all his
Awards will lapse on the day he so ceases. The Company may however, at its discretion, Vest, or recommend the Trustee to Vest, as soon as possible, all or part of any Award and/or preserve all or part of any Award to the extent that it is not Vested
immediately. The Award, to the extent that it is preserved, must be preserved until the end of the Incentive Period and will continue to be subject to the Rules. To the extent that the Company or the Trustee has not exercised its discretion to Vest
or preserve all or part of an Award, it will lapse on the date the Company, or the Trustee, confirms its decision (as the case may be). 

  
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	6.5	 Circumstances when a performance target will be treated as if it has been waived



 If a Participant’s Award is to Vest under Rule 6, any performance target which applies to its Vesting will be
treated as if it had been waived, unless the Company decides otherwise. If the Company does decide otherwise, Awards will, at the discretion of the Company, and when the relevant event in Rule 6 takes place, either lapse in part and/or, to the
extent that they do not lapse, they will be preserved or Vest on whatever basis the Company decides. 
  

	6.6	 Ceasing to be in Employment in other circumstances 



If, before the end of the Incentive Period, a Participant gives or is given notice to leave Employment or ceases to be in Employment without
any notice having been given in any circumstances other than the ones referred to in Rule 6.2, Rule 6.3 or Rule 6.4, his Award will lapse on that date, unless the Company decides otherwise. 

 

	6.7	 Change of circumstances of Employment—deferral of Vesting and lapse provisions



 If a Participant ceases to be in Employment before the end of the Incentive Period, but continues to provide services to
the Group or becomes employed by an Associated Undertaking, the Company may decide that the Participant is deemed not to have ceased Employment and that his Awards will continue to be held subject to the Rules. Rules 5 to 6 will apply when he
subsequently ceases to provide services to the Group, or when he ceases to be employed by an Associated Undertaking and is not re-employed by a member of the Group, or in such other circumstances as the
Company may determine. 
  

	6.8	 Exercising discretion to preserve/Vest 



If the Company or the Trustee decides to exercise any discretion it has under this Rule 6 as regards Vesting or preservation of an Award
it must do so not later than the date which is three months after the date the Participant ceases Employment, failing which the Award will be treated as lapsing in full on the date he so ceases. In the three month period following a Participant
ceasing Employment, an Award will not be capable of Vesting under any other provision of the Rules, unless the Company or the Trustee exercises its discretion to preserve an Award. 

 

	6.9	 The effect of the lapsing of Awards 



To the extent that a Participant’s Award lapses, he is not entitled to any Shares which are the subject of that Award. 

  
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	7.	 THE END OF THE INCENTIVE PERIOD 



 

	7.1	 Where all or part of the Award is subject to a performance target which has been met



 At the end of the Incentive Period and to the extent that an Award has not already Vested under Rule 5 or Rule 6, the
Remuneration Committee, in its absolute discretion, will decide as soon as practically possible to what extent the performance target relevant to each Award has been met. To the extent that the Remuneration Committee decides that it has been met,
the Award will Vest (subject to Rule 7.3) as soon as practically possible following the Remuneration Committee’s decision. The relevant number of Shares will be transferred as soon as practicable to a Participant who up until the end of the
Incentive Period: 
  

	 	7.1.1	 was in Employment; or 



 

	 	7.1.2	 was not in Employment but to whom the Shares can still be transferred because of Rule 6. 



If the performance target is one which provides for Vesting in proportion to the extent that the performance target has been met, the Award
will Vest in proportion to the extent that the performance target has, in the Remuneration Committee’s view, been met at the end of the Incentive Period. 
  

	7.2	 If the performance target has not been met 



If the Remuneration Committee decides that the performance target which applies to an Award has not been met at the end of the Incentive
Period, the Awards will lapse on the date the Remuneration Committee so confirms. 
  

	7.3	 Deferral of Vesting in respect of specified Participants  



A Participant’s Award may be granted subject to the Remuneration Committee’s discretion to Vest his Award (to the extent that the
performance target has been met) as to some, but not all of the Shares the subject of that Award as soon as practicable following the end of the Incentive Period. If a Participant’s Award was granted on this basis, the Remuneration Committee
will decide at the same time as it exercises its discretion under Rule 7.1 what proportion of the Award will Vest thereafter and when such proportions shall Vest (the “Deferred Award”) PROVIDED THAT if a Participant ceases Employment
before the Deferred Award has Vested, it shall Vest in full on the date he so ceases Employment. The Remuneration Committee’s decision to postpone the Vesting of all of the Shares under the Award will be taken based on the extent to which any
awards granted to the Participant under the BT Executive Share Plan, the BT Deferred Bonus Plan, the BT Group Deferred Bonus Plan and the BT Group Retention Share Plan also vests in the financial year of the Company in which the end of the Incentive
Period falls. The Rules will continue to apply in respect of any part of an Award which has not yet Vested. 

  
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	8.	 TRANSFER OF SHARES 



 

	8.1	 When an Award has Vested 



When an Award has Vested, the Participant will be entitled to Shares the subject of that Award. The number of Shares he is entitled to (which
will be transferred to the Participant as soon as reasonably practicable) will depend on any exercise of the Remuneration Committee’s decision under Rule 7.3, and the extent to which any applicable performance target has been met. It will also
be subject to any withholdings in accordance with Rule 8.2 that may be necessary on account of a Participant’s Tax Liability in respect of the Award. 
  

	8.2	 Sale of Shares to satisfy a Participant’s Tax Liability 



Unless the Participant makes arrangements (satisfactory to the Company) to provide payment in respect of his Tax Liability, the Company or any
relevant company in the Group will make arrangements to sell on behalf of the Participant such number of Shares the subject of the Award which has Vested as is necessary to discharge the Tax Liability. 

 

	9.	 AMENDING THE PLAN 



 

	9.1	 The Company has discretion to amend the Rules 



Subject to the rest of this Rule 9, the Company can amend the Rules at any time. The Trustee will be notified of any amendment to the Rules.

  

	9.2	 Additional sections 



The Company can adopt additional sections of the Rules applicable in any jurisdiction under which Awards may be subject to as additional and/or
modified terms and conditions, having regard to any securities, exchange control or taxation laws, which may apply to the Participant, the Company, any Participating Company or Associated Company. Any additional sections must conform to the basic
principles of the Plan and must not enlarge to the benefit of Participants the limits in the Rules. 
  

	9.3	 No abrogation of existing rights 



No amendment will be made under Rule 9.1 which would adversely and materially affect the existing rights of a Participant unless it is made
with his consent or by a resolution passed as if the Awards constituted a separate class of share capital and the provisions of the Articles of Association of the Company and of the Companies Act 2006 relating to class meetings (with the necessary
amendments) applied to that class. 
  

	9.4	 Shareholder approval 



No amendment to the advantage of Participants (except for an amendment which could be included in an additional section adopted under Rule 9.2)
can be made to the provisions in the Rules (if any) relating to: 
  

	 	9.4.1	 who can be a Participant; or 



 

	 	9.4.2	 the number of Shares which can be allocated under the Plan; or 



 

	 	9.4.3	 the basis for determining a Participant’s entitlement to and the terms of the Shares and any adjustment in
the event of a Variation 



  
 12 













 without the approval by ordinary resolution of the Company in general meeting, except minor
amendments to benefit the administration of the Plan, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for Participants or Eligible Executives or for a member of the Group.

  

	10.	 GENERAL 



 

	10.1	 Notices 



Any notice or other communication in connection with the Plan (including, if permitted, Award certificates) can be given by electronic mail or
by personal delivery or by post, (in the case of a company, to its registered office and in the case of an individual to his last known address) or by any other means which a Participating Company and its employees use to communicate with each
other. Where a notice or other communication is given by first-class post, it shall be deemed to have been received 72 hours after it was put into the post properly addressed and stamped. 

 

	10.2	 Documents sent to shareholders 



Participants may, but are not entitled to, receive copies of any notice or document sent by the Company to the holders of Shares. 

 

	10.3	 Replacement Award certificates 



If any Award certificate is worn out, defaced or lost, it can be replaced on such evidence being provided as may be required. 

 

	10.4	 Shares to cover Awards 



Enough Shares will be available at all times to satisfy all Awards granted. 

 

	10.5	 Administration of the Plan 



The Plan will be administered in a manner approved by the Company. No individual will have any authority in relation to the Plan unless that
authority has been approved in accordance with the policy set by the Board. The Company’s decision on any matter concerning the Plan, including whether or not any performance targets in relation to an Award have been met, or the interpretation
of the Rules, will be final and binding. 
  

	10.6	 Costs of introducing and administering the Plan 



The costs of introducing and administering the Plan will be borne by the Company. However, the Company may require any Participating Company to
enter into such arrangement to reimburse the Company for any costs borne by the Company directly or indirectly in respect of such Participating Company’s employees. 

  
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	10.7	 Termination of the Plan 



The Plan will terminate at the end of the Plan Period or at any earlier time the Company shall decide. Termination of the Plan will not affect
the subsisting Awards of Participants. 
  

	10.8	 Rights of Participants and Eligible Employees 



Benefits under the Plan will not be pensionable. Nothing in the Plan nor in any instrument executed pursuant to it will confer upon any person
any right to continue in the employment of the Group, or will affect the right of the Company or any company in the Group to terminate the employment of any person without liability at any time with or without cause, or will impose upon the Group or
the Trustee or the Board or their respective agents and employees any liability whatsoever (whether in contract, tort, or otherwise howsoever) in connection with: 
  

	 	10.8.1	 the lapse of any Awards pursuant to the Rules; 



 

	 	10.8.2	 the failure or refusal to exercise any discretion under the Rules; and/or 



 

	 	10.8.3	 a Participant ceasing to be a person who has the status or relationship of an employee or executive director
with the Company or any other company in the Group for any reason as a result of the termination of the employment relationship with the Company or any other company in the Group. 



 

	10.9	 Waiver of any rights 



Any person who ceases to have the status or relationship of an employee or executive director with the Company or any other company in the
Group for any reason whatsoever (whether lawfully or unlawfully) shall not be entitled and shall be deemed irrevocably to have waived any entitlement by way of damages for dismissal or by way of compensation for loss of office or otherwise to any
sum, damages, Shares or other benefits to compensate that person for the loss of any rights, benefits or expectations under any Award, the Plan or any instrument executed pursuant to it. If necessary, that person’s terms of employment will be
varied accordingly. 
 10.10 The benefit of Rule 10.8 and Rule 10.9 

The benefit of Rule 10.8 and Rule 10.9 is given for the Company and/or the Trustee (where the Award was not granted by the Company), as
appropriate for itself and as trustee and agent of the Company (if the benefit is given for the Trustee), and of all the Company’s Subsidiaries or any of its Associated Companies or Associated Undertakings. To the extent that the Company, any
Subsidiary, Associated Company or Associated Undertaking of the Company is not party to the grant of an Award, the Company and/or the Trustee, as appropriate, will hold the benefit of Rule 10.8 and Rule 10.9 on trust and as agent for each of them
and the Company and/or the Trustee may, at their respective discretion, assign the benefit of this Rule 10.10 to any of them. 
  

	10.11	 Awards are subject to the Rules 



Awards are granted incorporating and subject to the Rules. 

  
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	10.12	 Articles of Association 



Any Shares acquired on the Vesting of Awards are subject to the Articles of Association of the Company as amended from time to time. 

 

	10.13	 Governing law 



The Rules are governed by and interpreted in accordance with the law of England. Each Participant, the Company and any other Participating
Company or Associated Company submits to the exclusive jurisdiction of the English courts in relation to any disputes arising out of or in connection with the Plan. The Company may, in its absolute discretion, determine that another law may apply to
the application of the Plan outside the United Kingdom. 

  
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 THE BT GROUP INCENTIVE SHARE PLAN 

U.S. APPENDIX 
  

	1.	 This Appendix constitutes the part of the Plan that will govern the grant of Awards to Participants who are
subject to (or become subject to) United States Income Tax (the “U.S. Awards”). It incorporates all the Rules as set forth above as modified in accordance with the provisions of this Appendix. 



 

	2.	 How U.S. Awards will be granted 



All U.S. Awards will be evidenced by an instrument(s) in such form or forms as may from time to time be approved by the Company. 

 

	3.	 Administration of the U.S. Awards 



The Company shall (i) administer the U.S. Awards in accordance with this U.S. Appendix, (ii) establish from time to time such rules
and regulations as it may deem appropriate for the proper administration of the U.S. Awards and (iii) make such determinations under (including, without limitation, factual determinations), and such interpretations of, and take such steps in
connection with, the Rules, the U.S. Appendix and/or the U.S. Awards as it may deem necessary or advisable. 
  

	4.	 Addition of consistent provisions: certain rights 



Any U.S. Award may be subject to any other provision imposed by the Company that is consistent with the purpose and intent of this Appendix.
During the Incentive Period, a Participant may, in the sole authority and discretion of the Company, and subject to such terms, conditions and limitations as the Board may determine from time to time in its sole authority and discretion, have voting
and dividend rights with respect to such Participant’s U.S. Award if a certificate relating to the underlying Shares or ADSs has been issued in the Participant’s name. 

 

	5.	 Section 16 compliance 



If any officer, director or shareholder of the Company receives a U.S. Award and therefore becomes subject to Section 16 of the U.S.
Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company shall take all appropriate action to ensure that such U.S. Awards under this Appendix are exempt from Section 16(b) under the Exchange Act. 

 

	6.	 Right to ADSs 



The Company may arrange for any U.S. Award to constitute a right to or with respect to ADSs rather than Shares, in which case references to
“Shares” in the Plan shall be deemed to be reference to “ADSs”, as the context may require. In its discretion and upon such terms and conditions as it may implement from time to time, the Company may arrange for any U.S. award
relating to Shares to be satisfied in the form of ADSs and for any U.S. Award relating to ADSs to be satisfied in the form of Shares. 

  
 16 














	7.	 U.S. Withholding Taxes 



It shall be a condition to the obligation of the Company to deliver Shares or ADSs pursuant to any U.S. Award granted to a Participant under
the Plan that the Participant pays to the Company (or the Subsidiary that employs the Participant) such amount as may be required by the Company or such Subsidiary for the purpose of satisfying any liability for any U.S. Federal, state or local
taxes of any kind required to be withheld with respect of the U.S. Award. Any U.S. Award granted under the Plan to a Participant may require the Company or permit the Participant to elect, in accordance with any applicable rules established by the
Company, to withhold or to pay all or part of the amount of such withholding taxes in Shares or ADSs. Such election may be denied by the Company in its sole discretion, or may be made subject to certain conditions specified by the Company. Any
payments made in cash under the Plan are the subject of all U.S. Federal, state or local taxes of any kind required to be withheld with respect to them. 
  

	8.	 Securities Laws compliance 



No Shares or ADSs may be issued or transferred in connection with a U.S. Award unless the Company shall have determined that such issuance,
transfer or settlement is in compliance with or pursuant to an exemption from all applicable U.S. Federal and state securities laws. 
  

	9.	 Certain Definitions 



For the purposes of the U.S. Awards, where appropriate the following term shall have the following meaning, notwithstanding any contrary
provisions in the Plan:- 
 “Market Value” in relation to an ADS means an amount equal the average of the high and low sales
prices of ADSs recorded on the New York Stock Exchange on the applicable valuation date. 
  

	10.	 Amendments to certain provisions of the Rules  



In Rule 10.1 “72 hours” shall be deleted and replaced by “7 Dealing Days”. 

 

	11.	 Amendments to certain provisions of the Rules to comply with section 409A Internal Revenue Code



 Rule 4.1 

Rule 4.1 shall be amended by adding the following sentence to the end thereof: 

“For the avoidance of doubt, any increase in the number of Shares subject to a Participant’s U.S. Award pursuant to this Rule 4.1
shall not affect the settlement terms of the U.S. Award in a manner that would be inconsistent with Rule 7.3.” 

  
 17 













 Rule 5.7 

Rule 5.7.2 shall be amended by adding the following new sentence at the end thereof: 

“Such New Awards shall meet the requirements of U.S. Code Section 409A and any applicable regulations relating to substitutions and
assumptions of stock rights by reason of a corporate transaction.” 
 Rule 5.8 

Rule 5.8 shall be deleted and replaced with the following new Rules 5.8, 5.9 and 5.10: 

 

	 	“5.8	 Cessation of Employment following a change of Control 



If, at any time within the period of 12 months following the date of any change of Control of the Company (other than a change of Control as a
consequence of a scheme of arrangement under Section 899 of the Companies Act 2006 the effect of which was to create a new holding company for the Company, where such holding company had, following the scheme of arrangement, substantially the
same shareholders and proportionate shareholdings as those of the Company immediately prior to the scheme of arrangement), a Participant’s Employment: 
  

	 	5.8.1	 is terminated by his employer for a reason other than misconduct or poor performance; or 



 

	 	5.8.2	 ceases following the Participant’s resignation because there has been a material diminution in the
authority, duties or responsibilities in respect of the Participant’s Employment (a “Material Diminution”) compared to before the change of Control 



the Participant, subject to Rule 5.9, shall be entitled to receive an amount which is equal in value to the difference between the aggregate
Market Value of the Shares he became entitled to when his U.S. Award Vested under Rule 5.1 or Rule 5.4 and the aggregate Market Value of the Shares he would have become entitled to had the U.S. Award Vested at that time as if the performance target
had been met in full. For the purposes of this Rule 5.8, the Market Value used shall be the Market Value of a Share as at the date his U.S. Award Vested. Any amount payable under this Rule 5.8 shall be payable, subject to any deduction required by
law to be made, within thirty days after the cessation of Employment concerned. 
  

	 	5.9	 Interpretation of Rule 5.8 



For the purposes of Rule 5.8.2, a Participant’s resignation will not be regarded as being due to a Material Diminution unless: 

 

	 	5.9.1	 within 90 days of the Material Diminution first arising, the Participant has notified his employer of the
Material Diminution; and 



  
 18 














	 	5.9.2	 the Participant’s employer has not, within 30 days of the notification under Rule 5.9.1, taken action to
ensure that there is no longer a Material Diminution in respect of the Participant’s Employment. 


  

	 	5.10	 Compliance with U.S. Code Section 409A – General Offer; Scheme of Arrangement; Winding-Up  


 In the event a U.S. Award becomes Vested prior to the end of the
Incentive Period pursuant to Rule 5.1, Rule 5.4 or Rule 5.6, such U.S. Award shall be settled and Shares or ADSs issued or transferred at a time consistent with the provisions of Rule 7.3. Any amount required to be paid to a Participant pursuant to
Rule 5.8 shall be paid at a time consistent with the provisions of Rule 7.3. Shares or ADSs transferred with respect to a U.S. Award shall not be held in, or transferred, from the Trust in violation of Code Section 409A(b) “ 

Rule 6.8 
 Rule 6.8 shall
be deleted and replaced with the following new Rule 6.8: 
  

	 	“6.8	 Compliance with U.S. Code Section 409A – Changes in Employment
Status  


 In the event a Participant’s U.S. Award Vests pursuant to Rule 6.2.1 or the Company elects
to Vest all or part of an U.S. Award pursuant to Rule 6.2.2, Rule 6.3, Rule 6.4, or Rule 6.6, such U.S. Award shall be settled and Shares or ADSs issued at a time consistent with the provisions of Rule 7.3. In no event will the Company elect to
preserve or continue the U.S. Award of a Participant pursuant to Rule 6.2.2, Rule 6.3, Rule 6.4, Rule 6.6 or Rule 6.7 in a manner that would permit the U.S. Award to be settled at a time that would be inconsistent with the provisions of Rule
7.3.” 
 Rule 7.3 

Rule 7.3 shall be deleted and replaced with the following new Rule 7.3: 

 

	 	“7.3	 No Deferral of Compensation is Permitted 



The Rules of this Plan and the U.S. Awards made thereunder shall be applied in a manner so as not to constitute a deferral of compensation for
purposes of U.S. Code Section 409A. In particular, the periods during which holders of U.S. Awards may receive Shares or ADSs to which they are otherwise entitled (whether pursuant to Rule 5, Rule 6 or this Rule 7) shall be compliant with the
short-term deferral exemption provided for under the regulations implementing U.S. Code Section 409A. Accordingly, no U.S. Award shall be paid after the 15th day of the third calendar month
following the later of (i) the last day of the fiscal year of the Company or Subsidiary that employs the Participant in which such U.S. Award is no longer subject to a “substantial risk of forfeiture” (as defined for purposes of U.S.
Code Section 409A), or (ii) the last day of the calendar year in which such U.S. Award is no longer subject to a substantial risk of forfeiture.” 

  
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 THE BT GROUP INCENTIVE SHARE PLAN 

DEFINITIONS APPENDIX 

INTRODUCTION 
 The words and expressions used in
the Rules which have capital letters have the meanings set out below. In the Rules: 
  

	 	(i)	 the headings are for the sake of convenience only and should be ignored when construing the Rules;



  

	 	(ii)	 reference to any statutory provisions are to those provisions as amended, extended or re-enacted from time to time, and include any subordinate legislation made under them; and 


  

	 	(iii)	 unless the context requires otherwise, words in the singular include the plural and vice versa and words
imputing either gender include both genders. 


  

	1.	 DEFINITIONS 


  


			
	ADSs	  	American depositary shares each representing five ordinary shares in the Company;
		
	Appropriate Period	  	any time before midday on the day immediately before the date for which the shareholders’ meeting is convened;
		
	Associated Company	  	in relation to the Company:
		
		  	 (i) any company which has Control of the Company; or

		
		  	 (ii)  any company (other than a Participating Company) which is under the Control of
any company referred to in (i) above;

		
	Associated Undertaking	  	a company or partnership in which the Company has an interest through a shareholding or otherwise;
		
	Award	  	a contingent right to acquire Shares under the Plan which has been granted or is proposed to be granted under the Plan;


  
 20 














			
	Board	  	the board of directors for the time being of the Company or a duly authorised committee of it;
		
	Closed Period	  	a period when the PDMRs of the Company are prohibited from dealing in Shares under the Criminal Justice Act 1993, Part VIII of the Financial Services Market Act 2000 (market abuse) or the Market Abuse Regulation (EU)
596/2014 on transactions in securities, the Company’s share dealing code or under any other statute, regulation or similar code to which the Company is subject;
		
	Company	  	 BT Group plc (registered no. 4190816) unless:
  

(i) Rule 4.3 operates, in which case it shall mean the Employing Company, or

 
 (ii)  Rule 5.7 operates, in which
case it shall mean the company referred to in Rule 5.7,
  
 which, in all cases, for the
purposes of the Rules, may act through the Board or through any two employees of the Group authorised to act in accordance with the policies established under Rule 1;

		
	Control	  	has the meaning given by Section 995 of the Income Tax Act 2007;
		
	Date of Grant	  	in relation to an Award, the date on which that Award is granted;
		
	Dealing Day	  	a day on which the London Stock Exchange is open for the transaction of business;
		
	Definitions Appendix	  	this appendix which forms part of the Rules;
		
	Eligible Executive	  	any person (including one who is a director of the Company) who, at the Date of Grant, is an employee of the Company or a Subsidiary;
		
	Employees’ Share Scheme	  	an employees’ share scheme (as defined by Section 1166 of the Companies Act 2006) established by the Company


  
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	Employing Company	  	 following a demerger of the Company, the company whose shares are listed on the London Stock Exchange and is the ultimate holding company (as
defined in section 1159 of the Companies Act 2006) of:
  

(i) the business with which the Participant is employed; or

 
 (ii)  where the Participant ceased
employment with the Group prior to the demerger, the company which employed the Participant at the time that his Award was made;

		
	Employment	  	employment as an employee of a Participating Company or an Associated Company;
		
	Group	  	Participating Companies and Associated Companies;
		
	Incentive Period	  	in relation to an Award, the period (which cannot be less than three years) specified at the Date of Grant, during which the performance target which the Award is subject to is measured;
		
	London Stock Exchange	  	the London Stock Exchange plc (or any successor body carrying on the business of the London Stock Exchange) or, where the context so requires, the New York Stock Exchange or any other exchange on which the Shares are listed or
traded;
		
	Market Value	  	 in relation to a share on any day, an amount equal to:
  

(a) if and so long as the Shares are admitted to trading on the London Stock Exchange, its middle market quotation (as derived from the Daily Official List of
the London Stock Exchange) on, at the discretion of the Company, (i) that day, (ii) the Dealing Day immediately preceding that day or (iii) the average middle market quotation of the three Dealing Days immediately preceding that day;
and
  
 (b) subject to (a) above, the market value of a Share as determined in
accordance with Part VIII of the Taxation of Chargeable Gains Act 1992 on the Date of Grant (or such earlier date as determined by the Company);

		
	Participant	  	an Eligible Executive to whom an Award has been granted, or (where the context requires) his personal representatives;


  
 22 














			
	Participating Company	  	the Company and any Subsidiary designated by the Board as a Participating Company;
		
	Plan	  	the BT Group Incentive Share Plan constituted by the Rules;
		
	Plan Period	  	the period starting on the date on which the shareholders of BT Group plc approve in general meeting the adoption of the Plan and ending on the tenth anniversary of that date;
		
	Redundancy	  	ceasing to be in Employment because the Company has decided that there is no longer any requirement or there is a reduced requirement for the Participant to perform the work which he previously performed;
		
	Remuneration Committee	  	the duly authorised remuneration committee of the Board all of whose members are non-executive directors;
		
	Rules	  	the rules of the Plan, including the Definitions Appendix, as amended from time to time;
		
	Share	  	 a fully paid ordinary share in the capital of the Company unless:
  

(i) Rule 4.3 operates, in which case it shall mean a fully paid ordinary share in the capital of the Employing
Company; or
  
 (ii)  Rule 5.7
operates in which case it shall mean a fully paid ordinary share in the capital of the company referred to in Rule 5.7;

		
	Subsidiary	  	a company which in relation to the Company is a company as defined by Section 1159 of and Schedule 6 to the Companies Act 2006;
		
	Tax Liability	  	in relation to a Participant, the amount of all taxes and/or national insurance contributions or any other contribution which any company in the Group is required to, or may account for and on behalf of or, if permitted, in respect
of that Participant’s Award;
		
	Treasury Share	  	a Share held by the Company in treasury in accordance with Sections 724 to 732 of the Companies Act 2006;
		
	Trustee	  	the trustee from time to time of an employee share ownership trust established by the Company as an Employees’ Share Scheme;


  
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	Variation	  	 means:
  

(i) in relation to the equity share capital of the Company:

 
 (a)   a capitalisation issue,
an offer or invitation made by way of rights, a subdivision, a consolidation or reduction; or
  

(b)   any other variation;
  

(ii)  a demerger of the Company
  

which would, in the opinion of the Company, justify an adjustment to any Award;

		
	U.S. Awards	  	an Award applicable to a Participant who is subject to (or becomes subject to) U.S. Income Tax;
		
	U.S. Income Tax	  	income tax imposed by the United States Internal Revenue Code of 1986, as amended and the United States Department of Treasury regulations and other guidance issued thereunder, including any applicable exemptions from the general
requirements thereof (collectively, “ U. S. Code Section 409A”); and
		
	Vest, Vested or Vesting	  	in relation to an Award, the point at which a Participant becomes absolutely entitled to all or some of the Shares the subject of that Award provided that if this would be on a day which is in a Closed Period, the day on which that
Award vests will be the first Dealing Day following the end of the Closed Period.


  
 24