Telecom Share Option Scheme



  
 Exhibit 4.1 
  

  
 TELECOM SHARE OPTION SCHEME 
  

  
 [GRAPHIC] 
  









  
 TELECOM
SHARE OPTION SCHEME 
  
 TABLE OF CONTENTS 
  

	 1
	  	 NAME
	  	1
	 2
	  	 GROUNDING
	  	1
	 2.1
	  	 Alignment
	  	1
	 2.2
	  	 Corporate Objective
	  	1
	 3
	  	 KEY TERMS
	  	1
	 4
	  	 COMMITTEE
	  	3
	 4.1
	  	 Administration
	  	3
	 4.2
	  	 Delegation
	  	4
	 5
	  	 GRANTS
	  	4
	 6
	  	 REJECTION OF GRANT
	  	4
	 6.1
	  	 Opportunity
	  	4
	 6.2
	  	 Acknowledgement
	  	4
	 7
	  	 EXERCISE OF OPTIONS
	  	5
	 7.1
	  	 Qualifying Date notice
	  	5
	 7.2
	  	 Subsequent notice
	  	5
	 7.3
	  	 No further notice
	  	5
	 7.4
	  	 Date on which Options may be exercised
	  	5
	 8
	  	 PROCEDURE FOR EXERCISE
	  	5
	 8.1
	  	 Exercise Notice
	  	5
	 8.2
	  	 Payment
	  	5
	 8.3
	  	 Issue
	  	5
	 8.4
	  	 Committee’s Notice
	  	6
	 8.5
	  	 Effective Exercise
	  	6
	 8.6
	  	 Continued Breach
	  	6
	 9
	  	 RIGHTS ON EXERCISE
	  	6
	 10
	  	 ADJUSTMENTS
	  	7
	 10.1
	  	 Rights Issue
	  	7
	 10.2
	  	 Bonus Issue
	  	7
	 10.3
	  	 Reconstruction
	  	7
	 10.4
	  	 Qualifying Date acceleration
	  	7
	 11
	  	 LAPSE OF OPTIONS
	  	8
	 11.1
	  	 Rejection of Grant
	  	8
	 11.2
	  	 Leave Prior to Qualifying Date
	  	8
	 11.3
	  	 Lapse on Performance Expiry Date
	  	8
	 11.4
	  	 Leave After Qualifying Date: Involuntary Event
	  	8
	 11.5
	  	 Leave After Qualifying Date: Dismissal
	  	8
	 11.6
	  	 Leave After Qualifying Date: Other Reason
	  	8
	 11.7
	  	 Option Lapse Date
	  	8
	 11.8
	  	 Breach
	  	9
	 11.9
	  	 Variation or Waiver
	  	9
	 12
	  	 NO DIVESTMENT
	  	9
	 13
	  	 AMENDMENT AND TERMINATION
	  	9
	 13.1
	  	 Committee’s Discretion
	  	9

  










	 13.2
	  	 Termination
	  	9
	 13.3
	  	 Breach
	  	9
	 13.4
	  	 Notice to Participants
	  	10
	 14
	  	 QUOTATION
	  	10
	 15
	  	 MISCELLANEOUS
	  	10
	 15.1
	  	 Spirit of the Scheme
	  	10
	 15.2
	  	 Fractions
	  	10
	 15.3
	  	 Entire Agreement
	  	10
	 15.4
	  	 Delay
	  	10
	 15.5
	  	 Disputes
	  	10
	 15.6
	  	 Notice
	  	10
	 15.7
	  	 Governing Law
	  	11
	 15.8
	  	 Construction
	  	11








  
 TELECOM
SHARE OPTION SCHEME 
  
 Date: August 2003 
  

	1	NAME 

  
 The name of this scheme is the Telecom Share Option Scheme. 
  

	2	GROUNDING 

  
 The ultimate corporate objective is to create shareholder value (as measured by the sum of share price appreciation and dividend paid to shareholders). To
do this, employees must develop and implement successful corporate and business-unit strategies. Employee compensation is critical to this process in two ways: 
  


	 	(i)	by supporting the strategies, management processes, organisation approaches and culture critical to creating shareholder value; and 

  

	 	(ii)	by paying directly for the value created. 

  
 The Scheme: 
  

	 	2.1	Alignment 

  
 is intended to align the incentives for senior employees with the interests of Telecom’s shareholders; and 
  

	 	2.2	Corporate Objective 

  
 forms part of a Telecom corporate objective which seeks to build morale, retain good employees and promote decisions that will benefit Telecom
shareholders by conferring on a selected group of employees a right to participate in the equity of Telecom. 
  

	3	KEY TERMS 

  
 Unless the context requires otherwise: 
  
 “Breach” means a breach of: 
  

	 	(i)	Telecom’s constitution; 

  

	 	(ii)	the listing and/or other rules governing the Exchange or any other stock exchange on which Shares are quoted; and/or 

  

	 	(iii)	the Securities Amendment Act 1988, any other statute or regulation, or Telecom’s internal procedures for insiders; 

  
 “Business Day” means a day on which the Exchange is open
for trading; 
  

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 TELECOM SHARE OPTION SCHEME 
  

 “Commencement Date” means the date from and including which a Participant is
entitled to participate in the Scheme, specified in the Grant; 
  
 “Committee” means Telecom’s Human Resources/Compensation Committee or any other committee or person nominated by the board of directors of Telecom; 
  
 “Employment” means employment with, or the provision of personal services (otherwise than as an employee)
principally to, a company in the Group; 
  
 “Exchange” means New Zealand Exchange Limited’s NZSX; 
  
 “Exercise Date” means: 
  

	 	(i)	the later of the Qualifying Date and the Performance Date; or 

  

	 	(ii)	the Qualifying Date, if there are no Performance Criteria or the Qualifying Date and the Performance Date are the same, 

  
 subject to clauses 10.4 and 11.3; 
  
 “Exercise Notice” means notice of the exercise of an
Option; 
  
 “Exercise Price” means (subject to
clause 10) the average end of day market price of Shares on the Exchange for the Business Days in the month immediately preceding the Commencement Date; 
  
 “Group” means Telecom and its subsidiaries; 
  
 “Grant” means the grant of an Option; 
  
 “Involuntary Event” means death, redundancy, unjustified dismissal, retirement at or after attaining normal retirement age, illness,
accident, mental infirmity or physical infirmity; 
  
 “Leave” means to suffer termination of Employment by any means and for any reason, excluding: 
  

	 	(i)	termination primarily for the purpose of assuming further Employment; and 

  

	 	(ii)	non-permanent leave of absence with employer approval; 

  
 “Live Option” means an Option which has not been exercised, for which the Qualifying Date has crystallised and which has not lapsed
pursuant to clause 11; 
  

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 TELECOM SHARE OPTION SCHEME 
  

 “Option” means (subject to clause 10) an option to subscribe for a Share pursuant to
this Scheme; 
  
 “Option Lapse Date” means the
first day after the expiration of the period, specified in a Grant, from and including the Commencement Date; 
  
 “Participant” means an Employee to whom Options are granted; 
  
 “Performance Criteria” means the performance criteria (if any) specified in a Grant; 
  
 “Performance Date” means the date on which the Committee
notifies a Participant under clause 7 that the Performance Criteria are satisfied; 
  
 “Performance Expiry Date” means the date, specified in a Grant, for the purpose of clause 7.3; 
  
 “Qualifying Date” means the first Business Day after the expiration of the period, specified in a Grant, from and including the
Commencement Date; 
  
 “Reconstruction” means
any consolidation, subdivision, cancellation, redemption, acquisition by Telecom or other rearrangement or reconstruction whatever of shares in Telecom which changes the proportionate interest in Telecom represented by a Share; 
  
 “Scheme” means the Telecom Share Option Scheme recorded in
this document as amended from time to time; 
  
 “Share” means an ordinary share in Telecom; 
  
 “Takeover” means the acquisition by any means by any person (excluding Telecom) or group of associated persons of a legal or beneficial interest in 20% or more of all Shares; and 
  
 “Telecom” means Telecom Corporation of New Zealand Limited.

  

	4	COMMITTEE 

  

	4.1	Administration 

  
 The Committee will administer all aspects of the Scheme, including the making of Grants. Any matter to be determined by the Committee will be determined
as it sees fit in its sole discretion. 
  

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 TELECOM SHARE OPTION SCHEME 
  


	4.2	Delegation 

  
 The Committee may delegate to any person (and revoke any delegation of) all or any of its powers, discretions, rights and obligations under the Scheme
from time to time as it sees fit, and reference to the “Committee” will be construed accordingly. 
  

	5	GRANTS 

  
 The Committee may make a Grant to an Employee. Each Grant will: 
  

	 	(i)	specify the number of Options granted to the Employee; 

  

	 	(ii)	enclose a copy of the Scheme (unless the Employee has previously received a copy); 

  

	 	(iii)	enclose a copy of an investment statement for the offer of Shares made under the Grant (if made in New Zealand); 

  

	 	(iv)	specify the Commencement Date, the Exercise Price, the Performance Criteria (if any), the Performance Expiry Date (if any) and the periods after which the Qualifying Date and the
Option Lapse Date fall; 

  

	 	(v)	enclose an Options certificate; and 

  

	 	(vi)	specify the period during which the Employee may reject the Grant. 

  

	6	REJECTION OF GRANT 

  

	6.1	Opportunity 

  
 A Participant may reject a Grant by giving the Committee notice, and returning to the Committee the Options certificate, within 40 Business Days after the
Grant. 
  

	6.2	Acknowledgement 

  
 In retaining a Grant (and electing not to reject the Grant pursuant to clause 6.1), a Participant acknowledges that: 
  

	 	(i)	the terms of the Scheme are binding; and 

  

	 	(ii)	participation in the Scheme does not affect the terms of the Participant’s Employment. In no event will Telecom be deemed, by making a Grant or otherwise, to have represented
that a Participant’s Employment will continue until and/or beyond the Qualifying Date or the Exercise Date. 

  

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 TELECOM SHARE OPTION SCHEME 
  


	7	EXERCISE OF OPTIONS 

  

	7.1	Qualifying Date notice 

  
 On or prior to the Qualifying Date, the Committee will notify a Participant whether or not the Performance Criteria are satisfied (where applicable).

  

	7.2	Subsequent notice 

  
 If the Committee gives notice under clause 7.1 that the Performance Criteria are not satisfied, the Committee will notify the Participant of satisfaction,
on the next monthly anniversary of the Qualifying Date on which the Performance Criteria are satisfied (or, if that day is not a Business Day, on the next Business Day), subject to clause 7.3. 
  

	7.3	No further notice 

  
 The Committee will only give notice under clause 7.2 (if any) prior to the Performance Expiry Date. 
  

	7.4	Date on which Options may be exercised 

  
 Options may be exercised on the Exercise Date or any Business Day after the Exercise Date, unless: 
  

	 	(i)	Breach 

  
 the Committee considers that the exercise would give rise to a Breach; or 
  

	 	(ii)	Lapse 

  
 the Option has lapsed pursuant to clause 11. 
  

	8	PROCEDURE FOR EXERCISE 

  

	8.1	Exercise Notice 

  
 A Participant may, as the Participant sees fit from time to time (subject to clause 7.4), exercise part or all of that Participant’s Options (subject
to any minimum number or multiple of a number of Options prescribed by the Committee from time to time), by giving the Committee an Exercise Notice. 
  

	8.2	Payment 

  
 Any Exercise Notice must be accompanied by: 
  

	 	(i)	payment of the aggregate Exercise Price; and 

  

	 	(ii)	(if applicable) a form requesting consent to acquire Shares, in terms of Telecom’s internal procedures for insiders. 

  

	8.3	Issue 

  
 Within five Business Days after the date on which the Committee receives: 
  

	 	(i)	an Exercise Notice; 

  

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 TELECOM SHARE OPTION SCHEME 
  


	 	(ii)	payment; and 

  

	 	(iii)	(if applicable) a form requesting consent to acquire Shares, in terms of Telecom’s internal procedures for insiders, 

  
 in accordance with this clause, Telecom will issue to the Participant
Shares, unless clause 7.4 precludes the exercise of Options (if so, the Committee will give notice to the Participant accordingly and refund the Exercise Price (without interest)). 
  

	8.4	Committee’s Notice 

  
 The Committee will give a further notice to a Participant who has been precluded (pursuant to clause 7.4(i)) from exercising an Option, as soon as it
considers that the exercise would no longer give rise to a Breach. 
  

	8.5	Effective Exercise 

  
 Notwithstanding clauses 11.4 to 11.7, but subject to clause 8.6, the Exercise Notice of a Participant precluded (pursuant to clause 7.4(i)) from
exercising an Option will take effect 10 Business Days after the date on which the Committee gives its notice pursuant to clause 8.4, if the Participant: 
  

	 	(i)	pays the aggregate Exercise Price; and 

  

	 	(ii)	(if applicable) delivers a form requesting consent to acquire Shares, in terms of Telecom’s internal procedures for insiders, 

  
 during that period. If the Participant fails to do so, the
Exercise Notice will be deemed to have been revoked. 
  

	8.6	Continued Breach 

  
 If the exercise of Options pursuant to clause 8.5 would give rise to a Breach, the Committee will proceed as if an Exercise Notice had been given pursuant
to clause 8.1. 
  

	9	RIGHTS ON EXERCISE 

  
 Shares issued to Participants will be credited as fully paid and will rank pari passu in all respects with all Shares at the date of issue, except for any
dividend declared on Shares where the record date occurs prior to issue. 
  

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 TELECOM SHARE OPTION SCHEME 
  


	10	ADJUSTMENTS 

  

	10.1	Rights Issue 

  
 If, prior to the exercise of an Option, Telecom confers on the holders of Shares rights to acquire Shares (or other benefits or assets), the Committee may
adjust the Exercise Price so that Participants receive a benefit which reflects the value of the rights to holders of Shares. A Participant will not otherwise benefit from the rights and, in particular, may not acquire Shares (or other benefits or
assets) under the rights, except to the extent the Participant becomes a holder of Shares (on the exercise of Options) before the record date for the rights. 
  

	10.2	Bonus Issue 

  
 If, prior to the exercise of Options, Telecom issues Shares to the holders of Shares in a manner that maintains the existing relative voting and
distribution rights of all holders of Shares, a Participant will be entitled on exercising the Options to receive additional Shares as if the Shares under the Grant received on exercising the Options had participated in the bonus issue. 

 

	10.3	Reconstruction 

  
 If, prior to the exercise of an Option, there is a Reconstruction, the Committee will adjust the number of Shares to be received on the exercise of
Options, the Exercise Price and/or any other rights under the Options, to the extent required at the time of the Reconstruction under the applicable listing and/or other rules governing the Exchange or any other stock exchange on which Shares are
quoted. 
  

	10.4	Qualifying Date acceleration 

  
 Notwithstanding any other provision of the Scheme, if a Participant Leaves prior to the Qualifying Date: 
  

	 	(i)	due to death or redundancy; and 

  

	 	(ii)	on or after the date half-way through the period from the Commencement Date to the Qualifying Date, 

  
 the Committee may (but has no obligation whatever to) deem the Exercise Date to have occurred, on the day immediately prior
to the date on which the Participant Leaves, for a number of the Participant’s Options based on this formula: 
  

	 	 	 number of Options = number of all of the Participant’s Options x
	  	 n


	 	  	  t


  
 where 
  
 n is the number of days from the Commencement Date to the date on
which the Participant Leaves (both inclusive) 
  
 t
is the number of days from the Commencement Date to the Qualifying Date (both inclusive). 
  

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 TELECOM SHARE OPTION SCHEME 
  

 Where the Committee does so, those Options will lapse on the first day after the expiration of one
year from and including the date on which the Participant Leaves. 
  

	11	LAPSE OF OPTIONS 

  

	11.1	Rejection of Grant 

  
 If a Participant rejects a Grant under clause 6.1, the Options under the Grant will lapse immediately. 
  

	11.2	Leave Prior to Qualifying Date 

  
 If a Participant Leaves prior to the Qualifying Date, the Participant’s Options will lapse immediately, subject to clause 10.4. 
  

	11.3	Lapse on Performance Expiry Date 

  
 If the Exercise Date does not precede the Performance Expiry Date (where applicable), the Participant’s Options will lapse immediately. 

 

	11.4	Leave After Qualifying Date: Involuntary Event 

  
 If a Participant Leaves due to an Involuntary Event or within six months from and including the date of a Takeover, the Participant’s Live Options
(if any) will lapse on the first day after the expiration of one year from and including the date on which the Participant Leaves or on the Option Lapse Date, whichever is the earlier. 
  

	11.5	Leave After Qualifying Date: Dismissal 

  
 Subject to clause 11.4, if a Participant Leaves due to dismissal, the Participant’s Live Options (if any) will lapse immediately. 
  

	11.6	Leave After Qualifying Date: Other Reason 

  
 If a Participant Leaves due to a reason other than the reasons referred to in clauses 11.4 and 11.5, the Participant’s Live Options (if any) will
lapse on the first day after the expiration of three months from and including the date on which the Participant Leaves or on the Option Lapse Date, whichever is the earlier. 
  

	11.7	Option Lapse Date 

  
 A Live Option, which has not lapsed pursuant to clauses 11.4 to 11.6 (which, for the avoidance of doubt, are subject to clause 8.5) or 11.8, lapses on the
Option Lapse Date, subject to clauses 8.5 and 11.8. 
  

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 TELECOM SHARE OPTION SCHEME 
  


	11.8	Breach 

  
 Notwithstanding clauses 11.4 to 11.7, if, after the period of six months from the date on which it first gives notice pursuant to clause 8.3, the
Committee considers that it is still unable to give notice in respect of an Option pursuant to clause 8.4 and/or the exercise of Options pursuant to clause 8.5 would give rise to a Breach: 
  

	 	(i)	the Committee will arrange to pay the Participant the sum representing the difference between the Exercise Price and the average end of day market price of Shares on the Exchange
for the Business Days in the month immediately preceding the date of the Exercise Notice given by the Participant pursuant to clause 8.1; and 

  

	 	(ii)	the Live Option will lapse immediately upon that payment being made. 

  

	11.9	Variation or Waiver 

  
 The Committee may vary or waive the application of clauses 11.1 to 11.8 for any one or more of the Participants. 
  

	12	NO DIVESTMENT 

  
 No Participant may transfer, assign, or otherwise dispose of or create any interest (including any security, legal or equitable interest) in an Option,
without the prior written consent of the Committee. 
  

	13	AMENDMENT AND TERMINATION 

  

	13.1	Committee’s Discretion 

  
 Subject to clause 13.3, the Committee may from time to time: 
  

	 	(i)	vary any term of a Participant’s participation in the Scheme, with the agreement of the Participant; or 

  

	 	(ii)	amend the Scheme, if the Committee considers that the interests of Participants affected are not materially prejudiced. 

  

	13.2	Termination 

  
 Subject to clause 13.3, the Committee may terminate the Scheme. 
  

	13.3	Breach 

  
 The Committee: 
  

	 	(i)	may not amend (or vary any term of a Participant’s participation in), or terminate, the Scheme if this would give rise to a Breach; but 

  

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 TELECOM SHARE OPTION SCHEME 
  


	 	(ii)	may amend or terminate the Scheme if the Committee considers that this would avoid giving rise to a Breach. 

  

	13.4	Notice to Participants 

  
 The Committee will give notice of any amendment to or termination of the Scheme to all Participants affected. Similarly, the Committee will give notice of
any adjustment under clause 10 to all Participants affected. 
  

	14	QUOTATION 

  
 Options will not be quoted on a stock exchange. 
  

	15	MISCELLANEOUS 

  

	15.1	Spirit of the Scheme 

  
 If any circumstance arises which might result in the spirit and intent of the Scheme not being fulfilled, the Committee will use all reasonable endeavours
to effect any modification to the Scheme required to preserve that spirit and intent. 
  

	15.2	Fractions 

  
 If a calculation or adjustment under the Scheme produces a fraction of a cent or Share, the product will be rounded to the nearest whole number favourable
to the Participant. 
  

	15.3	Entire Agreement 

  
 The Scheme represents all of the terms on which Options are issued and exercised and Shares issued under the Scheme, except those which the Committee
reasonably implies to give effect to the Scheme. 
  

	15.4	Delay 

  
 No failure, delay or indulgence by the Committee in exercising any power or right conferred on it under the Scheme will operate as a waiver of that power
or right; nor will a single exercise of a power or right preclude further exercises, or the exercise of any other power or right under the Scheme. 
  

	15.5	Disputes 

  
 Any dispute which arises under the Scheme will be determined by the Committee. The Committee’s decision will be final. 
  

	15.6	Notice 

  
 All notices and communications required to be given or made under the Scheme will be in writing and addressed to the recipient at the address or facsimile
number from time to time designated by the recipient. Unless any other designations are given, the addresses and facsimile numbers of Telecom and a 

  

 10 









 TELECOM SHARE OPTION SCHEME 
  

 
Participant are those (if any) set out in the relevant Grant. Any notice or communication will be deemed to have been received: 
  

	 	(i)	at the time of delivery, if delivered by hand; 

  

	 	(ii)	on the second Business Day after the date of mailing, if sent by post or airmail with postage prepaid; or 

  

	 	(iii)	on the day on which confirmation of proper transmission is received (on transmission), if sent by facsimile. 

  

	15.7	Governing Law 

  
 The Scheme will be governed by and construed in accordance with New Zealand law. 
  

	15.8	Construction 

  
 Unless the context requires otherwise: 
  

	 	(i)	the singular includes the plural and vice versa, and words importing any gender include the other genders; 

  

	 	(ii)	a reference to a “person” includes any individual, partnership, committee and incorporated or unincorporated body (whether or not having a separate legal personality);


  

	 	(iii)	a reference to an “amendment” includes any deletion or addition; 

  

	 	(iv)	a reference to an enactment (statute or regulation) includes enactments in New Zealand and in any other jurisdiction affecting the Scheme, and is a reference to that enactment as
amended, or any enactment substituted for that enactment; 

  

	 	(v)	where a word or expression is defined in the Scheme, other parts of speech and grammatical forms of that word or expression have a corresponding meaning; and


  

	 	(vi)	a reference to a person includes its successors and permitted assigns. 

  

 11