ECO6051S
                            Private and Confidential
                          Sharesave : unlisted/approved





 ...............................................................................

                                  RULES OF THE

                            CHARTWELL RE CORPORATION

                              SHARESAVE SCHEME 1997

 ...............................................................................

                                    IR Ref :





















                                Deloitte & Touche
                                   Hill House
                               1 Little New Street
                                     London
                                    EC4A 3TR

                               Tel:- 0171 936 3000

                                  Ref:- ABB/SVW

<PAGE>

                                    CONTENTS


RULE                                                           PAGE

1       Definitions                                              1

2       Application for options                                  4

3       Scaling down                                             5

4       Grant of options                                         6

5       Number of shares in respect of
        which options may be granted                             7

6       Rights of exercise and lapse of options                  7

7       Takeover, reconstructions and
        amalgamation and liquidation                            10

8       Manner of exercise                                      11

9       Issue of transfer of shares                             11

10      Adjustments                                             12

11      Administration                                          13

12      Alterations                                             13

13      General                                                 13


<PAGE>

          Rules of the Chartwell Re Corporation Sharesave Scheme 199[o]

1.       Definitions

 1.1      In this Scheme,  the  following  words and  expressions  shall
          bear, unless the context otherwise requires,  the meanings set
          out below:

 "Appropriate Period"    the meaning given by paragraph  15(2) of  Schedule 9 to
                         the Taxes Act;

 "Associated Company"    within the meaning of section 187(2) of the Taxes Act;

 "the Board"             the board of directors of the Company,  or a duly
                         authorised committee of the board;

 "Bonus                  Date" the date on which the bonus
                         becomes    payable    under   the
                         Sharesave    Contract   made   in
                         connection with an Option being a
                         3  year  contract,  the  date  of
                         completion    of    36    monthly
                         contributions.

 "Close Company"         a close  company as  defined in Section  414(1) of the
                         Taxes Act as varied by paragraph 8 of Schedule 9 to the
                         Taxes Act;

 "the                    Company" Chartwell Re corporation
                         whose registered office is at 107
                         Elm  Street,  4  Stamford  Plaza,
                         Stamford, Connecticut, 06912;

 "Control"               within the meaning of section 840 of the Taxes Act;

 "Date of Grant"         the date on which the Board resolves to grant a
                         Option;

 "Date of Invitation"    the  date  on  which  the  Board  invites  applications
                         for Options;

 "Eligible Employee"     any individual who:

                         (a) (i)    is a  full  time  director  who  works  at
                                    least  25  hours  a week  (excluding  meal
                                    breaks) or is an  employee  of one or more
                                    Participating Companies; and

                             (ii)   has        such
                                    qualifying
                                    period (if any)
                                    of   continuous
                                    service  (being
                                    a        period
                                    commencing  not
                                    earlier    than
                                    five      years
                                    prior   to  the
                                    Date of  Grant)
                                    as  the   Board
                                    may  determine;
                                                         and

                            (iii)   is  subject  to
                                    income      tax
                                    under Case 1 of
                                    Schedule  E  as
                                    defined  in the
                                    Taxes Act; or

                         (b)        is a full time  director
                                    who  works  at  least 25
                                    hours a week  (excluding
                                    meal   breaks)   or   an
                                    employee      and     is
                                    nominated  by the  Board
                                    either  individually  or
                                    as   a   member   of   a
                                    category  of  such  full
                                    time     directors    or
                                    employees;

 "Exercise               Price"  the  amount   payable  in
                         relation  to the  exercise  of an
                         Option,  whether  in  whole or in
                         part,  being an  amount  equal to
                         the    relevant    Option   Price
                         multiplied   by  the   number  of
                         Shares  in  respect  of which the
                         Option is exercised;

 "Market                 Value" in  relation to a Share on
                         any  day  its  market   value  as
                         determined  in  accordance   with
                         Part  VIII  of  the  Taxation  of
                         Chargeable  Gains  Act  1992  and
                         agreed in advance with the Shares
                         Valuation  Division of the Inland
                         Revenue;

 "Material Interest"     the meaning given by section 187(3) of the Taxes Act;

 "Maximum Contribution"  the lesser of:

                         (a)   such  maximum   monthly contribution  as  may  be
                               permitted pursuant to paragraph  24 of Schedule 9
                               to the Taxes Act; or

                         (b)   such   maximum   monthly
                               contribution  as  may be
                               determined  from time to
                               time by the Board;

 "Member of a Consortium" the meaning given by section 187(7) of the Taxes Act;

 "Monthly Contributions"   monthly  contributions  agreed  to be paid by a
                           Participant under the Sharesave  Contract  made in
                           connection  with his Option;

 "Option"                  a right to acquire  Shares  under the Scheme which
                           is either subsisting  or (where the context so
                           admits or  requires) is proposed to be granted;

 "Option                   Price"  the price per  Share,  as
                           determined by the Board, at which
                           an Eligible  Employee may acquire
                           Shares  upon the  exercise  of an
                           Option being not less than:


                         (a) 85 per cent of the Market Value of the Shares; and


                         (b) if the Shares are to be  subscribed,  their nominal
                             Value, but subject to any adjustment pursuant
                             to Rule 10;

 "Participant"           an executive director or employee,
                         or former director or employee, to
                         whom an Option has been granted or
                         (where  the  context  so admits or
                         requires)       the       personal
                         representatives    of   any   such
                         person;

 "Participating Company"   (a)      the Company; and

                           (b)      any other  company  which
                                    is under the  Control  of
                                    the    Company,    is   a
                                    Subsidiary of the Company
                                    and is for the time being
                                    designated  by the  Board
                                    as    a     Participating
                                    Company;

 "Repayment"              in relation to a Sharesave  Contract,  the  aggregate
                          of the Monthly  Contributions which the Participant
                          has made and any bonus due at the Bonus Date;

 "Sharesave               Contract"   a  contract   under  a
                          certified    contractual   savings
                          scheme   (within  the  meaning  of
                          Section  326  of  the  Taxes  Act)
                          approved by the Inland Revenue for
                          the  purpose of  Schedule 9 to the
                          Taxes Act;

 "the Scheme"             the Chartwell Re Corporation  Sharesave Scheme in its
                          present form or as from time to time amended in
                          accordance  with its provisions;

 "Share"                  a fully paid ordinary share in the
                          capital  of  the   Company   which
                          satisfies the conditions specified
                          in paragraphs 10 to 14 (inclusive)
                          of Schedule 9 to the Taxes Act;
 "Specified Age"          60 years of age;
 "Subsidiary"             the meaning  given by Sections 736 and 736A of th
                          Companies Act 1985;

 "Taxes Act"              the Income and Corporation Taxes Act 1988


         1.2      In the  Scheme  where the  context so admits or  requires  the
                  singular  includes the plural and the  masculine  includes the
                  feminine  and  vice  versa;   references   to  any   statutory
                  provisions shall include any modification or re-enactment.

         1.3      Headings shall be ignored in construing these Rules.


2.       Application for Options

         2.1 The  Board  may  invite  applications  for  Options  from  Eligible
Employees at any time.

         2.2 Any  invitation  to apply for Options shall be in writing and shall
include details of:

                  (a)     eligibility;

                  (b)     the Option Price or the  mechanism by which the Option
                          Price will be notified to Eligible Employees;

                  (c)     the Maximum Contribution payable;

                  (d)     The  duration  of the  Eligible  Employees'  Sharesave
                          Contract (being a 3 year Sharesave Contract);

                  (e)     any  restriction  on the amount of bonus payable under
                          the  Sharesave  Contract  which  may  be  used  in the
                          exercise of the Option;

                  (f)     the date by which  applications  made pursuant to Rule
                          2.3 must be received  (being  neither  earlier than 14
                          days  nor  later  than  25  days  after  the  Date  of
                          Invitation),

                  and the Board may  determine  and  include in the  invitations
                  details   of  the   maximum   number  of  Shares   over  which
                  applications for Options are to be invited.

         2.3      Applications for Options must incorporate or be accompanied by
                  a proposal for a Sharesave  Contract.  If  application is made
                  for more than 1 Option,  each  Option must  incorporate  or be
                  accompanied by a proposal for a Sharesave Contract.

         2.4      An application  for an Option shall be in writing in such form
                  as the  Board  may from  time to time  prescribe  save that it
                  shall provide for the applicant to state:

                  (a)     the  Monthly   Contributions   (being  a  multiple  of
                          (pound)1 and not less than  (pound)5)  which he wishes
                          to make  under the  Sharesave  Contract  to be made in
                          connection  with the Option for which  application  is
                          made;

                  (b)     that his proposed  Monthly  Contributions  (when taken
                          together with any monthly contributions he makes under
                          any other  Sharesave  Contract)  will not  exceed  the
                          Maximum Contribution;

         2.5      Each  application  for an Option shall  provide  that,  in the
                  event of excess applications, each application shall be deemed
                  to have been  modified or  withdrawn  in  accordance  with the
                  steps taken by the Board to scale down  applications  pursuant
                  to Rule 3.

         2.6      Proposals  for a Sharesave  Contract  shall be limited to such
                  building society or bank as the Board may designate.

         2.7      Each application  shall be deemed to be for an Option over the
                  largest  whole  number of Shares  which can be acquired at the
                  Option Price with the Repayment  under the Sharesave  Contract
                  entered into in connection with the Option.

         2.8      Eligible  Employees  may  apply  for more  than one  Option in
                  response  to  any  invitation.   However,  where  an  Eligible
                  Employee applies for more than one Option,  he shall be deemed
                  for  the  purposes  of  Rule 3 to have  applied  for a  single
                  Option.


3.       Scaling Down

         3.1      If valid  applications  are  received  for a total  number  of
                  Shares in excess of any maximum number of Shares determined by
                  the Board pursuant to Rule 2.2, or any  limitation  under Rule
                  5, the Board shall scale down  applications by taking,  at its
                  absolute  discretion,  any of the  following  steps  until the
                  number of Shares available equals or exceeds such total number
                  of Shares applied for:

                  (a)     by treating  each  election for a bonus as an election
                          for  no  bonus  and  then,  so far  as  necessary,  by
                          reducing the proposed Monthly  Contributions  pro rata
                          to the  excess  over such  amount  as the Board  shall
                          determine   for  this  purpose  being  not  less  than
                          (pound)5 and then, so far as  necessary,  selecting by
                          lot; or

                  (b)     by reducing the  proposed  Monthly  Contributions  pro
                          rata to the excess over such amount as the Board shall
                          determine   for  this  purpose  being  not  less  than
                          (pound)5 and then, so far as  necessary,  selecting by
                          lot.

         3.2      If the number of Shares available is insufficient to enable an
                  Option based on Monthly  Contributions  of (pound)5 a month to
                  be  granted  to  each   Eligible   Employee   making  a  valid
                  application,  the Board may, as an alternative to selecting by
                  lot,  determine  in its  absolute  discretion  that no Options
                  shall be granted.

         3.3      If the Board so determines, the provisions in Rule 3.1(a), (b)
                  and (c) may be  modified  or  applied  in any manner as may be
                  agreed in advance with the Inland Revenue.

         3.4      If, in applying the scaling down provisions  contained in this
                  Rule 3,  Options  cannot be  granted  within the 30 day period
                  referred  to in Rule 4.2  below,  the  Board may  extend  that
                  period by twelve days.

4.       Grant of Options

         4.1 No Option shall be granted to any person if:

                  (a)    at the Date of Grant that  person  shall have ceased to
                         be an Eligible Employee; or

                  (b)     that  person  has,  or has had at any time  within the
                          twelve month  period  preceding  the Date of Grant,  a
                          Material Interest in the issued ordinary share capital
                          of a Close  Company  which is the Company or a company
                          which has  Control of the  Company or is a Member of a
                          Consortium which owns the Company.

         4.2      Within 30 days of the day agreement is reached with the Inland
                  Revenue  as to the  Market  Value of a Share,  the Board  may,
                  subject to Rule 3 above,  grant to each Eligible  Employee who
                  has submitted a valid application, an Option in respect of the
                  number of Shares for which  application  has been deemed to be
                  made under Rule 2.7.

         4.3      The  Company  shall  issue  to  each   Participant  an  option
                  certificate in such form (not inconsistent with the provisions
                  of the  Scheme) as the Board may from time to time  prescribe.
                  Each such  certificate  shall specify the Date of Grant of the
                  Option,  the number and class of Shares  over which the Option
                  is granted, the Option Price and the Bonus Date.

         4.4      Except as  otherwise  provided in these  Rules,  every  Option
                  shall be personal to the Participant to whom it is granted and
                  shall not be transferable.

         4.5      No amount shall be paid in respect of the grant of an Option.


5.       Number of Shares in respect of which Options may be granted

         5.1      Individual Limits

                  No Eligible  Employee shall be granted an Option to the extent
                  it would at the  proposed  Date of Grant  cause the  aggregate
                  amount of his contributions  under all Sharesave  Contracts to
                  exceed the lesser of:-

         5.1.1    a Monthly Contribution of (pound)250; and

         5.1.2    the maximum Monthly Contribution specified by the Board.
6.       Rights of exercise and lapse of Options

         6.1              (a) Save as provided in Rules 6.2,  6.3,  6.4 and Rule
                          7, an Option shall not be  exercised  earlier than the
                          Bonus Date under the Sharesave  Contract  entered into
                          in connection with the Option.

                  (b)     Save as provided  in Rule 6.2, an Option  shall not be
                          exercised  later than six months  after the Bonus Date
                          under  the   Sharesave   Contract   entered   into  in
                          connection with the Option.

                  (c)     Save as  provided  in Rules 6.2 and 6.3, an Option may
                          only be  exercised  by a  Participant  whilst  he is a
                          director or employee of a Participating Company.

                  (d)     An Option may not be exercised by a Participant  if he
                          has,  or has had at any time  within the twelve  month
                          period  preceding  the date of  exercise,  a  Material
                          Interest in the issued  ordinarily  share capital of a
                          Close  Company which is the Company or a company which
                          has  Control  of  the  Company  or  is a  Member  of a
                          Consortium  which owns the Company,  nor may an Option
                          be  exercised  by the  personal  representatives  of a
                          deceased  Participant  if the  Participant  had such a
                          Material Interest at the date of his death.

                  (e)     An Option may be  exercised in part only  however,  if
                          such  partial  exercise  occurs the  unexercised  part
                          shall lapse at the date of exercise.

         6.2      An Option may be exercised by the personal  representatives of
                  a deceased  Participant  to the extent of the  Repayments  due
                  under the Sharesave Contract at the date of death:

                  (a)     within  twelve  months following the date of his deat
                          if such death occurs before the Bonus Date;

                  (b)     within twelve  months  following the Bonus Date in the
                          event of his death  within six months  after the Bonus
                          Date.

         6.3      An Option  may, to the extent of the  Repayment  due under the
                  Sharesave Contract at the date of cessation, be exercised by a
                  Participant  within six months  following  his ceasing to hold
                  the office or  employment by virtue of which he is eligible to
                  participate in the Scheme by reason of:

                  (a)     injury,  disability,  redundancy within the meaning of
                          the  Employment  Rights  Act 1996,  or  retirement  on
                          reaching the  Specified  Age or any other age at which
                          he is bound to retire in accordance  with the terms of
                          his contract of employment; or

                  (b)     his office or  employment  being in a company of which
                          the Company ceases to have Control; or

                  (c)     the  transfer  of his  contract of  employment  (which
                          relates  to a  business  or part of a  business)  to a
                          person  who is  neither an  Associated  Company  nor a
                          company of which the Company has Control; or

                  (d)     retirement  at any  age at  which  he is  entitled  to
                          retire in accordance with the terms of his contract of
                          employment (other than at the Specified Age or any age
                          at which he is bound to retire), early retirement with
                          the  agreement of the employer,  or pregnancy,  but in
                          each  case  only  if  such   cessation  of  office  or
                          employment  is more than three years after the Date of
                          Grant.

                  For the purposes of the Scheme, a woman who leaves  employment
                  due  to  pregnancy   will  be  regarded  as  having  left  the
                  employment on the day on which she indicates that she does not
                  intend to return to work.  In the  absence of such  indication
                  she will be regarded as having left employment on the last day
                  on  which  she  is  entitled  to  return  to  work  under  the
                  Employment  Rights  Act  1996,  or if later,  any  other  date
                  specified in the terms of her employment.

         6.4      An Option  may, to the extent of the  Repayment  due under the
                  Sharesave  Contract at the date of reaching the Specified Age,
                  be exercised by a Participant  within six months following the
                  date he reaches the Specified  Age if he continues  after that
                  date to hold the office or employment by virtue of which he is
                  eligible to participate in the Scheme.

         6.5      No person  shall be treated  for the  purposes  of Rule 6.3 as
                  ceasing  to hold an  office or  employment  by virtue of which
                  that  person is eligible to  participate  in the Scheme  until
                  that  person  ceases to hold any office or  employment  in the
                  Company or any Associated  Company or any company of which the
                  company has Control.

          6.6     An  Option  granted  to  a  Participant shall lapse  upon  the
                  occurrence of the earliest of the following:

                  (a)     subject to (b) below,  six months after the Bonus Date
                          under  the   Sharesave   Contract   entered   into  in
                          connection with the Option;

                  (b)     where the  Participant  dies  before  the Bonus  Date,
                          twelve  months after the date of death,  and where the
                          Participant dies in the period of six months after the
                          Bonus Date, twelve after the Bonus Date;

                  (c)     the expiry of any of the six month  periods  specified
                          in Rule 6.3 (a) to (d),  save  that if at the time any
                          of such  applicable  periods  expire,  time is running
                          under the twelve month periods  specified in Rule 6.2,
                          the Option  shall not lapse by reason of this rule 6.6
                          until the expiry of the  relevant  twelve month period
                          in Rule 6.2;

                  (d)     the expiry of any of the period specified in Rules 7.3
                          to  7.5,   save  where  an  Option  is   released   in
                          consideration  of the grant of a New  Option  over New
                          Shares in the  Acquiring  Company  (during  one of the
                          periods  specified  in Rules 7.3 and 7.4)  pursuant to
                          Rule 7.6;

                  (e)     the   Participant   ceasing  to  hold  any  office  or
                          employment  with  a   Participating   Company  or  any
                          Associated  Company  for any  reason  other than those
                          specified in Rule 6.3 or as a result of his death;

                  (f)     subject  to Rule  7.5,  the  passing  of an  effective
                          resolution,  or the  making of an order by the  court,
                          for the winding-up of the Company;

                  (g)     the  Participant  being  deprived  (otherwise  than on
                          death) of the  legal or  beneficial  ownership  of the
                          Option  by  operation  of law,  or doing  anything  or
                          omitting  to do  anything  which  causes  him to be so
                          deprived or become bankrupt; and

                  (h)     before  an  Option   has   become   capable  of  being
                          exercised,  the  Participant  giving  notice  that  he
                          intends to stop paying Monthly Contributions, or being
                          deemed  under the terms of the  Sharesave  Contract to
                          have given such  notice by making an  application  for
                          Repayment of the Monthly Contributions.

7.       Takeover, reconstructions and amalgamation, and liquidation

         7.1      If any person  obtains  Control of the  Company as a result of
                  making   an  offer  to   acquire   Shares   which  is   either
                  unconditional  or is made on a  condition  such  that if it is
                  satisfied the person making the offer will have Control of the
                  Company,  Option may be exercise within six months of the time
                  when the person  making the offer has obtained  Control of the
                  Company and any  condition  subject to which the offer is made
                  has been satisfied or waived.

         7.2      For the  purpose of Rule 7.1 a person  shall be deemed to have
                  obtained  Control of the  Company  if he and others  acting in
                  concert with him have together obtained Control of it.

         7.3      If any person  becomes  bound or  entitled  to acquire  Shares
                  under sections 428 to 430F of the Companies Act 1985 an Option
                  may be exercised at any time when that person remains so bound
                  or entitled.

         7.4      If,  under  section  425 of the  Companies  Act 1985 the court
                  sanctions  a  compromise  or  arrangement   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,  an Option may be exercised within
                  six  months  of  the  court   sanctioning  the  compromise  or
                  arrangement.

         7.5      If a resolution for the voluntary winding-up of the Company is
                  passed,  an Option may be exercised within two months from the
                  date of the passing of the resolution.

         7.6      If any company ('the Acquiring Company'):

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

                          (i)      a general  offer to acquire  the whole of the
                                   issued  ordinary share capital of the Company
                                   which is made on a condition  such that if it
                                   is satisfied the Acquiring  Company will have
                                   Control of the Company; or

                          (ii)     a general  offer to acquire all the shares in
                                   the  Company  which are of the same  class as
                                   the  Shares  which  may  be  acquired  by the
                                   exercise of Options,

                          in either case  ignoring  any Share which are already
                          owned by it or a member of the same group of
                          companies; or

                  (b)     obtains  control  of the  Company  in  pursuance  of a
                          compromise  or  arrangement  sanctioned  by the  court
                          under section 425 of the Companies Action 1985; or

                  (c)     becomes  bound or  entitled  to acquire  shares  under
                          sections 429 to 430F of the Companies Act 1985,

                  any Participant may at any time within the Appropriate Period,
                  by agreement  with the Acquiring  Company,  release any Option
                  granted  under  the  Scheme  which  has not  lapsed  ("the Old
                  Option")  in  consideration  of the  grant to him of an option
                  ("the New Option")  which (for the purposes of paragraph 15 of
                  Schedule 9 to the Taxes Act) is  equivalent  to the Old Option
                  but  relates to shares in a  different  company  (whether  the
                  Acquiring Company itself or some other company falling with in
                  paragraph 10(b) or (c) of Schedule 9 to the Taxes Act).

         7.7      The New Option  shall not be regarded for the purposes of Rule
                  7.6 as equivalent to the Old Option unless the  conditions set
                  out in  paragraph  15(3) of  Schedule  9 to the  Taxes Act are
                  satisfied,  but so that the  provisions of the Scheme shall be
                  construed as if:

                  (a)     the New Option were granted under the Scheme at the
                          same time as the Old Option;

                  (b)     except  for  the  purposes  of  the   definitions   of
                          "Participating  Company" and  "Subsidiary"  in Rule 1,
                          the reference to Chartwell Re  Corporation  Ltd in the
                          definition of "the Company" in Rule 1 were a reference
                          to the different company mentioned in Rule 7.6;

                  (c) Rules 12.1 and 12.2 were omitted.


8.       Manner of exercise

         8.1      An Option may only be exercised  during the periods  specified
                  in Rules 6 and 7, and  only  with  monies  not  exceeding  the
                  amount of the Repayment under the Sharesave  Contract  entered
                  into in connection  therewith as at the date of such exercise.
                  For this  purpose,  no account shall be taken of such part (if
                  any) of the  Repayment  of any Monthly  Contribution,  the due
                  date for the repayment of which under the  Sharesave  Contract
                  arises after the date of the Repayment.

         8.2      Exercise  shall be by the  delivery  to the  Secretary  of the
                  Company or its duly appointed agent, of an option  certificate
                  covering the Shares over which the Option is to be  exercised,
                  with the  notice  of  exercise  in the  prescribed  form  duly
                  completed  and  signed  by the  Participant  (or  by his  duly
                  authorised   agent)  together  with  any  remittance  for  the
                  Exercise  Price  payable,  or  authority  to  the  Company  to
                  withdraw and apply monies equal to the Exercise Price payable,
                  or authority to the Company to withdraw and apply monies equal
                  to the Exercise Price from the Sharesave Contract,  to acquire
                  the  Shares  over  which the  Option is to be  exercised.  The
                  effective  date of  exercise  shall be the date of delivery of
                  the notice of exercise.


9.       Issue or transfer of Shares

         9.1      Shares to be issued  pursuant to the exercise of an Option
                  shall be allotted within 28 days following the effective date
                  of exercise of the Option.

         9.2      The  Board  shall   procure  the  transfer  of  Shares  to  be
                  transferred  pursuant to the  exercise of an Option  within 28
                  days following the effective date of exercise of the Option.

         9.3      Shares  to be issued  pursuant  to the  Scheme  will rank pari
                  passu in all  respects  with the Shares then in issue,  except
                  that they will not rank for any rights  attaching to shares by
                  reference to a record date preceding the date of exercise.


         9.4      Shares  to be  transferred  pursuant  to the  Scheme  will  be
                  transferred  free of all liens,  charges and  encumbrances and
                  together with all rights attaching  thereto,  except they will
                  not rank for any rights  attaching to Shares by reference to a
                  record date preceding the date of exercise.


10.      Adjustments

         10.1     The number of Shares  over which an Option is granted  and the
                  Option Price  thereof  shall be adjusted in such manner as the
                  Board shall  determine  following  any  capitalisation  issue,
                  rights issue, subdivision, consolidation or reduction of share
                  capital of the Company or any other variation of share capital
                  to the intent  that (as  nearly as many be  without  involving
                  fractions  of a Share or an Option  Price  calculated  to more
                  than two decimal places) the Exercise Price payable in respect
                  of  an  Option  shall  remain  unchanged,   provided  that  no
                  adjustment  made  pursuant  to this  Rule  10.1  shall be made
                  without the prior approval of the Inland Revenue).

         10.2     Subject to Rule  10.3,  an  adjustment  may be made under Rule
                  10.1 which would have the effect of reducing  the Option Price
                  of unissued  Shares to less than the nominal value of a Share,
                  but  only if,  and to the  extent  that,  the  Board  shall be
                  authorised  to  capitalise  from the reserves of the Company a
                  sum  equal to the  amount by which  the  nominal  value of the
                  Shares in respect of which the Option is  exercisable  exceeds
                  the adjusted  Exercise  Price,  and so that on exercise of any
                  Option in respect of which the Option Price has been  reduced,
                  the Board shall  capitalise  and apply such sum (if any) as is
                  necessary to pay up the amount by which the aggregate  nominal
                  value  of the  Shares  in  respect  of  which  the  Option  is
                  exercised exceeds the Exercise Price for such Shares.

         10.3     Where an Option subsists over both issued and unissued Shares,
                  an adjustment  permitted by Rules 10.2 may only be made if the
                  reduction  of the Option Price of both the issued and unissued
                  Shares can be made to the same extent.

         10.4     The Board may take such steps as it may consider  necessary to
                  notify Participants of any adjustments made under this Rule 10
                  and to call in,  cancel,  endorse,  issue or reissue an Option
                  certificate consequent upon such adjustment.

11.      Administration

         11.1     Any notice or other communication made under, or in connection
                  with,  the  Scheme  may be given by  personal  delivery  or by
                  sending  the same by post,  in the  case of a  company  to its
                  registered office and in the case of an individual to his last
                  known  address,  or, where he is a director or employee of the
                  Company  or an  Associated  Company,  either to his last known
                  address or to the address of the place of business at which he
                  performs the whole or substantially the whole of the duties of
                  his  office  or  employment,  and  where  a  notice  or  other
                  communication is given by first-class post, it shall be deemed
                  to have been  received 48 hours after it was put into the post
                  properly addressed and stamped.

         11.2     The  Company  may  distribute  to  Participants  copies of any
                  notice or document normally sent by the Company to the holders
                  of Shares.

         11.3     If any option  certificate shall be worn out, defaced or lost,
                  it may be  replaced  on such  evidence  being  provided as the
                  Board may require.

         11.4     The Company  shall at all times keep  available  for allotment
                  unissued  Shares at least  sufficient  to satisfy  all Options
                  under  which  Shares  may  be   subscribed   or  procure  that
                  sufficient  Shares are  available  for transfer to satisfy all
                  Options under which Shares may be acquired.

         11.5     The decision of the Board in any dispute relating to an Option
                  or the due exercise  thereof or any other matter in respect of
                  the Scheme shall be final and conclusive.

         11.6 The costs of  introducing  and  administering  the Scheme shall be
borne by the Company.


12.      Alterations

         12.1     The  Board  may at any time  alter or add to all or any of the
                  provisions  of the Scheme in any  respect  except that no such
                  alteration or addition shall take effect until approved by the
                  Inland Revenue.

13.      General

         13.1     The Scheme shall  terminate  upon the [o]  anniversary  of its
                  adoption  by the Board.  Termination  of the  Scheme  shall be
                  without prejudice to the subsisting rights of Participants.

         13.2     The  Company  and any  Subsidiary  of the  Company may provide
                  money to the  trustees  of any  trust or any  other  person to
                  enable  them  or him to  acquire  Shares  to be  held  for the
                  purposes  of the  Scheme,  or  enter  into  any  guarantee  or
                  indemnity  for these  purposes,  to the  extent  permitted  by
                  section 153 of the Companies Act 1985, provided that any trust
                  deed to be made for this  purpose  shall,  at a time  when the
                  Scheme is approved by the Inland  Revenue under  Schedule 9 to
                  the Taxes Act, have  previously  been  submitted to the Inland
                  Revenue.

         13.3     The rights and  obligations of any individual  under the terms
                  of his office or employment with the Company,  a Participating
                  Company, a Subsidiary of the Company, or an Associated Company
                  shall not be  affected by his  participation  in the Scheme or
                  any right  which he may have to  participate  therein,  and an
                  individual  who  participates  therein shall waive all and any
                  rights  to  compensation  or  damages  in  consequence  of the
                  termination of his office or employment  with any such company
                  for any reason  whatsoever  insofar as those rights arise,  or
                  may  arise,  from  his  ceasing  to have  rights  under  or be
                  entitled to exercise  any Option  under the Scheme as a result
                  of such  termination,  or from the loss or diminution in value
                  of such rights or entitlements.

         13.4     Notwithstanding  any other  provision  of the Scheme the Board
                  may amend or add to the provisions of the Scheme and the terms
                  of Options as they  consider  necessary  or  desirable to take
                  account of or to mitigate or to comply with relevant  overseas
                  taxation,  securities  or exchange  control laws provided that
                  the terms of Options  granted  under this  Scheme are not more
                  favourable than the terms of options granted to other Eligible
                  Employees.

         13.5 These Rules shall be governed by and construed in accordance  with
English law.