Document:

Telecom Restricted Share Scheme

  
 Exhibit 4.2 
  

 TELECOM RESTRICTED SHARE
SCHEME 

  
 [GRAPHIC] 

  
 TELECOM
RESTRICTED SHARE SCHEME 
  
 TABLE OF CONTENTS 
  

	 1
	  	Introduction	  	1
	 	  	 Name
	  	1
	 	  	 Glossary
	  	1
	 2
	  	Offers	  	1
	 	  	 Invitation
	  	1
	 	  	 No cost
	  	1
	 	  	 Content
	  	1
	 3
	  	Loan	  	2
	 4
	  	Acceptance	  	2
	 	  	 Return documents
	  	2
	 	  	 Direction and acknowledgements
	  	2
	 	  	 Processing of acceptance
	  	2
	 5
	  	Transfer Date	  	3
	 6
	  	Early termination	  	3
	 	  	 Sale and repayment
	  	3
	 	  	 Confirmation
	  	4
	 	  	 Discretionary benefit
	  	4
	 7
	  	Incidents of ownership	  	5
	 	  	 Obligations of Nominee
	  	5
	 	  	 Compulsory sale
	  	5
	 	  	 Reorganisation
	  	6
	 	  	 Rights issue
	  	6
	 8
	  	No divestment	  	6
	 	  	 Absolute prohibition
	  	6
	 	  	 No effect
	  	7
	 9
	  	Operation of Scheme	  	7
	 	  	 Administration
	  	7
	 	  	 Delegation
	  	7
	 10
	  	Rights attaching to Shares	  	7
	 11
	  	Amendment	  	7
	 	  	 Telecom’s discretion
	  	7
	 	  	 Breach
	  	7
	 	  	 Notice to Executives
	  	7
	 12
	  	Miscellaneous	  	8
	 	  	 Telecom responsibility
	  	8
	 	  	 Deemed actions
	  	8
	 	  	 Fractions
	  	8
	 	  	 Entire agreement
	  	8
	 	  	 Delay
	  	8
	 	  	 Disputes
	  	8
	 	  	 Notice
	  	8
	 	  	 Governing law
	  	9
	 	  	 Construction
	  	9
	 GLOSSARY
	  	10

  
 TELECOM
RESTRICTED SHARE SCHEME 
  
 Date: August 2003 
  

	1	Introduction 

  
 Name 
  

	1.1	This is the Telecom Restricted Share Scheme (the Scheme). 

  
 Glossary 
  

	1.2	A glossary of defined terms is included on page 10. 

  

	2	Offers 

  
 Invitation 
  

	2.1	Telecom Corporation of New Zealand Limited (Telecom) may offer under the Scheme ordinary shares in Telecom (Shares) to an executive (an Executive) who is
employed by Telecom or a subsidiary (a Subsidiary) of Telecom (Employment). 

  
 No cost 
  

	2.2	An Executive will not be required to pay any amount under the Scheme to Telecom or a Subsidiary from the Executive’s own funds. 

  
 Content 
  

	2.3	Each offer (acceptance of which will be conditional on approval by Telecom) will be made in an offer document, and will: 

  

	 	(i)	specify the aggregate value of Shares to be allocated to the Executive (the Total Price); 

  

	 	(ii)	have attached a copy of the Scheme (unless the Executive has previously participated in the Scheme); 

  

	 	(iii)	have attached a copy of an investment statement for the offer (if made in New Zealand); 

  

	 	(iv)	specify the date on which the Shares are to be allocated (the Allocation Date); 

  

	 	(v)	specify the date on which the Shares are to be transferred to the Executive and released from the Scheme (the Transfer Date); 

  

	 	(vi)	have attached a loan agreement (see clause 3); 

  

	 	(vii)	refer to Telecom’s internal procedures for insiders; 

  

	 	(viii)	have attached a form requesting consent to acquire the Shares, in terms of those procedures; and 

  

	 	(ix)	specify the period during which the offer may be accepted. 

  

 1 

 TELECOM RESTRICTED SHARE SCHEME 
  

	3	Loan 

  

	3.1	A Subsidiary (the Lender) will lend to the Executive (interest-free) the Total Price if Shares are to be allocated to the Executive (the Loan).

  

	4	Acceptance 

  
 Return documents 
  

	4.1	An Executive who wishes to accept an offer of Shares must return to Telecom, within the time specified and completed by the Executive: 

  

	 	(i)	the acceptance part of the offer document, confirming the Executive’s acceptance; 

  

	 	(ii)	the form requesting consent to acquire the Shares, in terms of Telecom’s internal procedures for insiders; and 

  

	 	(iii)	the agreement for the Loan. 

  
 Direction and acknowledgements 
  

	4.2	In accepting an offer of Shares, an Executive: 

  

	 	(i)	will be deemed to have directed the Lender to apply the Loan in payment to Telecom of the Total Price as payment for the Shares (this deemed direction discharging fully the
Executive’s obligation to pay for the Shares); 

  

	 	(ii)	will be deemed to have directed Telecom that the Shares be held under the Scheme on behalf of the Executive by a person appointed from time to time by Telecom for that purpose
(the Nominee); 

  

	 	(iii)	acknowledges that acceptance is conditional on approval by Telecom, and the Executive is bound by the Scheme; and 

  

	 	(iv)	acknowledges that participation in the Scheme does not affect the terms of the Executive’s Employment. In no event will Telecom or a Subsidiary be deemed by making an offer or
a Loan (as the case may be) or otherwise to have represented that an Executive’s Employment will continue until and/or beyond the Transfer Date. 

  
 Processing of acceptance 
  

	4.3	An acceptance will be invalid and of no effect if it would give rise to a breach (a Breach) of: 

  

	 	(i)	Telecom’s constitution; 

  

	 	(ii)	the listing and/or other rules governing New Zealand Exchange Limited’s NZSX (the Exchange) or any other stock exchange on which Shares are quoted; and/or

  

 2 

 TELECOM RESTRICTED SHARE SCHEME 
  

	 	(iii)	any statute, regulation or Telecom’s internal procedures for insiders. 

  

Otherwise, Telecom will (subject to clause 2.3): 
  

	 	(iv)	determine the number of Shares (existing and/or new) to be allocated to the Executive by dividing the Total Price by the average end of day market price of Shares on the Exchange
for the days on which the Exchange is open for trading (Business Days) in the month immediately preceding the Allocation Date (the Allocation Price); 

  

	 	(v)	allocate the Shares to the Executive; and 

  

	 	(vi)	send the Executive confirmation of the allocation and the Allocation Price. 

  

	5	Transfer Date 

  

	5.1	On the Transfer Date (subject to clauses 6 and 7): 

  

	 	(i)	an Executive will be entitled to a cash bonus from a Subsidiary which, after first deducting tax at the highest marginal tax rate applying to the Executive, is equal to the Loan
(the Bonus); 

  

	 	(ii)	the Executive will be deemed to have directed the Subsidiary (with effect from the Allocation Date) to apply the Bonus in repayment of the Loan (this deemed direction discharging
fully the Executive’s obligation to repay the Loan); and 

  

	 	(iii)	the Nominee will transfer to the Executive the Shares it holds for the Executive. 

  

	6	Early termination 

  
 Sale and repayment 
  

	6.1	Where: 

  

	 	(i)	an Executive ceases to be Employed (unless the Executive immediately assumes further Employment or is on non-permanent leave of absence with employer approval);

  

	 	(ii)	an Executive purports to act in breach of clause 8.1; and/or 

  

	 	(iii)	Telecom is put into liquidation (or suffers a similar event), 

  
 before the Transfer Date (Early Termination), the Executive will be deemed (subject to clauses 6.3 and 7) immediately before Early Termination to
have: 
  

	 	(iv)	sold to the Nominee for the Total Price beneficial ownership of the Shares held by the Nominee for the Executive; and 

  

 3 

 TELECOM RESTRICTED SHARE SCHEME 
  

	 	(v)	directed the Nominee (with effect from the Allocation Date) to apply the amount due to the Executive for the Shares in repayment of the Loan (this deemed direction discharging fully
the Executive’s obligation to repay the Loan). 

  
 Confirmation 
  

	6.2	For the purpose of clause 6.1(iv), Telecom and the Executive acknowledge that the Total Price is: 

  

	 	(i)	the value of the Shares; and 

  

	 	(ii)	the lowest price they would have agreed for the Shares if payment had been required on the Allocation Date (in terms of the rules in the Income Tax Act 1994 concerning the accrual
treatment of income and expenditure). 

  
 Discretionary benefit 
  

	6.3	Where Early Termination: 

  

	 	(i)	is caused by the Executive’s death or redundancy; and 

  

	 	(ii)	occurs on or after the date half-way through the period from the Allocation Date to the Transfer Date, 

  
 Telecom may (but has no obligation whatever to) arrange for the Executive an early entitlement to part of the Bonus based on
this formula: 
  

	part entitlement = Bonus   x	 	 n

	 	t

  
 where 
  
 n is the number of days from the Allocation Date to the date of Early
Termination (both inclusive) 
  
 t is the number of days
from the Allocation Date to the Transfer Date (both inclusive). 
  
 Where Telecom does so, the Executive will be deemed to have directed the Subsidiary (with effect from the Allocation Date) to apply the part Bonus in part repayment of the Loan (this deemed direction discharging the Executive’s
obligation to repay the Loan to the extent of the part Bonus), and the Nominee will transfer to the Executive the corresponding number of Shares it holds for the Executive (determined by dividing the part Bonus by the Allocation Price). 

 

 4 

 TELECOM RESTRICTED SHARE SCHEME 
  

 Clause 6.1 will otherwise apply to the balance of the Shares held by the Nominee for the Executive
and the balance of the Loan. 
  

	7	Incidents of ownership 

  
 Obligations of Nominee 
  

	7.1	The Nominee will: 

  

	 	(i)	hold in its name on trust for an Executive under the Scheme legal ownership of Shares allocated to the Executive; 

  

	 	(ii)	not pay to the Executive any dividends on those Shares, except to the extent (if any) specified in the offer document; 

  

	 	(iii)	not exercise any voting rights attaching to those Shares; 

  

	 	(iv)	hold for the Executive any and all Shares under a bonus issue or any other capital reorganisation whatever received by the Nominee as holder of those Shares (subject to clause 7.3).
The additional Shares will be treated in the same manner as the other Shares held for the Executive, and references to Shares will be construed accordingly; and 

  

	 	(v)	not participate in any non-renounceable rights issue or dividend reinvestment plan concerning those Shares. 

  
 Compulsory sale 
  

	7.2	On any compulsory sale under applicable takeover laws of the Shares held until then by the Nominee for an Executive: 

  

	 	(i)	the Executive will be entitled to the Bonus; 

  

	 	(ii)	the Executive will be deemed immediately before the compulsory sale to have: 

  

	 	•	 	transferred beneficial ownership of the Shares to the Nominee; and 

  

	 	•	 	directed the Subsidiary (with effect from the Allocation Date) to apply the Bonus in repayment of the Loan (this deemed direction discharging fully the Executive’s obligation
to repay the Loan); 

  

	 	(iii)	the Nominee will distribute as soon as practicable to the Executive all consideration received by the Nominee for the Shares; and 

  

	 	(iv)	the Executive will be entitled to no further benefit under the Scheme. 

  
 The Nominee will not exercise any right conferred on it under applicable takeover laws. 
  

 5 

 TELECOM RESTRICTED SHARE SCHEME 
  

 Reorganisation 
  

	7.3	On any amalgamation of Telecom (except with a Subsidiary), or reorganisation of Telecom’s share capital (including under any arrangement or compromise) under which Shares are
replaced by other securities and/or cash, where the Nominee held Shares until then for an Executive: 

  

	 	(i)	the Executive will be entitled to the Bonus; 

  

	 	(ii)	the Executive will be deemed immediately before the amalgamation or reorganisation (as the case may be) to have: 

  

	 	•	 	transferred beneficial ownership of the Shares to the Nominee; and 

	 	•	 	directed the Subsidiary (with effect from the Allocation Date) to apply the Bonus in repayment of the Loan (this deemed direction discharging fully the Executive’s obligation
to repay the Loan); 

  

	 	(iii)	the Nominee will distribute as soon as practicable to the Executive the Shares, and/or other securities and/or cash received by the Nominee for the Shares; and

  

	 	(iv)	the Executive will be entitled to no further benefit under the Scheme. 

  
 Rights issue 
  

	7.4	On any issue by Telecom to its shareholders of renounceable rights to acquire Shares (or other benefits or assets), the Nominee will: 

  

	 	(i)	endeavour to sell the rights arising out of the Shares held by the Nominee for an Executive, if it considers that a market for them is readily available (in all respects as it sees
fit, and without any liability whatever for any act or failure to act whatever in this regard); and 

  

	 	(ii)	pay to the Executive as soon as practicable the amount received by the Nominee (less all expenses and liabilities whatever) for the rights arising out of the Shares.

  

	8	No divestment 

  
 Absolute prohibition 
  

	8.1	An Executive may not (including by operation of law) transfer, assign, or otherwise dispose of or create any interest (including any security, or legal or equitable interest) in a
Share held by the Nominee for the Executive (but subject to clauses 6.1, 7.2 and 7.3). 

  

 6 

 TELECOM RESTRICTED SHARE SCHEME 
  

 No effect 
  

	8.2	Clause 6.1 will apply on any purported transfer, assignment, other disposition or creation of interest in breach of clause 8.1 (and the purported transfer, assignment, disposition
or creation will be void). 

  

	9	Operation of Scheme 

  
 Administration 
  

	9.1	The board of directors of Telecom from time to time (the Board) will administer all aspects of the Scheme, including the offering of Shares. Any matter to be determined by
Telecom will be determined as the Board sees fit in its sole discretion, subject to the Scheme. 

  
 Delegation 
  

	9.2	The Board may delegate (to the extent permitted by law) to any person (and revoke any delegation of) any or all of its powers, discretions, rights and obligations under the Scheme
from time to time as it sees fit, and references to Telecom and the Board will be construed accordingly. 

  

	10	Rights attaching to Shares 

  

	10.1	Shares allocated to an Executive will rank equally with all other Shares at the Allocation Date, except for any dividend declared on Shares with a record date before the Allocation
Date. 

  

	11	Amendment 

  
 Telecom’s discretion 
  

	11.1	Telecom may from time to time, subject to clause 11.2: 

  

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

  

	 	(ii)	amend the Scheme, if it considers that the interests of Executives are not materially prejudiced. 

  
 Breach 
  

	11.2	Telecom: 

  

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

  

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

  
 Notice to Executives 
  

	11.3	Telecom will give notice of any amendment to or termination of the Scheme to all Executives affected. 

  

 7 

 TELECOM RESTRICTED SHARE SCHEME 
  

	12	Miscellaneous 

  
 Telecom responsibility 
  

	12.1	References (direct or indirect) in the Scheme to actions or obligations of a Subsidiary (including the Lender) or the Nominee impose an obligation on (and enforceable against)
Telecom to procure performance of those actions or obligations. A Subsidiary, the Lender and the Nominee may be one or more persons. 

  
 Deemed actions 
  

	12.2	All actions (including directions) and consequences deemed to occur under the Scheme will occur irrevocably and unconditionally (subject to clause 11). 

  
 Fractions 
  

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

  
 Entire agreement 
  

	12.4	The Scheme represents all of the terms on which Shares are allocated under the Scheme, except those which Telecom reasonably implies to give effect to the Scheme.

  
 Delay 
  

	12.5	No failure, delay or indulgence by Telecom 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. 

  
 Disputes 
  

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

  
 Notice 
  

	12.7	All notices and other communications 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: 

  

	 	(i)	the addresses and facsimile numbers of Telecom and an Executive are those set out in the offer document; and 

  

	 	(ii)	notices or communications to Telecom will be addressed and marked to the attention of Telecom’s Company Secretary. 

  
 Any notice or communication will be deemed to have been received:

  

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

  

 8 

 TELECOM RESTRICTED SHARE SCHEME 
  

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

  

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

  
 Governing law 
  

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

  
 Construction 
  

	12.9	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 amend includes modify, delete, add and vary; 

  

	 	(iv)	a reference to apply includes apply under assignment or set off; 

  

	 	(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; 

 

	 	(vi)	a reference to the Scheme means the Scheme as amended from time to time; and 

  

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

  

 9 

 TELECOM RESTRICTED SHARE SCHEME 
  

 GLOSSARY 
  
 Allocation Date means the date on which Shares are, or are to be, allocated to an Executive (specified in the offer
document) 
  
 Allocation Price means the average end of day market
price of Shares on the Exchange for the Business Days in the month immediately preceding the Allocation Date 
  
 Board means the board of directors of Telecom from time to time 
  
 Bonus means a cash bonus from a Subsidiary for an Executive which, after first deducting tax at the highest marginal tax rate applying to the Executive, is equal to the Loan 
  
 Breach means a breach of Telecom’s constitution, the listing and/or other
rules governing the Exchange or any other stock exchange on which Shares are quoted, and/or any statute, regulation or Telecom’s internal procedures for insiders 
  
 Business Day means a day on which the Exchange is open for trading 
  
 Early Termination means: 
  

	 	•	cessation of an Executive’s Employment (unless the Executive immediately assumes further Employment or is on non-permanent leave of absence with employer approval);

  

	 	•	an Executive purporting to act in breach of clause 8.1; and/or 

  

	 	•	Telecom being put into liquidation (or suffering a similar event), 

  
 before the Transfer Date 
  
 Employment means employment by Telecom or a Subsidiary 
  
 Exchange means New Zealand Exchange Limited’s NZSX 
  
 Executive means an executive who is Employed 
  
 Lender means the Subsidiary providing the Loan 
  
 Loan means an interest-free loan to an Executive equal to the Total Price 
  
 Nominee means the person appointed from time to time by Telecom to hold Shares on behalf of an Executive 
  

 10 

 TELECOM RESTRICTED SHARE SCHEME 
  

 Scheme means the Telecom Restricted Share Scheme 
  
 Share means an ordinary share in Telecom 
  
 Subsidiary means a subsidiary of Telecom 
  
 Telecom means Telecom Corporation of New Zealand Limited 
  
 Total Price means the aggregate value of Shares allocated, or to be allocated,
to an Executive (specified in the offer document) 
  
 Transfer Date
means the date on which Shares are, or are to be, transferred to an Executive and released from the Scheme (specified in the offer document). 
  

 11Telecom Share Rights Scheme

  
 Exhibit 4.3 
  

 TELECOM SHARE RIGHTS
SCHEME 

  
 [GRAPHIC] 
  

  
 TELECOM
SHARE RIGHTS SCHEME 
  
 TABLE OF CONTENTS 
  

	 1
	  	NAME	  	1
	 2
	  	GROUNDING	  	1
	 2.2
	  	Alignment	  	1
	 2.3
	  	Corporate Objective	  	1
	 3
	  	KEY TERMS	  	1
	 4
	  	COMMITTEE	  	3
	 4.1
	  	Administration	  	3
	 4.2
	  	Delegation	  	3
	 5
	  	GRANTS	  	3
	 6
	  	REJECTION OF GRANT	  	4
	 6.1
	  	Opportunity	  	4
	 6.2
	  	Acknowledgement	  	4
	 7
	  	EXERCISE OF OPTIONS	  	4
	 7.1
	  	Breach	  	4
	 7.2
	  	Lapse	  	4
	 8
	  	PROCEDURE FOR EXERCISE	  	4
	 8.1
	  	Exercise Notice	  	4
	 8.2
	  	Payment	  	4
	 8.3
	  	Issue	  	5
	 8.4
	  	Committee’s Notice	  	5
	 8.5
	  	Effective Exercise	  	5
	 8.6
	  	Continued Breach	  	5
	 9
	  	RIGHTS ON EXERCISE	  	5
	 10
	  	ADJUSTMENTS	  	6
	 10.1
	  	Rights Issue	  	6
	 10.2
	  	Bonus Issue	  	6
	 10.3
	  	Reconstruction	  	6
	 10.4
	  	Exercise Date acceleration	  	6
	 11
	  	LAPSE OF OPTIONS	  	7
	 11.1
	  	Rejection of Grant	  	7
	 11.2
	  	Leave Prior to Exercise Date	  	7
	 11.3
	  	Leave After Exercise Date: Involuntary Event	  	7
	 11.4
	  	Leave After Exercise Date: Dismissal	  	7
	 11.5
	  	Leave After Exercise Date: Other Reason	  	7
	 11.6
	  	Option Lapse Date	  	7
	 11.7
	  	Breach	  	8
	 11.8
	  	Variation or Waiver	  	8
	 12
	  	NO DIVESTMENT	  	8
	 13
	  	AMENDMENT AND TERMINATION	  	8
	 13.1
	  	Committee’s Discretion	  	8
	 13.2
	  	Termination	  	8
	 13.3
	  	Breach	  	8
	 13.4
	  	Notice to Participants	  	8

  

 TELECOM SHARE RIGHTS SCHEME 
  

	 14
	  	QUOTATION	  	9
	 15
	  	MISCELLANEOUS	  	9
	 15.1
	  	Spirit of the Scheme	  	9
	 15.2
	  	Fractions	  	9
	 15.3
	  	Entire Agreement	  	9
	 15.4
	  	Delay	  	9
	 15.5
	  	Disputes	  	9
	 15.6
	  	Notice	  	9
	 15.7
	  	Governing Law	  	10
	 15.8
	  	Construction	  	10

  

  
 TELECOM
SHARE RIGHTS SCHEME 
  
 Date: August 2003 
  

	1	NAME 

  
 The name of this scheme is the Telecom Share Rights 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: 
  

	 	2.2	Alignment 

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

	 	2.3	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; 
  

 1 

 TELECOM SHARE RIGHTS 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 a company in the Group;  
  
 “Exchange” means New Zealand Exchange Limited’s NZSX;

  
 “Exercise Date” means the first
Business Day after the expiration of the period, specified in a Grant, from and including the Commencement Date, subject to clause 10.4; 
  
 “Exercise Notice” means notice of the exercise of an Option; 
  
 “Exercise Price” means nil; 
  
 “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 Exercise Date has crystallised and which has not lapsed
pursuant to clause 11; 
  
 “Option” means
(subject to clause 10) an option to acquire 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; 
  

 2 

 TELECOM SHARE RIGHTS SCHEME 
  

 “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 Rights 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. 
  

	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; 

  

	 	(iii)	specify the Commencement Date, the Exercise Price and the periods of years after which the Exercise Date and the Option Lapse Date fall; 

  

	 	(iv)	enclose an Options certificate; and 

  

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

  

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 TELECOM SHARE RIGHTS SCHEME 
  

	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 Exercise Date. 

  

	7	EXERCISE OF OPTIONS 

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

	 	7.1	Breach 

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

	 	7.2	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), 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)	the Options certificate; and 

  

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

  

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 TELECOM SHARE RIGHTS SCHEME 
  

	8.3	Issue 

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

	 	(i)	an Exercise Notice; 

  

	 	(ii)	an Options certificate; 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 precludes the exercise of Options (if so, the Committee will give notice to the Participant accordingly and return the Options certificate). 
  

	8.4	Committee’s Notice 

  
 The Committee will give a further notice to a Participant who has been precluded (pursuant to clause 7.1) 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 11.3 to 11.6, but subject to clause 8.6, the Exercise Notice of a Participant precluded (pursuant to clause 7.1) 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)	surrenders the Options certificate; 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. 
  

 5 

 TELECOM SHARE RIGHTS 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), a Participant
will not 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 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	Exercise Date acceleration 

  
 Notwithstanding any other provision of the Scheme, if a Participant Leaves prior to the Exercise 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 Exercise 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 (original) Exercise Date (both inclusive). 
  

 6 

 TELECOM SHARE RIGHTS SCHEME 
  

 Where the Committee does so, clause 11.3 will apply to those Options, as if they had been Live
Options when the Participant Left. 
  

	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 Exercise Date 

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

	11.3	Leave After Exercise 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. 
  

	11.4	Leave After Exercise Date: Dismissal 

  
 Subject to clause 11.3, if a Participant Leaves due to dismissal, the Participant’s Live Options (if any) will lapse immediately. 
  

	11.5	Leave After Exercise Date: Other Reason 

  
 If a Participant Leaves due to a reason other than the reasons referred to in clauses 11.3 and 11.4, 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. 
  

	11.6	Option Lapse Date 

  
 A Live Option, which has not lapsed pursuant to clauses 11.3 to 11.5 (which, for the avoidance of doubt, are subject to clause 8.5) or 11.7, lapses on the
Option Lapse Date, subject to clauses 8.5 and 11.7. 
  

 7 

 TELECOM SHARE RIGHTS SCHEME 
  

	 	11.7	Breach 

  
 Notwithstanding clauses 11.3 to 11.6, 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 equal to 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. 

  

	 	11.8	Variation or Waiver 

  
 The Committee may, in its absolute discretion, vary or waive the application of clauses 11.1 to 11.7 both inclusive either generally or in relation to
individual 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 

  

	 	(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. 
  

 8 

 TELECOM SHARE RIGHTS SCHEME 
  

	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 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 

  

 9 

 TELECOM SHARE RIGHTS SCHEME 
  

	 	(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 South Wales 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. 

  

 10

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