Document:

Waiver

 

Exhibit 10(q)

WAIVER

     WHEREAS, Sea Pines Company, Inc. (“Sea Pines”) and Sea Pines Associates,
Inc., both corporations organized and existing under the laws of the State of
South Carolina (collectively, the “Borrower”), and Wachovia Bank, N.A., a
national banking association (the “Bank”), are parties to the Amended and
Restated Master Credit Agreement dated as of October 31, 2002 (the
“Agreement”); and

     WHEREAS, on April 30, 2003, a verdict (the “Verdict”) was rendered against
Sea Pines in the Court of Common Pleas of the State of South Carolina (the
“Court”) in the matter of Thomas DiVinere, Pete Pomranz, and Grey Point
Associates, Inc. v. Sea Pines Company, Inc., C/A No. 95-CP-07-1893 (the
“Case”); and

     WHEREAS, the Case has resulted in Events of Default (as defined in the
Agreement); and

     WHEREAS, Sea Pines has filed post-trial motions in the Court with respect
to the Verdict, and either Sea Pines or the plaintiffs in the Case may appeal
any judgment entered thereon; and

     WHEREAS, the Bank and the Borrower are negotiating the terms of a credit
facility to fund the payment of any judgment entered in the Case (such payment
to include any deposit with the Court to stop the accrual of post-judgment
interest pending the appeal of any judgment entered in the Case), up to a
maximum of $8 million; and

     WHEREAS, the Bank is willing on the terms set forth herein to waive for a
limited time the Events of Default arising from the Case.

     NOW, THEREFORE, in consideration of the foregoing, the sum of $1 paid, and
other good and valuable consideration, the receipt and sufficiency of which the
Bank hereby acknowledges, the Bank hereby waives, retroactive to the filing of
the complaint in the Case and continuing until June 30, 2003, the Events of
Default arising from the Case, including but not limited to the rendering of
the Verdict and the entry of any judgment thereon; provided, however, that if
on or before June 30, 2003 the Borrower accepts a loan commitment from the Bank
on such terms as to which the Bank and the Borrower may mutually agree, such
agreement to be evidenced by their execution of a commitment letter containing
such terms, then this Waiver shall continue until the expiration of such loan
commitment. All other provisions of the Agreement shall be and remain in full
force and effect. This Waiver is limited solely to Events of Default arising
from the Case, including but not limited to the rendering of the Verdict and
the entry of any judgment thereon, and shall not be effective as to the
occurrence of any other event(s) or matter(s) which would result in an Event of
Default.

     IN WITNESS WHEREOF, the Bank has executed and delivered this Waiver this
16th day of June, 2003.

	 	 	 	 	 
	 	 	 	 	WACHOVIA BANK, N.A.
	 	 	 	 	 
	 	 	
By:
	 	/s/ Timothy S. Blake
	 	 	 	 	

	 	 	 	 	 
	 	 	
Its:
	 	Vice PresidentMRV Communications, Inc. - Exhibit 4.3

 

Exhibit 4.3

AMENDMENT #1 TO

CONVERTIBLE NOTE

     This Amendment #1 (this “Amendment”) to the Convertible Note (together
will all convertible notes issued in exchange therefore or replacement thereof,
the “Notes”), dated June 4, 2003, issued by MRV Communications, Inc., a
Delaware corporation (the “Company”), to Deutsche Bank, AG London Branch (the
“Holder”) is dated and is effective June 13, 2003.

     1.     Other Indebtedness. The Company and the Holder agree that Section 8 of
the Notes, is hereby amended such that Section 8 of the Notes shall be deleted
in its entirety and the following substituted in lieu thereof:

		
	 	     "(8) Other Indebtedness. Payments of principal and other
payments due under this Note shall not be subordinated to any
obligations of the Company. For so long as this Note is
outstanding, the Company shall not, and shall not permit any of
its Subsidiaries (as defined in the Securities Purchase Agreement)
to, (a) create, issue, incur, assume, guarantee or suffer to exist
any Indebtedness (as defined below) or any Lien (as defined
below), except (i) Indebtedness secured by a purchase money
security interest and monetary obligations under any leasing or
similar arrangement, in each case, incurred in the Company’s
ordinary course of business, (ii) up to an aggregate of
$17,000,000 of unsecured Indebtedness (excluding the Notes and the
Indebtedness described in clauses (iii) and (iv) of this
sentence), (iii) Indebtedness arising from the sale of receivables
with recourse through the Company’s foreign offices in the
ordinary course of business and consistent with past practices and
(iv) Indebtedness under the Company’s outstanding 5% Convertible
Subordinated Notes due June 15, 2003, pursuant to the terms
thereof on the date of the Securities Purchase Agreement (but not
any extension, amendment, refinancing, renewal or replacement of
such Indebtedness); or (b) issue any capital stock of the Company
redeemable prior to the Maturity Date. For purposes of this Note:
(x) “Indebtedness” of any Person means, without duplication (A)
all indebtedness for borrowed money, (B) all obligations issued,
undertaken or assumed as the deferred purchase price of property
or services (other than trade payables entered into in the
ordinary course of business), (C) all reimbursement or payment
obligations with respect to letters of credit, surety bonds and
other similar instruments, (D) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property,
assets or businesses, (E) all indebtedness created or arising
under any conditional sale or other title retention agreement, or
incurred as financing, in either case with respect to any property
or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or
sale of such property), (F) all indebtedness referred to in
clauses (A) through (E) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, change,
security interest or other encumbrance upon or in any property or
assets (including accounts and contract rights) owned by any
Person, even though the Person that owns such 

 

 

		
	 	assets or property
has not assumed or become liable for the payment of such
indebtedness,
and (G) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A)
through (F) above; (y) “Lien” means any mortgage, deed of trust,
pledge, lien (statutory or otherwise), security interest, charge
or other encumbrance or security or preferential arrangement of
any nature, on any property of the Company or its Subsidiaries,
including, without limitation, any conditional sale or title
retention arrangement, any capitalized lease and any assignment,
deposit arrangement or financing lease intended as, or having the
effect of, security; and (z) “Contingent Obligation” means, as to
any Person, any direct or indirect liability, contingent or
otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary
purpose or intent of the Person incurring such liability, or the
primary effect thereof, is to provide assurance to the obligee of
such liability that such liability will be paid or discharged, or
that any agreements relating thereto will be complied with, or
that the holders of such liability will be protected (in whole or
in part) against loss with respect thereto. Notwithstanding
anything to the contrary in this Note or the Securities Purchase
Agreement, nothing in this Note is intended to restrict the right
of the Company to pay or redeem at maturity its outstanding 5%
Convertible Subordinated Notes due June 15, 2003 (but not any
extension, amendment, refinancing, renewal or replacement
thereof), pursuant to the terms thereof on the date of the
Securities Purchase Agreement, and any such payment or redemption
shall not in any manner constitute an Event of Default under this
Note.”

     2.     Transferees. The Holder agrees that it shall deliver a copy of this
Amendment in connection with its transfer or assignment of the Notes pursuant
to Section 17 of the Notes or otherwise, and be bound by and subject to the
terms and conditions of the Notes, as amended hereby.

     3.     Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument and shall become effective when counterparts
have been signed by each party and delivered to the other party; provided that
a facsimile signature shall be considered due execution and shall be binding
upon the signatory thereto with the same force and effect as if the signature
were an original, not a facsimile signature. If the Company executes this
Amendment with a facsimile signature, the Company shall provide the Holder with
an original signature for each of the Notes held by such Holder within 2
business days of the date hereof.

     4.     Other Provisions. Except as set forth herein, all other provisions of
the Notes shall remain in full force and effect.

* * * * *

 

 

     IN WITNESS WHEREOF, the Company and the Holder have caused this Amendment
to be duly executed as of June 13, 2003.

	 	 	 
	COMPANY:	 	
HOLDER:
	 	 	 
	MRV COMMUNICATIONS, INC	 	
DEUTSCHE BANK, AG LONDON BRANCH
	 	 	 
	                      /s/ Shay Gonen	 	                      /s/
Tracy Fu
	 	 	 
	By:	 	By:
	
	 	

	Name:    Shay Gonen	 	Name:   
Tracy Fu
	
	 	

	Title:     Chief Financial Officer	 	
Title:     Authorized Signatory<PAGE>

                                                                     EXHIBIT 4.8

================================================================================

                               THE PREMIER FARNELL

                       EXECUTIVE SHARE OPTION SCHEME 2003

================================================================================

  AS PROPOSED FOR APPROVAL BY SHAREHOLDERS IN GENERAL MEETING ON - 11 JUNE 2003

                   INLAND REVENUE APPROVAL TO APPENDIX 1 - [*]

                        INLAND REVENUE REF - X 22558/SCL

                      [FRESHFIELDS BRUCKHAUS DERINGER LOGO]

<PAGE>

                                    CONTENTS

<TABLE>
<CAPTION>
CLAUSE                                                                                       PAGE
<S>                                                                                          <C>
THE PREMIER FARNELL EXECUTIVE SHARE OPTION SCHEME 2003....................................    2

1.       DEFINITIONS......................................................................    2

2.       GRANT OF OPTIONS.................................................................    4

3.       INDIVIDUAL LIMITS................................................................    5

4.       SCHEME LIMITS....................................................................    6

5.       EXERCISE AND LAPSE OF OPTIONS - NORMAL CIRCUMSTANCES.............................    6

6.       EXERCISE AND LAPSE OF OPTIONS - CESSATION OF EMPLOYMENT..........................    7

7.       DEATH OF OPTION HOLDER...........................................................    8

8.       METHOD AND EXTENT OF EXERCISE....................................................    8

9.       ALLOTMENT OR TRANSFER OF SHARES ON EXERCISE OF OPTIONS...........................    9

10.      GENERAL OFFER FOR THE COMPANY ETC................................................    9
         General Offer....................................................................    9
         Compulsory Acquisition...........................................................   10
         Scheme of Arrangement............................................................   10

11.      OPTION ROLLOVER..................................................................   12

12.      ADJUSTMENT OF OPTIONS............................................................   13

13.      RIGHTS ATTACHING TO SHARES ALLOTTED OR TRANSFERRED PURSUANT TO OPTIONS...........   13

14.      AVAILABILITY OF SHARES...........................................................   14

15.      ADMINISTRATION AND AMENDMENT.....................................................   14

16.      GENERAL..........................................................................   15
</TABLE>

<PAGE>

                               THE PREMIER FARNELL
                       EXECUTIVE SHARE OPTION SCHEME 2003

1.       DEFINITIONS

1.1      In this Scheme, unless the context otherwise requires, the following
words and expressions shall have the following meanings, namely:

ADOPTION DATE means the date of the adoption of the Scheme by the Company in
general meeting;

ASSOCIATED SCHEME means any Share Option Scheme (other than the Scheme and
excluding any savings related share option schemes) established by the Company
or any associated company of the Company within the meaning of section 416 of
the Taxes Act;

BASIC SALARY means an Executive's annual basic salary in respect of his
employment with the Group;

THE BOARD means the board of directors of the Company or where appropriate a
duly authorised committee thereof;

CAPITAL REORGANISATION means any variation in the share capital or reserves of
the Company (including, without limitation, by way of capitalisation issue,
rights issue, sub-division, consolidation, or reduction);

THE COMPANY means Premier Farnell plc registered in England No. 876412 by
whatever name known from time to time;

CONTROL has the meaning given to that word by section 840 of the Taxes Act;

DATE OF GRANT means the date on which an Option is granted;

DEALING DAY means any day on which the London Stock Exchange is open for the
transaction of business;

EXECUTIVE means any bona fide employee or executive director of any member of
the Group who is not within 6 months of the date on which he is bound to retire
under his contract of employment;

EXECUTIVE SCHEME means any Share Option Scheme (other than the Scheme) under
which employees may be selected for participation at the discretion of the body
administering that scheme and for the purposes of this definition includes the
Premier Farnell Performance Share Plan;

EXERCISE PRICE means the price per Share payable on the exercise of an Option as
determined by the Remuneration Committee (subject to adjustment under rule 12)
but which shall not be less than the greater of:

                                                                          Page 2

<PAGE>

(a)      the middle market quotation for a Share as derived from the Daily
         Official List of the London Stock Exchange for the Dealing Day
         immediately preceding the Date of Grant; and

(b)      in the case of any Option under which Shares are to be issued, the
         nominal value of a Share,

and which shall be stated at the Date of Grant;

GRANT PERIOD means the period of 42 days commencing on any of the following:

(a)      the Adoption Date;

(b)      the day immediately following the day on which the Company makes an
         announcement of its results for the last preceding financial year, half
         year or other period; or

(c)      any day on which the Remuneration Committee resolves that exceptional
         circumstances exist which justify the grant of Options;

THE GROUP means the Company and the Subsidiaries and MEMBER OF THE GROUP shall
be construed accordingly;

ITEPA means the Income Tax (Earnings and Pensions) Act 2003;

THE LONDON STOCK EXCHANGE means London Stock Exchange plc or any successor body
thereto;

OPTION means a right granted under the Scheme to subscribe for or purchase
Shares;

OPTION HOLDER means any individual who holds a subsisting Option (including,
where the context permits, the legal personal representatives of a deceased
Option Holder);

OPTION PERIOD means the period commencing on the third anniversary of the Date
of Grant of the Option and expiring on the tenth anniversary of the Date of
Grant or, if the Remuneration Committee so determines, such earlier date which
is not later than the tenth anniversary of the Date of Grant;

PERFORMANCE PERIOD means the period over which any objective condition imposed
by virtue of rule 2.3 must be satisfied;

REMUNERATION COMMITTEE means the remuneration committee of the Board;

RETIREMENT AGE means, with effect from the date on which paragraph 22 of
Schedule 21 to the Finance Bill 2003 (as published on 16 April 2003) or such
other provision as may replace such paragraph takes effect, age 55 for the
purposes of paragraph 35A of Schedule 4 to ITEPA;

THE SCHEME means this Scheme as amended from time to time;

                                                                          Page 3

<PAGE>

SHARE OPTION SCHEME means any employee share option scheme established by the
Company excluding the Premier Farnell Performance Share Plan;

SHARES means fully paid and irredeemable ordinary shares in the capital of the
Company or shares representing those shares following any Capital
Reorganisation;

SUBSIDIARY means any subsidiary of the Company within the meaning of section 736
of the Companies Act 1985 over which the Company has Control;

TAXES ACT means the Income and Corporation Taxes Act 1988; and

UKLA means the United Kingdom Listing Authority.

1.2      Where the context permits the singular shall include the plural and
vice versa and the masculine shall include the feminine. Headings shall be
ignored in construing the Scheme.

1.3      References to any act of Parliament shall include any statutory
modification, amendment or re-enactment thereof.

2.       GRANT OF OPTIONS

2.1      The Remuneration Committee may, during a Grant Period, grant Options at
the Exercise Price to any Executives selected by the Remuneration Committee.

2.2      Immediately prior to the granting of any Options the Remuneration
Committee may, in its absolute discretion, enter into a deed poll recording its
intention to grant Options and agreeing to be bound by the Option certificates
to be issued to the Executive in respect of such Options. No consideration will
be payable by the Executive on the grant of an Option.

2.3      An objective condition or conditions must, unless otherwise stated in
the Scheme, be satisfied prior to the exercise of Options. Such conditions:

(a)      shall for the time being consist of the condition set out in the
         Schedule to this Scheme. In the event that the Remuneration Committee
         considers that the condition set out in the schedule is no longer
         appropriate, it may at the time of granting Options impose such
         different objective conditions as it considers are appropriate;

(b)      may be amended or waived following the Date of Grant but before the
         expiry of the Performance Period if:

         (i)      events happen following the Date of Grant with the result that
                  the circumstances which prevailed at the Date of Grant which
                  were relevant to the conditions that were originally imposed
                  regarding the exercise of the Option have subsequently
                  changed; and

         (ii)     the Remuneration Committee is satisfied that any such amended
                  conditions would be a fairer measure of the performance of the

                                                                          Page 4

<PAGE>

                  Company and the Remuneration Committee reasonably considers
                  that such amended conditions are:

                  (A)      equally demanding; and

                  (B)      no more difficult to satisfy than the original
                           conditions; and

(c)      shall cease to apply in circumstances in which Option Holders become
         entitled to exercise Options in accordance with rules 7, 10.1, 10.2,
         10.3 and 10.5 and, to the extent permitted by the Remuneration
         Committee, rule 10.4.

2.4      An Option may be granted subject to such conditions for payment of
taxation, employees' national insurance contributions and employer's national
insurance contributions liability as the Remuneration Committee may determine
(including without limitation the right to sell on an Option Holder's behalf
sufficient shares to satisfy any taxation or national insurance contributions)
and if any condition is imposed relating to the assumption, payment or
reimbursement by the Option Holder of any employer's national insurance
contributions liability, such conditions shall comply with any applicable
legislation or regulations and the Remuneration Committee shall be entitled to
waive in whole or in part the Option Holder's obligation in respect of such
liability.

2.5      Any Executive to whom an Option is granted may, by notice in writing to
the Company given within 30 days after the Date of Grant, renounce in whole or
in part his rights under the Option. In such a case, the Option shall, to the
extent renounced, be treated as never having been granted and (if already
issued) the Option certificate shall be returned to the Company for cancellation
or (in the case of renunciation in part) for amendment. No consideration shall
be payable by the Company for any such renunciation.

2.6      No Option shall be granted under the Scheme more than ten years after
the Adoption Date.

2.7      Every Option granted hereunder shall be personal to the Option Holder
and, except to the extent necessary to enable a personal representative to
exercise the Option following the death of an Option Holder, neither the Option
nor the benefit thereof may be transferred, assigned, charged or otherwise
alienated. Any transfer of an Option otherwise than as permitted in this rule 7
shall cause the Option to lapse.

3.       INDIVIDUAL LIMITS

3.1      Subject to rule 3.2 below, no Executive shall be granted an Option
which would, at the proposed Date of Grant, cause the aggregate of (i) the
aggregate Exercise Prices of the Shares which he may acquire by exercise of that
Option and (ii) the aggregate exercise prices of any other options granted to
him under the Scheme and any Associated Scheme in any calendar year to exceed an
amount equal to 100% of his Basic Salary as at the proposed Date of Grant.

3.2      If, in connection with the recruitment of a senior Executive, the
Committee considers that exceptional circumstances exist which justify a grant
of Options in

                                                                          Page 5

<PAGE>

excess of the amounts prescribed in rule 3.1, the Committee may in its absolute
discretion grant Options to that senior Executive in excess of such amounts.

4.       SCHEME LIMITS

4.1      No Option to subscribe for Shares shall be granted to the extent that
the result of that grant would be that:

(a)      the aggregate number of Shares that could be issued on the exercise of
         that Option and any other Options granted at the same time, when added
         to the number of Shares that:

         (i)      could be issued on the exercise of any other subsisting share
                  options granted during the preceding ten years under the
                  Scheme or any other Share Option Scheme;

         (ii)     have been issued on the exercise of any share options granted
                  during the preceding ten years under the Scheme or any other
                  Share Option Scheme;

         (iii)    have been issued during the preceding ten years under any
                  profit sharing scheme or Executive Scheme; and

         (iv)     could be issued pursuant to any subsisting awards made during
                  the preceding ten years under any profit sharing scheme or
                  Executive Scheme;

         would exceed 10 per cent. of the ordinary share capital of the Company
         for the time being in issue; and

(b)      the aggregate number of Shares that could be issued on the exercise of
         that Option and any other Options granted at the same time, when added
         to the number of Shares that:

         (i)      could be issued on the exercise of any other subsisting share
                  options or other awards granted during the preceding ten years
                  under the Scheme or any Executive Scheme; and

         (ii)     have been issued on the exercise of any share options or other
                  awards granted during the preceding ten years under the Scheme
                  or any Executive Scheme,

         would exceed 5 per cent of the ordinary share capital of the Company
         for the time being in issue.

4.2      Reference in this rule 4 to the ISSUE of Shares shall, for the
         avoidance of doubt, mean the issue and allotment (but not transfer) of
         Shares.

5.       EXERCISE AND LAPSE OF OPTIONS - NORMAL CIRCUMSTANCES

5.1      Save as otherwise permitted in these rules, an Option may only be
exercised:

                                                                          Page 6
<PAGE>

(a)      during the relevant Option Period; and

(b)      if any conditions imposed under rule 2.3 have been fulfilled or waived
         in accordance with these rules.

5.2      Notwithstanding any other provision in these rules, an Option shall
lapse automatically on the earlier of:

(a)      the expiry of the Option Period; and

(b)      the Option Holder being declared bankrupt or entering into any general
         composition with or for the benefit of his creditors including a
         voluntary arrangement under the Insolvency Act 1986.

6.       EXERCISE AND LAPSE OF OPTIONS - CESSATION OF EMPLOYMENT

6.1      Save as otherwise provided in these rules, an Option shall lapse
automatically on the Option Holder ceasing to be an employee of a member of the
Group (whether lawfully or unlawfully).

6.2      Where an Option Holder ceases to be an employee of a member of the
Group by reason of:

(a)      injury, disability or ill-health;

(b)      retirement at or after the date on which he is bound to retire under
         his contract of employment or at the Retirement Age;

(c)      early retirement (with the consent of the Company);

(d)      redundancy (within the meaning of the Employment Rights Act 1996);

(e)      his employing company ceasing to be a member of the Group;

(f)      the business (or part of a business) in which he is employed being
         transferred to a transferee which is not a member of the Group; or

(g)      any other reason as the Committee so decides in its absolute
         discretion,

he may exercise his Options within six months of the date on which employment
ceased, subject to any performance conditions imposed under rule 2.3 being
satisfied within that period, or such longer period as the Remuneration
Committee may determine in its absolute discretion (being not longer than 42
months after the date of Grant of the Options). In the alternative, the
Remuneration Committee may, other than when the Option Holder's employment has
ceased in the circumstances mentioned in rule 6.2(b), in its absolute discretion
and having regard to the extent to which any performance conditions imposed
under rule 2.3 have been satisfied up to the date on which employment ceased,
allow the Optionholder to exercise his Options within six months of the date on
which employment ceased PROVIDED THAT in all cases where employment ceases
before the expiry of any relevant Performance Period and Options become
exercisable pursuant to this rule 6.2, the number of Shares in

                                                                          Page 7

<PAGE>

respect of which an Option may be exercised shall be the number in respect of
which the Option is granted (subject to any adjustments under rule 12)
multiplied by the fraction A/B (where A is that part of the Performance Period
measured in complete months from the Date of Grant to the date of cessation of
employment and B is 36 or such other number as is equal to the number of months
in the Performance Period).

Failing any such exercise the Options shall (subject to rule 6.5 and rule 7)
lapse automatically. For the avoidance of doubt, an Option exercisable under
this rule 6.2 may lapse at an earlier date by virtue of rule 10 and may not be
exercised after the expiry of the Option Period.

6.3      For the purposes of rules 6.1 and 6.2 a female Option Holder shall not
be treated as ceasing to be an employee of a member of the Group if absent from
work wholly or partly because of pregnancy or confinement until she ceases to be
entitled to exercise any statutory or contractual right to return to work.

6.4      Where any exercise under rule 6.2 would be prohibited by law or the
Model Code for Securities Transactions by Directors of Listed Companies (or the
Company's dealing rules) the period during which the Option Holder may exercise
his Options shall be extended by the period of the prohibition.

6.5      In any case where the Remuneration Committee is aware that an Option
Holder will cease to be an employee of a member of the Group and be entitled or
permitted to exercise his Options immediately thereafter under rule 6.2(e) or
6.2(f) it may permit him to exercise his Options in the period of 14 days
immediately preceding the date upon which it believes that such cessation will
occur (whether or not the Option Period will have commenced but having regard to
the extent to which any conditions imposed under rule 2.3 have been satisfied).

6.6      For the purposes of rules 6.1, 6.2, 6.4 and 6.5, following an Option
rollover pursuant to rule 11.1, an Option Holder shall not be treated as ceasing
to be employed by a member of the Group until he ceases to be employed by a
company which is either (i) the acquiring company (as defined in rule 11.1) or
(ii) a subsidiary of the acquiring company (within the meaning of section 736 of
the Companies Act 1985).

7.       DEATH OF OPTION HOLDER

If an Option Holder dies while in service or at any time after leaving service
when he holds an Option his legal personal representatives may exercise his
Option (whether or not the Option Period has commenced and whether or not any
conditions imposed under rule 2.3 have been satisfied) within twelve months of
the date on which death occurred, failing which exercise the Option shall lapse
automatically. For the avoidance of doubt, an Option exercisable under this rule
7 shall not lapse prior to the expiry of the specified twelve month period by
virtue of rule 6.2 but may lapse at an earlier date by virtue of rule 10.

8.       METHOD AND EXTENT OF EXERCISE

8.1      An Option Holder may exercise his Option in whole or in part by giving
notice in writing to the Company in the form prescribed by the Company
specifying

                                                                          Page 8

<PAGE>

the number of Shares in respect of which the Option is being exercised and
enclosing or arranging to provide payment in full of the aggregate Exercise
Price of those Shares. Notice must be delivered to or sent by pre-paid post to
the registered office of the Company or at such other place as the Company may
prescribe. Exercise shall be deemed to occur on the day following the day of a
receipt by the Company of the notice of exercise. If the Option is exercised in
respect of some only of the Shares comprised in the Option, the Company shall
procure the issue of an Option certificate to the Option Holder in respect of
the balance or the re-issue of the original Option certificate after
endorsement.

8.2      The exercise of an Option shall be conditional on the Option Holder
complying with any such arrangements specified by the Remuneration Committee
pursuant to rule 2.4 for the payment of any taxation, employees' national
insurance contributions or employer's national insurance contributions
liability.

8.3      Where any exercise would be prohibited by law or the Model Code for
Securities Transactions by Directors of Listed Companies (or the Company's
dealing rules) the period during which the Option Holder may exercise his
Options shall be extended by the length of any such period of prohibition
PROVIDED THAT an Option may not be exercised after the expiry of the Option
Period.

9.       ALLOTMENT OR TRANSFER OF SHARES ON EXERCISE OF OPTIONS

Subject to any necessary consents, to payment being made for the Shares and to
compliance by the Option Holder with the terms of the Scheme, not later than 30
days after receipt of any notice of exercise in accordance with rule 8, the
Company shall either allot and issue, or procure the transfer of, Shares to the
Option Holder (or to his nominee). The Company shall (unless the Shares are to
be issued in uncertificated form) as soon as practicable deliver to the Option
Holder (or his nominee) a definitive share certificate or other evidence of
title in respect of such Shares. Where the Shares are issued or transferred to a
nominee of the Option Holder, the Option Holder shall remain the beneficial
owner of the Shares.

10.      GENERAL OFFER FOR THE COMPANY ETC.

GENERAL OFFER

10.1     If any person (either alone or together with any person acting in
concert with him) makes a general offer to acquire the whole of the share
capital of the Company (other than those shares which are already owned by him
and/or any person acting in concert with him), the Company shall, as soon as
reasonably practicable thereafter, give notice to each Option Holder of such
general or other offer and prior to the date on which the offer becomes or is
declared unconditional in all respects each Option Holder may exercise his
Options within the period of six months following the date on which the offer
becomes or is declared unconditional in all respects whether or not the Option
Period has commenced PROVIDED THAT if such event occurs before the expiry of any
relevant Performance Period the number of Shares in respect of which an Option
may be exercised shall be the number in respect of which the Option is granted
(subject to any adjustments under rule 12) multiplied by the fraction A/B (where
A is that part of the Performance Period measured in complete months from

                                                                          Page 9

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the Date of Grant to the date on which the offer becomes or is declared wholly
unconditional and B is 36 or such other number as is equal to the number of
months in the Performance Period) and further PROVIDED THAT the Remuneration
Committee may in its absolute discretion having regard to the extent to which
performance conditions have been satisfied up to the relevant date determine
that Options may be exercisable in respect of a greater number of Shares not
exceeding the total number of Shares under the Option.

Failing any permitted exercise the Options shall, without prejudice to the
operation of rule 11, lapse automatically upon the expiry of the six month
period provided that, if an event as described in rule 10.2 occurs during the
six month period, the period during which the Options may be exercised shall be
the shorter of the periods specified under this rule 10.1 and rule 10.2.

COMPULSORY ACQUISITION

10.2     If any person becomes bound or entitled to give a notice under sections
428 to 430F of the Companies Act 1985 to acquire Shares, and the circumstances
mentioned in rule 10.1 apply, each Option Holder may exercise his Options at any
time during the period of 30 days from the date on which such a notice is first
issued (whether or not the Option Period has commenced PROVIDED THAT if such
event occurs before the expiry of any relevant Performance Period the number of
Shares in respect of which an Option may be exercised shall be the number in
respect of which the Option is granted (subject to any adjustments under rule
12) multiplied by the fraction A/B where (A is that part of the Performance
Period measured in complete months from the Date of Grant to the date on which
the notice is served and B is 36 or such other number as is equal to the number
of months in the Performance Period) and further PROVIDED THAT the Remuneration
Committee may in its absolute discretion having regard to the extent to which
performance conditions have been satisfied up to the relevant date determine
that Options may be exercisable in respect of a greater number of Shares not
exceeding the total number of Shares under the Option.

Failing any permitted exercise the Options (or such part thereof as the
Remuneration Committee may specify) shall, without prejudice to the operation of
rule 11, lapse automatically upon the expiry of the 30 day period.

SCHEME OF ARRANGEMENT

10.3.1   If a court shall direct that a meeting of the holders of Shares be
convened pursuant to section 425 of the Companies Act 1985 for the purposes of
considering a scheme of arrangement involving the reconstruction of the Company
or its amalgamation with any other company or companies, each Option Holder may
exercise his Options conditionally on either the scheme of arrangement being
approved by the shareholders' meeting or sanctioned by the court (as determined
by the Board in its absolute discretion) (the RELEVANT CONDITION), between the
date of the court's direction and twelve noon on the day immediately preceding
the date for which the shareholders' meeting is convened (whether or not the
Option Period has commenced PROVIDED THAT if such event occurs before the expiry
of any relevant Performance Period the number of Shares in respect of which an
Option may be exercised shall be the number in respect of which the Option is
granted (subject to

                                                                         Page 10

<PAGE>

any adjustments under rule 12) multiplied by the fraction A/B where (A is that
part of the Performance Period measured in complete months from the Date of
Grant to the date of the shareholders' meeting or court sanction (as the case
may be) and B is 36 or such other number as is equal to the number of months in
the Performance Period) and further PROVIDED THAT the Remuneration Committee may
in its absolute discretion having regard to the extent to which performance
conditions have been satisfied up to the relevant date determine that Options
may be exercisable in respect of a greater number of Shares not exceeding the
total number of Shares under the Option.

10.3.2   Failing any permitted exercise the Options (or such part thereof as the
Remuneration Committee may specify) shall cease to be exercisable between the
last time upon which permitted exercises may occur and the first date on which
it can be determined whether or not the relevant condition is satisfied. If the
relevant condition is not satisfied, the Options shall continue. If the relevant
condition is satisfied, the Options (or such part thereof as the Remuneration
Committee may specify) shall, without prejudice to the operation of rule 11,
lapse automatically on the date on which the scheme of arrangement is sanctioned
by the court.

10.3.3   The Board shall endeavour to procure that where an Option Holder has
conditionally exercised his Options in accordance with 10.3.1 above prior to
twelve noon on the day immediately preceding the date for which the
shareholders' meeting is initially convened the scheme of arrangement shall, so
far as it relates to Shares, be extended to such Option Holder as if each Share
in respect of which the Option was conditionally exercised had been allotted and
issued, or transferred, to him by that time.

10.3.4   Provided that without prejudice to the operation of rule 11.1(b),
Options shall not be exercisable without the consent of the Remuneration
Committee under the foregoing provisions if the purpose and effect of the scheme
of arrangement is to create a new holding company for the Company, such company
having substantially the same shareholders and proportionate shareholdings as
those of the Company immediately prior to the scheme of arrangement.

DEMERGER

10.4     If the Board becomes aware that the Company is or is expected to be
affected by any demerger, dividend in specie, super-dividend or other
transaction which, in the opinion of the Board, would affect the current or
future value of any Options, the Remuneration Committee (acting fairly and
objectively and taking account of the extent to which any conditions under rule
2.3 have been satisfied, the period of time which has elapsed since the Date of
Grant and any other criteria they may consider to be relevant) may, in its
absolute discretion, allow Options to be exercised (whether or not the Option
Period has commenced and whether or not any conditions imposed under rule 2.3
have been satisfied). The Remuneration Committee shall specify the period in
which such Options shall be exercisable and whether such Options shall lapse at
the end of the specified period. The Remuneration Committee shall notify any
Option Holder who is affected by the discretion exercised under this rule.

                                                                         Page 11

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VOLUNTARY WINDING-UP

10.5     If notice is duly given of a resolution for a voluntary winding-up of
the Company then an Option Holder may exercise his Options (whether or not the
Option Period has commenced and whether or not any conditions imposed under rule
2.3 have been satisfied) within the period of two months from the date of the
resolution, failing which exercise the Options shall lapse automatically.

11.      OPTION ROLLOVER

11.1     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; or

(b)      obtains Control of the Company in pursuance of a compromise or
         arrangement sanctioned by the Court under section 425 of the Companies
         Act 1985; or

(c)      becomes bound or entitled to acquire shares in the Company under
         sections 428 to 430F of that Act,

each Option Holder may at any time within the appropriate period (which
expression shall be construed in accordance with paragraph 26(3) of Schedule 4
of the ITEPA), by agreement with the acquiring company, release any Option which
has not lapsed (the OLD OPTION) in consideration of the grant to him of an
option (the NEW OPTION) which (in accordance with rule 11.2 below) is equivalent
to the old option but relates to shares in a different company (whether the
acquiring company itself or another company falling within paragraph 26(2) of
Schedule 4 of the ITEPA) (the NEW SCHEME ORGANISER).

11.2     The new option shall not be regarded for the purposes of rule 11.1 as
equivalent to the old option unless the conditions set out in paragraph 27 of
Schedule 4 of the ITEPA are satisfied and, in relation to the new option, the
provisions of the Scheme shall be construed as if:

(a)      the new option were an option granted under the Scheme at the same time
         as the old option;

(b)      references to the PERFORMANCE CONDITIONS were references to such new
         performance conditions (if any) relating to the business of the new
         scheme organiser or any member of the new scheme organiser's group as
         the Remuneration Committee may consider are appropriate in the
         circumstances;

(c)      references to the COMPANY in rules 6 to 16 and in the definition of
         GROUP were references to the new scheme organiser;

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<PAGE>

(d)      references to the BOARD in rules 10, 12 and 15 were references to the
         board of directors of the new scheme organiser;

(e)      references to the REMUNERATION COMMITTEE, were references to the
         appropriate committee(s) of the board of the new scheme organiser; and

(f)      references to SHARES were references to shares in the new scheme
         organiser.

12.      ADJUSTMENT OF OPTIONS

In the event of any Capital Reorganisation or the implementation by the Company
of a demerger or the payment by the Company of a dividend in specie or a
super-dividend (which in the case of a demerger or payment of a dividend would
materially affect the value of an Option), the Exercise Price, the definition of
SHARES and the number of Shares comprised in an Option may be adjusted in such
manner as the Remuneration Committee may determine; provided that:

(a)      in respect of an Option under which Shares are to be transferred prior
         notification shall be given to the person holding the Shares to which
         the Option relates;

(b)      no adjustment shall be made pursuant to this rule which would increase
         the aggregate Exercise Price of any Option; and

(c)      except as provided in this subparagraph 12(c) no adjustment may have
         the effect of reducing the Exercise Price to less than the nominal
         value of a Share. Where an Option subsists over both issued or unissued
         Shares any such adjustment may only be made if the reduction of the
         Exercise Price of Options over both issued and unissued Shares can be
         made to the same extent. Any adjustment to the Exercise Price of
         Options over unissued Shares shall only be made 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. The Board may apply such sum in paying up such
         amount on such Shares and so that on exercise of any Option in respect
         of which such reduction shall have been made the Board shall capitalise
         such sum (if any) and apply the same in paying up such amount as
         aforesaid.

13.      RIGHTS ATTACHING TO SHARES ALLOTTED OR TRANSFERRED PURSUANT TO OPTIONS

13.1     All Shares allotted or transferred upon the exercise of an Option shall
rank pari passu in all respects with the Shares in issue at the date of exercise
save as regards any rights attaching to such Shares by reference to a record
date prior to the date of exercise.

13.2     Any Shares acquired on exercise of Options shall be subject to the
articles of association of the Company from time to time.

                                                                         Page 13

<PAGE>

14.      AVAILABILITY OF SHARES

14.1     The Company shall at all times keep available for issue sufficient
authorised but unissued Shares to permit the exercise of all unexercised Options
under which Shares may be allotted or shall otherwise procure that Shares are
available for transfer in satisfaction of the exercise of Options.

14.2     If and so long as the Shares are admitted to listing by the UKLA and
admitted to trading by the London Stock Exchange, the Company will, at its
expense, make application to the UKLA and the London Stock Exchange for Shares
allotted on the exercise of any Option to be admitted to such listing and
trading respectively.

15.      ADMINISTRATION AND AMENDMENT

15.1     The decision of the Board shall be final and binding in all matters
relating to the Scheme and it may at any time discontinue the grant of further
Options.

15.2     The Remuneration Committee may amend any of the provisions of the
Scheme in any way it thinks fit, provided that:

(a)      the Remuneration Committee shall not make any amendment that would
         materially prejudice the interests of existing Option Holders except
         with the prior consent or sanction of Option Holders who, if they
         exercised their Options in full, would thereby become entitled to not
         less than three-quarters of all the Shares which would fall to be
         allotted or transferred upon exercise in full of all outstanding
         Options; and

(b)      no amendment to the advantage of Executives or Option Holders may be
         made to:

                  (i)      the definition of EXECUTIVE in rule 1.1;

                  (ii)     the limitations on the numbers of Shares subject to
                           the Scheme;

                  (iii)    the maximum entitlement of an Executive under the
                           Scheme;

                  (iv)     the basis for determining an Executive's entitlement
                           to Shares under the Scheme;

                  (v)      the terms of Shares to be provided under the Scheme;

                  (vi)     the adjustment provisions of rule 12 of the Scheme;

         without the prior approval of the Company in general meeting except in
         the case of minor amendments to benefit the administration of the
         Scheme, to take account of a change in legislation or to obtain or
         maintain favourable tax, exchange control or regulatory treatment for
         Executives and Option Holders or any member of the Group; and

                                                                         Page 14

<PAGE>

(c)      without prejudice to any provision of the Scheme which provides for the
         lapse of an Option, the Remuneration Committee may not cancel an Option
         unless the Option Holder agrees in writing to such cancellation.

15.3     Notwithstanding any other provision of the Plan, the Remuneration
Committee may establish appendices to the Scheme for the purpose of granting
Options to Executives who are or may become primarily liable to tax outside the
United Kingdom on their remuneration, subject to such modifications as may be
necessary or desirable to take account of overseas tax, exchange control or
securities laws provided that any Shares made available under such appendices
shall count towards the limit set out in rule 4 hereof.

16.      GENERAL

16.1     Any member of the Group 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 those
purposes, to the extent not prohibited by section 151 of the Companies Act 1985.

16.2     The rights and obligations of an Option Holder under the terms and
conditions of his office or employment shall not be affected by his
participation in the Scheme or any right he may have to participate in the
Scheme. An individual who participates in the Scheme waives all and any rights
to compensation or damages in consequence of the termination of his office or
employment with any company for any reason whatsoever (whether lawfully or
unlawfully) 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. In the event of any conflict between the terms of this
rule 16.2 and the Option Holder's terms of employment, this rule will take
precedence.

16.3     The existence of any Option shall not affect in any way the right or
power of the Company or its shareholders to make or authorise any or all
adjustments, recapitalisations, reorganisations or other changes in the
Company's capital structure, or any merger or consolidation of the Company, or
any issue of shares, bonds, debentures, preferred or prior preference stocks
ahead of or convertible into, or otherwise affecting the Shares or the rights
thereof, or the dissolution or liquidation of the Company or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.

16.4     Any notice or other document required to be given under or in
connection with the Scheme may be delivered to an Option Holder or sent by post
to him at his home address according to the records of his employing company or
such other address as may appear to the Company to be appropriate including any
electronic address. Notices sent by post shall be deemed to have been given on
the day following the date of posting and notices sent by electronic means shall
be deemed to have been given twelve hours after the time of despatch or at such
earlier time as receipt is acknowledged. Any notice or other document required
to be given to the Company under or in connection with the Scheme may be
delivered or sent by post to it at its registered office (or such other place or
places as the Company may from time to time determine and notify to Option
Holders).

                                                                         Page 15

<PAGE>

16.5     Benefits under the Scheme shall not be pensionable.

16.6     The Company, or where the Board so directs any Subsidiary, shall pay
the appropriate stamp duty on behalf of Option Holders in respect of any
transfer of Shares on the exercise of Options.

16.7     These rules shall be governed by, and construed in accordance with, the
laws of England.

                                                                         Page 16

<PAGE>

                                   APPENDIX 1

                   INLAND REVENUE APPROVED PART OF THE SCHEME

In relation to any Executive to whom the Remuneration Committee wishes to grant
Options under an Inland Revenue approved scheme, the following provisions
relating to Options shall apply:

(A)      Rules 1 to 16 of the Scheme shall apply to the grant of Options under
         this Appendix subject to the modifications contained in the following
         paragraphs.

(B)      The definition of EXECUTIVE shall be construed so that:

                  (i)      no Option may be granted under this Appendix to a
                           director of any member of the Group unless such
                           director is required to devote not less than 25 hours
                           per week to the affairs of the Group; and

                  (ii)     no Option may be granted under this Appendix to an
                           Executive who is ineligible to participate in the
                           Scheme by virtue of paragraph 9 of Schedule 4 to
                           ITEPA.

(C)      In the definition of GRANT PERIOD a new paragraph (d) shall be inserted
as follows:

         "(d)     any day on which any change to the legislation affecting Share
                  Option Schemes approved by the Inland Revenue under ITEPA is
                  proposed or made"

(D)      The definition of SHARES shall be subject to the condition that they
         satisfy paragraphs 15 to 20 of Schedule 4 to ITEPA.

(E)      Rule 2.1 shall be amended by the addition of the following words:

         "No Options shall be granted under this Appendix until the Scheme and
         this Appendix have been approved by the Inland Revenue."

(F)      The imposition of any objective conditions pursuant to rule 2.3, or any
         amendment to such conditions, must be approved in advance by the Inland
         Revenue.

(G)      Rule 2.3(c) shall not apply to the grant of Options under this
         Appendix. In its place a new rule 2.3(c) shall be inserted as follows:

         "shall cease to apply in circumstances in which Option Holders become
         entitled to exercise Options in accordance with rules 6.2, 7 and 10 or
         following an option rollover in accordance with rule 11 hereof".

(H)      Rule 3 shall not apply to the grant of Options under this Appendix. In
         its place a new rule 3 shall be inserted as follows:

                                                                         Page 17

<PAGE>

         "No Executive shall be granted an Option under this Appendix which
         would, at the proposed Date of Grant, cause the aggregate of the market
         values (determined at their Date of Grant (in accordance with part 8 of
         the Taxation of Chargeable Gains Act 1992)) of subsisting Options held
         by him pursuant to a grant under this Appendix and the exercise prices
         of subsisting options held by him under any Associated Scheme, to
         exceed L30,000 (or such other amount as shall be specified under
         paragraph 6 of Schedule 4 to ITEPA from time to time).

         For the purposes of this paragraph (H) ASSOCIATED SCHEME means any
         Share Option Scheme (other than the Scheme) approved under Schedule 4
         to ITEPA and established by the Company or an associated company of the
         Company within the meaning of section 416 of the Taxes Act.

(I)      In rule 6.2 the words "In the alternative, the Remuneration Committee
         may, other than when the Option Holder's employment has ceased in the
         circumstances mentioned in rule 6.2(b), in its absolute discretion and
         having regard to the extent to which any performance conditions imposed
         under rule 2.3 have been satisfied up to the date on which employment
         ceased, allow the Optionholder to exercise his Options within six
         months of the date on which employment ceased" shall not apply to the
         grant of Options under this Appendix.

(J)      In Rule 10.4, the words "and any other criteria they may consider to be
         relevant" shall not apply to an Option granted under this Appendix.

(K)      In Rule 11.2 paragraph (b) shall not apply to the grant of Options
         under this Appendix. In its place a new paragraph (b) shall be inserted
         as follows:

         "any conditions imposed under rule 2.3 have been satisfied".

(L)      In Rule 12 the words "or the implementation by the Company of a
         demerger or the payment by the Company of a super dividend" shall not
         apply to an Option granted under this Appendix. No adjustment pursuant
         to rule 12(a) in relation to an Option granted under this Appendix
         shall take effect without the prior approval of the Inland Revenue.

(M)      Rule 15.3 shall not apply to the grant of the Options under this
         Appendix.

(N)      At a time when this Appendix is approved by the Inland Revenue, and if
         such approved status is to be maintained, no amendment to the rules of
         the Scheme or this Appendix, may take effect as regards this Appendix
         without the prior approval of the Inland Revenue (and if such approved
         status is not to be maintained, the Company shall notify the Inland
         Revenue of the relevant amendment). With effect from the time when
         Royal Assent is given to the Finance Bill 2003, this Clause (N) shall
         be construed so as to only require Inland Revenue prior approval to any
         amendments to key features (as defined by paragraph 31 of Schedule 4 to
         ITEPA) of the Scheme or this Appendix.

                                                                         Page 18

<PAGE>

(O)      In the case of any instance of "absolute discretion" applying to
         Options granted under this Appendix, the relevant references shall be
         amended to read "sole discretion" and the Committee shall exercise such
         discretion in a fair and reasonable manner.

                                                                         Page 19

<PAGE>

                                    SCHEDULE

              REAL GROWTH IN EARNINGS PER SHARE PERFORMANCE TARGET

The condition referred to in rule 2.3 is that, at the Accounts Date of the
Company following the expiry of a Prescribed Period relating to an Option, the
extent to which an Option shall be exercisable will be determined as follows:

                  (i)      if the Company's percentage growth in its Annualised
                           EPS over a Prescribed Period (comparing the Basis
                           Year with the Latest Year) is an average of at least
                           five per cent. per annum greater than the percentage
                           increase, if any, in the RPI Index, as adjusted (if
                           appropriate) pursuant to paragraph 3 below, over that
                           Prescribed Period the Option shall be exercisable in
                           respect of all the Shares comprised therein;

                  (ii)     if the Company's percentage growth in its Annualised
                           EPS over a Prescribed Period (comparing the Basis
                           Year with the Latest Year) is an average of three per
                           cent. per annum greater than the percentage increase,
                           if any, in the RPI Index, as adjusted (if
                           appropriate) pursuant to paragraph 3 below, over that
                           Prescribed Period, the Option shall be exercisable
                           over 50% of the Shares comprised therein; and

                  (iii)    if the Company's percentage growth in its Annualised
                           EPS over a Prescribed Period (comparing the Basis
                           Year with the Latest Year) is an average of between
                           three per cent. and five per cent. per annum greater
                           than the percentage increase, if any, in the RPI
                           Index, as adjusted (if appropriate) pursuant to
                           paragraph 3 below, over that Prescribed Period, the
                           Option shall be exercisable over Shares comprised
                           therein as is determined on a straightline basis
                           between 50% and 100% of the Shares comprised therein.

The following provisions apply for the purposes of determining whether the
conditions set out in this Schedule have been satisfied.

1.       In this Schedule, unless the context otherwise requires, the following
words and expressions shall have the following meanings, namely:

ACCOUNTS means the consolidated accounts of the Company for a Financial Year
prepared under the historical cost convention, modified for the revaluation of
certain land and buildings, and in compliance with all applicable accounting
standards and the Companies Act 1985 (as amended);

ACCOUNTS DATE means the date on which the Accounts have been approved by the
Board;

                                                                         Page 20

<PAGE>

ANNUALISED EPS means Earnings per Share adjusted proportionately upwards or
downwards in a case where the relevant Financial Year is greater than or less
than one calendar year;

AUDITORS means the auditors for the time being of the Company (acting as experts
not arbitrators);

BASIS YEAR means, in relation to an Option, the Financial Year ending
immediately before the Date of Grant of that Option;

EARNINGS PER SHARE means, for any Financial Year of the Company, the
consolidated earnings per ordinary share of the Company calculated in accordance
with Financial Reporting Standard No. 3 issued by The Accounting Standards Board
Limited or any modification thereto provided that to ensure comparability of
Financial Years of the Company within a Prescribed Period and for the Basis Year
the Board may:

(a)      adjust the figure for earnings per share as calculated in accordance
         with the relevant accounting standard to arrive at a figure which
         reflects the underlying business performance of the Group (and may,
         without limitation, adjust by excluding extraordinary or exceptional
         items from the earnings per share calculation and any consequent tax
         effect);

(b)      adjust the figure for any tax charge to ensure that the deduction for
         taxation in respect of the Latest Year shall be on a basis consistent
         with that applicable to the Basis Year;

(c)      adjust the figures to exclude any charge for the amortisation of
         goodwill; and

(d)      ensure that the relevant accounting standards are applied on a
         consistent basis in respect of years falling within any Prescribed
         Periods and for the Basis Year;

FINANCIAL YEAR means an accounting reference period as defined in accordance
with section 224 of the Companies Act 1985;

LATEST YEAR means, in relation to an Option, the latest Financial Year prior to
the exercise of the Option for which Accounts have been approved by the Board
not being later than the Financial Year ending immediately after the fifth
anniversary of the Date of Grant of the relevant Option;

PRESCRIBED PERIOD means a period of three or four consecutive Financial Years
commencing with the Financial Year in which the Date of Grant of the relevant
Option falls;

RPI INDEX means the Index of Retail Prices (All Items) published by H. M.
Government.

2.       As at each Accounts Date of the Company following the expiry of a
Prescribed Period, the Board shall calculate the percentage growth between the
Annualised EPS for its Basis Year and for its Latest Year and shall determine
whether

                                                                         Page 21

<PAGE>

that percentage growth is an average of at least three per cent. per annum above
the percentage increase, if any, in the RPI Index, as adjusted (if appropriate)
pursuant to paragraphs 3 and 4 below, over that Prescribed Period. If, at the
end of the first applicable Prescribed Period, the percentage growth in
Annualised EPS is an average of at least three per cent. per annum above the
percentage increase, if any, in the RPI Index, as adjusted (if appropriate),
then the extent to which an Option shall be exercisable shall be determined in
accordance with sub-paragraphs (i), (ii), and (iii) at the beginning of this
Schedule. If, at the end of the first applicable Prescribed Period, the
percentage growth in Annualised EPS is an average of less than three per cent.
per annum above the percentage increase, if any, in the RPI Index, as adjusted
(if appropriate), then the Board shall calculate Annualised EPS at the end of
the next Prescribed Period and then determine the extent to which an Option
shall be exercisable in accordance with sub-paragraphs (i), (ii), and (iii) at
the beginning of this Schedule.

3.       Where a Financial Year within a Prescribed Period or the Basis Year is
greater than or less than one calendar year, the percentage increase in the RPI
Index for that Financial Year shall be adjusted proportionately upwards or
downwards as appropriate in order to secure that such percentage increase is
annualised in a manner consistent with the Annualised EPS.

4.       For the purposes of paragraph 2 the Board shall make such adjustments
as they may consider appropriate to take account of any intervening capital
reorganisation of the Company including, without limitation, any capitalisation
issue, rights issue, sub-division or consolidation of share capital, reduction
of capital or demerger within the meaning of section 213 to 218 of the Taxes Act
and any modifications to the relevant accounting standards.

5.       If the composition of the RPI Index changes or the RPI Index is
replaced by another similar index, the Board may make such adjustments to any
calculations using the RPI Index (or any replacement index) as they consider to
be fair and reasonable.

6.       The Auditors shall confirm in writing to the Board:

(a)      that calculations made by the Board in accordance with this Schedule
         are correct; and

(b)      where an adjustment has been made by the scheme organiser under
paragraph 4, that such adjustment is in their opinion fair and reasonable.

                                                                         Page 22

<PAGE>

                                   APPENDIX 2

                          US OPTIONS PART OF THE SCHEME

This Appendix 2 governs the grant of Options to any employee whose remuneration
is (or is, at the anticipated time of exercise of an Option, likely to be)
subject to taxation in the United States of America and to whom the Board wishes
to grant Options and the provisions of the Scheme shall, save where otherwise
specified below, apply in relation to Options granted under this Appendix 2.

1.       GRANT OF OPTIONS

1.1      Options granted under this Appendix 2 may either be designated as
         "incentive stock options" ("ISOs") within the meaning of section 422 of
         the United States Internal Revenue Code of 1986, as amended (the "US
         Tax Code") or as "nonqualified stock options". The Remuneration
         Committee shall have the sole authority and discretion as to whether
         and to whom to grant either type of option; provided, however, that the
         terms of each Option shall specify clearly the type of option granted
         and no such Option shall permit a "tandem" exercise arrangement within
         the meaning of Temp. Treas. Reg. section 14a.422A-1(Q/A-21), (Q/A-39).

1.2      Where an Option is to be granted under this Appendix 2, the Company may
         arrange for any such Option to constitute a right to American
         Depositary Shares ("ADSs") rather than shares in the Company, in which
         case the references to "Shares" in the applicable rules shall be deemed
         to be references to "ADSs", as the context may require. The costs
         relating to the issuance of ADSs upon the exercise of an Option shall
         be borne by the Company. In addition, the Company may arrange for the
         Exercise Price of any Option to be paid in U.S. Dollars.

1.3      Where an Option is to be granted under this Appendix 2, the Company may
         offer from time to time various methods of facilitating cashless
         exercise by the Option Holders. Further, the Company may permit the
         aggregate Exercise Prices of the Shares which are subject to the
         Option, together with any other amounts due under these Rules in
         connection with such exercise and a sale of such Shares, to be paid
         from the proceeds of the sale of a portion of such Shares (or other
         Shares owned by the Option Holder) so that the Option Holder need not
         pay any net amount to the Company.

1.4      The definition of EXERCISE PRICE in Rule 1.1 shall be amended such
         that, in the case of an Option which is intended to be granted as an
         ISO, the price at which the Shares, or ADSs, may be acquired by the
         exercise of the Option shall not be less than 110% of the fair market
         value of the Shares or ADSs in the case of an ISO granted to a Ten
         Percent Shareholder. For the purposes of this Rule 1.4, the fair market
         value of an ADS shall be as determined in Rule 5.6.1 of this Appendix 2
         and the fair market value of a Share shall be the closing middle-market
         quotation for a Share as derived from the Daily Official List of the
         London Stock Exchange for the Dealing Day nearest preceding the Date of
         Grant on which Shares were traded.

                                       -1-

<PAGE>

1.5      Where an Option has previously been granted under this Appendix 2, the
         Company may arrange for any Option granted over Shares to be satisfied
         in the form of ADSs, and for any Option granted over ADSs to be
         satisfied in the form of Shares, and for the Exercise Price of any
         Option expressed in Sterling to be paid in U.S. Dollars and for the
         Exercise Price of any Option expressed in U.S. Dollars to be paid in
         Sterling.

1.6      All Options granted under this Appendix 2 which are intended to be
         granted as an ISO shall be evidenced by a written instrument in such
         form or forms as may from time to time be approved by the Company
         which, among other things, shall set out the number of Shares or ADSs
         subject to the Option, the manner in which a Participant may exercise
         his Option (including the Exercise Price, the date on which the Option
         will expire if unexercised and the terms of any performance condition),
         and the form of payment for the Shares or ADSs which may be issued or
         transferred under the Option.

2.       ELIGIBILITY

2.1      The class of persons who may be granted ISOs under this Appendix 2
         shall, in addition to the limitations otherwise imposed by the Scheme,
         be limited to those persons who are employees of the Company or its
         "parent" or "subsidiary" corporations within the meaning of section
         424(e) and (f), respectively, of the US Tax Code.

3.       LIMITS

3.1      The maximum aggregate number of Shares over which ISOs may be granted
         under this Appendix 2 during the term of the Scheme shall not exceed
         10,000,000, subject to any adjustments under Rule 12 which are made in
         a manner consistent with Section 422 of the US Tax Code. To the extent
         permitted under Section 422 of the US Tax Code, any Shares subject to
         an ISO award which lapses, expires or is otherwise terminated without
         the issuance of such Shares will not be included in assessing this
         limit. For the purposes of this limit an Option granted over ADSs will
         reduce the amount of Shares available on the basis of the ratio of
         Shares to ADSs.

3.2      To the extent that the aggregate fair market value of Shares or ADSs
         (determined as of the Date of Grant in accordance with the requirements
         of Section 422 of the US Tax Code and Rule 1.3 of this Appendix 2) with
         respect to which ISOs are exercisable for the first time by an Option
         Holder during any calendar year (under all incentive stock option plans
         of the Company or its "parent" or "subsidiary" corporations within the
         meaning of sections 424(e) and (f), respectively, of the US Tax Code)
         exceeds US$100,000 (or the Sterling equivalent), such Options shall be
         treated, to the extent of the excess, as nonqualified stock Options. In
         determining whether, and to what extent, the grant of an ISO exceeds
         such limit, ISOs shall be taken into account in the order in which they
         are granted.

3.3      The definition of OPTION PERIOD in Rule 1.1 shall be amended such that
         an ISO granted to a Ten Percent Shareholder may not be exercisable more
         than 5 years after the Date of Grant.

                                       -2-

<PAGE>

3.4      Rule 2.6 shall be amended such that an Option may be granted only
         within the period of 10 years beginning with the earlier of the date on
         which this Scheme is approved and adopted by the Board and the date on
         which this Scheme is approved by the Company's shareholders.

4.       EXERCISE OF OPTIONS

4.1      If any Option is exercised in accordance with Rules 5, 6 or 7 of the
         Scheme more than three months after the date that the Option Holder was
         last employed by the Company (or by its parent or a subsidiary as
         defined in this Appendix 2); more than three months after the date that
         the Option Holder died, if such Option Holder's death occurs more than
         three months after such Option Holder was last employed by the Company
         (or by its parent or a subsidiary as defined in this Appendix 2), or in
         the case of "total disability" (as defined by section 22(e)(3) of the
         US Tax Code) more than twelve months after the date that the Option
         Holder was last employed by the Company (or by its parent or a
         subsidiary as defined in this Appendix 2), then such Option shall be
         treated as a nonqualified stock option for purposes of the US Tax Code.

4.2      Rule 2.4 shall be amended to apply to any liability for any U.S.
         Federal, state or local taxes of any kind required to be withheld with
         respect to the exercise of an Option or any sale of Shares issued upon
         the exercise of an Option.

4.3      If any Shares or ADSs issued or transferred to an Option Holder
         pursuant to the exercise of an ISO are disposed of (within the meaning
         of Section 424(c) of the US Tax Code and the regulations promulgated
         thereunder) within two years of the Date of Grant or within one year of
         the date of transfer of such Shares or ADSs to the Option Holder, the
         Option Holder shall, within 10 days of such disposition, notify the
         Company in writing of the date and terms of the disposition and shall
         provide such other information regarding the disposition as the Company
         may reasonably require in order to secure any deduction then available
         against the Company's or any other corporation's taxable income.

4.4      Rule 6.2(b) shall be amended to read, "retirement at or after the
         prescribed minimum age and years of service under any retirement plan
         of the member of the Group employing such Option Holder;".

4.5      Rule 6.2(c) shall not apply to Options granted under this Appendix.

4.6      Rule 6.2(d) shall be amended to read, "termination of employment
         because such Option Holder's position with a member of the Group is
         eliminated, but not in circumstances in which such employment
         termination results from or involves, in whole or in part, any action
         or omission by the Option Holder that breaches, violates or conflicts
         with applicable employment or severance agreement terms, such Option
         Holder's fiduciary duties to such member of the Group, applicable
         policies or the best interest of such member of the Group or any other
         circumstances involving any termination of employment by such member of
         the Group in whole or in part for cause;".

                                       -3-

<PAGE>

5.       MISCELLANEOUS

5.1      Shares shall not be issued or transferred pursuant to the exercise of
         any Option granted under this Appendix 2 unless the exercise of the
         Option and the issuance and delivery of such Shares shall comply with
         all relevant provisions of law, involving, without limitation, the U.S.
         Securities Act of 1933, as amended (the "Securities Act"), the Exchange
         Act, applicable state securities laws, and the requirements of any
         stock exchange upon which Shares may then be listed, and, at the
         discretion of the Company, shall be further subject to approval of
         counsel for the Company with respect to such compliance. None of the
         Company or any of its subsidiaries or affiliates shall have any
         obligation to register any Shares under the Securities Act or any
         applicable state law. Any share certificates evidencing any Shares
         issued pursuant to the Scheme may bear a legend indicating that the
         transferability of the certificate and the Shares are restricted and
         subject to terms and conditions contained in the Scheme or otherwise.

5.2      The Company shall (i) administer this Appendix 2, (ii) establish from
         time to time such rules and regulations as it may deem appropriate for
         the proper administration of this Appendix 2, and (iii) make such
         determinations under, and such interpretations of, and take such
         actions in connection with, this Appendix 2 or Options granted under
         this Appendix 2 as it may deem necessary or advisable, including (but
         not by way of limitation) determinations, interpretations, amendments
         or other actions to ensure that any Option that is intended to be
         granted as an ISO will comply with the requirements of Section 422 of
         the US Tax Code.

5.3      Any provisions of the Scheme which are superseded by or otherwise
         inconsistent with the provisions of this Appendix 2 as applied to an
         employee who is employed or remunerated in the United States, or who is
         a citizen of the United States shall have no effect in respect of such
         employee.

5.4      Rules 5.2(b) and 16 shall not apply to the extent prohibited by US
         federal or applicable state law. In addition, in the case of an Option
         which is intended to be granted as an ISO, Rules 6, 11, 12 and 15 shall
         not apply to the extent that treating the Option Holder as not ceasing
         to be employed by the Company (or by its parent or a subsidiary as
         defined in this Appendix 2), the substitution of new options for old
         options, the waiver of any objective condition (other than that the
         Option Holder be in service during the Performance Period), the
         adjustment of any Options which have been granted under this Scheme, or
         any amendment of this Scheme would disqualify any Option which is
         intended to be granted as an ISO from so qualifying.

5.5      Where any currency conversion is required for the purposes of any rule
         in this Appendix 2, the Remuneration Committee shall use any rate of
         exchange published in a national newspaper as it shall reasonably
         determine to be appropriate.

5.6      For the purposes of the rules in this Appendix 2, and notwithstanding
         any contrary provision in the Scheme:

                                       -4-

<PAGE>

5.6.1    "FAIR MARKET VALUE" means, in relation to an award over ADSs, an amount
         equal to half-way between the high and low sales prices of ADSs
         recorded on the New York Stock Exchange on the day nearest preceding
         the applicable valuation date on which ADSs were traded; and

5.6.2    "TEN PERCENT SHAREHOLDER" means an Option Holder who, at the time an
         ISO is to be granted to him or her, owns (within the meaning of Section
         422(b)(6) of the US Tax Code) shares possessing more than 10% of the
         total combined voting power of all classes of shares of the Company, or
         any parent or subsidiary (as such terms are defined in this Appendix 2)
         of the Company.

                                       -5-

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